Do a Short Sale or Apply For a Loan Modification?

A short sale is when your lender allows you to sell your property for the current market value (or a price agreeable to all parties) that is less than your current mortgage balance. The difference is usually split between the lender and borrower (percentages vary) via a 1099, promissory note, or with cash contribution from the borrower. A short sale is only a viable option if you are looking to move out of the property. But what if you want to stay but you cannot afford the current mortgage? That's when the dreaded loan modification is your only hope.
Loan modifications--a new way to elevate your blood pressure. More than half of the clients who hire me to assist them with facilitating a short sale have tried to modify their loan with their current lender--often to no avail. They borrower is forced to provide tons of paperwork, wait for months on end only to get declined or they receive an unreasonable proposal. The proposals given to consumers from their lenders range from a small reduction in payment to an increase in the payment!!! The truth is banks do not make it easy to do a loan modification and seem to only be interested in meeting federal guidelines of providing clients with a proposal or a decline to meet the requirement that they have to do one or the other, whether it makes sense or not, within a certain time frame. The phone conversations with condescending customer service representatives are enough to make anyone irate. The best option is to use third party companies like NACA to successfully get an affordable payment option. The process is simple, but not a fast one. On average it takes 6-12 months, but in some cases the lender will suspend foreclosure attempts while a borrower is in the loan modification process. I have personally used NACA for a loan modification, represented one of their borrowers in purchase and another in a short sale. There are other outfits that assist with short sales, however, any that require money to begin the process are a SCAM! Use only a HUD approved counseling agency. This way you can be sure the company is legitimate.
Some lenders will require that you contact one prior to allowing you to do a loan modification.

Flopping. The new method of flipping in the housing market

So you've heard about and seen shows about 'flipping' houses. Buying distressed homes at a steep discount below market value, fixing them up, and then re-selling them for a profit. This is common and easy to do in a home market where values are stable and increasing. While it can be good to get rid of properties that are eyesores and make a transitional, 'up-and-coming' area desirable, it opens the door to fraud. Fraudulent appraisals and inflated home values cause over saturation of properties and are followed by a steep decrease in property values (reference the 2008 real estate market) which causes a 'down' market. Since we are currently in a market where values are declining and slightly stable in some affluent areas (Sandy Springs, Johns Creek), the opportunity to flip remains, but if you're not an investor with cash on hand, the competition is stiff and the loan products available are not as favorable as they once were with 15%-20% down payments. You also have most homeowners owing more on their homes than they are worth and some in the process of losing their homes so short sales are all the rage. This has opened up an opportunity for investors to 'flop' properties.

Flopping is when an investor purchases a home from a homeowner through a short sale and then turns around and sells it for a profit. Sounds like an okay deal right? Well in some cases, investors are purchasing the homes and then re-selling them the same or the next day without even doing anything to them and not disclosing this to the seller's lender or the new buyer. That is where you have fraud.

I personally had a transaction on a Snellville home where the short sale was advertised as being investor owned. We submitted an offer, negotiated the price, went under contract, and completed the home inspection. When the title was ran, it showed that the owner of the property was a different person than the seller on our contract. We discovered that this investor (with help from the listing agent) had the home under contract with the bank at a short sale price ($80,000) negotiated with the REAL seller. The agent then marketed the property at $10,000 below market value and got a contract with my buyer at $115,000 ($15,000 below market value). My client's lender would not lend on a property that had not been owned by the seller for at least 91 days. We terminated the contract when we discovered the shady dealings of this agent.

Understand this, flopping cannot happen without a third-party facilitating the process with the seller's lender. In most cases, it is the listing agent who is in collusion with the investor. Even if the agent discloses that the investor is 'flopping' the property, it is an illegal practice because the listing agent's duty should be to sell the property to the investor ONLY. Once the investor purchases the property, they are free to do with it as they please (unless a deed restriction is in place)---even use the same agent to re-sell the property at a profit. The problem is when the agent is mis-representing the sale as being a short sale for a distressed homeowner, when it is really a 'flop' to an investor who usually pays the agent a kickback or percentage of the profit made. Also, no lender would co-operate with a short sale if it is disclosed that the purchaser is intending to immediately re-sell the property for a profit. In this case, the listing real estate agent has to be aware of the investors intent in order to facilitate a short sale like this so it's flat out wrong. Things to look out for are any extra addendums or documents required for you to sign that outline a legal entity (S-corp,trust,llc.) as the seller or a name difference of the name on title and the seller of a contract you have in place. There was a recent article of house flopping on MSN News. The biggest dangers to home buyers are the risks of losing earnest money if their loan cannot progress due to the title issue, the time wasted pursuing a property that would not work in the first place, and being accused as an accessory to real estate fraud if the original seller's lender discovers that all parties involved were aware of the 'flop'. Real estate fraud is a hot topic and sensationalized on the news so I'd rather my 5-minutes of fame on a more positive topic. Thank you.

Strategic Foreclosure

Strategic foreclosure has become a HOT topic as of late. With property tax assessments coming out (forcing homeowners to see the neighborhood values), property values still dropping in some areas (3 years before we see any bottom in my opinion), interest rates under 4.5% (WOW!), and aggressively priced, rehabbed foreclosures looking good (Fannie Mae is setting the trend) it makes a homeowner wonder, "Should I just let my home foreclose instead of dumping payments into a black hole?"

The reality is that some of us (yes I'm in that group too!) may NEVER see our current loan balances match our property values in the next 7-10 years. Those who purchased in 2006-2007 with 100% financing have the extra pain of buying at the peak of the market so they are even more upside down. Once you get over the anger of the values dropping, get through the anguish of thinking of 'wasting' money on a depreciating asset, and get a grip on what you need to do next, you need to figure out what you want to do and what you are able to do. Let's look at some popular options:

1. Allow the home to foreclose and down-size to rental for 5-7 years.
2. File a bankruptcy including the home and purchase another home in 2 years.
3. Buy a new property and let the old property foreclose.

Any route you go, you need to know what it takes to cover yourself from any deficiency judgements from your current lender. Also, if you plan to buy again, to know exactly what you need to do following the foreclosure. I've always felt that you should look at it as a business would look at an asset and take all of the emotions out of play. Here is the best synopsis I found about strategic foreclosure:

"Society has put a stigma on foreclosure. If you foreclose on your house, that means you are a deadbeat loser who won't pay their bills. Society has turned what is in essence a business and financial decision into a black mark against the character of the person themselves. It is important to understand that having a foreclosure is not an indication of your character as a person. Life can happen. Medical bills and emergencies arise. Step back from the emotional aspect and look at the situation from a business perspective. No one wants to foreclose on their house. Sometimes, it is unavoidable." (link to full article)

Want more house for the money? Retail & Real Estate

Outside of school districts, retail is a very close second to what drives property values in metro Atlanta's suburbs. Once you get past that your commute will suck no matter where you live (sad but true), how you much time you spend driving to do errands will become the lesser of two evils.

Alpharetta started the trend when Northpoint mall was created. This mall anchored out parcels and blocks of retail which turned into streets of bustling retail. The housing market around it benefited and still does to this day. It lessens the blow of how GA-400 is the only way in & out of Alpharetta because there isn't much you need to leave the city for outside of a museum or the fox theater. Gwinnett piggy backed on that idea by adding 2 malls (Discover mills & the behemoth Mall of Georgia) to compliment Gwinnett Place mall. Gwinnett took it a step further adding the Gwinnett arena, Braves minor league stadium and the Park of Suwanee which rivals Centennial Olympic Park. This retail growth has brought both counties other big box retailers (best buy, WalMart, home depot, etc.) that add to the surrounding retail.

Douglas & Clayton counties never quite grasped that idea. In the boom of 2000-2004 a lot of new construction went up in these counties. Lower prices & property taxes began to lure potential home buyers as values began to rise in the competing counties. The problem came when the buyers flocked to Clayton, Henry, & Douglas county, they soon discovered a simple Saturday of running errands involved a lot more driving than they were used to. Coupling that with buyers noticing that they were shopping where the moved away from!

With gas not being your wallets best friend right now, it's definitely a factor to consider when thinking about moving to a certain county to get more for your money. You could be giving that money back in gas and patience with every trip to the store!

Tips on finding a good deal---that REALLY work!!!

In a buyer's market, finding a good deal is what every buyer entering the market demands. With a glut of foreclosures entering the market monthly (roughly 11,000 homes monthly), lingering short sales, and stale re-sales, it actually makes it more difficult to find one because you have so many choices. If you are unable to filter through properties you can end up wasting precious time on homes that aren't worth your energy and missing out on real deals. So after reading my last blog on how to spot a good deal, now you just have to know how to FIND one.

NARROW YOUR SEARCH

You need to have a target in mind as broad as a zip code and as specific as a subdivision. This will enable you to keep a sharp eye on new listings as they enter the market. If your search is too broad, you will likely miss out on deals because you're busy looking in other areas. People wonder how a house can be on the market only a few days and already be under contract; that usually happens when buyers have been scouting an area and notice a sign go in the yard and they inquire (and even make offers) immediately. Some agents will post a sign prior to a home being listed on the MLS.

LOOK OFF THE BEATEN PATH

The very popular communities usually have the lowest possibility of finding a 'steal' because EVERYONE is looking there. These sellers know this so they will either have higher entry level prices or under price a home to create a bidding war (yes, even in a buyers market multiple offer situations are all too common). Some surrounding areas with less traffic will usually yield better prices, less competition, and still have the same location benefits/perks.

FIND A GOOD AGENT

Locating a good agent can be the difference in locating and successfully purchasing a phenomenal deal. Some agents specialize in certain neighborhoods, areas, & even school districts so not only do they know all of the current inventory, but they also may have insight to homes entering the market. Even if the agent doesn't specialize in a certain area, with the right amount of internet savvy (imperative for today's market) they can set up custom searches that locate these hot properties the second they enter the market.

Using these tips will definitely land you a good deal in any market. But remember this, with values so depressed now, whatever you purchase is still a good deal in the long term as values will eventually stabilize and increase. Maybe not to the 2007 values, but at least 30% than where we currently stand in this current market.

A GOOD DEAL. Would you know one if you saw one?

Chances are if you are currently looking for a home, or know someone who is, everyone is looking for a steal of a deal. In this market, there more deals than ever before and some purchasers are finding once in a lifetime opportunities. But what about you? Chances are, you wouldn't know a good deal if it fell in your lap! Here's how you know when you have a golden opportunity on your hands and it's time to make a move.
First, DO YOUR HOMEWORK!
Homework consists of knowing what has recently sold, what's currently on the market, and what the history of the area is. It could be a particular subdivision or an entire school district. Whatever the case, know the area. Just like shopping for a car, if you don't research BEFORE buying, you'll pay too much---even in this market. You won't be able to identify a good deal if you don't know market value. Too many times people will see a property that is way under-priced and will waste time trying to get it even lower when they should be offering full price before other offers roll in. Some banks & even HUD list properties aggressively knowing that the demand will net them bids over the asking price.
Second, KNOW YOUR LEVERAGE!
If you are financing a property, know the pros and cons that a SELLER sees when looking at your offer. If you have an FHA loan, and the house needs repairs, chances are the seller would rather a buyer who has a conventional loan or is paying cash rather than deal with FHA repair requirements. If you are paying cash, know the market and use your ability to close faster than a buyer with financing contingencies to get a deeper discount.
Third, BE READY TO DO SOME WORK!
Very few of the GREAT deals are move-in condition. The truth is that the discount on the price is usually taking into consideration an issue with the home whether it's the condition of the property, extensive repairs, title issues, the surrounding area, or seller's need to sell. No matter what it is, expecting to find a home with $20K+ in equity that needs no work is not realistic at all. Know your thresholds of repairs and work within those means.
Four, CASH IS KING!
We all know that an all cash offer is always the most attractive to a seller, however, they are usually the lowest offers a seller will see. If you are using financing to purchase, having the ability to pay your own closing costs in exchange for a better sales price, buying a home AS-IS, or even putting down more to use conventional financing are all to your advantage because a seller will feel less pressure and in turn will come down substantially on price and not feel offended as they would with low-ball cash offers. You must paint the picture for the seller and make them feel as if they are getting something---even if they aren't!!!

Getting Pre-Qualified BEFORE searching for a house

The purchasing a home can be an exciting experience. Finding new neighborhoods, driving around new parts of town, & meeting neighbors & getting the skinny on the pros/cons of the neighborhood can be fun. Even peeking into a vacant home (there are a lot of them nowadays!) or dare I say 'breaking' into one that's open can really make the Sunday search enjoyable. The biggest way to put a damper on all of that is to find a home that you are in love with only to discover that you either that you can't afford it, your loan program won't finance it or worse, you can't qualify for a loan at all! A common occurrence is potential home buyers searching online, driving around to look at homes, and even calling agents to inquire or even view a home without getting pre-qualified first. Just like with buying a car, any radio talk show will tell you that you need to figure out your buying power first before even stepping foot into a dealership and I'm here to tell you that purchasing a house is no different. Here are the top reasons why you need to get pre-qualified FIRST before looking at homes.

Know how much you qualify for!
Without knowing your price ceiling, you will more than likely begin looking at homes that are above your price point. Some people have champagne taste and beer money so you want to be sure you have a realistic expectation on what you can get in a home. With today's market you can definitely get more (size,aesthetics,better areas) that you could just 4 years ago.

Determine your type of financing
There are two basic types of loans available, conventional and FHA loans. With FHA loans there are numerous guidelines that a property must meet in order for a your lender to allow you to secure a loan for it. For single family homes it must pass an FHA appraisal and cannot have more than $5,000 in repairs. More recently, a condo is a much more difficult buy using an FHA loan with new requirements in place for the COMMUNITY that the condo is located in. If the community is not FHA approved, you won't be able to buy in that complex.

Maybe you can't qualify
If it comes to light that you cannot qualify for a loan, the earlier you discover this the better. If you have a set target date ( i.e. a lease that's up in a few months), you want to get pre-qualified early to ensure there are no items on your report that need to be removed, disputed, or accounts with balances that need to be paid down or settled. With issues like these, once you fix them, it takes time for your score to rebound. You don't want to find out at the last minute that you'll need 3-6 months to be able to qualify when you've been actively looking to move already and could have been fixing these items when you first decided to purchase.

You can contact me directly at rousereo@gmail.com for more tips and suggestions regarding this topic

2010 Homestead Exemption

If you purchased a home in 2010 that you currently reside in as your primary residence, don't forget to file for your homestead exemption! You only get one chance to do it or you lose it FOREVER! You are required to file a property tax return in the county (and city, if applicable) where the property is located, even if you are not eligible for homestead exemption (owner-occupant).
DEADLINES FOR HOMESTEAD EXEMPTION & PROPERTY TAXES







COUNTY PHONE # HOMESTEAD PROPERTY
Barrow 770-307-3108 March 1, 2011 April 1, 2011
Cherokee 770-479-1953 April 1, 2011 April 1, 2011
Clayton 770-477-3311 April 1, 2011 April 1, 2011
Cobb 770-528-8600 April 1, 2011 April 1, 2011
Dekalb 404-298-4000 March 1, 2011 March 1, 2011
Forsyth 770-781-2106 April 1, 2011 April 1, 2011
Fulton 404-612-6440 April 1, 2011 April 1, 2011
Gwinnett 770-822-8808 March 1, 2011 March 1, 2011
Hall 770-531-6720 March 1, 2011 March 1, 2011
Henry 770-954-2470 April 1, 2011 April 1, 2011
Jackson 706-367-6330 March 1, 2011 April 1, 2011
Rockdale 770-929-4123 March 1, 2011 April 1, 2011
Walton 770-261-1352 March 1, 2011 April 1, 2011

Remember, if you need tips on how to file for your tax assessment dispute or you need supporting documentation, contact me at rousereo@gmail.com