Housing Is ‘Awakening From Hibernation,’...

An improving economy is contributing to a gradual rebound in home prices across the country, according to mortgage giant Freddie Mac’s 2012 Economic Outlook report, released Wednesday. But there is still a way to go in the road to recovery for the housing market, the report noted. 

“The housing market is showing some signs of shaking off the depression-like conditions that have plagued it for much of the past few years,” according to the report. “As if awakening from hibernation, housing starts and home sales moved to higher levels of activity.”

In fact, the signs have prompted Freddie Mac to revise its forecast upwards for home sales and originations. One economic contributor that’s helping to stabilize housing: The drop in the unemployment rate to 8.3 percent, its lowest level in three years, according to the report. 

“A variety of encouraging indicators suggest that the housing market may be feeling a nascent recovery ... and more neighborhoods may see a stabilization in overall demand and housing values this spring,” says Frank Nothaft, Freddie Mac’s chief economist. 

Median home sale prices are up, despite a slight drop in new and existing home sales, Freddie Mac reports. About a half of the increase in housing starts has been for construction of rental apartments in multi-unit buildings to meet the increasing demand, the report notes. New rental construction, at its current pace, is expected to reach its highest level since 2005. 

“Housing starts continue to run below net household formations [and will allow for absorption of existing vacant homes],” according to the report. 

Source: “Freddie Mac: Economic Growth Expected to Stabilize Housing Market,” Dow Jones Newswires (March 28, 2012)

Buying is Cheaper Than Renting in Nearly All Major Cities

DAILY REAL ESTATE NEWS | THURSDAY, MARCH 22, 2012

Home buying is the smarter choice than renting, according to Trulia’s Winter 2012 Rent vs. Buy Index. 

Buying a home is more affordable than renting in 98 of the nation’s 100 largest metro areas, according to the index, which tracks asking prices for rental units compared to for-sale homes in major metro areas.

The only two metros out of the 100 tracked where renting was found to be the better deal: Honolulu and San Francisco. Still, the index notes that if you plan to stay in those markets more than five years, you might still be better off owning than renting in those markets too. 

Falling home values and low mortgage rates have made home ownership more affordable. Meanwhile, rents have been on the rise. 

“As rents rise and prices stagnate, home ownership is becoming even more affordable, but rising rents create a dilemma for people who can’t afford to buy yet,” says Jed Kolko, Trulia’s chief economist. “Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring home owners face.”

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News 

The Year Ahead: Real Estate’s Best Bets in 2012

Whatever your specialty, you can find opportunities for business growth.

JANUARY 2012 | BY ROBERT FREEDMAN, NICHOLE ODIJK DEMARIO

Slowly, a recovery seems to be taking hold. “More jobs, rising rents, a rising stock market, and continuing high affordability conditions” are combining to get more people into the market, says NAR Chief Economist Lawrence Yun. On the commercial side, all the major sectors are seeing improving fundamentals, and more positive trends are expected in 2012. Against that backdrop, we asked some of you to tell us what you expected to be your best source of business this year.

Residential

With prices expected to rise slightly in both existing- and new-home sales in 2012, buyers may not get quite the same bargain they got last year. Still, conditions remain favorable for buyers, and NAR is forecasting a 5 percent increase in existing-home sales over 2011. Here are three pockets of opportunity.

1. International investment. With U.S. real estate values down, a favorable currency exchange rate, and the promise of a stable place to invest while Europe deals with debt crises in Greece, Spain, Italy, and other countries, foreign buyers continue to stream steadily to the United States.

“People [are trying] to move their cash somewhere safer,” says Brian Block, broker-associate with ­RE/MAX Allegiance in Arlington and McLean, Va.

Elaine Murphy Carlson, a broker-associate with RE/MAX Palos Verdes Realty in Palos Verdes Peninsula, Calif., says foreign investors who stayed away during the darkest days of the financial crisis are coming back. Indeed, NAR’s 2011 Profile of International Home Buying Activity shows foreign households bought $82 billion worth of residential real estate last year, up from $66 billion in 2010.

Block says the investors he works with are professionally successful individuals with cash available. “They will buy when they see a good deal,” he says. He has gained investor business by demonstrating a solid knowledge of the market and finding networking opportunities, from local Chamber of Commerce meetings to regular real estate industry functions.

2. Distressed inventory in centrally located neighborhoods. Affordable housing in inner-ring suburbs or center city areas may be real estate’s sweet spot in 2012, Block says, because buyers today aren’t looking just for bargains, they’re looking for convenience and lifestyle amenities. A 2011 survey of U.S. adults conducted for NAR by research firm Belden Russonello & Stewart seems to support Block’s assertion. Nearly six in ten adults (58 percent) said they’d prefer to live in a neighborhood with a mix of houses and stores and other businesses within an easy walk.

Block says he has seen first-hand the shift among both first-timers and retirees toward smaller, close-to-the-city homes in walkable neighborhoods. He reaches out to potential clients by using social media and blogging to talk about issues like lengthy commutes.

3. Rentals. Rising rental rates in many markets are making home ownership a more appealing option, especially for those seeking to buy distressed property. But many households aren’t financially ready to buy, either because of credit dings or the continuing overly tight credit restrictions of lenders. Others are waiting to make sure home prices have bottomed out. That’s why many real estate companies have shifted their business model to include rental and property management.

Bill Bloomberg, broker-owner of Distinctive Rental Homes in Eden Prairie, Minn., opened his business in 2011 with high-end rentals as his central focus, providing assistance to both renters and owners who choose to rent rather than sell their property.

Bloomberg, who has nine years of experience working in conventional real estate sales, says helping owners find tenants is a great way to retain clients who might otherwise have turned to another real estate professional.

“If a listing isn’t selling, it’s usually because of price. However, most owners are going to try to switch to another agent first to see if that will make a difference,” Bloomberg says. “Presenting an option such as renting can prevent that from happening.”

And when owners opt to rent their property rather than sell it, they may be providing a unique opportunity, helping renters get one foot into a neighborhood that’s currently beyond their buying power, says Gina Chirico, sales associate with Lattimer Realty in Fairfield, N.J.

To attract rentals and tenants, Bloomberg says, he keeps up with sites that renters frequent such as Craigs­list and syndication sites such as ListHub, Postlets, and vFlyer. He also relies on referrals, listings bringing other listings, and basic cold calling.

“As long as wages go down, traditional homes sales will suffer,” Bloomberg says. “People say I’m pessimistic, but understanding how the economy works has helped me make the adjustments I needed to make it in my business.” Another plus, he says: Rentals are less stressful than sales.

Meanwhile, Bloomberg recognizes that today’s renters could well become buyers of the future. The majority of renters (63 percent) say they are at least somewhat likely to purchase a home in the future. Among them, young adults (age 18 to 24) have the strongest aspirations for home ownership, according to an NAR survey of 3,793 adults conducted by Harris Interactive and released in January 2011.

Commercial

All of commercial real estate’s main sectors — office, industrial, retail, and multifamily—began improving last year, but a solid turnaround is still another year away at least, according to Yun’s research. Here’s a look at what to expect in each sector.

Multifamily. Apartment rentals are once again expected to be the best-performing commercial sector. For the second year in a row, absorption of existing units is far outpacing completions of new units: Almost 170,000 units were absorbed in 2011, against completions of about 38,000 units. In 2010 the spread was even wider. As a result, vacancies continue to drop and rental rates continue to rise.

Yun is forecasting multifamily vacancies to drop to 4.6 percent in 2012 from 5.3 percent this year, and to drop to 4.5 percent in 2013. The rental rate, at a median of $1,066 per unit, is expected to increase 3.5 percent next year and 3.8 percent in 2013.

Nationwide List Prices Rise Nearly 7%

Notoriously, Utah is behind the rest of the nation when it comes to changes in our market. If you are thinking of buying or selling a home, this is one of the important pieces information that will help you get a good deal. 

Median list prices nationwide increased 6.82 percent in February compared to February 2011, according to the latest data from Realtor.com, tracking 146 markets. 

“The nation’s housing market as a whole are in better shape today than at any time since the 2009-2010 tax credits,” according to Realtor.com’s monthly housing summary. “While higher list prices do not always translate into higher sales prices, they may signal a growing optimism on the part of sellers that the market has begun to turn around.”

Florida continues to be the market seeing some of the biggest increases to median list prices in the last year. The following 10 markets posted the biggest rise in median list prices year-over-year, according to February housing data from Realtor.com. 

1. Miami, Fla.

Year-over-year increase: 26.19%

Median list price: $265,000

2. Phoenix-Mesa, Ariz.

Year-over-year increase: 20.62% 

Median list price: $174,900

3. Punta Gorda, Fla.

Year-over-year increase: 19.35% 

Median list price: $185,000

4. West Palm Beach-Boca Raton, Fla.

Year-over-year increase: 18.48%

Median list price: $225,000

5. Washington, D.C.-Md.-Va.-W.Va.

Year-over-year increase: 18.45%

Median list price: $384,950

6. Boise City, Idaho

Year-over-year increase: 16.28% 

Median list price: $150,000

7. Naples, Fla.

Year-over-year increase: 15.67% 

Median list price: $369,000

8. Fort Myers-Cape Coral, Fla.

Year-over-year increase: 15.59%

Median list price: $229,900

9. Daytona Beach, Fla.

Year-over-year increase: 15.56% 

Median list price: $179,000

10. Sarasota-Bradenton, Fla.

Year-over-year increase: 14.47%

Median list price: $246,000

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

Where do the most optimistic Americans live?

By Reuters

Where do Americans have the most hope?

In U.S. cities, that place is Provo-Orem, Utah, where 76 percent of residents say their area is becoming a better place to live, according to a Gallup poll released on Tuesday.

The findings show the Utah valley's metropolitan area closely followed by Lafayette, Louisiana; the Raleigh-Cary, North Carolina area; and Huntsville, Alabama.

The nation's least optimistic city? Binghamton, New York, where less than 28 percent see their area improving.

Flint, Michigan; Rockford, Illinois; and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania were other pessimistic cities on Gallup's Healthways-Wellbeing Index.

Gallup, which based its survey on interviews with 353,492 adults across the United States, said it wasn't immediately clear why residents in some urban areas were more optimistic and satisfied with their communities compared to others, but that unemployment rates, income and other factors may be at play.

"Together, the data suggest there is likely a combination of factors that can create optimism about a community," it said in a statement releasing the results.

Read the full Gallup story
The national polling group also said what works in some of the best performing cities could provide an example for other regions to follow. It said leaders in more optimistic areas could "channel that positive energy into a community's economic and social infrastructure, in turn, creating the types of good jobs that help cities thrive."

"Alternately, communities in which residents lack optimism risk losing the very talent and energy they need to rise again," Gallup said.

Gallup's interviews were conducted throughout 2011. The poll's margin of error varied according to the size of the metro area, from less than 1 percentage point for larger cities to plus-or-minus 6.5 percentage points for smaller ones.

The backlash against Zillow & Co.

Real-estate agencies are taking a harder look at national aggregators. They say the websites can be inaccurate, frustrating potential buyers.
2/28/2012 By Steve Yoder, The Fiscal Times


It used to be a given for anyone selling a house that a real-estate agent would put the listing on national real-estate aggregator websites like Zillow, Trulia and Realtor.com to maximize exposure and sell the home quickly. But that could be changing fast as aggregators and agents face off.

Since 2005 or so, real-estate agents have shared data about homes they have for sale with those national sites, which have millions of visitors (Zillow, for example, had 32 million last month). But even though the sites have grown, sales haven't in the distressed housing market, and some agents believe the sites may not be helping. They accuse the sites of engaging in practices that give buyers inaccurate information that may hurt sales.

Among their complaints are that the sites allow any agent, for a fee, to have his or her name and photo appear prominently beside the homes listed for sale in a given region, even if the person in picture isn't the agent representing the seller. In reality, the agent in the photo may know little about the property or the neighborhood where the house is located, frustrating customers' efforts to get accurate answers, according to a report last year by real-estate consulting firm Clareity.

Some agents also claim that many listings on the largest sites are inaccurate. "The wrong photos often appeared with our listings," says San Diego Realtor Jim Abbott, whose firm no longer shares data with the national sites. He also says that the sites kept up listings that were no longer on the market. Clareity CEO Gregg Larson says Zillow and Trulia get information about the same property from multiple sources, such as the listing agent, the local multiple listing service and syndication services. "The duplicates sneak through, and then you have (the same) listing with different prices, listed by different brokers."

One Massachusetts agent, Jack Attridge, notes in a letter to Inman News that because homes he's listed appear on national sites, he's often contacted by agents and customers well outside his area who have questions about those properties. Most of the time, they have incorrect information, and Attridge wrote that none of those calls has resulted in a sale.

These and other problems hurt agents' reputations and do nothing to sell houses, they say. Abbott argues that inaccurate Web listings, combined with side-by-side links to agents who know little about the property, frustrate potential buyers and may actually drive them to look elsewhere.

Abbott studied three years of his agency's sales data and compared listings that the company didn't share with national sites to those it did. "Time after time, the listings that we did syndicate compared with the listings that we didn't had no better outcomes," he says. "In fact, the ones we didn't syndicate often sold faster" and closer to the asking price.

Zillow CEO Spencer Rascoff has fired back, asserting that an internal company study shows that homes in the top 10% of page views on Zillow sell more than a month faster than their counterparts in the bottom 10% of views and achieve sale prices closer to their asking price. He also says Zillow "invests massive resources in making our listings as accurate as possible."


Nevertheless, Abbott and a few others have opted out. Edina Realty in Minnesota fired the first shot in November by announcing it would no longer list its data on aggregator sites like Trulia and Realtor.com. Abbott pulled out on Jan. 27 with a hard-hitting Web video announcing his company's plans. Then on Feb. 6, a bigger player weighed in: Metrolist, a Denver multiple-listing service (a member cooperative that agents jointly buy into that advertises properties locally), announced it would no longer allow a Zillow subsidiary to use its data.

Some agents in larger metropolitan areas say they have better local listing service options. "It would only take a few good-sized brokers in every community before these sites either drastically changed how they do business or went away altogether," says Abbott.

But other industry insiders worry that agents will lose business by pulling out of the aggregator sites. "All it takes is (brokers who don't share data) losing a few listings and having a couple of their top-selling agents complain," Larson says, and "they'll cave."

Jay Thompson, the owner of Thompson Realty in Phoenix, has chosen to continue listing with the sites. "Good luck explaining your decision to not market a listing on high traffic sites," he writes on his blog. "I can assure you that if a Phoenix area brokerage chooses to do that, then we will use their decision to our advantage."

Abbott argues the opposite could happen. Since he posted his video, he's had 12 people who were interviewing for an agent to sell their home ask him about his company's new policy. "We got all 12 of those listings," he says. Calls to the company, he adds, have "gone through the roof."

Warren Buffett on CNBC: I'd Buy Up 'A Couple Hundred Thousand' Single-Family Homes If I Could

By: Alex Crippen 
Monday, 27 Feb 2012

Warren Buffett says along with equities, single-family homes are a very attractive investment right now.

Appearing live on CNBC's Squawk Box, Buffett tells Becky Quick he'd buy up "a couple hundred thousand" single family homes if it were practical to do so.

If held for a long period of time and purchased at low rates, Buffett says houses are even better than stocks.

He advises buyers to take out a 30-year mortgage and refinance if rates go down.

Finally, time to buy a house?

Look past national headlines about the continuing decline of housing prices and focus on your local market. It's likely recovering nicely already.  

By MSN Money partner  This post comes from Diana Olick  at partner site CNBC.

Nobody wants to catch a falling knife. It is as simple as that. If potential buyers see continued home price erosion, they will stay parked on the sidelines. But as with everything else in this unique and historic housing market, perhaps the usual logic doesn't apply.

“Housing is one of the great investments right now. I tell people all the time when they come up to me, they say, 'What should I do, Mr. Trump?' I say go buy a house," said Donald Trump earlier today on CNBC.


"It wouldn't be an obvious mistake to buy a house now," hedged Robert Shiller, barely a few hours later.

Perhaps they were just jumping off Warren Buffett's declaration Monday that if he had a way to manage them, he would buy a couple hundred thousand single-family homes and rent them out.

Housing appears to be rated a "buy" these days, especially among investors, who see a ripe and rising rental market and big potential for income. But is it the right time yet for what I call "organic" buyers to get in? By this I mean people buying a home to actually live in it, raising a family there and letting the dog run around in the backyard. If prices are still falling, couldn't an even better deal be waiting down the road a bit?

No. House prices will continue to fall on a national basis at least through 2012, but you have to look past national headlines to your local market, which is likely recovering nicely already. The trouble with the national numbers is that they are heavily weighted toward the lower end of the market and its distressed end.

About 73% of homes that sold in January were priced below $250,000, according to the National Association of Realtors. Forty-seven percent of homes sold that same month were considered "distressed," which is either a foreclosure or a short sale (where the lender allows the borrower to sell for less than the value of the mortgage). With all the activity in these areas, no surprise that prices skew lower.

The $250,000 to $500,000 price range may now be the sweet spot for the market. Sales in January were up in this price range, and if you have good credit, you are within GSE (government-sponsore​d enterprise) and Federal Housing Administration loan limits in most markets. While the FHA just raised its insurance premiums, which may hurt much-needed first-time homebuyer demand, it is still one of the best loan products out there today, especially for those with lower down payments.

You cannot time housing any more than you can time the stock market. True, housing moves far more slowly, but that works to its benefit, as prices don't rise and fall on daily news or even on major events. Sales have clearly bottomed out in housing, and prices always lag sales. They will lag longer this time around, no question, but they will come back. Supply and demand will eventually win out, even after a historic crash. If you can't get a good mortgage now, then perhaps it's not your time, but if you can, waiting may not buy you much.

The short-sale buying guide for today's housing market

Here's a 10-step primer on short sales and the steps you will need to take to purchase one.

By Bobbi Dempsey of Bankrate.com

Foreclosure is a fairly well-understood process, but as "short sale" signs sprout like weeds, you may wonder what they are all about.

When a lender agrees to accept a mortgage payoff amount that is less than what is owed in order to facilitate a sale of the property by a financially distressed owner, it's called a short sale. The lender forgives the remaining balance of the loan.


Everyone loses — or wins
Short sales are a mixed bag for the buyer, the seller and the lender.
If you're a seller, a short sale is likely to damage your credit — but not as badly as a foreclosure. You'll also walk away from your home without a penny from the deal, making it difficult for you to find another place to live.

The buyer gets the property at a reduced price, but the property in all likelihood has its share of problems — think fixer-upper — and will need to go through considerable red tape in order to make the deal happen.


The lender takes a financial loss, but perhaps not as large a loss as it might if it forecloses on the property.
Before you even start considering getting involved in a short sale, there are two situations in which an attempt at a short sale is almost certain to fail:

• No default on loan — Lenders almost never will accept short-sale offers or requests for short sales until the borrower is far behind in payments and a notice of default has been issued.
• Bankruptcy — If the seller has filed for bankruptcy, forget it. Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy because negotiating a short sale is considered a collection activity and collection activities are prohibited in bankruptcies.

Can it work for you?
Buying a home in a short sale can be a hassle, so why should you consider it? It boils down to the bottom line. You will get the property for a substantial discount. Since the lender is eager to continue to get paid the money it loaned out, it may also offer favorable financing terms.


Since the sellers play an active role in the short-sale process, you will have their cooperation (and most likely won't need to evict them upon taking possession of the home). This is not always the case with a property that has gone through foreclosure.

Whether you've become aware of the distressed situation on a property through an agent, a “for sale by owner” ad or word-of-mouth, this is not a do-it-yourself project. A short sale is one real-estate deal where you really need to get help from an experienced agent or attorney. Not all real-estate agents know how to handle a short sale, so make sure you consult with one who can demonstrate special training or a good track record with short sales.


Why lenders (might) agree
It might seem counterintuitive for a lender to go along with a short sale. After all, a lender is legally entitled to pursue the full balance of the loan. When a homeowner falls behind on payments, the lender can (and often does) hold the borrower responsible for every penny owed.

And yet more and more lenders are willing to consider approving a short sale.

Lenders are painfully aware of just how bad the current foreclosure crisis is. They know the cold reality is that a large number of struggling borrowers will end up losing their homes, and so they often see the advisability in accepting the inevitable and trying to minimize their losses. Yet some lenders seem to remain in denial.
Foreclosure is an expensive and time-consuming process for a lender. By agreeing to a short sale, the lender wraps up this little mess quickly, and perhaps with less of a loss than it would have incurred with a foreclosure.


Remember, after foreclosing, the lender owns the home and has to maintain it, insure it and pay taxes on it. So instead of receiving payments each month, the lender is now forking out money every month. Plus, short sales help the lender look good on paper — the property never gets listed as an actual foreclosure, which helps the lender's numbers. Lenders see it as the lesser of two evils — if the numbers make sense for them.
Here are the 10 steps to buying a short sale:


1. Identify potential short sales
Locate pre-foreclosures in your area. You can use an online database, search courthouse listings and legal ads or use an experienced real-estate agent as a buyer's agent. First, try to determine how much is owed on the house in relation to its approximate value. If it seems high, it's a good candidate because it indicates the seller might have trouble selling it for enough to satisfy the loan. Pass on those in which the owner has a lot of equity in the home — the lender likely will prefer to foreclose and resell closer to the market price.


2. View the property
Gauge its condition and estimate of how much it's going to take to repair or renovate. If it needs work, many "normal" buyers won't consider it, which is good for you.


3. Do your research
What is the property worth? What's the profit potential? If you're an investor or even a homeowner planning to live in the home a short time, you'll want to profit from the deal.


4. Find all liens and mortgages
Ask the seller or his agent what liens are on the property, and which lender is the primary lien holder.


5. Figure out the financing
This is critical. You have to know how you're going to pay for the property. If you're a good credit risk, the existing lender may be willing to give you a loan. Since it already has a lot of your information in the short-sale paperwork, it may be able to expedite the loan application process. It's important to understand that in a short sale, you have to be able to move quickly. Once an agreement is worked out, it is common for the lender to require closing in as few as 20 days. This is too late to start shopping for a mortgage.


6. Contact the lender
You or your agent should speak with the loss mitigation department — or perhaps the resource recovery department — rather than the collection or customer service department, which is only interested in recouping past-due loan payments. Finding the decision-maker can be one of the biggest initial challenges. You will first need to have the homeowner complete and sign (notarization is usually required) an authorization letter, which gives the lender permission to discuss the mortgage situation with you.


7. Complete the lender's short-sale application, if it has one
Many lenders have an application specifically for a short-sale request.


8. Assemble the proposal
The proposal generally consists of a package of materials including the application and authorization letter, plus:

• The purchase and sale contract, signed by you and the seller, to buy the property for a specified price. The lender is not going to entertain tentative offers. You're not going to get the chance to ask the bank, "Would you take X number of dollars?" In most cases, this also means posting a sizable amount of money to demonstrate your desire and ability to go through with the transaction if it is accepted. If you can't make a sizable down payment, the lender would have no reason to believe you can do any better than the last owner. It's also very important to the buyer that the contract be contingent upon all lenders approving the short sale in writing.
• A hardship letter. It's important to remember a lender will not even discuss a short sale until the homeowner has fallen behind on payments — usually 90 days. The lender must be convinced that taking a smaller loss now is better than a bigger loss later. To make that case, start with a letter written by the seller giving an overview of the seller's desperate situation. The lender must recognize the seller's inability to pay the loan — immediately and in the foreseeable future — and that the situation is irreversible. The seller should supply as much evidence and documentation as possible, such as divorce papers, evidence of job loss, delinquent accounts, utility shut-off notices, car repossession paperwork, last two years' tax returns, recent pay stubs and recent bank statements. If the lender thinks the seller has money or assets stashed away, it will never go along with a short sale.
• A statement of the property's value. This can be an appraisal or a broker's price opinion. The lower the estimate of the property's current market value, the better it will be for you. You want to show the lender that the seller would not be able to get enough for the home via a normal sale to satisfy the loan. Compile a list of all the problems with the home that hurt the value and make it undesirable to the average buyer and tougher for the lender to resell. The longer a lender must hold onto a property, the more expensive it becomes. If the lender realizes the property will bring it nothing but headaches, it will be more likely to OK a short sale. Richard Geller, of MortgageReliefFormula.com, who has participated in hundreds of short sales, says this part is critical. "Many short sales are turned down because the lender doesn't think the offer is high enough." He advises doing this before the lender does a valuation. "There are ethical and legitimate ways to get a low valuation, and if you show this to the lender to start with, your offer won't look so low." Geller adds that the offer to the lender can be below the amount of valuation: "The offer can be 85 percent in areas that are slow but not terribly distressed, and as low as 50 percent in really distressed areas."
• Detail the costs and liabilities. You want to show the lender it would be much better off letting you take the property off its hands. If you can convince the lender that the home is a money pit, all the better. Take photos of any damage and get estimates of the repair costs. Note: This is also a good opportunity for you to take an honest look at the property and decide if you are willing and able to invest the time and money required to fix it up. Remember: A short sale is always an as-is sale. The lender is not going to pay for or otherwise be responsible for any repairs. But, for example, if the lender forecloses, there's a good chance it will be forced to make repairs just to get the house resold. That's one of the liabilities the lender may face.
• A settlement statement. This statement, which can be prepared by a closing agent or real-estate lawyer, outlines the purchase price, the closing costs and any other costs or fees involved in the transfer of the property. It is often referred to as a net sheet, and the information can be entered onto a HUD-1 Settlement Statement to show the final, negative result at closing.

9. Negotiate
It's not uncommon for the lender to reject your offer or to come back with a counteroffer. As with any real-estate transaction, you should figure out beforehand what your absolute highest limit is, and don't be afraid to walk away if the lender won't meet your figure.


10. Seal the deal
Once you've reached an agreement that all three parties — you, the seller and the lender — are OK with, get everything in writing and officially recorded. Make sure the seller understands all of the terms of the deal. Next comes the closing and the property is yours.


More important details
1. The entire process gets far more complicated — and success more uncertain — if more than one lender is involved. Second or junior lenders often are the ones absorbing most of the loss. If there is a second mortgage or a home equity line of credit, you'll need approval from all. In addition, you may find your mortgage loan was sold to another entity in a process called "securitization," and therefore you also need approval from that company.
Be sure to do a title search, and verify the lien position of the lender you plan to contact. Pursue short sales only with the primary lien holder. Making a deal with a junior lien holder is a waste of time, as you will still be on the hook to the primary lien holder for whatever is owed to it.
2. The Mortgage Forgiveness Debt Relief Act of 2007 gave short sellers a big tax break by changing the way the forgiven amount was viewed for tax purposes. Before passage of the act, that amount was considered as income for the borrower and was subject to tax. However, the new law removed that tax liability.
3. Time is of the essence. While you negotiate with the lender, the clock keeps ticking. Do everything you can to get the lender to move quickly. Many short sales fall apart because the lender moves too slowly and fails to complete the deal before the property goes to auction.
4. Some buyers have successfully negotiated with the lender to minimize the damage to the seller's credit rating. The lender has no obligation to agree to this, but if you can persuade it not to report this action as a black mark on the seller's record (and put this in writing as part of the deal), it will give the seller a big head start in rebuilding his financial life. Typically, the loan will show up on a credit report as "paid," but it will carry a notation that says something like "settled for less than originally owed." That is more favorable than a foreclosure, but still negative.

Did You Know?

Utah saw home sales increase in 2011

SANDY — Home sales in Utah last year rose to their highest levels in three years, according to a new report from the Utah Association of Realtors. The report indicated that nearly 33,000 homes sold in 2011, up almost 9 percent from 2010 and at least 5 percent from each of the past three years.

Since last July, statewide sales have climbed for seven straight months, with sales increasing dramatically in several counties, including Uintah — up 33 percent, Wasatch — up 21.4 percent, Washington — up almost 12 percent and Utah — which had a nearly 11 percent hike in sales.

“We’re seeing higher sales because of increased homebuyer confidence, affordable home prices, stronger employment and record-low interest rates,” said Lori Chapman, president of the Utah Association of Realtors.

The report indicated that single-family homes had the highest sales increases for the year, climbing more than 10 percent compared to 1 percent for condominiums and townhomes. Additionally, pending sales — which measure contracts that have been signed to buy properties — were up more than 11 percent in 2011 compared to 2010.

“Based on these figures and recent forecasts, we expect the trend of rising sales to continue into this year,” Chapman said. “In Salt Lake, homes sales are expected to rise 15 percent in 2012.”

Meanwhile, as home sales rose during 2011, housing supply was absorbed, the report stated. Inventory levels were down nearly 24 percent at the end of December, with the 20,243 homes listed for sale representing a 7.2-month supply of inventory — down more than 31 percent from the 10.5-month level in 2010.

“The effect of the steep inventory drop was to bring supply and demand more in line,” Chapman explained. “Traditionally, a market is balanced between buyers and sellers when the inventory represents a supply of about six months.”

Supply was particularly tight in the low price ranges, the report said. For homes priced at or below $150,000, the supply of inventory was at 5.9 months, while the supply for properties in the $150,001 to $200,000 category, supply was at 6.1 months.

Prices were down about 8 percent in 2011 compared to 2010 with the statewide median sales price of homes sold at $174,900. The average sales price also declined about 8 percent for the year to $224,526.

“While prices remained weak in 2011, the reduced supply and increased demand suggest that trend will not continue,” Chapman said. “A new (national) report predicts Utah home prices will have increased by the end of summer, with the state having the seventh- highest appreciation in the country.” 

By the numbers

2011 sales compared to 2010
Single family home

• 10% increase

Condominiums and townhomes

• 1% increase

Pending sales

• 11% increase

Home supply inventory
$150,000 and below

• 5.9 months

$150,000-$200,000

• 6.1 months

Statewide median sales prices
$174,900

• 8% decrease

Statewide average sales price
$224,526

• 8% decrease

What You Need to Know About the Mortgage Settlement

A settlement announced this week among state and federal officials and the nation’s five largest banks is the largest joint state-federal settlement in history against an industry. The settlement, which amounts to somewhere between $25 billion and $26 billion, is aimed at fixing some of the mortgage abuses over the last few years that caused people to lose their home.

So what does the settlement mean for home owners? 

Home owners underwater on their house or struggling to make payments may have something to gain from the deal. Home owners who are eligible for payments or principal write-downs on their mortgage from the settlement will be notified by mail within the next nine months. 

Those who may be eligible for aid under the settlement include home owners who are currently struggling to make their payments and need a loan modification; borrowers who are current on their payments but owe more on their house than it’s currently worth; or borrowers who may have already lost their home to foreclosure. 

In the settlement, banks have agreed to write off a sum of the mortgage principal in select cases where home owners are struggling to make payments. Home owners will then be able to refinance and lower their monthly payments. Underwater borrowers also may receive aid, such as being able to refinance so they also can lower their monthly payments.

Borrowers who have already lost their home to foreclosure may be eligible for payments. About $2,000 per person will be doled out to 750,000 borrowers found eligible. 

Payments will be paid over a three-year period.

The banks participating in the settlement are Bank of America, JPMorgan Chase, Wells Fargo, Citi, and Ally/GMAC. Fannie Mae and Freddie Mac-backed loans are not eligible for the benefits. 

You can learn more about the settlement at the just-launched “National Mortgage Settlement” Web site. 

Source: “What the Mortgage Settlement Means to You,” MSNBC.com (Feb. 9, 2012)

Provo on List of Improving Housing Markets that is Growing...

The list of housing markets showing signs of improvement in home prices and overall market conditions in February has grown to nearly 100 cities, according to the National Association of Home Builders/First American Improving Markets Index. 

The index reveals metro areas that have shown improvement in home prices, housing permits, and employment for at least six straight months. 

In the latest index, some markets that were particularly hard-hit during the housing market crash — such as Miami and Detroit — were added to this month’s list. Such cities are seeing a turnaround in their sluggish housing markets, possibly already hitting bottom. 

“Despite the many challenges that continue to drag on the housing recovery — including the tight lending environment for builders and buyers — improving conditions are slowly but surely spreading from one housing market to the next,” Bob Nielsen, NAHB chairman, said in a statement. 

The 29 metro areas added to the list this month are: 

• Napa, Calif.
• Deltona, Fla.
• Miami, Fla.
• North Port, Fla.
• Tampa, Fla.
• Augusta, Ga.
• Shreveport, La.
• Springfield, Mass.
• Cumberland, Md.
• Lewiston, Maine
• Boston, Mass.
• Detroit, Mich.
• Duluth, Minn.
• Rochester, Minn.
• Jefferson City, Mo.
• Kansas City, Mo.
• Hattiesburg, Miss.
• Omaha, Neb. 
• Ocean City, N.J.
• Syracuse, N.Y.
• Springfield, Ohio
• Youngstown, Ohio
• Portland, Ore.
• Longview, Texas
• Memphis, Tenn.
• Provo, Utah
• Salt Lake City, Utah
• Bellingham, Wash.
• Kennewick, Wash.

See all 98 metro areas on the list at www.nahb.org/imi. 

Still, while there are signs of improvement, the metros on the list, for the most part, continue to have a long way to go to fully recover, said David Crowe, NAHB’s chief economist. But "this is a sign that a large cross section of the country is starting to turn the corner as local economic conditions stabilize,” Crowe said.   

By Melissa Dittmann Tracey, REALTOR® Magazine Daily News

Beat the Competition in Buying Foreclosures

While bank-owned homes are plentiful in many markets, they aren’t always easy for a buyer to get. Foreclosure sell at bargain prices — sometimes at 35 percent discounts when compared to nonforeclosures. These ultra-low prices are attracting investors and all-cash offers, which makes it difficult for other buyers' bids to win out. 

So how can your buyers beat the competition to get a foreclosure? 

1. Get the first look: Fannie Mae and Freddie Mac’s First Look program offers first-time home buyers and others who need financing and are looking for a primary residence the first opportunity to see bank-owned homes before investors. Buyers have a 15-day window to submit offers before investors have the opportunity to start bidding. 
2. Submit a competitive offer: Homes priced at heavy discounts can be in high demand and attract multiple bids. Lowball offers won’t likely get far. Some housing experts suggest starting with your best offer. "My advice is to offer the most you feel you would ever pay for the property," said one recent buyer of a foreclosure. 
3. Make a large deposit: If a buyer wants to get the banks attention, they could offer a larger than typical good-faith deposit. But if the buyer has to back out of the deal for some reason, he or she may be at risk of losing the deposit. 

Even if your buyers really want the property, don’t let them cave in to unreasonable demands, like waiving a home inspection. Otherwise, it may be a decision they quickly regret if the home is later found to be ripe with problems. 

Source: “How to Beat the Competition and Buy a Foreclosure,” Sun Sentinel (Fla.) (Feb. 5, 2012)

Study forecasts recovering home prices for 2012 in Salt Lake metro area

By Jordan Miles: Deseret News, Published: Friday, Feb. 3 2012 12:20 p.m. MST


SALT LAKE CITY — The financial services company Fiserv Inc. recently released a new study of more than 380-plus U.S. housing markets and forecast recovering prices for many of the housing markets across 2012 and 2013. Though the national housing average is forecast to still be in the red for 2012, one of the markets that is forecast to raise is the Salt Lake City metro area.




The study shows an average of a 31 percent decrease in home prices across the last five years in the U.S. from the third quarter of 2006 to the third quarter of 2011. This decrease shows the heart of the recent recession and its effects on the average family’s largest investment. Across the same five-year period, prices in the Salt Lake area decreased by a little over 16 percent. This is half the fall that the nation experienced on average, but still a painful drop.


However, Fiserv forecasts for 2012 show a 1.5 percent growth in prices on average in the Salt Lake area from third quarter of 2011 to that same quarter in 2012. At the same time, the U.S. is still forecast to have prices decrease by almost 3 percent. In Utah in 2013, however, the study forecasts further increases in Salt Lake and the nation of 7.4 percent and 3.8 percent, respectively.


The study also examines a home affordability ratio in all 380-plus markets by examining the median family income and the area’s median price for a home. The ratio is created by taking the median home price and dividing it by the median family income. At the Utah housing price peak in late 2007, the home affordability ratio was a high 3.3. But in the third quarter of last year, Utah saw a glimmer of light by seeing this number decline to a 2.7 with a median family income being $67,200 and the median home price of $183,000.


As the final effects of this recession begin to fade, more positive signs of markets recovering and home prices stabilizing may be more prevalent, giving hope back to the nation.