Wednesday, October 31, 2007

We heard a lot about short sales and foreclosures, but nothing lately … what’s up?

Just a few months ago, the phrase “short sale” was on every real estate practitioner’s lips. It was the ready answer to the plethora of over-encumbered properties and was the key to making Buyers and Sellers happy at the same time. Every agent talked about it, and the Lenders even started opening up to the concept. So what happened?

There are several contributing factors that changed the short sale miracle into a problem. In a reasonable short sale situation, the Seller agrees to sell to a Buyer at a fair market value, which is below the amount of the existing loan. The Lender, instead of going to the great expense, risk, and liability of taking the property back by foreclosing, agrees to take less, and the sale proceeds.

What is hampering the short sale process today is that many of the “creative” loans that were put in place a couple of years ago involved a Second Deed of Trust. The Second is just that, Second … behind the First. When the value of the home is less that the amount of the First, the Second is wiped out in a foreclosure. They are also wiped out in such a short sale. Many are trying to negotiate something with the holder of the First so they get something by cooperating, but absent that, there is no incentive for them to cooperate … and most don’t.

Another detrimental factor of short sales is the time and mechanics involved. Most Lenders will not look at the application unless the borrower is behind in payments presenting a dilemma for owners current with their payment. Once you miss a payment, you have about four months before your home is foreclosed on. This situation forces the owner to miss payments and then watch the time go by to their deadline. It is frustrating as the Lenders want everything to be via FAX and email. There is no phone communication… paperwork gets lost… time goes by… and nothing is certain. Buyers don’t like waiting with so much uncertainty about the outcome.

Our Advice: Buyers were initially excited about short sales because it was a way to get a home in good condition at a good price. There wasn’t the risk associated with buying foreclosure properties in which case you can’t see the interior when you buy it. Most foreclosures these days are going back to the bank as the loan is higher than the value and a short sale couldn’t be worked out. You can buy bank owned properties at or below market after they get them back and evaluate what they have, but it is rare these days to get a good deal on the courthouse steps. Short sale sellers – get a good short sale agent and make a run at it, and look to your options. Buyers – do not discount short sales on principle these days, rather look at the circumstances of the individual property, the loan, and the agent involved. You can make a good deal with good business practices. Foreclosures and short sales … a game of patience.

This market requires hard work and short sales require extraordinary hard work. Be realistic… be fair, and all will benefit. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, , 775-781-5472.

Wednesday, October 17, 2007

My neighbor doesn’t keep his property up … will that affect my sale?

In this Market of 2007 all things come in to play when you are looking for an edge in the market place. Neighbors are an important consideration for most Buyers, especially when the homes are positioned close to one another. A good neighbor is something worth disclosing for added value while a bad neighbor should be disclosed to prevent any ensuing litigation for non-disclosure.

Good neighbors are worth their weight in gold. Lasting friendships for parents and children are created by living next to one another and having a great neighbor relationship. That doesn’t mean having dinner together every Saturday night, but it does involve watching over one another’s children, property and pets. It can involve giving a lending hand when needed, and exchanging pleasantries when you see one another. A united and strong neighborhood is a safer environment that creates a harmonious living standard. That doesn’t include an overbearing Homeowner’s Association group which can actually have the opposite result on the neighborhood. There are some such HOA’s in our area that have a detrimental effect on their neighborhood in their zeal to protect it. As with anything in life, balance is needed to be a good neighbor. Don’t snoop or pry, and don’t shutter yourself out of existence.

We know of a circumstance where the neighbor’s children had friends with motorcycles that came roaring in to the neighborhood all hours of the day and night to listen to the band practice in the garage. The Sellers of the house next door were going out of their minds from the continual invasion of their quiet enjoyment of their property, but, despite numerous police reports and visits, the problem persisted. They felt trapped – emotionally and financially. They were concerned that they could not ever sell and that was in a good market! Fortunately, they sold, with a proper disclosure, and made their move to the tranquility of the Carson Valley.

Bad neighbors can have a negative impact in different ways. The above is not obvious unless you are around when the invasive sound is occurring. More obvious are unkempt properties, i.e. - dead lawn, overgrown with weeds, and junk or debris strewn about the property. Such properties bring down the overall value of the neighborhood and can undoubtedly have a detrimental impact on a potential Buyer of your property.

Our Advice: If your neighbor has let his property go there are some things you can do about it … carefully. The first is to understand what is happening in the household, i.e. - are they facing foreclosure or bankruptcy? You can offer, gently, to pay for the cleanup as it would greatly benefit you in your selling efforts. If they are uncooperative, or vindictive, call the County Code Enforcement Officer. That process takes longer, but will resolve the problem for the benefit of the entire neighborhood. If you don’t take action on their property you will have to on yours … by a major price reduction.

Neighbors and neighborhoods are a big reason why people move to the Carson Valley. Let’s keep it a place where people can still talk over the fence, or bring dinner to the sick person next door … your neighbor.

Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates,, 775-781-5472.

Wednesday, October 3, 2007

New Predator Lender Law

I heard “no-doc” loans are now illegal in Nevada … is that true?

Effective October 1, 2007, Nevada amended its unfair lending practices and mortgage fraud provisions. The changes regarding low, or no document, home loans are vague resulting in temporary confusion in the loan industry. The language is seemingly simple,”…it is an unfair lending practice for a lender to knowingly or intentionally make a home loan, other than a reverse mortgage, to a borrower, including without limitation, a low-document home loan, no document home loan, or stated-document home loan without determining, using any commercially reasonable means or mechanism, that the borrower has the ability to repay the home loan.” It did cause some to incorrectly think no-doc loans were a thing of the past.

The intent of the law was to disallow approving loans based solely on equity, what is known as hard money loans. According to the primary sponsor of the bill, Markus Conklin, Vegas, it was intended for consumer protection, not to “slow up the process for qualified people” attempting to purchase homes. Discussions between credible lenders and the State resulted in an understanding that such loans can be made as long as "any commercially reasonable means or mechanism" was used to determine that the borrower has the ability to repay the loan. Such means or mechanisms would include, without limitation, credit scores, (an online service that reports appropriate compensation for jobs), a detailed discussion between the lender and the borrower about the repayment of the loan, etc.

Reputable lenders have always used reasonable means and mechanisms to determine a borrower’s ability to repay a loan. They have done so for the protection of their investors as well as that of the borrower. A good lender cares about you, truly cares, and isn’t just looking to fund a loan to get a commission. They will question you about your investment objectives, your cash flow, potential repayment sources, and determine a loan program that will work well for you and your situation.

Our Advice: The new law protects the unwitting consumer from predatory lenders, and won’t have much of an impact on the business practices of good lenders. No document loans have their place in the market and are a viable option for certain acquisition circumstances you might find yourself facing. Take the time to discuss your repayment options with your lender so you know how the loan will ultimately affect you and your investment. Pay attention – ultimately the decision is yours and you should understand what your options are and the effect your final decision has on you. This is true with any borrowing situation you are considering.

Don’t experiment with lenders. A good lender is a vital component in your real estate program and we are fortunate to have several in the Carson Valley to serve you.

Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates,, 775-781-5472.