Nancy Riley's Blog

What Happens When More Homeowners Figure This Out?

Nancy Riley (Bradley Real Estate) — Wed, 22 Sep 2010 21:59:36 -0700

This is an interesting article. There are many homeowners in this predicament and it only means that home prices are going to continue lagging until something is done to fuel the real estate market. Banks could start by absorbing their losses now instead of prolonging the inevitable. Consumers (the homeowners they are letting down) will not refill the banks coffers any time soon as foreclosures, bankcruptcies, unemployment and other ills of the economy keep hitting them. Any comments?

Via Fran Gatti - Realtor®, CDPE®, RDCPro®, Crescent City CA Real Estate (RE/MAX Coastal Redwoods):

What Happens When More Homeowners Figure This Out?

Say you purchased your home in 2005 for $400,000 and it is now worth $250,000? Not such a stretch especially if you live in California, Arizona, Nevada or Florida.

Now imagine you have either lost your job, or in the case of many residents in my market, had your wages cut 15-25% by the State of California. To add insult to injury, that great loan being touted at the time you purchased your home is set to adjust up in 2011 at year five.

You can no longer afford your home...what to do?

Overwhelmed by the number of defaulted properties, banks have stretched out the time between the beginning of mortgage delinquency and formal foreclosure to an incredible average of 469 days -- more than 15 months. The homeowner now has several choices:

Sell the home short sale which may preserve his credit somewhat over a foreclosure. The average short sale takes about 4-5 months and then the homeowner will be out and on his way. He may struggle to find a rental with his tarnished credit. Hopefully he thought ahead and saved money for the 4-5 months he was waiting for the short sale to be processed.

The homeowner could do a deed in lieu of foreclosure. This could get him out of the home quickly and have the whole fracus behind him.

The homeowner could stay in the home for 15 months--maybe longer--pocketing cash each month without a house payment or having to pay rent.

According to this article: In Reality, Housing Is Not Even Close to Stabilizing, the cure rate on home loans that are past due 30 days is 30%, and past due 60+ the cure rate is zero. This hasn't always been the case, but in this brave new economy, zero is the new 30%. Also, an incredible 14% of the nearly 54 million first liens in the country are now either delinquent or in default.

Why? Have you tried to do a loan mod? The folks I know who have tried are in loan mod hell and have been there for more than a year with no end in sight.

Have you heard the short sale horror stories? I just read a blog on AR that said Wells Fargo will cancel out the short sale if it goes even one day past the close date and will not grant any extensions.

Homeowners don't feel the love, any warmth and certainly no fuzziness from their lender. For these reasons and more, it would seem most folks are opting for option 3.

For an excellent understanding of the foreclosure dilemma and why we can expect almost 7 million foreclosures over the next few years, check out the article mentioned above. To believe that prices are firming now is to completely ignore the shadow inventory mentioned in this article. Ignore it at your own risk.

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Thank you for stopping by. Your comments on this post are welcomed and appreciated.
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What price can your buyer afford to pay for a home?

Nancy Riley (Bradley Real Estate) — Sun, 18 Oct 2009 22:57:57 -0700

It certainly helps a real estate agent convert potential clients to buying clients when we can qualify them early. Questions such as what price can I purchase can be answered by determining the comfort payment level regardless of whether they can qualify for more house. Ask your client what are they comfortable paying in a house monthly payment (PITI), and how much are they planning on putting down. To calculate this you can do a close estimate for them. Say the comfort payment is $5,000 (PITI). Multiply by 80% (this is a shortcut number I use for my area) = $4,000 PI. Use this as Payment on your calculator, at say 6% interest, 30 year fixed term, then do Present Value (PV)= $670,502.29 Maximum loan amount, divided by LTV, in this case say 90%, or .90 = $$745,002.54 Sales Price. You may use a lower shortcut number such as 70 or 75% depending on your area to get your PI, but it is just an approximation. Is this useful to you? Plug in your numbers and you should have an estimate for your clients. Especially new homebuyers! You should, however, refer your clients to a Lender for pre-approval before you make your offer! For questions please call me at my cell phone (415)260-9539, or email me at nancy@bradleyrealestate.com or newday_3@ix.netcom.com Be sure to visit my web site: www.nancyrileyrealestate.com

SHOULD I CONSIDER A 1031 TAX DEFERRED EXCHANGE ON MY INVESTMENT PROPERTY?

Nancy Riley (Bradley Real Estate) — Fri, 30 Jan 2009 22:20:28 -0800

IN A BUYER'S MARKET LIKE WE ARE HAVING IN MANY AREAS OF CALIFORNIA MANY REAL ESTATE INVESTORS MAY BE TAKING A LOOK AT NEW POSSIBILITIES AND MAKING CHANGES IN THEIR PROJECTIONS. WHATEVER THEY MAY BE, A TAX DEFERRED EXCHANGE IS A CONSIDERATION WHICH YOU MUST CONSULT WITH YOUR TAX ADVISOR, AND A TAX DEFERRED 1031 EXCHANGE SPECIALIST (THE INTERMEDIARY).

IT IS IMPORTANT TO START LOOKING INTO IT AS SOON AS POSSIBLE AS THERE ARE TIME LIMITS THAT YOU NEED TO BE AWARE OF. THE PROPERTY TO BE EXCHANGED MUST BE OF LIKE KIND IN NATURE OR CHARACTER. MOST REAL PROPERTY CAN BE EXCHANGED FOR OTHER REAL PROPERTY, SUCH AS AN OFFICE BUILDING FOR VACANT LAND, BUT PROPERTY HELD FOR PERSONAL USE CANNOT BE EXCHANGED FOR INVESTMENT PROPERTY. BASICALLY, THE PROPERTY IS SOLD WITH THE PROCEEDS HELD BY A THIRD PARTY UNTIL A NEW PROPERTY IS IDENTIFIED (WITHIN 45 DAYS) AND PURCHASED (WITHIN 180 DAYS). THE PROPERTY RECEIVED WILL HAVE THE SAME COST BASIS AS THE PROPERTY TRANSFERRED, PROVIDED THAT NO MONEY OR OTHER CONSIDERATION IS RECEIVED IN THE TRANSFER. ANY SUCH CONSIDERATION WOULD BE CONSIDERED 'BOOT', AND IS TAXABLE. IF THERE ARE MORTGAGES ON ANY OR BOTH OF THE PROPERTIES THEN THE DIFFERENCE IS CONSIDERED INCOME OR MORTGAGE RELIEF ON THE PROPERTY TRANSFERRED.

EVERY SITUATION IS DIFFERENT AND REQUIRES CAREFUL CONSIDERATION. IF YOU ARE CONSIDERING SUCH A MOVE, CONTACT NANCY RILEY AT (415) 260-9539, OR BY EMAIL TO newday_3@ix.netcom.com, or nancy@bradleyrealestate.com. ALSO PLEASE CHECK OUT MY WEB SITE: WWW. NANCYRILEYREALESTATE.COM

I WILL HELP PROVIDE THE TEAM YOU NEED TO DO SUCH A TRANSACTION.

NANCY RILEY