Short Sales-Still lurking around out there.

The improvement in home values over the past two years has greatly reduced the number of short sales on the market. For the investor or home buyer who is not pressed for time, a short sale can be a good buy. Generally you can purchase a home for below market cost because of the distressed nature of the sale. However, in many areas including the eastern and outlying portions of Montgomery County, home values have yet to appreciate above the dizzying heights achieved around 2005-6. This means that there are still many homeowners who have mortgages where the principal owned is still higher than the value of the home. For this reason, don't expect short sales to completely disappear for a few years yet. In the community where I live Hillandale MD there are now only four properties listed as short sales. This is far below the average numbers for the past few years. If you were to look in some communities in Howard or Prince George's Counties you will a greater proportion of short sales. In DC and West Montgomery County short sales have all but dried up.

There is good news in these numbers. The reduction in short sales on the market indicate a growing economy and improving housing market. This will help us all as equity in our homes in probably the biggest investment that most Americans will ever have. If you would like to explore distressed homes for sale in your community you can go to my own listing search engine. There you can use filters to find distressed homes or set up an alert to let you know when a distressed home comes on the market in your community.

Condo Buyers Need to Beware

I am getting a lot of calls lately from first time buyers looking to buy condos. Primarily because so many people are priced out of the market for single family homes and townhouses. With the lower prices these days there seem to be a lot of good condo deals on the market these days. However, all is not as it seems and I caution  prospective condo purchasers to be careful. Right now, I can think of three problems associated with condos that are popping up and making it very hard to get loans to purchase or for sellers to sell.

Non owner occupancy. There has been a flood of investors snapping up condos for cheap. They are mostly all cash buyers looking for attractive short sales or bank owned properties. In the past many of these investors were rehabbing and flipping the homes-which is a good thing. However, with the low costs of units and cheap financing many are buying condos in order to hold and rent them out. Typically, rental properties get less care than owner occupied properties and if there are too many rental units in a condo development then it becomes very difficult to obtain financing for prospective buyers who are looking to use FHA or minimum down conforming loans. Currently FHA guidelines allow no more than 50% of the homes in a condo project to be non-owner occupied, and a lot of projects are failing to make the grade and losing FHA approval.

Delinquent condo association payments. FHA refused to approve a project where more than 15 per cent of the units are 30 days or more behind on the payment of condo fees to the association. With the state of the economy this is a growing problem as many condo projects are now falling above this level.

Condo projects that are entering a new maintenance cycle. During the last boom in the late 1980's many apartments were rehabbed and converted into condos. These units are now entering into a 25 year cycle where key upgrades and repairs are needed. Things such as expensive new window or roofs or parking lot repaving come at about this stage. These major repairs cost big money and a lot of condo projects have underfunded reserve funds and just do not have the money on hand to pay for this work. When this happens it usually means that special assessments are passed on to the current unit owners and these generally are added to the monthly condo fees. I am seeing some units in the area where the monthly fees are topping $1,000 per month. When faced with the reality of this tough market many sellers have to cough up the full balance for these assessment at settlement. Smart buyers are checking and passing up on projects have a history of passing large assessments to the owners.

This does not mean that all condos are a bad buy, and certainly there are some very nice condos in the area. However buyers need to be very careful when looking at that condo "deal' in today's market. The best bet are newer condos or units that have been recently rehabbed and converted. In this case, FHA financing is usually readily available and you are pretty sure that you will have at least two decades before serious physical upgrades are needed. I really like some of the condo conversions that I am seeing in the District these days. Some really fine older buildings with modern units inside. A nice mix in my opinion. 

Streamlined Short Sale Process

I read a good article recently in the Christian Science Monitor about how banks are doing a better job of working with homeowners to streamline the short sale process. This has been very noticeable in my office as some banks (did somebody say Bank of America) have really changed course in the past few months over this matter. It does depend on the bank but almost all of them have moved towards speeding up the process. Basically, a short sale is where the bank allows a property in distress to be sold for less than the note owned on the property. Usually, the bank just eats the loss (but not always). You might wonder why any bank would do this. The reason is simple. You might not believe it but it is cheaper for the bank to allow a short sale than it is for them to foreclose on a property. It seems like a lot of banks had trouble accepting this but now after five years into a poor real estate market most have now seen the light.

Don't be afraid or embarrassed to ask your lender to let you sell your home short. Millions of American homeowners have done it and it is not a bad way to get out from under a house payment that is wrecking your life. Remember, that you are going to have to prove that your are under a hardships, so you will have to be prepared to write some letters and provide financial information to back up your claim. But in the end, selling your home short is much better than ignoring the problem and allowing it to go to foreclosure.