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Distressed properties and First time home buyers



foreclosure-webRISMEDIA, May 19, 2009-(MCT)-Value-conscious, first-time buyers have become key to the housing markets recovery, and they are snapping up priced-right foreclosures despite the warts-and-all, sold-as-is condition of the properties. Half of the sales made in the years first quarter were to first-time buyers and almost half of all these sales were distressed properties, the National Association of Realtors reported. Distressed properties include foreclosures and short sales, which are private transactions in which a homeowner sells the property for less than the amount owed on a mortgage.

The glut of foreclosures has pushed down home values, so heightened interest in buying them benefits the immediate neighborhood and the overall housing market.

Its a very good first step, said Lance Ramella, a principal at RW Real Estate Advisors in Oakbrook Terrace. The first step is selling the most value-conscious units and those are the foreclosures. Were not going to see any real sustainable price appreciation until we move the foreclosures off the inventory list.

Moving homes off the foreclosure inventory list may take a while though. With the lapse of several industrywide foreclosure moratoriums, lenders nationwide are initiating foreclosure proceedings again. Government-led efforts to refinance or modify troubled loans cant help the rising number of people unable to pay their mortgages because theyve lost their jobs.

In Illinois, more than 7,300 homes became bank-owned during the years first quarter, according to RealtyTrac. Its impossible to determine how many of them are listed for sale, or sold, at any one time because the areas real estate listing service doesnt require a property to be listed as a foreclosure.

To capture new interest in home sales thanks to lower interest rates and a first-time-buyer tax credit, a growing number of lenders and asset management companies that own foreclosed homes now appear more willing to drop prices. Banks used to hold fast on pricing and held back properties so they didnt flood the market, but that has changed, said Susan Sirles Fidler, an agent at Re/Max 10 in Oak Lawn who works with lenders.

Attractive pricing is causing a noticeable increase in multiple offers. In just the past two weeks, a two-bedroom, two-bath Lincoln Park condo listed at $289,000 garnered 60 showings in two days and 20 offers; it sold for just over $330,000. A vandalized East Village penthouse that needed at least $80,000 in repairs was listed at $159,000 and sold for $245,000. In Northbrook, a foreclosed home listed at $719,000 received multiple offers and sold for $730,000.

A bidding battle on a foreclosure with potential is not the exception, said Henry Torn, a buyers agent at Chicago Realty Partners.

The uptick in interest is encouraging to lenders as well. Thats what gives us hope, said Sanjiv Das, chief executive of CitiMortgage. Its positive, healthy activity. Were actively lending to that end of the market, the owner-occupant.

Finding diamonds in the rough can be a test of stamina, determination and an ability to hold ones breath. There can be evidence of vandalism, water damage, multicolor mold and squatters who didnt have access to bathroom facilities because the plumbing fixtures were stolen.

This is not for the faint of heart, said Marki Lemons, an agent with Rubloff Residential Properties, who carries a flashlight into properties and keeps paper masks in her car. You have to be patient, be non-judgmental and have some vision. You have to decide if you can stomach this.

Others are in decidedly better shape, in part either because companies are offering departing homeowners cash for keys and a clean property or they are sprucing up the properties before they put them on the market.

These asset managers are at a point where theyre writing checks and trusting the Realtor to get the work done and put it on the market, said Dean Rouso, owner of Prime Property Partners in La Grange. Were helping the neighborhoods because instead of having this comparable property out there for $99,000, we now have a comp for $150,000.

Not all buyers, however, find themselves on the winning end of foreclosure deals, and that is causing them to look for value in the traditional market.



Tax Credit Can Be Used for Down Payment
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.

Previously, most buyers wouldn't receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS® has been calling for the change.

We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment, Donovan says. His remarks came in an address to several thousand REALTORS® gathered Tuesday morning at "The Real Estate Summit: Advancing the U.S. Economy," at the 2009 REALTORS® Midyear Legislative Meetings&Trade Expo in Washington, D.C..

He says FHAs approved lenders will be permitted to monetize the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Moving Up in a Down Market what the media isn't telling you!!



Weve all heard of the vast fortunes made during the Great Depression of the 1930s, but what about the opportunities available in todays Great Real Estate Recession? Are you going to make the most of them?

Those who believe that real estate is a tide that moves all boats equally are just plain wrong. The fact is, we may very well be in the single greatest move-up real estate market in decades! Todays market represents a rare opportunity for some to move up to their dream home at virtually unprecedented prices. Here is what most in the media, pessimists and those non-strategic about real estate are not telling you:

Prices of higher-priced homes have (generally) declined more, as measured in dollars and/or percentage of price, than have prices of lower-priced homes.
Vacation properties have also changed based upon their own local economics.
If the price of your home has moved down less than the price of your ideal home, this may be the time to make your move.

Here are some of the often-overlooked questions you need to answer before considering your move-up:

1. What price could my home bring if put on the market today?
2. What is the price of my ideal home in todays market?
3. What will the difference in monthly costs be should I decide to move up?
4. What will my net costs be after tax?
5. What is the potential for immediate lifestyle enhancement and for long-term financial gain if I move up?

The answers to these questions are vital to making a more fully informed decision about the opportunities present in todays market. As a Top 5 in Real Estate member, I can help you find these answers. I also encourage you to discuss any changes in your real estate holdings with your attorney, financial planner and accountant.

If you have longed to move to another community, enjoy a house at the shore or create income through rental property, now might be your best chance to do so. If you or any of your family, friends or neighbors need help monitoring the market, I can help. Simply forward this e-mail to them. If you would like to find your own real estate opportunity, e-mail me and lets get started.

Remember, some of the greatest fortunes were made through real estate purchased during the Great Depression. Your ship may have just come in!

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Dont be one of the People who say I should have bought in 2009

IF A WINDOW OF OPPORTUNITY APPEARS, DONT PULL DOWN THE SHADE. Tom Peters. And last week, the Fed saw their regularly scheduled meeting as a window of opportunity to make a blockbuster announcement.

On Wednesday, the Fed announced that over the course of 2009, they will purchase an additional $750 Billion of Mortgage Backed Securities, as well as $300 Billion in long-term Treasuries, primarily to help shore up the housing market and keep home loan rates low. On the announcement, Bonds exploded higher, leaving Bond prices within whiskers of the best levels ever.

However, its important to understand that while their actions may keep a lid on rates moving higher, they may not cause them to move dramatically lower more on this in the Mortgage Market View article below. Additionally, due to many understaffed lenders and investors currently working at maximum capacity, we could once again see that improvements in Bond pricing may not all be passed through to our rate sheets.

Another factor that could impact whether Bonds and rates see significant improvement ahead are concerns of future inflation - the arch enemy of Bonds and home loan rates - brought on by all the recent aggressive moves by the Fed. While we know there is little inflation at the present time, the chatter of future inflation could have a negative impact on Bonds and home loan rates, or at least stifle any improvements.

Although the media is already spinning it differently, this is not a time to stay on the fence, hoping and waiting for lower rates. Home loan rates remain within inches of all-time historic lows, but may not necessarily move significantly lower based on this purchasing plan - waiting is a very risky move.
More good news last week, as Housing Starts for February came in better than expected and actually increased for the first time in eight months. In addition, Fed Chairman Bernanke stated the recession should end in 2009 and that he is confident of the long-term outlook for the US economy.

Also, an update on Mark-to-Market - the accounting rule which has had a devastating impact on
the financial markets - which we have discussed many times, including in last weeks issue. The Financial Accounting Standards Board (FASB) agreed that it will propose to allow companies to use more leeway in applying the accounting rules they use to value their assets, and planned a final vote for April 2nd. If this rule change is approved, it could result in better first-quarter financial statements for companies that have been affected by this rule. Stocks have been moving higher lately in the hopes that Mark-to-Market will be fixed, and a resolution could help Stocks further improve.

7 Tips to help you negociate a loan modification


The Obama Administrations Homeowner Affordability and Stability Plan included refinancing of qualifying mortgages owned or securitized by Fannie Mae or Freddie Mac to a lower fixed interest rate. As reported by the Washington Post, the Obama Administration announced that the program will apply to previously excluded second mortgages.

In part to help those outside this program, the Obama plan also included $75 billion in matching cash to encourage lenders to agree to mortgage modifications.

Here are a few tips to keep in mind when seeking a mortgage loan modification:

1. Dont fall for any mortgage modification scams (such as advanced fee scams).
2. To learn how to best make your case for a loan modification, contact one of the HUD Approved Foreclosure Avoidance Counselors in your area. They can also inform you about any federal, state or local programs that may assist you.
3. Get an accurate picture of your finances. Your best chance at getting a modification is to demonstrate the ability to repay and a thorough understanding of the costs and income you face going forward.
4. If the problem making payments is short-term, ask your lender about forbearance or postponement of payments for a limited period. Be prepared to demonstrate when youll be able to start making payments again.
5. If the problem is long term, and what you need is modification, be prepared to make an offer and demonstrate how you could repay the modified loan. Be sure your lender is up to speed on incentive programs that may be available to help.
6. When negotiating a modification, make sure to understand how it will deal with any fees or penalties that may have accrued. Know what fees are in play and whether the modification will eliminate, reduce or tack them on for repayment.
7. If the lender wont modify and foreclosure looms, consider asking the creditor to produce the note, (particularly when a creditor other than the original lender seeks foreclosure). Its a stalling tactic, but can sometimes encourage creditors to negotiate

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