Phil's Real Estate Blog

5 Reasons Why You Should Buy A Home

July 31st, 2010 8:54 AM

Homeownership almost seems like a dirty word in today’s society. People are blogging, tweeting and facebooking their belief that buying a home is just plain stupid. I respect their opinion on the issue though I totally disagree. Why?

This might be the best time to buy a home in American real estate history.

Some might think I’m crazy. Cynics might think that I am saying this because I still hold a real estate license (though I have not listed nor sold a home in ten years). My reason for saying it is actually quite simple. Owning a home makes more sense than not owning a home for the vast majority of families in this country. Let me give you five reasons why.

1. Real Estate is a Great Long Term Investment

Don’t take my word on this. This is what Mike Mandel, former chief economist at BusinessWeek and current Senior Fellow at Wharton’s Mack Center for Technological Innovation, had to say:

We’ve just had the biggest boom and bust in real estate in recent history. Nevertheless, real estate has still greatly outperformed the stock market over the past ten years.

Below is his chart actually showing the difference between real estate and the stock market.

2. A Home Is a Better Place to Raise a Family

Don’t take my word on this. When Fannie Mae asked current renters for the major reason to buy a house in their National Housing Survey 2010, these were the answers renters gave (they could pick multiple answers):

78% said it was a good place to raise children
75% said because they would feel safe
70% said because you have control of your own space

3. A Home Creates a Sense of Community

Don’t take my word on this. The Federal Reserve Bank of New York just published a paper The Homeownership Gap. The paper explained:

Because owners have a financial interest in their property, they have incentives to take measures that will maintain or increase the value of that property. Some of these measures—such as fixing a leaky roof—are closely related to the house itself. Others, such as investing resources in the betterment of the neighborhood and the community, have broader beneficial effects on the local area, creating what economists call “positive externalities.”

4. It’s Cheaper to Own Than Rent in Many Parts of the Country

Don’t take my word on this. Housing Wire just reported on a Credit Suisse study:

While a segment of the renting population continues to rent, many are looking to dip their toes in the homeownership waters. Credit Suisse said the percentage of median household income needed to pay the mortgage on a median priced home is at a 30-year low… Low mortgage rates and property values makes homeownership more attractive than renting for many. In many markets — including Washington DC, California’s Inland Empire, Las Vegas and Phoenix — paying for a mortgage is less expensive than renting.

And here is a graph from the study:

5. The People Who Do Buy a Home Don’t Regret It

Don’t take my word on this. Probably the best people to ask if buying a home makes sense are the people who currently own homes. A recent national poll commissioned by Bankrate.com found:

Ninety percent of homeowners say they don’t regret buying their home despite a nationwide tsunami of foreclosures, short sales and loan modifications.

It’s a great long term investment. It’s a great place to raise a family. It gives you a greater sense of community. It’s less expensive than renting. People who currently own have no regrets. Buying a home seems like a no brainer to me.

Posted by Philip DeLizio on July 31st, 2010 8:54 AMPost a Comment (0)

7 Smart Strategies for Kitchen Remodeling

July 30th, 2010 10:31 AM

If you’re contemplating a kitchen remodel, you’re also weighing a considerable investment. But a significant portion of the upfront costs may be recovered by the value the project brings to your home. Kitchen remodels in the $50,000 range recouped 76% of the initial project cost at the home’s resale, according to recent data from Remodeling Magazine’s Cost vs. Value Report. To make sure you maximize your return, consider these seven smart kitchen remodeling strategies.

1. Establish your priorities

Simple enough? Not so fast. The National Kitchen and Bath Association (NKBA) recommends spending at least six months planning before beginning the work. That way, you can thoroughly evaluate your priorities and won’t be tempted to change your mind during construction. Contractors often have clauses in their contracts that specify additional costs for amendments to original plans. Planning points to consider include:

Avoid traffic jams. A walkway through the kitchen should be at least 36 inches wide, according to the NKBA. Work aisles for one cook should be a minimum of 42 inches wide and at least 48 inches wide for households with multiple cooks.
Consider children. Avoid sharp, square corners on countertops, and make sure microwave ovens are installed at the heights recommended by the NKBA—3 inches below the shoulder of the principle user but not more than 54 inches from the floor.
Access to the outside. If you want to easily reach entertaining areas, such as a deck or a patio, factor a new exterior door into your plans.

Because planning a kitchen is complex, consider hiring a professional designer. A pro can help make style decisions and foresee potential problems, so you can avoid costly mistakes. In addition, a pro makes sure contractors and installers are sequenced properly so that workflow is cost-effective. Expect fees around $50 to $150 per hour, or 5% to 15% of the total cost of the project.

2. Keep the same footprint

No matter the size and scope of your planned kitchen, you can save major expense by not rearranging walls, and by locating any new plumbing fixtures near existing plumbing pipes. Not only will you save on demolition and reconstruction, you’ll greatly reduce the amount of dust and debris your project generates.

3. Match appliances to your skill level

A six-burner commercial-grade range and luxury-brand refrigerator might make eye-catching centerpieces, but be sure they fit your lifestyle. It’s probably the part of a kitchen project where people tend to overspend the most.

The high price is only worth the investment if you’re an exceptional cook. Otherwise, save thousands with trusted brands that receive high marks at consumer review websites, like www.ePinions.com and www.amazon.com, and resources such as Consumer Reports.

4. Create a well-designed lighting scheme

Some guidelines:

• Install task lighting, such as recessed or track lights, over sinks and food prep areas; assign at least two fixtures per task to eliminate shadows. Under-cabinet lights illuminate clean-up and are great for reading cookbooks. Pendant lights over counters bring the light source close to work surfaces.

• Ambient lighting includes flush-mounted ceiling fixtures, wall sconces, and track lights. Consider dimmer switches with ambient lighting to control intensity and mood.

5. Focus on durability

People are putting more emphasis on functionality and durability in the kitchen. That may mean resisting bargain prices and focusing on products that combine low-maintenance with long warranty periods. Solid-surface countertops [Corian, Silestone] are a perfect example. They may cost a little more, but they’re going to look as good in 10 years as they did the day they were installed.

If you’re not planning to stay in your house that long, products with substantial warranties can become a selling point. Individual upgrades don’t necessarily give you a 100% return, but they can give you an edge when it comes time to market your home for sale, if other for-sale homes have similar features.

6. Add storage, not space

To add storage without bumping out walls:

• Specify upper cabinets that reach the ceiling. They may cost a bit more, but you’ll gain valuable storage space. In addition, you won’t have to worry about dusting the tops.

• Hang it up. Install small shelving units on unused wall areas, and add narrow spice racks and shelves on the insides of cabinet doors. Use a ceiling-mounted pot rack to keep bulkier pots and pans from cluttering cabinets. Add hooks to the backs of closet doors for aprons, brooms, and mops.

7. Communicate effectively—and often

Having a good rapport with your project manager or construction team is essential for staying on budget. Poor communication is a leading cause of kitchen projects going sour. To keep the sweetness in your project:

Drop by the project during work hours as often as possible. Your presence assures subcontractors and other workers of your commitment to getting good results.
Establish a communication routine. Hang a message board on-site where you and the project manager can leave each other daily communiques. Give your email address and cell phone number to subs and team leaders.
Set house rules. Be clear about smoking, boom box noise levels, which bathroom is available, and where workers should park their vehicles.

Consumers spend more money on kitchen remodeling than any other home improvement project, according to the Home Improvement Research Institute, and with good reason. They’re the hub of home life, and a source of pride. With a little strategizing, you can ensure your new kitchen gives you years of satisfaction.

Posted by Philip DeLizio on July 30th, 2010 10:31 AMPost a Comment (0)

Client First Real Estate Receives 2009 Best of Business Award

July 27th, 2010 7:59 PM

Press Release
FOR IMMEDIATE RELEASE

Client First Real Estate Receives 2009 Best of Business Award

Small Business Commerce Association’s Award Honors the Achievement

SAN FRANCISCO, August 12, 2009, Client First Real Estate has been selected for the 2009 Best of Business Award in the Real Estate category by the Small Business Commerce Association (SBCA)

The Small Business Commerce Association (SBCA) is pleased to announce that Client First Real Estate has been selected for the 2009 Best of Business Award in the Real Estate category.

The SBCA 2009 Award Program recognizes the top 5% of small businesses throughout the country. Using statistical research and consumer feedback, the SBCA identifies companies that we believe have demonstrated what makes small businesses a vital part of the American economy. The selection committee chooses the award winners from nominees based off statistical research and also information taken from monthly surveys administered by the SBCA, a review of consumer rankings, and other consumer reports. Award winners are a valuable asset to their community and exemplify what makes small businesses great.

About Small Business Commerce Association (SBCA)

Small Business Commerce Association (SBCA) is a San Francisco based organization. The SBCA is a private sector entity that aims to provide tactical guidance with many day to day issues that small business owners face. In addition to our main goal of providing a central repository of small business operational advice; we use consumer feedback to identify companies that exemplify what makes small business a vital part of the American economy.

SOURCE: Small Business Commerce Association

Posted by Philip DeLizio on July 27th, 2010 7:59 PMPost a Comment (0)

I Just Can't Say That....

July 3rd, 2010 10:43 AM

While your home may be prefect for a large family, in a quiet, family neighborhood and right Federal Fair Housing Act

across the street from the church I just can't say that. Your home may be right in the middle of the financial district, near public transportation and have a free membership to the gym making it ideal for a working professional but I just can't say that.

You see, there is the Federal Fair Housing Act that I must adhere to that strictly prohibits discriminatory preference against:

Race or Color
National Origin
Religion
Sex
Familial Status
Handicap/Disability

To advertise your home in a family friendly neighborhood would be discriminatory. Why? It would discourage those without children from looking at your home based on familial status. While your home may be right across the street from the largest Catholic church in town it would be discriminatory based on Religion.

As a Realtor® it is my job to highlight your home and advertise it in the best possible light. If you hire me to be your Realtor® then you must be comfortable with me and trust that I know how to advertise your home without violating the Federal Fair Housing Act. If you DON'T hire me, or any Realtor® for that matter, to assist you in selling your home you must know that you are subject to the Federal Fair Housing Act as well. Yes, even as a private seller!

The next time you see the ad that I run for your home please don't be upset with me for not mentioning that your home is family friendly or right next door to the Synagogue. Besides, your home has many more beneficial attributes for me to concentrate on!

Posted by Philip DeLizio on July 3rd, 2010 10:43 AMPost a Comment (0)

Landscaping for Curb Appeal

June 21st, 2010 1:36 PM

A beautiful yard is a head-turner, no doubt about it. The good news is that even if you can’t tell a tulip from a turnip at the garden center, you can still create eye-catching curb appeal by paying attention to the basics of good landscaping. Ignoring your yard—or doing something that’s out of character with the neighborhood—can jeopardize the assessed value of your home.

“We have several categories for design and appeal,“ says Frank Lucco, a real estate agent and professional appraiser in Houston. “That’s where we make those adjustments. Poorly maintained landscaping can be as much as a 5 or 10% deduction.”

Appraisers are quick to praise the allure of a well-tended lawn and good-looking landscaping when it comes time to sell your home, but most do not assign any specific increase in monetary value for upkeep.

“Landscaping is going to add to the appeal of the property and it may sell quicker, but it’s hard to determine value,” says John Bredemeyer, president of Omaha-based Realcorp. “You have to have a number to compensate someone if you drove into their tree and killed it, but is it really market value? Probably not.”

Nevertheless, most professionals agree that curb appeal and a well-maintained appearance prevent your property from losing value. Here are the top suggestions from real estate agents, appraisers, and landscape designers for boosting the curb appeal of your yard:

Green up the grass
If your house has a front yard, make sure it‘s neat and green. You don’t want bare spots, sprawling weeds, or an untrimmed appearance.

“It’s so simple to go to Home Depot, buy fertilizer, apply it every six weeks, and water it,” says Mitch Kalamian, a landscape designer in Huntinginton Beach, Calif. “It will green up.”

If the yard looks really scruffy, you may decide to invest in some sod. According to the National Gardening Association, the average cost of sod is 15 to 35 cents per sq. ft. If you hire a landscaper to sod your yard for you, labor will add 30% to 50% to the total cost of the project.

Another alternative is to plant low-maintenance turf grasses. Turf grasses are durable and drought-resistant. Expect to pay $18 to $30 for enough turf grass seed to plant 1,000 sq. ft. of lawn area.

Add colorful planting beds
Flower beds add color and help enliven otherwise plain areas, such as along driveways and the edges of walkways. In general, annual flowers are a bit cheaper but must be replaced every year. Perennials cost a bit more but come back annually and usually get larger or spread with each growing season.

If you’re not sure what to plant, inquire at your local garden center. Often, they’ll have a display of bedding plants chosen for their adaptability to your area. Also, they‘ll be inexpensive because they’re in season, says Peter Mezitt, president of Weston Nurseries in Hopkinton, Mass. Try pansies in the summer, and asters and mums in the fall to add vibrant color. “That’s what we do around the entrance to our garden center,” Mezitt says.

Valerie Torelli, a California REALTOR® who dresses up her clients’ yards to sell their houses faster and for more money, says that in her market, she can put in a bed of colorful annuals and bark, as well as cutting down overgrown shrubs, for less than $500. “We can buy gorgeous plants for $3.99 to $15.99,” she says.

Add landscape lighting
For homeowners who have made a sizeable investment in landscaping, it makes sense to think about adding another 10% to 15% to the bill for professional lighting. “You can’t see landscaping after dark,“ says Brandon Stephens, vice president of marketing for a landscape lighting firm in Lubbock, Texas, “and buyers are not always looking at houses on a Saturday afternoon.”

The cost of a system runs from $200 for a DIY installation to more than $4,000 for a professional job. If you‘re doing it on your own, the key is to light what you want people to see, such as mature trees and flowering shrubs.

Plant a tree
The value of mature trees is particularly difficult to determine. Lucco says that in his market, mature trees contribute as much as 10% of a $100,000 property’s overall value. In addition, a properly placed shade tree can shave as much as $32 a year on your energy bills. Expect to pay $50 to $100 for a young, 6- to 7-foot deciduous tree.

Posted by Philip DeLizio on June 21st, 2010 1:36 PMPost a Comment (0)

Keep Your Home Purchase on Track

June 17th, 2010 9:38 PM

Keep Your Home Purchase on Track

You’ve found your dream home. Make sure missteps don’t prevent a successful closing.

A home purchase isn’t complete until you make it to the closing. Until then, the transaction can fall apart for many reasons. Here are five tips for avoiding mistakes that cause a home sale to crater.

1. Be truthful on your mortgage application

You may think fudging your income a little or omitting debts when applying for a mortgage will go unnoticed. Not true. Lenders have become more diligent in verifying information on mortgage applications. If you fib, expect to be found out and denied the loan you need to fund your home purchase. Plus, intentionally lying on a mortgage application is a crime.

2. Hold off on big purchases

Lenders double-check buyers’ credit right before the closing to be sure their financial condition hasn’t weakened. If you’ve opened new credit cards, significantly increased the balance on existing cards, taken out new loans, or depleted your savings, your credit score may have dropped enough to make your lender change its mind on funding your home loan.

Although it’s tempting to purchase new furniture and other items for your new home, or even a new car, wait until after the closing.

3. Keep your job

The lender may refuse to fund your loan if you quit or change jobs before you close the purchase. The time to take either step is after a home closing, not before.

4. Meet contingencies

If your contract requires you to do something before the sale, do it. If you’re required to secure financing, promptly provide all the information the lender requires. If you must deposit additional funds into escrow, don’t stall. If you have 10 days to get a home inspection, call the inspector immediately.

5. Consider deadlines immovable

Get your funds together a week or so before the closing, so you don’t have to ask for a delay. If you’ll need to bring a certified check to closing, get it from the bank the day before, not the day of, your closing. Treat deadlines as sacrosanct.

Posted by Philip DeLizio on June 17th, 2010 9:38 PMPost a Comment (0)

7 Tips for Improving Your Credit

June 16th, 2010 4:29 PM

7 Tips for Improving Your Credit

Here’s how to clean up your credit so you get the least-expensive home loan possible.

Getting the loan that suits your situation at the best possible price and terms makes homebuying easier and more affordable. Here are seven ways to boost your credit score so you can do just that.

1. Know your credit score

Credit scores range from 300 to 850, and the higher, the better. They’re based on whether you’ve paid personal loans, car loans, credit cards, and other debt in full and on time in the past. You’ll need a score of at least 620 to qualify for a home loan and 740 to get the best interest rates and terms.

You’re entitled to a free copy of your credit report annually from each of the major credit-reporting bureaus, Equifax, Experian, and TransUnion. Access all three versions of your credit report at www.annualcreditreport.com. Review them to ensure the information is accurate.

2. Correct errors on your credit report

If you find mistakes on your credit report, write a letter to the credit-reporting agency explaining why you believe there’s an error. Send documents that support your case, and ask that the error be corrected or removed. Also write to the company, or debt collector, that reported the incorrect information to dispute the information, and ask to be copied on any materials sent to credit-reporting agencies.

3. Pay every bill on time

You may be surprised at the damage even a few late payments will have on your credit score. The easiest way to make a big difference in your credit score without altering your spending habits is to diligently pay all your bills on time. You’ll also save money because you’ll keep the money you’ve been spending on late fees. Credit card or mortgage companies probably won’t report minor late payments, those less than 30 days overdue, but you’ll still have to pay late fees.

4. Use credit carefully

Another good way to boost your credit score is to pay your credit card bills in full every month. If you can’t do that, pay as much over your required minimum payment as possible to begin whittling away the debt. Stop using your credit cards to keep your balances from increasing, and transfer balances from high-interest credit cards to lower-interest cards.

5. Take care with the length of your credit

Credit rating agencies also consider the length of your credit history. If you’ve had a credit card for a long time and managed it responsibly, that works in your favor. However, opening several new credit cards at once can lower the average age of your accounts, which pushes down your score. Likewise, closing credit card accounts lowers your available credit, so keep credit cards open even if you’re not using them.

6. Don’t use all the credit you’re offered

Credit scores are also based on how much credit you use compared with how much you’re offered. Using $1,000 of available credit will give you a lower score than having $1,000 of available credit and using $100 of it. Occasionally opening new lines of credit can boost your available credit, which also affects your score positively.

7. Be patient

It can take time for your credit score to climb once you’ve begun working to improve it. Keep at it because the more distance you put between your spotty payment history and your current good payment record, the less damage you’ll do to your credit score.

Other web resources

How FICO scores are calculated

Answers to frequently asked credit report questions

Posted by Philip DeLizio on June 16th, 2010 4:29 PMPost a Comment (0)

The 9 Steps to Home Ownership

April 2nd, 2010 4:49 PM

The 9 Steps to Home Ownership

Step - 1 Make the Decision to Buy

It seems obvious, but it's good to note that the first step to buying a house is making the decision to buy. Consider the reasons you want a new house and write them down. Determine how long you want to live in the new house - does buying still make good financial sense? Can you afford a house that will meet your list of requirements? A good rule of thumb is your mortgage payment should not exceed 1/3 of your net monthly income.

Step 2 - Seek Professional Guidance

I'd like to schedule a time to meet with you to hear the reasons you want to buy a house and your plans for the future. We'll talk about neighborhoods, schools, economic factors liable to affect the market today and tomorrow, as well as how you would like your house and neighborhood to grow with you.

At this time, I will also help you get pre-qualified for a mortgage loan. Pre-qualification is a written statement from a loan officer indicating his or her opinion that you will be approved for a mortgage loan up to a certain amount. The fact that you are pre-qualified will help us when we are negotiating the deal.

Step 3 - Begin the Hunt

After our initial meeting, I'll search all my resources for houses on the market that fit your criteria. I'll preview these houses to eliminate the duds. Then, I'll schedule appointments to tour the houses at times convenient to you.

As we tour houses, I'll point out positive features and negative features. I'll ask you to tell me what you like and what you don't like. You'll probably amend your "wish list" as we tour houses, some things will become more important and others less important. With this new information, I'll refine our search criteria to narrow in on the house of your dreams.

Step 4 - Know the Market

My knowledge of the local market is an essential factor in the house search. I'll let you know when the market in a particular neighborhood is "hot" and requires immediate action or when the market is "cool" and allows for thoughtful consideration.

As we tour houses, I'll let you know when the asking price has negotiating room and when the house is "priced to sell". My unique market knowledge will keep you a step ahead of the "house hunting competition".

In a "seller's market". It is not unusual to see multiple offers on a property, full-price offers and even above-price offers. On the flip side, during a "buyer's market" there are more houses for sale than buyers. This gives us more negotiating room as houses are taking longer to sell.

Step 5 - Find Your Dream House

I'm confident we'll find your dream house. When we do, I'll put together the purchase offer tailored for your needs including appropriate contingencies (such as obtaining financing, favorable home inspection, clear title, etc.).

The offer is normally presented with "earnest money". This is a cash deposit made to a home seller to secure an offer to buy the property. The amount is applied to closing costs. If the seller accepts the offer, generally closing is held 30 to 60 days from the offer date (generally dependent on the turn around time of your mortgage financing).

Step 6 - Negotiate the Deal

It is not uncommon to receive a counter offer when the initial purchase offer is submitted. Don't let this discourage you. We will discuss the counter offer and decide whether or not to accept the counter offer, submit our own counter offer, or reject the counter offer and move on.

Market conditions will play a role in how aggressively we negotiate the deal. We will also work within your limits. Emotions can lead to buyer's remorse. It is better to set limits prior to negotiating an offer and stick to these limits.

Step 7 - Get a Loan

During the closing period, you will be working with your mortgage lender to close the loan. Since you pre-qualified for the loan before starting your home search, you will be that much closer to the end. I'll gather the necessary property information your lender will need to close the loan.

Step 8 - Close the Deal

You will receive a "Good Faith Estimate" of closing costs at the time the loan application is submitted to the lender. The estimate is based on the loan officer's past experience and may not include all the closing costs. I will be glad to review the "Good Faith Estimate," answering questions and highlighting missing costs and estimates I believe to be low.

Step 9 - Move In

Congratulations! It's time to move into your new house and make it your home. Enjoy this exciting time. I'll give you a checklist to help you remember the numerous details that will make your moving day a pleasure.

Posted by Philip DeLizio on April 2nd, 2010 4:49 PMPost a Comment (0)

Tax Issue Affecting SHORT SALES

January 29th, 2010 12:53 PM

Attorney General Opinion
RE: Tax Issue Affecting SHORT SALES

Late Wednesday, Maryland Attorney General, Doug Gansler released his opinion as to whether or not a local jurisdiction can collect transfer and recordation tax on forgiven debt in a short sale transaction (see 1/22/2010 Legislative Alert for background).

Read the Attorney General opinion here >>

Before more than 200 REALTORS^® in attendance at MAR's Legislative Day, Mr. Gansler explained his Assistant AG's position that this practice is inconsistent with Maryland law. Specifically the Attorney General of Maryland opinion is as follows, "Counties do not have the authority to include debt forgiven by the seller's lender in calculating consideration on which the recordation tax will be calculated."

MAR's Vice President of Legal Affairs, Chuck Kasky is backing the position, "This is the definitive statement on the law as of today. Attorney General Gansler spoke to REALTORS^® last night and was very clear that the definition of "consideration" is a matter of state law and until a court says otherwise, a county cannot tax excess debt in a short sale."

The Attorney General opinion does reference that the practice of collecting on forgiven outstanding debt is not specifically prohibited in Maryland law. As such, PGCAR is partnering with MAR, GCAAR and AACAR in promoting legislation in Annapolis to prohibit taxing outstanding debt. At the present time there are several State Senators and Delegates ready to move legislation through the General Assembly. At such time when it becomes necessary we may issue a REALTORS^® Call-To-Action urging members to contact their political representatives on the issue.

Posted by Philip DeLizio on January 29th, 2010 12:53 PMPost a Comment (0)

Standardized Short Sale Process Will Benefit All Parties

January 27th, 2010 9:08 AM

Standardized Short Sale Process Will Benefit All Parties

by Bob Hunt

Two years ago the National Association of Realtors® formed a task force to address the vexing issue of short sales. A multitude of members had complained of lengthy and often incomprehensible processes that – although they varied in detail from lender to lender – all seemed to share the characteristics of being inefficient and irrational. Upon completing its studies the task force issued recommendations that the short sale process be standardized among lenders, that common forms be used, and that fixed time frames be adopted for various phases of the short sale process.

Fast forward to November 30, 2009 when the Treasury Department announced the Home Affordable Foreclosure Alternatives (HAFA), a program that features – you guessed it – standardized short sale procedures, common forms, and fixed time frames. The program is directed to lenders and servicers participating in the Home Affordable Modification Program (HAMP). It applies to non Freddie Mac or Fannie Mae loans. It covers liens on a borrower's principal residence up to an amount of $729,750 (higher if the property is 2 – 4 units).

HAFA is meant to help borrowers who either do not qualify for a HAMP loan modification or who have been unable to keep up their payments under such a plan. A major time-saving feature of the HAFA program is that the financial information already gathered in the loan modification application will be used to determine eligibility for the short sale program.

Prior to approving a borrower to participate in a HAFA short sale the servicer must determine the minimum acceptable net proceeds that the investor will accept. Each servicer must develop a written policy, consistent with investor guidelines, for making that determination. Then, once a borrower has been approved for the short sale program, the net requirement may not be increased for at least 120 days.

A borrower's approval is expressed in a standardized Short Sale Agreement (SSA). The SSA must be good for at least 120 days. No foreclosure may take place while the agreement is in effect. The SSA requires that the property be listed and actively marketed with a "licensed real estate professional who is regularly doing business in the community where the property is located."

Within three business days of an executed purchase agreement, the borrower is to submit a Request for Approval of Short Sale (RASS), which is also a standard form. Within ten days of receipt of a completed RASS, the servicer must indicate approval or disapproval. The approval cannot be contingent on a lowering of the real estate commission that had been agreed to. Also, the approval cannot require a closing in less than 45 days. Again, no foreclosure may take place during the period approved for closing.

One of the common hang-ups in short sales is the matter of junior liens. HAFA takes this into account, although perhaps not to a degree than junior lien holders might wish. The servicer may "authorize the settlement agent to allow up to an aggregate of $3,000 of the gross sale proceeds as payment(s) to subordinate mortgage/lien holder(s) in exchange for a lien release and full release of borrower liability." Each lien holder may be paid up to 3% of their unpaid balance, but the aggregate of such payments may not exceed $3,000. They are paid up to 3% in order of their priority.

HAFA has financial incentives for all parties. The borrower receives a $1,500 relocation allowance, paid at closing. The servicer receives $1,000 for administrative costs. The investor will be paid one dollar for every three that had been paid to junior lien holders. If $3,000 had been paid to juniors, $1,000 would be paid to the investor.

The HAFA program will not apply to all loans, but it will cover a lot of them. Hopefully, it will bring a little more order and sanity to the process.

Published: January 26, 2010

Posted by Philip DeLizio on January 27th, 2010 9:08 AMPost a Comment (0)