With the expiration of the home buyer tax credit, some are worried that the real estate market will cave in. I don’t think this is the case. My article of April 20, 2010 detailing the First Quarter 2010 Atlanta Real Estate Market shows that compared to the same time period in 2009, the Atlanta Market is improving. As fact would have it new construction is actually rebounding as well.

When 100% financing options went away(except for VA Financing) what happened… the sun still came up the next morning, the market still did business and yes there remained a need for qualified REALTORS to assist buyers and sellers with their real estate needs. Look what happened when the “Cash for Clunkers” program expired…automobile sales took off like a rocket shot and the manufacturers began looking toward profitability.

Let’s Look at the Facts

The First Time Buyer Tax Credit was put into place to help stimulate the national real estate market in 2008. Real estate had just been through one of the most severe downturns in history. The tax credit was continued through 2009 and in November of 2009 an additional category was included that would benefit current homeowners (in certain circumstances) with a tax credit also. When Congress extended the first time buyer tax credit and included the current owner category in November 2009, they made it clear that the program was not going to be extended again. This is not to say that there will never be another program like this, but at midnight on April 30, 2010 this program is gone.

Alternatives

While there are alternatives that are not tax credits, they do assist First Time Buyers with the purchase of a home. There are down payment assistance and grant programs from the various counties as well as the State of Georgia. For information on these programs please get in touch with me and I will assist you.

Amazing Deals Exist

Even though the Atlanta Real Estate Market is recovering, amazing deals still exist. Short Sale opportunities as well as Foreclosure and HUD properties are fairly prevalent in most areas and represent an excellent opportunity for buyers and savvy investors to snatch up a steal of a deal on a home. Do you fit into one of these categories? Just let me know and we can start locating your dream home immediately.

This article is being published in an attempt to help put into layman’s terms some of the verbiage in the directives associated with the Home Affordable Foreclosure Alternatives Program. I hope it helps.

Possibly one of the least successful programs the federal government has ever instituted is the Home Affordable Modification Program, known to some as HAMP. This program along with the Home Affordable Foreclosure Alternatives makes up the current Making Home Affordable initiative from the government. The purpose of HAMP was to provide an avenue for homeowners to refinance their mortgage to make the monthly payments more affordable. It seems as though the lenders tightened their lending practices just about the same time that the HAMP program was launched. Recent news reports have stated that as few as 5% of eligible home loans have received a permanent modification. The latest report of the HAMP Program from March 2010 shows a total of 230,801 permanent modifications have been done since the program’s inception in early 2009. At this rate it will take about 25 years for eligible loans to get modified. The requirements for a HAMP loan modification are as follows:

•    Homeowner desires to keep their home
•    The mortgage loan must be for the homeowner’s primary residence.
•    The mortgage must have been originated prior to January 1, 2009.
•    The amount of the loan should be $729,750 or less
•    If the account is not in default, the homeowner must be able to demonstrate imminent danger of default, which can include providing proof of a financial hardship, job loss, etc.
•    The payment on the first mortgage (second liens do not qualify for the program) must be more than 31% of the homeowner’s gross income. This includes principal, interest, insurance, taxes, and HOA fees. The gross income includes all borrowers, if more than one person signed the note.

The reason for starting this article with HAMP information and requirements is due to fact that in order to be eligible for the HAFA Program, a seller must first be HAMP eligible. The HAFA Program went into effect on April 5, 2010 and is due to expire on December 31, 2012. Where HAMP is designed for homeowners who desire to remain in their home HAFA is for homeowners who, due to the declining market and current economic conditions, desire to “Short Sale” their home or provide the lender with a “Deed in Lieu of Foreclosure”. HAFA is not for FHA, VA, Fannie Mae or Freddie Mac backed loans. To find out if your loan is eligible you must contact your servicer. HAFA requirements state that the homeowner:

•    Must be HAMP Eligible
•    The home must be the Primary Residence
•    The loan must have been originated before 01/01/2009
•    The loan must be in default or be reasonably suspect of going into default
•    The loan amount must be under $729,750
•    The monthly payment must exceed 31% of the homeowners Gross Income

HAFA vs. Traditional Short Sale

In a traditional Short Sale transaction everything is a guess regarding price and terms. The seller, homeowner, may agree to specific terms and conditions only to have the lender reject the transaction. With a non HAFA transaction the property would be marketed, then an offer received and then the waiting game, some of which we have seen go longer than 6 months, begins. See the timeline below for more information on HAFA timelines. With a HAFA transaction most of the waiting time is spent on the front end of the sales process prior to an offer being presented.

With a HAFA transaction the price, the closing costs contributions by the seller along with other variables are established by the lender. The lender is then bound by these terms for 120 days. Buyers will know the terms of the purchase from the start rather than having to play a wait and see game. This fact alone should help shorten the timeline for prospective buyers and hopefully eliminate those horror stories we have heard about regarding the amount of time involved in getting a short sale closed.

How to Get Started With HAFA

Even if you have not applied for or been contacted by your lender regarding a loan modification, to begin the HAFA process you start with the Request for Modification and Affidavit. On this form you will fill in the basic information paying special attention to the “Hardship Affidavit” section of the form. You should attach documentation showing that the monthly payment on your home exceeds 31% of your gross monthly income.

Benefits of HAFA for Sellers

HAFA provides some very special and important benefits compared to the traditional short sale for the homeowner who is facing foreclosure.

•    Seller is released of all liens
•    Shortened timeline after the receipt of a contract
•    Seller gets a $3,000 relocation allowance
•    The lender is bound by the established price and terms for 120 days

Disadvantages of HAFA for Sellers

While the upside seems to outweigh the downside of a HAFA transaction it would be inappropriate not to disclose the disadvantages also. As we see it the disadvantages for the Seller in a HAFA transaction are as follows:

•    Must be an arm’s length transaction
•    The Seller may have to pay taxes on the debt forgiven and the relocation allowance
•    Reporting to the major credit bureaus that the mortgage was settled for less that the full payment
•    You must have clear title to the property. Second lien holders must agree to a substantial short payoff. If a second position does not agree then all of this work has been for nothing
•    If you sign the standard Short Sale Agreement as it is written you are agreeing that if the home does not sale in the 120 day time period, you are agreeing to a Deed-in-Lieu of Foreclosure

Seller Responsibilities

In a HAFA transaction the homeowner is responsible for several items regarding the home:

•    All property maintenance both interior and exterior
•    All Utilities
•    Any Assessments
•    Association Dues
•    Maintain Insurance on the property

HAFA Timelines

In any real estate transaction timelines are an important part of the documentation required to achieve a successful closing. Timelines in HAFA are no different. Let’s look at the timelines in a HAFA transaction:

•    Lender responds to Request for Modification and Affidavit….No Specific Timeline
•    Seller and Broker respond to Short Sale Agreement(SSA)……14 Calendar Days
•    Seller responds to Alternative Request for Approval of Short Sale….14 Calendar Days
•    Request to Approve a Short Sale(RASS) 3 Business Days from receiving an offer
•    Lender response to Request to Approve a Short Sale………….10 Business Days

Important Certifications from the Seller

There are several very important items that as the seller you must certify. Under penalty of perjury you certify that:

1.    This is an arm’s length transaction, between the parties who are unrelated and unaffiliated by family, marriage or commercial enterprise
2.    There are no agreements or understandings between you and the buyer that you will remain in the property as a tenant or later obtain title or ownership of the property
3.    Neither you nor the buyer will receive any funds or commissions from the sale of the property
4.    There are no agreements or offers relating to the sale or subsequent sale of the property that have not been disclosed to the Servicer

Is That All

My intention is to present as complete an overview as possible and put it in layman’s terms for everyone to understand. I feel certain that with the HAFA Program having just launched that there will be changes as the program evolves. I will attempt to keep you posted as I become aware of changes to this program.

If you are in a situation where it may be necessary for you to short sale your home and would like free no obligation counseling on your options, feel free to give me a call or contact me by email. I will do everything I can to assist you through this difficult time.

Many times in this wonderful world of real estate home sellers are led down a path that looks oh so rosy yet does absolutely nothing to help get the home sold. What I am talking about is the agent that will over price a property, building up the seller’s hopes, and put the homeowner in a position of having to try to chase the market. I attended a seminar several years ago where the instructor stated that if you price a home high it’s OK because you will be the one who gets to reduce the price. I totally disagree with this philosophy. With all the information available to buyer’s being at the click of a mouse so to speak, it baffles me why a professional REALTOR would put a client through this nonsense.

Let me give you an example of what I am referring to. This is a true account of an actual listing that started out with a discount broker and has evolved with no success for the seller.

•    5-1-2008 Property listed at $530,000
•    6-13-2008 Price reduced to $480,000
•    9-6-2008 Price reduced to $425,000
•    10-29-2008 Listing Expires
•    1-23-2009 Property is relisted at $389,000
•    7-23-2009 Listing Expires again
•    7-24-2009 Property is relisted this time to a reasonable $339,000
•    8-31-2009 Seller withdraws listing from the listing service 38 days into a 6 month listing contract
•    9-2-2009 Seller relists the property with a different agent for $359,000

Do you see what I mean about chasing the market? This seller was led down the primrose path initially and then once they reached the reasonable list price of $339,000 elected to change agents after 38 days into the third listing period and raise the price by $20,000.00. Will they be chasing the market again? A buyer’s agent will be able to show their client this entire detailed chronology for this home. If you were the buyer what offer price would you make? Would it be over $339,000? If I were representing the buyer I don’t think I could advise them to offer anything above $339,000 and I would probably suggest less. How much money has this seller lost in over 16 months of a declining market? Not to mention at least 16 months of payments and taxes on a property they obviously want to sell!

Real estate is local and values as well as markets differ all across the nation however one thing is constant, if your home is overpriced it will not only not sell but it will not appraise (which brings up a totally different set of circumstances). So now it is time to answer the all important question of “Who is the best agent to sell my home”. I think it is safe to say that the best agent to help sell your home is the one that will provide you with the truth about the value (It may or may not be what you want to hear) and provide you with the maximum exposure (Multiple website exposure on both local and national sites).

Here is an offer for anyone in the Atlanta Real Estate Market, if you elect to have me represent you in the sale and marketing of your home we will obtain an appraisal in order to establish the list price and I will reimburse you for the cost of the appraisal when we close the sale of your home. Does this sound fair to you? Let me know what you think.

It’s that magical time of the year. You guessed it; magically the sun will begin to come up an hour later and will set an hour later than in the last few days. Yes it only comes twice annually and the spring forward portion will be arriving this Saturday Evening. So here we go, it’s time for your friendly semi-annual time change announcement. However for this one I have decided to add a bit of a twist. How about the top ten list of things to do for the time change?

1.    Set your clock forward one hour prior to going to bed Saturday Evening
2.    Change the batteries in your Smoke detector
3.    Change the batteries in your Carbon Monoxide detector
4.    Change the filters in your HVAC System
5.    Vacuum the vents and returns on your HVAC system
6.    Check for the expiration date on your fire extinguisher
7.    Replace the baking soda box in your refrigerator
8.    Verify the time and date settings on your computer and fax machine
9.    Call 10 neighbors and remind them of items 1 – 8
10.     Visit one elderly neighbor and help them with items 1 – 8

So there you have it, this year’s “Spring Forward” top ten things to do list. Have fun with it and help your neighbors.

The Isakson/Lieberman Amendment

News out of our nation’s capital is providing perspective buyers with reason to celebrate and look ahead in the housing market. We have all heard of the “American Recovery and Reinvestment Act” that President Obama wants enacted immediately. An amendment to benefit buyers of primary residences was introduced by Senator Isakson (R-GA) and Senator Lieberman (ID-CT).

Comments from Senator Lieberman, “The rapid decline in housing prices lies at the heart of the economic crisis.”  “Real economic growth will not resume until housing values stabilize and American families once again have faith and confidence that the most valuable asset they own – their home – is safe and secure. This kind of credit could repay dividends many times over by increasing housing values, creating construction jobs, and generating state and federal tax revenue.”

The amendment was met with bipartisan support and was approved. The important provision in the amendment was the establishment of up to a $15,000 tax credit for buyer’s purchasing their primary residence.

How Does It Work?

The calculation for how to determine how much your tax credit would be is performed in this manner. Your will get a tax credit for 10% of the purchase price of the residence up to a maximum of $15,000. One of the nice provisions of the amendment is that the tax payer may choose to take the credit all in the first year or it can be split between two (2) years. One very positive feature, as opposed to the First Time Buyer Tax Credit of last year, is that this tax credit does not have to be repaid.

What Is The Timeframe?

Upon enactment of the legislation a buyer will have one year in which to complete their purchase. This sounds like a long time but in reality now is the time to start looking. The housing inventory is at a peak and your best selection for that home that meets your exact requirements may be right now.

What Are The Drawbacks?

The only drawback or downside to this amendment is that if the residence is sold or is not utilized as the primary residence in the first two years, the tax credit must be repaid. There are of course circumstances where this repayment would not apply.

Last week, while attending a continuing education class, I along with the other attendees saw on a listing the classification for a HERS Index. One student in the class asked, what is a HERS Index? No one was able to answer the question. As is usually, when a question like this arises there will be research done and a blog post to follow that answers the question. This is no exception.

After doing a Google search, the first site that I visited in my quest for information on a HERS Index/Rating was the Energy Star site. What I found was that a HERS rating is a scoring system that involves an analysis of a homes construction plans along with on site inspections and testing. Upon review of the plans the “Energy Rater” uses an energy efficiency software package to analyze the design of the home. The Rater will then make recommendations to the builder that will identify energy efficiency improvements that will ensure that the home will meet Energy Star performance guidelines.

Onsite inspections are made by the “Energy Rater” along with the input from the original plan review are used to generate the HERS Index. The on site inspections typically include a blower door test that tests for leaks in the house and a duct test that test for leaks in the duct work.

So now we know what HERS stands for: Home Energy Rating System.

But What Do The Numbers Mean?

Based on the 2006 International Energy Conservation Code, a home built to these standards will have a Hers Index of 100. The lower the Hers Index the more energy efficient the home is. A 1 point decrease in the HERS Index equals a 1% saving in energy consumption compared to the standard. A home with a HERS Index of 85 would be 15% more efficient than the standard.

Who Does The Testing?

The second site that I went to while searching for information was the Residential Energy Services Network (RESNET) site. From their site we get the RESNET Mission Statement:
•    The Residential Energy Services Network’s (RESNET®) mission is to ensure the success of the building energy performance certification industry, set the standards of quality, and increase the opportunity for ownership of high performance buildings.

Certified Rater’s must complete training by a RESNET Accredited Training provider and pass a test to be certified. After certification, the Raters then begin their work of examining plans and helping builders construct more energy efficient homes.

Did you think the holidays are over? If you closed on your new home last year then not quite yet. If you closed on your new home in the last calendar year, or perhaps you haven’t filed yet, you have one more present. That’s right, you guessed it, you get to file for your Georgia Homestead Exemption and save a little money.

So you closed on your new home last year. Congratulations! If you purchased new construction you get to be the first owner to file for the Homestead Exemption. If you purchased a resale property, you probably enjoyed the previous owners Homestead Exemption but now you need to file for yourself. The process is very easy and most counties in the Greater Atlanta area have everything you need online. This is one of the few tax reducing benefits that remain for us homeowners. Sorry I said the “T” word.

So if you haven’t already filed for your Homestead Exemption, get busy it will save you some $$$.

As was stated in Part Three, everything about a Reverse Mortgage can’t be just perfect. There have to be some aspects of a Reverse Mortgage that may not be as desirable as on other mortgage products. Let’s examine what some of the downsides and pitfalls may be.

High Fees and Closing Costs

Fees and closing costs are higher on a Reverse Mortgage compared to a forward mortgage (Standard Mortgage with Monthly Payments). Each Reverse Mortgage has a one time 2% charge of the appraised value from FHA that goes into a pool of funds, much like a one time Mortgage Insurance payment. Reverse Mortgages also have a one time charge for monthly servicing of the loan. With a forward mortgage this fee is collected monthly and hidden in the payment. Origination Fees along with Attorney Fees and all other fees to close a loan remain in effect. A counseling fee has to be paid as HUD requires all applicants to obtain counseling prior to the lender processing the loan. On the bright side of most of the fees and closing cost associated with a Reverse Mortgage, the borrower is not paying them in the form of cash they are being rolled into the loan. The best way to evaluate what kind of fees and closing costs would be involved in a Reverse Mortgage for you would be to schedule a consultation with Qualified Atlanta Reverse Mortgage Lender.

I’m Spending My Kids Inheritance

With a Reverse Mortgage you are utilizing the equity in your primary residence as opposed to leaving it to your heirs. Of course the strong likelihood of appreciation exists for the residence thus leaving a situation where there may be equity for the heirs to divide.

Property Taxes and Insurance

If you had a forward mortgage on your primary residence and paid your property taxes and insurance through an escrow account you will now be paying those bills yourself.

Limits on Reverse Mortgage Amounts

Remembering from Part One in this series, Reverse Mortgages are an FHA product and are thus regulated and controlled by FHA loan limits. Currently that figure is $417,000. There are rumors that the possibility exists that there will be Jumbo Reverse Mortgages available in the near future. While I don’t know this to be fact or fiction I am just letting you know what I am hearing.

Possible Problems With New Construction

Newly built properties must comply with FHA minimum property requirements, the Certificate of Occupancy must be issued, if the residence is a Condo the Homeowners Association must have been in control of the association for 1 year and any loan that financed construction must be paid and the Reverse Mortgage assumes the first position on the residence.

Possible Problems With A Refinance

When utilizing a Reverse Mortgage for refinancing your primary residence there will of course be an appraisal performed. If the appraiser determines that major repairs need to be made, funds from the Reverse Mortgage can not be drawn upon until these repairs are completed. These needed repairs can be handled in one of several ways:
1.    Completed Prior to closing with borrowers funds
2.    Completed After closing with a Repair Rider to the Reverse Mortgage
3.    Completed After closing with funds escrowed at closing

I hope you are finding this educational series on Reverse Mortgages helpful. Just doing the research has been a huge educational experience for me. I have one more part planned and that will be a FAQ (Frequently Asked Questions) unless you as the readers have topics that you would like for me to research for you and report here. Let me hear from you, So until Part Five….

Before we dig any deeper into Reverse Mortgages lets review what we have covered so far. In Part One we found out what a Reverse Mortgage is, what the requirements are for obtaining a Reverse Mortgage, how not to be taken advantage of and using a Reverse Mortgage for the purchase of a home. In Part Two we examined some important questions to ask yourself about your financial health and we looked at some possible ways to use a Reverse Mortgage to your advantage. To aid with understanding how a Reverse Mortgage can work let’s look at a couple of examples.

Using A Reverse Mortgage For A Refinance

John is 77 years old and his wife Mary is 75 years old. They currently live in their $200,000 home that has a remaining balance owed of $75,000. Their current payment is $825 per month and their income is $2,200 per month from Social Security. Upon interviewing John and Mary, their loan officer establishes what their goals are and what they would like to accomplish:

•    They want to remain in their home
•    They want to have money available for a few repairs on their home
•    They want to eliminate their current mortgage thereby increasing their discretionary income
•    They want to have funds available in case of an emergency

Based on their age, John and Mary qualify for a Reverse Mortgage in the amount of $142,000. Subtracting the remaining balance owed on their current mortgage along with all the costs associated with closing the loan, John and Mary will have $55,348 available for repairs or emergencies, will never have to make another payment on their home as long as they live there and feel as though they just received an $825 per month raise. In fact they just received that $825 increase by keeping the monthly house payment they were used to making for themselves. SWEET!

Using A Reverse Mortgage For A Purchase

Mr. and Mrs. Smith, aged 77 and 75, are in the process of relocating to Atlanta to be closer to their daughter, son-in-law and their grandson. They have sold their very nice home in Oklahoma and have net proceeds of $200,000. They have asked their Atlanta Buyers Agent to help them find a home close to their daughter for $200,000 or less so that they will not have a mortgage payment. Their daughter happens to live in a very nice area of Gwinnett County and homes in the $200,000 range close by are not common. Fortunately the Smiths were working with a REALTOR who was also educated in the advantages of a Reverse Mortgage. After obtaining all the information and scheduling a consultation for Mr. and Mrs. Smith with a loan officer, it was determined that they would be able to purchase a $400,000 dollar home that kept them in a similar lifestyle that they were accustomed to. They would only have to use $127,000 of their proceeds for their downpayment with the balance of the purchase being financed via a Reverse Mortgage. The Smiths are able to keep part of their proceeds, live in a much nicer home than they anticipated and now can spend more quality time with family.

What To Expect in Part Four

It sounds as though a Reverse Mortgage is the greatest thing since sliced bread and for some that is true. In Part Four I think we should examine some of the pitfalls and downsides of a Reverse Mortgage. So until then…..

In Part One of this series we examined what a reverse mortgage is, what you need to do to qualify for one, the code of ethics a respectable lender will adhere too and being able to use a reverse mortgage to purchase a home. In this article let’s dig a bit deeper and examine how to use a reverse mortgage to your best advantage.

Questions to Ask Yourself

Having reached the age requirements to qualify for a reverse mortgage and coming close to retirement time you need to look at your financial health and determine what kind of impact retirement will have on your lifestyle. Will you have a retirement income from your employer? Will you be funding your retirement totally on your own from your investments? How will Social Security benefits fit into your future? Do you have a combination of these possibilities? The main question becomes, when I retire will I have the funds that I need to maintain my lifestyle? A reverse mortgage can help with the funds that you may need!

Ways To Use A Reverse Mortgage

Let’s examine a few of the possibilities for ways to put a reverse mortgage to work for you. One of the most common advantages to a reverse mortgage is providing the recipient with a supplemental monthly income. Recalling from Part One, one of the ways for you to receive you funds from your reverse mortgage is via monthly payments to you from the mortgage company. These can be set up as a fixed amount that is paid to you monthly for as long as you live in the house. So if retirement was not looking like it would be in your future any time soon due to monthly financial requirements a reverse mortgage may well solve your problem. Make certain to talk with a qualified Atlanta Reverse Mortgage lender along with your tax advisor or financial planner to determine what is best in your exact circumstances.

Let’s say that you have retired and your combination of employer funded benefits, your investments and your social security benefits provide you with ample funds to sustain your lifestyle but you have always wanted that vacation home at the beach or in the mountains. In order to obtain it prior to reverse mortgages you had to either pay cash from your funds or take out a loan that required a monthly payment. Consider that now you may be able to obtain your vacation home utilizing a reverse mortgage. By accessing the equity of your primary residence with a reverse mortgage you may be able to purchase your vacation home for cash while not having a payment on your current home. How about that, 2 homes with no payments is a real possibility.

Perhaps a vacation home is not for you. Well that’s OK also. Maybe you just want to modernize and update your current home. Finally having that dream kitchen with granite counter tops and replacing those avocado green or harvest gold appliances with stainless steel ones is what floats your boat. Guess what that is OK. Maybe you have decided that you want to help pay for your grandchildren’s education. As a parent that went through that process several years ago, I can tell you it would be greatly appreciated. Perhaps you just want that new luxury car that has been crying out to you for years. Well you could do that too. This is in no way a complete list but I think you can see there are limitless ways for you to put a reverse mortgage to work for you.

Stay tuned over the next week or so for additional articles in this series about Reverse Mortgages in Atlanta.