June, 2009
Short sales are an interesting animal. My team has dedicated itself to helping as many home owners as possible avoid foreclosure. The primary way in which we do that is via the short sale process. Over time and through experience, short sale listings have become a primary focus of my team’s business. When people ask us what we do, our primary answer is… “We help people sell their homes, who owe more than they can sell it for.”
All of that to lead up to this point, for most consumers there are still many mysteries surrounding the short sale process. One of the big mysteries is the whole first trust/second trust issue. So, I wanted to take a few minutes to explain this scenario.
Unfortunately, more often than not, when someone is doing a short sale on their home, they have two trusts. This means they have in effect, two loans on the property. They have a first/primary trust, and a second trust. Most people with two trusts, obtained the second loan to avoid paying mortgage insurance, which must be paid, if the loan to value ratio is less than 80%. So, they secured a loan for 80% of the value (the first trust) and another loan for 20% of the value, (the second trust.) I say this is unfortunate, because the second trust is what makes a lot of short sales very difficult to negotiate. Let me explain.
Let’s say John purchased a home for $260,000. He secured a first mortgage for $208,000. He then secured a second mortgage for $52,000, so that he wouldn’t have to pay mortgage insurance. Now, for whatever reason, he has to move, or can no longer afford the payments. But, because of the declining market his home is now worth $195,000. He still owes $260,000.
John decides he must short sale the property that is located in the Fredericksburg real estate market. He lists his home for sale, and secures a buyer contract for $195,000. From the $195,000 the bank may net $180,000 after paying fees, etc. So the $180,000 by default goes to the first/primary trust lienholder. They may offer a few thousand dollars to the second trust. For this scenario, let’s say they offer $5000 to the second trust.
The first trust is now netting $175,000, meaning they are losing $33,000. The second trust is netting $5,000, meaning they are losing $47,000. The second trust is much more likely to dig in their heels and fight the short sale, or fight to have the home owner pay more money at the closing table to offset some of their loss, and understandably so. Actually, these are pretty tame numbers in the Fredericksburg real estate market. My team has negotiated short sales where the second trust is in excess of $125,000, and the second trust bank is looking at losing nearly that entire amount.
This is why short sales with two trusts/loans are much more difficult to negotiate, and why these transactions sometimes take months and months to work out. There is nothing easy about negotiating a short sale. Like I said in an earlier post, make sure, if you need to short sale your home, you choose a team who are truly experts at getting the job done. Your future depends on it.
Hope that sheds some light on the first trust/second trust thing. Let me know if you have any questions on this topic.
Share on Facebook
Category : Blog
SHORT SALE INFORMATION – Fredericksburg real estate market
Did you know that over the last year, a national average of only 1 in 5 short sale transactions ever close? If you are trying to short sale your home, can you afford to be a negative statistic (4 out of 5 short sale transactions don’t close) while you wait for the foreclosure hammer to drop?
If you are in a position where you need to conduct a short sale on your home, make sure you make good decisions about the team who handles your short sale. Pick a real estate agent or team who…
• Knows how to secure a viable contract quickly (14 days or less)
• Has proven negotiating strategies with the banks
• Knows how to ethically and effectively influence the short sale process
• Knows what constitutes a viable contract for the banks… it’s not just a guessing game, even though a lot of real estate agents think so.
Category : Blog
Recently we mentioned new regulations that would allow first time homebuyers in the Fredericksburg real estate market the option of using the $8,000 tax credit for closing costs or the down payment on their home purchase, instead of waiting to use it on their tax return. We also mentioned that it would take a little while for the loan programs to catch up and offer ways to actually do this.
The VHDA Homebuyer Tax Credit Plus Program is an option that is now available for buyers of homes for sale in Fredericksburg and the surrounding counties. However, buyers need to go ahead and find their home purchase, because any purchases under this program must close by November 30, 2009.
Share on FacebookNew – VHDA Homebuyer Tax Credit Plus Program
VHDA’s Homebuyer Tax Credit Plus Program provides first-time homebuyers an affordable funding source to access their anticipated tax credit for use as downpayment and closing costs. Reservations for this program will be accepted beginning June 9, 2009.
Program Details
Similar to the FHA Plus Program, the Homebuyer Tax Credit Plus is a combined second mortgage with a VHDA FHA insured first mortgage. The second mortgage can be up to 5% of sales price or appraised value, which ever is less. No interest and no payments are due on the second mortgage for the first 12 months of the loan. This provides the homebuyer sufficient time to receive their federal first-time homebuyer tax credit and use it to repay the loan with no costs or penalty. If the second mortgage is not fully repaid during the first 12 months, the balance will be amortized over the remaining 29 years at the same interest rate as the first mortgage. If partial repayment is made to the second mortgage during the first 12 months, the loan will be re-amortized at the lower balance for the final 29 years. This will result in a lower monthly payment on the second mortgage.
Eligibility Details
Borrowers must meet VHDA’s mortgage revenue bond First–time homebuyer program guidelines including income and sales price limits. Borrowers must also meet Federal first-time Homebuyer Tax Credit requirements. As a part of the Federal First-time Homebuyer Tax Credit requirements – all loans must close by November 30, 2009, regardless of the reservation or commitment period allowed by VHDA.
Category : Blog
We try really hard to be an informative site and to not do much tooting of our own horn. But I felt it was worthy to share this tidbit of information, since our readers have helped us achieve this milestone. As of this morning, our blog ranks in the top 10% of all website traffic as measured by Alexa.
“Traffic Rank: Top 9.48 %
Alexa is an online service that measures traffic for millions of sites on the Internet in a similar way to Nielsen television show ratings. Your website has an Alexa rank in the top 9.48 % of all websites.”
Our blog is also ranked in the top 2.48% of all blogs measured. Not bad for two years work. Thanks for reading, and making us a trusted resource for your Fredericksburg real estate information.
Share on Facebook
Category : Blog
In recent months I have been talking about the changes taking place in the Fredericksburg real estate market and the surrounding counties. One of the first indications of a balancing market is the influx of buyers in the lower price points of a market. That has certainly happened here in our market.
Now, however, there is something else that is occurring. The inventory is slimming down, meaning that there are fewer homes for buyers to choose from. This again is primarily seen in the segment of the Fredericksburg real estate market that is from about $200,000 and under, but can be seen in other price ranges as well.
The combination of having a lot of buyers wanting to buy, and a lower housing inventory, means one thing… a seller’s market. That is exactly what we are experiencing in the lower price points in our market. That is why I posted the article recently about how buyers need to act quickly, which is an affect of a seller’s market. If you have a home to sell, in a price point under $250,000, it is a great time to get your home on the market for sale.
Like I mentioned there are still great deals available, you just have to be decisive to get them. Good luck, and happy house hunting.
Share on Facebook
Category : Blog
I had talked a few days ago about having already reached the bottom of the Fredericksburg real estate market. Today, I am expounding upon that, based on some experiences this week. Keep in mind, there are a lot of buyers because many people want to take advantage of the $8,000 tax credit, and other favorable conditions. Listen to the video and it will explain more about how and why you need to act quickly if you are a real buyer in this market.
Share on Facebook
Category : Blog
A question I am asked very often is, “What does AS-IS mean?” Today in this video entry I address what this term means, and how it applies to buyers looking to purchase property in the Fredericksburg real estate market. As-Is is not something to be leery of, just make sure you know how to protect yourself and make sure the property meets your expectations. If you need more information on this topic as it applies to homes for sale in Fredericksburg, and the surrounding area, don’t hesitate to ask.
Share on Facebook
Category : Blog
Hey everyone,
I am trying out a new feature here on the blog. Beginning today I am going to be posting a series of video blogs. The video entries should have pretty much the same tone as the the written posts, meaning, they should primarily be consumer oriented. Our goal since the inception of our blog, has been to provide information that is current and relevant to the Fredericksburg real estate market, including the surrounding counties. We want that information to be helpful to all real estate consumers, whether they are working with my team or not. We intend to try to keep that focus with the video entries.
So, check out the first video post titled “Bottom of the Market,” and let me know what you think.
Share on Facebook
Category : Blog
Today we are talking about my opinion that we have reached the bottom of the Fredericksburg real estate market. Particularly regarding homes for sale in Fredericksburg and the surrounding counties that are at a certain price point.
Share on Facebook
Category : Blog
On Friday, the U.S. Department of Housing and Urban Development (HUD) announced that first-time home buyers using FHA-approved lenders can now get an advance on the $8,000 tax credit created by the stimulus package and apply it toward their down payments or closing costs.
This is great news but we need to remember that investors (those who loan the money) still need to catch up to all the changes happening. Right now they are all allowing this to cover only closing costs NOT for the down payment. We anticipate that will change over the next few weeks. I will keep you posted!
Kimberly Thagholm, CMPS®
Fairway Independent Mortgage Corporation
540-972-1105 office
866-602-8578 fax
Category : Blog