Are home prices still falling?

This is a question I get a lot. Unfortunately the realty is that prices in most markets are still falling. What does this mean for you.?

Well it means that your home value is still declining. Does this mean that it is not the time to sell? It depends on your situation. You may need to move closer to family for health reasons or such. Your maybe transferred. There are a number of reasons you may want to sell. Do it before prices go Lower. We have not turned the corner yet as a nation so make decisions on today not on what may happen.
Nondistressed home prices fall for 7th straight month 12 of 30 major metro areas post monthly increases
By Inman News Inman News® Share This
A rising share of distressed home sales pushed down prices on nondistressed homes for the seventh month in a row in February, according to a price index from FNC, a provider of real estate collateral management software. FNC's Residential Price Index (RPI) is a "hedonic" index based on data collected from public records and combined with appraisal data that includes information on a property's physical condition and neighborhood attributes.
Sales prices of nondistressed new and existing single-family homes fell 0.8 percent in February compared to the month before and 3 percent from February 2011. Both figures are unadjusted for seasonality. The index excludes sales of bank-owned homes (REOs), short-sale homes, and homes sold at foreclosure auction.
Seven consecutive months of price declines have "coincided with a rising share of distressed properties in total home sales, which climbed from 22.8 percent in July to 27 percent in February, pushing down the prices on nondistressed home sales. Continued acceleration in disposing the inventory of distressed homes could further dampen home prices in the coming months," FNC said in its index report.
In its calculation of distressed sales, FNC includes properties repossessed by lenders ("real estate owned" homes) and homes sold at a foreclosure auction, but does not include short sales.
Source: FNC
Three-month index trends for a national composite, a composite of 30 major metro areas, and a composite of 10 major metro areas show similar monthly decreases in December, January and February of around 1 percent and similar yearly decreases hovering around 3 and 4 percent, though February's 3 percent rate was the slowest deceleration rate in 20 months, according to the report.
Source: FNC

Among the individual markets in the 30-MSA composite, 12 posted modest monthly increases in February with Cleveland seeing the biggest rise, 2.9 percent, followed by San Antonio (2.1 percent), and Riverside, Calif. (2 percent). Of the remaining 18 markets, Baltimore and Tampa, Fla., saw the sharpest monthly price drop, 2.4 percent each, followed by Detroit (2.1 percent) and New York (1.8 percent).
Source: FNC
Only six of the 30 markets experienced year-over-year price increases: San Antonio (2.5 percent), Minneapolis (2.5 percent), Detroit (1.8 percent), San Francisco (1 percent), Boston (0.9 percent), and Denver (0.5 percent).
Among the markets where prices fell, Atlanta posted the biggest hit (10.7 percent), followed by Las Vegas (10 percent), Seattle (8 percent), Baltimore (7.5 percent), Tampa (7.3 percent), and Washington, D.C. (7.3 percent).
Source: FNC
Peak to date, prices in the 30-MSA composite have dropped 33.6 percent. Only San Antonio has seen its prices rise above its market peak, 4.9 percent. Houston, whose prices have fallen only 0.1 percent from peak, comes in second. The vast majority of the remaining markets saw double-digit drops from peak led by Las Vegas (62.8 percent), Phoenix (59 percent), Riverside (58.6 percent), Orlando (58 percent), Sacramento (57.1 percent), and San Francisco (49.9 percent).
Source: FNC

Looks like congress is going to extend the debt forgiveness on short sales. Why is that important? Well it means that the loss incurred by the lenders on the amount short of the full debt is not considered income to the family that needs to sell.

This means that now is still a good time to do a short sale and not just walk away. Short sales are not fun for anybody that I have met yet, however those that I have helped have all felt better about the transaction once it was done. 

This is an interesting article about all the reasons why the debt forgiveness should continue. Give it a quick glance and let me know what you think.

April 12, 2012 Sponsored by Lowe's Congress considers extension to mortgage-debt relief deadline Action not expected until post-election By Ken Harney Inman News® Share This For anyone hoping that a fractious, election-bound Congress can manage to extend a law that is crucial to the housing recovery -- the Mortgage Forgiveness Debt Relief Act -- here's a little good news: Before heading home for the Easter holiday recess, key members of the House and Senate tax-writing committees introduced bills that would keep the law alive through 2014. Without action by Congress, the law -- which allows homeowners whose mortgage debts have been written off by lenders in short sales, foreclosures, principal reductions and deeds-in-lieu of foreclosure to escape heavy federal taxation on the amounts forgiven -- would expire Dec. 31, 2012. Real estate and mortgage trade groups believe that any expiration would be disastrous for large numbers of underwater owners trying to rid themselves of smothering debt loads. It could also sharply reduce the appeal of short sales and other resolutions needed to clear out distressed inventories. If homeowners thought they'd be penalized for agreeing to principal reductions and debt cancellations, they'd be far less likely to participate. That, in turn, could hamper efforts like the $25 billion nationwide robo-signing mortgage settlement, which features more than $10 billion in debt forgiveness, as well as the Obama administration's efforts to spur short sales and principal reductions at Fannie Mae and Freddie Mac. Until the tax code was amended in 2007, the Internal Revenue Service treated owners whose unpaid principal balances were canceled as having received actual income from the transaction and hit them with tax bills. For example, in a short sale where the lender wrote off $100,000 of unpaid mortgage debt prior to 2007, the federal tax code treated the $100,000 as ordinary income to the seller and the IRS imposed tax levies at regular rates. Though the prospects for quick action on the issue are virtually nonexistent, the sudden introduction of multiple bills on both sides of Capitol Hill can only be a positive sign. In the Senate, Finance committee member Debbie Stabenow (D-Mich.) joined with fellow Democrats Robert Menendez (New Jersey), Sherrod Brown (Ohio) and Jeff Merkley (Oregon); and two Republicans: Dean Heller (Nevada) and Johnny Isakson (Georgia), on a proposed extension (S 2250) through Dec. 31, 2014. In the House, 14 of the 15 Democrats on the Ways and Means Committee -- the point of origination for most tax legislation in Congress -- are co-sponsoring a bill (HR 4202) with the same provisions as Stabenow's. One Republican on the Ways and Means Committee, U.S. Rep. Tom Reed of New York, also is introducing an extension bill, but the text and bill number were not immediately available. President Obama's fiscal 2013 federal budget proposal calls for an extension through 2014, which congressional analysts estimate would cost the government $2.7 billion in tax revenues over the coming two years. In a statement, Stabenow said, "It is bad enough that so many families are faced with mortgages that now exceed the value of their home. "But to add insult to injury, without this bill the IRS would once again require these families to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That's just wrong." The lack of more Republican co-sponsors on Reed's bill may point to difficulties for the debt relief extension that could materialize as early as the end of this month. The Republican-controlled Ways and Means Committee says it plans to look at all "extenders" -- expired or soon-to-lapse special benefit programs ranging from corporate research and development tax credits to individual homeowner write-offs for residential energy improvements -- within the next two weeks. If the Republican majority decides that mortgage debt relief is just another contributor to the federal deficit, the House version of bills could be derailed indefinitely. (Remember that last December, House and Senate conferees deferred action on a long list of extenders -- including deductions for private mortgage insurance premiums -- and they all remain in legislative limbo.) But tax analysts and lobbyists on Capitol Hill say the most likely scenario shapes up something like this: Though the National Association of REALTORS® and other groups will push for early consideration of the debt relief extender, it's unlikely that Congress will be able to focus on a major revenue package until after the November elections. Then, the victors and lame ducks from both houses will have to do the year's tough lifting: They'll take up the entire range of budget, deficit and debt-ceiling issues during several frenetic weeks, and finally hammer out an omnibus bill that includes either a one- or two-year new lifeline for mortgage debt relief. Though there's a chance the entire process will break down again as it did last year, Jim Tobin, chief lobbyist for the National Association of Home Builders, told me last week, "We remain optimistic that once we get past the election and into a robust lame duck session, Congress will do the right thing" on mortgage forgiveness. "But any way you look at it," he added, "taxing (financially distressed) homeowners on phantom income is just inequitable." Plus, it makes absolutely no economic or political sense for either party -- whether we have a President Romney and Republican majorities in both houses, or President Obama and the Democrats come away big winners -- to kick homeowners when they're already down. Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance. Contact Ken Harney:

How are a tree, a shadow and our reputation connected?

"Character is like a tree, and reputation is like a shadow. The shadow is what we think of it; the tree is the real thing." -- Abraham Lincoln, 16th President of the United States I thought about this and did not think too much about it. Then I went to lunch I saw a tree shadow. That is when it got interesting. I noticed several things. The more I looked at different trees and shadows the more I thought about the quote. We put a lot of stock in our reputations and we should to a point, why? Our reputation maybe someone else s first impression of us. Is this what we always want? I had some crazy thoughts going on. Please bear with me on this. I said I noticed several different thinks about the shadows. One it was hard to tell what kind of tree it was just by the shadow. I looked at Palm trees, Pine trees, Cottonwood trees, Elm trees and Ash trees. The Palm was the most distinctive while the other trees were harder to tell what they were by the shadow. Two, where the shadow was cast made the shadow clearer or less distinct. Example if the shadow was on grass it was less distinct than on pavement and pavement was less distinct than if it as cast on a car. Why did I find this interesting. If our reputation is like the shadow of a tree, what would make us clear and distinct would be up how we cast that shadow on someone else. The other thing that came to mind was that it would be the reality of whom we cast that shadow on and their take on us. This does not always me it would be an accurate representation us. Think about it. How many times have you been talking to someone then finally introduce yourselves and they say "your that person. Your are nothing like so and so you described you." I thought that was interesting about the quote, "the tree is the real thing, or character". The shadow is representative of our character not always our true character. The shadow or reputation maybe represent part of us not always give clear or distinct representation of ourselves. We should endeavor to make the most of a good reputation however we are not in full control of the shadow we cast. Our reputation is based on how someone else sees us and interprets our actions or words and then projects them. Our shadow can become defused, indistinct and not even represent us. Part of it is up to us to make very clear, very distinctive and positive impressions on those we touch in our lives so the shadow we cast is as representative of our true character. Just something to think about.

The following is an article where Fannie Mae and Freddie Mac are attempting to make Short Sales time line shorter. They have proposals in place and such. To really fix the issue mortgage insurance companies need to be totally removed from the equation. I have had customers tell me they were not paying MIP in their payments. They were right the banks, investors, and underwriters that created securities backed by loans, did purchase the MIP without informing the borrower. MIP is one of the biggest obstacles to over come in the negotiating process. Investors that are holding the notes, not to be confused with the bank servicing or collecting the payments, have no standardized formula for negotiating the Short Sale. Since each one is done differently we can get no consistency on time frames or execution of the transaction. The banks have been bailed out twice and have spent the money on task forces and massages not on the issue at hand. Address the issue and maybe something different will happen. I apologize if this is not very Positive or gives hope, I do not see Short Sales going away or getting better until real changes are made. Read below what others think will help. Federal plan to make short sales shorter Fannie and Freddie's overseer has plans to streamline the process By Ken Harney Inman News® Share This For home sellers, buyers and real estate brokers hoping for breakthroughs on simplifying short-sale transaction and timelines, this may not be the proverbial silver bullet, but it's definitely positive news: The agency that controls Fannie Mae and Freddie Mac has a serious effort under way to remove or minimize some of the major hurdles and to put those changes in the field as soon as this fall. Officials at the Federal Housing Finance Agency -- the folks who now make the rules governing millions of mortgage transactions at both companies -- told me last week that they are actively seeking input from lenders, servicers, REALTORS®, investors and housing counselors about how to speed up short sales on loans connected with Fannie and Freddie. National Association of REALTORS® officials, who have already met with the agency's special short-sale task force, confirm that the effort is for real and promise potentially significant reforms. FHFA officials say their deadline to wrap up their review of short-sale obstacles is June 30, and they plan to announce detailed improvements to the process no later than Sept. 30. Given the sheer size of the companies' portfolios -- plus the estimated 1.7 million additional loans expected on the foreclosure conveyor belt at Fannie and Freddie in the coming several years -- any substantive improvements could have wide-ranging benefits for everybody involved. What's the agency looking at? High on the list: 1. Second liens. Banks that hold second mortgages and equity credit lines on underwater houses often drag out the short-sale process by refusing to recognize hard economic realities: The collateral that once secured their loan no longer exists. They stand to be zeroed out in the event of either a foreclosure or short sale, and they will have to report that loss to auditors, investors and regulators. As a result, they dither and delay deals by demanding too much for their consent to sale terms, or they simply hold out until buyers give up and the transaction collapses. FHFA officials leading the short-sale reform effort believe that Fannie and Freddie have sufficient pressure points on banks that they can bring to bear -- mainly related to servicing rules and penalties -- but they decline to discuss what they might entail. For their part, servicing experts in the private sector say better standardized rules between the two companies on second liens in short sales, plus fixed ceilings on what banks can expect out of transactions in advance, could reduce much of the current friction. Travis Hamel Olsen, chief operating officer of Loan Resolution Corp., a Scottsdale, Ariz.-based firm that assists major lenders in troubled mortgage workouts, says FHFA should enforce a non-negotiable 10 percent ceiling on what second lien holders can obtain from short sales. That is higher than the 6 percent or $6,000 ceiling allowable under the federal government's HAFA (Home Affordable Foreclosure Alternatives) ceiling, but attractive enough to bring most major banks who deal with Fannie and Freddie to the table faster. 2. Mortgage insurers. The FHFA task force expects to come up with rules that eliminate or reduce mortgage insurance companies' current ability to prolong negotiations indefinitely over claims in short sales, and thus contribute to the breakdown of transactions. 3. Mandatory timelines. Though FHFA is nowhere close to deciding on hard and fast timelines for participants to meet in short sales involving Fannie and Freddie, they are a top priority in the current effort. Six months from start to finish "is way too long," said one official, who declined to suggest what would be a more acceptable limit. Legislation pending in Congress and supported by NAR (House bill H.R. 1498) would nail down one key time segment -- it would require servicers to respond within 45 days to any fully executed short-sale offer. 4. Valuation issues. FHFA expects to produce better guidance on the steps servicers and other participants in short sales should follow to arrive at acceptable property valuations. That, in turn, should help limit negotiations over what lenders and buyers expect from transactions and the methodologies used to get to the final numbers. In its recent meeting with FHFA officials, NAR pushed hard for Fannie and Freddie to tell brokers and other interested parties early in the process what minimum price they will accept in any given short sale. 5. Staffing. Though the biggest banks and servicers have muscled up their loss-modification and foreclosure alternatives staffing since the start of the mortgage bust, FHFA believes that greater responsiveness to short-sale participants -- sellers, buyers, realty agents -- is needed. Since both Fannie and Freddie have "servicer performance evaluation" standards, FHFA has a variety of administrative carrots and sticks available to prod lenders and servicers to push through short sales faster. So what does this all add up to? Just another bureaucratic exercise? Or could FHFA's new push for short-sale efficiency really mean something on the front lines? My guess is that it just might. FHFA, which is tasked to "conserve" Fannie's and Freddie's assets and achieve the best possible financial resolutions of their troubled loan portfolios in the taxpayers' interest, appears to be genuinely seeking to cut timelines and red tape in short sales. They also know the hard facts: Short sales yield Fannie, Freddie and investors much more at the bottom line -- they cost taxpayers a lot less on average -- than foreclosures. Remember these deadline dates -- June 30 and Sept. 30. We'll check back and see how much actual streamlining comes out of the FHFA's latest high-priority project. Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance.

The following article makes some very interesting assumptions without looking at facts. I am not being negative or a hater I just find the media in general to not take the time to inform themselves properly on the actuality of what is going on. Credit score is now on average lower to get loan 700 from 720. More homes than ever are being purchased with FHA loans. FHA loans with some lenders is 580 credit score most banks is 640. This does not mean that lending has been loosened up just that realtors and lenders have relearned how to do FHA and VA loans again because that is how to close transactions. Credit loosening, I have not seen credit loosening I have seen it tighten up more not less. Again conventional loans have stricter 28/42 debt ratios and FHA does not have such tight rules. FHA can go 55% back end combined debt ratio if it will pass DU underwriting. We are not getting lessening of credit again adjustment of loan officers and realtors Shifting with the market. LTV loan on loans, again FHA which is 96.5% LTV and conventional is 80% LTV. None of the FHA information was factored into this report. They did not address the 5million plus homes in shadow inventory that are still sitting out there. We are not in a housing recovery mode yet however we might be going in the right direction. The real key to the housing crisis is jobs. If people are working the short sales stop and foreclosures go back to normal numbers. These are the things that will make a huge impact in the economy until it gets to that point we have to Shift to the market and make the most of what we have. We have a long road a head however we can still make a living and succeed, we just need to remain positive and know what is going on so we do not become reactive and stay proactive on what we are doing. Housing Crisis to End in 2012 as Banks Loosen Credit Standards 01/24/2012 By: Krista Franks Printer Friendly View Email Enter your email to receive Daily Email Updates: Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit. The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago. Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters. However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability. Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV. While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan. Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability. Recent Articles

Short Sales and What they mean?

A short sale is selling a home for less than what is owed to the lending institution that is servicing the loan on the home. How does a short sale effect a family? The family that does a short sale has more control over when and how they leave a property. About 50% of the families I have worked with get relocation funds. A families credit is impacted however not as hard as with a foreclosure. After foreclosure it will be 7 years before purchase with a FANNIE MAE or FEDDIE MAC loan. FHA or VA is 3 years. This will effect investors more than traditional home buyers. A short sale is 3 years with some exceptions. Stress of having your home foreclosed is greater than a short sale. Having trustee sale paperwork and ads placed in paper does not feel good nor does having the Trustee paperwork taped to your garage door, with a short sale we avoid this. Having to sale your house because you can no longer make the payments is not fun. Leaving on your terms is better than being told to leave. What I have seen from the short sale is the peace of mind it gives someone from knowing that they did everything they could right even though the economy and the banking world let them down. Having maintained a level of self-respect is priceless. Instead of walking away talk to a true real estate professional and do a short sale. We are there to help you and your family.

Where Are We Headed With Mortgage Rates?

I always get asked what will interest rates do? I have given up trying to predict that one. Here is some news on interest rates and other indicators to what they might do. This is what I do know. I have never seen them this low and the saying is all good things must end. Take advantage of the rates we have now to purchase that dream home, first home or get involved in investing. This was reposted from the Lock Advisor. Mortgage markets worsened last week as domestic job growth surprised Wall Street and the Eurozone moved yet one more step closer to reaching a lasting Greece sovereign debt solution. ` Conforming mortgage rates rose on the news, although you wouldn’t know it from looking at Freddie Mac’s weekly mortgage rate survey. ` According to Freddie Mac, the average 30-year fixed rate mortgage rate fell to 3.87% last week with 0.8 discount points due at closing, plus closing costs. 1 discount point is a fee equal to one percent of your loan size. ` 3.87% for a 30-year fixed rate mortgage is the official, all-time low for the weekly Freddie Mac survey, conducted since the 1970s. However, because Freddie Mac gathers its results on Monday and Tuesday only, by the time the survey results were released Thursday morning, mortgage rates were already rising off their lows. ` Then, Friday morning, after January’s Non-Farm Payrolls data was released, mortgage rates surged. ` The January jobs report exceeded expectations in nearly every fashion possible : ` Economists expected to see 135,000 jobs created in January. The actual number was 243,000. Economists expected to see the Unemployment Rate at 8.5% in January. The actual number was 8.3%. Revisions added an additional 180,000 net new jobs to the original 2011 tally. ` As compared to one year ago, there are 2.1 million more people employed in the U.S. workforce. Figures like this hint at a stronger national economy, and that tends to drive mortgage rates up. ` This week, with little economic data due for release, mortgage rates are expected to move on momentum. Right now, that momentum is causing rates to rise slightly again, today. ` If you’re shopping for a home and getting a mortgage and want to know if the time is right to lock, consider that it’s impossible to time a market bottom, but simple to spot a “good deal”. Now appears to be one of them. ` Moderately priced homes are expected to see the most appreciation this year in the housing market. Purchasing Bank Owned Properties and Distressed Homes could be where you find your best values or reach out to any one of the Realtors at fb Home Buyer’s Educational Page to learn more about great opportunites in your area today. ` If you just want to do some window shopping right now be sure to check out of links for Bank Owned Foreclosed Properties to the right of the page.

Loan Debt Forgiveness

Should you do a short sale? Great question. Are you upside down on your mortgage with no end in sight. Then you might want to consider this article that was in the LA Times.The tax-relief law allows homeowners to exclude from income certain debts forgiven by their lenders. The tax break expires Dec. 31, 2012, but keep in mind that a short sale or foreclosure can take many months. January 29, 2012|By Lew Sichelman LA Times Reporting From Washington — The window is closing rapidly on one of the most important tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners. Although the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lenders doesn’t expire until Dec. 31, it’s likely to take every bit of the next 11 months for financially troubled homeowners to persuade their banks to either foreclose or allow their houses to be sold for less than they are worth. Although owners who are struggling to hold on to their homes shouldn’t throw in the towel solely because of the pending tax bite, it is certainly something to consider. Under the tax code, borrowed money need not be reported as income because you have an obligation to repay. But if the lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists. So, if you owe $250,000 and your lender forgives $50,000 of that debt in a $200,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36%, you would owe $18,000 in taxes. Under the Mortgage Forgiveness Debt Relief Act of 2007, though, taxpayers are allowed to exclude from income the discharge of debt on their principal residence — at least until 2013. So when your lender agrees to a short sale, there is no tax on the difference between the selling price and the amount you owe. When your lender forecloses, there is no tax on the canceled debt. Even when you refinance at a lower loan balance, there is no tax on the difference between what you owed on the old loan and what you owe on the new one. But unless Congress extends the law — and there is no indication lawmakers are even thinking about that — all residential mortgage debt relief that takes place on or after Jan. 1, 2013, will once again be considered taxable income. Why worry about this nearly a year before the law changes? Because the timelines on debt forgiveness decisions by lenders are absolutely horrendous. As of October, it was taking lenders an average of 674 days to process a foreclosure, according to Lender Processing Services, a Jacksonville, Fla., mortgage technology firm. That’s more than 22 months, or almost two years from the time the process starts to when the property is actually repossessed. And lenders don’t even start the process until an average of 391 days after last receiving a payment. Of course, each state has a different timeline. There are no hard and fast numbers when it comes to short sales or refinancings. But they also can be long, drawn-out transactions. According to a nearly year-old survey by Equi-Trax Asset Solutions, a Santa Barbara analytics company, it can take four to nine months for underwater borrowers to persuade their lenders to sign off on a deal in which the lender will net less than what the borrower owes. Eighteen percent of the 600 agents polled said short sales can be closed in less than three months if the stars line up just right. But almost 10% said these transactions require more than 10 months to complete. A refinancing that involves principal amnesty is probably the quickest of the three debt-forgiveness scenarios. At Carrington Mortgage Services, a Santa Ana-based lender licensed in 32 states, a “short-refi” takes 45 to 60 days. There are many factors besides a tax break to consider when deciding whether to give up your house. What will a foreclosure or short sale do to your all-important credit score? How long will you be precluded from buying another house? Will the extra income push you into a higher tax bracket? As always when it comes to such matters, you should consult a tax professional before making any decisions. Here are a few of the other important rules that you and your tax person need to know: • The debt-relief law applies only to debt incurred to buy, build or improve a personal residence. • The law does not apply to vacation homes or investment properties. • The maximum amount you can treat as indebtedness is $2 million, or $1 million if you are married but filing separately. For more detailed information, see IRS Publication 4681.

Why 33% of Real Estate Transactions are Not Closing Escrow

Why 33% of Purchase Transactions are Not Closing Escrow

According to recent figures from the National Association of Realtors (NAR), 33% of purchase transactions are not closing escrow right now. NAR also advises the two main reasons for the contract cancellations are, #1 loan applications are being declined by lenders, and #2 appraisals are not coming in at value to match the negotiated sales price (see below). After discussing these issues with several underwriters this past week, here are some tips that you can use that will ensure your transactions do not run into any problems.

1. Why are so many loan applications being denied?

According to several different underwriters I talked to, the two main reasons lenders are denying loan applications are, #1 the buyer did not qualify for the loan program the lender submitted for approval, as the underwriting guidelines for the particular loan program were not followed, and #2, the documentation sent in on the loan application was not verified upfront. As there are quite a few examples I could elaborate on why the underwriters are denying applications, I will only go through a few of these. For example, the underwriters mentioned that “FHA buyers purchasing condos“ and “Buyers purchasing flipped properties” are 2 types of transactions that they seem to decline more than most. So here are some tips to make sure these two purchase options go smoothly.

FHA Buyers Purchasing Condos

According to FHA underwriters, the majority of FHA transactions that do NOT close escrow are due to one of the following 4 reasons below. If your client is interested in buying a condo & obtaining FHA financing, try and get the following 4 questions answered upfront to ensure the complex will qualify for FHA financing, otherwise when the HOA cert comes in and one of these 4 below are wrong, the loan will be denied.

1. Is the complex currently FHA approved? The complex has to be FHA approved, here is a link to check if a complex is FHA approved or not.

2. What are the owner occupied ratios? Remember FHA needs 50% of the units to be Owner occupied!

3. Are there less than 15% of the units in the complex currently delinquent. The FHA requires that no more than 15% of the units can be delinquent in a 30 day period.

4. Is there any current litigation in the complex? The FHA will not allow any financing in a complex that has litigation.

*Here is a Solution. If a particular complex is NOT FHA approved, then the buyer can qualify for 5% down conventional financing instead. It is a much better loan for the buyer anyway as it eliminates the expensive FHA monthly mortgage insurance, so they will get an even lower monthly payment.

Buyers Purchasing Flipped Properties

Another reason loan applications are being denied, is because the property was a “Flip” and did not meet the qualifications for financing. For example even though Fannie Mae, FHA and the VA have no problems financing flips even if the seller is making >20% in less than 90 days of resale, unfortunately there are Conventional, FHA and VA lenders that will not finance this type of transaction at all.

Some conventional lenders also require 2 appraisals and when one comes in lower than the other this will kill the deal (you must use the lower of the 2 appraisals). *2 appraisals are required on FHA flips where the seller is making >20% within 90 days of resale. So the problem with flips is that some lenders have their own “Overlays” or rules that they apply on top of Fannie Mae, FHA and VA flip rules to help limit their loan risk. So therefore it is very important that the right lender is chosen upfront to ensure it will not run into problems.

Here is a summary of the rules for purchasing flipped properties when obtaining either Conventional, FHA or VA financing, New Rules Buyers and Sellers Must Know About Financing Flipped Properties.

2. Appraisals are Not Coming in at Value?

The #2 reason why 33% of transactions are falling out of escrow right now is because appraised values are coming in below the negotiated price! We all hear about out-of-area appraisers who don’t know the local market, use of distressed-sale properties to appraise a property that is not being sold under distress, and lack of comparable sales. The key to a good appraisal is using accurate comparable sales to arrive at an appropriate price for the property in question.

New HVCC Rules have Created Problems

We all know that Fannie Mae initiated changes in appraisal guidelines in 2009 via HVCC that prohibit mortgage brokers or agents from selecting the appraiser. However, even though the loan officer can’t have direct contact with the appraiser, a real estate agent can. Here are 4 tips for agents to help with appraisals.

4 Appraisal Tips for agents

Here are some good tips for agents to follow when the appraisal is being done on a transaction, that will help ensure the final appraised value is not left up to chance.

1. Meet the appraiser at the property.

The buyers or sellers real estate agent should always plan to meet the appraiser at the property to offer relevant comparable sales information. Make sure you are the contact to schedule the appraisal and then go meet the appraiser at the property and find out if he knows the area, what data is he using etc, so you can ensure that you are giving every chance for the appraised value to come in at the purchase price.

2. Improvement list provided to appraiser

If improvements have been made to the property, or there are features that don’t meet the eye, a list should be provided to the appraiser so they can include this in their final report.

3. Public records are often wrong

The public record is often wrong, particularly regarding square footage. Any documentation to justify a different number should be made available. According to current appraisal guidelines, square footage added without a building permit usually won’t get credit as usable square feet. This can lower the appraised value.

4. When there aren’t enough comps for past 3 months

When there aren’t comps for the past three months, it’s critical the appraiser is provided with the data upon which to make an accurate evaluation, particularly if the appraiser is unfamiliar with the local market.

As appraisers these days now work for the lenders and have no relationship with any parties on the transaction, unfortunately there will be appraisers that do not care what the final value comes in, as they get paid regardless of the quality of their work! Therefore it is important to do what we can to improve the odds that the final appraised value is not left up to chance.


Doing the homework upfront on transactions is key

It is no secret that lenders are changing their rules all the time these days and most would say much too often, one underwriter told me they had over 100 new rule changes to deal with last quarter alone on Fannie, FHA and VA loans. So if a loan officer is not paying very close attention to all of these changes and is not doing thorough homework upfront on the buyers or the property, the buyer can be put into a transaction that will not close escrow.

Your real estate agent and loan officer both have to do their home work you put an offer on a home. If you need help finding either Call my office will we assist finding the right agent or lender so you can avoid these types of issues. Call 760-605-1632

How do you Negotiate?

Negotiating skills vary from person to person. How do you negotiate? I took a class on negotiating which helped me tremendously. Why would I take a class on it? Because I needed to. I did not realize what I was losing and giving away.

First rule I learned was; be willing at all times to walk away. This means to me that I can not allow myself to show my emotional attachment to whatever it is I am trying to buy or sell, including my services as a real estate agent. This is not an easy task however when you learn this skill it empowers you.

Always set a limit. You have to know where you are and how far you are willing to go. You can end up giving more away than you wanted to or can afford to if you do not set limits. This gives you the ability to know when to walk.

Learn to bluff. Walk away and do not run back to table walk back to table. If they see you walking and they give up something walk back don't run.

Never take the first offer. I have always wondered after the fact how much more could I have gotten. Make your price drops smaller and smaller that way you give the appearance of reaching you bottom line before you get there.

I have attached an article on another realtors angle on negotiating I hope this helps you get more value for yourselves and your customers.

5 faces of real estate dealmaking: from 'Drama Queen' to 'No-gotiator'
Mood of the Market

By Tara-Nicholle Nelson
Inman News®

I was one of those kids who was mortally embarrassed by my parents. (I later realized that their fashion choices were not bizarre -- they were just '70s chic held over a tad bit too long.) My mother seemed always to gravitate to the yellow 'sale' signs on top of retail racks -- which seemed horrifying back then.

And my Dad? Horror of horrors, he tried to negotiate everything -- and I mean every single thing. He would actually bargain for things like TVs and computers at stores like Sears, and I would grow hot with embarrassment, detouring into what we'd now call the "tween" section, hoping no one would know we were related.

Fast forward 10 or 15 years, and you'd find me, at an appliance outlet, getting my washer and dryer for 50 percent off because the front windows had been scratched, and negotiating for them to order and install new windows before delivering the machines to me.

In my adulthood, my Dad and I have often worked together on strategies for negotiating our largest purchases -- particularly when it comes to real estate. (My Dad is a prolific investor, and I've negotiated for a hundred or so homes myself.)

I've noticed that my Dad and I have distinct negotiating styles. I tend to gravitate toward properties that are already value-priced, get as much information as possible about the seller's situation, and negotiate a reasonable discount plus as many perks and incentives thrown in as I can.

I like places with major upside potential, so I can control how their value increases, no matter what's going on in the market.

My Dad tends to run all sorts of numbers and analytics, plus wield the fact that he pays in cash, as major bargaining leverage. And his constant refrain is "Buy it right." He wants to feel that he is buying a place that already has lots of equity and/or cash flow potential because he bought it for such a low price -- it takes the pressure off when he later wants or needs to sell.

We share in common that we never make our best offer on our first offer (except in a seller's market, when all the rules change) and we virtually never accept the first offer we receive.

We both place a strong priority on neighborhoods, have a tendency to avoid getting emotionally involved or attached at all to homes, and insist on starting the negotiation off being very clear and realistic in our own minds about the contours of our own personal top or bottom lines.

As I contemplated how my father's negotiating skills and my own negotiating styles are similar and dissimilar, I could not escape noticing how other buyers' and sellers' negotiating styles can be grouped into profiles, so to speak.

Some I've run into more than a few times in my real estate lifetime include:

1. "The Faux-gotiator." The Faux-gotiator makes a minimal effort at negotiating, because she knows that's what she's supposed to do. Like my Dad and I, this breed of negotiator tries to abide by the never-take-the-first-offer rule. But the Faux-gotiator caves at the slightest sense of resistance from across the negotiating table. And devotees of this style come in two varietals: lazy (they simply don't want to do the work of negotiating, so they barely bother) and attached (they just love the house too much -- or need to sell too much -- to give more than a modicum of negotiating effort).

2. "The Drama Queen or King." These wannabe royals are, in some ways, the opposite of the Faux-gotiator. They make a big hue and cry about how "hard core" their bargaining skills are, about how the other side's issues or interests are just "not relevant" to them, and about how outraged they are when they receive resistance from across the negotiating table.

Yet all that drama tends to be a front behind which they hide truly poor negotiation skills. After they wax hyperbolic, they tend to cave and strike deals not too far from the original list price or offer. Methinks they doth protest too much; often the drama is driven by a premature attachment to the property or sale, or the fact that they have no basis in market data or facts for their negotiation demands.

3. "The High-Rolling Lowballer." These folks pull up to view a modest starter home in a rapper-style Mercedes Benz, and literally drip logos in their wake as they tour the home. Though they seem to have the highest possible ratio of status symbols per square inch of body area, when it's time to actually buy or sell a home, they insist on overpricing or lowballing the seller beyond all reason.

These folks cause lots of head-shaking by the agents and other parties in their transactions, as it seems that a slight reprioritization of their real estate matters over high-status consumer goods might make them better able to make reality-based offer and pricing decisions.

4. "The No-gotiator." These are the folks who offer to pay the list price or take the first offer, as a matter of course, even when the market or transaction dynamics suggest that they could get better terms. Some No-gotiators find the confrontational, adversarial connotations of negotiationg distasteful or anxiety-creating. Others are so attached to a certain outcome that they fear the deal falling apart too much to try to push back against the list price or buyer's offer.

5. "The Reality Checker." Finally, there's a fifth type of real estate consumer negotiation profile, which I'll call the Reality Checker. These negotiators do the research. They know how long the place has been on the market, relative to average in the area; and they're well aware of how much list prices are usually able to be bargained down in that neck of the woods.

They have asked for information about the other side's priorities and, to the extent they received any, they have taken that information into consideration in formulating their offer or response. They are clear about what they can afford to do, and how much they simply want a particular property or outcome, but they are not overly optimistic about their negotiating prowess or unrealistic about what the market will bear.

And they don't go in with rules of thumb -- always trying to get 20 percent off, or some such. They make a smart offer (or counteroffer), or accept the other side's position when reasonable and affordable. And, not surprisingly, they often succeed in both striking a good deal and actually getting what they want.

What does better mean to you?

Are we going to have a better real estate market this year? This is a questions real estate agents are getting asked a lot lately. Well are we? This is all about perspective.

From my stand point. Will I sell more house this year than last? Yes I already am ahead of last year in open escrows and buyers appointments. I will have more listings because I have a better marketing plan and I am more self disciplined than last year.

How is this of any interest to anyone else? Good question. That is my perspective. If you want to sell your house the market value may not be what you want it to be, however there are buyers out there and they are buying.

Are we done with short sales? Not by a long shot. I wish we were, we will be when people get back to work everywhere not just in certain areas. read the following for other perspectives on the up coming years real estate market.
Perspectives on a 'better' real estate market
Housing recovery may not bring a sales spike

By Glenn Roberts Jr.
Inman News®
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NEW YORK -- When the real estate market improves has a lot to do with your perspective on the market, said Alex Perriello, president and CEO for Realogy Franchise Group, during a panel presentation Thursday at the Real Estate Connect conference.

"Oftentimes I'm asked, 'When's the market going to get better?' It all depends on how you define the word 'better,' " Perriello said during a panel presentation titled "The State of Real Estate: The Year Ahead."

"If you define 'better' as 'When will I not have to deal with foreclosures, short sales, underwater homes, people with damaged credit, (problems with appraisals), tough lending standards?' the answer to that is 'No time soon' -- at least for the next two or three years, and in some places, depending on where you live, it could be much longer than that."

He added, "If you define 'better' as 'When am I going to make more money in this business?' he noted that even if real estate sales fall to 4 million this year -- less than the 4.2 million in 2011, $35 billion in sales commissions are going to be earned by someone in this industry over the next 12 months." Realogy operates company-owned offices and franchise networks under the Coldwell Banker, Century 21, Sotheby's International Realty, and Better Homes and Gardens Real Estate brands, among others.

Diana Olick, real estate correspondent for CNBC and author of the "Realty Check" blog at CNBC.com, who also participated in the panel session, said she doesn't expect a sharp rebound once the real estate recovery takes hold.

She said she expects that at some point in the middle of 2012 "we are going to see the price stabilization we need, then people are going to start to buy," adding, "I don't think we're going to see a great surge up ... we're going to see pockets of strength in certain markets."

The factors that she expects will keep the real estate market subdued: deflated consumer confidence, and the need to work through the stream of distressed properties.

Olick and Perriello agreed that reduction of principal for distressed homeowners has proven one of the most effective deterrents to foreclosure, and panelists generally agreed that the foreclosure process is taking far too long to run its course in many areas.

Olick said that the problem is that many homeowners appear to be "staying in their houses and gaming the system," living in their homes without paying the mortgage for several years, in some cases. "That's a big problem right now," Olick said.

She also said she believes that investors will be at the forefront of the real estate recovery.

While investors -- namely house-flipping speculators -- have been vilified for their role in driving up prices during the boom years, Olick said that "it is the private equity, the institutional markets, coming in and taking the distress out of the markets that we need right now. That's going to be the strength in the market this year, and that's a good thing."

Margaret Kelly, CEO for Re/Max LLC and a fellow panelist, said that real estate professionals "have to embrace investors," agreeing that investors have an important role to play in working through excess inventory. Many investor-bought properties are converted to rental housing, she noted.

Kelly said she believes the short-sale process must be improved and expedited, and appraisal reform is also needed. "Appraisals have been a nightmare," she said.

Perriello's primary hope for the housing market: "If I could fix one thing, it would be a clear, concise national housing policy from Washington, D.C.

"If you think about the last three or four years, it's been a mixed bag," he said. "On the good side we've had government agencies buying up mortgage-backed securities, which has provided capital to the market, which has been a good thing -- it's kept interest rates low."

The series of federal homebuyer tax credit programs have also provided some welcome relief, he said.

"On the negative side, you've got legislation that's been passed -- like Dodd-Frank would be a perfect example -- that's now in the hands of the regulators. And if the regulators have their way it's going to be, I believe, very damaging for housing and it's going to make mortgage lending even more difficult for the homebuyer to get a loan and it's going to be more expensive."

There have also been mixed messages over the mortgage interest tax deduction, and policy reversals over loan limits, he said.

"People are concerned, there's doubt in the market, and whenever there's uncertainty and doubt in the market people sit back and say, 'I think I'll wait,' " he said.