Oh short sales how we hate you.  Yes, they are great for buyers who just have no other choice.  But they too could face the tax consequences the next year if their lender turns that $20,000 they were short in tot he IRS.  There are other pitfalls, as well.  Melissa Zavala of San Diego Homes describes five things to avoid, including:

Multiple Offers. Short sale lenders prefer to work with one purchase and sale agreement at a time. If the offer is not accepted or the buyer walks, you can submit a backup offer. Never submit multiple offers. Submitting multiple offers slows down the short sale process.

Incomplete short sale packages. In order to assure that your short sale is processed as quickly and efficiently as possible, then it is best to send a complete short sale package—even if you have to wait a few extra days for an additional pay stub or bank statement. When the short sale lender reviews the package, if it is complete, the lender can work towards a quicker decision on the file.

Great advice. Be careful of short sales, or if you’re in the middle of one be sure you’re working with a competent agent to help guide you!

When you buy a home, it is traditional to have an appraisal done. Not for you.  For your lender.  A lender does not want to loan money to pay for a home that’s not worth as much the money given.

The problem of several years ago was that appraisers became “gun shy” because they pulled the trigger during the boom years of the early 2000′s and allowed appraisals to go through on homes that were not worth what the purchase price was.  As a result homeowners quickly found themselves upside-down in their homes – they owed more than the mortgage they were holding.

The good news is that home appraisals are no longer derailing sales, according to CNN Money

But now, as home prices climb and housing inventories shrink, appraisers are valuing homes at or above their selling prices, according to Lawrence Yun, chief economist for the National Association of Realtors.

Between 2008 and 2010, appraisals for more than a third of Seattle-based real estate agent Michael Ackerman’s sales came in below the selling price. So he had to get creative.

“I started pulling out the key boxes at the homes so the appraisers couldn’t get in,” said Ackerman. “They had to call me to let them see the home. I would bring a packet of comparables along and explain what I used to price the home.”

This is great news for the housing market, for buyers, for realtors, but especially for sellers!

So this is “almost” wordless! Posted because you’d almost have to get a second mortgage to afford a vacation like this!

Photo from Pinterest.

The dream of home ownership is alive and well. To have the ability to put a thousand nail holes in your yard, to paint the shutters purple and pink, or to poke your fingers in your own dirt is a wonderful feeling! However if you’re going to dream it, you need to understand what you’re getting into financially. And about one-third of home buyers don’t understand mortgages, according to CNN Money.com.

“All too often buyers focus on negotiating a lower home price and ignore the importance of finding the right loan,” said Erin Lantz, director of mortgages for Zillow. “Buyers should always shop multiple lenders and compare rates and fees and read lender reviews in order to find the best loan for their situation.”

One example: 34% of respondents believe lenders are required by law to charge the same fees to all clients for credit reports, appraisals and the like. That’s wrong. Fees vary from bank to bank and can often be negotiated.

Ask a lot of questions and ask a lot of questions to at least three different lenders!  Ask for references and follow up on the references! There is plenty of help online if you have mortgage questions, so research independently if you need to.

That monthly mortgage payment of $1,000 was not that big of a deal when both of you were working – before that greedy company sent your husband’s job overseas.  But now on one income, it can get very difficult to find that last penny each and every month.  However, there are ways to save money on mortgages.

From Money Q&A, the top tip is to pay extra toward the principal. Of course, of course this is difficult but if you add just a little each month it will make a difference in the long run.  There’s also this suggestion,

Another way for homeowners to save money on their mortgages is to eliminate private mortgage insurance costs.  Homeowners who pay less than 20 percent of the selling price of the home as their down payment are required to pay private mortgage insurance (PMI).  This insurance protects the lender’s investment until the borrower has 20 percent equity in the home.  Some loan terms require PMI to be paid upfront, where most PMI costs are rolled into the loan.  Generally, the PMI is paid for a fixed period of time or until the balance of the principal reaches 80 percent.

Keep an eye on your PMI. Banks don’t always automatically lower your payment when you’ve reached the important 80 percent threshold!

Photo from Pinterest.

With high demand for homes now seeing a return, especially in some pockets of the housing market, builders are having to resort to holding lotteries to see which buyers get the newest units available.  According to CNN Money, the demand for some housing projects is so great that only 10 – for example – of the 50 buyers who are prequalified and ready to buy get selected. As a result… lottery.

Each month, as new sections of the [Fusion] development [in Sunnyvale, Calif.] came under construction, roughly 50 buyers would show up at O’Brien Homes’ sales office hoping to be picked for one of the 10 or so sites available. The participants were already pre-qualified for a mortgage and had their down payment in place. After being assigned a number, they crossed their fingers and waited for each bingo ball to be plucked from the tumbler.

For each unit, the company drew a winner and a backup, just in case the winner backed out.

It really would be extremely frustrating for buyers who never get their number picked. And wow! Real estate really may be making a comeback at last!

Homeowners who were unfairly persecuted by banks who claimed non-payment are now beginning to collect compensation for the foreclosures. But the compensation checks that have been mailed are pretty much insulting to a lot of the victims.  From NBC News.com,

Pooley said she’s been fighting to save her home from foreclosure for the past three years.   Believing that her servicer did not follow legal procedures, she said she has contested the foreclosure through her state’s foreclosure process, and managed to stop three foreclosure sales.  She said she also has tried to get authorities to investigate. 

Last month, she received her settlement payment, a check for $300.

“It was more than pathetic. It was insulting,” Pooley told NBC News. “I spent more in money on postage providing government agencies with detailed descriptions of what had happened in my case.

Military personnel who were foreclosed get the largest amounts from the settlement, but the remaining 2 million homeowners get between $300 and $500 each. That couple hundred bucks really is little comfort for people who have been unfairly displaced with their credit scores ruined.

Earnest money is often a thorn in the side of buyers. They don’t like writing that check and they like it even less when the check is cashed for deposit! But it is an essential part of the buying process because of its role in truly committing buyers to a home (except for the contingencies!).

But what really happens with that earnest money? Does the seller keep it?  No. Does the real estate agent keep it? No.  Denver agent Jill Cox explains,

This good faith money will be reduced from the total amount you will need at closing. Typically it is held at the Title Company on behalf of the buyer. If there are bumps in the road, and the buyer opts to terminate, two forms Notice to Terminate and Earnest Money Release will need to be signed by both buyer and seller for the earnest money to be returned to buyer.

As Ms. Cox said in the article, you’ll know the buyer is not a “good” buyer if the earnest money check bounces!

Photo by David Goehring.

I have witnessed mortgage fraud and it scares me to death.  When I’ve seen it, I walk away because I want no part of it.  People can justify it however they want, but the bottom line is it is theft.  But how can you tell if it’s mortgage fraud?  Lender George Souto of Middletown, Connecticut tells us of red flags that help to identify mortgage fraud,

• Indication that the Borrower will not really be occupying the property, and it is really and investment property, some of the signs of this are:
• Long unrealistic distance between their job and the property.
• The new property is not large enough to adequately house all those who are going to occupy it.
• The Borrower is moving from a larger property into a smaller property, and it is not because they are an empty nester, or someone in a similar circumstance.
• The Borrower states that they are going to sell or rent out the current property, but the property is not listed, and they do not have a lease for a possible renter for the existing property.

• Indications that the Borrower does not have enough of their own funds to purchase the property: 
• The downpayment is not from a Checking, Savings, Retirement Account, or Gift from an authorized donor.
• The deposit or downpayment is money from a promissory note on the existing property.
• Funds are from stocks, or bonds that are not publicly traded.
• Face Value of a Life Insurance Policy is listed on the application as an asset in stead of the Cash Value.

Click through to see other red flags. Then if you are a lender, appraiser, or Realtor, avoid it.

Photo by Tim Green.