Tax Credit Extended and Expanded

On Friday, November 6, 2009, President Barack Obama signed into law a new bill extending the $8,000.00 tax credit for first time homebuyers (those of you who have not owned a home in three years) and expanded to buyers who have owned their primary residence for five of the last eight years ($6500.00 tax credit). These tax credits expire on April 30, 2010.



Read the article from Florida Association of Realtors for all the specifics:

http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=226422

And don't forget, homeowners in Brevard County, Florida who purchase before December 31 may qualify for double homestead deduction, that's $50,000!

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A Never Ending Saga of a Loan Modification

It all began in January of 2009. They were self employed and had not had a paycheck for a couple of months. they had struggled financially since early 2007 and in 2008, they cashed in all savings accounts, but now there was nothing left.

Jan. 16, 2009
They called their lender to discuss their situation, hopeful for a loan modification.
They were faxed some forms to fill out.
Jan. 23, 2009
They faxed back the requested forms.
Feb. 24, 2009
Spoke to a representative, but made no progress.
Told to complete another package of forms and mail to lender.
March 3, 2009
Mailed requested package of forms.
March 17, 2009
File was assigned to a negotiator.
March 24, 2009
Called and received confirmation that package was received and negotiator was assigned.
Was told it would be up to 45 business days for review.
April 1, 2oo9
Called for an update, was told file was active and open and it would be 30-45 days.
April 20, 2009
Called for another update, was told file was in process, and it would be 38-43 days, probably Mid May and that we would be notified by mail.
April 21, 2009
Received email from negotiator requesting still more documents.
April 23, 2009
Negotiator called to discuss the possible options of a loan modification, such as interest rate reduction, extension of mortgage from 30 to 40 years, forebearance, probably prinicipal reduction would not be an option.
April 28, 2009
Emailed all other requested documents to the negotiator.
May 1, 2009
Negotiator emailed to say she would complete analysis of loan modification, but only if our couple did not make their April payment.
As it turned out, because our couple is self employed, it was determined they would need another 90 days of income history. So the only option was to take a 90 day forebearance which reduced the mortgage payment to $500.00 per month.
May 5th, 2009
Received written approval for the 90 day forebearance. Signed by the couple along with the first $500.00 payment. (June)
July 1, 2009
Sent second $500.00 payment.
July 25, 2009
Sent third $500.00 payment.
July 30, 2009
Called to find out what needed to be done to get a permanent loan modification. Was told they needed ALL THE DOCUMENTS that were sent earlier in the year back to lender again.
August 4, 2009
Received written request to fax all documents to the lender again.
And it needed to be done within 10 business days or the file would be closed!
August 13, 2009
Faxed complete 91 page package to lender.
August 14, 2009
Called and got receipt that package was received and it would take 6-8 weeks to complete.
Continue to make $500.00 payments until such time.
September 14, 2009
Received letter from PMI company stating that lender alerted them that our couple was behind in payments and that our couple should try to work with their lender to work out a modification.
September 15, 2009
Called lender for an update, was told the file was assigned to a negotiator on Sept 11, 2009.
September 15, 2009
Emailed contact at the PMI company to explain the situation and asked her to call to discuss.

Although this sounds like a fictional story, it is a true account and I am not revealing the name of our couple or the lender in question to preserve the privacy of our couple.

I am also withholding my personal comments on this loan modification until our couple gets resolution. However, I would love to hear your comments and experiences regarding loan modifications.

Stay tuned as the saga continues...

Owner Financing Makes Sense in a Buyers Market

If you have owned your property for many years and do not have a mortgage, then you should seriously consider owner financing. Not to be confused with a lease option or lease to own, where the buyer leases for a period of time prior to purchasing the property. Owner financing is selling the property to the buyers and they accept the deed to the property. The original owner becomes a lien holder to the property. Should the buyers default on the loan, the original owner can then foreclose on the property (according to each States foreclosure laws) and can then take possession of the property again.

Of course, the goal is not to foreclose, but to sell in a buyers market and recoup more equity through the financing of the property. Generally, owner financing will garner a higher interest than a traditional mortgage and can be tied to a balloon mortgage (such as a 5 year or 10 year balloon). So even though the sales price will be lower, any loss can be recaptured through mortgage interest.

Here are some other benefits to Sellers:

• Maximize Profit in a "Buyer's Market"

Due to unprecenedted amount of foreclosures in Brevard County, prices have declined to record lows. It will take many years for significant price apppreciation.

• Relief of Property Tax Burden

Buyer will be responsible for all Property Taxes

• Relief of Hazard Insurance Burden

Buyer will be responsible for Hazard Insurance

• Steady Stream of Monthly Income

Buyer generally pays monthly interest only payments

• Sell Homes before Further Depreciation and/or Deterioration

Since many homes are vacant, they are sugject to deterioration due to inclement weather, vandalism, and pests, etc.

• Homes Sell More Quickly

Ability to price home competitively and offer financing which can be hard for a buyer to obtain in this market.

• Lower closing costs

Real Estate Commissions, Tax Stamps and Title Insurance will be based on the lower sales price.

• Another Financial Option for Buyers

There are very few financial options for Buyers without large down payments or excellent credit scores. Many qualified buyers can not buy due to new restrictions.

• Lower Monthly Payments for Buyers

Interest Only payments are lower than a conventional fixed loan, freeing up cash to enable the buyer to do improvements to the property.

• No Appraisal Necessary

Appraisal is not necessary for loan and condition of the property is not a deterrent as it might be with FHA or VA loans.

Of course, this type of transaction should not be undertaken without performing your due diligence and scrutinizing your potential buyers ability to afford the purchase. And as always, you should review all contracts with your attorney and tax consultant.

Is Your Rental Being Foreclosed?

I get calls and inquiries all the time from renters who say the home or condo they are renting is being foreclosed and they fear they will be thrown out on a moments notice.

This is not true! A federal law was passed in May 2009 that protects tenants whose rentals are being foreclosed. This is Public Law 111-22, effective May 20, 2009, TITLE VII--PROTECTING TENANTS AT FORECLOSURE ACT.

In a nutshell, if you have a bona fide lease and are paying fair market rent, the new owner of the property must honor your lease. Unless, the new owner is going to occupy the property, then they need not honor the lease, but must give the tenant 90 day notice to leave the property.

If you do not have a lease, then the new owner must give you 90 day notice to leave. Also, the lease transaction must be an "arm's length transaction", meaning the lease can not be a spouse, child, or parent of the original owner.

You must also be current on your rent.

Keep in mind also, if you are current and keeping the rental in good repair, many banks who are foreclosing will pay a tenant to move out and leave the property in good condition. This is known as "Cash for Keys".

TITLE VII will terminate on December 31, 2012.

And since I am not an attorney or a politician, here is the link to the ACT with all the specific details: http://www.nlihc.org/doc/701-704-Public-Law-111-22.pdf

I look forward to your comments and experiences on this topic.

Short Sale Alert/Important New Information

I just had a very interesting conversation with a negotiator at Bank of America. As you may or may not know, short sales can be a very frustrating real estate experience. When I relayed my dismay at yet another delay to the negotiator, he felt the need to explain some policies that will delay the short sale decision.

Here is the information you need to know:

1. The negotiator has guidelines from each investor and when he/she reviews a short sale file, determines if it meets those guidelines.
2. A credit history is pulled on the owner of the property and all financial information is confirmed before short sale is sent for approval.
3. If it is determined that the owner can contribute financially to offset the loss, the short sale approval will be contingent on the owner bringing approximately 10% of the loss to the closing table or sign a promissary note for a higher amount at 0% interest for several years.
4. If an owner disagrees with these terms, he may provide additional evidence that they are financially unable to contribute any money towards the loss or try to negotiate a different settlement. This will be presented to a vice president for review.
5. If the vice president rejects this proposal, the file may be turned over to the Fraud Department for further review.

Real Estate Agents:

Don't take this lightly! Make sure your sellers understand there may be grave consequences if they do not provide complete financial information to the lender or servicer. Make sure they speak to an attorney if there is any question or concerns whatsoever!!

If you are working with a buyer who wants to put an offer on a short sale, make sure you have a conversation with the listing agent. You need to ask if the seller is prepared to make a financial contribution if asked by his bank. If not, you could be wasting your time and your customers time!

Sellers:

All financial information will be scrutinized. Make sure you submit a complete package to the lender. Speak to an attorney before proceeding with a short sale!

Consider each offer seriously, you may have a greater financial obligation with unrealistically low offers.

Buyers:

Find an experienced agent who understands the short sale transaction. Understand that the lender or servicer controls the short sale, and there is nothing that can be done to speed up the process.

Make a reasonable offer, if a seller is savvy, they will realize there is no benefit to them to take an offer below market value.

Please note:

Although this information came from a conversation with an employee of Bank of America and may not be the official stance of Bank of America, I think it is worth taking heed. It makes sense that lenders are continuing to lose large sums of money and will now start to reduce these losses in any way they can. I am sure Bank of America is not alone and I am sure most other lenders will look at short sales differently.

I look forward to your comments and your own personal experience with short sales.

57 Days Left!

Even though you think you have over 3 months left to get your $8,000.00 tax credit, you really only have about 57 days! The average sale now takes 45 days to close and when you factor in Murphy's Law (if something can go wrong, it will go wrong) you better give yourself a 2 week window to take care of any last minute issues. Remember, you must close no later than December 1, 2009.

And if you are a Brevard County resident (you don't need to be a first time home buyer) you may also qualify for up to $10,000 assistance!

If you have considered purchasing a home and have been waiting for just the right time, ie:the bottom of the market, I am here to tell you that the next 57 days is the right time to buy a home!

Start your search now at http:sthomson.servingbrevard.com!