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REALTOR® Magazine-Daily News-Extreme TV Makeovers Downsize

Contract to Closing. Know What's Next.

Evaluating the First Offer

Your dining room table is the scene of high drama. Your home has been listed for sale for six weeks, and finally, the first offer has come in. You are meeting with the agents, and are very excited until they mention the price--it is a lot less than you expected.

Before you feel offended, however, remember that the first offer is often just the beginning of a negotiating process. Your agent can help you weigh the good and bad points, evaluating the price in relationship to the terms or conditions of the sale. Sometimes an offer with a low price can look quite attractive once you understand all of the terms. If you are willing to make some compromises, the buyers may accept a counter offer that will give you more money. A lower price from highly qualified buyers may be better than one from people who may have difficulties with financing. Keep in mind that your first negotiated price is often your best price!


Making An Offer : Low Offers

You have found the perfect house with everything you wanted--and then some--but the price is more than you want to pay. You decide to go for it anyway, and ask the agent to submit what real estate agents call a "low ball" offer.

Low ball offers sometimes work. If the market is fluctuating and the sellers are anxious, they may just accept it. They may be willing to negotiate if they have listed the house at a higher price than is reasonable. Most sellers are open to offers, but they won't give their house away, especially if the asking price is in line with recent sales of similar homes.

What do you have to lose by making a low offer? If the seller yells and screams, the agent will be the focus of his wrath -- and we don't take it personally. If you really want the house, however, a very low initial offer may irritate the seller to the point that he won't consider a better offer, if you decide to submit one. Design your strategy on the basis of how badly you want the house.


First Time Buyers: Credit Card Traps

It is not unusual for first-time buyers to be free of debt. They have been saving for their first home for many months or even years. But after they move into their new home, the new homeowners are often deluged with pre-approved credit card applications from banks and stores offering credit lines. Before they realize what is happening, they can be overwhelmed with debt.

The consumer credit agencies know that mortgage companies do thorough checks before approving a loan, and those who have passed through that process are considered good credit risks. They also know that new homeowners often need to make major purchases of furniture and appliances at a time when they have depleted most of their savings accounts. After years of disciplined savings, new owners may be faced with a tremendous temptation to just say "charge it" for the things they need.

If you have just purchased a home, be aware--and wary--when those credit card applications start pouring in!

Fair Market Value

What is the best price for a piece of real estate? Mortgage lenders, appraisers, and real estate brokers use what is called the "fair market value" (FMV). FMV has been defined as "the price that a buyer is willing to pay and the seller is willing to accept, when both parties are knowledgeable about the property and neither is under any time pressure to buy or sell". Sounds great, but how is this price determined?

The starting point for determining a fair price may be an opinion of the value or "comparative market analysis". Such an analysis uses information on similar properties which are: 1) currently for sale, 2) already sold, or 3) expired properties (those which did not sell). Local, national and international trends and market conditions must also be evaluated.

By comparing similar properties in each of the three categories and the market conditions, appraisers, lenders and agents come very close to the maximum price that buyers would be willing to pay for a house.

Nearly half of all US Home Owners will be underwater by 2011

NEWS RELEASE: A Recent Study by Deutsche Bank shows nearly half of all US Home Owners will be underwater by 2011 and it could be 2020 or beyond before the housing market turns up. Contrary to some Government statements, the housing recession is far from over. Hundreds of thousands of agents who have seen the conventional market dissipate and are thinking a recovery is around the bend, should think again. Many have turned their focus to Distress Sales (REO's, short sales, etc.) but are running into fierce competition in securing and selling listings. At the same time, asset managers and loss mitigators for lending institutions are becoming more and more hard-pressed to find enough qualified agents to provide them with what they need to approve short sales, as well as list and sell their REO's.


A typical Realtor® might or might not inform you of what they feel about the market. We are not your typical Realtors®. Be the news sweet or sour, we don’t SPIN it and give our clients or prospective clients the feeling of security in a insecure marketplace.

If you have the same feelings as we do, and are in the buying or selling situation, contact me. I promise I don’t bite and I will treat you with the respect that you deserve during a Real Estate Transaction.

Best regards,

Roger M. Morris

RE/Max Preferred Group
401 Crescent Ave.
Cincinnati, OH 45215
rmorris.remax@zoomtown.com
513-325-1056

Learn more at www.MlsCincyOhio.com

Credit Consequences of Home Loss

by Bob Hunt

Financially distressed homeowners not only face painful personal circumstances, but also they must consider choices that have both tax and credit implications. While a variety of professionals may be able to explain taxation issues in these circumstances, not as much seems to be known about credit consequences - other than that they are bad.

Recently, the legal department of the California Association of Realtors® (CAR) issued a memorandum titled "Credit After Foreclosure, Bankruptcy, or Short Sale." It is an extremely useful document for those who have questions about how credit is affected by the various ways in which one might lose his or her home.

In large part the memo is based on the 2008 update of Fannie Mae guidelines (Fannie Mae Announcement 08-16), so it should be clear that the explanations are not completely general or unqualified. When, for example, it is said that a person is not eligible to obtain a home loan for a certain number of years, that means that Fannie Mae won’t buy a home loan made to that person during that time. Granted, most lenders want to be able to sell their loans to Fannie Mae or Freddie Mac (whose rules tend to be similar), but there might be portfolio lenders or other institutions that would make such a loan.

That said, it is well worthwhile to review the contents of the memo.

Five years after a foreclosure, a consumer may be eligible to obtain a home loan. Of course, certain restrictions may apply. At least a ten percent down payment is required, and a minimum credit score of 680. Also, purchase of a second home or investment property is not permitted.

A consumer may be eligible three years after foreclosure if "extenuating circumstances" had led to the foreclosure. Extenuating circumstances are "nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations."

Four years after giving a deed-in-lieu of foreclosure, a consumer may be eligible for a home loan. If there had been extenuating circumstances, that period is shortened to two years.

In the case of a short-sale, when the mortgage had been delinquent, a consumer may be eligible for a home loan two years after completion of the short sale. There are no exceptions due to extenuating circumstances.

If the consumer had executed a short sale, but had not been delinquent on his or her mortgage, then there is no two-year period applicable. To be eligible for a home loan, the borrower must not have had any mortgage delinquencies of sixty days or more during the past twelve months, and the borrower must not have "entered into any agreement with the short sale lender to repay any amounts associated with the short sale, including a deficiency judgment."

In the case of bankruptcies, other than Chapter 13, there is a four year period from the discharge or dismissal date of the bankruptcy before the consumer may be eligible to obtain a home loan. With a Chapter 13 bankruptcy, the period is two years.

It is frequently said that short sales have a less damaging effect on credit than do foreclosures. While this may be true with respect to the length of time before one can obtain a home loan again, it should also be noted that a short sale has no greater effect than a deed-in-lieu when there are extenuating circumstances. Moreover, it is certainly not true with respect to one’s FICO score. A deed-in-lieu, a foreclosure, or a short sale all have the same impact as far as FICO is concerned. Some people will not believe this. They should visit the FICO web site and look at the question regarding alternatives to foreclosure.

Published: March 23, 2010