Monday, June 24, 2013

Are Short Sales Worth the Trouble?

Short sales – a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth – continue to dominate the housing market, but these real estate transactions aren’t for everyone.

Making sense for my Readers:
  • Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss.  To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale.  Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.
  • Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price.  According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.
  • Home buyers wanting to purchase a short sale must have patience.  In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours.  With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases.  It may take 30 days or longer for a buyer to receive a response from the bank.
  • In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home.  In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.
  • Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or forego an inspection altogether.
Even with the challenges associated with short sales, buyers should be aware it takes along time, your offer can't be contingent on selling your current home, and it is an as-is sale.  not avoid these transactions.  Being prepared ahead of the time and working with an experienced REALTOR® can help buyers avoid frustration

Monday, June 17, 2013

Did You Miss The Boat On Record-Low Mortgage Rates?

Ed Torrez--Prediction
Borrowers who didn’t take advantage of the historically low interest rates likely have missed the opportunity to purchase or refinance using an ultra-low mortgage rate. In the past month, rates have been on the rise and are expected to continue to climb. Fannie Mae’s chief economist doesn’t believe mortgage rates will ever be that low again.

Making sense for my readers:

  • According to the economist, the Fed is going to stop bolstering the housing market, which has kept rates at rock-bottom levels by buying up to $85 billion a month of Treasury bonds and mortgage-backed securities. That has enabled lenders to sell mortgage loans at low interest rates and recoup their money immediately – plus profits.

  • If the Fed stops purchasing the securities, private investors will have to pick up the slack. For investors to do that, the loans will have to offer a better payoff, and that would mean raising rates for borrowers.

  • Low mortgage rates generally are a result of an economy in distress. But now, the market believes the economy is getting stronger. Job gains have picked up, and the fact that that hiring is advancing rather than retreating is good news for the economy. Any positive future reports are expected to push rates higher.

  • Today’s rates are unprecedented. The ever-popular 30-year, fixed-rate mortgage hit a 37-year low in 2003 at 5.23 percent. It is likely that any return to normal conditions will be accompanied by higher mortgage rates.

  • Borrowers should keep in mind that even if rates go up a percentage point or two, mortgages will still be relatively low. Historically, 30-year loans are usually 5.5 percent or higher. For clues in the direction of mortgage rates, experts recommend borrowers look at the daily movements in 10-year Treasury bond yields. Mortgage rates track Treasury yields with the difference between them holding fairly constant.