• LOW INVENTORY – fewer homes for sale is increasing demand. Currently 10,325 active listing

• MULTIPLE OFFERS -  for homes under $300k

• APPRAISALS – still a challenge but coming in higher than last year

• DAYS ON MARKET DOWN 13% (103 DAYS)
  AVERAGE SOLD PRICE UP 4% ($260,000)

Congress allowed two important tax breaks for home owners to expire at the end of 2011 . Make sure you enjoy the deduction on your 2011 taxes, because beginning with the 2012 tax year:

1. You can no longer deduct the cost of private mortgage insurance premiums.

2. You aren’t getting a tax credit for some of your home energy improvements.

You can take advantage of these provisions when you file your 2011 tax return — but beyond that, who knows.

Now that Congress is back in session, it’s likely going to pick up where it left off — arguing about what programs to cut and what taxes to raise. The programs, deductions, and tax credits supporting home ownership belong at the top their to-do list.

Up until the end of last year, you could deduct your private mortgage insurance premium (PMI) when calculating your income taxes. It was a benefit targeted to lower- and middle-income home owners. Once you made $100,000 or more, it started disappearing and anyone who had more than $110,000 of adjusted gross income couldn’t use it.

The home owners who have to get mortgage insurance are buyers with less than a 20% down payment and refinancers with less than 20% equity. That’s more often first-time home buyers or younger home owners and less often move-up buyers who’ve built up equity in their homes. So in taking away the PMI deduction, Congress is raising taxes paid by first-time home buyers and younger home owners leaving them with less money to spend on housing. That’s especially wrong-headed when the housing market is struggling to recover.

The tax credit for energy efficiency upgrades wasn’t enormous — it was capped at $500 or 10% of the cost for some projects; less for others. But it was a nice incentive to add insulation, new windows, or to upgrade your HVAC system with a more efficient unit — exactly the kind of actions that help decrease our dependence on fossil fuels, leading to a cleaner environment and less outflow of U.S. income to foreign countries. Not to mention, hopefully, smaller utility bills.

In 2012, home ownership and energy independence advocates will fight to get those expired tax rules back on the books and to have them apply retroactively. It’s a familiar fight — they had to do the same thing at the end of 2010.

But this year, the battle is more complicated because there’s a presidential election, discord between the major parties, and a general lack of consensus on any issues.  Hopefully they will be renewed!

1. Determine The Most You Are Willing To Pay: Work with your agent to get a report of similar homes that have sold and determine the “maximum” you are willing to pay.

2. Offer Your Maximum: If there are multiple offers and you are convinced this is the home for you, present your “maximum”, often called highest and best, and that way if you get outbid you don’t have any regrets

3. Don’t Believe Your Friend Who Says to Offer 10% below list price: While some people will tell you to always offer X % below asking price, this simply is not true when buying foreclosed home in Colorado. It is competitive. Most foreclosed homes in Colorado sell for 99% of list price. Some sell higher. Your agent can give you professional advice to make a strong offer but without paying too much.

4. Tighten Up Those Dates! - When you write an offer to buy a home in Colorado, we have a date table for all kinds of “outs” for the buyer, otherwise called contingencies. These include a deadline for inspections, appraisals, final loan approval, etc. If you back out of the contract for one of those reasons (on or before the deadline for that contingency), you get your earnest money (deposit) back. If you want to give yourself the best chance of beating out another offer, take out the contingencies you are willing to waive. The ones you need, make the dates as soon as they are feasible to accomplish. This includes closing.

5. If possible, close in the CURRENT MONTH - this is self explanatory, but sellers  (if all other factors in the offers are the equal) will often choose the offer that can close soonest.

6. Show Them The Money! – If you can pay cash, do it! Next in order of preference is a conventional loan with a strong down payment. Last on the pecking order is an FHA loan because it has more hoops the buyer/seller/property need to jump through and increases the likelihood of it falling through. When given the choice, sellers prefer cash buyers and then conventional buyers.

7. Increase the Earnest Money – having a higher earnest money and/or a portion of it explicitly non refundable can help!

8. Take Out Concessions - It’s pretty common to ask the seller to pay a buyer’s closing costs, but in a multiple offer situation, take them OUT if you can afford to. It shows sellers you don’t “need” concessions and are therefore a stronger buyer. The seller ultimately wants the highest offer price that has the lowest likelihood of falling through.

GOOD LUCK!

For Buyers

1. The List Price is Arbitrary -The list price on a new short sale is almost always based on the listing agent’s best guess at what will (1) attract an offer and (2) the bank will approve. When you see that new listing or price reduction with a price that is so low you think it’s a typo, it doesn’t mean the bank will actually approve it for that price. Often, this is done to get an offer FAST.

2. Not All Offers Get Submitted (or even presented to the seller) – You have heard of the term “gatekeeper”? Well, the Listing Agent is the gatekeeper in a short sale. Yes, legally the agent must present all offers to the seller, but not all agents do. It’s not right (and is even illegal), but some agents wait until they find their own buyer to double end the deal and then have their owner/seller accept that offer. Shady? Yes. Does it happen? Unfortunately yes. Make sure your buyer agent is barking up the right tree to confirm your offer is presented. However, at the end of the day, if the gatekeeper doesn’t want to go with your offer, it’s just not gonna happen.

3. Cash Is King - As noted above, in Colorado, the listing agent and the seller determine which offer to accept and send to the bank for short sale approval. Many times a lower cash offer will be accepted in favor or a higher financed offer. Why? Because there is a lessor chance of the deal falling out. If the seller and agent believe the offer is still within range that the bank will accept, they would prefer to go through all the hoops only once with one offer instead of a 3 month ordeal to get an offer approved, and then the buyer can’t qualify for a loan and they start all over.

For Sellers

1. The Owner Is Still The Boss (not the bank) – When an offer comes in, YOU DON”T HAVE TO ACCEPT IT! You can treat it like a normal sale and reject it, counter it, or accept it. Often, when I receive an offer on one of my short sale listings, we counter it. We take out inclusions like refrigerator, washer & dryer, etc. We move up dates for inspection, appraisal, closing, etc. Everything is still negotiable just like a normal sale and only once you and the buyer have accepted/signed a final contract or counter does it become a binding contract and get submitted to your mortgage holder for approval.  The banks are notorious for playing hardball, but you Mr & Mrs Seller still have control in what offer, terms, inclusions, etc that you will accept.

2. It’s Based on Hardship, Not Being Underwater – When a bank reviews the offer submitted above and determines if they will approve it/counter it/etc….they are really looking at the seller’s financial hardship. They want to know with certainty that the seller does not have other alternatives based on their financial situation. Just because someone is under water and owes more than it will sell for is not the main reason a bank will approve a short sale. It is based on a valid hardship as to why a short sale is necessary for the owner.

3. Your Debt Isn’t Always Forgiven - It pains me to write this one, but not all short sales forgive the amount owed. If you owe $300k and the bank gets $250k from the sale, many people assume that the bank will write off that $50k as bad debt. Well, nowadays banks are sometimes asking for the seller to bring a % of that to closing. Some are also asking the seller to sign a promissory note for the % of that deficiency and make monthly payments after closing. Does it happen a lot? No. But it does happen sometimes, and often on a non-owner occupied short sale (investment property).  These terms are not known until the short sale has been reviewed and approved by the bank. They will send an approval letter outlining the terms. If you (the seller) don’t like the terms, YES you can negotiate to get more favorable terms…and NO…you don’t have to go through with the sale if you can’t get terms that you like.

4. It’s Not Always Best To Accept The Highest Offer - Sounds silly but here’s why (from a real life example I had) We received an offer on a short sale listing, accepted it, and sent it to the bank for short sale approval. We received approval on it, but at the same time, received two other offers that were both higher than the first. We then called for a “highest and best” from all offers, meaning they all give us their best and final offer and we would determine which we would go with. One of the subsequent offers gave us a highest and best higher than the first was willing to increase to. We kicked out the first offer and submitted this new higher offer to the bank. The bank now approved that higher price. Life is good right? Wrong. We told the winning offer they are approved and those buyers got impatient and bought another home. Neither of the other offers were willing to increase their offer to the new approved price so I told the bank we need to re-issue the approval on the lower priced offer we initially had. Guess what they said? NO!

Why did this happen. Once the bank sees an offer price, they feel that is what the home is worth. If that high offer price falls out and no other buyer will pay that much, you are stuck because the bank thinks the home is worth the higher price and won’t approve a lower price until MONTHS go by and the home fails to sell at the higher price they want.

What’s the moral to this one….I may get in trouble for saying this….but sending in the highest offer is not always the best strategy for a seller. Many buyers on short sales get impatient and often the first buyers walk away before you have approval. So, the offer you submit should be at a price that, if approved, you are confident another buyer will be willing to pay too.

5. Submitting More Offers To The Bank is Not Better – There are several reasons for this. First, See#4 above. Second, the bank then feels it’s a highly competitive property and they negotiate harder with both the buyer AND seller on terms of the short sale. Third, you want the bank to focus on one offer and take it from start to finish with approval. Every time a new offer is submitted to the bank they start the 60-90 day process over and these are the stories you hear about short sales taking a year or longer for approval.

What This Means For Sellers:

It’s an ideal time for people thinking about selling to put their home on the market because the demand is higher than it’s been over the last few years.  If you or someone you know has been thinking about selling but has been waiting for the market to improve, they should really consider selling.  Demand is very high right now.

What This Means For Buyers

For buyers, this shift means it’s more important than ever to know what homes match their needs the moment they go on the market. Prices are starting to trend upwards (up 2% from 1 year ago) because of the supply vs demand principle. My team and I actually use a custom program that alerts us the second a home is listed that fits our buyers needs so they can see it before everyone else. If you know someone who could benefit from this please let me know!

Some Other Notable Stats for March 2012 Denver Metro Real Estate

Days on Market DOWN 15%

Average Sold Price UP 2%

Sold Homes Up 11%

Justice will be 3 in May and Tasias (Cy) is 7 mos!  It’s the fastest and slowest time of our lives (parents of small kids know what I mean) but Cece & I are so grateful for our many blessings!

Thank you for your trust, business, and referrals. It means so much to me AND my family!

CLICK HERE TO SEE KIDDOS PHOTO GALLERY

What is a deficiency?

Let’s say your mortgage forecloses and you owe $300k on the mortgage. If the bank sells the home later for a $250k NET then the deficiency you are responsible for is $50k. Legally they can come back to you for that deficiency in Colorado if you foreclose. In real life this is often a debt collector who bought the $50k note for a deep discount. The deficiency can show on your credit and if it’s outstanding, can be a big black eye when applying for new credit lines and often result in denials or very unfavorable terms and rates.

IF you short sale, often the home will sell for more than it would as a bank-owned foreclosure because it’s usually in better condition. It hasn’t sat vacant for a prolonged period of time or had time for pipes to burst, landscaping to die, etc. With a higher sale price the deficiency is less.

In addition, often banks are forgiving the deficiency. Sometimes it’s just forgiven as part of the short sale. Other times they request a promissory note stating that the borrower will pay back a small % of the forgiven balance over X amount of years. The terms of this are all part of the short sale negotiations which is why it’s important to have a savvy short sale agent/broker working for you.

That being said, here is a rough outline of the major differences between Short Sales and Foreclosures. Questions – just holler – Mike – 303-669-2744 x 5 or my email is in the header of this website.

1. Consider loan modification first.
If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:

• Your property is worth less than the total mortgage you owe on it.
• You have a financial hardship, such as a job loss or major medical bills.
• You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team.
The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest. A qualified real estate professional can:

• Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
• Help you set an appropriate listing price for your home, market the home, and get it sold.
• Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
• Ease the process of working with your lender or lenders.
• Negotiate the contract with the buyers.
• Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in.
Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include:

• A hardship letter detailing your financial situation and why you need the short sale
• A copy of the purchase contract and listing agreement
• Proof of your income and assets
• Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period.
Even if you’re well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

• If you have only one mortgage, the review can take about two months.
• With a first and second mortgage with the same lender, the review can take about three months.
• With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don’t expect a short sale to solve your financial problems.
Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:

• You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
• Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
• Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.

If you or someone you know is going through a hard time and needs the help of a real estate professional please give me a call with their name and number and I would be happy to follow up with them for you. I have listed and sold many short sales and will take good care of them for you. If you have questions about your specific situation and want to get some advice feel free to give me a call too. I hope this was helpful and please call or email me if you have any questions or I can help you in any way!

Mike – 303-669-2744

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Please include signed copies of ALL DOCS below  if you are submitting an offer on a short sale listing of ours:

1. TRG Supplement to Short Sale Addendum to Contract to Buy and Sell Real Estate (will be uploaded her soon – please email requesting for now)
2. Lead Based Paint Disclosure (if built before 1978)
3. CREC Short Sale Addendum (Contract to Buy & Sell Real Estate) and please make submission deadline MEC + 5 Days
4. Copy of Earnest Money Check
5. Pre-Approval Letter from Lender if buyer is obtaining a loan
6. PROOF OF FUNDS if down-payment is more than 5% of purchase price
7. PROOF OF FUNDS if buyer is paying cash and not obtaining a loan

NOTE: The offer must be signed by buyer’s broker before it can be reviewed
SUBMISSION: You may fax your offer to 888-385-8297or email it to taylorrealtygroup@gmail.com