John Beckett's Real Estate Blog

Foreclosure is a fairly well-understood process, but as “short sale” signs sprout like weeds, you may wonder what they are all about. When a lender agrees to accept a mortgage payoff amount that is less than what is owed in order to facilitate a sale of the property by a financially distressed owner, it’s called a short sale. The lender forgives the remaining balance of the loan.

Identify potential short sales: Locate pre-foreclosures in your area. You can use an online database, search courthouse listings and legal ads or use an experienced real-estate agent as a buyer’s agent. First, try to determine how much is owed on the house in relation to its approximate value. If it seems high, it’s a good candidate because it indicates the seller might have trouble selling it for enough to satisfy the loan. Pass on those in which the owner has a lot of equity in the home — the lender likely will prefer to foreclose and resell closer to the market price.

View the property: Gauge its condition and come up with a rough estimate of how much it’s going to take to repair or renovate. If it needs work, many “normal” buyers won’t consider it, which is good for you.

Do your research: What is the property worth? What’s the profit potential? If you’re an investor or even a homeowner planning to live in the home a short time, you’ll want to profit from the deal.

Find all liens and mortgages: Ask the seller or his agent what liens are on the property, and which lender is the primary lien holder.

Figure out the financing: This is critical. You have to know how you’re going to pay for the property. If you’re a good credit risk, the existing lender may be willing to give you a loan. Since it already has a lot of your information in the short-sale paperwork, it may be able to expedite the loan application process. It’s important to understand that in a short sale, you have to be able to move quickly. Once an agreement is worked out, it is common for the lender to require closing in as few as 45 days. This is too late to start shopping for a mortgage.

Negotiate: It’s not uncommon for the lender to reject your offer or to come back with a counteroffer. As with any real-estate transaction, you should figure out beforehand what your absolute highest limit is, and don’t be afraid to walk away if the lender won’t meet your figure.

Seal the deal: Once you’ve reached an agreement that all three parties — you, the seller and the lender — are OK with, get everything in writing and officially recorded. Make sure the seller understands all of the terms of the deal. Next comes the closing and the property is yours.

Read more at: http://realestate.msn.com/article.aspx?cp-documentid=23538985&page=2

The First Time Home Buyer Tax Credit of 2009 was given new life late last year. President Obama extended the original credit end date until April 30th for purchases and buyers under contract before then have until the end of June to close escrow and claim the credit. The credit has been a success to this point, helping to drive consumers back into the ailing real estate market. There has been some talk in the media about 2010 being the rebound year for the economy. Home sales in several areas around the country are up and prices have stabilized or increased. However, foreclosures are still a problem in several states coupled with high unemployment.  Considering the overall state of the union, I wonder if the government isn’t considering an extension of the credit into the fall. Interest rates are still very low and there is plenty of surplus housing available.  Consumers have been buying but new inventory coming on the market is still a factor.

What do you think?

Reference: http://www.realestateindustrywatch.com/tax-credit-coming-to-an-end/

The clouds may be starting to lift, ever so slightly, for the beleaguered housing market. The latest evidence came recently when new data showed that fewer homeowners are falling behind on their home loans. The delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 9.47% of all loans as of the end of the fourth quarter of 2009, according to the Mortgage Bankers Association. That’s down from 9.64% in the third quarter. It’s extremely rare for the delinquency rate to decline at the end of the year when homeowners are grappling with the cost of heating bills and Christmas presents. The data still pointed to a troubled housing market that is likely to worsen before it improves. The delinquency rate was up from 7.88% a year ago. And though California is faring better than some other hard-hit states, the state delinquency rate is 12.49%.  In a sign that delinquencies may be leveling off, loans past due by 30 days and 60 days declined compared with the third quarter of 2009 and the fourth quarter of 2008. The number of loans going into foreclosure, though up from a year earlier, declined compared with the third quarter as efforts to modify mortgages took hold. But the portfolio of loans more than 90 days past due—containing the mortgages being evaluated for modifications—continued its rise to record levels. That indicates that there is still much short-term pain for the housing markets to endure as many of these fall into foreclosure.  4.99% of all prime fixed-rate loans, the kind made to the best-qualified borrowers, were categorized as seriously delinquent (that is, in foreclosure or more than 90 days past due), up from 2.25% a year earlier. For prime adjustable-rate loans, the category containing tricky pay-option mortgages, 18.13% were seriously delinquent, compared with 10.45% a year earlier. And 42.7% of subprime adjustable loans were seriously delinquent, up from 33.78% in the fourth quarter of 2008.

Read the entire article at:  http://rismedia.com/2010-02-22/mortgage-delinquencies-slowing/