7 Tips for Short Sale Success

When you owe more on your home than it’s worth, but you have to sell, you need to squeeze every dollar possible from the sale. Here are seven tips for navigating the short-sale process.

1. Know who you owe

A short sale has to be approved by any company that has a mortgage or lien against your home. That includes your first, second, or even third mortgage lender, your home equity line lender; your homeowners or condominium association; and any contractors who’ve placed a lien on your home. Make a list and start talking to everyone early in the process. Ask what documents they’ll need from you.

2. Pick your short sale team

You’ll need to work with a team of short sale experts, including a real estate agent, real estate attorney, and your accountant. Look for agents and attorneys who advertise themselves as short sale experts. Interview at least three, and listen carefully for signs that they understand the complexities of the short sale process.

Agents should explain how they’ll arrive at a suggested price for your home. Ask them to show you a sample short-sale package or for an example of a prior short-sale success.

3. Get your documents ready

Gather the paperwork your creditors and mortgage lenders asked to see, like your listing agreement and a hardship letter explaining why you need to do a short sale. You’ll also need proof of what you earn and what you owe as well as copies of your federal income tax returns for the past two years.

4. Expect delays

Despite a federal rule saying banks participating in the federal government’s Making Home Affordable loan modification program (http://www.houselogic.com/articles/making-home-affordable-modification-option/) must respond to short-sale offers within 10 days, it may take weeks or months for your lender to decide whether to allow you to sell your home in a short sale–and even longer if you must negotiate with more than one lender or lienholder.

Your lender and lienholders don’t have to agree to your proposed short sale. They can reject your terms or make a counteroffer, which can create further delays.

5. Anticipate demands

Discuss with your short-sale team how you should respond to common short-sale demands from lenders. For example, are you willing to sign a promissory note agreeing to pay outstanding amounts after the sale is complete?

6. Know the tax implications

Any unpaid amount of your mortgage “forgiven” by your lender through a short sale may be considered income to you under federal tax rules. Ask your attorney or accountant whether you qualify to exclude that amount as income on your tax returns under the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act. Also ask if you’ll be required to report amounts “forgiven” by other lienholders, if applicable.

7. Consider how the short sale will affect your credit and what you must pay

Ask whether your lender will report the short sale to credit-reporting agencies. Having a portion of your debt forgiven may negatively affect your credit score, but a short sale typically damages your score less than a foreclosure or bankruptcy.

Ask you lawyer whether you’ll be responsible for paying back the lenders’ loss. If the lender says it will forgive any losses on the sale of your home, get that promise in writing.

There will be no more dramatic price drops such as those 30% to 50% declines we saw between 2006 and 2008. But the market will not stabilize in 2009. Furthermore, consumer confidence will continue to fall, and more people will find themselves out of work.

On the bright side, employed home buyers with good credit will find 2009 is an excellent time to buy.

Sellers will withhold listings from the market or cancel listings that don’t sell within 90 days. Although persistent demand will come from first-time home buyers and investors, inventory will fall. Falling inventory will not drive up the prices.

The number of homes for sale in states such as California will decrease by 45% or more from the same months in 2007. New home starts will fall by the wayside, and the construction industry will see at least another 10% in layoffs.

Although fewer homes will be available for sale, those sellers will be motivated to sell.

In an effort to drive up housing prices, banks will slowly release their REO inventory to the market and price those homes at 5% to 20% under comparable sales. Banks will be under great pressure to cut losses and increase revenue. Although state charters prohibit banks from renting out bank-owned homes, banks will find a way to work around this prohibition.

By transferring title from bank-owned homes into holding companies, banks may find a loophole that will allow them to rent out homes instead of putting them on the market. This maneuver will let banks receive income while waiting for the market to turnaround.

To rent the homes, banks will be forced to fix them up.

Due to limited inventory, coupled with pseudo pricing on short sales and foreclosures, more buyers will find themselves competing over the attractive listings. It will not be unusual for sellers to receive 20 or more offers on these listings.

Multiple offers may drive up the prices to market value but buyers will refuse to pay over market value. The stiff competition will cause frustration and confusion among buyers who will find themselves going head-to-head with investors. Cash buyers will win every time over buyers who need financing.

This means it will be more important than ever for home buyers to hire an excellent negotiator.

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7 Steps to Take Before You Buy a Home

By doing your homework before you buy, you’ll feel more content about your new home.

Most potential homebuyers are a smidge daunted by the fact that they’re about to agree to a hefty mortgage that they’ll be paying for the next few decades. The best way to relieve that anxiety is to be confident you’re purchasing the best home at a price you can afford with the most favorable financing. These seven steps will help you make smart decisions about your biggest purchase.

1. Decide how much home you can affordGenerally, you can afford a home priced 2 to 3 times your gross income. Remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care if you plan to have children.

2. Develop your home wish listBe honest about which features you must have and which you’d like to have. Handicap accessibility for an aging parent or special needs child is a must. Granite countertops and stainless steel appliances are in the bonus category. Come up with your top-five must-haves and top-five wants to help you focus your search and make a logical, rather than emotional, choice when home shopping.

3. Select where you want to liveMake a list of your top-five community priorities, such as commute time, schools, and recreational facilities. Ask your REALTOR® to help you identify three to four target neighbourhoods based on your priorities.

4. Start savingHave you saved enough money to qualify for a mortgage and cover your down payment? Ideally, you should have 20% of the purchase price set aside for a down payment, but some lenders allow as little as 5% down. A small down payment preserves your savings for emergencies.

However, the lower your down payment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment. Your down payment size can also influence your interest rate and the type of loan you can get.

Finally, if your down payment is less than 20%, you’ll be required to purchase private mortgage insurance. Depending on the size of your loan, PMI can add hundreds to your monthly payment. Check with your state and local government for mortgage and down payment assistance programs for first-time buyers.

5. Ask about all the costs before you signA down payment is just one home buying cost. Your REALTOR® can tell you what other costs buyers commonly pay in your area-including home inspections, attorneys’ fees, and transfer fees of 2% to 7% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as window coverings and patio furniture for your new yard.

6. Get your credit in orderA credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a home mortgage.

You’re entitled to free copies of your credit reports (https://www.annualcreditreport.com/cra/index.jsp) annually from the major credit bureaus: Equifax (http://www.equifax.com), Experian (http://www.experian.com), and Trans Union (http://www.transunion.com). Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. If your credit score isn’t up to snuff, the easiest ways to improve it are to pay every bill on time and pay down high credit card debt.

7. Get prequalifiedMeet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.

If you’re self-employed, you’ll need your current profit and loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.

Consider your financing options. The longer is the loan, the smaller your monthly payment. Fixed-rate mortgages offer payment certainty; an adjustable-rate mortgage offers a lower monthly payment. However, an adjustable-rate mortgage may adjust dramatically. Be sure to calculate your affordability at both the lowest and highest possible ARM rate.
More from House Logic
Learn how Fannie Mae and Freddie Mac mortgages can help you save on financing (http://www.houselogic.com/articles/how-fannie-mae-and-freddie-mac-save-you-money/)

Article from BuyAndSell.HouseLogic.com
By: G. M. Filisko

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Single Family
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Beautiful home ready to move in. 3 bedrooms and 2 baths, nice backyard, and excellent area. This is a great opportunity for first time home buyers.

When looking for your new house, make sure to take into consideration how long you plan to stay there. Image: Thinkstock Images/Comstock/Getty Images 

1. Know thyself

Understand the type of home that suits your personality. Do you prefer a new or existing home? A ranch or a multistory home? If you’re leaning toward a fixer-upper, are you truly handy, or will you need to budget for contractors? 

2. Research before you look

List the features you most want in a home and identify which are necessities and which are extras. Identify three to four neighborhoods you’d like to live in based on commute time, schools, recreation, crime, and price. Then hop onto REALTOR.com to get a feel for the homes available in your price range in your favorite neighborhoods. Use the results to prioritize your wants and needs so you can add in and weed out properties from the inventory you’d like to view. 

3. Get your finances in order

Generally, lenders say you can afford a home priced two to three times your gross income. Create a budget so you know how much you’re comfortable spending each month on housing. Don’t wait until you’ve found a home and made an offer to investigate financing.

Gather your financial records and meet with a lender to get a prequalification letter spelling out how much you’re eligible to borrow. The lender won’t necessarily consider the extra fees you’ll pay when you purchase or your plans to begin a family or purchase a new car, so shop in a price range you’re comfortable with. Also, presenting an offer contingent on financing will make your bid less attractive to sellers. 

4. Set a moving timeline

Do you have blemishes on your credit that will take time to clear up? If you already own, have you sold your current home? If not, you’ll need to factor in the time needed to sell. If you rent, when is your lease up? Do you expect interest rates to jump anytime soon? All these factors will affect your buying, closing, and moving timelines. 

5. Think long term

Your future plans may dictate the type of home you’ll buy. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in the home for five to 10 years? With a starter, you may need to adjust your expectations. If you plan to nest, be sure your priority list helps you identify a home you’ll still love years from now. 

6. Work with a REALTOR®

Ask people you trust for referrals to a real estate professional they trust. Interview agents to determine which have expertise in the neighborhoods and type of homes you’re interested in. Because homebuying triggers many emotions, consider whether an agent’s style meshes with your personality.

Also ask if the agent specializes in buyer representation. Unlike listing agents, whose first duty is to the seller, buyers’ reps work only for you even though they’re typically paid by the seller. Finally, check whether agents are REALTORS®, which means they’re members of the NATIONAL ASSOCIATION OF REALTORS®. NAR has been a champion of homeownership rights for more than a century. 

7. Be realistic

It’s OK to be picky about the home and neighborhood you want, but don’t be close-minded, unrealistic, or blinded by minor imperfections. If you insist on living in a cul-de-sac, you may miss out on great homes on streets that are just as quiet and secluded.

On the flip side, don’t be so swayed by a “wow” feature that you forget about other issues—like noise levels—that can have a big impact on your quality of life. Use your priority list to evaluate each property, remembering there’s no such thing as the perfect home. 

8. Limit the opinions you solicit

It’s natural to seek reassurance when making a big financial decision. But you know that saying about too many cooks in the kitchen. If you need a second opinion, select one or two people. But remain true to your list of wants and needs so the final decision is based on criteria you’ve identified as important. 

More from HouseLogic

HOAs: What You Need to Know About Rules

A Financial Plan for Your Home

When It Pays to Do It Yourself 

G.M. Filisko is an attorney and award-winning writer who has found happiness in a brownstone in a historic Chicago neighborhood. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics

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HOW CAN A BRAIN KNOW WHETHER THERE IS SOMETHING WORTH STRIVING FOR? WELL, IT CAN LOOK AROUND AND SEE HOW WELL-OFF

OTHER PEOPLE ARE. IF THEY CAN ACHIEVE SOMETHING, MAYBE SO CAN YOU. OTHER PEOPLE ANCHOR YOUR WELL-BEING SCALE AND TELL YOU WHAT YOU CAN REASONABLY HOPE TO ACHIEVE. Steven Pinker

A Most-Wanted list of five common household contaminants.

We all want our homes to be clean, safe places to live — sanctuaries away from the chaos and cares of the outside world. But toxic invaders may lurk inside your home, putting you and your family at risk. Here are five household pollutants to watch out for, and tips on how to minimize your exposure.

1. Cigarette Smoke

Cigarette smoke is a toxic pollutant, made up of more than 4,000 chemicals. In smokers, it causes a variety of deadly cancers, as well as asthma, emphysema, chronic bronchitis, heart disease, respiratory allergies and complications during pregnancy. In addition to the 440,000 American smokers who die every year from illnesses caused by cigarette smoke, thousands of nonsmokers die from health problems caused or aggravated by secondhand smoke, including heart disease, lung cancer and sudden infant death syndrome. The Centers for Disease Control ranks smoking as the leading preventable cause of death and disease in the United States each year.

What You Can Do: Quit smoking, and urge your loved ones to do the same. Short of that, don’t allow smoking indoors or in areas where others may be exposed.

2. Lead

More than a quarter century after the 1978 ban on lead in paint, nearly half a million American prekindergarten children have elevated levels of lead in their blood. That’s largely because old lead paint remains on the walls in many homes, workplaces and schools. This paint can emit lead-laced dust particles, especially during remodeling and construction. Old, corroded lead pipes are another common culprit. Elevated blood-lead levels in kids increase risk of learning disabilities, behavioral problems, anemia and, in extreme cases, serious brain damage.

What You Can Do: If your house is more than 25 years old, you should have it tested for lead paint. Some state and local health departments provide assistance for lead testing. If there is a significant lead hazard in your home, consider having lead paint removed. This work should always be done by a professional trained and certified in lead paint removal. One of the easiest ways to decrease the risk from lead paint is simply to paint over it — but avoid scraping, sanding or heating it, which allows dangerous lead particles to escape. Also, you should keep floors, windowsills and other surfaces free of dust, and wash children’s toys frequently to remove any lead particles. Lead in pipes is more difficult to handle, but you can have your water tested. Contact your state or local health department for information on local contractors, or obtain a testing kit from a hardware store, and install a water filter if you find lead in your water. Also, ask to have your child’s blood tested for lead at his or her next regular doctor’s appointment.

3. Pesticides

The pesticides we use to control weeds and insects in and around our homes can be significant health hazards. Exposure to certain pesticides is associated with health problems ranging from skin rashes to nervous system disorders and cancer. Children are at the greatest risk of harm because of their hand-to-mouth habits and still-developing nervous systems; also, the places they play are often the type of area that is treated with pesticides. In recent years, a number of the most dangerous pesticides have been pulled off the market, thanks to pressure from environmental groups. But that doesn’t make the aging supplies in your garage any safer.

What You Can Do: You can prevent pest problems by keeping your home and its surroundings clean and well maintained. Only use pesticides when necessary, read labels carefully — in the store and in your home — and follow all of the instructions. Avoid pesticides containing organophosphates, which include ingredients such as acephate, dichlorvos, dimethoate, disulfoton, malathion, naled, phosmet, tetrachlorvinphos and trichlorfon. Carbamates, which include the pesticides carbaryl (Sevin), and propoxur (Baygon), are another class of chemicals that should be avoided. The dangerous pesticide diazinon was banned at the end of 2004, but it could still be lurking in an old bottle of weed killer lying around your house. Likewise, the manufacture of chlorpyrifos (sold as Dursban or Lorsban) was halted as of 2000, but stores were still allowed to sell existing stocks, which were considerable. If you find unsafe pesticides in your home, don’t flush them down a toilet or pour them down a drain — you don’t want these chemicals to end up in your water supply, either. Instead, call your local public works department to find out how to dispose of unsafe pesticides. Also, lobby your local government not to use unnecessary or unsafe pesticides in parks, schools and other public places.

4. Formaldehyde

Formaldehyde isn’t just the stuff of high school science labs. It’s more common in your home than you might think. Formaldehyde is used in fertilizers, glues, plywood, fiberboard, particleboard and certain types of insulation, as well as in some disinfectants, antibacterial soaps and even beauty products. Formaldehyde has been classified as a probable human carcinogen by the EPA. Its vapors can irritate the eyes, nose, throat and skin, and also cause asthma attacks in sensitive people. Home exposure to formaldehyde has been linked to respiratory allergies in children.

What You Can Do: If you’re remodeling, use exterior- rather than interior-grade pressed wood products. The formaldehyde in exterior grade products is more stable and less likely to break down and get into the air. Also, when you buy wood furniture or fixtures (cabinets, for example) that use particleboard — many do, even if you can’t see it – make sure it is laminated or otherwise coated. And finally, if you have products or construction in your home that could release formaldehyde vapors, make sure you have good ventilation.

5. Radon

Radon is an invisible, odorless, radioactive gas produced by the decay of a naturally occurring element in soil called radium. Radium could be anywhere, and if it occurs in high levels, radon gas can be a serious problem. Radon seeps into homes through cracks in the foundations, accumulating in lower floors, especially basements. The problem is worst where ventilation is poor. Radon gas is the second leading cause of lung cancer in the United States, after tobacco, and is responsible for approximately 21,000 lung cancer deaths every year.

What You Can Do: Test your home for radon with one of several EPA-approved kits, available for about $35 in hardware stores.

Source: NRDC.ORG