Jim and Kathy Campbell Say Good Bye to Beaver Dam

SOLD in only 37 days!  How? 

The right price, a great home - perfectly staged and lovingly maintained, motivated buyers and sellers.

This was a win-win.

Kathy and Jim - IF you ever read this; it was great to get to know you.  It was such a short time that we had together, but I really felt connected (my shoulder is somewhat disconnected after playing racquetball with you). 

The Foreclosure Freeze

You most certainly have been hearing about the massive "robo-signing" foreclosure scandal that is rapidly encompassing the biggest banks in the country.  Here are 4 things home buyers need to know about this breaking real estate news, and how it impacts them.  Here locally, we are seeing some of these large national banks pulling or suspending their foreclosure sale (literally pulling these homes off the market).  We (in our local area) have not been as hard hit as other areas of the state, but THIS WILL AFFECT US TOO.

1.  What is robo-signing is, and what all the fuss is about?  The phrase robo-signing refers to what we’re now realizing has been a very common practice in the banks’ foreclosure document processing divisions, where one person was essentially given the job of signing as many 10,000 foreclosure documents per month, by hand.  These individuals were supposed to be reviewing the files, making sure grounds for foreclosure actually existed, signing the docs in front of notaries. But because of the volume of documents, what they actually did was just sign thousands of documents at a time, without even reading them, and ship them off somewhere else to be notarized.

If you do the math on an 8 hour workday, you'll see that that only gives the staffer 1.5 minute to review each file and documents to make sure the foreclosure is warranted.  That's not humanly possible, which is how these staffers got the nickname “robo-signers”
   
Government regulators are very concerned that the banks may have been taking people's homes without following the proper legal procedures.  As a result, 40 states' attorneys general (including Wisconsin) are teaming up to launch a multi-state investigation, and the federal Comptroller of the Currency and federal attorney general may also get involved in investigating this issue.
2.  Will the freeze will make the banks cancel buyer contracts on REO properties? Currently, the freeze impacts bank-owned properties that are owned and/or serviced by Ally Financial/GMAC Mortgage, JP Morgan Chase, and some properties that were owned by Bank of America. Generally, contracts to buy these homes are being put on hold and extended for 30 days.  As well, the banks are often reaching out directly to buyers and offering them the option to cancel their contracts and recoup their deposit money.

3.  Is it safe to buy a foreclosed home? There's lots of talk right now about the "clouds" that this scandal will create on the titles to homes that were foreclosed by the banks' foreclosure mills. And that makes sense: if the home wasn't properly foreclosed on in the first place, then the legitimacy of the bank's resale can be called into question.  Normally, I'd say: Don't worry about it - that's why we have title insurance!  But last week, 3 of America's largest title company insurers declared that they will not offer title insurance on a number of the homes that may have been involved in this scandal.

In the vast majority of cases – when the foreclosure was justified and a bona fide purchaser, someone who was not involved in the bank’s wrongdoing, has purchased the home, courts will not reverse these foreclosures or their sale to buyers.  But if you’re in the market for a foreclosure, get clear on which bank owns the place as soon as you can, and run the property past your title insurer before you get too far into the transaction to make sure they can write a policy of title insurance on the property before you spend too much money on inspections and appraisals.

4.  How the foreclosure freeze will impact American home values.  In the short term, these freezes might cause prices to stabilize, as we expect to see the supply of foreclosures for sale start to shrink.  However, if these freezes stretch out for a long period of time, they could simply be delaying many inevitable foreclosures, which could delay the recovery of the housing market and home prices, over time.  I wouldn't expect to see the freezes cause prices to drop much beyond where they are now, but if they stretch out, they could keep appreciation flat for a longer period of time.

Funds Available for Homebuyers

There are funds available through the City of Beaver Dam HOME/HCRI Homebuyer Program and the MSA HOME/HCRI Homebuyer Program which is for all of Dodge County.  The programs help with down payment, eligible closing costs and home repairs.  These are 0% interest, deferred payment loans paid back when the home is sold or no longer the primary residence.  The homebuyer must meet the income requirements and contribute a minimum of $1,000 for the down payment.  Please let me know if you have  any questions.

The nice thing with this program is that you might/may be able to piggyback this money as your required downpayment for an FHA loan.  FHA loans require 3.5% downpayment, but also allow this money to be gifted.  The money coming from HOME/HCRI is recognized by FHA as a valid gift.  So, on a $100,000 home purchase, instead of needing $3,500 down payment, you'll only need $1,000. 

Raven and Andy Griffin

Not every closing goes as smoothly as we would hope, BUT "any landing that you can walk away from is a good one".   It all started out with falling in love with a Short-Sale home.  We new that we had to be very patient and we were.  The difficulty came when the lender accepted the short-sale offer and said that we had only 30 days to close.  Raven and Andy's lender just couldn't get it all done, so there was a lot of stress at the very end. 

In the end though, Raven and Andy are so excited to be moving into their new home. 

Congratulations

FHA 203k Program

Right now, with lenders being more frugal with loans than ever before, FHA loans are about the only way to get into a home with less than the 10-20% down payment being required by other lenders.  With an FHA loan, you will currently need 3.5%  of your own funds for a down payment, but even the origin of those funds have some flexibility, i.e. gift from a loving relative, your 401k program, or just your documenting that you have the ability to save the money prior to closing.

Well now, this sounds like FHA loans are the answer to mortgage scarcity.  There is a catch to FHA loans, and for that matter to any funds backed by the government, i.e VA, USDA.   The home that you are interested in must meet FHA standards, which include structural, mechanical, health and safety concerns.  The major components of the home (furnace, roof, water heater...) must have at least 5 years of live remaining.  The home must meet wheatherization minimum standards such as insulation, storm windows even a crack in the window can disqualify the home.  So, for many reasons, the home that you would love to buy may not quality for a loan, and if you are determined to buy this home, all of the issue MUST be corrected prior to closing.  Who pays for the repairs/improvements, and who is going to scrape and paint where the paint is peeling?

Don't give up hope.  FHA came up with the 203k exactly for this situation.  Essentially, you can get an additional $35,000 to cure any of the issues that would prevent the home from qualifying.  No; you may not fund a shopping trip.

The streamlined program is intended to facilitate uncomplicated improvements to a home for which plans, consultants, engineers, or architects are not required.  The program allows for improvements/repairs to roof, gutters, HVAC systems, plumbing, electrical, painting, weatherization, basement waterproofing, re-siding the exterior, and septic and well replacement just to name a few. 

You may not use the funds for new construction, repair of structural damage, landscaping, or improvements requiring a work schedule longer than six months.

The work does not have to be completed prior to closing.  There is a specialize home inspection (a home inspector that is approved for this program) required.  You will work with your lender on getting contractor proposals and an appraisal, which shows the value "as improved".

The biggest thing to remember is that not every lender understands the first thing about FHA loans let alone the 203k program, so ONLY work with a lender that has specific knowledge.

Let me know if you need a lender - I have one that I think is the best.  As always, please feel free to email me or I'd love to have you check out our website.



Home Being Sold with As-Is and Where-Is clauses

   Let's first understand what the term "As-Is" and "Where-Is" imply, then we'll look at what actions are necessary to protect yourselves.  As always, there are many tangents to this issue that can change or complicate your particular transaction.  You can also visit my website or feel free to email me with specific questions.

There are a few misunderstandings with these terms.  The first is the time-frame to which they apply.  As-Is doesn't technically take affect until you bought the home; as in, you bought the home as-is.  Once you bought a home as-is, your legal ability to return to the seller and demand that they make repairs for a undisclosed defect are removed or greatly limited.  When the legal term "where-is" is used, your ability to seek a cure - from the seller - for title issues and others blemishes on your rights of ownership are also limited (depending on the type of deed you received).

The second misunderstanding is that by agreeing to an as-is clause, you are giving up your rights to due diligence, which includes inspecting the home for defects, and investigating the condition of the title.  The opposite is actually true.  "As-Is" is a huge red flag that should alert you to the need for much greater investigation.

The third misunderstanding is that the seller will not fix defects that you identify.  In any contract, the seller can not be forced to fix anything (unless they agreed to do so).  The same is true with an as-is clause.  You can request that the seller fix a defect, and if they refuse, then you have to decide if you still want the home.

As always, there are many tangents to this issue which can change or complicate your particular transaction, so please talk to your agent email or call me.

Matt and Christel Peterson

Matt and Christel - it was so nice to work with you and helping you get your first home.  See you on the 9th with pizza for the big move.  Evan Gagnon was happy that you both were going to make his house a home.  Thanks for allowing me to help

Question from home owner, "I owe the lender $240,000, but my home is only worth $190,000 what are my options.



Depending on whether you wish to stay in your home or sell, there are some options and some hope for you.  Although, there are not many success cases nationally, some lenders are working with borrower to modify their mortgages.  Nationally, only around 77,000 mortgages have been modified.  Lenders have many options when modifying mortgages:  interest rate reduction, principle reduction, term extensions etc.  All these modifications can help reduce your payments.  Your first step is to contact your lender's "Workout Department, or whatever they call it.

If you know for certain that you can not stay in your home, then you have a few options too.  You again need to communicate with the lender's Workout Department and inform them that you can not afford to stay in the home.  Ask them if they will take a deed-in-lieu of foreclosure.  This will affect your credit but not nearly as much as a full foreclosure.  You may need to strongly suggest that you can not afford staying in the home..."we will not be making any future mortgage payments".  Unless you are leaving the area for ever, DO NOT give up your home or otherwise abandon it.  Why pay rent somewhere else, when it could take a year or more for the lender to work something out with you.

The other solution is a short-sale.  You will need a real estate agent knowledgeable with the procedure.  You again will work with the lender.  This time we put your home on the market for the "market value" not what you need to get to pay off the mortgage and the bills. 

Let me know if you have subsequent questions on this issue

Carpet allowance verses installing carpet

I was asked today by a home owner whether is was better to include an allowance so that a prospective buyer could buy carpet or should they go ahead an install the carpet now and hope that this would attract a buyer faster.

Although there can be many different scenarios whenever people are involved, I believe that installing the carpet now is the best answer.

Let's go through the reasoning.  From a neuroeconomics position (the study of human decision making), we consumers are very visually impacted.  You can tell me all day that you intend to give me money for new carpet, or even that you intend to install new carpet, BUT all that I see is the old nasty carpet in front of me.  As a buyer, with numerous homes to choose from, I'll choose the home that made the best impression on me.

We (consumers) want it NOW not later.  You say I can have new carpet; well then where is it?  I want it now.  From a psychological standpoint, future benefits are weighted less against current benefits.   Which would you rather have, $100 today, or $100 in a month.

 

Jim and Linda Strysick's new home

Linda and Jim

It was fun working with you both (and your (Linda) sister Liz).  I hope that you feel extra special knowing that you are my first entry on this blog.  Let me know if you need help fixing the faucet.  And, Linda; it is not stealing now that you own the place.  Keep in touch

Brian