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

News out of Washington D.C. was good today if you are thinking about buying a new home. The soon-to-expire $8,000 First Time Home Buyer Stimulus Program has been extended until April 30^th, 2010. Further, there is a provision to that will allow many current homeowners to take advantage of the economic stimulus.

Here are some of the key details for First Time Home Buyers:

• “First Time” is defined as anyone who hasn’t owned real estate in the past 3 years
• The tax credit is $8,000 or 10%, which ever is less
• There are income restrictions ($150,000 for individuals and $225,000 for married couples)
• Properties must be under contract by April 30^th, 2010 and close by June 30^th 2010

Here are some of the key details for Current Homeowners:

• Homeowner must have owned a primary residence for 5 consecutive years within the past 8 years.
• Purchased home must be less than $800,000
• Income requirements and expiration dates are the same as for “First Timers”

I you have any questions about this government program, feel free to call me at (708) 790-8705 or send me an email at John.Plepel@EscrowRE.com. I can also refer you to either a mortgage or tax professional if there are questions that are beyond my base of knowledge.

According to CNN.com (click here for the article: http://www.cnn.com/2009/POLITICS/10/28/senate.homebuyers.credit/index.html ), the senate is reportedly close to an agreement that would extend the tax credit program.  Additionally, the article says the new bill will also include a tax credit for current homeowners who purchase a new home.

The bill will also need to go to the House of Representatives and there are many details that still need to be disclosed, including income requirements.  I will forward more information when I come across it. 

In addition, if you would like to speak to a lender about these programs, feel free to drop me a line (john.plepel@EscrowRE.com or 708.790.8705).  I have a couple good loan officers I can refer you to.

I am often asked, especially by first time home-buyers, where to start and what to expect out of the home-buying experience.  Accordingly, I thought it would be a good idea to write an article regarding “The Process” of purchasing a home.

Mortgage Pre-Approval

Unless you are planning to write a check or bring a briefcase full of money, I always suggest that the first step should be to meet with a loan originator (they may call themselves a mortgage broker, mortgage counselor, loan officer, or anything that sounds similar.  Don’t worry, they all more-or-less mean the same thing).  This can be done at your home, at their office or even over the phone.

A good loan originator will be able to provide you with a copy of your credit report, discuss your loan options (FHA, conventional, fixed, ARM, etc.), give you an idea of how much you can borrow, and provide a “Pre-Approval Letter.”  They will also let you know what documents you will need to start gathering so you are ready when the right house comes along.

Choose a Real Estate Agent

A typical home search can last from 30 to 90 days, but I have clients that I have been working with for nearly 2 years.  What this means is that you are going to spend a lot of time with your real estate agent.  It is a good idea to make sure that they are not competent, but that their personality is a good match for you.  You may want to interview an agent or two and ask your friends/family if they would recommend the agent that helped them buy their home. 

Start Looking

This is where the fun really begins.  You are preapproved, so you have an idea of what you can afford.  You have chosen a good agent who is helping you understand the market.  You have probably made a list of needs and wants for your new home.  It is time to start looking.

The internet is by far the most efficient place to start.  Have your agent set you up on an automated search of listings and make sure the search automatically includes new listings so you are the first to see the best deals when they hit the market.

Some people like to start with open houses, while others prefer to start looking at homes with a professional.  There is no right or wrong way.  The one piece of advice that I do give is to do a drive-by of any homes you think may be a good fit.  This will not only give you a chance to see the more of the exterior than the MLS photos provides, it will also give you a chance to see the block.  Ask yourself if you can imagine coming home to this block every day.

Your agent will be able to give you a lot helpful guidance and advice, but it is up to you to decide what you do and don’t like.

Negotiation

Once you have found the right home, it is now time to get it for the right price.  Your agent should be able to provide you with plenty of market data.  Ask your agent if they have a strategy for negotiations.  A good agent will be able to say more than “lets make an offer and see what happens.”

A couple things other than price that you may want to consider when negotiating are: Closing Date, Earnest Money, Contingencies, and your loan.  You may be able to make your offer stronger with one or more of these terms and still buy your home for the price you want.

Acceptance

Once your offer has been accepted, there are a number of things that happen right away.  This includes hiring an attorney to look the contract over, finalizing the loan application, and conducting a home inspection.

This first week can be very hectic and there are even more things happening behind the scenes, such as scheduling an appraiser and reviewing the documents required for the loan.

Underwriting

After the first week or two, there is typically a period when it seems like nothing is happening.  The appraisal has been ordered.  The inspection issues have been negotiated.  And you have secured hazard insurance for the new home.  This is a good time to catch your breath and maybe pick out some drapery.

About a week or two before closing, there is usually another flurry of activity.  It usually starts with your loan originator calling to tell you that the bank has issued a “conditional approval.”  This means that there the file looks good, but the underwriter wants some additional information or documentation.  This can range from another verification of your employment to a paid receipt of your homeowners insurance.

Closing

A “Closing” is the actual sale of the property.  By the time you get to the closing table, everything should be decided and negotiated already.  Your attorney will receive a HUD-1 (sometimes referred to as a RESPA) a day or two prior.  This is the document that shows all of the items that are paid to and from each party.  The bottom line of the HUD-1 is the amount you will need to bring with you that day.

Post Closing

Congratulations, you have purchased a new home.  Before you unload the moving truck and have your house-warming party, there are a couple things you might want to consider:

• Taxes:  Owning a home may impact your tax returns.  It is a good idea to talk to an accountant to see if there are any changes you should make regarding your returns.  You may also may want to ask if there are any additional documents that you need collect for your tax returns now that you own a home.
• Life Insurance:  You just made what is probably the largest purchase of your life.  At the same time, you may have just taken out the largest loan of you life as well.  It may be a good time to talk to an insurance agent or financial advisor to discuss if a life insurance policy worth at least the loan balance would be a good idea to protect your family in the unlikely event that tragedy strikes.
• Locks:  I always recommend hiring a locksmith to come and change the locks.  The seller is obligated by law to give you all of their keys, but you never know what keys they may have lent to family or friend over the years. 
• Celebrate:  There has undoubtedly been a lot of excitement and stress in the previous months.  Take some time to celebrate this milestone in your life. 

Here is the real estate market report for the 4th Quarter 2008 - Oak Park. I have also included a Year-End Insert Page.

Let us know what you think.2008 Q4 Oak Park Market Report

2008 Oak Park Market Report - Year End Insert

Do you have a house or condo that you want to sell, but it is not listed?  Here is your place to list it for FREE.  You can even upload photos if you would like.  Be sure to leave contact information in case someone is interested in learning more about it.

Here are the rules:  1) Although we call this “For Sale By Owner,” feel free to post rental listings here as well; 2) Please don’t post here if your home is already on the MLS with a Realtor.  3) Please notify us or post on the site when you sell and/or rent your place.  You may even get a “congradulations” from someone.

That’s it.  Should be pretty easy.