Highest Record of Home Sales Since 2007!

More and more homebuyers are taking advantage of the federal homebuyer tax credit, creating a huge surge of home sales.  November home sales rose nationally by 7.4 percent and are the highest reported level of sales in nearly three years.  51 percent of homebuyers in November used the federal homebuyer tax credit.  The $8,000 tax credit was extended for the first four months of 2010 and expanded to grant a $6,500 credit to qualified current homeowners looking to buy a new home.  

"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there."  The national association's chief economist, Lawrence Yun, said the tax credit buyers certainly helped inflate numbers in November, but he thinks it might be just the tip of the iceberg.

"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead," Yun said.  He said he is hopeful that the market, which has been propped up by the federal government incentives would be self-sustaining by the second half of 2010.

Brent T. White, a University of Arizona law school professor, says that it's in the homeowners' best financial interest to stiff their lenders and that it's not immoral to do so.  White contends that upwards of 15 million homeowners within the country. 

"Homeowners should be walking away in droves," White said. "But they aren't. And it's not because the financial costs of foreclosure outweigh the benefits."  See the full video below.

According to CNN Money, homeowners in increasing numbers are walking away from their homes rather than keeping up with deteriorating assets and increased payments.  "I stopped paying my mortgage in October, after shelling out about $70,000 in interest [over 15 months]," said one borrower, David, who doesn't want his last name used. "Now, I'm just waiting for the default notice." 

This unfortunate situation is affecting homeowners across the country within all price points.  HouseBuyerNetwork.com CEO Duane LeGate says that Susan's two-bedroom condo in Sonoma County is worth $340,000, but the mortgage balance is $380,000. She can't refinance and it's difficult to sell.

And now reports are emerging of homeowners skipping out on mortgages even though they can still afford to pay them.

"Homeowners should be walking away in droves," White said. "But they aren't. And it's not because the financial costs of foreclosure outweigh the benefits."

Pending Home Sales Surge to 3-year High

As home buyers scramble to take adavantage of the tax credit that was set to expire at the end of November, the amount of signed contracts to buy previously occupied homes in the U.S. rose for the eighth straight month in September. The National Association of Realtors said that its seasonally adjusted index of sales agreements rose 6.1 percent from August to 110.1. It was the highest reading since December 2006 and more than 21 percent above a year ago. Economists surveyed by Thomson Reuters expected the index would be level at 103.8.

With foreclosures continuing to surge, "an extended and expanded tax credit would help absorb this incoming inventory," Lawrence Yun, the Realtors' chief economist, said in a statement. "We're clearly not out of the woods because an excess of homes remains on the market despite recent improvements," he said. "Although current inventory is getting closer to price equilibrium, foreclosures will continue to enter the pipeline. An extended and expanded tax credit would help absorb this incoming inventory."

Pending sales were up 10 percent in the West and 8 percent in the Midwest. They were up 5 percent in the South and were down 2 percent in the Northeast.

In the South, pending home sales increased 4.9 percent to an index of 109.7 and is 22.8 percent above September 2008. In the West the index jumped 10.2 percent to 143.8 and is 23.7 percent above a year ago.

Bank of America has stated that they are relaxing it's policy of payoffs of short sales connected with second liens on homes facing foreclosure.  This is good news for many Realtors and homeowners who have had an incredible amount of trouble completing a short sale transaction due to second lien holders demanding more money for equity loans and second mortgages. 

Bank of America has been one of the least cooperative institutions to deal with.  In the past, they have demanded 10 percent of what the homeowner owed on the equity line.  If they did not receive it, they would not sign off on the short sale.

Bank of America is now asking for five percent of the sale proceeds on the short sale, net of realty commissions, closing and other costs. Bank of America feels that this change will open the door for more short sales to be processed and close.
Raffi Tal, CEO of Los Angeles-based I-Short Sale, Inc., one of the largest players in the field, says Bank of America's new policy "will still jeopardize" many short sales that involve its second liens. 5 percent of an equity line can still jeopardize some deals if the mortgage is really upside down.
You will still need a strong negotiator to work your short sale deals.  Bank of America along with other lenders still have strong rules regarding seller concessions to buyers, some require the buyer to pre-qualify with their institution.
The bottom line, work the numbers and see how this change can move your short sale from paper to the closing table.

Is there such a phrase as "approved short sale"? 

Maybe for some it is when the lender has started the foreclosure process on a property.  It may be for some when the homeowner calls the lender asking for a "short sale" package to include what will be needed to justify short paying the loan.  For some Realtors, usually those unfamiliar with short sales, it is when a homeowner calls and says "I'm upside down on my mortgage and can't pay it", "please list my property as a short sale".  There are too many properties within our Multiple Listing Service with days on market over 200 days.  The average foreclosure process within North Carolina is 270 days.

Establishing Your Short Sale Situation

As a homeowner, you need to establish that you are in a legitimate short sale situation.  Evidence has to be shown that:

• The borrower can not make payments on the loan
• The house is equal to or less than the mortgage owed
• There are no other assets owned by the borrower
• There is a contract and valid and able buyer willing to purchase the property.

Is it Worth it to the Bank?

The bank has to see if foreclosing or accepting a short sale will result in a higher return.  Values have been given to the bank by broker price opinions and desktop appraisals better known by Automated Valuation Modules.  Different discount percentages will be given based by geographic location and foreclosure fees standardized by Fannie Mae by state will be inserted.  These fees include taxes, closing costs, commissions, repairs, etc.  An equity analysis and short sale analysis will give the bank an economic decision on the property. 

If you would like more information on buying one of our short sale listings or see if your home is a candidate for short sale, please give us request information here. You can also call us 24 hours a day at (704) 559-5988.