U r b a n T r e k k e r

2 Things about Short-Sales

Besides all the things that you've read and hear ( here, here) lenders are getting better in processing short-sales. Short-sale can be a good opportunity (not for everyone, though). I know that's me saying it. However, the process of getting short-sale a done deal.. still take time.

Here are the dollars-and-cents dealing with short sale.

#1.Successful short sale really depends on how good the listing agent is.

I had represented buyers in multiple short-sale transactions. Dealing with a good, experienced 'short-sale' listing agents make a big difference. There are companies doing just short-sale businesses. You'll find that some settlement companies also take a proactive approach - when it comes to dealing with the lenders. I had a case, where the banks approved it in a matter of 4 weeks! Which is rare, really rare.  The listing agent has been doing a lot of short-sales, so she knows what it takes to close the deal. On top of that, my client gets closing assistance, and the  first mortgage lender agreed to pay the second  mortgage.

And my client asked 'why?' ..that fast. Sheesh..

#2. The listing price sometime is not the closing price you ended up with.

If the property still in good conditions and priced competitively, it'll invite contracts. So, multiple buyers compete for 'that one' house. Higher demand drives up its price. On the other hand, since a short-sale transaction has to be approved by the bank/s (holding the loan/s) or what the industry call 'third-party-approval' the list price might not be the one bank wants to approve. In MLS, there are two kinds of remarks, one for agent and one what the public - you - see. The one for agents have all kinds of remarks that buyer agents read before proceeding.

The take home message is: Don't get too excited when you deal with short-sale (even after contract is ratified). You should continue looking, just in case.. The contract you're putting on - doesn't go through. (Or, your lender refused to financed your purchase).

Because things do happen..

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How to Access $8,000 Tax Credit for Dowpayment & Closing via VHDA Loan Program

A while back HUD announced that FHA will allow state housing finance arms to provide second mortgage so you can use the 'anticipated' $8,000 tax credit towards your downpayment and closing costs to buy homes with FHA-insured loans. (h/t NAHB)

The big question is "how do you do it?" Yup- that is how. Last weekend I was out with a client. We talked about this tax credit thing. (This client used to work for IRS). She says that "she is familiar about how tax credit works however, she found out that none of the lenders she talked to, know how to do it. If such thing is available, she would like to apply for one."

The thing with tax credit is, you have to file your income tax first before you can get the credit. So, if we're talking about the deadline for the credit, closing by November 30, 2009 - you have a problem here. Because technically, you can't access the credit before you file your taxes. See how it's complicate things a bit..

Don't worry now. We've got the the answer to this "how" can you access the credit for downpayment and closing. It is done through state housing agencies. According to NCSHA (Natl. Council Housing Agencies), a number of state housing agencies offer this kind of program: Colorado, Delaware, Idaho, Kentucky, Missouri, Nebraska, New Jersey, New Mexico, Ohio, Pennsylvania, Texas, Tennesse and Virginia. (if it's not listed here, there's no such thing available in your state).

It's just because I do biz in Virginia, will talk about VHDA program. This is how the program works, via VHDA:

• Eligibility: Borrowers must meet federal First-time Homebuyer Tax Credit requirements as well as VHDA's requirements regarding first-time buyer status, income limits, sales price, etc.
  
• Maximum income: The combined income of all household members may not exceed VHDA's maximum income limit. For example, Wash DC MSA, 2 or fewer can't make more than $86,900. (more about max. income limit, here)
• Maximum sales price: On the 2 or fewer max. income above, the maximum sales price is $408,100.
• Max. sales price/ total loan amount: The combination of 1st and 2nd loans cannot exceed VHDA sales/ income limits.
• Minimum credit score: 620.
• Qualifying ratios: FHA ratios of 31% payment-to-income/ 43% debt-to-income apply. 
• Required borrowers funds: Must have a minimum of 1% of the sales price "VERIFIED" as their own funds to be contributed towards the transaction or have it available as reserves.
• Pricing options: Pricing options are available (think this info is for lenders). Rate on first and second mortgage will be the same (this is good!). No points or origination fee charged on the second mortgage. - emphasis added

So the program is designed to fill the need of first-time buyers. Oh, not all FHA lenders work with this kind of program. Only VHDA approved lenders offer their products.

The catch: you have to take a "free" VHDA homeownership seminars. That's it. Here is where you find out about the classes..in Northern Virginia.

Weekly Roundup

America's Most Expensive Homes

There's been a lot of denial among luxury homeowners. In 2006, it was thought that the luxury market wouldn't suffer the same fate as the broader market.

The State of the Nation's Housing 2009 report gives U.S. market mixed grades

The nation's housing industry should remain mired in an epic slump for the rest of 2009, but the longer-term picture is not all doom and gloom, according to the "The State of the Nation's Housing 2009" report, to be presented on Monday by Harvard University's Joint Center for Housing Studies at the Ford Foundation in New York City. (We'll have more news from the event later this week.)

41 Charged as Mortgage Fraud Hits Condos and Suburbs

Federal law enforcement officials recently announced charges have brought against 41 defendants in five separate cases in Chicago. The cases involve more than $48 million in fraudulently obtained mortgages for dilapidated homes in urban areas as well as deals involving million dollar condominiums in a Chicago high-rise and sprawling homes in affluent suburbs like Wheaton and Glenview. The vice president of a title company, mortgage brokers, loan officers, appraisers, real estate investors and an attorney are among the 37 defendants charged.

What's With All the Moaning About Home Appraisals?

Lately, mortgage brokers, builders, real estate agents and others in the housing business have been moaning about appraisals. On Tuesday, it was the turn of Lawrence Yun, the chief economist of the National Association of Realtors. He lamented that May home sales were “less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”

10 Things Moving Companies Won't Say

The moving industry packs in nearly 55 percent of its business during the summer months, but often leaves a trail of frustrated consumers in its wake. The Department of Transportation receives up to 4,000 household moving complaints annually, mostly about loss and damage, poor service, or overcharging. The Council of Better Business Bureaus, meanwhile, reports that complaints about movers jumped from nearly 3,800 in 1997 to more than 9,200 in 2007.

Additional news from around DC region:

• Q&A: Sally Wilson on the USGBC Headquarters, LEED Fine Print, and Negotiating a Green Lease [Metropolis]
• Montgomery Approves Project Before Moratorium [Washington Post]
• Eastern Market reopens after $22M renovation [Wash Biz Journal]
• Index finds D.C. has best 'brain smarts' in U.S. [WTOP]
• Looking for a rent-free home on a lot of land [Real Estate Wonk]
• "Not Paying the Mortgage Yet Stuck with the Keys" [Hot Property]
• Prince William transfers Silver Lake to Park Authority [DC Examiner]
• Cuts Coming to Community Center Hours [Arlington Gazette]
• Experts: Investment in Green Amenities Pays Dividend [Gazette]
• DDOT Launches Real Time Circulator Mobile App [DCist]
• F.C. Council Unanimous in Bid to Convert City to 'Green Lab' [FCNP]

Friday Fun: Where Credit is Due..

Song parody, via Calculated Risk.

N.Va. Sales up 4.6% in May. Active Listings Drop 25%

Sales of resale home is up across the board for Northern Virginia. The number of homes sold is up by 4.6% to 1,803 units. On the other hand, sales prices declined 9.33% in May from $478,672 to $433,257. Median sales also declined 7.41% from $405,000 to $375,000.

Two other indicators are: 1)  the number of homes under contract or pending sales and 2) active listings. The number of homes went under contract – up 21.75% from 2,166 to 2,637 units. A 21.75% increase in contracts from a year ago. On the other hand, active listings drop 25.17% from 10,757 to 8,050 units that translates to monthly supply of 4.46 months. Mmm, a seller's market. (take this with a grain of salt)

On year-to-date basis, the total number of homes sold is up 11.15% from 6,114 to 6,796 homes while prices declined 16.22% from $480,534 to $402,608.

At a glance: Northern Virginia May sales

Home sales	2009	2008
Detached	835	798
Townhouse	507	492
Condos, coops	461	434
Total sold	1,803	1,724	4.58%
Pending	2,637	2,166	+21.75%
Days on mkt	76	88	-13.64%
Ave.sales	$433,257	$478,672	-9.49%
Ave. median	$375,000	$405,000	-7.41%
Ave. list price for solds	$467,995	$518,231	-9.69%

data: NVAR, MRIS

When you look at the average sales price, you know that homes under $500,000 are the ones still selling. According to Prof. Stephen Fuller, from Center for Regional Analysis – GMU, homes under $400k still rule! Here’s the stats, via NVAR.

 

I think the biggest thing from the chart above is this:

"Average Price May 2009 = April 2004"

Helloooooo...

Finally, let’s take a quick look at financing trend. Because the type of financing has something to do with sales trend.

May financing	2009	2008
Total transactions	1,803	1,724
Breakdown:
Conventional	860	1,181	- 27%
FHA	538	278	+93%
VA	174	95	+83%
Assumption	51	44	+15.9%
Cash	169	0
All other	11	19	-42%

See that, how FHA financing ruled! From this stat, we can see that many first-time buyers and VA buyers – swarmed the market – buying..

Weekly Roundup

The Low Down on Listing Home Inspection Costs

Question: I have been looking for a house. I was driving in an area that I like and noticed a house I had long admired had just gone up for sale. I called the listing Realtor, viewed the house and made an offer which was accepted.

Price Slashed on 23.6% of Listed Homes

Nearly one in four US homes for sale today have had at least one price reduction, as sellers come to grips with the reality of a weakening economy and a housing market still groping along toward bottom.

The Summer Home Bust

In recent years, I've approached the summer with something resembling dread. Another three months of having to explain that, no, we won't be spending much time at our place on Cape Cod, seeing as how we don't have one.

Mortgage crisis robbing seniors of golden years

Howard Weiss is 77 and scared. This year, the semiretired distributor from Phoenix ran into financial problems and stopped making his mortgage payments. He was told his home was scheduled for a foreclosure auction in May.

8 'freebies' for new-home buyers

Rhonda Duffy, owner of Duffy Realty in Atlanta, says a builder's whole career could rest on whether he or she sells one house.

The Psychology of Short Sales by Tanta, April 2008

As CR mentions in his essay on housing supply in this issue, plenty of markets are seeing very large segments of for-sale inventory coming in the form of short sale listings. Yet completed short sales remain a small segment of actual “distressed sales” or final dispositions of “worked out” loans.

Programmable thermostats are no longer part of the federal Energy Star program

The U.S. Environmental Protection Agency recently announced that it will suspend its Energy Star specification for programmable thermostats effective December 31, 2009. Any models manufactured after that date cannot bear the Energy Star label; manufacturers will have several months to update their Web sites and promotional material.

FROM AROUND THE WASHINGTON DC REGION:

• Chevy Chase to hold informational, public hearings on purple line [Gazette.net]
• Getting Closer to Confirmation of the Real World House [DCist]
• Beware: Decks Could Soon be Counted as Lot Coverage [Historic Vienna]
• Wiehle avenue development approved [Fairfax Times]
• Local Area Has Its Share of Virginia's Wealthiest [Gazette]
• Greater Washington Initiative: Region's economy to shrink in 2009 [Washington Biz Journal]
• Virginia changes mortgage regulations to fight fraud [Virginia Business]
• Is McMansion era over? [Virginia Business]
• The Cash That's Left [Washington Post]

Foreclosure Goes Upscale: Business Week

The second wave of foreclosures? Mortgage Bankers Association report pointed to that prime loans no longer immune to foreclosures. And then there is this:

According to research by the National Association of Realtors, there are enough $750,000-plus homes on the market to cover more than 40 months' worth of demand at the current rate of sales. That's four times the rate of oversupply in the housing market as a whole.

[via Business Week]

Time to buy? 

Is your Condo on "FHA-Approved" List?

I had this conversation with a lender about FHA approved condos. Yes, condos specifically. Because if you're financing your purchase with FHA loan you want to know this info in advance - before - making an offer if the condo is FHA approved. If you're going with conventional loan, you are okay.

This is the website where you can check whether the condo is FHA-approved or not. On this website you can do search by name, location, or status.

Financing Trends

Northern Virginia

NVAR region, from 18,598 total "all" (single family, townhouse, condo) sales in 2008, here is the breakdown:

Conventional: 12322

FHA: 3480

VA: 1011

Washington DC

From 5563 total sales in 2008:

Conventional: 3875

FHA:  754

VA: 37

You see, FHA takes big chunk of home buying in our area.

So bookmark this website, for your reference:

https://entp.hud.gov/idapp/html/condlook.cfm

It helps if you are a seller too. Because part of the promotion, you can say that 'the building is FHA-approved.' It expands the pool of buyers for your condo. 

For Washington DC region, look for lisf of condominiums under the Washington DC field office.

The "Monetization" of $8,000 Credit for Downpayment Use, Not Straightforward

I re-read HUD Sec. Donovan's announcement on the $8,000 credit that can be rolled into downpayment. When it comes to application of this credit as downpayment it sounds a little bit complicated. 

The language, via HUD.

"Home buyers using FHA-approved lenders can apply tax credit to their down payment in excess of 3.5% of appraised value or their closing costs, which can help lower interest rate."

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"...under the terms of of today's announcement, lenders now can monetize the tax credit use as additional down payment, or for other closing costs."

- emphasis added

If I understand this correctly, this sounds like you can 'monetize' the $8,000 anticipated tax credit above the '3.5 percent' down payment required by FHA. The common sense behind this is if you have more than 3.5% of DP available to you, you can either a) put more towards DP or b) buy point/s - both to reduce your monthly payment. 

Qualifying first-time home buyers only receive a tax credit up to $8,000, depending on the amount of the mortgage. And those who apply for an FHA mortgage can only access these funds after filing the year’s tax return.

In the meantime, however, home buyers financing through state Housing Finance Agencies (HFAs) “and certain non-profits” can use the anticipated tax credit amount via secondary financing provided by the HFA or non-profit, according to HUD’s announcement.

(via Housing Wire)

There's more info buried in the mortgagee letter (9-15), which says "the second lien may not exceed the total needed for the down payment, closing costs and prepaid expenses." Sounds like they're talking about short-term loan. Furthermore, only certain agencies qualified to purchase the credit from you, buyers. Agencies that can purchase the tax credit are FHA-approved mortgagees and FHA-approved non-profit orgs as well as Federal, state, and local governments.

My take on the whole thing is: Leave it to the lender. A lender should know better. After all they're the one that can sell the loans back to FHA. (If their loans can't pass FHA smell test, too bad).

Your Bank Has Failed: 60 Min.

Scott Pelley from 60 Minutes take us into the behind the scene. Pretty impressive show. This is how FDIC runs their operation when they're on a mission to take control a failed bank.

View it here..

Changed it to link. Video is "always" on..