I am in the process of building a butt-kicking single property website for a home here in the Atlanta area (not ready to spill the beans quite yet on which one…). I have previously mentioned this here.
As I’ve put this together, I have been consulting with a small number of other agents around the country that are doing or planning similar campaigns. I think this is going to be a full step past most of what has been done previously… but that is another post…
Walk-away borrowers have been a problem in a few markets (luckily, not so much in Atlanta). The government and lending industry are both looking at ways to keep borrowers from just walking away.
So, here is the situation…
Someone buys a home with a 0% down loan. The market turns a bit south, and now the property is worth less than the mortgage balance. The ARM is getting ready to reset, or does reset to a higher rate. The payment is no longer comfortable.
At this point, the borrower is faced with a tough decision. They can stop paying… it will take a few months for the bank to foreclose. They can try to sell the home in a short sale. Or, they can try to find a way to refi or keep on making the higher payments.
The problem is that a lot of borrowers are choosing to ride it out as long as possible, and then walk away. There are even websites and groups promoting this. They tell people facing these choices that they can “save” thousands of dollars and not face any negative consequences. They are right that one could bank up a goodly amount of cash (house payments for 3-12 months)… but there are going to be negative consequences.
The government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender.
Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.
Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.
Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven.
Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.
Source: Washington Post Writers Group, Kenneth R. Harney (04/12/2008)
There are some very good short sale agents (I’ll tell you flat out that I am not one of them… it is a specialty that requires more than a 4 hour class to do well… and a complete focus on just short sales) and a good short sale agent can negotiate a loan modification to sell the home.
Do yourself a favor. If you are in trouble, get help. I’ll be happy to help find a good short sale specialist wherever you are. If you want to stay in your home, contact your bank. Talk to them. It won’t be fun, but it will be way better than having the Sheriff do an eviction.
I see these pretty regularly, but this one was surprising because of the price.
Traditionally, these deals have involved $1m homes and leases on cars like a Mercedes or BMW. This is a house priced at $260k, and the car is an outright purchase. The house is either brand new, or pretty recently built.
They are paying a premium to the buyer’s agent as well.
Why am I mentioning this? I bet your first thought was that I wanted to help someone buy the house… but that wouldn’t be right. I want to warn buyers about these types of deals. They can be great, but there are some pitfalls.
The ad says that the house is priced “below Market Value.” Well… market value hasn’t been determined yet. Market value is defined as the price at which a buyer and seller can agree to the purchase. It may be below appraised value, but that is the opinion of one appraiser.
So, what is the danger, Lane? The danger is that if the new owner needed to sell the property in the near future, it is likely that there would not have been enough appreciation to cover the cost of the car. That means that the buyers could find themselves upside down in the home for a few years. It is likely that the home would have to appreciate for 5 years or more to allow the new owner to sell without involving their checkbook.
Perhaps it is a great marketing move… but it could be a move that doesn’t provide a positive financial impact on the buyer in the future.
A real estate deal is made up of a lot of components, and there are a lot of opportunities for exposing both buyers and sellers to legal or financial pitfalls.
Car is NOT the included vehicle.
Yesterday I posted up that I was kicking around the idea of a Seller Seminar. The focus of this seminar would be to help sellers get ready to enter the market.
Of course all sellers have been through the purchase process, but it might have only been from the other side. Even for those that have previously sold homes, the market is always changing, and technologies have changed dramatically in the last few years.
Education and preparation are the keys to having a smooth and successful transaction. To that end, we will be putting on a seller seminar to address issues that are unique to sellers and are directed towards selling in the current real estate climate.
Don’t worry, thumb screws will not be applied to get you to list your home for sale right now, nor to use any of the specific vendors that will share their expertise. 
We have put up a survey to gather more information about what sellers want to know and when it would be convenient. Visit the survey here. There is also a link that will be on the tool bar at the top of the blog until the survey results are compiled.
How many “First Time Home Buyer” seminars have you heard of? Ok, I’ve heard of zillions of them. It is a light-bulb idea for about half of the agents that come in to the business. We all think that we can fill a room with buyers and give them some great information… And some are able to do it quite effectively.
But, most of the time the agent gets a conference room somewhere, buys a bunch of food, and then sits around eating it.
But, one thing I have never heard of anyone doing is a First Time Home Seller Seminar. I posted the idea up on Active Rain, and I was shocked a bit by how many people thought it was a great idea. Ok, it wasn’t that they thought it was a great idea, but rather that they thought it might be a very popular idea.
So, I want to do it. I will be looking to host a first time seller seminar (that won’t just be for first time sellers) in the next month or so. We will talk about:
So, if you are interested, let me know. Send me an email or give me a call. Leave a comment. Whatever you are comfortable with.
A couple of things of note: We won’t trash people that sell without agents (FSBOs). There won’t be a hard sell, the goal will be to give solid information.
I’m looking forward to hearing from some people…
