Selling Your Home In A Glut

Sell Your Home: One of 4.03 Million just like it

I once read that the odds of a squirrel stealing your keys are 1 in 4 million.

Do you feel really lucky?

If you do and you think this could be your day, you might want to take a stab at selling your house before your lender runs out of patience and forecloses. Right now there are a little more than 4 million houses on the market. Do you think you can do it by the end of business today?

If you’ve gotten a letter from your lender telling you that you need to either pony up some cash to reinstate your loan or face foreclosure, you may decide that selling your home is the only logical solution you have. So you plant a big “For Sale” sign in your yard, string up some fancy balloons and wait. And wait.

The foreclosure clock runs very quickly, especially when you have to try to sell a big ticket item that’s as in demand as back rubs in a leper colony. That clock could seem like it’s running even faster if you decide to go it alone and save money on a real estate commission.

Houses will sell, but if you have very little equity or your home isn’t in pristine condition, it could take even longer. You can increase your home’s chances of selling, but it might require you to pump some cash into your property in the form of repairs. If you don’t have the money to reinstate your mortgage, it’s unlikely you can raise enough cash to make repairs that might make it more appealing to a potential buyer.

If the idea of negotiating with a potential seller doesn’t appeal to you, it would be in your best interest to call a trained real estate professional. Is selling your best solution in today’s market? By getting ahold of a professional with a thorough knowledge of the local real estate market, you can find out what all of your options are.

An independent analysis by a trained professional can give you a free, objective look at what you might be able to work out with your lender. If your real estate professional recommends selling, a full marketing plan can be developed that can best position your home for the quickest sale possible.

Make the call. It can’t hurt – and it could very well be the difference between an equitable solution to your crushing foreclosure problems and major disappointment.

Why We Face More Foreclosures

I am a real estate agent. My profession is predicated on the American dream of owning a home. But even if hope springs eternal in my heart, I am enough of a realist to know that the economic crisis will continue at least maybe for the next few years. Despite the abundance of evidence to the contrary, many want to tout their rosy predictions for a housing boom that will supposedly soon take place. After all, prices have gone down as far as they possibly can, so there is no way for them to go but up — right? Wrong. Housing prices may continue to decline and this is mostly due to the fact that the inventory of houses is too great. Why? Foreclosures, plain and simple.
It is estimated that another five million delinquent mortgages will go through foreclosure (or short sales) over the next few years. Right now, an estimated 7.7 million households are in some stage of pre-default delinquency.
Here is why more foreclosures are coming our way:
1. Unemployment
One in five Californians is either unemployed or underemployed. The over-all unemployment rate in the country is over 10% though nobody really trusts that number. About $8.4 million jobs have actually been lost since the start of the recession. Jobless claims are rising. Companies are unwilling to hire. If layoffs continue, there will be decreased consumer spending. It is not clear whether the $35 billion jobs bill will significantly encourage firms to start hiring again. Sadly, more people will lose their homes because they will choose to prioritize food and other necessities over mortgage payments.
Statistics show that if a homeowner misses one payment, there is a 25% chance of recovery; if two payments are missed a 5% chance and once 3 payments are missed, there is only 1% chance that the homeowner can recover.
2. Negative Equity
Twenty three percent of mortgage holders are in negative equity. They owe more than what their homes are worth. The doomsayers say that in 2011 almost half of homeowners will be in this situation. How long will a person who is experiencing loss of income continue to pay for a loan that is not backed by a property equivalent in worth? The only way out would be to go into foreclosure or arrange for a short sale.
3. Housing Inventory — Real and Shadow
Laurie Goodman of Amherst Securities explained it best when she said in late 2009 that about seven million homeowners in the country are not paying their mortgage. This means that approximately about 13.5% of homeowners have missed at least 1 payment – a potential source of defaults.
There exists an inventory of homes in the market. But what many are unaware of is the shadow inventory – the notices of default, bank-owned REOs and auction listings – all of which will surely further contribute to the ongoing real estate crunch.
The domino effect is at work. The more houses getting foreclosed out there, the more prices decline. The more prices decline, the more in danger the whole real estate sector and the economy is — which, of course, in turn, leads to higher unemployment etc. and, yes, inevitably, foreclosure.
4. Mortgage Interest Rates
We hear it all the time – mortgage rates are at historic lows. But, by the end of March, when the Fed Chairman is expected to exit the buying of mortgage backed securities, interest rates will most likely climb. How does this affect anything, you say? When interest rates go up, the purchasing power of borrowers who need loans, goes down. A borrower who was previously pre-qualified for a loan at 5% with a debt to income ratio of 31%, will now no longer be eligible for the loan amount they had applied for it there is even a 0.125% to 0.25% increase in the mortgage interest rate. The pre-approved loan now goes down by as much as $50,000 to $75,000.
If the purchasing power goes down, guess what else goes down. That’s right – home prices in order to make them more affordable to the average income borrower. Then, as in the scenario painted above, everything else is affected and the homeowner once again is in danger of facing foreclosure.
5. Economic Non-Recovery
Although the present crisis is unmistakably linked to the collapse of the booming housing market in the United States, it is also safe to say that subprime lending is not the only origin of this recession. Government activities such as the weakened regulation of Fannie Mae and Freddie Mac, miscalculation by banks and investors, oil prices, the deregulation of markets and many other factors come into play. In other words, it is an oversimplification to say that recovery will come before long because the housing market will soon “stabilize.” So, as more wrongful political policies are enforced and financial markets remain volatile, the economy doesn’t stand a chance of recovering soon. Homeowners face greater challenges ahead.