Danilo Bogdanovic-Real Estate Consultant -Loudoun and Fairfax County

Many sellers and buyers ask me if a short-sale is the way to go whether it's to "get out" of their current mortgage/property or when buying a property in order to "get a great deal". There are lots of issues with short-sales whether you're a homeowner or a buyer and the cons many times outweigh the pros.

To better explain the issues with short-sales, check out the post entitled "Short Sales Not The Solution For Eveyone" by Joe Ferrara and Gustavo Blachman over at the Sellsius Real Estate blog. Here's an excerpt:

"Short Sales are simply not the solution for everyone. It is a dangerous idea that preys on people's hopes, not to mention makes the current mortgage crisis worse. The truth is that most short listings will never get to the closing table. There are just too many factors to take into consideration. The short sales agreement is subject to the lender's approval. Closings can be subject to marketable title. There could be multiple liens on the property. The offer presented could be too low for the bank's expectation or below the appraisal/broker's price opinion. The seller may not qualify for the program. The buyer may lose interest during the process, which can take as long as six months. The area or condo may be blacklisted. There are simply too many uncertainties surrounding this dangerous practice in these unprecedented times."

The moral of the story is that short-sales are not for everyone. If you're a buyer trying to purchase a property that's a short-sale, you may be wasting your time if your buyer's agent, the listing agent on the property, the seller and the bank are not all on the same page and know what they're doing. And even then, the chance of it being approved is less than that of you winning at a Blackjack table in Vegas.

For more resources and information about foreclosure/bank-owned and short-sale properties in Loudoun County, VA, check out my local RE blog LoudounForeclosures.com.

The foreclosure/bank-owned and short-sale portion of the Loudoun County real estate market has been steadily improving over the last 6 months. But last month brought some of the best news we've had in a long time - demand outpaced supply!

For the first time since the market turned, there have been more distressed properties sell than new ones come on the market in a one month period. August had 326 distressed properties sell versus 306 new ones come on the market.

Here's a graph showing new listings (supply) versus solds (buyer demand) for 2008 (click to enlarge):

Notice that in January, the number of new listings was more than double the amount of solds. Since then, the number of solds has been steadily increasing. The number of solds in August was more than double those in January.

As for inventory, there was a spike in new distressed property listings last spring, but it's back down to the 300 per month level.

This is very good news for not only the foreclosure/bank-owned and short-sale property market, but the Loudoun County real estate market in general. The key ingredients to a stabilization of the market is lower inventory and higher demand, which is what we're seeing across the board in Loudoun County.

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Loudoun Real Estate Inventory Levels Well Below National Average

Loudoun County officials are currently working on a program that will help Loudoun employees buy foreclosed homes. The program would provide $5000 in grants to county and school system employees in order to purchase foreclosed property in Loudoun County.

Loudoun County officials are currently working on the proposal which will go before the Board of Supervisors next month.

This comes after the Loudoun County board last month approved a program that would low-interest loans to those making up to $99K per year.

Loudoun has been hit hard by foreclosures and the county is trying to be a part of the solution as well as make it more affordable for county employees to actually live in the county they work in. This is definitely a step in the right direction.

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Loudoun County Considering Foreclosure Program For County Employees

Source: WUSA9.com and The Washington Post

Many buyers worry about one thing when it comes to a mortgage - the rate - and they pay little attention to mortgage guidelines. But in these market conditions, mortgage rates should be no higher than number 2, if not number 3 on the "worry list" with mortgage guidelines being number 1.

Why? Because mortgage guidelines dictate whether you qualify for a mortgage in the first place, regardless of the rate. If you can't qualify, then the rate doesn't matter. Private lenders, as well as the FHA, are getting more strict on their guidelines every day.

Here are some examples of how guidelines are tigthening up:

• A few years ago, you needed a minimum of 620 score to qualify for a "prime" or "A-paper" loan. Now, most lenders require a 720 or higher
• Rather than one month's cash reserves, most lenders are now requiring 3 to 6 month's reserves
• The amount of the down payment required by the lender has gone from none or 3 percent to a minimum of 10, if not 20 percent
• "No-Doc" loans are a thing of the past. Now you have to have all your paperwork and records for several years back otherwise the lender won't even touch you
• Banks are going belly-up left and right and the ones that are still standing and healthy (only a few left) are making it even more strict to get financing.

There's an excellent video you should check out by Dan Green over at The Mortgage Reports explaining mortgage guidelines and why they're becoming more strict. Click here to check out the video

As you can see, it's about much more than just rates these days. And as more banks go up in flames and credit gets tougher to get, these guidelines will get more strict. So rather than watching rates, watch mortgage guidlelines.

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FHA Guidelines Tighten On 2nd Homes, Rental Income

The Dulles Area Association of Realtors (DAAR) is sponsoring the 17th annual charity auction and dinner to raise funds for Loudoun County charities at River Creek Country Club in Leesburg.

More than $39,000 was raised and donated to local charities last year. Proceeds benefitted Rebuilding Together-Christmas In April, Good Shepherd Alliance, Loudoun Abused Women's Shelter-Children's Services, Loudoun Cares, Loudoun Families for Children, Volunteers of American Emergency Shelter and Volunteers of America Transitional Housing Shelter.

The silent auction will be held on October 24 from 6 to 11pm. Donations of $100 or more are requested from area businesses for the event. Auction and dinner tickets are $65.

For tickets to the DAAR charity auction and dinner, click here. To be a sponsor and/or donate an item(s), contact Kathleen Mellot, Director of Member Services, at 703.777.2468 or kmellot@dullesarea.com.