Alise Roberts » Straight from the horse’s mouth

Why Would ANYONE Sell Their House Right Now?

Alise — Mon, 22 Mar 2010 23:13:59 +0000

I have heard this sentiment expressed over and over again the last few months. From the outside, it may seem a reasonable question. After all, a lot of the traditional “hold ‘em or fold ‘em” rules say “Hold”. Prices are (hopefully) settling at the bottom of the pre-boom 2003 pricing. Inventory is high, really high. A lot of that “inventory” includes short sales and already foreclosed homes at even lower prices. Is there any reason for someone who is NOT is dire straights to throw their hat into the frenzied ring? Unequivocally, yes.

The first group of folks that I highly recommend consider selling, are those who are certain- beyond a shadow of a doubt-that they are going to need or want to move in 5 years or less. I can’t guarantee that prices will be better in 5 years, but I can safely say that we are looking at AT LEAST 5 years before you could expect to do significantly better than you can today. So, if you and your 3 little ones are feeling cramped in a 2 bedroom condo, or mom has moved in and you’ve been calling the sofa a temporary bedroom, or the commute from Everett to Federal Way is wearing thin…it’s time to act. These are extreme examples, of course. I really just want to encourage you to examine your present circumstances and ask yourself; “Can I make this work another 5 years?”. If the answer is not a resounding yes, then call me.

Perhaps you are ok in your current digs, but you have a wandering eye for all of the bargains out there. Remember the chaos of 2005? Trying to buy a home meant standing in line with 10 other buyers who wanted the same home. Now the tables have turned. There are thousands of really, truly motivated sellers who will do just about anything to make a deal with you. If you have considered being a “move up” buyer (larger home, better neighborhood, better view) this is the time to act! True, you will make less on your current home than if you hang onto it, but let’s do the math.

Say your current home would sell for $300,000 but you’d really like to get $350k out of it. You won’t get that right now, and that’s holding you back from selling. You’ve been eyeing a home with twice the square footage that’s 20 minutes closer to work for $475. In 2006, that home would have been $600k, so it REALLY feels like a bargain. Still, you are torn. Selling for $300,000 means you are actually going to take a bit of a loss on the house if you purchased it in the last 5 years, and that’s not sitting well with you. You could hold out for 5 years, until your house is again worth $350k. By then, the house you are REALLY hankering for is back up at $600k. Do you see what’s happening? You created a net LOSS for yourself of $75,000. Or, to be realistic, it’s an extra $153,303 over the life of a 30 year loan (and that’s at the currently awesome 5.5% rates).

Don’t get me wrong, this is NOT a cry to go out and overextend yourself on a home you can’t afford. In fact, lenders have tightened up their guidelines, thank goodness, so that it’s pretty hard to do that. It’s just a nudge to explore your options.

If you know you won’t qualify for a different house, and you are able to make your payments- I definitely recommend KEEPING your home if at all possible. There’s too many tax benefits and too much wealth building potential to choose renting unless it’s absolutely necessary.

Lastly, and back on topic, the tax credit expires the end of June, and homes need to be under contract by the end of April. Although there will still be people who buy and sell, I do expect to see a noticeable decline in activity- meaning now is a better time than later to get your house on the market and in front of buyers.

If all this makes about as much sense a broken piggy bank, call or email me for a consultation.

Short Sale Updates

Alise — Tue, 29 Dec 2009 02:47:49 +0000

A ton of rumors and half truths have been flying around this month regarding changes the banks are required to make in the handling of short sales. I have gotten several calls from potential sellers who believe that the process is now simplified. While that CAN be true, there are a number of factors that determine whether or not your home will qualify for the expedited processing. Bad news first-

This program does not help with second mortgages or HELOCs. However, the information you gather for your application package MIGHT help you or your Realtor negotiate with the second lender.
You cannot go straight to a short sale without going through the process of applying for refinance or modification.

PLEASE NOTE- There are a lot of home loan modification programs available through individual lenders, this is only in reference to the Making Home Affordable program. Here are the steps you have to take to determine eligibility. 1. First you have to determine if you are eligible for a REFINANCING through this program. Here's how:

You must be the owner of a home that has a loan insured by Fannie Mae or Freddie Mac. You can check online for Fannie Mae or Freddie Mac to see if your home qualifies.
The first mortgage must be for an amount no more than 125% of what you owe. In other words, if your home is now worth $200,000 and you owe $250,000, you could qualify, but if you owe $275,000 you would not. If you aren't sure of your homes current market value, please contact me
You must be current on your mortgage payments.

If you do not meet those requirements you may qualify for a LOAN MODIFICATION, which can lower your monthly payments to an affordable level. To qualify for a modification you must meet the following:

The home must be your primary residence
The loan must be for less than $729,750
You must have gotten the loan before January 1, 2009
Your payment; including principle, interest, taxes, insurance and HOA dues must be more than 31% of your gross income. If you need help determining this, CLICK HERE
You must have either had a) a significant change to your payment amount or b) a change in circumstances that makes your payment a hardship. This can be a loss of income, a health crisis etc.

If you meet all those requirements, you MAY qualify for a loan modification through the Making Home Affordable program. If you do NOT qualify for a refinanace or a loan modification, or are unable to make the payments that are arranged through the MHA program, you may then qualify for the expedited review process on a short sale. Those guidelines state:

You must have applied for the refinance or loan modification (above) and been turned down OR
Been approved but be unable to complete the trial period for your new payments OR
Be late for two consecutive months AFTER completing the trial phase successfully OR
You may simply request a short sale after your application has been approved

At this point you will be participating in the Home Affordability Foreclosure Alternatives program, or HAFA. Here's how that will help you:

You will already be qualified, eliminating the need for the often lengthy approval process
You will be able to have a pre approved price for your short sales prior to listing the home
Lenders have to release you from future liability (see note above regarding second mortgages)
Lenders will not be allowed to reduce the commissions to the real estate agents. They often do this at the last moment now, something that has made many agents shy away from representing short sale sellers. (At Alise Roberts and Co, we have always provided the same excellent service to our sellers involved in a short sale as we do to any other client)
An incentive is provided to lenders to encourage them to participate in this program, increasing the chances of more lenders participating.

Overall, I think the MHA and HAFA programs will help a lot of sellers, if they make use of it. Education yourself on alternatives is so important. Often, homeowners facing foreclosure do nothing but wait for what they think is the inevitable. I can tell you from helping dozens of families this year- know your options.

Great news on Short Sales!

Alise — Tue, 01 Dec 2009 22:06:25 +0000

The new Home Affordable Foreclosure Alternatives Program has some really helpful new guidelines for the short sale process. As a short sale specialist who has had to navigate the shadowy, poorly regulated short sale halls for the last few year, I think most of these guidelines will really speed up the process if implemented.

New proposed changes to help distressed homeowners

Alise — Mon, 30 Nov 2009 20:03:05 +0000

All over the country, foreclosures are up for the 9^th straight quarter. A report last week by the Mortgage Bankers Association listed that 14 percent of homeowners with mortgages are either behind in their payments or headed for foreclosure. In response, it has been announced that there some changes to its "Home Affordable Modification Program,” originally launced in February of this year. The original program was meant to incentivize the banks to create loan modification programs for those who needed them. Under the plan, lenders who agreed to lower payments for troubled borrowers were to be paid $1,000 initially for each loan. That was to be followed by $1,000 annually for up to three years. The planned changes are supposed to increase transparency and accountability from mortgage companies. One of these priorities is to put more pressure on lenders by highlighting the ones who are lagging in loan modifications. Another is to delay the cash incentive payments to banks until the loan modifications have actually become permanent. I think there is a HUGE value to that. As an active professional, I can attest to the fact these modifications are taking an incredibly long time. Homeowners are stuck in a limbo of not knowing if they are facing foreclosure or relief for months at a time. I have had many sellers that were considering a short sale , but prefer to modify their loan if that’s an option. When it takes months for the modification application process, when a homeowner is turned down, they now have thousands of dollars in additional fines that have to be negotiated away. The original target for the foreclosure crisis had been borrowers who had gotten involved in subprime mortgages. Now this crisis has now extended to those who took out conventional, fixed-rate loans as well. Due to high unemployment and falling home values, it has even extended to some borrowers who were able to put down a significant down payment on their homes of at least 10 to 20 percent.

LOW Rates = LOW Payments

Alise — Wed, 18 Nov 2009 00:10:32 +0000

With rates hovering near historical lows, a mortgage of $350k (principle and interest) will run around $1847/month at a rate of 4.85%. If rates go up to 6% next year that same mortgage will now run you about $2100.00 (principle and interest). That is a difference of $253 per month! OR if you are qualified up to $350k now and rates go up to 6% next year, then at that time you will only be able to buy a home for $308k to keep your payments the same they would be at the previous $350k with a 4.85% rate. That will be quite a change in what you can buy for the money! Here is a helpful (and somewhat corny) video that explains it even better.

The $8,000 Tax Credit has been extended!

Alise — Tue, 10 Nov 2009 18:28:52 +0000

If you were kicking yourself for not jumping in while you had the chance, it’s time to start patting yourself on the back. The previous credit provided up to $8,000 to homebuyers who had not owned a home in the past 3 years, and whose income was $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns. For home purchases occurring after November 6, 2009, the new income limits are $125,000 for single taxpayers and $225,000 for married couples filing jointly. That definitely helps folks around the Puget Sound, and I look forward to helping many of you take advantage of this opportunity in the next few months. One part of this “new and improved” credit that I really like- is the addition of a move-up buyer credit. This provision allows for a tax credit of up to $6,500 to homebuyers who have lived in the same residence for 5 of the last 8 years, on purchase amounts up to $800,000. Another element of the new version is that it allows prospective home buyers who believe they qualify for the tax credit to reduce their income tax withholding. Reducing tax withholding will enable the buyer to accumulate cash to contribute to their closing costs or down payment. Any home purchase qualifies, including single-family homes, townhouses, condominiums, manufactured homes and even houseboats! Qualifying homes may be an existing home, new home or a home the owner contracted to build. If you own a vacation home or rental home that is not their principal residence are also eligible for the tax credit if you buy a principal residence.