Losing your home is a stressful and disheartening experience, especially if you feel you were duped into a sub prime mortgage by a shady lender. For children however, a foreclosure will take an emotional toll that can have a lasting impact on all areas of their lives.
According to the report, "The Impact of the Mortgage Crisis on Children," more than two million children around the country are being directly affected by a foreclosure, while thousands more are affected indirectly via foreclosures of rental properties.
With so many of our young people experiencing foreclosures firsthand, it's important to consider what impact this sudden upheaval and financial trouble has on our nation's children.
The main consequence of a foreclosure is the loss of the family home. Not only is the loss of the home itself difficult for children, but they're also forced to leave the familiar sanctuary of the neighborhood, say goodbye to friends, and in some cases, leave behind their schools. This loss of peer relationships and important teachers can leave a child heartbroken, anxious, and scared.
Often a foreclosure proceeding and its immediate aftermath happens so quickly that there's no time to really prepare the child for the swift changes about to occur. The entire family is swept up in the current of monetary concerns, grief, and overwhelming stress.
With parents preoccupied with finding an affordable place to live, the children's emotional state is often brushed aside. Dealing with the logistics of a foreclosure is more than enough for parents to worry about, and the children usually know it.
When parents are dealing with stress and depression, kids can feel it. They see you sad, irritable, and under pressure. Children aren't equipped to understand what's causing your stress, so they internalize it as being their fault. Even if they understand that you're losing the house because you've run out of money, they will likely still see the situation as being their fault. They feel like a burden on you; that if you didn't have to feed and clothe them, you'd be able to keep the house.
In you think your children are dealing with feelings like these, it's imperative that you explain that the foreclosure is not their fault, and that everything will work out all right. Since a child's stability is being threatened, you need to reiterate the fact that no matter where you end up, you'll always be there for them. Try to maintain routine as much as possible, and if you can, keep them enrolled in their current school so that they have something familiar to turn to every day. For a child, their teachers, parents, and friends will be much needed touchstones in this difficult time.
Even if you have children who are old enough to know that they're not responsible for the situation, a feeling of powerlessness and frustration can develop. They see that you're upset and struggling, but as they're only children, they can do little to remedy the situation. Teenagers can take care of their younger siblings, or get a part-time job to help out the household, but younger kids' hands are tied.
This kind of self-imposed emotional responsibility is a heavy burden for a child. Kids need to know that they're living in a safe, stable environment. A consistent environment, and strong connections are vital to proper development, and a foreclosure can take those away.
Many children of foreclosure are forced to live in temporary quarters like motel rooms, emergency shelters, or even vehicles. Homelessness in children has risen by leaps and bounds this past year, as foreclosures and high rents have pushed families out of their homes. Regardless of the cause of the foreclosure crisis, it's clear that the ones losing out are the children. If you're a parent facing foreclosure, remember to pay attention to your child's emotions. You can ease the transition simply by being there for them, and by maintaining as much normality as possible.
Author: Stacey Neir
Wednesday, September 22, 2010
Real Estate Terms Every Seller and Buyer Should Know
When it comes to selling a home there's a lot to know beyond staging and setting a reasonable list price. As with any industry, there's a lingo (homestead, quit-claim) and a set of acronyms (DOM, CMA) that might seem a bit foreign if you've never sold a home before.
Turn to this glossary when you're just not sure if "dual agent" means two real estate agents will be working on your contract or that one agent represents both the buyer and the seller (it's the latter). Read on for more need-to-know terms when selling a home.
Affidavit of title: A written statement that sellers make under oath certifying that they are in possession of the property, and that since the examination of the title on the date of the contracts no defects have occurred in the title. Marital status is also stated.
Agent: The licensed real estate salesperson or broker who represents buyers or sellers.
Appraisal: The estimated current market value of a property, as determined by a professional appraiser -- usually by comparing the property to recent sales of similar ones.
Assessed value: The value of real estate property as determined by an assessor, typically from the county.
"As-is": A contract or listing clause stating that the seller will not repair or correct any problems with the property.
Back on market (BOM): When a property or listing is placed back on the market after being temporarily removed.
Back-up offer: When an offer is accepted contingent on the fall-through or voiding of an accepted first offer on a property.
Bidding war: When two or more buyers compete for a property by submitting higher offers than the first.
Brokerage: A firm engaged in buying and selling real estate for clients, using brokers and real estate agents to handle the deal.
Broker's tour: A set time and day when real estate sales agents come to view listings by multiple brokerages in the market.
Buyer's agent: The agent who shows the buyers the property and negotiates the contract for the buyer through closing.
Buyer's market: A market condition characterized by low prices and a supply of properties that exceed demand.
Capital gain: Profit earned from the sale which is above the original purchase price.
Chain of title: The document that shows the succession of conveyances, from some accepted starting point to the current holder of title.
Closing: The end of the transaction process, in which the deed is delivered, documents are signed and funds are dispersed.
Closing costs: Expenses above and beyond the purchase price of a house and land (such as agent fees, taxes, etc.) that is paid by the buyer or seller at the completion of the sale.
Closing statement: A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction
Commission: The compensation paid to the listing brokerage by the seller for selling the property, a percentage of which is also paid to the buyer's agent (although in some cases a buyer may be required to pay his or her own share of the commission).
Commission split: The percentage of commission which is split between the real estate sales brokerage and the real estate sales agent or broker.
Comparable: A property used in an appraisal or comparative market analysis (CMA) report that is equivalent to the seller's property.
Competitive Market Analysis (CMA): A comparison of the prices of recently sold or listed homes that are similar to a seller's property in terms of location, style and amenities. This is usually prepared by a listing agent for the property's seller.
Contingency: A provision in a contract that requires certain actions before the contract is binding or the transaction can be finalized or "closed."
Contract for deed: A sales contract in which the buyer takes possession of the property but the seller holds title until the loan is paid. Also known as an installment sale contract.
Cost approach: Determination of the estimated value of a property that comes from adding, to the estimated land value, the appraiser's estimate of the replacement cost of the building, less any depreciation.
Counteroffer: An offer made in response to an offer received from the buyer (which, in effect, rejects the buyer's offer).
Curb appeal: The visual impact that a property projects from the view from the street.
Days on market: The number of days that a property has been for sale on the market.
Depreciation: A loss of value in property due to physical or functional deterioration.
Disclosures: Federal, state, county and local requirements of disclosure that the seller provides and the buyer acknowledges.
Down payment: The amount of cash put toward a purchase by the borrower.
DOM: Days on market -- the number of days that a property has been listed for sale.
Dual agent: A state-licensed individual who represents the seller and the buyer in a single transaction.
Earnest money: The money given as a good faith deposit to the seller at the time the offer is made. Once accepted by the seller, it is held in a trust account until closing.
Escrow account: The trust account established by a broker for the purpose of holding funds, such as the earnest money, on behalf of the seller or some other person until the closing.
Exclusive-right-to-sell listing: A listing contract whereby the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner's stated terms, and agrees to pay the broker a commission when the property is sold.
Expired listing: A property listing that has expired per the terms of the listing agreement.
Fiduciary relationship: A relationship of trust and confidence between the real estate agent and client, as under the terms of a listing contract or buyer agency agreement.
Flat fee: A predetermined amount of compensation received or paid for a specific service in a real estate transaction.
For sale by owner (FSBO): A property that is for sale by the property owner and not represented by a real estate agent.
Inclusions: Fixtures or personal property included in a contract or offer to purchase.
Installment sales contract: A sales contract in which the buyer takes possession of the property and pays the purchase price in periodic installments, even though the title is retained by the seller until the loan is paid off. The same as: contract for deed.
Lease option: When a lease gives the tenant the right to purchase the property during the lease term.
List date: Actual date the property was listed with the current broker.
List price: The price of a property through a listing agreement.
Listing agreement: A contract between an owner-seller and a real estate broker to have the broker find a buyer for the owner's real estate in exchange for the owner paying a commission.
Listing appointment: The time when a real estate sales agent meets with potential clients (who are selling a property) to secure a listing agreement.
Lockbox: A device with a combination or keypad that hangs from the doorknob and stores the keys to the property for sale, so that agents can gain access for showings.
Market value: The estimated price that a property is likely to sell for under normal conditions on the open market.
Multiple-listing service (MLS): A group of member brokers who agree to share their listing information with one another in the hopes of procuring buyers for their properties more quickly than they could on their own.
National Association of REALTORS® (NAR): A national association of real estate sales agents.
Net listing: A listing contract between the seller and the seller's broker which sets a baseline price for a property; the broker nets any funds above that price when it sells. This type of listing is illegal in some states.
Open listing: A listing contract under which the broker's commission is contingent upon the broker bringing in a buyer before the property is sold by the seller or another broker.
Parcel identification number (PIN): A county or city tracking number for a property.
Pending: The status of real estate under an accepted contract that has not yet closed its transaction.
Preview appointment: When a buyer's agent views a property alone to see if it meets his or her buyer's needs.
Quit-claim deed: A document that releases the grantor/seller from whatever interest he or she has in the real estate.
Real estate agent: An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or seller.
REALTOR®: A registered trademark of the National Association of REALTORS® that can be used only to refer to its members.
Re-list: Property listed by a broker that formerly was listed with another broker.
Severalty: Ownership of real property by one person only; also called sole ownership.
Staging: Preparing a home for sale through the neutral but appealing placement of furniture and accessories.
Survey: The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.
Temporarily off market (TOM): A listed property that is taken off the market for a short time.
Title search: The examination of public records relating to a real estate parcel which determines the current state of its ownership.
Transaction: The purchase process from offer to closing or escrow.
Under contract: A property that has an accepted real estate contract between a seller and a buyer.
Walk-through: A showing before closing that permits the buyers one final tour of the property that they are purchasing, typically so that they can check for any changes or defects.
Author: Sheree R. Curry
Turn to this glossary when you're just not sure if "dual agent" means two real estate agents will be working on your contract or that one agent represents both the buyer and the seller (it's the latter). Read on for more need-to-know terms when selling a home.
Affidavit of title: A written statement that sellers make under oath certifying that they are in possession of the property, and that since the examination of the title on the date of the contracts no defects have occurred in the title. Marital status is also stated.
Agent: The licensed real estate salesperson or broker who represents buyers or sellers.
Appraisal: The estimated current market value of a property, as determined by a professional appraiser -- usually by comparing the property to recent sales of similar ones.
Assessed value: The value of real estate property as determined by an assessor, typically from the county.
"As-is": A contract or listing clause stating that the seller will not repair or correct any problems with the property.
Back on market (BOM): When a property or listing is placed back on the market after being temporarily removed.
Back-up offer: When an offer is accepted contingent on the fall-through or voiding of an accepted first offer on a property.
Bidding war: When two or more buyers compete for a property by submitting higher offers than the first.
Brokerage: A firm engaged in buying and selling real estate for clients, using brokers and real estate agents to handle the deal.
Broker's tour: A set time and day when real estate sales agents come to view listings by multiple brokerages in the market.
Buyer's agent: The agent who shows the buyers the property and negotiates the contract for the buyer through closing.
Buyer's market: A market condition characterized by low prices and a supply of properties that exceed demand.
Capital gain: Profit earned from the sale which is above the original purchase price.
Chain of title: The document that shows the succession of conveyances, from some accepted starting point to the current holder of title.
Closing: The end of the transaction process, in which the deed is delivered, documents are signed and funds are dispersed.
Closing costs: Expenses above and beyond the purchase price of a house and land (such as agent fees, taxes, etc.) that is paid by the buyer or seller at the completion of the sale.
Closing statement: A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction
Commission: The compensation paid to the listing brokerage by the seller for selling the property, a percentage of which is also paid to the buyer's agent (although in some cases a buyer may be required to pay his or her own share of the commission).
Commission split: The percentage of commission which is split between the real estate sales brokerage and the real estate sales agent or broker.
Comparable: A property used in an appraisal or comparative market analysis (CMA) report that is equivalent to the seller's property.
Competitive Market Analysis (CMA): A comparison of the prices of recently sold or listed homes that are similar to a seller's property in terms of location, style and amenities. This is usually prepared by a listing agent for the property's seller.
Contingency: A provision in a contract that requires certain actions before the contract is binding or the transaction can be finalized or "closed."
Contract for deed: A sales contract in which the buyer takes possession of the property but the seller holds title until the loan is paid. Also known as an installment sale contract.
Cost approach: Determination of the estimated value of a property that comes from adding, to the estimated land value, the appraiser's estimate of the replacement cost of the building, less any depreciation.
Counteroffer: An offer made in response to an offer received from the buyer (which, in effect, rejects the buyer's offer).
Curb appeal: The visual impact that a property projects from the view from the street.
Days on market: The number of days that a property has been for sale on the market.
Depreciation: A loss of value in property due to physical or functional deterioration.
Disclosures: Federal, state, county and local requirements of disclosure that the seller provides and the buyer acknowledges.
Down payment: The amount of cash put toward a purchase by the borrower.
DOM: Days on market -- the number of days that a property has been listed for sale.
Dual agent: A state-licensed individual who represents the seller and the buyer in a single transaction.
Earnest money: The money given as a good faith deposit to the seller at the time the offer is made. Once accepted by the seller, it is held in a trust account until closing.
Escrow account: The trust account established by a broker for the purpose of holding funds, such as the earnest money, on behalf of the seller or some other person until the closing.
Exclusive-right-to-sell listing: A listing contract whereby the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner's stated terms, and agrees to pay the broker a commission when the property is sold.
Expired listing: A property listing that has expired per the terms of the listing agreement.
Fiduciary relationship: A relationship of trust and confidence between the real estate agent and client, as under the terms of a listing contract or buyer agency agreement.
Flat fee: A predetermined amount of compensation received or paid for a specific service in a real estate transaction.
For sale by owner (FSBO): A property that is for sale by the property owner and not represented by a real estate agent.
Inclusions: Fixtures or personal property included in a contract or offer to purchase.
Installment sales contract: A sales contract in which the buyer takes possession of the property and pays the purchase price in periodic installments, even though the title is retained by the seller until the loan is paid off. The same as: contract for deed.
Lease option: When a lease gives the tenant the right to purchase the property during the lease term.
List date: Actual date the property was listed with the current broker.
List price: The price of a property through a listing agreement.
Listing agreement: A contract between an owner-seller and a real estate broker to have the broker find a buyer for the owner's real estate in exchange for the owner paying a commission.
Listing appointment: The time when a real estate sales agent meets with potential clients (who are selling a property) to secure a listing agreement.
Lockbox: A device with a combination or keypad that hangs from the doorknob and stores the keys to the property for sale, so that agents can gain access for showings.
Market value: The estimated price that a property is likely to sell for under normal conditions on the open market.
Multiple-listing service (MLS): A group of member brokers who agree to share their listing information with one another in the hopes of procuring buyers for their properties more quickly than they could on their own.
National Association of REALTORS® (NAR): A national association of real estate sales agents.
Net listing: A listing contract between the seller and the seller's broker which sets a baseline price for a property; the broker nets any funds above that price when it sells. This type of listing is illegal in some states.
Open listing: A listing contract under which the broker's commission is contingent upon the broker bringing in a buyer before the property is sold by the seller or another broker.
Parcel identification number (PIN): A county or city tracking number for a property.
Pending: The status of real estate under an accepted contract that has not yet closed its transaction.
Preview appointment: When a buyer's agent views a property alone to see if it meets his or her buyer's needs.
Quit-claim deed: A document that releases the grantor/seller from whatever interest he or she has in the real estate.
Real estate agent: An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or seller.
REALTOR®: A registered trademark of the National Association of REALTORS® that can be used only to refer to its members.
Re-list: Property listed by a broker that formerly was listed with another broker.
Severalty: Ownership of real property by one person only; also called sole ownership.
Staging: Preparing a home for sale through the neutral but appealing placement of furniture and accessories.
Survey: The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.
Temporarily off market (TOM): A listed property that is taken off the market for a short time.
Title search: The examination of public records relating to a real estate parcel which determines the current state of its ownership.
Transaction: The purchase process from offer to closing or escrow.
Under contract: A property that has an accepted real estate contract between a seller and a buyer.
Walk-through: A showing before closing that permits the buyers one final tour of the property that they are purchasing, typically so that they can check for any changes or defects.
Author: Sheree R. Curry
Short Sales Get a Tall Boost From Obama
Underwater on your mortgage? Thinking about asking your lender to sign off on a short sale, or even just mailing back the keys? If you've tried to request clearance for a short sale, you know that most banks have hesitated to give an OK to borrowers who want to bail out for less than their property is worth. But thanks to the Obama administration, your moment may have now arrived.
As detailed by The New York Times today, starting on April 5th the Department of the Treasury will support short sales and deeds-in-lieu-of-foreclosure as options for homeowners who owe their lenders more than the sale price of the property.
Under the new Home Affordable Foreclosure Alternatives (HAFA) program, which includes all lenders already participating in the Home Affordable Mortgage Program (HAMP), each lender on a property going into a short sale or deed-in-lieu is eligible to receive $1,000 from the U.S. Treasury. The borrower gets $1,500 for relocation costs. (To make sure homeowners don't get railroaded into losing their homes when they should be able to hold on to them, the federal program's rules require lenders to first deem the borrower ineligible for a mortgage modification, or the borrower must try and fail to make a modification work.) The sweetest part of the deal is that the lender can't then pursue the borrower in court for any additional money owed. You send keys, and receive cash.
Why would a lender agree to that? Over at Aol DailyFinance earlier today, Peter Cohan was skeptical that $1,000 will be enough to persuade lenders to cut money-losing deals with borrowers. The Times story echoes that concern, quoting industry insiders who predict that banks will want to hold out for a recovery in sales prices.
But Cohan may have missed the main point of the new federal program. It costs tens of thousands of dollars in legal fees and property maintenance and real estate broker services to take a property all the way through foreclosure and to a final sale. Lenders know this, and know that just taking the property back now, or better yet selling it to an interested buyer right away, could leave them with far smaller losses than if they just wait for the worst to happen. The new federal program doesn't require lenders to go through this calculation, but its guidelines make clear that it expects lenders will do it anyway – after all, it has a responsibility to investors in mortgage-backed securities to maximize financial gains or minimize losses, and could get sued if it doesn't.
Really, lenders will make their decisions based on local market conditions. In areas where homeowners are getting legitimate short sale offers – legitimate being the key concept here, since short sales offer a golden opportunity for crooks to rip off banks in order to score a property cheaply – they have a ready-made pool of buyers who can help them get rid of very expensive headaches.
And the biggest breakthrough here is that for the first time, someone in charge is setting up standardized rules for short sales. Until now, many short sales have been chaotic affairs that string borrowers and buyers along for months, only to have the lender turn down an offer at the last minute because of some alleged objection by a mortgage-backed securities investor. "Alleged," because the lender never had to prove any of this.
Now, under HAFA, lenders will have to set up clear and consistent written policies for determining which short sale offers they'll accept, set a timeframe for completing each sale, and document all of their efforts with each individual borrower. They'll have to set reasonable limits on fees charged to mortgage securities investors. Buyers can't turn around and flip houses to new buyers, which should help avoid much fraud. And both the lender and borrower have to sign an agreement outlining their responsibilities.
Sounds like an improvement to me.
As detailed by The New York Times today, starting on April 5th the Department of the Treasury will support short sales and deeds-in-lieu-of-foreclosure as options for homeowners who owe their lenders more than the sale price of the property.
Under the new Home Affordable Foreclosure Alternatives (HAFA) program, which includes all lenders already participating in the Home Affordable Mortgage Program (HAMP), each lender on a property going into a short sale or deed-in-lieu is eligible to receive $1,000 from the U.S. Treasury. The borrower gets $1,500 for relocation costs. (To make sure homeowners don't get railroaded into losing their homes when they should be able to hold on to them, the federal program's rules require lenders to first deem the borrower ineligible for a mortgage modification, or the borrower must try and fail to make a modification work.) The sweetest part of the deal is that the lender can't then pursue the borrower in court for any additional money owed. You send keys, and receive cash.
Why would a lender agree to that? Over at Aol DailyFinance earlier today, Peter Cohan was skeptical that $1,000 will be enough to persuade lenders to cut money-losing deals with borrowers. The Times story echoes that concern, quoting industry insiders who predict that banks will want to hold out for a recovery in sales prices.
But Cohan may have missed the main point of the new federal program. It costs tens of thousands of dollars in legal fees and property maintenance and real estate broker services to take a property all the way through foreclosure and to a final sale. Lenders know this, and know that just taking the property back now, or better yet selling it to an interested buyer right away, could leave them with far smaller losses than if they just wait for the worst to happen. The new federal program doesn't require lenders to go through this calculation, but its guidelines make clear that it expects lenders will do it anyway – after all, it has a responsibility to investors in mortgage-backed securities to maximize financial gains or minimize losses, and could get sued if it doesn't.
Really, lenders will make their decisions based on local market conditions. In areas where homeowners are getting legitimate short sale offers – legitimate being the key concept here, since short sales offer a golden opportunity for crooks to rip off banks in order to score a property cheaply – they have a ready-made pool of buyers who can help them get rid of very expensive headaches.
And the biggest breakthrough here is that for the first time, someone in charge is setting up standardized rules for short sales. Until now, many short sales have been chaotic affairs that string borrowers and buyers along for months, only to have the lender turn down an offer at the last minute because of some alleged objection by a mortgage-backed securities investor. "Alleged," because the lender never had to prove any of this.
Now, under HAFA, lenders will have to set up clear and consistent written policies for determining which short sale offers they'll accept, set a timeframe for completing each sale, and document all of their efforts with each individual borrower. They'll have to set reasonable limits on fees charged to mortgage securities investors. Buyers can't turn around and flip houses to new buyers, which should help avoid much fraud. And both the lender and borrower have to sign an agreement outlining their responsibilities.
Sounds like an improvement to me.
Author: Alyssa Katz
More Foreclosures Expected as Housing Crisis Continues in Florida
In the first six months of this year, households in most of the country's largest 200 cities received more foreclosure warnings than in the first half of 2009, The Associated Press reports. High unemployment -- 9.5 percent in June, which doesn't include the millions of Americans who are no longer eligible for benefits -- is the main driver, and foreclosure listing firm RealtyTrac expects 1 million Americans to lose their homes to foreclosure this year.
While the metro areas with the most warnings were in Florida, California and Nevada, the crisis is expanding to other metro areas.
"The face of foreclosure is driven much more now by unemployment than in the past, and it's moving out from the places where we've been focusing on in the last few years," said Rick Sharga, RealtyTrac senior vice president. "The combination of a weak job market and a weak housing market is making it difficult in some of these areas."
Meanwhile, some economists and economic reporters continue to focus on the wrong indicator -- consumer confidence -- when gauging the economy's performance.
Explains the Center for Economic and Policy Research's Dean Baker, one of the few economists to identify the housing bubble before the bust:
While the metro areas with the most warnings were in Florida, California and Nevada, the crisis is expanding to other metro areas.
"The face of foreclosure is driven much more now by unemployment than in the past, and it's moving out from the places where we've been focusing on in the last few years," said Rick Sharga, RealtyTrac senior vice president. "The combination of a weak job market and a weak housing market is making it difficult in some of these areas."
Meanwhile, some economists and economic reporters continue to focus on the wrong indicator -- consumer confidence -- when gauging the economy's performance.
Explains the Center for Economic and Policy Research's Dean Baker, one of the few economists to identify the housing bubble before the bust:
"Consumers are actually spending at a relatively high rate. (The savings rate is well below historic levels.) The problem is that they lost $8 trillion in housing wealth. The housing wealth effect on consumption is something that economists have known about for more than 60 years. It's too bad that they seem to have forgotten, and so have the reporters who cover this issue.
The problem is not confidence. It is a lack of money. That is why consumers are not spending more and will not anytime soon regardless of how happy they are."Author: Paul Wachter
What to Make of the Grim Home Foreclosure News
The number of U.S. homes seized by banks reached 95,364 in August, the highest monthly figure on record since analysts began tracking the number in 2005. That's a 25 percent increase from the August 2009 figure. In recent weeks, the housing market has declined so precipitously that some experts have suggested the end of housing as an investment. Here's what journalists and experts have to say about the latest record-breaking bad news.
How Foreclosures Make Everything Worse: Bloomberg's Dan Levy writes, "Foreclosures are contributing to a growing housing supply that may add as many as 12 million homes to the U.S. market. Demand is crumbling amid high unemployment and following the expiration of a federal homebuyer tax credit in April. Sales of new and existing homes fell in July to the lowest level on record. Home prices have fallen 28 percent since 2006, according to the S&P/Case-Shiller index of values in 20 U.S. cities."
Bad Loans, Unemployment Exacerbate Problem: The Associated Press reports, "Banks have been stepping up repossessions to clear out their backlog of bad loans with an eye on eventually placing the foreclosed properties on the market, but they can't afford to simply dump the properties on the market. Concerns are growing that the housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April."
Fewer People Can Pay Mortgage Brokers: The Street's Lauren Tara LaCapra explains, "Mortgage servicers have begun to grapple with troubled borrowers who can't find solutions through the government or the private industry." That has left mortgage bankers with fewer options other than repossession.
Silver Lining: Default Notices Decreasing: 24/7 Wall Street's Douglas McIntyre writes, "A total of 96,469 U.S. properties received default notices in August, a 1% decrease from the previous month and a 30% decrease from August 2009 -- the seventh straight month where default notices have decreased on a year-over-year basis. Default notices peaked in April 2009, when 142,064 were reported nationwide, RealtyTrac reported. The news, in other words, has a silver lining. Year-over-previous-year numbers have begun to show a substantial improvement."
New Phase for Housing Market: CNNMoney's Les Christie writes, "The foreclosure crisis has entered a new phase: The number of properties entering the foreclosure process has dropped, and now nearly matches the number of repossessions. The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes." So why foreclose more homes? "Borrowers might vacate their homes when they receive default notices, leaving the houses empty, subject to vandalism, and forcing lenders to take over the expense of maintaining them."
How Foreclosures Make Everything Worse: Bloomberg's Dan Levy writes, "Foreclosures are contributing to a growing housing supply that may add as many as 12 million homes to the U.S. market. Demand is crumbling amid high unemployment and following the expiration of a federal homebuyer tax credit in April. Sales of new and existing homes fell in July to the lowest level on record. Home prices have fallen 28 percent since 2006, according to the S&P/Case-Shiller index of values in 20 U.S. cities."
Bad Loans, Unemployment Exacerbate Problem: The Associated Press reports, "Banks have been stepping up repossessions to clear out their backlog of bad loans with an eye on eventually placing the foreclosed properties on the market, but they can't afford to simply dump the properties on the market. Concerns are growing that the housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April."
Fewer People Can Pay Mortgage Brokers: The Street's Lauren Tara LaCapra explains, "Mortgage servicers have begun to grapple with troubled borrowers who can't find solutions through the government or the private industry." That has left mortgage bankers with fewer options other than repossession.
Silver Lining: Default Notices Decreasing: 24/7 Wall Street's Douglas McIntyre writes, "A total of 96,469 U.S. properties received default notices in August, a 1% decrease from the previous month and a 30% decrease from August 2009 -- the seventh straight month where default notices have decreased on a year-over-year basis. Default notices peaked in April 2009, when 142,064 were reported nationwide, RealtyTrac reported. The news, in other words, has a silver lining. Year-over-previous-year numbers have begun to show a substantial improvement."
New Phase for Housing Market: CNNMoney's Les Christie writes, "The foreclosure crisis has entered a new phase: The number of properties entering the foreclosure process has dropped, and now nearly matches the number of repossessions. The number of homeowners falling enough behind on their loans to attract initial notices of default was down 30% in August, RealtyTrac said Thursday. Eventually, that should translate into fewer people losing their homes." So why foreclose more homes? "Borrowers might vacate their homes when they receive default notices, leaving the houses empty, subject to vandalism, and forcing lenders to take over the expense of maintaining them."
Author: Max Fisher
Thursday, September 16, 2010
Buying a Foreclosure?: You Need Good Inspections
With foreclosures at record highs, buying a foreclosed home might be a great deal, but the risk of getting a lemon also is greater.
Home inspectors don't always catch all the flaws in foreclosed homes that have remained empty for months, if not a year or longer.
Here are the top areas, from air conditioning to plumbing, that a potential homebuyer should either urge a home inspector to thoroughly check, or bring in a specialist to examine:
Heating, ventilating and air conditioning (HVAC) unit
Most home inspectors don't check the HVAC completely, giving a mostly visual check, said Bill Cunningham, product manager for Lennox. Beyond simple maintenance that the previous homeowner might not have done, such as changing the filter regularly, a home repossessed by the bank might have had the electricity cut off. That could lead to damage in a cold environment, for example, if the heater hasn't been turned on for a winter season.
Air conditioners are also full of a few hundred pounds of copper coiling, which vandals could steal to sell. That type of theft should be plainly visible, Cunningham said. Replacing an entire air conditioner could cost $2,000 to $15,000, he said.
A drawback to buying a repossessed home is that there's probably not a maintenance record, he said. It's a good idea to look at the back of the air conditioner to see what year it was built (it should be on it somewhere, much like a car's vehicle identification number is under the hood) and see if the system is beyond the average lifespan of 10 to 15 years. If it is, you might be buying a new one soon.
Mold
Mold can grow when a house is closed up for too long, both behind the walls and out in the open. A humid climate, or leaky faucets if the water hasn't been turned off, can lead to mold. Beware of a house that has been boarded up, preventing air circulation.
Water problems
Leaking valves, gaskets and appliances are common for houses that have been empty for a while. Every plumbing fixture and appliance has at least one valve, gasket or hose that can dry out if the item isn't in regular use.
Hard water left in a water heater for too long can cause problems, said Andy Jasper, owner of Village Plumbing in Indianapolis, Ind. Freezing can cause problems with water in the bottom of dishwashers, as well as in the ice-maker lines to refrigerators, Jasper said.
Allowing a sewer trap to dry out can allow methane gas back up into the house, and older homes with old sewer lines could be clogged from tree roots.
Unwanted guests
Vandals and animals can damage a foreclosed home that has been empty for a long time. Along with the copper in an air conditioner, vandals might also rip out wiring, cabinets and plumbing fixtures to sell. Ripping out such components could cause structural damage to the house, something an inspector should be aware of.
Small animals such as raccoons, along with rodents and insects, can damage a home by chewing through walls and leaving unsanitary conditions.
Buying a foreclosed home can be a good deal, as long as you're aware of the increased potential for problems that need fixing. Even if the damage is in obvious sight, get a home inspector to look for additional damage you can't see, and don't count on a thermal imaging gadget alone to do the job.
Author: Aaron Crowe
Home inspectors don't always catch all the flaws in foreclosed homes that have remained empty for months, if not a year or longer.
Here are the top areas, from air conditioning to plumbing, that a potential homebuyer should either urge a home inspector to thoroughly check, or bring in a specialist to examine:
Heating, ventilating and air conditioning (HVAC) unit
Most home inspectors don't check the HVAC completely, giving a mostly visual check, said Bill Cunningham, product manager for Lennox. Beyond simple maintenance that the previous homeowner might not have done, such as changing the filter regularly, a home repossessed by the bank might have had the electricity cut off. That could lead to damage in a cold environment, for example, if the heater hasn't been turned on for a winter season.
Air conditioners are also full of a few hundred pounds of copper coiling, which vandals could steal to sell. That type of theft should be plainly visible, Cunningham said. Replacing an entire air conditioner could cost $2,000 to $15,000, he said.
A drawback to buying a repossessed home is that there's probably not a maintenance record, he said. It's a good idea to look at the back of the air conditioner to see what year it was built (it should be on it somewhere, much like a car's vehicle identification number is under the hood) and see if the system is beyond the average lifespan of 10 to 15 years. If it is, you might be buying a new one soon.
Mold
Mold can grow when a house is closed up for too long, both behind the walls and out in the open. A humid climate, or leaky faucets if the water hasn't been turned off, can lead to mold. Beware of a house that has been boarded up, preventing air circulation.
Water problems
Leaking valves, gaskets and appliances are common for houses that have been empty for a while. Every plumbing fixture and appliance has at least one valve, gasket or hose that can dry out if the item isn't in regular use.
Hard water left in a water heater for too long can cause problems, said Andy Jasper, owner of Village Plumbing in Indianapolis, Ind. Freezing can cause problems with water in the bottom of dishwashers, as well as in the ice-maker lines to refrigerators, Jasper said.
Allowing a sewer trap to dry out can allow methane gas back up into the house, and older homes with old sewer lines could be clogged from tree roots.
Unwanted guests
Vandals and animals can damage a foreclosed home that has been empty for a long time. Along with the copper in an air conditioner, vandals might also rip out wiring, cabinets and plumbing fixtures to sell. Ripping out such components could cause structural damage to the house, something an inspector should be aware of.
Small animals such as raccoons, along with rodents and insects, can damage a home by chewing through walls and leaving unsanitary conditions.
Buying a foreclosed home can be a good deal, as long as you're aware of the increased potential for problems that need fixing. Even if the damage is in obvious sight, get a home inspector to look for additional damage you can't see, and don't count on a thermal imaging gadget alone to do the job.
Author: Aaron Crowe
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