Archive for May, 2009

Five Ways the New Housing Law Benefits Home Owners

Ann Arbor , MI May 26, 2009 – The Helping Families Save Their Homes Act (S. 896) was recently passed by Congress and signed into law by President Obama last week.   “There are five primary sections of the new law that will benefit home owners and consumers,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Benefit #1 – Loan Modifications and Short Sales Should Get Easier
“Most mortgage loan modification plans announced by the government to date have been voluntary, meaning that mortgage companies do not have any legal obligation to participate,” Nicholas said.  The new law changes that by requiring servicers to modify loans and approve short sales for consumers as long as three requirements are met:

  • Default on the mortgage needs to be reasonably foreseeable
  • The home owner must occupy the property as their primary residence
  • The mortgage company needs to be able to recover more from the loan modification or short sale than they would by sending the home into foreclosure

“These three requirements were also present in legislation that was signed into law in 2008,” Nicholas said.  “However, this new law is more effective because it specifically states that servicers must consider any of the plans that have been endorsed by the US Treasury Secretary – including the Obama administration’s Making Home Affordable plan – when making their decisions.  This means that home owners should find it easier to qualify for a loan modification or short sale because their mortgage servicers are finally obligated by law to consider some of these new plans that have been completely voluntary up until this point.  It may take several weeks for servicers to start implementing the new law, but the bottom line here is that help is finally on the way.”

Benefit #2 – New and Improved FHA Hope for Homeowners Program
“It has been reported that only one family has qualified for the FHA Hope for Homeowners program since it was launched last year,” Nicholas said.  The new version of the program should generate a lot more participation from lenders due to four major updates:

  • The current mortgage lien holder is allowed to share in any appreciation in home value that occurs over time.  Previously, first lien holders were excluded from equity sharing and they had little incentive to participate in the program.
  • The FHA premiums are reduced to “not more than” 3% up front and 1.5% annually.  This means that the current lender may only need to reduce the principal to 90% of the current home value instead of the 87% that was required under the old plan.
  • This program can now be used in conjunction with the Obama administration’s Making Home Affordable program that pays servicers a fee to reduce the mortgage balance.
  • Borrowers are no longer required to document their income through tax returns.  The Department of Housing and Urban Development (HUD) will issue income documentation guidelines that may make it easier for some borrowers to qualify using alternative sources of income documentation.

Benefit #3 – $250,000 FDIC Insurance Limit Extended to December 31, 2013
“The $250,000 limit was set to expire at the end of 2009 and revert back to $100,000,” Nicholas said.  “The new law prevents another large scale panic by extending the higher $250,000 limit for another four years.  Also, the FDIC is now allowed to borrow up to $100 billion from the US Treasury in case of emergencies.  This is significant because insured deposits have tripled since the FDIC’s old borrowing limit of $30 billion was set during the 1990s.  The FDIC is funded by the banking system and has never been funded by the US government.  They only borrowed once from the Treasury during the 1990s and paid back all the money in full with interest.  As a temporary measure, the FDIC is allowed to borrow up to $500 billion from the US Treasury throughout the end of 2009 as long as this is approved by a two-thirds majority vote of the FDIC Board of Directors and the Fed Board of Governors in consultation with the President and the US Treasury Secretary.”

Benefit #4 – Borrowers Must be Notified When Ownership of Their Mortgage Changes
“This is significant because previously, borrowers were only notified when their servicer changed,” Nicholas said..  “The current mortgage crisis has proven that the owners of the mortgage – not the servicers that collect the monthly payments – are the real decision makers when it comes to approving loan modifications and short sales.”

Benefit #5 – Tenants are Better Protected in the Event of Their Landlord’s Foreclosure
“Many renters have been forced to leave their homes because of their landlord going through foreclosure,” Nicholas said.  The new law provides two minimum guidelines that protect tenants:

  • Tenants are now allowed to occupy the property until the end of their lease term (even after the landlord goes through foreclosure) as long as the new buyer does not intend to occupy the new home as their own primary residence
  • If the new buyer intends to occupy the home as their own primary residence, the tenant must be given a 90 day notice before being forced to leave

*Article courtesy of Glen Barnette, CMPS Platinum Mortgage Inc

May 27, 2009 at 11:17 pm Leave a comment

Creative ways to buy a home after a foreclosure or short-sale

Homeowners who were foreclosed upon or did a short sale of their home are now finding creative ways to get back into home ownership. One way of easing their way into a lifestyle that they are familiar with is called a lease-to-own or lease purchase.

What is a lease-to-own/lease purchase or lease option agreement?
These terms are synonymous with each other and interchangeable. A lease-option agreement allows the renter to lease the home and provides the renter the option to purchase the home in the future at an agreed-upon price.

A typical lease-option agreement requires the renter to pay a somewhat higher monthly rent for the home and obligates the owner to credit a portion of that rent toward the renter’s down payment.  For example, if the owner’s expected market rent was $1,500 per month, he or she might increase that to $1,800 per month and apply $300 per month to your down payment. After one year, you would have a down payment credit of $3,600.

The renter pays an option fee — typically 1% to 5% of the purchase price for the right to the option.  The option fee is typically credited towards the purchase price.  The renter is not obligated to exercise the option to buy the home at the end of the option term.

Why do renters and sellers agree on a lease purchase?

A renter who has poor credit and is unable to secure a loan can consider a long option period (one to three years) to build his credit, while a seller whose house has been difficult to sell might be interested in a lease-to-own arrangement.

Advantages for Renter:

1.  Renter is given one to three years to repair credit and ease into home ownership.
2.  Renter has the opportunity to live in and test the condition of the house prior to buying the home.
3.  Renter builds equity into the home by locking the price now in an upward real estate market.

Advantages for Seller:

1.  Seller is able to find a buyer on a property that is hard to sell.
2.  Seller is able to receive more money for rent than market value. This especially benefits a homeowner who is upside down on his house and does not want to miss payments.
3.  If renter is not able to qualify for a loan at the end of the option term or renter decides not to purchase the property, seller keeps the option fee and premium.

Disadvantages for Seller

1.  Seller is holding the property for a year or more to a renter with less than good credit and who is not certain to buy the property.
2.  Seller may have to take legal action if renter is delinquent in payments or seller no longer would like to sell the property to the buyer.
3.  Seller may lose money in an upward real estate market.

Disadvantages for Renter

1.  Renter has a limited number of homes to choose from because lease-to-own sellers are rare.
2.  Renter loses the option money and the premium if renter decides not to exercise the option to buy the home.
3.  Renter may lose equity on the home in a downward real estate market.

Dangers of a lease purchase agreement:

There are many problems that could take on legal attention in a lease purchase agreement.  Ninety percent of these types of agreements fail because the renter and the seller agree on a price now for a pending contract that will take effect in one to three years. Anything can change within the waiting period in the lives of the renter, seller and the real estate market. These changes could prompt a cancellation of the contract.  Such changes may include:

1.  The real estate market price index can change to favor one party over the other.
2.  A seller may decide to sell the house quicker than the agreed-upon date if the real estate market picks up, if seller is relocating, or if there is a death in the family, unexpected medical expenses, or life changes such as a divorce.
3.  Buyer is unable to continue making timely payments.
4.  Seller may find another buyer who is willing to pay more for the property.
5.  Buyer no longer likes the property due to a job change, growing family, medical expenses, etc.

If the buyer does not purchase the property at the end of the option term, the buyer loses the option fee and premium. If seller no longer wants to sell the home to the buyer, seller may refund the some money to the renter.

Because lease-to-own agreements can be complex legal arrangements, I recommend you contact an attorney to make sure your interests are protected.  For more information, feel free to contact me via email at or phone at (480) 650-0075..

May 18, 2009 at 11:52 am 10 comments

Metro Phoenix Enters a Seller’s Market

Recently, the Arizona real estate market has seen a tremendous increase in home sales. The demand for homes has been triggered by low prices, low interest rates and generous home buying incentives. The  inventory of homes dropped significantly from 49,000 homes to 37,350 in less than two months. The Valley is entering a seller’s market as demand for homes continues.

If you are looking to sell your home soon, there are benefits to starting the process now rather than waiting. The public is usually late to react to changes in the market.

I have yet to hear any major media outlets report that the Valley is entering a phase that qualifies as a seller’s market. That’s because the media typically rely on national statistics, not localized areas.

In Metro Phoenix, all signs now point to our area already qualifying as a seller’s market.  Some areas have less supply than other areas. Once the news of the seller’s market is widely reported  and takes on a national scale, I can imagine a surge in the inventory of homes being offered for sale from homeowners who had been waiting to sell, builders who had been holding off on building homes, even as the number of foreclosures may also increase.

The seller’s market is here today and may be gone tomorrow — we don’t know exactly when. In the meantime, if you’ve been considering selling a home for any reason, this may be the perfect time to avoid pandemonium and make your exit before the sleeping giant wakes up.

May 14, 2009 at 11:13 pm Leave a comment

A Comprehensive LooK at the Current Metro Phoenix Real Estate Market – April 2009

Preliminary April 2009 Report

Published by Cromford Report

April 6, 2009 established a bottom for $/SF sales pricing across the Greater Phoenix area. This does not mean that prices will not go lower in certain areas – they will. But the overall average price per square foot put in a convincing low on April 6 and has been moving sideways to slightly up ever since. The increasing sales volume tends to reinforce the significance of this pattern.

Those who wish to see some graphical evidence of this are referred to: The Daily Chart of Sales Price per Square Foot for All Areas and Types

The same chart for single family detached homes in the major cities is available here. Studying this chart I would claim that the cities of Phoenix, Avondale, Gilbert, Mesa, Peoria and Queen Creek are making the best cases for establishing a bottom, while Chandler, Goodyear, Scottsdale, Tempe, Glendale and Surprise still have some work to do. Of course we need to continue to watch to see if the pattern strengthens or fades. The current readings for Pending $/SF suggest more sideways movement in the near term.

Every city showed improvement in April over March with supply falling and demand rising. In some areas the fall in supply was breathtakingly swift. Pending sales rose yet again, actual sales continued their strong advance, and listing success rates climbed. To illustrate the change in the market since January, let’s look at Months Supply for May 1st vs. Jan 1st:

1. Avondale 4.4 (was 8.9)
2. Chandler 5.7 (was 9.1)
3. Gilbert 5.2 (was 7.9)
4. Glendale 3.2 (was 9.1)
5. Goodyear 3.8 (was 8.6)
6. Mesa 4.4 (was 8.9)
7. Peoria 4.9 (was 10.3)
8. Phoenix 3.4 (was 9.0)
9. Queen Creek 2.9 (was 6.1)
10. Scottsdale 14.3 (was 19.4)
11. Surprise 3.3 (was 7.2)
12. Tempe 6.7 (was 8.7)

I would consider an inventory level of 4.5 months as “normal” so we can see 7 out of the 12 major cities now have a “below normal” inventory judging by months supply.

Let’s look at some basic sales numbers:

April sales (all types and areas) – 8,500 (includes 44 out of territory ARMLS sales, e.g. Payson, Prescott, Flagstaff)

Greater Phoenix Lender-owned Property sales – 5,629

Greater Phoenix Pre-foreclosure & Short Sales – 846

Greater Phoenix Normal Sales – 1981

So REOs still dominated the sales figures, but they are not as dominant as they once were. Among the active listings, REOs are declining quite fast – they now comprise about 17% of all listings whereas in early January they comprised 28% of a much bigger number. In fact, considered as a market segment, Greater Phoenix REO listing on ARMLS represent only a 1.3 month supply at their current monthly sales rate.

Pre-foreclosures and short sales are becoming an increasing percentage of both listings and sales, although their listing success rate, having improved from 21% in February to 34% in April, still has a ways to go to rival REOs with their phenomenal listing success rate in April of 86%.

As before, the majority of the sales action is concentrated at the affordable end of the market, but it has to be said that improvement in demand is clearly visible at almost all price ranges.

May 10, 2009 at 1:39 pm Leave a comment

Looking for Houses without an LSR

A buyer emailed me recently to ask if he could go ahead and see homes for sale without a Loan Status Report (LSR). My answer was no, and I gave him a brief reason why. So many buyers want to look at homes without even knowing what they financially qualify for. To look at homes without an LSR or pre-approval letter is like going to war without a weapon. Below are reasons why a serious buyer must have a LSR ready to go before looking at homes:

1. YOU’LL KNOW WHAT YOU CAN AFFORD – Buying a home is not only about LOCATION, it is also about FINANCING. The LSR is a one-page document that is meant to help you find out how much you can be approved to borrow, as well as what your closing costs will be, your estimated monthly mortgage payment, etc., so you will be looking at homes that you can qualify for and be financially prepared for. It is important to find this information out UP FRONT than to be surprised later.

2. AN LSR IS A REQUIRED DOCUMENT FOR AN OFFER – No seller will accept an offer on their home without the buyer presenting an LSR, unless it is a cash offer. So, if the buyer falls in love with a house and does not have an LSR , he or she could lose the house to someone else who has an LSR ready.

The LSR alerts the buyer and Realtor of any lender conditions on the purchase of the home. Say for example, a seller offers closing cost assistance for the buyer. This condition and other conditions will be negotiated in the buyer’s offer.

4. YOU’LL SAVE TIME – We save everybody’s time if the buyer has an LSR ready to go. With an LSR, all parties know that the buyer is qualified to buy a home at a certain price range. They are also aware of any lender conditions, making the entire buying process simpler, easier and faster.

On the other hand, if you are not ready to buy a home or have some conditions that need to happen prior to buying, It would be good to look at houses on your own and at your own pace to get a feel of the market. Once you are ready to buy, contact a reputable Realtor such as myself, and a lender to help you with your pre-approval and LSR.

May 5, 2009 at 1:30 pm Leave a comment

Short Sale Seminar a Success

Buyers and sellers wanting to know more about the short sale process filled the room during the short sale seminar conducted by Maria Hass of Realty Executives. Ms. Hass informed attendees of what to expect in buying a short sale or selling the home short. Maria Hass conducts regular seminars on different aspects on real estate to better serve her clients and the public. Her next seminar will be about credit and ways to repair ones credit to qualify for a home.

May 4, 2009 at 12:44 pm Leave a comment



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