Jolynna McCune, Affiliate Broker

What is a short sale? A real estate short sale is when a home owner sells their property for less than what they owe on the mortgage, and the lender gives their permission to do this. Short sales are becoming more popular in areas or circumstances where the seller owes more than the home will likely sell for and the seller does not have the financial means to make up the difference. The seller should retain the services of a REALTOR with knowledge and experience in short sale transactions. The REALTOR gets written permission from the seller to negotiate on the sellers behalf directly with the mortgage company. The lender often allows the REALTOR fees and closing costs to be deducted if the seller does not have the financial means to do so. Offers to purchase are then presented to the mortgage holder and typically to any PMI company insuring the loan.

If you are selling your home as part of a short sale transaction, make sure to negotiate for a release and full satisfaction of the mortgage from your lender. Depending on the laws of your state and your individual circumstances, lenders may be able to wait a year or two for you to improve your financial situation, and then file a deficiency judgment against you to try and recover the money that you still owe them. The only way for you to avoid this risk is to have the lender not only release the mortgage lien, but also agree in writing to a full satisfaction of the mortgage. You should be aware that short sales are best left as a last resort when there is no other viable option to sell your home and foreclosure may be in the future. You must be able to prove that you lack the financial resources to sell your home by more traditional means.

Also read the Mortgage Forgiveness Debt Relief Act of 2007, and be aware the I.R.S. could consider debt forgiveness as income. The advice of an attorney and a CPA is highly recommended.

Short sales negatively impact your credit and your ability to purchase another home. While preferable to a foreclosure, it is still not an option for a homeowner to seek lightly. A professional REALTOR can counsel you on your options and help you choose the right course of action for your situation.

If you would like the counsel of a REALTOR regarding the steps to take to sell your property on a short sale, please call Jolynna McCune with GROOME & CO REALTORS at 901-649-0221. All consultations are confidential.

If you are attempting to buy a home on a short sale, try to make sure the deal is closeable. Have your REALTOR verify the status of the sellers relationship and history of discussions with their lender regarding the likelihood of allowing a short sale. Many short sale listings are not closeable deals because the lender won't allow it, yet many weeks or months can be wasted in waiting it out.

How does a foreclosure differ from a short sale?

In a foreclosure the sellers have lost ownership of the property through a legal process and is being sold by the bank, mortgage holder or in some instances the PMI company or guarantor of the loan. In a short sale the homeowner may still reside in the home and is still the legal owner of record. To purchase a foreclosure from a lender, a buyer must have strong financing from a reputable lender who funds loan directly (NOT mortgage brokers in most cases) or proof of cash funds prior to submission of an offer. Also, in most cases, the homes need at least some repair and the seller will generally not be willing to pay for those repairs. Therefore, the buyer must have available funds to repair the home after closing. In some cases, the lender for the buyer may require repairs to be done prior to closing to obtain the loan. This is typically true for FHA financing or other financing where buyer's down payment is minimal. In such instances a buyer is better to look for homes with very minimal damage or needed repair. If the terms of the offer allow, the buyer may have the home inspected within a short time frame after the offer is accepted to determine if the buyer would like to proceed with the sale.

Please give me a call or reply to this post to receive a weekly list of foreclosures in the area.

Other types of foreclosures are HUD homes or VA owned properties. These are homes that the department of housing and urban development or veterans affairs own. On HUD homes the process is more like an auction, where the seller allows the home to be shown by any REALTOR to prospective buyers. After the property has been available for a short period of time, the bid period ends and HUD reviews the offers. They will often accept one of the offers at that time. If HUD deems the offers too low, it will remain on the market and will be open to daily bids until a satisfactory offer arrives. A listing of HUD homes can be found on www.hud.gov and follow the links to Tennessee properties. GROOME & CO is registered with HUD and we will be happy to show you properties of interest.

There are many bargains in today's market for a buyer. Short sales, bank foreclosures, government foreclosures and relocation/corporate owned homes. However, do not overlook extremely motivated sellers with homes in excellent condition. In many instances a great home priced very well with excellent care and maintenance or numerous upgrades can be a better deal than that low priced foreclosure that needs tens of thousands in work ( which will typically have to be done with your cash rather than financed in the loan ). Have the guidance of a REALTOR to help you find the right deal for your circumstances. If time is not a concern then a short sale offer may be right for you. However, if you need a specific closing date or do not have large cash reserves for repairs and updates needed in a distressed property then a well priced traditional sale with a highly motivated seller may be the best route.

If you are interested in buying a short sale or need the counsel of a REALTOR regarding the steps to take to sell your property on a short sale, please give me a call! 901-649-0221

FIVE QUICK TIPS TO IMPROVE THE DESIRABILITY OF YOUR HOME

1. TOUCH IT UP:

A finished, flawless paint job can enormously increase the value and attractiveness of your home! Spend some time checking the exterior and interior surfaces - as well as fences, banisters etc. - and touch up any chipped or peeling paint.

2. BAKE, BAKE, BAKE:

Research has shown that potential buyers are greatly influenced not only by the appearance of a house, but by its scent as well! Baking cookies or pastry before an open house or showing will fill your home with a warm, welcoming and comforting aroma that is irresistible to buyers!

3. TOUCH OF COLOR:

In addition to providing a delightful and aromatic scent, fresh flowers brighten up your home and appeal to the buyer's sense of aesthetics. Add a few arrangements in different rooms to add some color and cheer!

4. MIRROR IMAGE:

Mirrors have long been used to give the impression of extra spaciousness in a home. Adding a few mirrors to different areas of the house - including hallways and bonus rooms - will make the house appear roomy and bright.

5. LANDSCAPE LUXURY:

Paying special attention to your landscaping is absolutely crucial during the selling process. Keep your lawn freshly mowed, flowerbeds free of weeds, and add some additional outdoor lighting to brighten up the pathways.

Now that you've made the decision to purchase your first home, a hearty congratulations is in order! Becoming a homeowner, especially for the first time, can stir up some feelings of anxiety and excitement. With the knowledge that you gain through individual research and the help of your REALTOR®, you will soon begin to feel like a seasoned house hunter.

Tip # 1: Do Your Homework

Did you know that there are a number of incentives available to first-time home buyers? Everything from a 3-5 percent down payment and interest rates as low as 5.75 percent are just a few of the ways that lenders help to make the dream of home ownership into a reality for many. An FHA loan, for instance, is especially appealing to first-time home buyers. The best way to find out what's available, in terms of down payment requirements and interest rates, is to do your homework by comparing offerings from various lenders.

Tip # 2: Save Money

Although many loans are geared toward offering lower down payments to first-time home buyers, it's important to save as much money as possible so that you will have enough to provide an earnest money deposit (if applicable), pay for closing costs and still have the funds to furnish and decorate your new home.

Tip # 3: Get Your Credit Profile in Order

When you apply for a loan, the lender will access a copy of your credit report and will use the information to determine your creditworthiness and/or interest rate. This means that you will want to make sure that the information contained in your credit report is accurate and up-to-date. You can do this by requesting a copy of your file from each of the three major credit reporting agencies - Experian, Equifax and TransUnion.

In addition to past credit history, lenders will also look at your current debt ratio in order to determine whether or not you can afford the home. This means that you may want to consider paying down some of your existing credit card debt and avoid taking on any new debt before applying for a mortgage.

Tip # 4: Start Your Search

With the World Wide Web being what it is today, it's no surprise that many potential home buyers start their search online. A Realtor's Web site is designed to not only list real estate, but also to educate a buyer as they move through the process of searching for a new home. In addition, the internet offers a way for consumers to browse through color photos and virtual tours, both interior and exterior, along with information pertaining to the homes themselves. The convenience of being able to find a home that you like without having to wait is just one of the many benefits to shopping for a house online. When you are finally ready to meet with a REALTOR®, you will already have one or more prospects in mind.

Tip # 5: Have Patience

Perhaps you will find the perfect house this week, or maybe it will take a little longer. Some buyers find exactly what they are looking for right away, while others have to do a little more searching to find their dream home. As a first-time home buyer, it's a good idea to begin the process with an understanding that good things really do come to those who wait. You may see a number of homes, take numerous photos and may even make an offer or two, but patience may very well be the key to finding your new home.

Tip # 6: Take Notes

If you see a lot of homes, it will be impossible to remember the features of each. For this reason, you should consider taking a notebook and writing down each unique or defining aspect that you like or dislike about a particular house. This information, along with any photos that you take, will help you greatly when it's time to make a choice.

Tip # 7: Don't Settle

A home is a big investment and it could, quite possibly, be the largest you will ever make. For this reason, along with the fact that you will be living in the home every day, make sure that you get what you want. There could be an instance where you need to make some type of compromise, but you may want to avoid choosing something just because it's within your price range or you feel as though it's your only option. New houses are placed on the market every day and, as a buyer, the next one listed may just be your dream home.

There are a number of factors that can contribute to the affordability of a house and, as a potential homebuyer, it's important that you know what type of mortgage payments are within your budget.

Debt-to-Income Ratio

As a homebuyer, your first consideration will be the amount of your monthly mortgage payments. If you owe a lot of debt, lenders may consider you to be a high credit risk, which makes debt-to-income ratio a leading factor in determining how much of a house you can afford.

Most lenders will discount any loans that you will have paid off within one year when determining how much of a home you can afford. As a general rule, your mortgage payment should not exceed 25-30 percent of your monthly take-home pay.

Loan Term

Although you will end up paying more interest in the long run, you will find that you can afford a more expensive house if you request a loan term of 25-30 years, compared to a shorter term of 15 years.

Interest Rates

When you look at an interest rate, all you see is a number. Hopefully, it's a single digit that's comparable with current market rates. Most homebuyers already know that their interest rate affects their monthly payment which, in turn, is determined by the borrower's income. Lower interest rates mean that you can afford a larger principal loan amount, which means a more expensive house.

Credit History

Because your past credit history will play a large role in determining your interest rates, it will also impact the affordability of a house. For instance, a buyer who pays six percent interest will save a considerable amount of money over a buyer who pays eight percent interest on their home loan. It may not seem like much now but, when averaged over time, the savings could be tremendous.

Down Payment Amount

Believe it or not, the amount of your down payment will not only show the lender how serious you are about buying a home, but it will also affect your ability to afford a particular house. For instance, if you were to qualify for a home loan of $200,000, but your dream home was currently listed for $250,000, a down payment in the amount of $50,000 would get you into the home.

The above scenario is just an example, but it does show how a down payment can affect the price of the home that you are able to afford. Some lenders may only require a five percent down payment, but you are free to pay as much above that as you wish. A larger down payment can also reduce the principal loan amount, which thereby reduces the monthly mortgage payments.

I'm in Your Neighborhood

A home warranty plan, also known as a home protection plan, is a service contract that offers homeowners a way to safeguard themselves against possible breakage or a malfunction within the home. It's impossible to predict the future, which is why so many buyers look for that little extra peace of mind to comfort them when life unexpectedly throws them an unforeseen problem.

Who Needs a Home Warranty Plan

Basically, anyone who purchases a home and is concerned with the cost of repairs should consider a home warranty plan. This is especially true of first-time home buyers who may not be familiar with home maintenance.

Factoring in the Cost

When factoring in the potential cost of repairing a major appliance or other home component, a home warranty plan may not be a bad investment. The actual cost of warranty coverage will depend on the plan chosen and the items protected. As is the case with everything in life, it's best to shop around and compare prices.

Who Pays For a Home Warranty Plan

As a buyer, you can order a home warranty plan in conjunction with the purchase of your home. However, some sellers or builders may include this type of offering as an incentive to attract potential buyers. In this case, the plan is yours at no additional cost. Some REALTORS® may also offer a home warranty plan as a gift to customers who buy a home through their agency.

What's Covered & What's Not

Just like a car warranty, no two policies are the same. Coverage varies by location and issuer, and your REALTOR® can help you to choose a warranty plan that best suits your needs. Most basic plans cover a home's heating and cooling system, electrical system, plumbing, water heater and major appliances, including a dishwasher, range/oven/cooktop, garbage disposal, etc. Coverage does not apply to items that are misused or damaged, either intentionally or through negligence. Instead, most home warranty plans are designed to protect the homeowner from defects that result during the course of normal wear and tear.

When considering the purchase of a home warranty plan, review the complete contract and familiarize yourself with exactly what's covered under your policy. If you want an upgraded policy, don't hesitate to ask your REALTOR® if one is available. Most companies do not require a home inspection and will notify homeowners when their coverage is about to expire. The good news is that most policies are renewable.

What to do if a Problem Arises

If you are unable to satisfactorily resolve an issue with your home warranty plan, either due to denial of a claim or undesirable service, talk to the REALTOR® who sold you the home. If he/she refers a lot of business to this particular company, it may be possible for him/her to speak with them about reaching an amicable resolution.

The purchase of a home is a big step and it's likely to be the largest purchase you will ever make, so be sure to consider all of the options available to help protect yourself from costly repairs. Ask your REALTOR® for more information relating to available home warranty plans.