Friday, September 7, 2012
New Blog Series
Think short sales are fascinating? Think you want to know more? Or just have nothing else to do on a Saturday night? I am going to start what will equate to a journal for each of my short sales as I start them. There will be details about the calls to the banks, the resubmission of paperwork, all that fun stuff. There will, of course, be no details disclosed about the parties involved. Names and addresses will be changed to protect the innocent.
Next step...........I have to actually figure out how to make a new blog....anyone?
Wednesday, April 25, 2012
Anyone Notice a Swift Change in the Market?
Anyone else notice something neat happening or is it just me?
Here is what I am noticing. Homes are selling very fast and frequently with multiple offers. We are seeing homes selling in less than 60 days. But...days on market for active listings is still very high. The overpriced listings are hanging around too long and then there are the dregs. You know, terribly distressed properties which require cash or a rehab loan. But outside of those two examples, homes are selling very quickly. A well priced home able to be financed should be no problem to sell in today's market. Buyers are out there and rates are still fantastic.
Sunday, November 20, 2011
Foreclosure fears foster true grief
Reports of foreclosures by the millions have been in the news so much over the past few years that to some, it might seem like the new normal.
But as a real estate professional who is in the trenches with financially stressed homeowners every day, it never for a second feels to me like business-as-usual.
The prospect of losing ones home is right up there among the major sources of grief, and often, it goes hand in hand with other tragic setbacks such as the loss of a job, a divorce, death of a loved one, mounting medical bills or skyrocketing mortgage payments.
Unfortunately, the first stage of grief is denial, and that’s even more the case when the threat of foreclosure is looming. No one wants to talk about or admit financial troubles—even when millions of others have founds themselves in a similar spot. It’s completely understandable, but for homeowners who are behind on mortgage payments, decisive action is often the most critical step toward ensuring the best possible solution.
I help homeowners to deal with every aspect of the grief and uncertainty that accompanies a mortgage which is no longer manageable. In the process, I help them to get on a path of financial solvency.
If you or someone you care about would like to change the course of a life that’s facing foreclosure, I get it and I can help.
Contact me today at 541-606-2954 or tara.nagelhout (at) gmail.com
But as a real estate professional who is in the trenches with financially stressed homeowners every day, it never for a second feels to me like business-as-usual.
The prospect of losing ones home is right up there among the major sources of grief, and often, it goes hand in hand with other tragic setbacks such as the loss of a job, a divorce, death of a loved one, mounting medical bills or skyrocketing mortgage payments.
Unfortunately, the first stage of grief is denial, and that’s even more the case when the threat of foreclosure is looming. No one wants to talk about or admit financial troubles—even when millions of others have founds themselves in a similar spot. It’s completely understandable, but for homeowners who are behind on mortgage payments, decisive action is often the most critical step toward ensuring the best possible solution.
I help homeowners to deal with every aspect of the grief and uncertainty that accompanies a mortgage which is no longer manageable. In the process, I help them to get on a path of financial solvency.
If you or someone you care about would like to change the course of a life that’s facing foreclosure, I get it and I can help.
Contact me today at 541-606-2954 or tara.nagelhout (at) gmail.com
Monday, August 15, 2011
The F Word........FRAUD
Fraud comes in all shapes and sizes, and fraud in the real estate world is no different. From inflating income to obtain loans, to falsifying documents to get rid of a house via short sale, fraud knows no boundaries. At national levels, mortgage fraud risk has declined 2.3 percent over the year.* Interthinx’s nongeographic fraud risk analysis found that investor loans are riskier than owner-occupant loans with three times the risk of employment/income fraud. The report also concluded that as the loan amount increased, so did the risk of occupancy or employment/income fraud. Oregon ranks at number 15 for mortgage fraud risk. Salem, Oregon received the highest fraud risk rating, "very high" as did Atlanta, Memphis, and pretty much all of southern California.
What does mortgage look like at the beginning of a loan? Buyers find themselves falsifying their financial information to obtain a loan when they would be otherwise ineligible. With stated incomes being a fossil of the housing boom, it isn't as easy to falsify income and it is a lot more bold these days. Income fraud is seen in traditional full documentation loans by forging or altering an employer issued W-2, tax returns, or bank statements. WOW! That is bold! There are the rare occurances of the loan broker falsifying the borrower's documents in order to facilitate the closing in order to "earn" their commission. Again, very bold and very stupid. According to CoreLogic, over $10,000,000,000 (yep...that is a ten billion) in loans were made with fraudulent application data in 2010 alone!
Occupancy fraud is another method which remains popular. This is when a buyer states they will be living in the property when in fact it is being purchase as an investment. You might wonder why anyone would do that? Well, interest rates for investment properties are significantly higher and require significantly larger down payments than owner occupied properties. That answer is pretty simple. And you might wonder why it matters? Lenders are well aware that a borrower will take all measures to protect the property he/she lives in. The owner's “attachment” to the property is just as emotional as it is financial. In the case of a non-owner occupied home, the emotional attachment does not exist, or at least is not as strong. Because of this lenders require a higher interest rate to offset the potential they have for loss.
Appraisal fraud is when the home's value is deliberately over or understated. When it is over stated, more money can be obtained by the borrower from the lender for a cash-out refinance, or more funds going to the seller in a purchase transaction, or in a fully blown fraud for profit scheme to the organizers. Inflating the value is easy to understand, but why would anyone deliberately understate the value of a home? On the purchase side again, in order to get a lower price for a foreclosed property. Some foreclosed properties have the appraisals completed prior to being put on the market. I dishonest appraiser may be involved in the preparation but there could also be somebody on the other end who is editing it with graphic editing tools. Devaluing property for the purpose of a loan modification or short sale is a whole second article, so come back in two weeks and we will find out all about it. Fraudsters can be very bold and with the prevalence of mortgage fraud and the limited capacity of the government to watch and detect, they are getting away with it. I always wonder, if these seemingly creative and clever people would use their powers for good instead of fraud, how much better would this country be?
What does mortgage look like at the beginning of a loan? Buyers find themselves falsifying their financial information to obtain a loan when they would be otherwise ineligible. With stated incomes being a fossil of the housing boom, it isn't as easy to falsify income and it is a lot more bold these days. Income fraud is seen in traditional full documentation loans by forging or altering an employer issued W-2, tax returns, or bank statements. WOW! That is bold! There are the rare occurances of the loan broker falsifying the borrower's documents in order to facilitate the closing in order to "earn" their commission. Again, very bold and very stupid. According to CoreLogic, over $10,000,000,000 (yep...that is a ten billion) in loans were made with fraudulent application data in 2010 alone!
Occupancy fraud is another method which remains popular. This is when a buyer states they will be living in the property when in fact it is being purchase as an investment. You might wonder why anyone would do that? Well, interest rates for investment properties are significantly higher and require significantly larger down payments than owner occupied properties. That answer is pretty simple. And you might wonder why it matters? Lenders are well aware that a borrower will take all measures to protect the property he/she lives in. The owner's “attachment” to the property is just as emotional as it is financial. In the case of a non-owner occupied home, the emotional attachment does not exist, or at least is not as strong. Because of this lenders require a higher interest rate to offset the potential they have for loss.
Appraisal fraud is when the home's value is deliberately over or understated. When it is over stated, more money can be obtained by the borrower from the lender for a cash-out refinance, or more funds going to the seller in a purchase transaction, or in a fully blown fraud for profit scheme to the organizers. Inflating the value is easy to understand, but why would anyone deliberately understate the value of a home? On the purchase side again, in order to get a lower price for a foreclosed property. Some foreclosed properties have the appraisals completed prior to being put on the market. I dishonest appraiser may be involved in the preparation but there could also be somebody on the other end who is editing it with graphic editing tools. Devaluing property for the purpose of a loan modification or short sale is a whole second article, so come back in two weeks and we will find out all about it. Fraudsters can be very bold and with the prevalence of mortgage fraud and the limited capacity of the government to watch and detect, they are getting away with it. I always wonder, if these seemingly creative and clever people would use their powers for good instead of fraud, how much better would this country be?
Monday, July 25, 2011
To Short or Not to Short...part 3
After all the conflicting information we hear about short sales and their impact on credit scores you are probably wondering what you should do. When working with a distressed homeowner the first question I like to ask is "What do you want?". While this may seem like a very open ended question, it isn't. Most people know what I am asking and are able to answer fairly quickly. While some may respond with "I want to keep my home, I just need a payment I can handle" others quickly jump to "I just want this over and want to move on with my life.". There is a wide range of answers in between as well.
One consistent requirement for your servicer to agree to a short sale is a valid hardship. They need to see why you need to sell your home. And here's the thing, the fact that your house is worth less than you owe is not a hardship. I know, that might not be what you want to hear, but a lack of equity was not the intent when these programs were set up. What is a hardship? Loss of job, death of a spouse, medical bills, necessary relocation, and other similar life changing events.
You may also hear stories of the bank "forcing" 30 day lates in order to allow the short sale. While in most cases a servicer will not allow a short sale without the payments being late, the intended purpose again, is that if you can make your payment, you should. If you can't then you can't.
Foreclosures, short sales and being delinquent have become almost mainstream. The stigma once attached is rapidly diminishing and what was once a private matter most people would prefer to hide is now becoming nearly a badge of honor to be worn with pride. The result? A continuous snowball of distressed properties, each one contributing to lower neighborhood property values. While there are true hardships and people who honestly need to sell their homes, there are also many cases of owners who just simply don't want to pay on a home which is underwater, from an equity point of view. The problem is that with each short sale or foreclosure the surrounding home values decline and decline, and then decline some more.
In a normal fair market sale, a seller will work as hard as possible to obtain the highest sales price. Why? Because the higher the selling price, the more money in their pocket. When it comes to the point that the seller will be receiving no funds from the transaction their motivation to get the highest price possible is removed from the equation. We see sellers accepting virtually any offer because they just don't care. But they should care. Another $5,000 or $10,000 not only decreases the loss the investor absorbs, but it also helps to maintain property values of the surrounding homes. The game should not be to get any offer as fast as you can, but to get the highest and best offer you can.
The answer is never clear and each person is different. But if you can make your payment, do it. Your credit score will thank you, your future ability to buy a home with thank you, and your neighbors will really thank you. If you can't, consult a Realtor, do your best to sell the property for the highest possible value.
One consistent requirement for your servicer to agree to a short sale is a valid hardship. They need to see why you need to sell your home. And here's the thing, the fact that your house is worth less than you owe is not a hardship. I know, that might not be what you want to hear, but a lack of equity was not the intent when these programs were set up. What is a hardship? Loss of job, death of a spouse, medical bills, necessary relocation, and other similar life changing events.
You may also hear stories of the bank "forcing" 30 day lates in order to allow the short sale. While in most cases a servicer will not allow a short sale without the payments being late, the intended purpose again, is that if you can make your payment, you should. If you can't then you can't.
Foreclosures, short sales and being delinquent have become almost mainstream. The stigma once attached is rapidly diminishing and what was once a private matter most people would prefer to hide is now becoming nearly a badge of honor to be worn with pride. The result? A continuous snowball of distressed properties, each one contributing to lower neighborhood property values. While there are true hardships and people who honestly need to sell their homes, there are also many cases of owners who just simply don't want to pay on a home which is underwater, from an equity point of view. The problem is that with each short sale or foreclosure the surrounding home values decline and decline, and then decline some more.
In a normal fair market sale, a seller will work as hard as possible to obtain the highest sales price. Why? Because the higher the selling price, the more money in their pocket. When it comes to the point that the seller will be receiving no funds from the transaction their motivation to get the highest price possible is removed from the equation. We see sellers accepting virtually any offer because they just don't care. But they should care. Another $5,000 or $10,000 not only decreases the loss the investor absorbs, but it also helps to maintain property values of the surrounding homes. The game should not be to get any offer as fast as you can, but to get the highest and best offer you can.
The answer is never clear and each person is different. But if you can make your payment, do it. Your credit score will thank you, your future ability to buy a home with thank you, and your neighbors will really thank you. If you can't, consult a Realtor, do your best to sell the property for the highest possible value.
Monday, July 11, 2011
To short or Not to Short....part 2
One common belief is that a short sale is better on your credit report than a foreclosure. While a foreclosure on your credit report is terrible, a short sale may be just as damaging as a foreclosure to the seller's credit or credit rating. Both FICO and VantageScore have release recent studies that show "For anyone, a short sale can be almost as destructive as a foreclosure." FICO looked at how a short sale or foreclosure would affect three hypothetical mortgage holders: One with a 780 score; another with 720, who may have; and a third with a 680. In a short sale, assuming that the lender or servicer has waived the right to collect the difference between the amount owed and the amount paid, the 780 score drops to between 675 to 655; the 720 score drops to between 625 to 605; and the 680 score drops to between 630 to 610.
The biggest impact on a mortgage holder's credit score is missed monthly mortgage payments. If a person with a credit rating of 780 is 30 days late, the score drops as if a short sale has occurred (690 to 670). The same is true for the person with a 720 score (650 to 630) and a person with a 680 score (620 to 600). Thus, a short sale or foreclosure has almost the same credit rating effect if the seller is behind on the monthly mortgage payments.
Belief #2: The bank will not pursue a deficiency judgment. While some lenders clearly disclose in their short sale approval letters that a deficiency will not be pursued, others are less blatant. I have heard Realtors say "Oh, don't worry, they say they can come after you for the remaining balance but they never do.". Well.....the lenders might not be coming to collect the remaining balances right now, but right now they are quite busy. What happens when they no longer have all these short sales to process and their employees need something to do? Well, my bet is all those sellers who didn't have a very clear release of money owed will be hearing from some agressive collection agencies. These collection agencies will buy up these old debts for pennies on the dollar and will do all they can to collect the remaining balances. Debtors will have a choice of paying the debt in full, possibly settling the debt, or filing bankruptcy.
Belief #3: You won't be taxed on the amount of debt forgiven. The Mortgage Forgiveness Debt Relief Act does provide for sellers to not be taxed on the debt forgiven, there are certain qualifications which must be met. The first is that the home must be the debtors primary residence. This means a seller can't short sale a rental property and claim the forgiveness. Second, the debt forgiven must be from purchase money or a non cash out refinance. In other words, if you took out an equity loan to buy a boat or pay of credit card debt, you will be taxed on the amount forgiven.
Come back in 2 weeks for part 3 of To Short or Not to Short.
Important legal disclaimer: I am a Realtor with a lot of knowledge and experience on my side. I am not a lawyer or an accountant. As such, for legal or tax advise you should consult a professional in that field. This article is a collection of my opinions and should not be considered legal or tax advice.
The biggest impact on a mortgage holder's credit score is missed monthly mortgage payments. If a person with a credit rating of 780 is 30 days late, the score drops as if a short sale has occurred (690 to 670). The same is true for the person with a 720 score (650 to 630) and a person with a 680 score (620 to 600). Thus, a short sale or foreclosure has almost the same credit rating effect if the seller is behind on the monthly mortgage payments.
Belief #2: The bank will not pursue a deficiency judgment. While some lenders clearly disclose in their short sale approval letters that a deficiency will not be pursued, others are less blatant. I have heard Realtors say "Oh, don't worry, they say they can come after you for the remaining balance but they never do.". Well.....the lenders might not be coming to collect the remaining balances right now, but right now they are quite busy. What happens when they no longer have all these short sales to process and their employees need something to do? Well, my bet is all those sellers who didn't have a very clear release of money owed will be hearing from some agressive collection agencies. These collection agencies will buy up these old debts for pennies on the dollar and will do all they can to collect the remaining balances. Debtors will have a choice of paying the debt in full, possibly settling the debt, or filing bankruptcy.
Belief #3: You won't be taxed on the amount of debt forgiven. The Mortgage Forgiveness Debt Relief Act does provide for sellers to not be taxed on the debt forgiven, there are certain qualifications which must be met. The first is that the home must be the debtors primary residence. This means a seller can't short sale a rental property and claim the forgiveness. Second, the debt forgiven must be from purchase money or a non cash out refinance. In other words, if you took out an equity loan to buy a boat or pay of credit card debt, you will be taxed on the amount forgiven.
Come back in 2 weeks for part 3 of To Short or Not to Short.
Important legal disclaimer: I am a Realtor with a lot of knowledge and experience on my side. I am not a lawyer or an accountant. As such, for legal or tax advise you should consult a professional in that field. This article is a collection of my opinions and should not be considered legal or tax advice.
Tuesday, June 28, 2011
To Short or Not to Short...that is the question. Part 1
Today's real estate market is a confusing spiral of conflicting information and challenging choices. Short sales, foreclosure, strategic default, waiting it out, or just burying your head in the sand are all options considered by distressed and depressed home owners today.
Perhaps a quick definition of potentially unfamiliar terms would be in order. Short sale: This is when the owner is selling their home for less than is owed to the bank. The bank must agree to accepting less than is owed and allowing the lien to be released from title. While we all understand foreclosures and assume they are caused by the owner's inability to pay, there is another option. Many owners are able to pay, but due to any number of factors choose to not pay. Strategic defaults are much more prevalent in larger cities where values have taken larger hits than we have seen in Lane County. Las Vegas is a perfect example. Some neighborhoods have seen declines of 50% or more in values. In these situations many borrowers look at their home from an investment point of view and wonder how many years it will take to get their value back and weigh that information against the consequences of just walking away. In Oregon, under a basic note and trust deed, there is no deficiency to the owner if they walk away. Enter strategic default. The choice to just walk away even if you can pay the bill.
Waiting it out is another option. Many owners, looking at their home as a home and not an investment choose to continue making their payments and realize having a home is a necessary expense. They know one day the value will return and will choose to sell at that point.
Sticking one's head in the sand is also a choice. Not a good one, and it generally ends in foreclosure, but it is still a choice.
Now back to the original question. Should you consider a short sale? Over the past five years short sales and the processes involved have evolved as fast as rabbits can breed. Home owners in distress hear many reassuring statements leading them to believe a short sale is better than a foreclosure, but as the process evolves, so do the consequences. Some common beliefs are that a short sale is better for your credit than a foreclosure, that the bank won't pursue a deficiency judgment against you, you will not be taxed on the forgiven debt, or that if you are taxed you can just tell the IRS you are insolvent and there will be no tax implications. While all these statements may be true, as with everything in life, it is in the details and certain restrictions will apply. Want to know more....come back in two weeks for part two.
Important legal disclaimer: I am a Realtor with a lot of knowledge and experience on my side. I am not a lawyer or an accountant. As such, for legal or tax advise you should consult a professional in that field. This article is a collection of my opinions and should not be considered legal or tax advice.
Perhaps a quick definition of potentially unfamiliar terms would be in order. Short sale: This is when the owner is selling their home for less than is owed to the bank. The bank must agree to accepting less than is owed and allowing the lien to be released from title. While we all understand foreclosures and assume they are caused by the owner's inability to pay, there is another option. Many owners are able to pay, but due to any number of factors choose to not pay. Strategic defaults are much more prevalent in larger cities where values have taken larger hits than we have seen in Lane County. Las Vegas is a perfect example. Some neighborhoods have seen declines of 50% or more in values. In these situations many borrowers look at their home from an investment point of view and wonder how many years it will take to get their value back and weigh that information against the consequences of just walking away. In Oregon, under a basic note and trust deed, there is no deficiency to the owner if they walk away. Enter strategic default. The choice to just walk away even if you can pay the bill.
Waiting it out is another option. Many owners, looking at their home as a home and not an investment choose to continue making their payments and realize having a home is a necessary expense. They know one day the value will return and will choose to sell at that point.
Sticking one's head in the sand is also a choice. Not a good one, and it generally ends in foreclosure, but it is still a choice.
Now back to the original question. Should you consider a short sale? Over the past five years short sales and the processes involved have evolved as fast as rabbits can breed. Home owners in distress hear many reassuring statements leading them to believe a short sale is better than a foreclosure, but as the process evolves, so do the consequences. Some common beliefs are that a short sale is better for your credit than a foreclosure, that the bank won't pursue a deficiency judgment against you, you will not be taxed on the forgiven debt, or that if you are taxed you can just tell the IRS you are insolvent and there will be no tax implications. While all these statements may be true, as with everything in life, it is in the details and certain restrictions will apply. Want to know more....come back in two weeks for part two.
Important legal disclaimer: I am a Realtor with a lot of knowledge and experience on my side. I am not a lawyer or an accountant. As such, for legal or tax advise you should consult a professional in that field. This article is a collection of my opinions and should not be considered legal or tax advice.
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