• The supply of existing homes on the market is at the second lowest level in 11 years.  New listings have dropped by 30,000 units from 2010
• The median price is lower than 2010.
• The number of units sold is the second highest in 11 years and second lowest in price.  Supply and demand are becoming more in balance.
• The average days on the market for homes dropped 13% in 2011.
• Foreclosures have slowed dramatically because the lenders are looking at short sales to resolve underwater properties.
• The most underwater owners have largely been through sale or foreclosure already.

All this, coupled with higher numbers of jobs creation, is signaling the bottom may have been reached. Arizona was 3^rd nationally in jobs creation for 2011. Many were hi-tech jobs.

Homes have become more affordable and the cost of homeownership is lower for every household after the market adjustment of the past 5 years. Costs have come more in line with income.

The Phoenix MLS reflects mainly Maricopa County. However, as Maricopa County goes, so goes the State of Arizona. Sales in the Valley will allow those sellers to relocate to the secondary markets in the state. Jobs will follow in those areas.

Another factor that is beginning to take effect is that homeowners who had to short sell, goes through foreclosure, or file bankruptcy during the Great Recession are beginning to have their credit healed by the passage of time. They will become a wave of buyers.

As we see a turn strengthen it is likely that interest rates will start to climb. Those who have been on the sidelines may decide to buy now rather than risk the market and interest rates rising out of their reach.  Now is the time to buy and lock in a low rate of interest.

Happy Thanksgiving

http://www.jennieshook.com

When a buyer has purchased property using financing, the lender has the buyer sign a Deed of Trust and Promissory Note to secure the property and guarantee the note payments. This is true of most financing arrangements including seller carryback financing.

With the decline of the market and the inability of most buyers to obtain financing from banks for land today it may be tempting for the buyer to “let the property go” back to the lender rather than continue to make payments or pay off a balloon payment. The buyer may feel it is better to cut their losses. There is a great risk in not fulfilling the obligation of the purchase contract and financing.

The lender has the right to expect full payment of the note and provided the financing in good faith at the time of purchase. The lender receives interest for providing that financing and is guaranteed payback by the Promissory Note. The buyer/borrower intends to make an unknown profit based on the market at the time of purchase and assumes the risk of loss if the market conditions change. The Deed of Trust secures the land with a lien recorded in the county. The Promissory Note is recorded and guarantees the payback.

In the event of a buyer’s default on the regular payments or a balloon payment, the lender has the right to demand payment plus all associated costs of collection. Most loans even have an interest acceleration if payments are more than 30 to 60 days late.

If the buyer refuses or is unable to make the payments the best remedy is to contact the lender to make arrangements to either extend any balloon that may be due or work out a time for the missed payments to be made up.

If the lender does not agree to negotiate a reset of the terms, they may foreclose on the property. The buyer will be out all monies paid on the property. Most importantly, the lender may require the borrower to pay for any losses incurred. Specifically, if the lender sells the property after foreclosure and does not net enough to pay off the promissory note, the lender will likely take legal action and obtain a Deficiency Judgment against the borrower based on the guarantee of the Promissory Note.

The borrower must pay the judgment plus interest and court costs. This further increases the total payoff mount. Failing to pay the judgment may force a bankruptcy of the borrower.

Any late payment, foreclosure, or deficiency and judgment may be reported to the credit bureaus damaging the borrower further.

Don’t Flush Your Money Away

Given these terms and conditions and the potential ramifications it is best to make the payments as originally agreed. It will be much cheaper in the long run and protect the borrower’s credit. The borrower will remain the owner and will reap the potential benefit of a profit when the market returns. The owner also has the right to sell at a loss and maintain their credit and take any loss for tax purposes.

Arizona has an anti-deficiency law that protects the borrower from a Deficiency Judgment. This only protects the borrower if the loan was for a primary residence on less the 2.5 acres and the loan is the original purchase money loan. It does not protect the borrower if the property was refinanced or if it is an investment property.

It is imperative to seek legal advice before getting into such a difficult financial decision.

Keep in mind that the public does not need a stock certificate to live. They do need a place to live. Real estate will return to a reasonable value in the short or long term.

Jerry Germansen, Associate Broker, eXp Realty Arizona 928 632 3906

Loan Modifications may be available if you qualify. You should speak to your mortgage company to see what they have available as there are many government backed “Loan Modification” programs and each mortgage company decides what program they will participate with. This can be a time consuming process.

What if you don’t qualify for a “Loan Modification”? You should always seek professional advice from a lawyer, tax advisor and/or a CPA as again you are unique. Some of your options may range between “Short Sale, Bankruptcy, Deed in Lieu or a foreclosure”.

Is a short sale better than a foreclosure? It could have less affect on your credit then the foreclosure. But there are requirements for a short sale, such as the seller must have a hardship (i.e. loss of job, divorce, illness etc.) and other paperwork involved.

How much time do I have before a foreclosure? Most mortgage companies do not do anything until you have missed your 3rd payment. Some may wait longer. But at some point they will serve you with a Trustee Sale notice. The foreclosure is scheduled 90 days after the notice has been filed. There are many different ways you may receive this notice including receiving it certified return receipt or posted on your property.

Short sale is when the bank agrees to accept less than what is owed on the property. Property values have plummeted in the area and the bank must accept market value for the property. If it goes into foreclosure it will be more expensive for the mortgage company and the home will probably sell for less than it would have as a short sale.

Who qualifies for a Short Sale? A homeowner must qualify for a short sale by having some kind of hardship that put them in a position where they can no longer afford to live in their home (ex. Loss of income, divorce, illness etc.). A homeowner will also have to provide several months worth of bank statements and other financial information.

Who pays the Real Estate commission to sell the house? The commission and most of the other sellers cost are usually taken from the mortgage company’s proceeds. The owner will not get any proceeds from this sale.

Will my debt be forgiven? Each situation is different. In many cases your mortgage company will agree to accept the short sale as full payment.

What about a “Deed in Lieu”? A “Deed in Lieu” is when the mortgage company agrees to take back the home. Most banks do not do this, although it’s becoming more accepted. This has the same effect on your credit as a foreclosure but the legal expense is less for the mortgage company.

It is important that you seek professional help from a lawyer, tax advisor and/or CPA as they will review your individual circumstance and be able to advise you on your options. When looking for aa Realtor find one that has experience doing Short Sales.

The bank first contacts a local agent who values the property via a Broker Price Opinion. It is assigned a value and the asset then awaits disposal.

Once the Asset Manager is ready to dispose of the property, he contacts another agent working in the area. Sometimes that agent is the only one in the state representing the bank who doesn’t even necessarily understand the local market. They are simply given the property to list for sale and generally have many of these bank-owned properties they represent.

The Asset Manager does not work within the customary and usual ways of traditional sales in a given market. They operate under their own rules and use their own forms. You must agree to buy a home under those terms or your offer is rejected. Those forms and terms are designed by the bank’s lawyers to protect only the bank.

The Asset Manager will not provide any disclosures or insurance claims history. It is strictly up to the Buyer to find out whatever they can about the property during a short inspection period after an offer is accepted. The property has often not been well maintained before foreclosure and may even have been damaged by the prior owner. You buy “As Is”. You have the responsibility to discover what “As Is” is. Once you have investigated the condition of the property, you must sign off on the existing condition or reject it and cancel the purchase.

The bank’s forms or addendum may hold you to a penalty of up to $100 per day for every day you are late in closing the purchase for any reason including your lender not funding in time. If they are the responsible party for a late closing, they are not subject to any penalty. You are held to a timetable but the banks are not. Time means little to them. Remember this is a non-emotional liquidation of an asset.

The bank will answer your offer only through their listing agent when they get to it. They may wait for other offers to encourage multiple higher offers. And, they may take a lower offer for undisclosed reasons or reject all offers. They may have listed it for sale at a price they would not sell it for only to stimulate showing activity. The time of acceptance that you give them in your offer does not require them to answer in a timely manner. It is only there for you to have a way to end the negotiation on your end. It puts no demand or obligation on the Seller (bank) to answer your offer within that specific time limit.

Once an offer is accepted, it will be subject to the bank’s additional forms, terms, and addenda. Every bank has these prepared by their lawyers. They also select the title and escrow company. You either agree to their terms or they will not sell the property to you.

Your close of escrow and time of possession is not emotional to the bank’s Asset Manager. They don’t care if you have your belongings waiting in a truck to move into a home. They don’t care if they have one more document to sign before you can get your keys after recording of your closing documents. They do not work past 5 PM in whatever time zone they are in and are not located in the local bank branch. They are in an office somewhere else and may have dozens of files to close a particular day–perhaps as many as 500 files on their desk in various stages of liquidation. You are strictly a number buying their asset.

As long as you are willing to work under these conditions, you may find a great property at a discounted price. It may be worth the extra time, hassle, and discouragement that you are likely to encounter along the way. Just be forewarned and then you won’t be surprised. We will be there for you, guide you through the process and advise you for your benefit and protection. WE are the experienced part of your team. Looking to buy in Prescott or Prescott Valley, call us first!

You need someone that can review your specific finances and guide you into the right program. No two borrowers are alike. You need someone that has the ability to get answers from the banks who are overwhelmed.

We have searched for the best local representation by experts that work in te field. The Mackey Law Firm PC is our recommendation. For a free initial consultation contact Bob Verbic at 928-708-3841. It may be the best safety call you ever make. Protect your family and your future and find the right answers.

If you are a buyer you should consider making an offer that is the amount that you would actually pay rather than to try to lowball the offer. If the real value is over the asking price, consider making an your offer accordingly. Putting out a realistic offer will get you the property you want. Lowballing will get you to the table writing contracts that are not acceptable to the bank.

Always be prequalified for your loan before looking for property. All banks require your pre-approval letter before considering your offer. Some even require you to go through the process of qualifying with their bank. Even if you are buying in a traditional property, you should have yourself qualified so the seller knows you are able to close the deal. It could make the difference in you getting the property over another buyers’ offer.

They have been given bail out money. They have controlled the market. They are not responding in a reasonable time to requests for loan modification or short sales. Now they are given a 22% advantage over you as a Seller. It’s time to write your representative and complain. If there is a program for the banks to get help liquidating the foreclosed properties they want to sell you should be able to use that same plan. It only makes sense. If you can’t sell and become a foreclosure victim yourself, the bank loses more, the neighborhood is effected with a vacant home going without upkeep, and the value of every home in the neighborhood is further devalued. That downward spiral could be avoided if you are given the same odds of selling because of the 22% downpayment assistance available for your home.

This is a disaster waiting to happen. You do not deserve to be given second position to the banks who created this mess in the first place. You can’t just write off the loss. For you it is real money. For the bank it is Monopoly money.