Residential Real Estate in SW Washington State

Residential Real Estate Services with Passion, Integrity, Knowledge

Facing a Foreclosure or Short Sale?

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Image thanks to Jeff Turner/FlickerThe Washington State attorney general’s office recently released three videos that explain your rights and options should you be facing a foreclosure or short sale of your home.

As an active Realtor®, I frequently receive phone calls from people that are already behind on their payments, or feel as though they will soon be in trouble with their mortgage. Sometimes, the call is from someone that is trying to get out from under a home that has lost significant value and is now worth far less than what they owe. Each of these types of calls requires a knowledgeable response and action. Sometimes the best response is to refer the person to an attorney. Most often, however, it’s a chance to help educate the caller as to the possible options based on their personal situation.

The three videos provided by Rob McKenna (Washington State Attorney General) and his staff explain some of the options available and the impact of these options on the consumer who may be facing a foreclosure or short sale of their home.

Each of the videos is moderated by Annie Fitzsimmons, the legal counsel for Washington Realtors. They are easy to understand and just a few minutes long. If you are facing a foreclosure or short sale, I urge you to take the time to view these videos, then give me a call if you have any questions or if you would like to discuss them.

In Part One, Mr. McKenna provides an overview of the options that are available:

In Part Two, Marc Cote, a Certified HUD Housing Counselor, discussses what will happen when you meet with a HUD Housing Counselor, what you need to be prepared for the meeting, and the options available when working with a HUD Counselor:

Part Three, presented by Rob Dickson, Lawyer and Short Sale Negotiator, discusses the short sale process, along with some of the difficulties that are faced when negotiating a short sale.

Obviously, at this moment many of us that are homeowners are facing significant loss of value in our homes and sometimes it takes just the smallest event to trigger an inability to make mortgage payments. Should that happen to you, please contact me at 206.300.8421 or gabrielle@gabriellenemes.com just to talk … and take advantage of the resources outlined in these videos.

The Value of Photos: It’s Good Seller Representation

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Buyers are hooked on photos. I mean REALLY hooked on what they see when searching online for a home. They read a home’s description in the marketing remarks, then expect to see a visual confirmation of all of the features mentioned. From there they go to Google maps, or Bing, or wherever and pull up aerial photos. They look at birds-eye views; sometimes they try to get elevation views so they can get an idea of what can really be seen when looking out of the living room windows!

Sellers are too! They want to see their home in all of its beauty up on the Web. Every feature. Every room. With flowers in bloom and counters gleaming. They’ve already looked at lots of houses on the internet and know that their house looks at least as good as all of the ones they see, and probably better.

And then there’s us Agents/Brokers. We do a quick MLS search for a home for a particular feature trying to find the perfect house for our clients, or in an attempt to begin evaluating the competition.

When working with clients, it’s so important to listen to what they want and/or why they bought the house they did. Perhaps it’s a great back yard. Or they want “this” kitchen. Or that master bathroom is amazing. That sort of thing. And, as agents, we tend to write all that down and include it in the description.

But sadly, so much of that glorious description isn’t borne out in the photos.

Case in point: Today I began searching for a Buyer who wants a mountain view. My MLS search pointed out 17 listings in his area and price range. Of those 17 listings, only three (3!!) actually gave some attempt at showing the mountain view they described or had included as a feature in the listing itself.

Now that’s a bit of a problem. The client wants to see photos and I’m left to question just how much of a view there actually is. One listing described an “amazing Mt. Rainier view.” Not a picture anywhere. Not even a mention that “The Mountain” really IS out there on a clear day. Of course I’ll drive out and take a look myself, but really? Is the mountain really visible?

Good photos are immensely valuable, especially to the Seller. This “amazing Mt. Rainier view” is intriguing enough to call the Buyer to go take a look. But just imagine how many folks would like to see that view and dream a little … perhaps just enough … to buy the house.

It doesn’t take an expensive camera to get good photos, but it does take paying attention. Both to the descriptions from the seller and to what we actually write. As agents, those are the things we need to emphasize in our photos. Rhapsodizing about the granite counters is one thing — showing a photo of a clean, decluttered, gleaming counter says it all. The potential buyer should say “Wow, Look at That!”

There’s value in that photo and it’s good seller representation.

 

Keeping Transactions on Course is a Bit Like Herding Chickens

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My family is new to the world of chicken-keeping. Funny busy noisy creatures those chickens. But inclined to running all over the place when attempting to direct them from one place to another. Block one bird from running off course, then look around and another one has doubled back and is heading back to the pen … or off to dig up a worm in a totally different area of the yard.

Kind of like keeping real estate transactions on course. Sometimes it takes a lot of arm waiving and shirt flapping to keep everyone moving in the same direction from start to finish. But persistence does pay off. Sometimes you have to pick one chicken up and carry it to the final destination. Seems like I’ve done that in my real estate career just a few times! Well, I guess I haven’t actually picked up any clients and carried them around, although sometimes it felt like it!

The business of real estate is hard work. It takes perserverance, tenacity, professionalism, exacting and timely actions, smiling personality, and a  lot of arm waiving and shirt flapping as well.

Maybe my career in real estate has trained me well for chicken-keeping! Or maybe it’s the other way around. Give me a call if you ever need someone to herd your real estate transaction through from start to finish.

 

Flood Maps Affect Home Sales and Purchases

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One of the requirements to obtaining and maintaining a mortgage or loan on your home is that it be adequately insured against unexpected disasters. It’s important to know that damage from floods or landslides are not typically included in normal homeowner insurance policies.

Evaluation of whether a home resides within a flood plain is part of the consideration in obtaining affordable homeowner’s insurance. This can affect the ability of a buyer to fulfill the terms of their purchase contract, as expensive insurance may negatively impact that buyer’s ability to qualify for the purchase of the home.

Similarly, the requirement that flood insurance be obtained can negatively impact the Seller’s ability to sell a home. A home that’s not insurable, or one that has what appear to be excessively high premiums, can be difficult to sell to anyone that must finance their purchase, limiting prospective buyers to cash only or seller-carried contracts.

In most purchase contracts in which I participate, I recommend that the buyer include a provision that their annual homeowner insurance premium be no more than 1/2 of 1% of the purchase price. Generally that’s doable, unless the home happens to reside in an area designated as residing in a flood plain — then prices skyrocket as the prospective homeowner must also negotiate flood insurance.

As geology, improvements to land, and technology change,  flood maps are updated by FEMA (Federal Emergency Management Agency). Your home, which previously was not within a flood prone area, may be now … or, conversely, perhaps it is no longer, affecting your  insurance rates.

In incorporated and unincorporated King County, those flood maps have recently been re-drawn and can now be viewed during one of the three public meetings listed below. Additionally, you can review the new King County flood maps online, obtain more information about these public meetings, and review the flood insurance studies by visiting the King County Preliminary Flood Insurance page.

City of Auburn
Wednesday, January 26, 2011
6 – 8:00 P.M.
Dick Scobee Elementary School
1031 14th Street NE, Auburn, WA 98002
253-931-4984

City of Renton
Thursday, January 27, 2011
6 – 8:00 P.M.
Renton City Hall
Council Chambers – 7th Floor
1055 S. Grady Way, Renton, WA 98057
425-430-6400

City of Kent
Monday, February 7, 2011
6 – 8:00 P.M.
Kent Senior Activity Center
600 E. Smith Street, Kent, WA 98030
253-856-5150

Additional information about flood insurance in Washington State can be found at the Office of the Insurance Commissioner.

Finally, be sure to periodically review the terms of your homeowner insurance policy. It’s critically important that you know exactly what is … and what is not … covered on your policy. Damage from flood waters, earthquakes, or extra coverage for all that nifty personal computing equipment you own, may require extra attention in the form of insurance riders.

 

For help with your homeowner insurance needs, please let me know and I’ll be delighted to refer you to an outstanding insurance professional.

Dear Bank — Can I buy my own short sale house?

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Dear Bank President:

See here’s the thing. Like much, if not MOST, of the country, the value of my house has dropped substantially. So has my income, but I’m STILL WORKING! Of course my income is now only about 2/3rds of what it was when I bought my house because I had to take a cut in pay to keep my job.

But I’m STILL WORKING and I’ve never missed a payment. I’ve now built up all of my credit cards to their limit and raided almost 100% of my 401k so that I can make my mortgage payments, yet I’ve NEVER missed a payment.

But the ratio between my mortgage and my house value is laughable. I’m so far upside down, I might just as well keep tunneling. Maybe I’ll end up in China like my Momma used to say.

And my friend, the very educated and talented REALTOR, says that the best way for me to get out from under this mess is to short sell my house because, like my income, it’s only worth about 2/3rds of what I paid for it five years ago. I even consulted with that real estate attorney who says maybe I should just let the house go back to the bank.

But, you see, I’m a responsible person. I make a commitment and I stick to it. Again, let me stress, I’ve NEVER MISSED A PAYMENT! It won’t be long now though. I just can’t continue to make payments at that fantastic 6.8% interest rate I had five years ago.

Here’s my proposal: My income supports a purchase that’s 2/3rds less than the current mortgage on my house. And interest rates have dropped below 5%. I CAN AFFORD THAT! And I can save you thousands of dollars and all of us can come out of this without egg on our faces and tons of embarrassment if you’d allow me to just buy back my own short sale property. Well, technically we shouldn’t have to go all the way through the short sale process. That’s messy, lengthy, expensive, and totally unnecessary!

So let’s do this: You process your own unbiased and fully researched Broker Price Opinion and I’ll pay for the appraisal. And then we’ll agree that the value of my house is 2/3rds of what it was. And then you’ll rewrite my mortgage/loan for that number at the current interest rate of less than 5%.

You’ll save money. You’ll not have yet another house sitting in your “bad loans” portfolio. And I’ll get to stay in my house and continue to maintain it, thus saving my neighborhood from further decline and dropping my house value even more. And my credit score will stay reasonable since we won’t have to go through all that “miss a payment or two or three so we’ll look at your short sale offer” business. My kids will continue to grow up in the same house at the same schools with the same friends in the same neighborhood, thus continuing to contribute to their sense of security. (We need these future secure workers to pay for their own houses and cars someday, thus helping to ensure your bank’s longevity.) We’ll all be winners.

How about it, Mr/Ms Bank President? Doesn’t that make loads more sense?

Sincerely,

Struggling Homeowner
i.e., Your Next Foreclosure Client

Investor Alert: FHA Financing for “Flipped” Houses

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In mid-January, 2010, the Department of Housing and Urban Development (HUD) issued a temporary waiver (good until February 1, 2011, or until extended or withdrawn) to give FHA borrowers the ability of obtaining an FHA-insured mortgage on a home that was purchased less than 90 days previous. What this means is that a Buyer can use FHA financing for a home which was bought by an investor less than 90 days before, then repaired or rehabbed.

On its surface, it would seem as though this waiver would be greatly beneficial to investors. After all, an investor needs to purchase a real bargain house, do some repairs, and then re-sell the home as quickly as possible for a profit.

In my experience, most investors look for the original purchase to be no more than 70% of its repaired value, with 50-60% (or even less) preferred. Considering that the cost of buying and then selling a home can easily run approximately 10% of its resale value, that there are costs of borrowing funds for purchase, and, of course, the necessary costs of repair, an investment home must be sold for far more than 120% of the investor’s purchase price.

It’s also important to bear in mind that many buyers (if not most) are also looking for homes that are a bargain … and are using FHA financing to secure their purchase.

So .. where this gets difficult is that there is a 20% variance to the flip rule for homes being resold within 90 days of an investor’s acquisition of the property:

* If the home is being sold for no more than 120% of its purchase price, then flipping guidelines do not apply.

* If the home is being sold for more than 20% above its purchase price, then the Buyer’s lender will require an independent home inspection, selected by the lender and likely paid for by the Buyer (OUCH!), and

* The Lender must justify the loan value by acquiring support documentation of the increased value or TWO appraisals, and

* Even if an appraiser doesn’t find the need for a repair, a lender can require that any issues revealed by a home inspection be fixed prior to closing!

A home inspection in the hands of an underwriter can be problematic. Every home requires some repair–no home is perfect. In a typical transaction, Buyers and Sellers often agree to financial adjustments rather than repair. Underwriters aren’t necessarily equipped to interpret the findings presented on a written inspection report, and an transaction otherwise acceptable to a Buyer and Seller may be stalled or cancelled.

Finally, in most transactions, the Buyer pays for the appraisal of the property they wish to purchase, used to assure their lender that the value of the home is at least equal to the amount of the loan. With the requirement that a flipped home sold for more than 120% of its investment purchase price, the Buyer may be required to pay for two appraisals, which further impacts the Buyer’s closing costs. In today’s buyer-driven market, remember also, that the Seller is very frequently asked to pay all or some of the Buyer’s closing costs.

Click to read the HUD Waiver of Requirements for FHA loans, then be sure to factor in these additional requirements that may be impactful of your desire for a quick resale of your investment property.

There is NOT a 3.8% Sales Tax on All Home Sales Starting in 2013!

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Over the last several weeks I’ve had a number of clients and contacts email me with a “Is This True?” question about the rumor of a 3.8% “sales tax” to be added to the sale of a home after 2012. With the passing of President Obama’s Health Care bill, some people are digging deep for every possible reason to cause panic and mayhem.

Last night I received yet another forwarded copy of this message. I’ve copied the message in the three bordered sections that follow. My response is below.


Subject: REAL ESTATE SALES TAX TO GO INTO EFFECT 2013 (Part of HC Bill)

 

This excerpt from the Healthcare Reform bill has been grossly misstated. There is a 3.8% tax that will be imposed beginning in 2013 (if not repealed before them … and it’s under discussion) … but it’s not on the gross amount of a sale.

In fact, this provision has  been so widely misunderstood and misquoted, that the National Association of Realtors produced a Question and Answer publication to expressly discuss the matter. Be sure to expressly study questions 8-10. Click to read the publication.

Essentially, it’s like this:

A 3.8% tax will be imposed on high income earners (single earners with Adjusted Gross Income (AGI) over $200k, couples with AGI over $250k); that sell property realizing a gain over $250k (single) or $500k (joint filers). So .. if you’re married with AGI over $250k, and you sell a piece of property with a gain over $500k, you’ll pay a 3.8% tax on the gain, not the entire sales price.

I’m not a tax expert and can’t speak to computation of AGI, but I suspect that there will be some fairly extensive calculations involved to minimize AGI.


 


What is a Deed-in-Lieu?

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No foreclosure!

A Deed-in-Lieu of Foreclosure is a process where the lender agrees to take the deed to your home rather than pursue a foreclosure action against you for nonpayment of your loan. This option is easiest where there is only one mortgage, and where there are no other liens.

Depending on your lender, a payment might be offered to the holder of a second mortgage or home equity loan, but that lienholder must also agree. Further, if you have yet additional liens against your home, such as tax or utility liens, your bank will likely not even consider this option. Your bank wants your home with “marketable title” … i.e., a clean and clear title without other encumbrances.

While this seems as though it might be an easy and logical solution, what’s important to remember here is that a bank isn’t in the business of owning real estate. They don’t want your home, especially if there’s no equity to be gained in taking it.

While definitely a generalization, there’s certainly truth to the statement that where banks readily accept Deeds-In-Lieu is where a home has equity in the current market and can be quickly liquidated at a profit to the bank. Great if you’re behind in your payments and absolutely must leave the loan obligation and there’s equity in the house. However, if there IS equity, why not try to refinance or pursue a loan modification first?

It’s also important to know that some banks won’t even consider a Deed-In-Lieu of Foreclosure unless you’ve already been rejected for a Loan Modification and/or were also unsuccessful selling your home as a Short Sale.

The information presented on this Site should not be construed as legal or financial advice. You are advised to seek consultation with a qualified Attorney and Accountant. ©Gabrielle Nemes, 2010

Sometimes a Short Sale is Just NOT the Right Answer!

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I like to consider myself a resource for sellers who are considering their options. Should they pursue a short sale? Should they just walk away? Should they just try to hang on no matter what?

Recently I had an opportunity to meet with a wonderful couple that were truly truly trying to do “the right thing,” as they phrased it. We met for a couple of hours while they showed me around their home.

Their pride was obvious. This house was their baby. They’d improved and lovingly planted almost every inch of the yard … and the inside was eat off the floor clean. Every room was polished and tidy. They were devasted that life had taken an unfortunate turn and they just couldn’t figure out how to hang on any longer.

After talking through the options, I sent them to talk to the other necessary experts — the attorney and the accountant.

Yesterday the husband called me back with an apologetic voice: “The attorney said that it would make absolutely no difference whether we let the bank just have the house, or short sale it. We’ve decided to just walk away.” He was distraught, thinking he’d “wasted my time!”

Heavens. Sometimes a short sale is just NOT the right answer. I reassured him that I was so happy to have met him and his family and wished them well.

Is a Loan Modification for Me?

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A number of considerations should be made when you are either in trouble already with your current mortgage, or anticipate that you might be soon.

One excellent option might be a loan modification, which is designed to reduce the amount of your mortgage payment to no more than 31% of your gross income.

Unfortunately as of this time, it appears that most loan modifications are unsuccessful, with something less than 5% of all applicants successfully completing the loan modification program being reported by some analysts.

However, don’t be deterred! Perhaps you’ll be able to complete  a loan modification and be able to remain in your home. According to some reports, the biggest issue with unsuccessful loan modifications is that homeowners do not adequately complete the necessary application, or do not provide sufficient documentation as required by the lender. Of course, there are also reports that lenders don’t recognize that a homeowner has completely required with all requirements. In any event, it doesn’t appear to be an easy or guaranteed process.

The first step is to determine whether or not your lender will change your existing loan to more favorably meet your financial requirements. This process is formally termed “loan modification.” Under the terms of the federal program, HAMP (Home Affordability Modification Program), essentially lenders are encouraged to offer loan modifications to homeowners that are either already behind in their payments or who face the prospect of soon being so.  

Be sure to contact your lender and ask for their loan modification package. You should receive, at a minimum, a list of exactly what they require, and how to proceed and apply.

The information presented on this Site should not be construed as legal or financial advice. You are advised to seek consultation with a qualified Attorney and Accountant. ©Gabrielle Nemes, 2010