How does a Short Sale Effect Value
April 20, 2008 | Leave a Comment
One of the requirements of being a licensed agent is to successfully complete various continuing education classes during each year. Last fall I attended a class on “Understanding Appraisals”. The instructor for this class is an Atlanta Appraiser by the name of Scott Murphy. I found Scott to be extremely knowledgeable and he was more than helpful for the agents taking the class. Taking into account Scott’s experience and expertise, I requested his insight on the effects of a short sale on appraised values from an appraiser’s viewpoint. The following is Scott’s reply:
The effect on the market due to short sales is yet to be seen. Short sales are relatively new to the market. Many short sales will go to investors who know how to manage the complex and time consuming process. They will work the system to obtain the property significantly below market. They in turn will relist and sell the house at market value, much the same as the foreclosure process. These sales will hopefully self correct themselves. The sales that will be most damaging to the market are those which sell to owner occupants slightly below market value with full market exposure.
The true test to the validity of the sale and to determine if the sale is a true arms length sale would be its exposure to the market. Foreclosure sales are generally discarded because a lack of exposure to the market or they are significantly inferior in condition to other homes in the neighborhood. Short sales, on the other hand, are typically in similar condition to other homes in the neighborhood. If the home is multiple listed for a reasonable amount of time (IE: 30 days or more) it is then thought to have been adequately exposed to the market and may very well be an arm’s length sale. The effect these sales will have on the market will be determined by the exposure and the number of them in a given neighborhood. Most neighborhoods can support 1-2 short or distressed sales without altering values. When the number of short of distressed sales exceeds the number of arm’s length sales values will significantly decrease.
I want to thank Scott for taking the time to share his insight. His answer has brought up an even more thought provoking question, Are short sales in any way responsible for the declining markets as viewed by the various mortgage lenders? If so would they not be like a double edged sword, they cut the losses of the lender by foregoing a foreclosure but create a more difficult lending environment for purchasers because entire market areas are becoming classified as declining markets.
Short Sale in Atlanta
April 18, 2008 | 1 Comment
If you are having difficulty paying your monthly mortgage payment, you are not alone. Lenders got very creative, even greedy, while inventing mortgage programs that helped families buy their first home or refinance existing mortgages. Many of these programs were for buyers with no money for a down payment or for families with less than perfect credit. These loans were known as subprime loans. One of the most popular of these loan programs were the hybrid adjustable rate mortgage. A hybrid ARM has a low interest rate initially (a teaser rate) which is followed by significant upward adjustments during the remaining years of the loan. Other than lenders, declining or flat markets and tougher economic conditions have contributed to everyone having a more difficult time meeting our monthly obligations.
Recently a new phrase has come into the real estate market, not only in Atlanta, but throughout the nation. That phrase is a short sale.
What is a Short Sale
A short sale is when you have the ability to sell you home, but the proceeds from the sale are less than the actual payoff and expenses involved in selling the home. In a short sale, the mortgage company agrees to accept less than the payoff they are owed. A short sale is an alternative to foreclosure which may benefit both the lender and borrower. Typically a short sale is a better solution for the lender than foreclosure. If the lender had to foreclose on the property, they would be responsible for attorney fees, possible eviction costs, utilities and other various costs associated with a foreclosure. In allowing a short sale the lender may be able to reduce their losses compared to a foreclosure. One important point is that the lenders typically require documentation as to the hardship that has caused the need for a short sale.
What Hardships are Acceptable
Most mortgage companies require a hardship letter prior to discussing a short sale. The hardship letter should present the facts clearly and honestly and must provide the proof regarding the situation that caused the borrower to fall behind on their payments. The following hardships are frequently accepted by mortgage lenders:
- Job Loss or significant loss of income
- Divorce or Separation
- Excessive Medical Bills
- Death of a Spouse
- Military Service
- Adjustment in Mortgage Payment
How Does a Short Sale Affect My Credit
The late payments that lead up to the short sale will, as expected, have a negative impact on your credit. The main advantage to a short sale is avoiding foreclosure. A short sale should be less detrimental on a credit report than either a foreclosure or a deed-in-lieu of foreclosure.
The Mortgage Debt Relief Act of 2007
By signing H.R. 3648, The Mortgage Debt Relief Act of 2007, President Bush changed the tax ramification for anyone selling their home via short sale or owners who are renegotiating their mortgage. Prior to this legislation signed into law any shortage on a full payoff to a lender was considered taxable income.
Work With a Professional
If you are thinking about a short sale on you home, it is recommended that you meet with a professional and discuss you exact circumstances so that you can be given the best guidance for your situation. Working with a REALTOR® who knows how to talk with the Loss Mitigation Departments at the lender as well as being able to guide you on all the proper documentation required for a short sale will make this process easier for you. The actual documentation required by each lender can vary dramatically. To successfully complete a short sale transaction it is necessary for you to have all the elements documented and in place along with having an effective short sale strategy.
I will be happy to meet with you to evaluate your situation and discuss the options that are available to you. Feel free to contact me via email or phone.
Atlanta FHA Loan Limits Raised
March 6, 2008 | 2 Comments
So what exactly does the FHA do? The FHA provides mortgage insurance on loans made by FHA approved lenders throughout the United States. Since it inception in 1934 FHA has insured more that 34 million loans. Generally FHA loans are easier for buyers to qualify for as they do not have the more strict underwriting guidelines of conventional loans.
We have known that it was coming, we just didn’t know how high the limits would be raised. Well we got the answer today. The Federal Housing Administration, FHA, has increased the loan limits on a FHA insured home loan in Metro Atlanta to $346,250 up from $252,890, an increase of 27%.
This action by FHA should help spur the housing industry in the Atlanta market. Any home priced below $346,250 just became easier for more buyers to qualify for.
Atlanta Real Estate Conditions
February 27, 2008 | Leave a Comment
The Atlanta Real Estate Market has escaped from many of the problems that have affected other major markets. It has been pointed out that the resiliency of the Atlanta market is due to our sector being fueled by jobs and relocation rather than speculative buying as has happened in some of the condominium resort areas. Just how lucky are we? Below you can see one of the policies lenders have adopted that affect buyers in other areas of the county.
In certain areas of the country lenders have implemented what is called a “Declining Markets Policy”. In essence what this policy calls for is for buyers, purchasing property in what the lender has identified as a declining market, to increase their stake in the property. Most lenders are requiring the loan-to-value (LTV) ratio if one loan is being utilized or the combined-loan-to value (CLTV) ratio if multiple loans are being utilized to be reduced by five (5) percent. An example would be rather than being able to obtain 100% financing in a declining market, a buyer could only obtain 95% financing. The exception to this policy would apply for FHA and VA loans. For these government backed loans a second level underwriter review is called for, thus making qualifying more difficult.
Lenders are identifying the declining markets by both city and county in the various effected states. Several sources are being used to determine which areas are included. Standard and Poors Case-Schiller Home Price Indices, The Federal National Mortgage Association, The Federal Home Loan Mortgage Corporation, The Office of Federal Housing Enterprise Oversight Index along with statistics from The National Association of REALTORS are the most common sources used in identifying these areas.
Not only are there declining markets, but several of the lenders are also looking more closely at what have been identified as “Soft Markets”. While these areas are not as drastically affected, the lenders are requiring a second level underwriting review for soft market identified locations.
In the latest report I have been able to obtain, the Atlanta Market has not been identified as either a declining or soft market as defined by these lender guidelines. This doesn’t mean that the buyers market is gone. It just suggests that the Atlanta Market has not been as decimated as some of the other major metropolitan markets. Conditions remain favorable toward buyers with sellers making considerable concessions and interest rates remaining low. To find more information about Homes for Sale, just let me know what your requirements are. I am here to help.
Avoid Foreclosure-Temporary Loan Relief Alternatives
February 20, 2008 | 2 Comments
One of the most important duties that I have is educating my clients and future clients about various aspects of the real estate market in Atlanta. With the current economic climate and foreclosure being discussed on virtually every news broadcast, it is important for consumers that are experiencing financial difficulty to know what their options are. In the recent post about How To Avoid Foreclosure I mentioned that there are some temporary alternatives that do not result in the loss of your home. Let’s take a closer look at what they are.
Forbearance
Forbearance is an agreement between you and your mortgage company that temporarily allows you to pay less that the full amount of your monthly payment or nothing at all during the forbearance period. Generally the mortgage company will consider forbearance when you can show that funds from a bonus, tax refund or other source will allow you to bring the mortgage current at a specific time in the future.
Loan Modification
A loan modification is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your loan in order to make the payments more affordable. Common loan modifications would include adding missed payments to the existing loan balance, changing an adjustable-rate-mortgage into a fixed-rate mortgage or extending the number of years for you to repay the loan.
A Repayment Plan
A repayment plan is an agreement between you and your mortgage company that gives you a fixed amount of time in which to repay the amount that you are behind on your mortgage. In this alternative you actually pay your regular monthly payment and add an additional portion of the past due amount to each installment. At the end of the repayment period you have paid back the amount that was delinquent.
Reinstatement
Reinstatement occurs when you pay your mortgage company the total amount that you are behind on your mortgage in one lump sum. A reinstatement generally occurs in conjunction with forbearance.
Knowing what options are available to you is often times half the battle. In many situations the best and least expensive alternative will be through working with your current lender or servicer of your loan. If your current lender has no desire to assist you, let me know. I can help you find a responsible lender that will help you or show you additional alternatives.
How to Avoid Foreclosure
February 6, 2008 | Leave a Comment
During the housing boom homeownership grew at record levels. Mortgage brokers were making loans utilizing all kinds of exotic loan programs. There were interest only adjustable rate loans, option loans were the purchaser would choose from one of 4 different payment options and 100% financing programs just to name a few. As long as home values continued to rise these types of programs may have made some sense. Unfortunately the housing market has gone through a "correction". What this means is that home values in many areas of the country have not continued with the appreciation that had been experienced in recent years. Not only had the values not appreciated but they depreciated by as much as 20% in some areas. From a purely economical perspective, the rate of appreciation could not be sustained.
Your Not Alone if You Are Having Trouble
For homeowners who utilized some of these more exotic loan programs to finance their homes the adjustable rates are increasing and making the mortgage unaffordable. Some homeowners who had less than perfect credit were able to purchase homes using sub-prime loans. Sub-prime loans generally have higher interest rates, costs and may have started with lower initial "teaser rates" which were followed by substantial increases that have now made them unaffordable. The Center for Responsible Lending estimates that there are approximately 2.2 million American households that have or will lose their homes as the monthly payments increase on these adjustable rate mortgages.
What Are The Alternatives
So what alternatives are available to homeowners faced with these escalating monthly mortgage payments. If you had not heard of it before, recently everyone has heard of foreclosure. Foreclosure is the method by which the lender takes back property that is not being paid for as agreed. A foreclosure is one of the permanent alternatives for loan relief. Some other permanent alternatives would be assumption, a short sale (short payoff) or a deed-in-lieu of foreclosure. Understand that these permanent alternatives result in the loss of your home.
There are also temporary alternatives which do not result in the loss of your home. These alternatives would include a forbearance agreement, a reinstatement, a repayment plan or possibly a loan modification.
Get Help From An Expert
Before getting to a situation where the lender has no alternative, do yourself a favor and get with a real estate expert who can help you understand your options. Remember you are not alone, but you have to take action. If you are currently behind on your mortgage or expect a problem with maintaining your mortgage Contact Mack for a free confidential consultation to discuss your exact situation and options. This service is free for any homeowner in the northeast Greater Atlanta area.
Terrasol - New Homes in Gwinnett
January 31, 2008 | Leave a Comment
The name Terrasol is derived from the Latin terms for "Earth" and "Sun". How fitting for this earth friendly new community in the highly acclaimed Brookwood High School district of Gwinnett County. The community when complete will be comprised of 128 upscale single family homes, a community center, a free-form pool, play area, four ALTA approved tennis courts and an outdoor fire pit. As if that wasn’t enough, in keeping with the earth friendly theme of the community, more than 40% of the land will remain in its natural state and there will be a natural walking trail over a mile and a half long. The wooded home sites in Terrasol will be generous in size and many will border either the Yellow River or the over 30 acres of preserved woodlands.
Great Gwinnett County Schools
Children living in Terrasol are fortunate to be included in some of Gwinnett Counties finest schools. They will attend Gwin Oaks Elementary, Five Forks Middle and Brookwood High schools.
Developed By Vesmont
Terrasol is being developed by Vesmont, LC. In keeping with their commitment to environmentally friendly building practices, Vesmont will construct the amenity area and the community center utilizing EarthCraft building methods and design principles, much as they accomplished with their Oak Grove Preserve community inside the perimeter near Lakeside High School. Vesmont, LC is a real estate investment and development company that specializes in developing residential and mixed use communities for quality builders as well as today’s home buyer who is looking for a community-based lifestyle in an upscale home.
For more information about Terrasol and lot or home availability contact Mack.
Interest Rates in Atlanta
January 24, 2008 | Leave a Comment
The Atlanta Mortgage Market
The mortgage market in Atlanta, along with most other markets, has been extremely volatile over the last few days. Lenders have been publishing rate sheets then retracting them, adjusting interest rates up then down and even preventing brokers from locking loans for borrowers. Typically loan officers get rate sheets from the lenders mid morning each weekday. Since Tuesday rate sheets along with revisions have been coming several times each day. Hopefully some of the volatility has eased from the market.
Fed Cuts Short Term Rates
When the Fed announced on Tuesday that they were cutting the Federal Funds Rate by .75 percentage points the phones began ringing off the hook. What must be understood is that this rate cut is for the interest rates that banks charge to each other. This is for "Short Term" loans and a mortgage is considered a long term loan.
Is It Time To Refinance
In the mortgage business one of the most often asked questions is, Is it time for me to refinance? The short answer to this question is maybe. The better question would be, Is it time to meet with a qualified loan officer to discuss my options? The easy answer to that question is YES. Several documents that you need to have with you so that you can obtain the best advise are your most recent statement from your mortgage lender and your warranty deed.
If you are currently in an Adjustable Rate Mortgage (ARM) also provide the loan officer with the information about when you adjustment periods are along with the amount of the adjustment.
A Big Win For The Little Guys
Much of the recent news regarding foreclosures has centered around how the borrowers entered into Adjustable Rate Mortgages and when they began adjusting upwards the borrowers just could not afford them anymore. With the current rates being in the 5.375% range for a 30 year fixed rate mortgage, it makes perfect sense for any borrower in an ARM to seriously consider refinancing now.
Atlanta Real Estate Expert
January 20, 2008 | Leave a Comment
Now more than ever it is increasingly important for Atlanta consumers to be represented by an Atlanta Real Estate Expert. The landscape of the real estate market in Atlanta is rapidly changing and having an agent that is educated and understands the nature of the market can represent substantial savings both financially and emotionally.
Georgia Real Estate Contracts Change
The Georgia Association of REALTORS has just released the 2008 version of the forms that Georgia REALTORS utilize. And yes there are changes. The major changes came on the Purchase and Sale Agreement, better known as the contract. The legal description can now be attached as an exhibit which would apply to a meets and bounds description or the full legal description for platted subdivisions can be incorporated into the contract. Now for the biggy, the method of payment shall be all cash at closing! Does this mean that you can not finance a home in Georgia anymore, of course not. To protect a buyer with a financing contingency an agent must complete additional documents. While time frames have always been important, knowing how to use them to protect a client especially with the financing and appraisal contingencies now puts them at a premium. The inspection portion of the contract is now the "Due Diligence Period" and also includes the statement that it is the duty of the buyer to inspect the neighborhood.
The News Media Failed
The uncertainty in the mortgage market has gotten most of the attention recently from the news media. One thing the news has failed to cover is the fantastic opportunities available to buyers in this market. Whether new construction or resale it doesn’t matter, it’s a buyers market in Atlanta and consumers need an agent that understands how to do business in this enviornment.
John Wieland Homes Sale of a Lifetime
January 17, 2008 | Leave a Comment
Recognized as one of the leading builders in the southeast, John Wieland Homes will be offering buyers in Atlanta, Charlotte and Raleigh N.C., Charleston S.C., and Nashville, TN. what corporate President Eric Price is calling the value of a lifetime and one-of-a-kind in the home building industry.
Save Up To $100,000!
John Wieland Homes is offering up to $100,000 in savings along with a lifetime structural warranty on every new home whether it is existing inventory or being contracted to be built. So what’s the kicker? Well just like every good retailer all sales, especially one titled "The Sale of a Lifetime", doesn’t last forever. Buyers must take advantage of this sale from January 25th through February 3rd 2008.
About John Wieland Homes
John Wieland Homes was founded by John Wieland in 1970 and currently is building in 60 neighborhoods in the southeast. In 2005 the company won the building industries top award when named "America’s Best Builder". Today they offer a wide variety of floor plans in both single family residences and townhomes ranging in price from the $200,000s to over $1 million.
