Loan Modification Programs - Success?

With another wave of foreclosures hitting the market, it might be time for a lot of homeowners to face a hard and difficult reality.  The big "F-word" is something nobody wants to speak about because of the harsh stigma attached to it.  When I asked some fellow acquaintances what the word "foreclosure" meant to them, some of the popular words were "poor," "dirty," and "lots of work."

That, to me, is unfortunate.  Those words place a stereotype on the millions of Americans that are going through a difficult situation, and are having to use this as a last resort.  Does that make them poor?  No.  Does it make them or their home dirty?  No.  In fact, I applaud the many people who have fought to the death to do everything they could to keep their home.

Unfortunately, the resources available to those homeowners have more bark than bite.

The Troubled Asset Relief Program (TARP) was funded by the government to help absorb the overwhelming number of foreclosures set to hit the market.  This past week, the Congressional Oversight Panel explained that TARP funds were to be used "...in a manner that protects home values, college funds, retirement accounts, and life savings; preserves homeownership and promotes jobs and economic growth; maximizes overall returns to the taxpayers of the United States."

So was it Mission Achieved?

One of the ways TARP was set to protect home values (both of those consumers in financial crisis and those who weren't) was through the Home Affordable Modification Program (HAMP).  It was supposed to prevent three to four million foreclosures.  To date, the plan is on track to help only 700,000 to 800,000 homeowners.  That would be about 25% of the goal - you be the judge.

Another program initiated to help was HOPE for Homeowners.  Established in 2008, it permitted the FHA to insure refinanced distressed mortgages.  Due to poor initial design, lack of flexibility, and reliance on voluntary principal, it was only able to help a handful of families refinance.

Success is measured on different scales by different perspectives.  TARP was set up to help home values from being crushed under the blanket of foreclosures.  In my opinion, the only thing it seemed to do was delay the inevitable.

Foreclosures vs. Your Home Price

Yes, it's hard.  It seems, now that we're coming out of the Eye of the Foreclosure Storm, that you see them everywhere.  You see domain names such as cheapproperties.com or stealahome.org.  The media sends a flurry of information down our televisions, computers, radios, and smartphones telling us that we're in for another wave.

Through all of this mess - has anybody told you how that affects YOU as a homeowner?

Unfortunately, there are two ways that a foreclosure or short sale can impact your home price.

1.  Distressed Properties impact the appraisal of your home
If there is a low amount of distressed properties in  your area, it is likely that your property value will be minimally impacted.  In fact, some experts say you may have appreciation due to this phenomenon.  By definition, a "low amount" would be anywhere between 10%-15%.  Once the foreclosure or short sale market hits more than about 30% of your market area, it is safe to say that these become the new "norm."  Buyers will look at all prices around you, and make decisions based on the "bang for their buck" ideal.

2.  They are discounted competition directly next to you
Of the five negotiable parts of a contract, price is, perhaps, the biggest component.  Every consumer, whether it be a home or a grocery item, wants the best deal.  According to RealtyTrac, foreclosures (on average) sell for a 41% discount and short sales for a 19% discount.  Though most people think these "distressed properties" are trashed and gutted, at sizable discounts they turn out to be more appealing than a normal sale.  Every buyer purchasing a distressed property is one less buyer for normal sales - and less demand in the market with an oversupply of homes means lower prices for you.

If you're a buyer, the field is all yours.  As a seller, it will be important to discuss with your real estate professional your financial bottom line.  This not only paints a bigger picture for you, but also helps guide you through a tough market to list a home in.

Staging Secrets

There is no question that staging sells homes.  Your best option would be to hire a stager, which can be not only inexpensive, but also pay off huge in the long run.  If you can't, here are a few tips to stay ahead of the home down the street you're competing with.

1.  Remove the Photos

As buyers are walking through your home, the ONLY thing you want them to feel is themselves in your space.  It's difficult for potential buyers to do this when they're looking at an entire wall of your annual ski trip to Vail.  Use nature prints as a sure-shot.  If you're on a budget, buy a few photographic calendars.  Replace the personal photos you have in your frames with the nature photos from the calendars, and you'll have a neutral look without having a blank wall.

2.  Accentuate the Positives

What do you like best about your home?  In most cases, it's the thing that pushed you to purchase it in the first place.  Accentuate those areas to make potential buyers linger in those spaces to make sure they're truly soaking it all in.

3.  Ditch the Extras

I'm sure the kitten laying at the foot of your porch door to keep the drafts out is cute - but not everybody will think so.  Get an early start on packing, take your extra items (which include any items you don't use on a regular basis) and box them up!  Also avoid politically- or socially-charged material.  You don't want a buyer to walk away simply because they disagree with your views.

4.  Paint.  Paint.  Paint.

Your daughter has absolutely loved her neon pink walls for the last few years - I have no doubt.  It's time for a change.  You want potential home buyers to see your house with as little extra work as possible, so help them out.  All colors should remain neutral.  Paint will always be a good investment when trying to sell a home, so utilize yours with a color scheme that is not only comfortable for YOU for a few months, but also appealing to would-be buyers.

5.  Go Away.

As an agent, there is probably nothing more uncomfortable than walking through a home with buyers while the sellers are sitting in the family room.  In fact, I showed a home to some buyers where there were two small (and energetic) children running around.  When I say "running around," I mean the type of young boys that come behind you from out of nowhere and punch you in the leg.  My buyers, who were newlyweds that had obviously not thought about starting a family yet, asked me if we could go...immediately.  Typically, clients take about 20-30 minutes to tour a single home, so do yourself a favor and make yourself scarce.  Nobody can imagine relaxing in their new family room with the noise of you and yours.

Real Estate Recovery?

Over the past few years, there have been thousands of news stories covering the housing market.  Through all of the statistics and advice given out, the general public must be lost.  It seems as if the outlook for the housing market changes, depending on who's eyes you might be looking through.

Harry Truman once said "It's a recession when your neighbor loses his job, it's a depression when you lose yours."  After watching this roller-coaster of an economic adjustment, this phrase rings true more and more often.

S&P's Case-Schiller Home Price Indices based on peaks and troughs in the market trends.  The have labeled the spring of 2009 the bottom of the housing market, but many experts say that another nationwide bottom - a second dip - will be announced soon.

What is interesting, in my opinion, is that the National Bureau of Economic Research recently stated that the "recession" has been over for more than a year.  According to them, the "recession" was over when the economy stopped contracting and began to expand.

So why are people not dancing in the streets?  It's simple...

Perception.

The current housing crisis continues to be "real" to the general American public when things "hit home" - literally.  It wasn't until the general American lost their job and realized they couldn't sell the home for what they owed on it.  It wasn't until their mortgage payment began increasing and they realized they couldn't refinance the loan because of a low appraisal at their current balance.  It wasn't until a listing agent sat down with them and told them what the comparable sales looked like for their neighborhood.

The Case-Shiller sees recovery as a return of home values to their mid-decade peaks.  Alan Greenspan, on the other hand, thinks recovery won't be here until housing prices rise another 10% from the status quo.

Is it easy to see how important perception is?  Every analyst and expert will shout something different about the exact definition of "recovery," which means it will only get more confusing.


If you, as a consumer, are looking for the experts to give you a date signaling the end of this market adjustment, you're searching for the impossible.  The fact is, most homeowners in America won't think the market has "recovered" until their mental target value for their home is reached.  Most buyers, alternately, won't think recovery will be here until they've been priced out at the value they recently purchased.

In every household, there is only one person who can dictate where the recovery is at to-date - you.

In the Eye of the Foreclosure Storm

The recent foreclosure statistics are making their rounds in the media, and giving a lot of people what could be seen as a false hope for the short-term future of the housing market.  Many of the headlines report that foreclosures have decreased over the last few months.  Though, technically, this is true - it is not in any way a sign that the housing market is about to slingshot back.

The issues regarding robo-signing, faulty paperwork, and other challenges have the banks trying to correct many of the problems that were brought to the surface in recent months.

For the past three (3) months, fewer than 300,000 properties are receiving foreclosure filings after 20 straight months where the total each month exceeded that same number.  And, though less foreclosures are actually hitting the active market, the percentage of loans in foreclosure rose to equal the all-time high.

Picture it like this:  Due to the overheated market between 2001-2005, foreclosures in the past few years have flooded the market.  At this point, most states (especially Judicial Foreclosure states like Illinois) have built a temporary dam to keep the market from remaining under a flood plane.  The keyword in the previous sentence is "temporary."  Those loans that are on the sidelines in foreclosure right now or facing it in the near future are about to hit the market again - and with vengeance.  The "dam" was never meant to be permanent.

Though it sounds alarming, it really isn't so bad.  The shadow of the overheated market will continue to linger in Real Estate for a while, but shouldn't stop you, as a consumer, from continuing on the path of the American Dream.  MSNMoney.com reported that, from January 2000 to June 2010, Real Estate still gave a 43% return on investment, which is more than DOW, S&P, and Nasdaq combined.

At the end of the day, check your options.  Homeownership may not be as scary as you might think.

Make An Offer

 

After hours on the internet, miles in your Realtor's car, and more homes running through your head than you know what to do with, you've found your dream.  Time to make it your own.  But where to start?

Know What's Included

Go through the contract with your Real Estate Agent and make sure that you know exactly what you're getting.  Does the dishwasher stay or go?  Are built-in shelves left with the home?  What about air conditioners?  As silly as a few of these questions might sound, the majority of issues that put a closing to a halt revolve around seemingly miniscule issues regarding what's personal property the sellers will take and what stays with the home.

Determine Your Financing and Your Own Personal Limit

In this market, buyers need to get a pre-approval letter from their lender that states you will have the funds to meet the seller's price.  There is one thing a buyer should remember - the number given to you by the lender does not have to be the number you are comfortable at.  Know your budget, and remind yourself of the expenses you'll have in addition to the monthly payment, including utility bills, property taxes, etc.  Just because a bank will give you $300,000, it doesn't mean you won't find a perfect home that costs $250,000.

Examine the Home Carefully

Before making an offer, estimate major improvements or renovations the home will need to undergo.  Check for more serious issues, such as moisture in basements or turned-up edges in wood flooring.  Discuss with your Agent possible issues the seller might fix before closing, or decide to do the repairs yourself.

Make A First Offer

Contrary to what most homebuyers believe, the first offer is not only determined by the dollar amount you would like to pay, but also by comparing listing prices and final sales prices of other comperable homes in the area.  Buyers should typically offer 5%-10% below the list price to show their serious inclination to purchase. Do not make an extremely low offer unless you are prepared for outright rejection.

Decide on Earnest Money

Some sellers determine a buyer's ability to back up their offer by their Earnest Money Deposit.  The cash you have included with your offer shows good faith.  The earnest money should gover about 1%-2% of the purchase price, and will be used later toward your downpayment.

Consider Contingencies

A contingency is a condition that the purchase offer will only go through if certain issues or demands are met.  Common contingencies are that the home must pass a professional home inspection, or the buyer's current home must first be sold before they can purchase the one in question.

Be Patient

After the first offer, most buyers can expect a counteroffer.  Counteroffers will go back and forth between buyer and seller until both parties agree upon a deal that satisfies their needs.  Be patient!  If you are over-anxious, you run the risk of showing the sellers that you'll be willing to go higher than your offer.

All of the items above should be discussed with your agent.  He or she should know how to handle all of these situations to make sure you're getting the best deal out there.

So buckle up and enjoy the ride!  In the end, it could land you your dream home.

Boost Your Curb Appeal

Though it might be hard to imagine it now, Spring is definitely on its way.  With a new spring comes a new burst of buyers that will be eager to settle in before summer hits.  In order to shake of the winter blues in your front yard and add some life, here are six simple ways to boost your curb appeal to attract buyers.

1. Punch Up the Windows

You can easily highlight the architectural elements by painting the outside trim with colors that set them off from the rest of the home.  For an extra punch, go ahead and add shutters or flower boxes.

2. Dress Up the Yard

A good visual mix can make small lots look larger.  Try sprucing up the front with ornamental grasses, flowers, stones, and other landscaping materials.  If you're looking for easy maintenance (which could also be a selling point to a potential buyer), use native plants - they need less water and fertilizer.

3. Tend to the Roof

Make sure the roof is in the best shape by replacing weathered or missing shingles.  If you have a porch, this is a must.

4. Accentuate with Paint

When choosing a color scheme, decide on one that calls attention to key architectural details.  No matter what type of home you have, there are colors that can make it pop.  Depending on the color of your home, a red front door has been known to draw lookers.

5. Entrance Exam

Consider adding a portico or porch.  Either will frame the front door, and a porch can add extra living space for a fraction of the cost of an insulated addition.

6. Shape Up Siding

Check to see that shingles, clapboards, and masonry are in good conditio.  Spotless siding helps a home's details stand out.

Fixing up the exterior of your home is a sure way to boost the appeal - and ultimately the value.  Experts have shown that the right colors can increase home value by as much as $10,000.  So whether you decide to hire a painter/contractor or flex your Do-It-Yourself muscles, tackling these projects will give your home a better chance of selling quickly in the not-so-far-away Spring.