Wednesday, January 28, 2009
What to watch for when buying or selling a short sale
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I have been getting a lot of questions about short sales lately. The first and most obvious question is, ‘What is a short sale?’ The simple definition is this. It is when someone is selling their house for less than they owe. There is a more in depth definition, but it’s like being upside down on your car.
So now that we have that out of the way, I also get a lot of questions about how it works. Here is the most basic explanation: Buyer and Seller agree to terms, once terms are reached the offer is given to the bank for approval, if bank accepts then you close just like a normal transaction. If the bank rejects the offer then you can counter-offer or walk away. As I said, this is putting it in the most simple of terms.
Now, here is how it will affect the sale. TIME TIME TIME!!!! Some banks are on the ball and you can get the entire process done within 60 days or so. However, this is NOT the norm. I have written and submitted many offers that have literally been in the bank’s hands for months. One example I like to give is in February of ’08 I submitted an offer that was then passed on to the bank. In September of ’08 my buyers finally gave up and bought another house without ever getting an answer on the offer. This is not normal either, but it happens!
This is how I suggest handling the purchase of a short sale. If you are dead certain that this is the ONE and only house you want then just be prepared to wait. You have to be ready to wait for months and upon approval you will have to move quickly. It’s an odd little twist on the whole process, in that the bank will make you wait for months to get an answer, and expect you to close within a matter of a couple weeks.
However if you are not dead set on a particular home than by all means write the offer on the home and then continue to look as if that offer never happened. In Oregon we have a ‘Short Sale Addendum’ and with the right verbiage it gives you the opportunity to walk away at any point prior to the bank giving approval. So, just continue to look at homes in the hopes you find one you like better, and if you don’t find anything your short sale should still be plugging along. This is a great way to ensure you actually find a home and don’t wait for months just to get a rejection by the bank.
If you’d like more information on short sales, the process or how I operate just give me a call and I’m happy to answer questions.
-Aaron
Sunday, January 18, 2009
2009 - Portland, OR Real Estate Whirlwind
Wow, where did 2008 go? And for that matter what happened to January? So far 2009 has been quite the whirlwind. After the crazy holiday season of 2008, in which I think the entire world stopped spinning, 2009 seems to be putting the globe back in motion. I have seen a flurry of activity, not just in real estate, but just in general. I think being cooped up for 2 weeks due to snow has renewed everyone’s desire to get out and be productive. I know it has for me!
Just to answer the question I always get, YES I am still working in Real Estate! Secondly, to the question of ‘How is the real estate market?’, it is actually a little crazy. I have seen several things happen. First off, I have had all kinds of calls wanting to cash in on the ridiculously low interest rates. I know my contacts in the mortgage industry have had their phones ringing off the hook. I have seen rates stay between 4.5% and 5% which historically is about as low as they’ve ever been. So, if you’re thinking about refinancing, now is the time! If you need a referral, I work with a few very solid brokers that could get you dialed in. Just call or e-mail me. I have also seen a lot of people looking to buy a home for the same reason. With rates as low as they are, and the price of housing dropping as it has, there are some absolute steals out there. When you start doing the math, you are able to get a lot more house for the same monthly payment. If you are looking at a price point between $350,000 and $400,000 your payment will be similar to what a $300,000 house payment was just a few months ago. Add in the fact that the average sales price in December 2008, as compared to December 2007, has dropped nearly $50,000, and you’ve got a ton of purchasing power. I know that’s kind of confusing, but you can always call and I will draw you a pretty little picture including stick figures, charts, and graphs. The moral of the story is that now is a great time to buy!
Outside of that, things for me are going well. I hope you had a great Christmas and New Year. Just let me know if there is anything I can do for you, or if you have any friends or family that are looking to buy or sell a home. Also, if you get a chance, check out my new and improved website: www.aaronstelle.com.
Aaron Stelle
Real Estate Broker
Licensed in OR & WA
e-PRO RE /MAX equity group, inc.
Direct: 503.495.3264
Mobile: 503.515.7557
Fax: 866.597.9159
Web: http://www.aaronstelle.com/
Just to answer the question I always get, YES I am still working in Real Estate! Secondly, to the question of ‘How is the real estate market?’, it is actually a little crazy. I have seen several things happen. First off, I have had all kinds of calls wanting to cash in on the ridiculously low interest rates. I know my contacts in the mortgage industry have had their phones ringing off the hook. I have seen rates stay between 4.5% and 5% which historically is about as low as they’ve ever been. So, if you’re thinking about refinancing, now is the time! If you need a referral, I work with a few very solid brokers that could get you dialed in. Just call or e-mail me. I have also seen a lot of people looking to buy a home for the same reason. With rates as low as they are, and the price of housing dropping as it has, there are some absolute steals out there. When you start doing the math, you are able to get a lot more house for the same monthly payment. If you are looking at a price point between $350,000 and $400,000 your payment will be similar to what a $300,000 house payment was just a few months ago. Add in the fact that the average sales price in December 2008, as compared to December 2007, has dropped nearly $50,000, and you’ve got a ton of purchasing power. I know that’s kind of confusing, but you can always call and I will draw you a pretty little picture including stick figures, charts, and graphs. The moral of the story is that now is a great time to buy!
Outside of that, things for me are going well. I hope you had a great Christmas and New Year. Just let me know if there is anything I can do for you, or if you have any friends or family that are looking to buy or sell a home. Also, if you get a chance, check out my new and improved website: www.aaronstelle.com.
Aaron Stelle
Real Estate Broker
Licensed in OR & WA
e-PRO RE /MAX equity group, inc.
Direct: 503.495.3264
Mobile: 503.515.7557
Fax: 866.597.9159
Web: http://www.aaronstelle.com/
It May Be Time to Think About Buying a House - NY Times Article
By RON LIEBER
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers. Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage. Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic. That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades. Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you. If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales. But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow. As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas. This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs. Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms. When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.” The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord. Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it. You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates. John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors. While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.” For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis. Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.” One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity. Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan. Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year. Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets. “We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers. Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage. Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic. That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades. Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you. If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales. But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow. As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas. This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs. Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms. When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.” The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord. Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it. You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates. John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors. While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.” For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis. Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.” One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity. Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan. Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year. Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets. “We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
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