Archive for November, 2009
At the National Association of Realtors annual meeting in San Diego last week, NAR’s chief economist Lawrence Yun stated real estate prices would climb approximately 4% and homes sales increase by 15% in 2010. Realtors applauded and celebrations broke out all across the convention hall.
Yet on the other side of the country, Jay Brinkmann the chief economist for the Mortgage Bankers Association (MBA) stated “despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks.”
Apparently these two chief economists are not looking at the same set of numbers. The latest unemployment numbers clearly show that the bumpy ride isn’t over for American wage earners and if you don’t have a job you aren’t buying a home. Somehow it seems optimistic maybe even unrealistic to think that we will see an increase of 15% in home sales under these conditions.
Does this mean that you shouldn’t buy a home in Northern Virginia? No it means that you have to decide if home ownership is right for you. If you are qualified to buy and you are looking forward to owning your own home then go for it. If you have doubts about your job then it might be better to wait a while longer. Remember statistics no matter which chief economists you listen to don’t pay the mortgage, you do.
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Welcome to “Flopping” the Latest Short Sale Flipping Scheme
November 19th, 2009 Categories: Real Estate Ramblings
The FBI, Fannie Mae and fraud experts agree, the new short sale flipping scheme popping up around the country is on the rise and will cost banks millions of dollars.
The premise is quite simple. Make a low offer on a short sale and convince the bank that the offer is “market value”. Close the deal and within 24 hours sell the property to a second buyer at a profit. The second buyer has no clue that the home is under contract for far less than what they are offering and of course the lender has no idea that the value of the property is thousands more than they are accepting.
So how does this happen? According to the FBI, it takes a less than ethical real estate agent, a lender and BPO (Broker Priced Opinion) that reflects a lower value. Since many banks depend on the BPO to determine the value of the property versus a full appraisal making it easier to manipulate a lower value on a short sale than you might believe.
In some areas lenders and title insurance companies are starting to get wise to this scheme and are making changes to try and discourage the practice. Most short sales I’ve been involved in require that everyone involved in the transaction complete an “arms length transaction certification” stating that we have no interest in the property of will profit in any way from the sale of the property.
It is interesting to see real estate news from other areas of the country and the Sarasota (FL) Herald Tribune recently published an article on how “flopping” impact the market in two local counties. They found 250 properties that sold multiple times at higher prices in 2009 and 50 of those were within 24 hours. The conservatively estimated based on questionable sales, banks netted $3.2 million less than what the properties sold for a few weeks later when they were flipped.
If you take that number and multiple nationwide you can begin to see that as taxpayers (lets face it we are the ones who are paying for this) are being swindled out of millions, excuse me make that billions of dollars by this latest flipping scheme. Somehow this starts to have a taste of some of the tactics that got the real estate market into trouble just a few short years ago.
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The New Deed for Lease Program Hits a Neighborhood Near You
November 8th, 2009 Categories: Real Estate Ramblings
Back in August 2009 I pondered Should a Distressed Homeowner Get to Rent Their Home Back from the Lender? when the first hints of the proposed “Deed for Lease “ program were announced.
This week Fannie Mae formally issued the “Deed for Lease” (D4L) program guidelines which allows qualifying homeowners facing foreclosure the opportunity to voluntarily turn in the deed to their home in exchange for the chance to stay in the property as renters.
Per Fannie Mae : “The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.”
Now anyone who keeps up with the news regarding loan modifications knows that the lenders have not been responsive to the “Making Home Affordable Program.” In fact a CNN report states: “Bank of America has only offered 4% of eligible homeowners trial modifications under the plan. Wells Fargo doesn’t fair much better at 6%. JP Morgan Chase is doing a bit better. Chase has provided 20% of eligible mortgages trial modifications, but when you think about it, saying 20% is better is actually pretty bad. That means 80% of eligible homeowners are not getting trial modifications.”
Think about this for a minute.
If one of the qualifications for the new D4L program is that homeowners have not been able to get a loan modification from their bank, does this mean that Fannie Mae is going to become the landlord for 80% of current distressed homeowners? Since this program is government backed it seems to me that every taxpayer in the US is about to become a part of the largest property management firm ever.
Recently my clients were considering offers on two short sales, when I asked the agent about the status of the process, the agents stated the homeowners were trying to work out a loan modification with their lenders. If they are unsuccessful will they now qualify for the new progam and stay in their homes versus completing the short sale? This could have an interesting impact on our local inventory and I wonder how many short sales may now be pulled off the market while more homeowners try to qualify for the new D4L program?
It seems we are only delaying the inevitable release of D4L properties back on the market as foreclosures. With the recent extension of the tax credit for buyers into April 2010 the timing of the D4L program makes no sense. Instead the homes will come on the market in 2011 when the tax credit is gone and the government will have to come up with yet another incentive to figure out of how to deal with a new glut of inventory.
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Sometimes you just need a little humor after a long day on the roads in Northern Virginia.
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Quick Guide to Extended Tax Credit for Northern Virginia Buyers
November 6th, 2009 Categories: Buyers Corner
I could recite the new extended tax credit to you or I could save us all time and link you to an official flyer.
Guess which route I’m going to take:
Extended First Time Homebuyers Credit
What isn’t shown on this flyer is the extension of the tax credit for military families. If you are active duty military or qualified government employee and have been stationed outside the US at least 3 months in 2009 you have more time to buy a home. If you meet the criteria you have until April 30, 2011 to settle on a new home. Now that is GOOD NEWS!
If you were sitting on the fence while all of the wrangling was going on in Congress now is your chance to get into the home buying mood. Buying a new home isn’t for everyone but if you have meet with a mortgage professional and you feel that you are financially prepared to make the plunge then give me a call.
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Northern Virginia homebuyers are you sure that pretty house you are in love with is all that it seems? A recent home tour uncovered a house that looked terrific. Granite counters, stainless steel appliances, beautiful bathrooms, large lot, great price. Everything that a Northern Virginia homebuyer is looking for. But hold on a second what about the permits and inspections for all of the beautiful remodeling work?
Sure enough a check of the Fairfax County Building Department finds permits issued and none of them with a completed status next to them. Out of all the permits pulled by electricians and plumbers we couldn’t find any that said the remodeling work had passed inspection. Since the property is being sold “as is” chances are that it might not even have an occupancy permit for the new owner to be able to move in.
It is an issue that buyers in Northern Virginia face everyday when they look to purchase a foreclosure or short sale. Since most of these properties are sold “as is” you don’t have many outs when it comes to discovering major defects.
If you see a home that is in the middle of a major remodel take a few minutes and check for building permits and inspections.
Prince William County Virginia
If you have questions most of the city and county government agencies are more than happy to answer them for you. Before you sign on the dotted line for your new home in Northern Virginia make sure you have looked deeper than the pretty bright lipstick. Hopefully you will find your dream home is all that you want it to be but if not you have saved yourself a lot of money and heartache.
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Recently it seems that agents have forgotten the basics of Virginia Real Estate Contract Law. It couldn’t be more clearly spelled out in Paragraph 10 of the Virginia Jurisdictional Addendum: “Notice to the Purchaser Regarding the Consumer Real Estate Settlement Protection Act. Choice of Settlement Agent. You have the right to select a Settlement agent to handle the closing of this transaction.”
Yet time after time listings agent will cross out your choice of settlement agent and insert theirs or state in the MLS you must use their settlement agent. Don’t be bullied by the listing agent. You are not required to use their settlement agent and if it means that you need to do a “split” settlement you can make that decision.
Why does a listing agent try and force you to use their settlement agent? The reasons vary. With short sales they may be working with the settlement agent as a negotiator and have promised to bring the settlement to their office. They could be working with a brokerage that has affiliated business relationships and it helps the brokerages bottom line. Or they could be a shareholder in the settlement company and receive an incentive to use the recommended settlement company.
So why should you care? In our current market making sure that the title work has been done, checked and double checked is critical. Assuring that liens have been released and foreclosures were filed properly are just part of the issues we see before we get to settlement. You might be surprised the number of time second liens or lines of credit with balances are discovered that the listing agent didn’t disclose. Working with a company that you know or your agent knows is reputable is key. You want to know that should there be a problem before the deed is recorded that they are going to work to resolve the issue for you is also important.
If you are buying a home in Northern Virginia and the listing agent tries to bully you into using their settlement agent, remind them of the wording in the Virginia Jurisdictional Addendum. Unless it makes sense for you then don’t feel as if you have to agree to their choice of settlement agent. It’s the law!
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