JIM'S SOAP BOX
Real Estate Newsletter Aug 09

TIME IS RUNNING OUT….

November 30th is the last day to take advantage of the $8000 tax credit available to first-time homebuyers. Qualified first-time home buyers may claim a tax credit of ten percent of the purchase price of their home, up to $8,000. In order to meet that deadline, first-time homeowners need to select a home and begin the loan process as soon as possible!

Surveys show that fewer than 1 in 5 homebuyers currently shopping for a home know about the tax credit, which is why I am actively trying to spread the word. Please let me know if I can assist you any way!

The goal of this newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.

It's Getting Easier to Go Green

I am proud to announce that I am a local provider of a new mortgage product called myEnergyLoan. I am one (of only two) providers in Arizona who are registered to provide and finance myEnergyLoan. The other registered Loan Officer is my green partner Jim Tulin, also with Nova Home Loans.

myEnergyLoan provides these core benefits to green real estate buyers and investors:
Provides the funds to make your energy efficient upgrades

Provides an efficiency credit to reduce closing costs
May be applied to lower your long term interest rate
Helps reduce your monthly utility bills
A certificate validating your myEnergyLoan Efficiency Credit

I urge that you call me if you are considering a purchase of an Energy Efficient home - or - if you are considering adding solar features to you current home. Ther are several Streamline Refinance programs that will allow you to add solar energy to your home without an appraisal. Something to think about.

Appreciation in Your Home's Value on the Way!

If you read the last edition of Jim’s Soap Box you saw that the sales in Maricopa County for May were very good, 9,284 homes to be exact. Well I am happy to announce that this was not a fluke, and the sales for June came in at 9,350 homes. These are both near record months and definitely suggest that the market is ending the cycle of depreciating property values. The numbers have not been verified for July or August yet – but on the 22nd of July there were over 16,000 pending sales – which is a staggering number.

So, what does that mean?
Your property value has been greatly affected by the sales of foreclosed properties. Appraisers can only compare your home’s value to similar homes that have sold in the last 60 to 90 days. Being that bank owned, foreclosed, and short sale properties make up 77% of the homes that have sold over the last quarter – the chances are high that you can only compare your home’s value to foreclosed properties being sold at great discounts. So, if you think your home should be around $200K in value – you might be shocked to know that the highest home sale in the last 60 days was a short-sale for $130K a few blocks away.

The biggest event (in my opinion) that will help your property value return to realistic levels, is to have privately owned (not foreclosed) properties begin to sell again. Considering that foreclosed properties are usually sold well under market value, why would someone (any buyer) choose a privately owned home for thousands of dollars more? Well, they actually wouldn’t chose that option unless,… there were no more foreclosures left to sell.

So, when 9,350 houses sold in June, that left only 26,000 homes left on the market at month’s end. Logic would dictate that we would be basically "Sold Out" of homes within 3 months if no new listings appeared. Realistically, people list houses every day and the supply will never really run out - but the demand for houses will definitely go up due to a lack of inventory – and that is when the average price of houses (foreclosed and private) will go back up.

Sounds great! When do I call to refinance?
Not quite yet, because the rest of the story goes like this. There are currently 47,000 houses in Foreclosure in Maricopa County that are not listed for sale yet. It is my guess that the banks would like to see the market tighten up a little to fetch a higher price for these houses. I have already seen higher competition over newly listed foreclosures in Metro-Phoenix. If you want to buy an under-priced foreclosure – be prepared to outbid a handful of other buyers.

So what are you trying to say?
The number of houses selling per month is very strong (nearly 10,000) and appears to not be slowing down. There are roughly 30,000 active listing with another 47,000 foreclosures available to be listed. Also, there are tens of thousands of people who want to list their house as soon as we "turn the corner" on property values. This translates into 10 months of housing supply rather than 3! However, I believe (in Phoenix) we have already hit the bottom of the curve and you will begin to see a tight market with signs of appreciation by the holidays. In the spring of 2010 there should be more optimistic press available than what I am prognosticating today. My friends, we have all made it through the storm.

Good News on American Home Sales

(CNNMoney.com) -- More Americans signed sales contracts to buy homes in June than in May, the fifth consecutive month of increases, according to a report released Tuesday.
The National Association of Realtors said its Pending Home Sales Index rose 3.6% during the month. That was 6.7% higher than June 2008. It was the fifth straight month of increases, the first time that has happened since July 2003..

The report followed several other recent pieces of good news for the housing industry, including a substantial rise in new home sales, a jump in existing home sales and the first home price increase in nearly three years.

The jump was also much higher than expected. A consensus of industry experts put together by Briefing.com had forecast an increase of just 0.7%

Low-end sales have been the strongest segment of the market, an indication that the first-time homebuyers tax credit, worth up to $8,000, is contributing to the rise. The clock, however, is quickly running out on this offer and may have buyers stepping up their shopping to get their purchases in under the wire.

Jim Cunningham
Loan Officer
Nova Home Loans8800 E. Raintree Drive, Suite #180Scottsdale, AZ 85260
480 614-6413 off
602 434-8261 cell
602 680-4664 eFax
jim@novahomeloans.com
www.NovaHomeLoans.com/Jim.Cunningham

Jim's Soap Box (June 09)

JIM'S SOAP BOX

Real Estate Newsletter June 2009

SUMMER IS HERE!!

I really thought we would all be cooked by early June, but the Phoenix weather has been outstanding. It must be the reason for the record number of sales in May. I will admit that I have been a housing optimist over the past couple years, and some accuse me of howling at the moon. However, in this edition of the soapbox, I actually have some statistics to maybe get excited about.

Also, I would like to welcome all of my Facebook contacts that I have recently included to the Soap Box mailing list. My thought is that if I can see what you've had for breakfast - you can read about my industry once a month. (facebook joke). Enjoy!!

The goal of my newsletter is to provide educational material mixed with Jim's unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.


How Did Wall Street Go Bust?

As a mortgage professional and educator, I have read countless pages on how the credit crisis evolved. Frankly, most of the things I read were position pieces that pointed the finger of blame at a specific industry or political party. Had I seen the following 10 minute video sooner, it would have saved weeks of reading.

So - if you don't have a full grasp on what happened to mortgage financing, and why Wall Street banks went bust - this is about the simplest explanation ever! ENJOY!!


What's Your Rate, Dude?

Here is a pet peeve of mine that I need to share with you in regards to interest rates. On occasion, I will have a potential client call me, and in their first breath of air, ask me what my rates are today. When I begin to explain that I need to know more about their situation before I can even begin to quote rates, they sometimes get a little frisky, and accuse me of not disclosing my rates upfront. Then the conversation spins into a dissartation by me on the dozens of factors that effect interest rates, and the potential client who now has tunnel vision on the rate I eventually quote him. This is not a desired scenario for a first contact with a new client.

These people are called rate shoppers and they usually make uninformed decisions on who their lender should be. Truth be told, there are dozens of factors that can effect your interest rate and they need to be explored before anyone can start quoting rates.

Look at the list below of 26 different criteria that affect your mortgage rate. How can anyone quote you an interest rate you can trust without a thorough knowledge of your unique financial situation?

1. Loan Amount 2. LTV 3. CLTV 4. Credit Score 5. Credit History 6. Escrow Preference 7. Closing Date 8. Loan Type 9. Property Type 10. Occupancy Type 11. Residency 12. Available Assets 13. Asset Seasoning 14. Co-borrowers 15. Debt Ratio 16. Housing Ratio 17. Improvements Needed 18. Employment Type 19. Employment History 20. Documentation Type 21. Paying Points 22. Length of Loan 23. Relocation 24. Seller Contributions 25. Gifts 26. Cash-out

My friends, please beware of anyone who quotes you an interest rate over the phone or the Internet without asking anything about you, your family, your finances or your lifestyle.


May Residential Sales - Highest Number Since August 2005!

May residential sales for Greater Phoenix were 9,290. The last time there were more residential sales was 45 months ago in August 2005 when sales were 10,031. I am pretty sure it was Mark Twain who said " there are lies..., there are damn lies..., & then there are statistics." As much as I agree with this philosophy, these numbers are pretty impressive. Even though 76% of the homes purchased in May 09 were either bank owned or short-sales, we are reducing our inventory at a record pace.

Feel free to contact me by phone or email for any purchase, refinance, or general mortgage advice.

Jim Cunningham
Sr. Loan Officer
NOVA Home Loans
8800 E Raintree Dr. #180
Scottsdale, AZ 85260
480 614-6413 office
602 434-8261 cell
jim@novahomeloans.com

Jim's Soap Box April 2009

JIM'S SOAP BOX

Arizona Real Estate Newsletter - April 2009

First things first - Sorry for the huge delay in this newsletter, but I have been a little busy. I am proud to announce that I have a new home to hang my mortgage hat. I have officially returned to NOVA Home Loans, and couldn't be happier!

The advantages I had operating as a mortgage broker eventually paled in comparison to what NOVA offers as a Mortgage Banker. The best way to summarize the motivation for this move is that I now have more control over each transaction, more support, and better rates. Please take note of my new contact info.

The goal of my newsletter is to provide educational material mixed with Jim's unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.


If you are looking to buy now, you should be looking FHA.

Most people who are looking to buy in this market would like to have a small down payment (who wouldn't - right?). Conventional lending in Arizona has become unattractive to the first time home buyer. With a conventional loan you are looking at a minimum of a 10% down payment, and a FICO score of 680 or higher. If your credit score is currently below a 680 (you cannot qualify to purchase mortgage insurance) and will need a 20% down payment. Unless you recently hit the Powerball - I'm guessing you don't have 20% down.

A FHA loan (Insured by the Federal Government) has a down payment of just 3.5%. And, buyers can still qualify for a FHA loan with FICO scores as low as 580. The rates for FHA are very competetive to conventional rates, and the monthly mortgage insurance is cheaper as well. Another strong advantage is that your 3.5% down payment can be a gift from a third party.***

There are additional FHA programs and features that are getting a lot of attention.

There is a $100 down payment program if you are buying a HUD owned home.
There is a FHA Rehab program (203K) that allows you to buy and fix-up a property at the same time. This will allow you to buy the $75,000 fixer-upper and finance $25,000 in upgrades at the same time. The rate is so competetive on this program that you will not have to refinance when the repairs are completed.

All FHA loans allow up to 6% in seller concessions to pay for your closing costs. This allows you to get into the home for only the 3.5% down payment & not a penny more. Many people use this money to buy their interest rate down as well.

FHA is no longer considered the "other option" if you do not qualify for a conventional loan. It is actually the preferred loan program for Arizona and probably financing 80% of today's purchases.



*** Moms & Dads - today is a great day to help your kids buy their first home. With thousands of homes for sale in Maricopa County for well under $100,000 - It's cheaper than renting & you can finally get them out of your house.



Jim Cunningham
Sr Loan Officer
NOVA HOME LOANS
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
480 434-8261 cell
jim@novahomeloans.com

Jim's Soap Box (November 08)

Jim’s Soap Box

Arizona Real Estate Newsletter – November 08

GOOD NEWS – A handful of my prayers were answered today as rates plummeted into the mid 5’s. It is the largest single day reduction in rates I have seen in the last 20 years. The refinance mini-boom I was predicting in September may have arrived this morning with the Feds public commitment to infuse another $800 billion into residential lending organizations.

The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.

The Federal Reserve
Nov. 25 (Bloomberg) – this was the lead article from Bloomberg.com this morning
The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.

The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements today in Washington.

With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation.

The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae.

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.

Analysis
The news released this morning is absolutely killing 10 & 30 year bonds. Being that Bonds and 30 year Mortgage notes traditionally have a congruent relationship, mortgage guys (like me) love it when Bonds are in the tank! As of 9:30am this morning (AZ time) the yield on the 10 year Treasury bond is the lowest I have ever seen it (possibly ever) at 3.13%. And the 30 year Treasury bond is also hitting the tailpipe at 3.64%. This is great news for homeowners- Mortgage rates are down!!

Call to Action
The last 3 times this calendar year when rates dipped into the mid to high 5’s it was short lived. I hope that today’s rates have some sustainability but I doubt it. If recent history repeats itself, we have about 2 or 3 days before it jumps back up!

Here are my rates on Nov 25th. These rates assume that you are a perfect borrower*. If you are not that perfect borrower – rates are still very good.

30 year fixed 5.625% (no points)

30 year fixed 5.250% (paying one point)

I know it is 2 days before Thanksgiving, and you’re thinking about oyster dressing, the In-laws, black Friday, & the spread of the Cardinals Eagles game – but you owe it to yourself to call or email me if this can help you.

If these rates cannot help you because you currently have a lower rate – then you really have something to be thankful for this year.

HAPPY THANKSGIVING!!

*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.

All Best!!
Jim

JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham

Jim's Soap Box (October 08)

Jim’s Soap Box

Arizona Real Estate Newsletter – October 08

THE GOOD NEWS – New home sales rose 2.7% Nationwide in September – according to the Associated Press. This came as a surprise to many who thought it was going to drop again after an awful August where new home sales dropped 12%. This bounce-back of volume did not really shock me but the reason I mention this to you is that the West was the driving force in September sales. Here is the breakdown of that National average by region.

West +22.7%
South +0.7%
Midwest - 5.7%
East -21.4%

I find this exciting because the fastest cure for the Southwest to get out of this declining market funk is to reduce available inventory. And unsold new homes make up a large percentage of that inventory here in Arizona.

The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.

The Prime Rate

The Feds have recently lowered the Prime rate by .5%, and there is widespread speculation that they will lower it again on the 29th of October. This upcoming reduction should be another .5% bringing the prime rate to a net 4%. This will tie the lowest prime has ever been (with 2003). I will admit that this will not solve all the credit problems, but it does reduce the interest payments for those people with current Home Equity balances they cannot refinance.

Other economic experts say that a .5% cut will not have any real effect on the market. But, if a larger cut happens (say .75% to 1.00%) lowing the prime rate into the 3s, it will have a more significant impact on the credit crunch. I guess they are giving a lot of weight to the “New Historic Low” headlines newspapers would give it.
What does that mean to 30 year rates??

The overall goal of this maneuver is to reduce interest rates on the prime side and on the 30 year fixed side (bond market). The last time they predicted a large cut in prime (Feb 08), the 30 year rates came down briefly in anticipation of the prime cut before the event itself. Once they cut Prime, the 30 year rates went up almost a half a point in one day. Will that happen again this time… who knows? My advice to people who are holding out on a transaction to see rates drop (on 10/30) is “don’t get burned.” If you have the rate to make something happen today you should lock in and pull the trigger.

The Election & Who is to Blame

With all of the current campaigning for the presidency, there has been some outstanding finger-pointing by both parties accusing the other for the housing debacle. I have seen everything from White Paper articles, Blogs, video magazines, news reports, and political internet ads accusing all kinds of individuals for our current Economic problems. I have seen “hard evidence” that the following people are solely to blame for this credit crunch issue; Jimmy Carter, Bill Clinton, George W Bush, Indy Mac, Oprah, Oil Companies, every Democrat that ran for public office since 1977, the French, the Director of Freddie Mac, Freddie Mercury (Freddie Mac’s nephew), and even yours truly – Jim the subprime Loan Shark. This may seem a bit sarcastic, because it is. 

In my opinion, as someone who has been in the trenches of the housing market for the last 7 years, there are probably well over 100,000 people who should shoulder the blame for this problem. The common denominator for these 100,000 people was simply greed. There were not enough level heads when the housing market was going really good to restrain the lenders & Wall Street.

I am not absolving Realtors, Appraisers, Loan Officers, Underwriters, Lenders, Borrowers, and the like for their part. However, what about the CFO of the A.I.G. Insurance company? What was his motivation to not diversify his portfolio into other vehicles except for Moderate Risk Mortgage Backed Securities? Was it Greed? I would bet on it.

If you wish to wrap your brain around the US financial numbers of the last 10 years I have an unbiased report with lots of good charts and graphs. It is a report from Casey Research called “The Crisis in Pictures”. You do not have to be an MIT graduate to read it (but an MIT graduate did give it to me – thanks Laura). Please respond to this email, requesting a copy of the report, and I will send it as a PDF. I highly suggest reading it if you have the 10 minutes to spare.

*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.

All Best!!

Jim

JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham

Fannie Mae, Freddie Mac & Government: What it means to you in the short term

In case you haven’t heard yet, the Federal Government took control of Fannie Mae & Freddie Mac over this last weekend. This means (among other things) that all changes to their loan programs will have to go through congress now. The potential long term effects of this Government intervention are still uncertain, however, the short term effects have been amazing. RATES ARE LOWER.

30 year rates have fallen about .5% in the last 24 Hours. Good borrowers can get a 30 year rate at 5.875% (without a buy down) as of 6:00 this morning. This is good news for people currently entertaining purchases - but is even BETTER news for people looking to refinance. If you have been holding off on refinancing because rates were too high in the mid 6's, now is the time to call your lender and watch rates fall this week. I think there is a strong potential to hit 5.5 sometime this week.

These windows of opportunity have been short lived over the last 18 months. It is a good time to get aggressive.

All Best!

Jim

JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham

Jim's Soap Box (July & August '08)

Jim’s Soap Box

Arizona Real Estate Newsletter – July & August 08

First off, I would like to proudly announce that July was a great step in the right direction for both me and the mortgage industry here in Arizona. The amount of Purchase Contracts that crossed my desk doubled in July, and I even had a couple of refinances as well. So, for those of you who were “concerned” about the missing July edition of Jim’s Soapbox (you can stop bugging your Internet Service Provider for the lost email) because here it is!

The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.

Tunnel Lights Approaching
There is light at the end of the housing tunnel for about 40% of the United States. And more importantly, 60% of us are unknowingly already out of the tunnel. The following is from a White Paper/RISMedia report edited by John Benson. For those of you who regularly read the Soapbox know that I have never been a fan of Big Media, thus the following article really spoke out to me.

When it comes to the national housing market, there is a lot of gloom and doom in the daily newspaper. Just look at a few recent headlines:

• “Home Builder Sentiment, So. California Home Prices Crumble” - USA Today, 7/16/08
• “Home Builders Post Steep Losses as Value of Unsold Land Slips” - New York Times, 7/27/2008
• “Home Prices In May Took A Steep Fall” - The Wall Street Journal, 7/30/2008

“Thank God the economy is not as bad as you read in the newspaper every day.” - Phil Gramm, top economic advisor to Sen. John McCain (R-AZ) Lost amid the uproar caused by Gramm’s proclamation that the U.S. is a “nation of whiners” was a breath of economic fresh air to Realtors nationwide.

The economic recession that the United States is facing has been portrayed in the media as being brought about by the rising cost of oil and the “burst bubble” in the housing market. There is no denying that the cost of oil continues to stand at near record levels. But while the bubble has burst on the housing market, is it really still a nationwide problem?

A recent report contributed to RISMedia, “Why 60% of the U.S. Can Stop Worrying about the Housing Market,” simply states “no.”

While home values did fall as the bubble burst, the media continues to report constant drops across the nation in national home values. The Office of Federal Housing Enterprise Oversight’s (OFHEO) House Price Index (HPI) tells a different story than the media is reporting. Citing data from home sales and appraisals for refinancing, OFHEO reported in May that 35 states saw a positive home value price change in the first quarter of 2008. In addition, 164 MSAs (Metropolitan Statistical Areas) showed positive first quarter appreciation when compared to the same quarter of 2007…

…According to PMI Mortgage Insurance Company’s “Economic & Real Estate Trends” report for summer 2008, almost 68% of the nation’s 322 remaining MSAs experienced positive appreciation during the quarter when MSAs located in California, Florida, Nevada, and Arizona are removed from PMI’s calculations.

Question – If the numbers from the end of this report excluded Arizona should it be considered good news? Heck yes!! The bubble bust over two years ago and now 63% of the nation experienced appreciation in their property from Q1 2007. That is an excellent sign that the worst is over and the remaining hard-hit areas (like AZ) are soon to follow. It is true that AZ still has a large supply of homes available, but we also have 10,000+ people (net) moving to Maricopa County every month. The end of the down cycle will be soon – even if they do not say it on TV!


Decreasing Home Values = Good News??
If your home value dropped since you last financed or purchased it, you might be able to turn it towards your advantage. Your Homeowners Insurance premiums are based primarily on the replacement value of your home. So if the replacement value of your home has dropped over the last 2 to 3 years, you should call your insurance agent to see if your Homeowners Insurance premiums should go down as well. It won’t make you rich,… but you might save a couple hundred bucks a year.

Here is the name of the Insurance Broker that I have worked with for years, and trust very highly. I suggest that you compare your current policy with what she has available using today’s property value.

April Irish
Hill Insurance Services
480.368.5222
airish@hill-ins.com

Bank Owned Property & Short Sale Property

The majority of purchases I have seen in the last 9 months are primarily buyers who are looking at either Bank Owned properties or homes that are being sold “short” to avoid foreclosure. There are simply not that many people looking to buy from private owners these days. Rather, everyone is looking for a smoking deal!

There is no arguing the point that these types of homes will be sold under their appraised value, giving you an immediate equity position. But, like many great deals – there can be a great deal of pain in your butt to actually get the home. My advice to anyone looking to get a bank owned/short sale home is to be ready to be extremely patient.

Bank Owned
A house that falls into foreclosure is eventually possessed by the bank in first lien position on the home’s Title. This is what we call a Bank Owned house. When you negotiate to purchase a Bank Owned home, you will be dealing with an unemotional seller who would like to recoup as much of their loss as possible, and they would like to sell the house quickly. Truth be told, banks prefer to lend money over owning & selling property.

When dealing with a Bank Owned homes (sometimes called a R.E.O.), be prepared to compete against several other buyers simultaneously. Usually the bank will price the home under its appraised value and take offers for up to 3 or 4 weeks before accepting a contract. They will then take the strongest offer. The “strength” of the offer will be a combination of how much the buyers offer, and how much of it they are financing. An all cash buyer will appear stronger than another borrower financing 97%.

Be prepared to outbid people who will offer more than the list price. If you need seller concessions to cover your closing costs, you should bid high enough above the asking price so that the bank will closely net that figure. Also, be prepared for the banks to reject your offer if you are asking too much in concessions to purchase the property.

Many REO properties will be listed and sold “as is”, meaning that they are not interested in fixing anything broken before you take possession. In the case of a government loan (especially FHA) items like the water heater, sink, and the arcadia door will all need to be fixed before your loan will go through. Be prepared to pay for the potential repairs yourself, or experience an escrow hold back during your purchase. The key is to remain patient and prepare yourself to lose negotiations on 2 or 3 houses before you actually get a contract on one you like.

Short Sales
If you think that buying a REO sounds aggravating – check into a Short Sale transaction. A Short Sale happens when the homeowner sells the property to a buyer at a loss to the bank. The seller usually entertains this idea before they slip into Bankruptcy or Foreclosure. This maneuver can actually be in the bank’s best interest too, if it saves them money over the alternative of the foreclosure proceedings and selling another REO. It is definitely in the seller’s best interest because a Short Sale is not nearly as bad to your credit or well being as a Foreclosure is.

So if both parties (Bank & Seller) benefit from the Short Sale what is the problem??

In my opinion - banks are great at lending money –but they are basically inept at selling houses in a timely manner. I cannot speak on behalf of any specific bank, but I would surmise that they are way too bureaucratic to do anything effectively. A bank will not identify an “acceptable” short sale value for a home until that property has actually been listed and there is a contract on the table. They will then take up to 90 days (no kidding) to give an answer. Many times that answer is no, because the offer is too low and the bank cannot justify that much loss on the current loan. The crazy part is that you can’t even ask the bank what an acceptable amount is until you have a contract in hand. You are basically throwing “manure” against the wall and seeing what sticks.

In some cases, the bank will actually respond to the original contract with a counter offer identifying the minimum value they will accept, but that is not often. In the event that you are trying to purchase a short sale property that has 2 liens against it (a 1st & 2nd Mortgage) held by separate lenders – you can double the aggravation and the headaches.

Also, the lien-holding bank reserves the right to cancel the deal any time during escrow for any reason they see fit. So, until you sign your loan docs (and it funds and records) they can cancel your purchase. DO NOT FALL IN LOVE WITH A SHORT SALE PROPERTY – it will break your heart and usually will.

However, if you have the patience and temperament for 6 months of negotiations – a short sale property can be a bargain!


*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.

All Best!!

Jim

JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham