Is there a "good" side to the foreclosure crisis?

AKA, Young Couple Buys First Home, Then Engagement Ring

My favorite part of selling homes is when you help people achieve their dreams, especially younger folks. Back in September I got a call from Kevin Garda. He had just had a bad experience with another real estate agent and a short sale property that he put an offer on. I told him and his girlfriend, Cristina, that I would be happy to find him a home and I was thrilled that he already had been approved for an FHA loan. When I met them, I knew they looked young but I didn't know what age until recently. Kevin is 23 and Cristina 25!

Anyway, within just a few weeks we had an accepted offer on a great single-story previously foreclosed home in the very low $100's (pictured).

Kevin is paying less on his mortgage then he was paying rent previously. And the most exciting news; After putting the home in escrow, Kevin put an engagement ring on Christina. The two are planning to get married soon. Congratulations guys!

This transaction made me reflect about today's market. Yes, there are a lot of foreclosures and short sales in our market. I should know, I have done plenty of short sales for my clients. But there is also a positive side. With the median home price in February being $128k, homes are more affordable than they have been in a long, long time. Kevin and Christina were able to buy their first home in a neighborhood they wanted to live in and pay less than rent. That couldn't have happened in 2004.

Help with Short Sales. You Can Now Buy a Replacement Home Right Away

Short Sale Help Is Here.

And Buy a Replacement Home Too!

We can help you sell your home even when you owe more that it is worth. We also have access to exclusive lenders that can finance you to buy a new home after you have short-sold your current property (yes, there are some restrictions).

OVERVIEW OF THE PROCESS:

1. Initial consultation. You discuss your situation with us and we will provide you some guidance on options. A SHORT SALE MAY NOT BE YOUR BEST CHOICE and we will suggest that you consult an attorney.
   
2. If you decide to short sale your home, we will explain to you how the sales process proceeds. You will sign a listing agreement and associated documents.
   
3. Your current lender(s) will ask for you to fill out some paperwork to start the short-sale process with you. We will submit that to the banks and start the process with them.
   
4. We will market the property using our exclusive systems. We might even have a buyer for your home in our system already!
   
5. When offers come in on your property, we discuss those offers with you. YOU decide which offer you would like to proceed with. We then present that offer to your lender(s) and provide evidence to them on why they should agree to the offer. Your closing costs, commissions, etc. will be paid by your lender when they agree to the short sale. In most cases you will owe us nothing for our services.
   
6. Once your home is sold and if you desire to buy another home at today's great prices, we will then find you another home of your choice and negotiate the purchase. Not everyone will qualify for a loan with our partner lenders but many do.
   

There’s “HOPE” for those to refinance at market value! Think of it as a short-refinance

The Housing and Economic Recovery Act of 2008 which is expected to be signed by President Bush today has a tremendously advantageous program within it called the “HOPE for Homeowners Act of 2008." This has the potential to help the many, many homeowners who have lost considerable equity in their homes and who want to refinance. Essentially, participating lenders will forgive the amount of the loan above market value for your home and refinance into a new government-backed loan. This will take some time to shake out (probably well past October), but could be of great assistance to families and stabilizing the housing market. The summary of the HOPE program is below.


Summary of the “HOPE for Homeowners Act of 2008"

The “HOPE for Homeowners Act of 2008" creates a new, temporary, voluntary program
within FHA to back FHA-insured mortgages to distressed borrowers. The new mortgages
offered by FHA-approved lenders will refinance the loans of distressed owner-occupants at risk
of losing their homes to foreclosure at significant discounts. In exchange, homeowners will
share future appreciation with FHA.
The program is built on five principles:
1. Long-term affordability. The program is built on the idea, expressed by Federal
Reserve Chairman Bernanke, that creating new equity for troubled homeowners is likely to be a
more effective way to avoid foreclosures. New loans will be based on a family’s ability to repay
the loan, ensuring affordability and sustainable homeownership.
2. No investor or lender bailout. Investors and/or lenders will have to take
significant losses in order to benefit from the proceeds of the loans refinanced with government
insurance. However, these losses would be less than the losses associated with foreclosure.
3. No windfall for borrowers. Borrowers will share their new equity and future
appreciation equally with FHA. Borrowers will pay for the FHA insurance.
4. Voluntary participation. This will be a voluntary program. No lenders, servicers,
or investors will be compelled to participate.
5. Restore confidence, liquidity, and transparency. Credit markets are fearful and
frozen in part because banks and other financial institutions do not know what their subprime
mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital
and stop the lending necessary for economic growth. This program will help restore confidence
and get markets flowing again.
Program Oversight. The new program will be overseen by a Board made up of the
Secretary of HUD, the Secretary of the Treasury, the Chairman of the Federal Reserve Board,
and the Chairman of the Federal Deposit Insurance Corporation (FDIC). The Board will have
the authority to develop standards within the framework of the legislation.
Eligible Borrowers. Only owner-occupants who are unable to afford their mortgage
payments are eligible for the program. No investors or investor properties will qualify.
Homeowners must certify, under penalty of law, that they have not intentionally defaulted on
their loan to qualify for the program and must have a mortgage debt-to-income ratio greater than
31 percent as of March 1, 2008. Lenders must document and verify borrowers’ income with the
IRS.
New Loan Amount. The size of the new FHA-insured loan will be the lesser of the
amount the borrower can afford to repay, as determined by the current affordability requirements
of FHA, or 90 percent of the current value of the home. Loans must be 30-year, fixed rate loans.
Equity & Appreciation Sharing. In order to avoid a windfall to the borrower created by
the new 90% loan-to-value FHA-insured mortgage, the borrower must share the newly-created
equity and future appreciation equally with FHA. This obligation will continue until the
borrower sells the home or refinances the FHA-insured mortgage. Moreover, the homeowner’s
access to the newly created equity will be phased-in over 5 years.
Eligible Mortgages. In order to protect against adverse selection, the program prohibits
the Secretary from paying an insurance claim whenever the representations and warranties
required to be made by lenders are violated, or in cases in which a borrower has an early
payment default and misses the first payment. The Act provides the Board the authority to
establish other protections against adverse selection, such as requiring “seasoning” for certain
higher risk loans before they can be insured under the program. Appraisers of property insured
by FHA must be certified by the state where the property is located, or by a nationally
recognized professional appraisal organization, and have “demonstrated verifiable education” in
FHA appraisal requirements.
Existing Subordinate Liens. Before participating in this program, all subordinate liens
must be extinguished. This will have to be done through negotiation with the first lien holder.
Qualified Safe Harbor. The legislation provides servicers with an incentive to participate
in the program by offering a safe harbor against legal liability.
Program Size. The program is authorized to insure up to $300 billion in mortgages and
is expected to serve approximately 400,000 homeowners.
Program Sunset. The program will begin October 1, 2008 and sunset on September 30,
2011. CBO say the program will net nearly $250 million for taxpayers. The program is paid for
by using part of the Affordable Housing Trust Fund; the GSE bill provides a further $2 billion
cushion for the government by establishing a reserve fund at Treasury over ten years. If the
program costs less than projected, the unused funds are returned to the Affordable Housing Trust
Fund. If the program more than pays for itself (as was the case during the Roosevelt
Administration), any excess savings are dedicated to reducing the national debt.

Market Slow? Then why do we have multiple offers?

Doom and gloom or new housing boom? A bit of both. If your trying to sell your home and you can't price it to sell, it's gloomy. But from a market standpoint certain segments are hot. Sizzling hot. Suddenly, those buyers and investors sitting on the sidelines are putting in offers on the best-priced homes. The homes that are "steals" are not only getting sold, they are receiving multiple offers, at least in Las Vegas. I called one listing agent on a bank-owned (REO) listing yesterday and she told me she had 27 offers on it. My own REO listings have also had several offers. Market slow, eh?

It really is a tale of two markets. The homes that are priced to sell, mostly bank-owned, some "short-sales," and some non-distressed homes are moving. And moving briskly. In fact, this last week, the number of homes going under contract is up several percent over the previous weeks and months. The demand has been there, sitting on the sidelines until the price is right. And for many, that time is now. The other market, those homes priced significantly higher than the distressed sales, are sitting there. I guess the old economics professor was telling the truth.

Yes, the price adjustment is causing grief for many sellers but the reality is the market has spoken and those words are actually a blessing for some. Yesterday, I showed several decent homes to a schoolteacher client of mine in the below $200k range. She is excited about two of the houses and we'll likely make an offer on one of them. I am so thrilled that I can actually find for an underpaid, hard-working schoolteacher, a home that she can afford. And I'm also thrilled that the investors are back. I will be showing an investor client several bank-owned properties in the under $200k range tomorrow. He intends to buy two homes for rentals. And with rental demand increasing, this is a good investment strategy.

So now with the new-home standing inventory drying up, the well-priced resales homes selling, it means that the market is coming back. Will the market return to frenzy status soon? Nope, but gosh, wouldn't we all like to see at least a "normal" market now. I do.

http://www.NevadaRealEstateCenter.com/

Buying or Renting a Pet-Friendly Home

Dogs are people too. Well, to some folks they are. And to most people their pets are part of the family (just as my Yuki is). Today I want to talk about some considerations when buying or renting a home if pets are part of the family.

So, your real estate agent just found you the purrfect home. There is plenty of room for Johnny and Susan and a big backyard for Sweety the Pitbull, Dumbo the Bull Mastiff, Tiny the Yorkshire Terrier, and Morris the Persian Cat. You put in an offer and the seller accepts! There is lots of paperwork, voluminous HOA (Home-Owners Association) docs you barely skim over, and packing to get done. Phew.

You move into your new home and all is great. An envelope shows up in your mail that week and you open it: "Dear Homeowner, there have been complaints that your dogs bark all night long. We are fining you $100. Please take the necessary means to keep your dog quiet. Love, Heavenly Homeowners Association." Excuse me?!?!?!?

Two days later: "Dear Homeowner, as you know the HOA rules allow a maximum of two domestic pets per household. You seem to have four. We are fining you $200. Please take the necessary means to get rid of two of your beloved pets immediately. Love, Heavenly Homeowners Association." What?!?!?!?!?

Five days later: "Dear Homeowner, as you know the HOA rules do not allow dangerous dog breeds to be anywhere in the community including Pitbulls, Akitas, Staffordshire Terriers, and Chows. We are fining you $300. Please take the necessary means to get rid of your beloved Pitbull immediately. Love, Heavenly Homeowners Association." My Pitbull is sweet, what the !?!K are they talking about?

Six days later: "Dear Homeowner, as you know the HOA rules do not allow any pets over 35lbs. Your Mastiff looks like a horse, what did you feed him, your Pitbull? We are fining you $200. Please take the necessary means to slim your 80lb Mastiff to 35lbs or get rid of your beloved Mastiff immediately. Love, Heavenly Homeowners Association." HELP!!!!!!!

Okay, yes this may sound like an impossibility. But any or all of these situations could happen to you if you don't read the HOA documents carefully. And yes, these scenarios do occur. Even in communities that don't have a governing HOA, local laws and CCRs could still have the same effect especially if you have a neighbor or two that get annoyed.

HOAs do provide a valuable service for those that like an orderly community. And most communities with Associations are very livable and even desirable. In Las Vegas nearly all newer communities are governed by an HOA and many older ones as well. So, what should you do to help avoid fines or worse, having to get rid of your four-legged family members?

When Buying

1. Get the HOA documents (CC&Rs/Rules and Regulations/Latest Board Meeting Minutes if possible) as soon as possible after getting your offer accepted.

2. Read the documents thoroughly. If there is something in there about pets that you don't understand, contact your Realtor or the Association directly and ask.

3. Check for: A. How many pets in total are allowed. B. Is there a weight limit. C. Are there restrictions on certain breeds. D. Barking/Nuisance rules and remedies.

4. If you are not familiar with the local laws, check those as well. Some states have already or attempting to ban the ownership of certain breeds all together!

For Renters:

1. Before signing the lease agreement, get a copy of the HOA documents too even though you don't own the home. As a tenant you are responsible to follow the rules and regulations. Many leases will assign the responsibility of paying any fines onto you.

2. Most rentals won't allow pets and those that do usually require an extra security deposit. Before even looking at a rental ask your agent or the property manager/landlord, what are the pet restrictions? Many will say "up to landlord's discretion" on what pets they will accept. This means you provide details (and sometimes pictures) about your pets on the application. Then the landlord says yay or nay. By the way, most landlords won't allow "dangerous" breeds to be in their properties even if there are no regulations against it. Also, many won't allow aquariums either for fear of water damage should the aquarium break.

Questions, comments?

-John

Welcome

Hello and welcome. This is the place to ask questions about Southern Nevada real estate. Whether it is residential, land, or commercial we have someone who can answer your questions and provide guidance.

Thanks!

-John Brassner
Realtor®, MBA
Windermere Real Estate