Tag Archives: purchase price

Cash is king in today’s housing market

In these financially uncertain times in the housing market, all-cash sales are attractive offers to homesellers, but come with a condition–they usually must settle for less. In a typical housing market, if your home receives multiple offers (from prospective cash-carrying and/or those pre-approved for a loan), you will accept the highest bid.  But in this current market, mortgages can be hard to come by, and sellers often will take less in order to have the deal go through. 

The outcome: lowering prices despite fewer listings and rising demand.  According to the Star Tribune’s article below, the increased amount of cash offers is offsetting other postive trends that, if there weren’t these cash offers, should lead to higher prices.

All-cash offers in today's real estate marketThis all-cash trend is especially prevalent in distressed sales, where investors are the main buyers, and who typically deal with cash as it is. Short sales and foreclosures accounted for 42% of active listings last month, on average in metro areas. Read more about what the Star Tribune has to say on this topic in their article below:

In today’s topsy-turvy housing market, cash rules

Financing uncertainties make those cash offers alluring, but sellers often must settle for less money to guarantee a deal.

When Chris and Diane Finney decided to buy a bank-owned condo in St. Paul, they knew there would be competition.

Their strategy? Offer less — but offer cash.

While others said they would pay more, they needed to finance the deal. The bank took less and took the cash.

“We were in the driver’s seat,” Chris Finney said.

In a normal housing market, multiple bids usually lead to higher home prices, and the highest bid wins. But when credit markets are tighter and appraisals are often lower, many sellers will take less to be sure that the deal will get done.

“If I get five offers on a property and the cash offer is darned close to being one of those top offers, I’d take the cash offer any day,” said Marshall Saunders, owner/broker at Re/Max Results.

In December, 33 percent of all U.S. home sales were cash deals — a record since the downturn started in 2006, according to Campbell Survey and Inside Mortgage Finance. As a result, home prices can’t gain much traction because many sellers won’t necessarily accept the highest offer.

For most home buyers, it’s confounding to be rejected because they are financing the deal. For the housing market, it means more downward pressure on prices despite tight supplies and rising demand.

“It’s a real sign of what’s going on,” said Guy Cecala, publisher of Inside Mortgage Finance. “All things being equal, cash wins.”

The volume of cash deals is offsetting other positive trends in the market that should be leading to higher prices. The number of houses on the market has fallen to an eight-year low, and sales are up double digits. At the same time, home prices continue to fall.

At least a third of all homes sales last year involved an investor, Cecala said, and they often pay cash…

Read more of this article from the Star Tribune: “In today’s topsy-turvy housing market, cash rules.”

Getting a mortgage after foreclosure

There are some additional hurdles for homeowners who have gone through a foreclosure, short sale or bankruptcy, but a little patience and some financial hard work will go a long way.

MortgagesBuying a home is a challenging goal for most hopeful homeowners. But for those who have experienced a bankruptcy, foreclosure or short sale, the hurdles are even higher.

Still, it’s not impossible to buy a home after financial difficulties, says Dan Keller, a mortgage banker with Hometown Lending in Everett, Wash. In fact, Keller says, people who have cleaned up their credit and are otherwise qualified to get a mortgage can buy a home as soon as they have outlasted a prescribed waiting period after the bankruptcy, foreclosure or short sale.

Wait a while
The waiting period can last one to seven years, says Kirk Chivas, chief operating officer at First Commerce Financial in Wixom, Mich. The one-year requirement applies to buyers who complete a Chapter 13 bankruptcy, have a spotless subsequent credit history and want to get a new loan insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veterans Affairs. The seven-year requirement applies to buyers who experienced a foreclosure and want to get a new conventional loan that can be sold to Fannie Mae or Freddie Mac.

In between are a number of two-, three- and four-year timelines based on similar criteria and other factors such as whether the buyer’s previous mortgage was current at the time of a short sale or the size of the buyer’s new down payment as a percentage of the home’s purchase price.

Generally speaking, the waiting periods after a bankruptcy tend to be more black and white while the waits after a foreclosure or short sale have more gray areas, Keller says. And in some cases, a waiting period can be waived or shortened if the buyer’s bankruptcy, foreclosure or short sale was due to extenuating circumstances or a hardship beyond his control.

Technically, it is possible for a buyer whose prior loan wasn’t in default at the time of a short sale to get a new FHA-insured loan with no waiting period, Chivas says. But he adds that he’s never encountered anyone in that situation.

Clean credit
Buyers must have very clean or perfect credit histories before they can buy homes after bankruptcy, foreclosure or short sale. A slip-up as small as one late credit card payment could disqualify a post-bankruptcy buyer from some loan programs, even if the waiting period has been completed, Keller says.

“Bankruptcy is a serious word,” he says. “If you do it, it’s a get-out-jail-free card. But once you get out of bankruptcy, you need to be flawless in your credit. Don’t even drop a gum wrapper.

Credit dings can be difficult to sort out for buyers who experienced a loan modification or short sale, in part because, as Chivas says, there’s “no consistency” in how lenders report those events to the credit bureaus. Buyers should review their credit reports and correct any errors or clarify the circumstances of adverse items.

Stable employment can be a plus, too, Keller says, noting that some loan programs are more lenient than others. “If there was a gap,” he says, “it needs to be explained.”

Consult a loan pro
Given these complexities, buyers are advised to consult a loan officer or mortgage broker early on for advice that applies to their situation.

“They may think they’re fine, but if they’re not talking to a professional, their hopes can get dashed or crushed,” Chivas says. “That’s why you want to speak to someone as soon as you start dreaming it up in your head” that you want to buy a home after a bankruptcy, foreclosure or short sale.

This article is by RealEstate.MSN.com, and is viewable here: “Getting a mortgage after foreclosure.”

ING Attempting to Steal Money From United States Military Personnel in a Short Sale

The following is an excerpt of recent negotiations ongoing with ING bank for a short sale transaction. Here is an example of what certain banks are still doing to literally steal money from innocent people, let alone in this case, an active duty military stationed locally and getting ready to retire, who does not have large income.  The new short sale law SB 458 has a controversial statement that was covered in a prior blog post (viewable here: “Short Sale Memoirs & New Laws“) regarding a contribution by a seller towards closing costs as being allowed.  This fact has been confirmed by attorneys as being interpreted as a direct violation of the law due to the fact any contribution for closing costs, taxes or otherwise is directly increasing the balance of the net sale for the lender and lowering the loss for their loan, thus breaking the law.

In addition, this lender as you can see wants to also steal money from the agents, leading me to believe that the negotiating person will get a cut of whatever he brings in. This needs to completely stop as these lenders are making it hard for most agents to earn a living themselves for their families.

While this one is not over, it shows you what is partly going on in a short sale transaction, not including negotiation with buyers and other lien holders, that make the work even more cumbersome only to have your income reduced due to the greedy tendencies of lenders that are still out there.

I anticipate a successful result as long as this lender comes to their senses.

I welcome comments…..

ING logo

 ING’s letter to me:

John,

I received the 2nd lien approval, and ran the numbers. Rather than going back and forth on negotiations, here is what I need to get this deal approved:

  • $3,700 cash at closing from the seller to cover the property taxes and closing costs

o Yes, we are allowed to ask for this money, as it is not going to the mortgage or missed payments

  • 4.5% commissions to help with part of the 2nd lien.

o As I said before, your listing agreement is not with ING DIRECT, and our max commissions are 5%. This is only a .5% reduction to help the deal get approved.

I will pay the 5% commissions if the $1,300 is added to the purchase price. I have been doing this job for a while, and knows what my credit review committee needs to get a deal approved. This terms are it. Assuming all parties agree, I can finish the file and have a decision for you in a few business days.

 

And my reply:

Dear ING

The seller will not be bringing any contribution to the table. I have already stated that. Any difference in costs, including commission contribution that ING refuses to pay or absorb will have to be covered by the buyer and if the buyer refuses, then I will have to find another buyer to pay that or the property will go to foreclosure.

Any contribution by the seller can be interpreted as a contribution to the loan and this has been confirmed by numerous attorneys. You are directly taking advantage of military personnel that has sacrificed his life for 20 years for our country, besides if the property goes to foreclosure, there is no recourse on this loan by ING, only more losses. No other lien holder in a short sale has ever done this to a United States military personnel borrower. You and ING are now crossing the forbidden line of respect for our military. I hope you cause ING to reverse their stance in this case. You have a borrower trying to do a good thing by selling the property early to avoid further losses to the bank only to get penalized for it.