You may believe that selling your home is impossible in today’s market

And, you may feel powerless to the process.

What could YOU possibly do to turn this housing market around?

There is no doubt that today’s real estate market is extremely difficult to navigate. However, you need to know that thousands of homes sold yesterday, thousands will sell today and thousands will sell each and every day from now until the end of the year.

It is totally within your power to guarantee that your house will sell even in the current market

“How?” you ask. Let’s look at the simplicity of the famous Serenity Prayer and apply it to selling a home in today’s real estate market.

Grant me the serenity to accept the things I cannot change,

Courage to change the things I can,

And wisdom to know the difference.

Accept the things you cannot change

The two main reasons that the housing prices have softened:

1. The current economy
2. The inventory of distressed properties (foreclosures and short sales)

As an individual homeowner, there is no way for you to impact either of those two situations. The best think-tanks in the country are struggling to discover solutions.

Have the courage to change the things you can

There is not a vacuum of buyers in the market. There is a vacuum of homes a buyer in today’s market will purchase.

Let me explain: could you sell your home today for $1? … $1,000 … $10,000? Of course you could. There are plenty of buyers in the market for a home they consider priced correctly. You have to decide what the correct price is for your home if you truly want to sell. If you want your house sold, you must list it at a price a buyer will pay for it. Not a buyer from 2006, but today’s buyer who has plenty of homes from which to choose.

It will take courage to sit with a real estate professional and honestly decipher the true value of your home. If you want to sell, you must have that courage.

The wisdom to know the difference

We all realize that the economic situation will take some time to correct. If you want to wait for prices to return to 2006 levels, you will probably have to wait for 5-7 years.

Look at the reason you decided to sell in the first place and decide whether the extra money you would get from the sale is worth that wait.

Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

This is where your wisdom must kick in. You already know the answers to the questions just asked. You have the power to take back control of the situation by pricing your home to guarantee it sells. If the time has come for you and your family to move on and start living the life you desire – then do it.

Do what is truly important.

The cost of a new home from a builder is all built into the price. Compare that with a foreclosure that sells ‘as is,’ but may wind up costing more than a new home because of the ‘fixes’.

Online Truth Squad

In Phoenix, one large builder, Fulton Homes, has put together the equivalent of an online truth squad — an interactive foreclosure cost calculator that allows shoppers to estimate the expenses they’re likely to encounter if they opt for a foreclosure.

The calculator uses what the company’s vice president, Dennis Webb, said are commercially available expense averages for acquiring, repairing and outfitting foreclosed houses of varying sizes, conditions and price levels in the area.

Say you’re shopping for a home to live in

… and you locate a number of foreclosures at low listing prices. You’re also aware of newly constructed homes that appear to carry higher prices for similar lot sizes and square footage.

The cost calculator prompts you for the size, price and physical condition of the foreclosure.

Let’s say one of them is listed for $110,000 with 2,125 square feet of living space. Based on a drive-by, you estimate the overall condition to be fair.

The dark side of foreclosure homes

For that foreclosure, according to their data, the typical post-acquisition costs — the repairs, new equipment, appliances and other improvements to make it adequate for you and your family — would add $32,288 more to the price you pay.

Likely expenses include …  and, for more click here.

KCM Blog September 11, 2011

If you count yourself in that number, here’s a handy guide for 9 pieces of paper you should be sure to round up as you prepare to file…  You do want to reap every penny of the tax rewards you’ve earned by virtue of owning a home!

9 Documents That Help You Reap Real Estate Tax Breaks

www.trulia.com

The Basics

The $25 billion in funds will be dispersed as follows:

$17 Billion National Commitment to Foreclosure Relief Efforts
The servicers collectively agree to commit a minimum of $17 billion directly to borrowers through foreclosure relief effort options, including principal reduction for qualifying borrowers, short sales, anti-blight measures, and enhanced homeowner transition programs.

$3 Billion National Commitment to Underwater Mortgage Refinancing Program
The servicers collectively agree to commit $3 billion to refinance “underwater” homes (when a homeowner owes more on a mortgage than a home’s current market value). To qualify, borrowers must be current on their mortgage payments on a mortgage owned by one of the five banks.

$5 Billion Payment to States and Federal Government
The servicers’ $4.25 billion payment to the states includes $1.5 billion for payments to borrowers who lost their home to foreclosure by one of the five servicers…$750 million of the state-federal payment will go to the federal government to resolve federal claims.

For further details on the settlement you can go to the official website.

Will the Settlement Have a Major Impact on a Housing Recovery?

Probably not. Though it is a step in the right direction, it may be too little too late. Here are some opinions on the settlement:

IHS Global Insights

“Like many previous plans to stem foreclosures, this agreement will help at the edges. The problem is too big for it to have a large impact, however…This agreement will help the housing market move ahead in 2012 in a small way. But it is hardly a game changer.”

HSH.com

“While there is no doubt some benefit to formalizing and organizing the process of foreclosure and better monitoring of the process, the fact is that the settlement changes little.”

Capital Economics

“While it is good that the settlement has been finalized and will offer principal reductions and refinancing schemes to borrowers, the bigger picture is that the settlement is not large enough to dramatically alter the outlook for the housing market or the wider economy.”

What about Foreclosures Moving Forward?

The settlement did bring clarity to one major issue – foreclosures. Banks have been holding off the foreclosure process on millions of homes over the last 18 months as they waited for the particulars of the settlement. They now know how they can move forward without penalty. The result will be an increase in foreclosures coming to the housing market.

Housing Wire

“It will speed up processing, and perhaps mean that foreclosures that have been waiting around since robo-signing came to light in 2010 will now gain legitimacy.”

Calculated Risk

“It does appear the number of completed foreclosures will increase following this settlement – especially in some judicial states with large backlogs – so there will probably be more REOs (lender Real Estate Owned) for sale.”

Bloomberg News

“The $25 billion settlement with banks over foreclosure abuses may result in a wave of home seizures…Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year over allegations of faulty and fraudulent paperwork used to repossess homes. With yesterday’s agreement, banks are likely to resume property seizures.”

Wells Fargo

“Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled. Many lenders have refrained from foreclosing on homes as they awaited the settlement.”

KCM Blog, February 13, 2012

Home Affordability Is High

I’ll say it again: With affordability soaring, falling home values, and low interest rates – now is a great opportunity to buy a home.

It’s like we’re having a sale! It’s our once-in-every-two-decades sale. We haven’t had a sale like this since Eisenhower.

Plus, interest rates are at or near record lows: Freddie Mac recently reported 30-year fixed-rates averaging below 4 percent. In 1972, 30-year fixed rates averaged 8.92 percent, and in the 1980s they even topped 18 percent. As rates fall, the purchasing power of home buyers increases.

Limited Housing Supply, Growing Demand

Could there be a looming housing shortage? Demand is expected to grow from the Echo Boomer generation (the 18-32 age group, which is about 80 million strong), people living longer, and population growth projections.

Meanwhile, new-home construction has slowed drastically since 2008 (averaging less than half its pace during the housing booming days). It is estimated that sixteen million new housing units will be needed over the next decade to keep pace with population growth, immigration, and the need to replace existing homes and demand for second homes.

We’re in the midst of a housing shortage…  We just don’t realize it.

Sale Cube photo by Renjith Ddrishnan

From KCM Blog, February 8, 2012 with permission

… Yes, you read that right! The National Association of Realtors chief economist, Lawrence Yun, predicts a 2% overall increase in home prices next year. And a 4% increase in the number of sales.

For 2013, he projects sales to pick up another 6 percent and prices to rise another 3 percent.

Ahem. That’s a change from the ‘gloom and doom’ that we have become accustomed to hearing.

Yun says that rather than continuing to head down, home prices have been stable for the last two years and are poised to head up, which will reduce lending risks, lower foreclosures, boost sales, and further strengthen the market.

To show that home prices have been stable, Yun cited both NAR and Case-Shiller data, which show prices have been hovering around a $140,000 national median since 2009.

Yun characterized today’s market as “strange” because of this disconnect between the good buying conditions and the low sales growth.

Rock-bottom consumer confidence is a big part of the weak market.

Lenders still profiting…

The hurdles to borrowers imposed by lenders through stringent underwriting requirements are a major issue. Lenders are requiring applicants to have credit scores of about 760 for Fannie Mae and Freddie Mac loans, and just under 700 for FHA loans, shrinking potential home sales by about 20 percent.

These stiff requirements come at a time when banks are seeing strong profits… ‘strange’ indeed.

Banks profited during the ‘bubble-time’ they largely created, and now are doing the same in the ‘oops-bubble-popped’ era.

Modest Volume, Price Gains Seen Next Year, November 2011

Warren Buffet is seen by many as the greatest investor of our time. When he speaks, people listen. Like anyone else in his position of influence, he is criticized by some for using his bullhorn to promote his own business agendas at times.

That makes it very interesting when we occasionally learn of how he privately advises those closest to him.

Such a situation occurred this week. Debbie Bosanek, Warren Buffet’s secretary of 37 years, recently purchased a second home in Surprise, Arizona.

In an article in the Omaha World Herald, Mrs. Bosanek discussed her reasons for purchasing a second home and the personal advice she received from Mr. Buffet.

“I just thought it was time to buy a home. Warren tells me that it will be the best opportunity in my lifetime. Mortgage rates are low and prices have dropped dramatically…I share Warren’s view about the future of America, and we believe that our country will do just fine. I’m happy to make this investment.”

The greatest investor of the last century privately has told the people closest to him that buying a home right now “will be the best opportunity in [their] lifetime”.

That’s good enough for me. How about you?

Actually, yes they do, and they are called the FHA loan.

One of the rarely touted advantages of people taking FHA mortgages today is the fact that they are assumable. What that means is, when the FHA homebuyer of today is looking to sell his home, a qualified purchaser can “take over” their loan.

Most people believe that interest rates will return to a “normal” range (between 6.5% and 7%) in a couple of years. When you assume a mortgage, the terms remain the same. This means that a buyer five years from now can enjoy a 4 – 4.5% mortgage by assumption rather than the 6.5% – 7% mortgage they would get without it. Since most people buy homes based on how the monthly payment fits into their personal monthly budget, this is extremely impactful.

As an example, a $300,000 loan at 4% today carries with it a $1,432.25 principal and interest payment on a 30 year fixed mortgage. If offered for sale in five years, the purchaser could assume the $271,858.56 balance with the same $1,432.25 payment and remaining term of 25 years. The total payments over the 25 years would be $429,675.

Compare that to a new $272,000 loan at 6.5% for 25 years, which would carry a monthly payment of $1,836.56 (over $400 more a month than the assumption and more than $120,000 more over the 25 year term).

At 6.5% for 25 years, to wind up with the same payment as the assumed mortgage, our borrowers would only be getting $212,000…$60,000 LESS!

FHA mortgaged homes will have more future value…

The point here is that, when rates go up, homes with assumable mortgages will have more value and will sell at higher prices because they are more affordable. As an additional bonus, the closing costs on assumable mortgages are significantly less (especially here in New York where NYS Mortgage Tax is such a large component of closing costs).

The borrowers must be credit-worthy of course (have good credit, qualifying income, and necessary assets to close), but they would have to be credit-worthy to get a new mortgage too!

Why else does an FHA mortgage work?

Besides the multiple other reasons to obtain an FHA mortgage (low down payment requirements, extended income ratios, lower credit scores, and easier sourcing of funds), there is another perk. In the future, there is a good chance that you may be able to sell your home for more money because of the FHA loan’s assumability.

Reprinted with permission: The Power of Assumability, Dean Hartman, January 12, 2012, KCM Blog