 If you've been tuned in to all the media coverage on the real estate market lately, you've probably heard the term "Short Sale" thrown around quite a bit. A short sale is where a home owner's mortgage company allows them to sell a home for less than what they owe on their loan balance. In this article, I'd like to touch on some of the basics of the short sale process, and the potential benefits to both buyers and sellers.
With the real estate market correcting itself, it is estimated that as many as 1/3 of all homeowners who bought in late 2005 to mid-2006 are "upside down" in their mortgage, meaning the market value of their home is less than the mortgage amount owed. If they are in their home for the long haul with a fixed rate mortgage, and can afford the mortgage payments without stress, that's no big deal, as the market will ultimately finish its correction and start to climb again.
However, if a home owner has an adjustable rate mortgage which will soon increase their mortgage to a point they can no longer afford, or if they lose a portion of their income to an unfortunate circumstance, being upside down can lead to big trouble.
This trouble is what has led to the record number of foreclosed homes that are flooding the market and ruining people's financial standing. But the cost of executing a foreclosure can cost a bank upwards of $50,000 in missed payments, back taxes, attorney's fees, realtor fees, court costs, and property restoration costs. So many banks are willing to accept less on the mortgage payoff than to push through the foreclosure process and potentially lose so much more. Hence the proliferation of short sales, which is really a win-win for the buyer looking for a deal and the home owner looking for relief. Even the bank wins because they don't generally lose as much as they might in the foreclosure process.
Let's look at what a home owner must do to get the bank to agree to a short sale:
1. Write a hardship letter to the bank explaining why your circumstances have rendered you unable to pay your mortgage as originally agreed.
2. Provide 2-3 years of tax returns showing your income & deductions.
3. Provide recent paystubs verifying your current income.
4. Provide 2-3 months of bank statements showing your average daily balances and assets.
5. Write a letter authorizing a 3rd party (if needed) to negotiate on your behalf during the short sale process.
Once these are reviewed by the bank's loss mitigation department, an authorization for a short sale may be granted. The home owner can then list their property for a price requisite with the current market, even if that price is lower than what they owe.
It's not a done deal yet though. The bank isn't going to let the property go for much less than market value. They will send out their own appraisal specialist out to the property to assess the true value of the property. Once a buyer comes along to put an offer in, the bank will compare that appraised value to the offer, and render a decision as to whether they will approve the sale. This process can take up to 60 days, with no guarantee of final approval.
If the short sale does go through, the seller will generally face one of two scenarios with regard to the difference between the debt owed on the mortgage and the amount recouped by the bank through the sale:
1. Deficiency Judgement - The bank holds the seller personally responsible for repaying the debt not paid off, using a court to instate a judgement against the borrower that must be paid back to the bank. The good thing is that often times a deficiency can be negotiated to a mere percentage of the difference owed.
2. Phantom Income - The bank writes off the loss and counts this money towards the borrower's yearly income. So for example a short sale of $50,000 would now count as if the borrower made an additional $50,000 that year, and the IRS would expect taxes to be paid on that, which can be significant.
At the end of the day, the home owner who has gotten themselves in over their head would do well to consider a short sale before allowing the bank to institute the foreclosure process, particularly because of the major effect that a foreclosure has on credit. Having a couple of late mortgage payments and a deficiency judgement is a lot easier to recover from than a full-fledged foreclosure when it comes to restoring one's credit and perhaps buying another home one day down the line.
If you or someone you know has gotten into a mortgage situation they can't maintain and now cannot refinance because of declining values, don't wait to act. Contact the 410homes team for assistance on the matter, and we can use our experience with short sales to negotiate a deal with the bank.
Courtesy of Troy Williams
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Courtesy of Troy Williams
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 It used to be the case that doing major improvements to your home always increased the value, but with the declining market, it's not guaranteed. Home improvement stores are getting hit hard by the economic downturn as well. But the key word to that question is "home" in my opinion.
There are some improvements you make and expect a return in value, and others that make your house a home and improve your standard of living. Personally, I want to put a deck on my home so my family can enjoy it, even though I know I'm unlikely to recoup the full cost of building it if I were to sell in today's market. Just my 2 cents.
Courtesy of Troy Williams
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 Non-profit organizations such as Nehemiah and AmeriDream facillitated homeownership for 1st-time homebuyers by acting as a middle-man for seller-funded downpayment assistance for the buyer. This circumvented minimum downpayment loan requirements for the buyer. Congress has banned these programs starting 10/1/08
This year alone, I've had 3 sales and one pending in which the buyer involved used these programs to help them afford to buy. Despite the rational reasoning behind forcing the prospective buyer to have
"skin in the game" and come up with their own mortgage down payment money, it is a fact that these restrictions will have a significant short-term impact on the 1st time homebuyer market. In my opinion, the number of sweeping changes to the way
mortgages are regulated could be overkill.
It's like taking an aspirin, then taking a tylenol, then taking some sudafed, and mixing in a little advil, all within the first hour after you get a headache. You could get rid of the headache fast or you could overdose and make the problem worse.
Courtesy of Troy Williams
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 INGREDIENTS
◊ For the dressing:
◊ 1/2 cup fresh lime juice
◊ 1/4 cup fish sauce
◊ 1/4 cup sweet chile sauce
◊ 1/4 cup filtered or bottled water
◊ 1 small garlic clove, finely minced
◊ 1/2 Thai chile, seeded and chopped
◊ For the sweet soy-glazed peanuts:
◊ 1 cup roasted unsalted peanuts
◊ 1/4 cup sake
◊ 2 tablespoons soy sauce
◊ 2 tablespoons mirin
◊ 1 8-ounce package rice vermicelli noodles
◊ 1/2 pound mung bean sprouts
◊ 1 large cucumber, peeled and seeded and cut into 2-inch julienne
◊ 1/2 cup chopped fresh mint
◊ 1/3 cup chopped scallions, green part only
◊ 12 medium shrimp, peeled and deveined
◊ 1 large egg, well beaten
◊ 1/2 cup panko breadcrumbs
◊ Vegetable or grapeseed oil
DIRECTIONS
Make the dressing: Combine all the ingredients in a small bowl.
To make the sweet soy-glazed peanuts: In a large nonstick skillet over medium heat, combine the peanuts, sake, soy, and mirin and cook until the liquid caramelizes and coats the peanuts; remove to a sheet of parchment paper and allow to cool. When cool, cover with another piece of parchment and lightly crush with a rolling pin.
In a large pot of boiling water, cook the noodles for 2 minutes. Add the bean sprouts and cook for 1 minute more. Drain both through a colander and run under cold water until cool. Drain and pat dry with paper towels.
In a large bowl, toss the rice noodles, bean sprouts, cucumber, mint, and scallions with all but 1/4 cup of the dressing and divide among four serving bowls.
Just before serving, fry the shrimp: Dip the shrimp first in the beaten egg and then coat with the breadcrumbs. In a medium saucepan, bring a 1/4 inch of oil to 325 degrees (or until a piece of shrimp sizzles upon contact). Immediately transfer shrimp to the hot oil and cook until golden brown on both sides, about 3 minutes total. Top each salad portion with 3 fried shrimp, drizzle with the reserved dressing, and top with the crushed peanuts. Serve immediately.
Courtesy of http://online.wsj.com/article/SB120837686446720429.html
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No matter what type of home you currently reside in, cooling and heating your home can buckle your budget. But you can lower your costs if you follow 10 basic steps.
1. Give your home an energy audit by writing down the amount you spend each month on gas/electric for a 12-month period. Based on your findings, when do you spend the most money?
2. Seal existing air leaks in ductwork, and around windows, doors and recessed lights. For information on how to complete these tasks, visit your local hardware store, go online or check your local library.
3. Add insulation in the attic, basement and anywhere else you can. You can also find information on adding insulation at your local hardware store, library or online.
4. Upgrade to Energy Star appliances. Most appliance retailers will carry Energy Star appliances of varying price ranges.
5. Consider installing programmable thermostats. Once installed, you may save up to 30% on your heating and cooling costs.
6. Tune up your boiler or furnace annually and upgrade to better furnace filters. This will increase the air quality in your home and increase the longevity of your boiler/furnace.
7. Consider upgrading windows and glass doors to double-paned, insulated models. If you cannot upgrade due to cost, put film on your current windows. Either way, this reduces excess glare in your home and provides a protection against UV rays.
8. Make sure your ventilation fans are working properly. Their main purpose is to get rid of excess humidity but be sure they are not also sucking out heated air from your home during the winter.
9. Replace your existing water heater with an on-demand tankless heater to reduce standby heat losses. Since they only work as needed,this can automatically reduce your energy bill.
10. Change over to compact fluorescent bulbs. Not only do they last for five years, they use 30% less energy than incandescent bulbs.
Courtesy of Meredith Williams
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