OPRF Real Estate Blog

New legislation went into effect last week to help homeowners that are “upside down” with their mortgage avoid foreclosure.  The Home Affordable Foreclosure Alternatives Program (a.k.a HAFA) gives participating banks specific guidelines, including timelines, for processing “short sale” transactions.

The program is somewhat of an extension of the Home Affordable Modification Program (HAMP) that gave incentives to banks to offer loan modifications to homeowners facing loan default.  Upon request and within 14 days, the bank is to use the financial and hardship information previously collected for loan modification purposes, to provide pre-approved short sale terms before the homeowner lists the property, including minimum acceptable net proceeds.

In addition to pre-approving the short sale, the participating bank is required to fully release the borrower from future liability.  This is significant because some banks previously would agree to release their lien on the property but NOT release the debt, thus converting the loan to an unsecured loan.  Additionally, the bank is not supposed to require a cash contribution from the seller in order to approve the short sale.

The government has stepped in to provide the bank with $1,500 to cover administrative costs and the homeowner with $3,000 for relocation assistance.  In order to facilitate transactions with more than one lien (i.e. home equity loan or delinquent real estate taxes), the government is offering to match one for three any proceeds that go to subordinate lien holders, up to $6,000 ($2,000 from the government).

Although the program is voluntary on the bank’s part, more than 80 banks and loan servicers have already signed on to participate.  The only apparent downside of the legislation is that there are no specific penalties for non-compliance.  The program went into affect on April 5, 2010 and is set to expire on December 31, 2012.

If you or anyone you know is in need of foreclosure avoidance services, please contact me at John.Plepel@EscrowRE.com or on my cell at (708) 790-8705.  In addition to knowing how to use this new law to your benefit, I have also lined up a group of professionals that are available to address any other specific concerns you may have.  These professionals include an attorney for legal advice, an accountant to make sure you avoid any unexpected tax implications, and a lender to help you put together a plan, if desired, to qualify for homeownership again in the future.

The number of single-family homes that sold in River Forest during the first quarter of 2010 (18) increased by 50% over the first quarter of 2009.  However, the average sales price of $581,166 was a 28.5% lower than Q1 of 2009 ($763,000).  Further, the average market time nearly doubled from 181 days (6 months) in Q1 2009 to 330 (11 months) in Q1 2010, indicating continued weakness in the overall market. 

Since the first quarter is historically the slowest in terms of transaction volume, I am always concerned about “adverse selection” (i.e. more large homes selling than smaller ones skewing the average or vise versa) when looking at Q1 market info.  Accordingly, it is prudent to look at the trailing 12-months of data vs. the previous 12 months.

Unfortunately, this larger sample size confirms the downward direction of property values, with the average sales price from the past 12 months ($675,655) 23% lower than the previous 12 months ($878,897).   Average market time has increased as well, increasing from 163 days (5 months) to 182 days (6 months).   

The sole positive indicator is the number of sales, which increased 11.6% to 77 transaction in the past 12 months compared to 69 transactions in the previous 12 months.  While some of this increase is likely due to the Housing Stimulus offered by the federal government, it is somewhat encouraging to see buyers coming back to the market. 

Transaction volume is an often overlooked indicater for property values.  However, it is critical that transaction volumes remain at or above current levels in order to keep downward pressure off of seller to reduce prices.

If you have any questions about the market or your home’s value, feel free to contact me at John.Plepel@EscrowRE.com or call me on my cell phone at (708) 790-8705.

The number of single-family homes that sold in Oak Park during the first quarter of 2010 (42) was slightly higher the first quarter from 2009.  Further, the average sales price of $407,249 was 8.1% higher than Q1 of 2009.  Additionally,  the average market time dropped 47.5% from 179 (6 months) in Q1 2009 to 94 (3 months) in Q1 2010. 

While this is some of the best real estate news our market has seen in some time.  I would caution that the first quarter is by far the slowest of the year.  The low number of transactions can sometimes lead to “adverse selection” (i.e. more large homes selling than smaller ones skewing the average).  

I look forward to seeing if this trend continues into the second quarter.  Anecdotal evidence suggests that the second quarter, aided by the Federal Housing Stimulus, should be strong. The real test will come in the third quarter when the stimulus incentives are no longer impacting the market.

If you have any questions about the market or your home’s value, feel free to contact me at John.Plepel@EscrowRE.com or call me on my cell phone at (708) 790-8705