The Short Sale

Will you see more "Foreclosure" signs in your neighborhood? It depends on whether the homeowner learns about an alternative called "The Short Sale."

Mortgage loans during the first half of this decade were deceptively easy to get. Now, as the impact of the sub-prime mortgage crisis is becoming more and more clear, thousands of homeowners are resorting to a method to sell their home for less than they owe on it as a means to escape foreclosure.

The process many distressed Sellers are using is called a “short sale,” and if done properly, it allows for a “win-win” between the lender and the beleaguered homeowner.

Before exploring the process further, let’s look at the numbers… they’re staggering. The mortgage industry says that sub-prime lending practices between 2001 and 2004 raised the mortgage default rate to between 3% and 6%. The good news is that upwards of 94% of all borrowers are making payments on their mortgages, but that 6% of borrowers who are in default amounts to $548 billion (with a “B”) in property nationally headed to foreclosure.

So what is a short sale? Simply put, a short sale is when an owner who’s in default on his or her loan sells the home to a third party for less than the amount owed, and the bank forgives the difference. The primary winner is the owner, because the transaction reads as a paid lien or judgment — rather than a foreclosure — on his or her credit report. But the bank also wins because they capture as much of the non-performing loan as possible. And neighbors and communities win because the stigma of a foreclosed property can have a negative impact on other homes on the market nearby.

Homeowners who are having difficult making their mortgage payments and who may be considering a short sale must generally meet three qualifying criteria: 1) they must be at least two months behind on their payments, 2) they must be able to prove a legitimate hardship, and 3) they must have little or no equity in their home.

So why don’t more short sales happen? Some homeowners don’t realize that their home qualifies for a short sale. (By definition, if the amount owed on a home is more than the current market value, the property is a candidate for a short sale.) Further, many homeowners already behind on their mortgage payments don’t realize that a short sale is an option. According to Freddie Mac, of homeowners who have loans that enter into the foreclosure process, 50 percent did not have contact with the lender before foreclosures began. Others might only have talked with the loan servicer’s collection department — whose income is based on collecting a debt… not finding ways to “work things out.” A short sale is also a great deal more complicated than a “normal” real estate transaction. In addition to the normal cast of characters (Buyer, Seller, two agents and Buyer’s lender), a short sale can also include the Seller’s loan servicer, the loan servicer’s loss mitigation department, housing counselor, junior lienholders, mortgage investors and mortgage insurers.

The first step for a homeowner is to determine if a short sale is an option. Contact a professional Real Estate Broker — like me — who is certified to participate in a short sale transaction. After consultation, a plan can be put into action to guide the homeowner through the short sale maze. If you have questions concerning short sales, please don’t hesitate to call me at 919-402-1242 or e-mail me at rflinn@fmrealty.com.

Does Population Growth Equal Housing Growth?

The headlines were abuzz a week or so ago, talking for once about a positive story: North Carolina's population continues to grow. More than 180,000 people moved to the Tarheel State in the year that ended July 1, 2008. Since last summer, our state grew at a rate of 2 percent -- the fourth-highest in the nation and more than double the national growth rate.

Why is this good news? Because population growth mandates that people have to live somewhere. Statistically speaking, nearly 70% of people who live in our area own the homes they live in. So, of those 180,000 folks moving here, 126,000 of them will be looking for a home to buy in the near future.

Real Estate colleagues of mine in other parts of the country would do just about anything to be able to claim statistics like that.

Here in the Triangle, we are seeing a drop in the number of homes on the market. There were 18,600 homes listed in TMLS at one point in September. And the numbers fell in October, November, and December. At this writing, more than 17,600 listings are currently on the market in the Triangle. But this drop in inventory is a good thing. One very smart person I know anticipates that inventory might get low enough again in the next year or so that we could even be looking at a housing shortage because many builders are no longer building. When this happens, the value of resale homes will begin to increase again as demand outpaces supply.

With the firestorm of negative news concerning the economy, I thought you'd appreciate a glimmer of hope.

I hope everyone has a very happy and prosperous New Year!

Robert Flinn, REALTOR®
919-698-2040 (Direct)
919-402-1242 (Office)
rflinn@fmrealty.com (email)

What Good I Have Done

When the Christmas tree goes up at my house, it’s accompanied by a televised holiday classic that we’ve recorded at some point over the years. It might be “A Charlie Brown Christmas” or “Rudolph The Red Nosed Reindeer” or the “Saturday Night Live Christmas Special” that’s playing in the background while lights and decorations go on the tree. Most of these shows were recorded directly off the air — with commercial breaks intact — and so spots from 10, 15, and 20 years ago are saved for posterity on VHS.

My career before Real Estate was in the local television business…. making TV commercials that tried to convince viewers how great the News team was or how accurate our weathercaster could be… or even what was going to be on Oprah tomorrow at 4:00. I spent 18 years in that line of work and yet, of all the television shows we’ve saved in our Christmas archives, not one of them has any of my work on them. It’s like all of that effort… all of that time invested… simply didn’t count for anything in the long run.

By contrast, this week 11 families will be celebrating their first Christmas in a new home that I helped them acquire this year. 9 others will open gifts under their tree for the second Christmas, 8 more will celebrate their third Christmas and 12 more will be celebrating their fourth yuletide season after buying a home with my help. And that doesn’t include the folks who sold houses through my affiliation with Fonville Morisey and who are now living in other places.

I much prefer the latter legacy.

One doesn’t have to look too far to realize that the world can often be a pretty crummy place. Difficult circumstances, evil people, or just plain bad luck can rain down on us at any given moment. The place we call “home” is where we can come at the end of a rotten day, close the door and shut out all of that conflict. “Home” is oursanctuary… it’s our refuge. It’s where love resides. It’s where care endures.

In my work, I have the privilege of being able to help people find that special place for themselves and their family. It’s a wonderful moment when I open the front door for someone, they walk into the home for the first time, and they get a sense that they’re welcome there… that there’s peace and contentment there… that they’re “home.” And I helped put them there.

And believe me, that’s way better than having a commercial on television!

Robert Flinn, REALTOR®
919-698-2040 (Direct)
919-402-1242 (Office)
rflinn@fmrealty.com (email)