Short Sale Fraud All Too Common

Provided By Realty Times

Let’s Talk Real Estate Q&A

Question: Mr. Aldana, I was recently approached by a friend who is losing his home and asked me to buy his home as a short sale, and then within a few months, change the ownership back to him so he can keep his home and I can be free to buy another home. Apparently, a real estate agent has been counseling him and telling him this is done all the time. Is this possible?

Answer: This sounds like fraud. Proceed at your own risk. Most short sale transactions include "arm's length" contractual clauses that forbid you from having any stake in the sale other than the sale itself. The clauses forbid the seller from re-buying the home, recovering title to the home or selling the home to a relative or business associate home to a relative or business associate or having other agreements with the buyer, again, except to sell the home to the buyer.

A short sale occurs when a seller owes more for a property than its value and negotiates with the lender to forgive the difference provided a buyer is a available. In some states a short sale can generate tax, credit and other financial consequences. Anyone considering a short sale should consult with a qualified certified public accountant or a real estate attorney.

All short sale agreements must be disclosed to the lender and the lender will not agree to any terms that don't comply with the arm's length clauses which all parties must sign and swear under penalty of perjury that they will not violate the terms of the agreement.

Lenders and banking regulators are aware of growing incidents of short sale fraud and not only must the parties sign the contract which forbids back room deals, but lenders audit the transaction. An audit will pull the title documents and if they reveal fraud, say if the property is sold back to the seller, the lender can call the loan and force you to pay it in full immediately.

Also, while it's easy to transfer the title from one person to another, it's not so easy to transfer the responsibility for paying the mortgage. Even if you transfer the title, unless you have the lender's approval you will remain responsible for paying the mortgage even if you don't have rights to the property. That could make it difficult for you to buy another home or acquire other credit. Your credit will suffer if you friend fails to pay the mortgage on time.

Imagine having perfect credit and then being at the mercy of someone else and hoping that they are never late on the mortgage for the next 30 years while you have no rights to the property.

My advice? Tell your friend to find an honest real estate agent. Yes, this kind of under the table deal between sellers and agents happen everyday, but that doesn't make it right and it could cost all parties involved a stay in county jail.

Surprising factors affect home insurance rates

Provided By Yahoo! 

Your home will obviously play a role in the price of your homeowners insurance. Stone front or vinyl siding? Hardwood floors or carpet? Your insurance agent will want to know all the details about what the company is insuring. More than that, though, expect your insurance agent to ask questions about personal factors that will play a role in your final insurance rate.

Pets

Your home insurance rates may increase if you own pets. Some insurance companies may also require proof of pet breed, especially if you own a dog breed deemed "aggressive" or an exotic animal. Some agents and companies may even ask for pictures of your pets in order to finalize your rate.

Risky fun

If you have children, you may also have a swing set or a backyard trampoline. What fun! Your insurance agent won't think so. These fun activities can be dangerous, so your insurance agent will see red and you'll send them more green.

Credit rating

Your credit score will impact your homeowners insurance, so don't be surprised if poor credit means a higher insurance premium. Insurance agents assume that if you haven't been able to manage your money in the past, you're a higher risk in the present. Do take the time to establish a good credit history now -- you'll need it when you purchase your home and get insured.

Lifestyle

Expect an insurance agent to ask some questions about your lifestyle when you nail down your rate. What might top the list? If you're a smoker, you may have a higher rate because of an increased risk of fire and damage to the home.

Age and homeownership history

If you're young and have just purchased your first home, your insurance rate may be higher than people who are long-time homeowners or older and well established in the community. Similarly some insurance agencies will offer a reduced rate to retired individuals.

Location

Where you live and local weather conditions will impact your homeowners insurance rates. A nearby fault line, proximity to a hurricane-prone coast line, or a flat prairie region where tornadoes often strike will all affect your insurance rates. If you can't control where you live, do listen to the Insurance Information Institute and take necessary precautions that will help keep your rate as low as possible (new windows, storm doors, etc.). Not sure what changes you can make to your home to reduce your rate? Ask your agent!

Current Mortgage Rates Bring on Mortgage Refinance Activity

Provided By Realty Times

While it would seem that everyone would be moving to make a home purchase, current mortgage rates are bringing on more mortgage refinance activity than new loans. According to the Mortgage Bankers Association's Market Composite Index for the week ending July 20th, the Purchase Index showed that purchase applications dropped by 3% on an adjusted basis while the Refinance Index hit the highest level in over three years by increasing 2% on a seasonally adjusted basis.The mortgage refinance share of all loan applications was 81%. In line with this, the National Association of Realtors reported that Pending Home Sales fell 1.4% in June. While this is being attributed to low inventory, it very well could be caused by consumer sentiment which declined to 72.3 this month, the lowest level of the year, according to the Thomson Reuters/University of Michigan report. With so much financial trouble in Europe and a sluggish economy here in the U.S., consumers are staying put and refinancing to lower mortgage rates instead.

FreeRateUpdate.com's survey of wholesale and direct lenders shows that mortgage rates continued to remain steady this past week with 30 year fixed mortgage rates at 3.375%, 15 year fixed mortgage rates at 2.750% and 5/1 adjustable mortgage rates at 2.125%, all available with 0.7 to 1% origination fee provided borrowers have good credit and qualifications. With these rates, existing homeowners are lowing their monthly mortgage payments or terms of the loan to save money with some consumers refinancing several times. SinceHARP has been expanded, more underwater homeowners have been able to refinance, thus preventing default or foreclosure.

HARP, which is for mortgages sold to Fannie Mae or Freddie Mac prior to June 1, 2009, has been a life line for a large amount of homeowners. By taking advantage of the HARP program, these borrowers are able to gain equity back faster putting them in a better position to sell later on. Since HARP can be difficult to obtain in some circumstances, it is recommended to inquire online where a multitude of lenders are available and can be matched up to a borrower's information.

FHA mortgage rates have remained steady for quite some time along with other mortgage rates. Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage rates are at 2.625% and FHA 5/1 adjustable mortgage rates are at 2.625%. Right now, FHA is seeing more activity for its refinance mortgages than for purchases since the expansion of the FHA streamline refinance. For FHA mortgages endorsed prior to June 1, 2009, FHA has reduced the upfront mortgage insurance premium to .01% and the annual mortgage insurance premium to .55%. By refinancing, there is an extreme amount of savings that FHA borrowers can obtain and with no cash out, there is no need for an appraisal or other documentation.

The normal upfront mortgage insurance premium and other FHA fees causes FHA closing costs (APR) to be higher than conforming mortgages whether for purchases or refinances. Now with this special reduction, borrowers are not hesitant to refinance as long as they can find a lender who will approve them. Many lenders are only accepting their current customers for this program causing much frustration for FHA homeowners. There are indeed lenders who will help any eligible borrower, but mostly likely, these lenders can only be found through an online resource.

Jumbo mortgage rates have been surprisingly stable for a number of weeks. After last week's stock market rally, jumbo 30 year mortgage rates increased by .125% and are now at 4.250%. Remaining the same, jumbo 15 year mortgage rates are at 3.125% and jumbo 5/1 adjustable mortgage rate are at 2.250%. These low jumbo mortgage rates are available with 0.7 to 1% origination fee for borrowers who have excellent credit. The jumbo mortgage market is slowly improving, with more lenders getting involved to take part in this risky, but profitable end of the business. High end borrowers normally have stable qualifications which lenders find attractive. As more jumbo mortgage offerings become available, borrowers should thoroughly search their options as they are faced with more competition and better mortgage terms.

MBS prices (mortgage backed securities), which move mortgage rates in the opposite directions, took a turn at the end of the last week which put mortgage rates at risk of rising. Stocks rallied for two days and rose quite a bit while MBS prices fell. Investors were looking at the statements from the President of the European Central Bank and his commitment to preserve the European Union. This week everything is turning around again as investors now await to see action from the ECB and possible additional stimulus from the Fed's. The Commerce Department reported that second quarter GDP increased at a 1.5% annual rates which was better than expected, but lower than the first quarter. June Durable Orders increased 1.6% from May which was also better than anticipated by analysts. Weekly jobless claims fell to 353,000 which was lower than expectations. While jobless claims is an important indicator, job creation is more important and affects markets in a stronger way.

TIGHTEST DFW APARTMENT MARKET IN DECADE

Provided By TAMU Recon Center


Dallas-Fort Worth’s robust economy is generating new households, creating the tightest apartment conditions in over a decade and facilitating healthy rent growth.

According to Marcus & Millichap's Apartment Research Market Report for third quarter 2012, employment gains in the Metroplex will approach 3 percent this year, more than the national rate of 1.7 percent.

"With business booming, job seekers will flock to the area from some late-recovery markets in the Midwest and the West Coast," notes the report. "As a result, leverage in lease negotiations will remain firmly on the side of apartment operators through the end of the year, spurring strong revenue gains.

"Some headwinds are forming, however. Year over year, home sales are up 20 percent, an indication that more renters are transitioning into single-family homes. Foreclosure activity, meanwhile, is up more than 10 percent from second quarter 2011, mitigating attrition from apartments to the housing market. As foreclosure activity begins to abate and new construction accelerates next year, apartment operators may have to react quickly with concession offerings to maintain tight occupancies."

Is Professional Property Management Right for You?

Provided By Realty Times

Whether you're a reluctant landlord --- renting out a property that you can't or don't want to sell in this market --- or an investor considering adding rental properties to your portfolio for the first time, you're likely considering whether you want to try and manage your rentals yourself, or whether you should hire a professional property manager. Here are a few factors to consider:

Distance

The first thing to consider is how close the rental property is to your own residence. If it's right around the corner, you'll have an easy time keeping an eye on the place, and you'll stand a better chance of being able to handle any needed repairs or emergency situations in a timely manner. On the other hand, if you live more than a 30-minute drive away, you're likely setting yourself up for a lot of scheduling difficulties if you try to manage the property on your own.

Time

Once you've rented your house to a responsible tenant, managing a rental property is not the kind of job that will require regular long hours. However, certain phases of the rental cycle will require quite a bit of your time. Getting a house ready to rent, marketing and showing the property, screening tenants, and getting all the proper paperwork in order can be time-consuming. Once you've placed a tenant, you'll need to be on-call in case repairs are needed. You'll need to ensure that rent is paid on time each month and keep accurate records of income and expenses for tax purposes. If you end up with problem tenant, chances are that many hours will be spent resolving the issues he or she presents you with.

Expertise

Professional property managers manage rentals systematically, using best practices that they've honed in the course of managing hundreds, if not thousands, of properties over the course of their careers. They have the market expertise to get top dollar for any given rental, and they know how to market properties to quickly find good tenants. They know how to structure leases to protect the property owner, how to work within Fair Housing laws, and how evictions need to be carried out. They have teams in place who can quickly respond to any issues that arise, including relationships with a variety of local service providers. If you're planning to manage rentals yourself for any length of time, these are all capabilities you'll need to be prepared to develop.

Finances

Property managers typically charge a one-time fee to get a property leased, then 8-12% of monthly rent for ongoing management. Many novice rental owners are reluctant to part with this kind of cash, especially if they already expect profit margins to be tight. However, it's important to consider that professional property managers can often command higher rents, reduce vacancy rates, address inexpensive problems before they become expensive ones, and provide many other cost efficiencies. When you realize that each month of vacancy costs about 8.3% of your total rental profits for a given year, it's easy to see how a professional property manager can easily earn his or her fee and then some---all while freeing you to pursue other revenue-generating activities.

In short, while it's easy to become the owner of a rental property, it's not always easy to manage one. If you want to enjoy the benefits of owning a rental without the time-consuming responsibilities that come with operating it, professional property management may be right for you.

Visit AllPropertyManagement.com to learn more about property management, then find a property manager in your area.