Nail 1- The end of the First Time Homebuyer Tax Credit.  While there is some debate on how big an impact the Tax Credit has had, there can be no debate on how its elimination (when combined with the other two nails) appears devastating to continuing the momentum.

Nail 2- The slowing, and eventual end, to the Federal Government’s purchase of Mortgage Backed Securities.  In 2008, 99% of all loans sold in the Secondary Market were bought by Uncle Sam.  When he moves to the sidelines on March 31, rates will climb swiftly.  It’s the only way to attract other buyers of MBSs back into the market.  Bottom line mortgage rates 1-1.5% higher than most buyers have become used to……and home sellers reluctant (or financially unable) to reduce prices 10-15% further to compensate.

Can anyone else see the faucet being turned off?

Today, we add the third nail.  Basically to lessen defaults on FHA loans (which have constituted more than 50% of the loans closed in some markets), guidelines are being tightened….even though we don’t have a definitive date for it yet.

1.      Lower FICO scores (below 580) will now require a 10% down payment….a significant jump from the current 3.5% down payment.

2.      The Up Front Mortgage Insurance Premium is being raised from 1.75% to 2.25%.  While this amount can be financed into the loan, it still raises the cost of home buying.

3.      The allowable seller’s concession (by which sellers have been able to pay closing costs on behalf of their purchaser) has been slashed from 6% to 3%.

While I understand requiring more cash in the deal for people who have not demonstrated good credit histories and raising the insurance costs to defray losses, I personally do not believe in reducing the allowable seller’s concession.  I acknowledge that by having more of the buyer’s money in the deal may make them more likely to fight to stay in the home, rather than walk away, I cannot believe that that potential benefit outweighs the number of people who will be forced to continue to rent because they cannot save up an additional 3%.  Taking buyers who would qualify for financing based on their income and credit, and keeping them in apartments when the market so desperately needs them to buy NOW doesn’t make sense to me.

Regardless, we need to adjust to the landscape.  Buyers who were even debating buying need to find a home, get into contract and apply for a mortgage today….waiting even for April 30 could be disastrous.  Home sellers need to price their homes to sell TODAY and not “wait for spring”.  At this point, I can see a first-time buyer who waits until May losing the $8000 tax credit, having to need 3% more cash, and paying a 1% higher rate……my advice, don’t look back with regret.  ACT and celebrate your decisiveness.

This weeks results of the public auction held each Tuesday at 11:30 AM in the Calender Control Part (CCP) Courtroom of the Supreme Court, 100 Supreme Court Drive, Mineola, NY was as follows:

Nassau County Long Island Foreclosure results 11/10/2009

Since the short sale is now so prevalent, I figured I’d share my experience with everyone, since it could benefit a lot of people. Here are my short sale purchase tips, in no specific order:

• In a short sale the deal is still negotiated with the homeowner with his or her agent. The listing agent or sellers attorney is really the key to the transaction. If the paperwork in a short sale package is incomplete the entire process will go no where. I am finding that there are a lot of Realtors trying to do short sales with no real experience.However, once you come to terms in your negotiation, the signed offer is sent to the bank holding the note to get their approval. They, the bank may take months to accept, reject or counter the offer already agreed upon. A strong offer in a short sale has NO CONTINGENCIES, offers a significant amount in down payment (LTV), preferably cash deal, quick close, and accept in as is conditions.
• The asking prices Realtors offer Long Island short sales for are somewhat based on comparable sales. However the home is worth less than the mortgage note the homeowner is on the hook for, and, as I mentioned previously, it’s the bank that’s calling the shots now, not the home owner. The fact that the homeowner has no equity at stake gives them the freedom to advertise a price that is very aggressive, in order to get a great deal of interest and multiple offers.
• Back in the mid 2000s, if you brought a fully qualified offer at list price for a home with no contingencies on the contract, and there were no competing bids, that house was pretty much yours. Now, since the list price is very aggressive, and the person who is selling the house doesn’t call the shots on the deal, a fully qualified offer at list price doen’t means a thing. It’s all up to the bank whether your offer will be accepted.
• Despite the fact that your fully qualified, no contingency offer doesn’t mean what it once used to, you pretty much have to bring one anyway. The bank is going to do its best to force the buyer into an ultimate “caveat emptor” situation with no wiggle room to get off the hook.

Understanding the points above, it behooves the buyer of a property that is being sold short to plan ahead and expect a drawn out process. Consider the following…

• If you are looking to buy a Long Island home and have a short contract-to-closing timeframe in mind, the short sale might not be for you. The bank probably has a huge backlog of short sales to work through, and as I mentioned above, they’re just not set up to handle these transactions expeditiously.
• If you have need to sell a property in order to buy the short sale, sell your property before even considering the short sale purchase, since the bank isn’t interested in your home sale or home close contingency.
• Once you’re ready to submit a contract on a Long Island short sale property, have a thorough home inspection done by a trusted, qualified, and licensed home inspector. Since you’re probably going to have to come up with a no contingency offer, you have to get your inspection done up-front.

And finally…

• Make sure you have a real estate attorney who has experience handling Long Island short sales. The process can be very intensive, and the contract is most likely not going to be a standard real estate contract a Realtor is accustomed to dealing with.
• Understand that you are going to contract subject to a 3^rd party (the bank, investor and often a mortgage insurance company) approving the short sale
• If you have a Realtor assisting you with purchasing a home on a short sale basis, and they aren’t providing you with the kind of tips and insights in this article, IMO, perhaps it’s time to find a new Realtor.
• If you think you might owe more than your home is worth and need to sell, make sure the Realtor you hire has lots of experience with Long Island short sales.
• There are opportunities for buyers in the Long Island short sale inventory, although it takes patience.

Has the Long Island housing market bottomed out?

There is no doubt that the Long Island real estate market is heading in a much more positive direction. Sales of existing homes, pending sales of existing homes and sales of new construction are all up. The media headlines are now mentioning and, in some cases, are exclaiming that we have reached a bottom. However, let’s not lose track of the real data behind the headlines.

Things are better. But, we still have a long way to go. For example, though it is true that nationally new construction sales shot up 11% in June, June has historically always been the best month of the year for this category. And, in actual units delivered, this June was the worst June since 1982! I am not trying to play the role of the pessimist just as I wasn’t playing the role of the optimist this past winter when I said the market wasn’t as bad as the media was reporting. I try to be a realist. What is reality telling me right now? All our hard work over the last twelve months is starting to pay off. Let’s remain diligent in the pricing of Long Island real estate to ensure we keep the present momentum going.

Now might be the time to pull the trigger on that Long Island real estate purchase. According to this year’s National Housing Pulse Survey from the National Association of Realtors:

83% of Americans still believe buying a home is a good financial decision.

75% of those surveyed also believe now is a good time to buy a home, a number that has increased steadily the past two years.

33% of renters are thinking more about buying a home than they were a year ago.

If you have any questions about whether it is the right time to buy or sell Long Island real estate feel free to contact me, Erik Reilly by cell/text 516.984.0789 or email reillyerik@aol.com

Plaintiff (Bank)          Address                     Town             Upset price               Result

Option One                 10 Downs Rd               Hempstead    $202K  investor $108,000

Citi Mortgagae  529-3B W. Broadway     Long Beach     investor*   $225,000

Indy Mac               80 Rockaway Ave          Rockville Centre      investor $380,000

JP Morgan            57 Claflin Blvd                  Franklin Square        $315,000 Bank

Perla?           500 Nassau Rd Roosevelt $650,000 Bank

Indy Mac           5 Welsley St                     Hempstead          $128,840 investor $156K

Lasalle           22 Lorraine Dr               Island Park          $171,500  investor $172K

HSBC                    207 Randall Ave             Freeport                 $366,686 Bank

Emigrant               33 Ave A                          Inwood                  $155,186  Bank

American Home 83 Fairview Blvd        Hempstead        $225,000 investor $258K

Fundex?     142 Cherry Valley  Ave       Garden City          $1,201,650  (2nd) Bank

Wamu         349-351 Central Ave              Lawrence             $997,778   Bank

BS Re?          390 Emerson Pl                       Uniondale           $195,000    Bank

Deutch        477 Sterling Ave                     Uniondale            $178,500 Bank

Citi Mort     54 Sycamore Ave                   Floral Park           $348,000     Bank

HSBC          19 S Cottage St                       Valley Stream     $259.237     Bank

Notes;

68 Scheduled, 16 auctioned, Plaintiffs (Banks) took back 10, investors bought 5, *Bank of America bid on the Long Beach unit, up to the winning bid of $225,000 and won the bid. (I have only seen that once before in the last 2 years of attending the auction) My thinking is that it was a first lien protecting it’s position over the foreclosing second lien holder, or vice versa.

The Garden City auction was interesting as the upset price was stated as over $1.2 million. One of the investors asked the Referee if it was a first lien that was being auctioned. The referee responded that it was not and that it was a second lien. The investor asked further how much the first was for and he responded that the first was for $800k with negative amortization to $1.3 million.

(Calculations are done excluding zero-values except for %Difference)

Counts

(Calculations are done excluding zero-values except for %Difference)

Counts

Stats are just stats. They don’t tell the truth & they
don’t tell lies. Some observations though— Volume (the # of houses
sold) was way up over the 2Q. Average and mean selling price also
up—compred to the 2ndQ 2008. What does that tell us? That selling
prices are going up? No they are not. It tells us that Oceanside Real
Estate Sellers have been humbled, have reduced their prices, and sold
their houses at what the market will bear. Houses that did not sell for
$650,000 were reduced in price to the low $500K and finally sold, after
2-3 years on the market chasing prices.

Homebuyers Tax Credit

An opportunity like this does not come around too often. With the recent
signing of a major housing stimulus bill, it’s now a great time to close on
your first home. On July 30, 2008, the Housing and Economic Recovery Act of
2008* was passed, which includes a new, temporary tax credit as an incentive
for first-time homebuyers. With this bill, first-time homebuyers may qualify
for a tax credit of up to $7,500* for the purchase of a principal residence.

• The National Association of
  Realtors First-Time Homebuyer®
• The National Association of
  Realtors®

Before you decide to use the first-time homebuyer tax
credit, please remember to consult with a tax professional.

*Housing and Economic Recovery Act of
2008. Consult a tax professional for details. Credit expires June 30, 2009.