Gregg & Debbie Munson

I have been asked this question more than once recently, thus I will try to answer. In a typical 'short sale', we're going to ask a lender to except an amount which is less than what is owed on the property; or, in other words, to except a short sale. In the past, short sales were more difficult to execute but in recent history, lenders are much more willing to except a short sale versus having to foreclose and own the property.

A normal short sale scenario runs something like this: John Smith buys a home in 2007 at a purchase price of $425,000. It's now 2009 and John just found out that his adjustable rate mortgage payment will increase substantially beyond what he can afford to pay. Not only that, John gets notice that he's being laid off. John now needs to sell so he calls his Realtor and finds out that his home is worth around $300,000. He's now in a panic state as he owes $403,000 on it. After some research, John hears something about a short sale process and calls me to see if it will work for his situation. We sit down and look at all options to see if we can find a way to keep John in the home but it looks like John must short sell as job prospects are weak at best. I then list John's home and soon procure a contract for $295,000. At that point, a short sale package is put together and forwarded to the lender for review. It usually takes the lender a month or tow but at some point, the lender will respond with a yes, no, or workout solution. More often than not, the lender will accept the short sale. Now, I'm oversimplifying the process a bit, but for the most part, it works something like the above example.

You may ask, why would the lender accept a short sale? There are many reasons but the main one is because lenders don't want to own the property. Statistics show that the lender will net more money via the short sale process than via foreclosure, since when a lender forecloses, he or she must place insurance on the property, pay property taxes, HOA fees, hire a property manager, maintain and repair the property and then hire a real estate agent to sell it. That's far too expensive to do. Again, the more logical solution is to except the short sale and move on with life.

I'm going to close for now but will continue to blog on this and related subjects in the near future. Please don't hesitate to contact me with questions as I look forward to helping.

P.S. You can visit my website www.GreggMunson.com for more information.

Gregg Munson CDPE

FLAGSTAFF MARKET SNAP SHOT FEBRUARY 2009*

February reflected the first real decline that I've seen in sometime. As you will note, January reflected an increase while February showed a sharp decline. Again, for my part, I believe that it's too early in the year to forecast the trend. Only more time will tell unless you are a diehard believer in the media. Take care and keep the comments coming. Thanks for reading.

*Criteria: Northern Arizona Multiple Listing Service sold data for City of Flagstaff single family homes. The city is defined as North West City, South West City, North East City, and South East City. Condos, townhomes, multi-family, land and commercial properties are excluded as are outlying areas. The exclusion of outlying areas and well as properties other than single family homes will have an effect on valuations.

Perhaps I have a little good news as it relates to Flagstaff real estate. What's the news? As it pertains to real estate financing, it appears that FHA will keep the former upper limit cap of $729,750.00 for "Conforming" loans in high cost areas. Previously, "Conforming" loans were limited to $417,000.00 with all loans over that amount referred to as "Jumbo" loans. Jumbo loans typically run a percent or so higher. While I don't know specifically how that will affect rates in Flagstaff, my best guess is that Coconino County, of which Flagstaff is a part, will retain the former upper conforming loan limit of $450,000. The ability for lender's and home buyers to obtain conforming (lower interest rate loans) in high cost areas such as Flagstaff, should provide a nice boost to help absorb more real estate inventory. What are your thoughts?

Will the plan help real etate and others areas of the economy. I think so. What are your thoughts?

The new economic stimulus package allocates $787 billion to boost our multi-trillion dollar economy. Here are some provisions individuals can take advantage of now.

1. Housing help. First time homebuyers can get up to an $8,000 tax credit if they close by November 30, 2009. This credit does NOT have to be paid back if you own the home three years. It phases out for single taxpayers making over $75,000 and for married couples filing jointly making over $150,000 (adjusted gross income).
Communities receive $2.0 billion to redevelop abandoned and foreclosed homes.
In high-cost areas, the bill restores the $729,750 upper conforming loan limit for Fannie Mae, Freddie Mac and FHA loan guarantee programs.

2. Home improvement tax credits. For money spent to make homes more energy efficient, a 30% tax credit through 2010, up to $1,500.

3. Residential renewable energy tax credits. Dollar caps have been removed on the 30% residential credit for solar thermal, geothermal and small wind upgrades.

4. Income tax credit. This will be up to $400 for individuals earning up to $75,000 and up to $800 for married couples filing jointly with up to $150,000 in income.

5. Alternative Minimum Tax reduction. Exempts from the AMT up to $46,700 of an individual's and $70,950 of a couple's income in 2009.

6. Earned Income Tax Credit. For 2009 and 2010, goes from 40% to 45% of the first $12,570 earned by families with more than three children.

7. Higher education tax credits. For 2009 and 2010, a $2,500 per year tuition tax credit for all four years of college. It's now 40% refundable and covers textbook costs. The credit phases out for individuals making $80,000-$90,000 and couples earning $160,000-$180,000.

8. Hybrid vehicle tax credit. Increased to $7,500 for purchasing a plug-in hybrid vehicle.

9. Help for car buyers. In 2009, anyone purchasing a new vehicle for up to $49,500 can deduct state, local and excise taxes, as well as car loan interest. This is an above-the-line deduction that can be taken even if you don't itemize. It begins to phase out for single taxpayers making over $125,000 and couples over $250,000.

There are many more programs for individuals, businesses and states, as well as a future foreclosure relief program - let's hope they all work.

... Have a great month!

FLAGSTAFF MARKET SNAP SHOT JANUARY 2009*

Well, here we go with a new year to keep abreast of. As you can see from the chart, the city of Flagstaff has weathered the real estate storm fairly well while other areas-including areas around Flagstaff-have suffered a much steeper decline. While it's too early to forecast 2009, I think it's safe to say that it will be an exciting year-not only for real estate but the economy in general. I'd appreciate your comments on any real estate subject including these monthly reports. Let's all make it a great 2009.

*Criteria: Northern Arizona Multiple Listing Service sold data for City of Flagstaff single family homes. The city is defined as North West City, South West City, North East City, and South East City. Condos, townhomes, multi-family, land and commercial properties are excluded as are outlying areas. The exclusion of outlying areas and well as properties other than single family homes will have an effect on valuations.