Randy Toltz

I remember a time when foreclosures and bankruptcy were reserved for the irresponsible, or for those to whom tragedy had struck. It was always somebody else, and nobody I knew. My oh my, how times have changed. Not only do I know many people who are facing these issues, but they are far from the dregs of society, in fact many are some of the brightest and most impressive people I know. Unfortunately,we are all victims of an economy that imploded leaving real property, our bastion of security in a state of disarray. So, here we are facing the things we never dreamed of, foreclosure, bankruptcy, short sales, repossessions, and the list goes on.

So, now the issue facing many is, I can not sell my home, as I owe more than it is worth, I can not continue to make my payments as my income has dropped, what do I do? For most in that situation a short sale is a better option than waiting for the bank to foreclose. Of course this is where our lawyers want me to tell you that this advise may or may not apply to everyone and that you need to check with with your lawyer, accountant and spouse before considering any decisions recommended herein.

For those of you who are unfamiliar with what a short sale is, I will give you a quick primer. A short sale is transaction where a property is sold for less than the total amount of the loans which are owed on it. For example, if I have a house for which I paid $750,000 with a $150,000 down payment a loan of $600,000, I later took out and equity loan of $75,000 to finish the basement and redo the patio. I now owe $675,000, but the problem is that the recent sales in my neighborhood, put the value of my home somewhere around $625,000 and with commissions and closing costs, I would only net somewhere just north of $580,000, or almost $100,000 short of my debts on the property. So, the reality is that the only way to sell the home is to get the banks to agree to take less than their lien amounts at the time of closing. That is what a short sale is, a bank approved sale of less than the value of the mortgages. Why would they do that, simple, if that is all the house is worth, then it is all it is worth and if they foreclose they will spend a whole lot more in legal fees and most likely get less on the sale end as an abandon house loses value quickly. So in a short sale situation the bank agrees to sale and in many cases will even discharge the deficiency owed by the borrower, meaning you may or may not have to pay back the rest.

So, to my original point, why is this a better option? Fist off a short sale seems to drop a persons credit rating anywhere from 50-100 points versus a foreclosure which can drop it 300 points or more. A short sale will impact your credit for a few years, where typically a foreclosure is 7-10 years. A short sale you may or may not have a deficiency to pay back, whereas in a foreclosure, you will most likely have to pay back the balance plus the additional attorney fees, which can add, up to another, $100,000 to your deficit.

Short sales are not easy, nor are they quick, and they do not always work out, but in the majority of cases there is much more to gain by trying than there is risk, so I encourage people to explore that option before it is too late. Statistics tell us that half of all people in foreclosure have never even heard of a short sale, so help spread the word and see if we can help those who are facing unimaginable hardships in these unprecedented times. With good advice we can often times make a bad situation not so bad, and in this economy, that matters.

If you have further questions, please call me or your Realtor to find out more.

Every friend, client and acquaintance asks; So how is the real estate market?, Have we hit bottom yet? My answer is pretty much the same, as I am sure are those of most agents. The truth, the truth is we don't know! We can not until we have a crystal ball, and to my knowledge nobody does.

That said, there are some things that we do know. There are always people buying houses. People are getting jobs, losing jobs, retiring, passing away, etc., but the truth is that life goes on without permission from the real estate market. So, yes there are buyers and sellers out there. There may be less elective home buying and selling during uncertain times, but houses will still be selling, and nice homes will still bring a fair price.

Another twist to this question seems to be; How can I compete with all these foreclosures and short sales? The answer to this is somewhat dependent on area and price range, but we are seeing almost a secondary real estate market being created. Bank owned and short sale properties are often great bargains, but the process of buying them is almost too much form most home buyers looking for a home for their family, especially in times where most moves are not elective. So, the investors are the ones buying the bank properties at a discount, and consumers are buying the private party homes at a fair market value, in a reasonable time frame. So, as a seller you are not necessarily competing directly with the bank owned property down the street, as the process of getting it closed may be too much for many buyers.

What this all really means, is that no, the sky is not still falling. I am not sure it ever was. Are there some market segments that have taken a hit? Of course there are, but in MOST cases it is not catastrophic, although there are some exceptions out there. In truth, real estate is still out performing the stock market and you get to live there too. So is now the right time to buy or sell? Well, as always that depends on your personal circumstances, but if the time is right for you, you need not panic. If your home is not worth quite what you want it to be, realize that neither is the home of the seller whose home you will be buying, so it should be close to a wash. The end is not near, so take a breath and do what is right for your family and the rest will fall into place.

Real estate has always been somewhat like horse trading, in that there is some degree of give and take. In a hot market we used to have to guess if a full priced offer would fly, or if we had to go a little over to get the deal. In an average market it is always a balance of the average home is selling for 2.8% below listing price can we get 5% off? And in the soft market it was how low can we offer without offending the seller, so that we can still see a counter proposal. Well, the gloves are now off, there is no offer that buyers won't throw out there and sellers need to have thick skin as to not take the market conditions as an insult to their home.

The truth is that the value of any property is not determined by the market. The market will influence the price, but the value is determined by the price a specific seller is willing to sell at and the price that a specify buyer is will to pay for that property. So, if my home is worth $300,000 to me and the market says it is only worth $250,000 then I retain the right not to sell it at that price. If I loose my job and find another out of state, it may be worth it to me to sell for $250,000 and therefore the value to me of the home has changed. This change had nothing to do with the outside market. Likewise, I may see a home priced $50,000 above the rest of the similar homes, but it has the garage I want, the views my wife loves and the ideal playroom for our 5 kids. At that point the extra $50,000 may be worth it to me. (I am intentionally not going into weather or not it will appraise in this discussion, but I content that can be dealt with as well.)

So take heart in the midst of these turbulent times, do not take it personally, or get frustrated by the process. Keep in mind there are two parties in this process and your voice is equal to theirs no matter which side you are on. If you keep your emotions in check and stick to the logical side of your brain, you can make it through the process with a satisfactory result.

Please note, that while there is hope, if you are unrealistic on your price and need to sell quickly that you may be headed for trouble. What we are discussing here applies to the process of negotiating and that a seller may choose to not accept an offer lower than their bottom line. In that case, they will need to wait for the next offer. There is now doubt, a see saw on which price and days on the market balance. Likewise as a buyer, do not expect the perfect home to be available at a bargain basement price. It may be, but more than likely, if it truly is perfect, the owners pride that makes it so, will also be the love for the home that makes them expect a better price.

What I am suggesting is be reasonable in you expectations, be honest with your self and your agent in your motivations and be patient and tolerant in the negotiation process. If you can manage all of that, you should be able to get through this market with a successful outcome.

It seems as we hear more and more about the terrible state of the real estate market, we expect that every house for sale is now set for the easy steal and that all bank owned and short sale properties are just low hanging fruit. I am not sure who is fooling who. Yes, there are some great opportunities out there, but they are not in every house nor are they for every buyer.

If you need a turn-key house in a hurry for your family, you may not find a steal at every stoop. Many of the bank owned houses need some work and most need a fair amount. Short sales are akin to a television mini series in how they can drag on. Sellers with a home in great condition who are not in trouble nor in a hurry, often times will wait for a fair price and if the home is truly nice and fairly priced, they will still get it and get it quickly. So, that home that you both truly loved may actually cost you a reasonable offer.

Why, we might ask would anyone pay the market price when deals abound? Easy, most people are still looking for a home for their family and the compromises of the deal can often times get trumped by being practical. After all, it is hard to prepare dinner in a kitchen for which Sears has not yet delivered the oven or stove. Nor will Mom sleep well knowing that over half of the disgusting stains on Johnny's floor are covered by a temporary rug.

See, the other truth is now you actually have to have a cash down payment to buy a home and all those minor fixes will need to be done after closing as all the really good deals are "as is". So all the fix up will take cold hard cash and you must have enough to swing it after the down payment. Something we are not used to.

Now for the investor, or those who have some time and cash, there are some amazing deals flowing by on a regular basis. For everyone else take heart, housing prices still are down and the values are there. You can buy a very nice home at an attractive price with an unheard interest rate that should set a nice foundation for your families financial future. I am not trying to burst the bubble of the sugar plums dancing in your head, just saying pay attention to the candy dish on the table, as nobody likes sugar plums anyway.