foreclosure

Why Foreclosed Homes Are A Home Sellers Biggest Competitor

When you are trying to sell your home, you might initially think you’ll get what you’re asking, maybe a little more. This is in spite of a rising number of people out of work and foreclosures at never before seen levels. The entire world wonders if the United States will be able to pull itself out these trying times. Measures are in place to help curb these problems but these are going to take some time to work down to the people who need help. During this time, how are you going to stop your biggest competitor from taking your home before you even have a chance to really sell it? The biggest issue facing homeowners is your biggest competitor. Who is that?

What Is A Homeowners Biggest Competitor?

A homeowner’s biggest competitor is actually foreclosure. How do you keep foreclosure from winning over you? Many people are under the assumption that time will stop the falling housing prices but it could actually take more than one or two years to stop this monster altogether and keep more than one million or more homes from falling into foreclosure. Most people think they are not affected by other peoples’ foreclosure but that’s not true.  More and more people are buying foreclosed homes but why?

 Foreclosed Homes Are Seen As Bargains

Is it because purchasing a foreclosed home is seen as a bargain? Look at your hometown. How many foreclosed homes do you see? Now do a search on how many sold homes were actually foreclosures. Does it seem like more people are looking for the bargains they find in foreclosed homes? It would seem so. It would seem that foreclosed homes have a higher selling rate than homes not in foreclosure. Many buyers will ask a real estate agent, “I want a foreclosure home”. Do you think the agent is going to argue with them why they shouldn’t get a foreclosed home? They’re going to abide by their wishes. Buyers and investors of foreclosed homes look at them like lottery tickets; who doesn’t want a lottery ticket that always wins?

Many homeowners looking to sell their home will boost the price of the home to more than what it’s actually worth. They know by doing so they’ll have to negotiate. However, the problem with this is that agents and buyers are looking for deals. If you’re asking more on the home than what it’s worth, you’re not going to show it to potential buyers. If most neighborhoods, buyers are seeking out the best deals such as square footage, best condition, lower price, etc. They believe foreclosed homes can give them all of them.

Sellers assume that foreclosed homes are rundown homes and that their homes are in much better shape so they can ask for more money. However, this is a false believe. Look at the homes in your neighborhood especially the ones foreclosed on. Do they look rundown to you? The truth is is that sellers have no real clue about how to price their house and they don’t know the overall condition of it. Many sellers who have marked up the price on their home blame the real estate market. However, this isn’t a good place to lay blame because people who don’t price their homes high are selling them.

Sellers are often misled about how long houses stay on a market because of the method their real estate agent uses. For instance, one home is on the market for a period of one year but another is sold within a month of going on the market, the real estate agent will take the total number of days they both sat on the market and divide it by two.

 Why Do Some Homes Sell More Quickly Than Others

It’s really crazy how many homes are on the market. For instance, in Hampton Roads, Virginia, there are close to 20,000 homes; that’s a lot of competition to buy a home. Most homes that have been sitting on the market for some time are indeed overpriced. Until the housing crisis settles down, it’s going to be difficult for any seller to sell their home.

If you want to sell your home, you have one rule you must understand and that is: Be truthful about the happenings in the market. When you’re friends tell you they want to sell their homes but they won’t give it away, they are certainly not looking at the big picture. Each month they have that home… it’s costing them money. It isn’t always about the monetary gains or losses that you need to look at. For instance, families who have children who would like one parent to stay at home are unable to because they refuse to lower the price of their home. They also run up credit card debt to deal with this vacant house. A seller’s peace of mind is not at rest until the house can be sold.

 Choices To Help Sellers With Their Homes

When you have a home and you can’t seem to sell it, you have choices. For starters, you can rent it out. Make sure to hire a property manager so that he/she knows what they are doing. Don’t let the home sit empty because you run a risk of three things:

•  Burglary
•  Fire
•  Vandalism

 On top of these things, sitting there empty will cost you money. You can always ignore the issue and hope that everything is settled quickly. You could also sell it for a lot less. You may ask yourself how much should you discount it at?

That doesn’t have an easy answer. The best way to deal if your price is too high is gauge how many people are coming to your home. If you aren’t getting offers on your home, there may be another problem altogether. You could also have problems after a contract has been signed such as inspection challenges or your buyer qualifying for a loan.

Some investors will buy the house as-is. However, the majority of sellers don’t like this route unless they plan on going into bankruptcy or foreclosure if they believe an investor won’t give them much for it. It’s riskier to deal with a buyer than an investor especially with the market the way it is currently. After all, these kinds of offers are low and they have less experience with inspections or obtaining money for the home. When you’re home is in need of repairs, banks tend not to loan money unless the home is fixed beforehand. However, experienced investors will have the money all lined up since this is what they do. While an investor wants a deal so does anyone whose anyone in the market.

 

foreclosure

Foreclosures hit record highs

Real Estate News & Commentary by Chris McLaughlin

According to the Mortgage Bankers Association’s (MBA) National Delinquency Survey, the delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64% of all loans outstanding as of the end of the third quarter of 2009, up 40 basis points from the second quarter of 2009, and up 265 basis points from one year ago.  The non-seasonally adjusted delinquency rate increased 108 basis points from 8.86% in the second quarter of 2009 to 9.94% this quarter.   The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure.  The percentage of loans in the foreclosure process at the end of the third quarter was 4.47%, an increase of 17 basis points from the second quarter of 2009 and 150 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 14.41% on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.  The percentage of loans on which foreclosure actions were started during the third quarter was 1.42%, up six basis points from last quarter and up 35 basis points from one year ago.  The percentages of loans 90 days or more past due, loans in foreclosure, and foreclosures started all set new record highs.  The percentage of loans 30 days past due is still below the record set in the second quarter of 1985. 

Why are foreclosures up?

Jay Brinkmann, MBA’s Chief Economist, says it’s jobs.  “Despite the recession ending in mid-summer, the decline in mortgage performance continues.  Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP.  Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07% to 1.42%.”  Brinkmann says it’s prime and FHA mortgages that are taking the worst beating.  “Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures.  33% of foreclosures started in the third quarter were on prime fixed-rate and loans and those loans were 44% of the quarterly increase in foreclosures.  The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54% of the quarterly increase in loans 90 days or more past due but not yet in foreclosure.  The performance of prime adjustable rate loans, which include pay-option ARMs in the MBA survey, continue to deteriorate with the foreclosure rate on those loans for the first time exceeding the rate for subprime fixed-rate loans.  In contrast, both subprime fixed-rate and subprime adjustable rate loans saw decreases in foreclosures.”

Taxes anyone?

More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest. Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group, puts it another way:  in 2015 alone, the estimated interest due – $533 billion – is equal to a third of the federal income taxes expected to be paid that year.  The money was borrowed at very low rates, but interest rates will rise when the economy improves, and at that point the country’s interest payments could jack up very fast.  “When interest rates rise even a small amount, the interest payments go up a lot because of the size of the debt,” Konigsberg said.  To help mitigate the potential risk of rising rates, the Treasury has said it would start increasing the average maturity of the new debt it issues so the debt it refinances in the next couple of years will be locked in at lower rates for longer periods of time.  And the Obama administration has promised to produce a deficit-reduction plan that would aim to bring down annual deficits to roughly 3% of GDP over the next several years, below the 4% to 5% currently projected.  If that happens, the $4.8 trillion in interest payments that CBO estimates for the next decade could go down if interest rates don’t increase as much as CBO expects.  The trouble is that this administration and Congress are showing no signs of slowing down the spending…shoveling billions into the maw of increasingly unpopular healthcare “reform.”  That could mean the president’s 2011 budget proposals would have to make a lot of unpopular changes like tax hikes to get closer to the 3% goal.

Credit availability the big question in commercial real estate

According to the National Association of Realtors (NAR), credit availability is the big unknown that will determine how soon commercial markets recover.  The Commercial Leading Indicator for Brokerage Activity rose 0.9% to an index of 102.4 in the third quarter from 101.5 in the second quarter, but is 11.1% below a reading of 115.3 in the third quarter of 2008. The index in the second quarter was at the lowest level since the first quarter of 1994; NAR’s track of the commercial leading indicator dates back to 1990.  Lawrence Yun, NAR chief economist, said some initial movements earlier this week in commercial mortgage-backed securities are encouraging. “The first commercial mortgage bond deal in over a year shows the Federal Reserve’s efforts to sell securities through the TALF program can be fruitful, but the level of activity is well below what is required to resuscitate the commercial market. Credit availability needs to significantly rebound for any hope of a meaningful commercial recovery in 2010.”  Yun said the modest index recovery follows steep declines in the past several quarters. “Gains in industrial production, durable goods shipments and retail sales; a rebound in the NAREIT price index; and improving figures on first-time unemployment claims were stabilizing factors,” he said. “Negative impacts include falling private sector income and fewer jobs involving commercial real estate. The office and industrial markets are the sectors most negatively impacted by the economic downturn.”

The real jobless rate

The real number dwarfs the statistic most people pay attention to—the U-3 rate—which most recently showed unemployment at 10.2% for October.  According to the government’s broadest measure of unemployment, some 17.5% are either without a job entirely or underemployed. The so-called U-6 number is at the highest rate since becoming an official labor statistic in 1994, and means that 1 in 5 Americans is either out of work or under-employed.  With such a large portion of Americans experiencing employment struggles, economists worry that an extended period of slow or flat growth lies ahead.  “To me there’s no easy solution here,” says Michael Pento, chief economist at Delta Global Advisors. “Unless you create another bubble in which the economy can create jobs, then you’re not going to have growth. That’s the sad truth.”  Pento warns that forecasts of a double-dip (“W”) or a straight up (“V”) recovery both could be too optimistic given the jobs situation.  Instead, he believes the economy could flatline (or “L”) for an extended period as small businesses struggle to grow and consequently rehire the workers that have been furloughed as the U-3 unemployment rate has doubled since March 2008.  As that trend has happened, the U-6 rate has expanded at an even more dramatic pace. Economists cite several reasons for the phenomenon, including  the collapse of real estate and associated jobs, and expanded unemployment benefits (which make it easier to be unemployed).   ”If full employment is 4 percent, people are wondering how we’re going to get from 10 (percent) to 4. Well, try getting from 17 to 4. We may not get back to full employment for a decade,” Mahn says. “As an investor, that causes me to look for different places now. Maybe you can’t just put money in US large caps and ride out this recovery.”

Mortgage rates at record lows

Freddie Mac’s weekly survey of average interest rates put the 30-year fixed-rate mortgage (FRM) at 4.83% with an average 0.7 points for the week ending Nov. 12, down from the average rate of 4.91% the previous week. That’s a mere 5 basis points shy of Freddie Mac’s record low of 30-year FRM rates, reached twice in April this year. Last year, the rate was 6.04%.  Freddie Mac put the 15-year FRM at 4.32% with an average 0.6 points, down from last week’s 4.4% and the lowest rate for the product since Freddie Mac began its 15-year FRM survey in 1991. A year ago, the average rate for the loan was 5.73%.  Bankrate.com’s survey of large US banks and thrifts put the 30-year FRM at 5.06%, the lowest in the survey’s 24-year history and down 13 basis points from the previous week. The previous low on the Bankrate survey was 5.13% in April. Bankrate.com put the average rate for a 15-year FRM at 4.48%, down 13 basis points from the previous week.  “Low fixed rates throughout the third quarter prompted an estimated $1.1 trillion in refinancing activity, saving homeowners about $10 billion in aggregate monthly payments over the first 12 months of their new loan,” said Freddie Mac vice president and chief economist Frank Nothaft. “Moreover, for the fourth consecutive quarter, more than 95% of prime borrowers who originally had an ARM selected a conventional fixed-rate mortgage in the third quarter of this year.”

foreclosure

Act Now To Stop Foreclosure And Save Your Home

The biggest mistake you can commit when you fall behind on your mortgage payments is to wait too long to tell your lender what is going on. It’s never too late to do anything but to prevent foreclosure, it is better to be proactive than reactive.

Acting fast is very important. It is extremely important to contact your lender as early as possible, after you find yourself unable to make your loan payments. Most of the major lenders have programs for mortgage modification, forbearance, or other remedies that can help you prevent foreclosure. More than half the people who go into foreclosure never respond to letters from the lenders, nor contact the lenders. Your options become limited as time passes by. Contact your lender immediately and tell the lender about your situation. Once you contact your lender, they can allow payment delays, mortgage modification, and come up with new repayment plans, or they may negotiate a lump-sum payment.

When it comes to preventing foreclosure, every minute counts. Early contact – within the first 15 days of missing a payment – is critical in saving homeowners from the devastation of foreclosure. More than half of those in foreclosure did not call for help when they fell behind in their mortgage payments. Do not hesitate to contact you lender. There is nothing to fear about or be embarrassed.

You can get emotional or fear contacting the lender when you face foreclosure. But you must contact the lender. You are not alone. There is nothing to be embarrassed about missing a mortgage payment.

Remember your loan servicer – who you get your monthly statements from may be different from the one who actually owns your loan. If you are not sure whom to contact, call the number on the statement and they will advise you.

Explain your situation to the lender. Once the lender appreciates the situation, he may come up with a workable suggestion. Remember, all this time his aim would be the same as yours – you are able to pay and the house remains in your hands. This can be done by increasing the number of installments which you were required to pay. This will ease the situation for your and lender’s money also remains the same. In fact, as a simple calculation may tell, the lender gains financially. Depending on your situation and the status of your mortgage, there may be different options available to you including

• restructuring

• refinancing

• selling your home

• deed in lieu of foreclosure

Be honest about your situation, so they can help you find the right solution. Lenders usually offer a variety of solutions for people who have fallen behind on their mortgages including temporarily reducing or waiving payments, setting up short-term repayment plans to help you make up the deficit, adding the unpaid balance to the principal of your loan and increasing your payments slightly to cover the extra amount, refinancing the debt, arranging a repayment plan or modifying the loan by adjusting the interest rate or extending the terms to make it more affordable. These options are discussed in detail in the following chapters.

However, if your situation is really bad, the lender may even agree to make other concessions. For example, the lender may be willing take less money in settlement of your dues. Once the lender realizes that the situation of the borrower has become very unviable, it is time for the lender to retrieve whatever possible from a potentially bad situation.

If the lender feels that the only way of saving the situation is to reduce the financial burden on the homeowner, the lender may also agree to reduce the interest.

The lenders have even been known to reduce the principal. It all depends on what sort situation the borrower finds himself in. It goes without saying that the lender will not be happy to do this, but then again, he has to reassess the circumstances and then decide.

 If you cannot keep your home, your lender can work with you to avoid foreclosure and reduce the negative effect on your credit reputation. For example, the lender can permit a qualified buyer to take over your mortgage debt and pay the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.

Don’t just sign your home away and walk out. Negotiate. Whatever be your situation, never ever enter into any deal without consulting an attorney. Never make an impulse decision. Your instincts will drive you to make quick decisions in order to resolve defaults as soon as possible. Before taking any decision, weigh the pros and cons.

foreclosure

The harsh truth of uncontrolled credit spending

Mortgage debt in the United States has increased over the years. Second mortgages accounted for less than 4% of the total mortgage debt at the beginning of the 1980s. It increased to 12% during the 1990s. From the 1090s till this year, it has increased by double digits and it continues to grow rapidly. The easy access to home equity is the main reason for this rise. No other form of credit has seen such rapid rise except the credit card. 

A home equity line of credit is a form of revolving credit in which your home serves as collateral. With a home equity line, you will be approved for a specific amount of credit–your credit limit, the maximum amount you may borrow at any one time under the plan. Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the home’s appraised value and subtracting from that the balance owed on the existing mortgage. If you are careful and use a home equity line of credit or second mortgage carefully, you will only benefit from it but if you default on a home equity line of credit or second mortgage, you could risk loosing your home. Many of those who used home equity line of credit or second mortgage recklessly are now finding themselves filing for bankruptcy. Most make the mistake of using home equity to pay of debts like medical and credit card bills. Medical and credit card bills are dischargeable debts, but defaulting on a home equity line of credit or second mortgage can result in foreclosure.

When you own a home and if the home has equity in it, it can be tempting to make use of the equity. Lenders will bombard you with advertisements exhorting you to do so. But once again, remember, if you are not careful, you could loose your home. The present foreclosure crisis has thrown many such homeowners out of their homes. The end to the present crisis seems to be a long way of.