Program to pay homeowners to sell at a loss

By DAVID STREITFELD

Published: March 7, 2010

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration's most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government's $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy's tentative recovery - the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

"We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender," said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table - the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property - the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in "relocation assistance."

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender's assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders' thinking, said the economist Thomas Lawler, went like this: "I lend someone $200,000 to buy a house. Then he says, 'Look, I have someone willing to pay $150,000 for it; otherwise I think I'm going to default.' Do I really believe the borrower can't pay it back? And is $150,000 a reasonable offer for the property?"

Short sales are "tailor-made for fraud," said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. "In a perfect world, this would work," he said. "But because estimates of value are inherently subjective, it won't. The banks don't want to sell at a discount."

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

"You have one loan, it's no sweat to get a short sale," said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. "But the second mortgage often is the obstacle."

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

"This is not an opportunity for the customer to just walk away," Ms. Huey said. "If someone doesn't come to us saying, 'I've done everything I can, I used all my savings, I borrowed money and, by the way, I'm losing my job and moving to another city, and have all the documentation,' we're not going to do a short sale."

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

"A short sale provides peace of mind," said Mr. Reddy, 32. "If you're in foreclosure, you don't know when they're ultimately going to take the place away from you."

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: "The place I'm in now is nicer and a little bigger."

A version of this article appeared in print on March 8, 2010, on page A1 of the New York edition.

 Nab a real estate deal - while you still can

 ( Money Magazine ) If you've been holding off on a real estate purchase, glimmers of a turnaround in the housing market may have you wondering if it's finally time to make your move.

While home prices remain low, they're no longer free-falling in most markets. Mortgages are historically cheap. And the sweet tax credit that was offered to new buyers last year has been extended to April 30 and expanded to include current homeowners too.

But for all the motivation to act quickly, buying right now is not a no-brainer. In some areas home prices may fall further. If you own a house now, it may take longer than you expect to sell it, and you may walk away with less cash than you thought.

"It's a good time to buy, but it's still a really difficult market," says Patrick Newport of IHS Global Insight. As the clock ticks toward the tax-credit deadline, answer these questions to decide whether it's time to get off the sidelines.

Can you really nab that tax credit?

Current homeowners who sign a contract to buy a home on or before April 30 get a dollar-for-dollar reduction on their taxes of 10% of the purchase price of the home, up to a maximum of $6,500 (first-time buyers can get up to $8,000).

But according to the National Association of Realtors, buyers spend about 12 weeks home shopping before making an offer, so if you haven't already started looking, you may be pressed to meet the deadline.

Plus, to qualify for the full credit, your household income must be under $225,000 if you're married and less than $125,000 if you're single; repeat buyers must have lived in the home they are selling for five of the past eight years. The good news: Once you've signed the contract, you have until June 30 to close the deal.

How much could you lose by waiting?

Besides the loss of the tax credit, the biggest game-changer facing buyers is a potential jump in mortgage rates. If the Fed moves ahead with its plan to stop buying mortgage-backed securities at the end of March, the rate on a 30-year fixed mortgage is expected to increase nearly a percentage point from today's 5.18% to 6.1% by the end of 2010, according to the Mortgage Bankers Association. On a $300,000 fixed-rate mortgage, that's an extra $174 per month.

But if home values are falling in your area, you don't have much to lose by waiting. If the house you want costs $375,000 today and you put down 20%, you'd pay $1,644 a month for a fixed-rate mortgage at 5.18%. Buy that same home for 5% less later on with rates at 6% and you'd only pay an extra $65 a month. If prices plunge 10% or more this year (as they are expected to in 12% of markets, according to Fiserv), you'll come out even or ahead.

To get a handle on the direction of your market, check trulia.com to see whether inventory levels are increasing, and visit realtytrac.com to find out whether foreclosure filings are still rising. A glut of properties and bank-owned homes means a recovery may not be in sight.

How quickly can you sell the home you now own?

Even in markets that are recovering, sellers must price aggressively to make a fast deal.

"Everybody thinks their house is worth more than it is," says Dallas realtor Bruce Lynn. Before you sign a contract for a new place, ask a few agents to give you a realistic figure that will generate a quick sale. Can't bear to part with your home at that price? Waiting may be your only option.

Also keep in mind that, with the credit crunch not far in the past, lenders may not approve your purchase until you've sold your home. A delay in sale could also stick you with two mortgages, far outstripping any savings from the tax credit.

See if the sellers will let you put a contingency in the contract that negates the sale if you don't find a buyer -- it's a long shot but worth a try. If they won't, propose adding a kick-out clause that allows the sellers to keep their home on the market, but lets you either pull out or quickly move ahead with the deal if they get another offer.

While extra contract negotiations may be a hassle, the past few years have proved that a purchase decision shouldn't be taken lightly. "This may be the best time in history to buy a home," says Denver realtor Jeff Fogler, "but only if you can really afford it."

By Beth Braverman, staff reporter March 2, 2010

Florida's existing home, condo sales rise in February 2010

ORLANDO, Fla. - March 23, 2010 - Florida's existing home sales rose in February, which means that sales activity has increased in the year-to-year comparison for the past year and a half (18 months), according to the latest housing data released by Florida Realtors®.

Existing home sales increased 21 percent last month with a total of 11,890 homes sold statewide compared to 9,867 homes sold in February 2009, according to Florida Realtors. Statewide existing home sales last month increased 13.6 percent over statewide sales activity in January.

Florida Realtors also reported a 59 percent increase in statewide sales of existing condos in February compared to the previous year's sales figure; statewide existing condo sales last month rose 9.8 percent over the total units sold in January.

"Homebuyers should take advantage of favorable conditions in the current housing market," said 2010 Florida Realtors® President Wendell Davis, a broker with Watson Realty Corp. in Jacksonville. "Mortgage rates remain near historic lows at just under 5 percent, but they won't stay at that level forever. Plus, only six weeks are left before the extended and expanded homebuyer tax credit expires. First-time buyers and current homeowners who want to buy their next home in time to use the tax credit must have a purchase contract signed before the April 30 deadline - then they'll have until June 30 to close the transaction."

Seventeen of Florida's metropolitan statistical areas (MSAs) reported increased existing home sales in January, while all but one MSA had higher condo sales. A majority of the state's MSAs have reported increased sales for 20 consecutive months.

Florida's median sales price for existing homes last month was $131,300; a year ago, it was $141,800 for a 7 percent decrease. Analysts with the National Association of Realtors® (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in January 2010 was $163,600, down 0.4 percent from a year earlier, according to NAR. In Massachusetts, the statewide median resales price was $300,000 in January; in California, it was $287,440; in New York, it was $242,750; and in Maryland, it was $234,894.

NAR's latest outlook predicts a surge in late spring home sales. "Activity should be picking up strongly in late spring as buyers take advantage of the tax credit, which is critical to absorb distressed properties reaching the market and to continually chip away at inventory levels," said NAR Chief Economist Lawrence Yun. "If there is sufficient job creation, housing can become self-sustaining with stable to modestly rising home prices."

In Florida's year-to-year comparison for condos, 5,085 units sold statewide last month compared to 3,190 units in February 2009 for an increase of 59 percent. The statewide existing condo median sales price last month was $92,200; in February 2009 it was $109,100 for a 15 percent decrease. The national median existing condo price was $172,400 in January, according to NAR.

Interest rates for a 30-year fixed-rate mortgage averaged 4.99 percent last month, even lower than the average rate of 5.13 percent in February 2009, according to Freddie Mac. Florida Realtors' sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state's smaller markets, the Punta Gorda MSA reported a total of 239 homes sold in February compared to 216 homes a year earlier for an 11 percent increase. The market's existing home median sales price last month was $96,600, slightly higher than the year-ago median price of $96,400. A total of 43 condos sold in the MSA in February compared to 33 units sold the same month a year earlier for an increase of 30 percent. The existing condo median price last month was $95,000; a year earlier, it was $88,300 for a gain of 8 percent.

 © 2010 Florida Realtors®

Things to Remember to Do Before Moving Day .

by Jennifer Strong

There are many things you must remember to do before moving, even though it's easy to forget some of them! Here's our Moving Tips list of some of the things you'll need to remember to do before moving...

For your old home:

Utility Accounts - remember to advise your present utility service providers that you'll be moving out and arrange to have any meters read on the day of your move. If you're moving out of the area and cannot get service with the same provider you'll also need to discuss closing your account with them.

Postal Services - remember to set up a postal re-direction service so that any mail sent after you move with your old address on is forwarded to your new address.

Change of Address cards - remember to inform everybody that you need to of your new address. You should be able to pick up some cards at your post office, or to save you some time you could print some yourself.

Reserve elevators, parking spots etc - remember to reserve the elevators for use (if applicable) in your current building. You may have to do this with the building's management personnel. Also, if you have limited parking or restrictions you should find out about reserving a space or two for your moving truck.

Stop delivery services - remember to cancel any delivery services, such as newspapers and milk, by giving several weeks notice of the date you wish them to stop.

For your new home:

Utility Accounts - remember to set up new utility accounts at least several weeks in advance. If you haven't had an account with the provider before, they may ask for a security deposit and this might take time to organize. You want to make sure that everything's ready and connected for the day you move in.

Reserve elevators, parking spots etc - the same goes for moving in as moving out if you're moving to a condo or similar. Double check what the building rules are and whether you need to reserve the elevators or a parking space for your moving-in day.

Repairs, decorating and renovation - if your new house needs any of these things doing, and you have the opportunity to do so, arrange to have these things done before you move in. It's so much harder to decorate when you're surrounded in boxes and so much nicer to have the house just as you want it for the day you move in!

First you will need " THe Best Realtor " you can find!  Call Vickie Townes with The Best Realty Team 239-671-3300

Pending in 48 days!

  NO Short Sale, No Foreclosure here. Don't miss this extraordinary built Aubuchon home, It truly is made to entertain. Boasting over 1600 sqft under air and a whopping 1320 sq screened in lanai with a 10k boat lift ,new roof in 2008, new air condenser, new hot water tank (1 mth old), newly painted outside and newer carpet as well! The meticulously maintained lawn and scrubs are stunning and not to mention the large palm trees that surround the property, wait there is more THE ASSESSMENTS ARE PAID! This one will not last, hurry before you miss it!

If you are looking to sell your home in 48 days, Call Vickie Townes and The Best Realty Team!  239-671-3300