REALTORS® Help Buyers, Sellers, With Short Sales Solutions
When families lose their homes to foreclosure, communities, the housing market and the economy all suffer. Short sales are one way that some troubled homeowners can avoid foreclosure, and Realtors® at the Short Sales Solutions session today at the 2008 REALTORS® Conference & Expo gained valuable insights into how to facilitate these complex sales.
"Homeowners who are struggling to make their mortgage payments must have more options available to them to avoid foreclosure," said National Association of Realtors® President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. "Short sales can benefit not only the homeowner in question, but also buyers, lenders and the surrounding community. With their established lender relationships and insights into complicated real estate transactions, Realtors® can add real value for both sellers and buyers interested in short sales."
A short sale is a transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan. The lender often receives a higher amount of the remaining loan balance than it would from the sale of the property after a foreclosure. This helps support home values in the surrounding community. Short sales also help homeowners maintain some level of credit.
According to Freddie Mac, of homeowners who have loans that enter into the foreclosure process, 50 percent did not have any contact with the lender before foreclosure began. One of the most valuable services Realtors® can provide to clients who may be facing a foreclosure is guiding them through the lender's short sale process and facilitating communication, according to session panelists Michael and Stacey Spikes of America's Home Rescue.
"The process for short selling an FHA loan is different than the process for shorting a Veterans Administration or conventional loan," said Stacey Spikes. "Knowing the type of loan the seller has, and understanding the proper steps for short selling that loan and the order of those steps, is critical."
Homeowners who are having difficulty making their mortgage payments and who may be considering a short sale must generally meet three qualifying criteria: they must be behind on their payments, be able to prove a legitimate hardship, and have little or no equity in their home.
While a typical real estate transaction involves two real estate professionals, a seller, a buyer, and the buyer's lender, a short sale can include all of these parties in addition to the seller's loan servicer, housing counselor, junior lienholders, mortgage investors and mortgage insurers. In addition to the number of parties involved, Realtors® say there are many reasons for the difficulty in completing a short sale. These include burdensome paperwork, appraisals that do not consider the sellers' duress or number of foreclosures in the community, over-burdened loss mitigation departments, and the complications created by second mortgages.
NAR has created a working group to examine the problems and difficulties surrounding short sales and to educate its members on how to best work with their clients through this process. NAR is also reaching out to its partners in the housing and mortgage industry to encourage adoption of principles and practices to streamline the short sale process.
"Short sales give many families in financial difficulties the possibility of salvaging their credit and avoiding the embarrassment of a foreclosure," said Gaylord. "Realtors® across the country stand ready to help, and NAR will work hard to ensure that short sales are a viable alternative to foreclosures whenever possible."
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
Information about NAR is available at www.realtor.org. This and other news releases are posted on the Web site's "News media" section in the NAR Media Center.
REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS®. All REALTORS® are members of NAR.
SOURCE National Association of Realtors |
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How do you get a low-interest rate loan?
Price discounts and interest rate buydowns are common incentives offered by new-home builders trying to overcome slow sales. Buydowns are a financing technique used to reduce the monthly payment for the borrower during the initial years of the loan. Under some buydown plans, a residential developer, builder or the seller will make subsidy payments (in the form of points) to the lender that "buy down," or lower, the effective interest rate paid by the home buyer. State agencies often offer lower rate loans. But to qualify, borrowers usually must be a first-time home buyer and meet income limits based on the median income level of their county.
Where can I get adjustable-rate loan info?
For adjustable-rate loan information, consult your local lender or the Consumer Handbook on Adjustable-Rate Mortgages, published by the Federal Reserve Bank of San Francisco. Write to the Public Information Department; P.O. Box 7702; San Francisco, CA 94120 or call (415) 974-2163.
Are interest rates negotiable?
Some lenders are willing to negotiate on both the loan rate and the number of points but this isn't typical among established lenders who set their rates like large corporations set the prices on their goods. Nevertheless, it pays to shop around for loan rates and know the market before you go in to talk to a lender. You should always look at the combination of interest rate and points and get the best deal possible.The interest rate is much more open to negotiation on purchases that involve seller financing. These usually are based on market rates but some flexibility exists when negotiating such a deal. When shopping for rates, look for published rates in local newspapers or check the growing number of Internet sites that publish such information. What are rates for FHA and VA loans?
There are no set interest rates for FHA and VA loans. The FHA stopped regulating rates in 1983 and the VA followed suit soon after. Shop around for the best rate.
How are the rates set for seller financing?
The interest rate on an owner-carried loan is negotiable. Ask your agent to check with a lender or mortgage broker to determine the current rate on institutional first (or second) loans. Seller financing typically costs less than conventional financing because sellers don't charge loan fees (points). Interest rates on an owner-carried loan will also be influenced by current Treasury bill and certificate of deposit rates. Sellers usually aren't willing to carry a loan for a lower return than they would earn if their money was invested elsewhere.
Where are interest rates headed?
At any one time, no one knows for sure where rates are headed. Beyond public policies put in place by the Federal Reserve Board, there are no laws that govern mortgage rates. Historically, usury laws were used to prevent lenders from charging sky-high interest rates when lending money. But in some states where there are usury laws, banks, thrifts and a number of other financial institutions are exempt from the law. Today, interest rates are governed solely by the financial markets and by Federal Reserve Board action, neither of which can be predicted with absolute certainty.
What is the value of a mortgage lock-in?
Locking in a mortgage rate with a lender is one way to ensure that same rate still will be available when you need it. Lock-ins make sense when borrowers expect rates to rise during the next 30 to 60 days, which is the usual length of time lock-ins are available. A lock-in given at the time of application is useful because it may take the lender several weeks or longer to prepare a loan application (though automated loan practices are cutting this time dramatically). However, some lenders require borrowers to pay lock-in fees to assure particular rates and terms. Be sure to check that the rates and points are guaranteed and that your lock-in period is long enough. If your lock-in expires, most lenders will offer the loan based on the prevailing interest rate and points. Lenders may have preprinted forms that set out the exact terms of the lock-in agreement. Others may only make an oral lock-in promise on the telephone or at the time of application. Resources:
* "A Consumer's Guide to Mortgage Lock-Ins," published by the Federal Reserve Board and Office of Thrift Supervision, Washington, D.C. |
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Do you have to buy HUD homes through a realty agent?
You can only purchase a U.S. Department of Housing and Urban Development property through a licensed real estate broker. HUD will pay the broker's commission up to 6 percent of the sales price.
Rules for a FHA Loan?
The U.S. Dept. of Housing and Urban Development offers a variety of loan insurance programs through the Federal Housing Administration, which requires approximately 3 to 4 percent cash down. There are no income requirements to qualify for a FHA mortgage. Other advantages are that FHA loans do not contain prepayment penalties and in some cases they are assumable by qualified purchasers. FHA loan limits vary, depending on the county where the property is located. FHA loans are originated and serviced by private lenders. FHA does not lend money. The mortgage is made by a bank, savings and loan, mortgage company or other FHA-approved lender. In addition, FHA does not set the rates and points. The lender determines these, so it is best to shop around by calling several FHA-approved lenders.
Are there programs for fixer-uppers?
If you need home loan to buy a "fixer-upper" and remodel it, look at the U.S. Department of Housing and Urban Development's Section 203(K) loan program. The program is designed to facilitate major structural rehabilitation of houses with one to four units that are more than one year old. Condominiums are not eligible. A 203(K) loan is usually done as a combination loan to purchase a "fixer-upper" property "as is" and rehabilitate it, or to refinance a temporary loan to buy the property and do the rehabilitation. It can also be done as a rehabilitation-only loan. Investors no longer may participate - only owner- occupants. Owner-occupants are required to come up with only 3 to 5 percent. HUD requires that a minimum of $5,000 be spent on improvements. Two appraisals are required. Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs. How does FHA work?
The U.S. Department of Housing and Urban Development offers a variety of loan insurance programs through the Federal Housing Administration which require approximately 3 to 5 percent cash down. FHA loan limits vary depending on the county where the property is located. FHA loans administered by HUD are originated by private lenders. For more information, contact lenders who offer FHA loans or a regional HUD office. Resources:
* "FHA Forms, Booklets and Publications," U.S. Department of Housing and Urban Development Printing Branch, Room B-100, 451 7th St., Washington, DC 20410; call (800) 767-7468. |
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Are there tax credits for first-time home buyers?
Many city and county governments offer Mortgage Credit Certificate programs, which allow first-time home buyers to take advantage of a special federal income tax write-off, which makes qualifying for a mortgage loan easier. Requirements vary from program to program. People wanting to apply should contact their local housing or community development office. Here is a list of four general requirements to keep in mind:
* Some credit may be claimed only on your owner- occupied principal residence.
*There are maximum income limits, which vary by locality and family size.
* You must be a first-time home buyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas.
* Allocations must be available. A local MCC program may have to decline new applications when it runs out of funds. |
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Are taxes on second homes deductible?
Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.
How is a home's value determined?
You have several ways to determine the value of a home. An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house. A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business. You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites.
Are property taxes deductible?
Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.
Where can I learn more about appealing my property taxes?
Contact your local tax assessor's office to see what procedures to follow to appeal your property tax assessment. You may be able to appeal your assessment informally. Mostly likely, however, you will have to go through a formal tax-appeal processes, which begin with an appeal filed with the appropriate assessment appeals board.
How do property taxes work?
Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the Jacksonville Florida current market value. These annual local assessments by county or local authorities help pay for public services and are calculated using a variety of formulas. |
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