John Beckett's Real Estate Blog

Homebuyers and sellers who expect an appraisal to sail through to closing without a hitch may be surprised to discover that home appraisals today can be problematic. The reasons for the change are complex, but there’s no question that mortgage lenders have started to demand more reviews and do-overs. Rob Johnson, vice president of lending at San Diego Funding, a mortgage company in San Diego, attributes the increase in home appraisal reviews to lender-specific requirements imposed because of past problems with certain types of home loans. For example, a mortgage lender might demand more scrutiny of an appraisal if the borrower has a marginal credit score or high debt level relative to income or if the property was a foreclosure that was fixed up and flipped by an investor.

Appraisals may lag home prices

Home prices are also a factor. When prices are on the rise, perhaps because buyers have bid more in a multiple-offer situation, appraised values might still be lower. The reverse is also the case. “Any time you have a market in transition, appraisals aren’t going to keep up because the appraisal is based on historical data,” Johnson says. nadequate “comps” can present problems as well. (“Comps” are recent sales of nearby homes that are similar, or comparable, to the home that’s the subject of the appraisal.) The mortgage lender may deem the comps inadequate if the homes were too far away or were sold in such nontraditional circumstances as a short sale or foreclosure or if the sales occurred too long ago. If the comps aren’t sufficient, the lender may order a review or second home appraisal to verify that they were chosen correctly. “If (the appraiser) can’t find three comps within that area and has to expand, that is where you start to get appraisal reviews or secondary appraisal requirements to make sure the appraisal was valid or that (the lender) was comfortable,” Johnson says. The term “second appraisal” generally refers to a new, start-from-scratch valuation. An appraisal review could be a “desk review,” in which the appraisal gets a second look by an office-bound person, or a “field review,” in which the appraisal is subject to another drive-by or in-person inspection of the property. A review is more common than a second appraisal.

New guidelines distance lenders from appraisers

Leslie Sellers, president of the Appraisal Institute in Chicago, says a lender might order a new home appraisal if the first one was based on factual errors or the appraiser wasn’t competent in the area. Some second appraisals, he adds, result from a misunderstanding of the Home Valuation Code of Conduct, guidelines that were meant to prevent undue pressure being placed on appraisers to inflate home valuations, but that may have caused some lenders to cut off communication with appraisers. “The banks are thinking they can’t even talk to the appraiser,” he says.

Sellers can offer comps to appraiser

An appraisal review can cost several hundred dollars while a second appraisal generally involves a second full fee, says Sara Schwarzentraub, owner of Inter-State Appraisal Service in San Diego. These costs usually are paid by the buyer. “It’s commendable that the lenders are being cautious and having stricter criteria to protect themselves, because in the long term that protects everybody, but it does make it more costly,” she says. Home sellers can offer the appraiser information that might affect the appraiser’s opinion of the home’s value. This information is best handed over before the appraisal is prepared. “If you know of a sale that’s similar to your house and it was a foreclosure, short sale, divorce or anything of that nature, make the appraiser aware of that,” Sellers says. Real-estate brokers can help buyers and sellers find comps to offer the appraiser, Johnson says. If the broker believes comps may present a problem, the buyer and seller can plan accordingly. “A good real-estate agent is aware of these issues. Many times, an agent will call us and say, ‘I know we are going to have problems with comps on this,” he says. Neither the buyer nor seller can choose the appraiser, but Sellers says buyers can insist on a minimum competency, which he defines as having local market knowledge and being certified as well as licensed. Buyers and sellers also can agree on longer time frames for the home appraisal contingency and closing date. Schwarzentraub says that asking for a 45- or 60-day closing, rather than 30 days, is not unreasonable. Buyers are entitled by federal law to a copy of any appraisal for which they’ve paid a fee. Buyers should look over the appraisal and notify the lender of any errors that could have affected the appraiser’s opinion of the home’s value.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24569959

Today’s Real Estate terms come from the word “Zone or Zoning”

Zone:  The area set off by the proper authorities for a specific use or in an area subject to certain restrictions or restraints.

Zoning:  The regulation of land by local government under its police powers in controlling things such as height, size and use of buildings and the use of land.

Zoning Map: A map showing the various sections of the community and the division of the sections into zones of permitted land uses under the zoning ordinance in specific areas.

Zoning Ordinance:  An act by city or county authorities to regulate and control the use of real estate for the health, morals, safety and welfare of the general public.

Spot Zoning:  An allowance of a non-conforming use in an area zoned for a another specific purpose.

Inclusionary Zoning:  An ordinance that requires a builder of new housing to set aside a designated number of units for low and moderate-income people.

Today’s terms have to do with Lots:

Key Lot: A lot in such a position that one side is adjacent to the back of other lots. It is considered to be the least desirable of the lots in a subdivision.

Lot Line: A boundary line of a lot as that is identified in a property survey.

Lot Split: The division of an existing small parcel into two separate parcels.

Lot And Block: A method of identifying real property on a recorded subdivision plat that identifies a parcel of land by reference to its lot and block numbers within the subdivision. (Sometimes called a recorded plat.)

You are two months late on your mortgage. You no longer have a grace period (usually 15 days), so your next payment is probably due on the first of the month. Once you are 90 days late, most lenders will not accept a partial payment. You usually need to pay the entire three months plus any fees, or the lender will start the foreclosure process. You have also recently gone through a Chapter 7 bankruptcy. Under the current bankruptcy law, you can’t refile for a Chapter 7 for the next eight years or a Chapter 13 for four years. Because of this fact, trying to save your home by using any unsecured or consumer credit lines (such as a personal line of credit or cash advances from a credit card) is risky if you find yourself unable to keep up with those payments. It is suggested that you contact Homeownership Preservation Foundation — a group partnered with NeighborWorks America, a national nonprofit created by Congress — by calling (888) 995-HOPE  at once. For the quickest service, call rather than e-mail or visit an office. A counselor will review your financial situation, make recommendations for a course of action that best fits your needs and help communicate with your mortgage lender to work out a plan. When you call, ask about a forbearance to temporarily modify or eliminate payments to be made up at the end of the forbearance period. Another alternative may be a permanent loan modification of the terms of the original mortgage in a way that addresses your specific needs. Such changes may include adding delinquent payments and other costs to the loan balance, changing interest rates or recalculating the loan. If all else fails, you may have two more options: selling your home in a short sale if you have no equity left, or a pre-foreclosure sale if the value of the house still exceeds the remainder of the mortgage. A pre-foreclosure sale arrangement allows you to defer mortgage payments that you can’t afford while you sell your house. This also keeps late payments off your credit report. These options are generally cheaper for the bank and less stressful for the homeowner than a foreclosure. Being late on your mortgage or having a loan modification on your credit report may set you up for a hike in your credit card interest rates under universal default rules. Review the default provisions of the credit cards on which you carry a balance and consider closing those accounts that have universal default provisions before they raise your rates. Once the accounts are closed, your rates should stay the same during your repayment period.

Read entire story at: http://realestate.msn.com/article.aspx?cp-documentid=13107755

Today’s Real Estate terms are ways to handle your home when you are behind on your payments are or will be behind in the near future:

Short Sale: A type of pre-foreclosure sale in which the mortgagee agrees to let you sell the property for less than the full amount due, and accept the proceeds as payment in full. The sale of property at a fair market price that’s lower than the loan balance(s).

Foreclosure: Foreclosure is the legal process whereby a lender (bank or secured creditor) terminates the owner’s right to a property that was pledged as security for a debt. The lender usually then forces a sale of parcel of the real estate or home, often at a public action, to satisfy the debt after the owner defaulted to comply with the agreement between the borrower and the lender.

Deed-in-Lieu of Foreclosure: Used by owners to voluntarily convey the title of their property to the mortgagee/beneficiary (lender) to avoid the negative credit consequences of a foreclosure. Lenders are generally reluctant to accept a “deed in lieu” unless the title is free and clear of any other encumbrances junior to theirs and the owners execute an estoppel affidavit acknowledging that they are acting volitionally, with informed consent.
A homeowner can qualify for a deed-in-lieu of foreclosure if:

• They are in default and do not qualify for any of the other options;
• All attempts at selling the house before foreclosure were unsuccessful; and
• There is no other mortgage in default.

Debtor In Possession: A situation arising out of a foreclosure or bankruptcy where the money-owing party remains in possession and controls the use of the property.

Deficiency Judgment:
1.  A judgment awarded by a court when the proceeds from the sale of the security pledged for a loan is insufficient to pay off the debt of the defaulting borrower.
2.   A personal judgment against a debtor for the amount remaining due after a judicial foreclosure of a mortgage or a trust deed. This remaining amount is handled by the lender in one of three ways: a payment agreement is offered, a deficiency judgment is entered, or the debt is forgiven.
If the deficiency debt is forgiven, your lender will issue you a 1099-C IRS form. The IRS then views the forgiveness of the debt as your personal income, which you will need to report on your taxes. If you are declared financially insolvent, the IRS can render the income as exempt.