Foreclosures In My Neighborhood - How Do They Affect My Value?
Posted by Paul Gonzales | Currently 1 Comment »
Foreclosed properties and “short sales” are certainly in the news today. We are all aware that they exist in every community right now including our own neighborhoods. Properties that have been taken back by a bank or lender and held on their books are known as “real estate owned” or REOs. For both regulatory and business reasons they must work to sell them as soon as they can and get the REOs off their ledgers. So-called short sales are where the private owner and the lender agree to sell the property for less than what is owed. In our current markets, this need to liquidate properties often forces the lender to sell at a loss. As seen in recent sales figures for many areas, this practice has at least the potential to drive market prices lower in some areas.
OK - So how can the sale of a nearby foreclosure or short-sale affect me?
Any individual home sale in the area is only one statistic, not the entire local market. In fact, a common misperception is that the lowest recent home sale “sets the price” for similar properties around it. Not so. Understanding just a couple of basics about how a professional appraiser determines value can illustrate the impact that recent nearby sales have on your home’s value.
Appraisers are required to identify recent sales of properties that are similar and near in proximity to the home being appraised; these other sales are called comparable sales, or “comps“. There are extensive rules and formulas that they use to accomplish all that but those are the general criteria that they seek. After adjusting the sales prices for considerations such as age, size, amenities, quality and condition (among many other issues) the appraiser then has a finely-tuned range of prices that he or she will use to determine the value of the subject property being appraised. While not impossible, it is rare that the final value ascertained will be equal to the lowest comparable sales price (REO, short-sale or otherwise). Most commonly, the final value will be somewhere within the range of prices analyzed.
Which brings us back to the topic of the sale of a nearby REO or “short“. If the lowest sales price in the pool of comps used by the appraiser is an REO and is also significantly lower than the rest of the comps in the pool, the appraiser has the latitude to comment on that aspect. Depending upon how solid the remaining sales comps are, the REO or short-sale could have only a minimal impact on the value of the subject property. It may thus represent only the low end of the value range for that particular market.
On the other hand, if the majority of recent comps happen to consist of REOs and/or short sales, then they may well define that local market and collectively have a significant impact on the value of the subject property.
In the final analysis, the value of your property is determined by your local market and is usually defined by recent multiple sales. Regardless of whether comparable sales are private sales, short sales or REOs, the market “is what it is” at that point in time. What’s most important to remember is that for the vast majority of markets, value is not defined by any one single sales transaction!
contact Paul at (800) 775-7334 or at paulforoans@aol.com
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The Forgotten Victims of Foreclosure
Posted by Traci Hansen | Leave A Comment »
With the rising number of foreclosures around the nation and right in our own neighborhoods, our sympathies go to the families that will leave their homes behind and out of desperation move on.
The question I pose is, what about the pets? The number of family pets that are left behind is staggering. The family pet, once part of the family, is now abandoned and trapped in an empty home, with minimal or no food and water.
The people to arrive first to a foreclosed home i.e. the junk haulers, Realtors, bank inspectors, and neighbors typically do not have the authority to remove the animals. Once the Humane Society has been called, it can take several days to respond to the foreclosed house due to the volume of other cases.
One of the Humane Society employees, who has personally responded to about 1,000 foreclosure calls last year, tells of finding the animals chained up, or running loose in the house. The Humane Society does not keep numbers on how many animals are found in foreclosed homes. The pets are simply listed as abandoned. Animal cruelty charges are rare in foreclosed cases because it’s hard to prove malice involved in leaving the pet behind.
The before mentioned Humane Society employee has found 15 dead animals in foreclosed homes and has filed charges in each of those cases. When he found a boxer tied to a tree in the backyard next to a pile of trash, no charges were filed. And nothing was done to the owners of a yellow lab who left the dog chained to a water faucet.
He states, “Once the family has been tracked down the first thing they tell you is, ‘Man we loved our dog, but we just couldn’t take him with us,’” Personally, there is no reasoning that I can wrap my head around to justify leaving your beloved pet behind. And if the family is moving into a place that does not accommodate pets, then why not drop them off at a shelter? At least that gives them a chance, even though the numbers are climbing at the shelters and due to overpopulation almost half of incoming animals are euthanized.
A majority of the pets found are in poor health, some can be rehabilitated, but approximately 15 percent are euthanized. As more families are forced from their homes, the fallout is painfully clear at the animal shelters nationwide. Experts say a dog will become dehydrated within 24 hours without water and could die in extreme heat within a few days. Like humans, dogs and cats can go for a long time without food but will quickly die without water.
How Can You Help Save Abandoned Pets?
In most states, by law, pets are personal property, which means they have little or no rights. Personal property left behind by home owners are subject to seizure by the lender that has taken the home back in foreclosure, but most REO lenders don’t want to take care of pets. Some laws do not allow for forfeiture of personal property until a certain period of time has passed, so lenders are prevented from removing pets, and often discourage others from intervening.
- If you know that a home in your neighborhood is being foreclosed upon, why not ask the occupants if they have made plans for their pets?
- Some homeowners might willingly turn over their pets to an animal welfare agency that specializes in rescuing stray and abandoned pets, if they knew where to take their pets.
- Leave animal rescue literature with the owners; it’s better to offend and apologize than to do nothing.
- After the owners have moved, check on the home to see if any pets were left behind or tied up in the back yard.
- Call your local Humane Society to find out how you can help to rescue abandoned pets.
- Call a local real estate agent and ask the neighborhood specialist to inspect the home for abandoned pets. Most will gladly oblige at no obligation.
- In some states, animal cruelty is against the law, If you suspect animal cruelty, call the police.
- If you find a dehydrated pet, provide a small amount of water under supervision—some pets can become so thirsty and weak that they can drown in a water bowl—then call a vet before administering food.
Because if you don’t speak up for these helpless animals, WHO WILL??????
If this blog has moved you in some way, please take a look at the nopawsleftbehind.org website… It is a nonprofit that helps the pet owners find shelters. Please take a look and see how you can become proactive and help the forgotten victims of foreclosure.
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Hope For Homeowners
Posted by Kevin Kueneke | Currently 2 Comments »
Part of the recently passed Housing and Economic Recovery Act (HR 3221) is the new Hope for Homeowners program. This is an FHA sponsored short-sale refinance intended to allow distressed homeowners keep owner occupied homes from going into foreclosure. Although lenders are not required to participate in the program, there will still be plenty of homes saved. Here are some basics:
• Principal residence only. 
• Existing loan must have been obtained on or before January 1, 2008.
• Borrowers can be up to date on their mortgage or in default, but they must prove that they will not be able to keep paying their existing mortgage (mortgage debt ratio must exceed 31% of monthly income) AND they must certify that they did not intentionally default on the mortgage for the purpose of obtaining the HOPE loan.
• Calculation of the new loan will be based on the borrower’s ability to make mortgage payments determined by FHA and the loan-to-value limited to 90% of the appraised value.
• The existing lien holder must waive any prepayment penalties and fees, including attorney and foreclosure fees if foreclosure proceedings have already begun.
• The existing lien holders must agree to accept the proceeds as payment in full of all indebtedness under the new loan (no 1099 from the lender for lost proceeds); all encumbrances must be removed.
• Those lien holders of existing subordinate mortgages will be entitled to future appreciation of the property. Standards and policies of the shared appreciation will be developed by FHA.
• The new loan must be a 30 year fixed rate mortgage.
• The interest rates and origination fees will be determined by the new Federal Housing Finance Agency, but will be comparable to market rates.
• The new loan amount cannot exceed $550,400 which is 132% of FHLMC loan limit established in 2007.
• The borrowers cannot put a new second lien on the property for 5 years after the refinance takes place.
• Income must be documented by income tax returns for the most recent two years.
• The borrower cannot have been convicted of mortgage fraud under Federal or State law during the past 10 years.
• The borrower must supply documentation to prove that they only own this one residence. If they own other properties, they cannot utilize this program.
• Borrowers will pay an Upfront Mortgage Insurance Premium (UFMIP) of 3% of the loan amount and an annual mortgage insurance premium of 1.5% of the loan amount. This is higher than the 1.5% UFMIP and 0.5% annual mortgage insurance of “regular” FHA loans.
• Equity Appreciation: upon sale or disposition of the property or subsequent refinance there will be shared equity on a graduated scale; HUD is entitled to 100% of the initial equity if property is sold or loan refinanced in first 12 months, 90% in months 13-24, 80% in months 25-36, 70% in months 37-48, 60% in months 49-60, and 50% months 61 and on. HUD will be entitled to 50% of any appreciation over and above initial 10% equity, regardless of future sale date.
• The program will be implemented October 1, 2008, and expires September 30, 2011.
As stated above, lenders are not required to participate and most likely will not assist certain borrowers whose written down loan amount is less cost effective than a foreclosure. That is, if the new loan amount that the borrowers can actually afford, based on verified income, is significantly lower than the possible post-foreclosure net proceeds, the lien holder will most likely choose to foreclose.
The official HUD website states that FHA will insure up to $300 billion in new loans under this program so for those borrowers that will qualify, this program is obviously good news and very welcome relief.
***As of October 1, 2008, HUD is encouraging all interested homeowners to contact their servicing lender regarding this program***
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