Giving your Home to the Lender: the Smart thing to do?!

When you bought your home you were making one of the largest business decisions of your life. The Bank / Lender who did the financing of the property made a business decision as well: to make that loan to you for a profit!

Thanks to our government (You, the tax payers), the banks are still making astronomical profits today. The only observable difference between Wall Street and the Banking Industry is the compensation packages today are structured differently ( Though not noticeable any smaller in $$$$$$ ).

I would like to suggest to every home owner who is upside down in their home, and who only owe on their original purchase loans – not those of you who refinanced and paid off other bills and your credit cards – to let the bank / lender live with a bad business decision they made in making that loan. No one had a crystal ball 5 years ago or we all would have made different business decisions – not only about our housing, but investing… and life in general. You may have made a great business decision when you bought that home.  However, now may be the time to make another great decision: let the bank own it.  You can probably rent the one next door for half of what you’re paying now.

Ed Henne
Office: (520)918-5989
Cell: (520)465-8000
ed@edhenne.com

~ Below is an article fro the Arizona Daily Star by Dale Quinn.  It addresses the opinions of U of A Law Professor Brent T White.  This is a must read…

Real estate: Stiffing lenders: the moral argument

Walking away from an upside-down mortgage doesn’t only make financial sense, in some cases it might be the right thing to do.

So says University of Arizona law professor Brent T. White, who’s now beefing up the moral side of his argument that homeowners could benefit financially by defaulting on their mortgages.

Critics of White have said it would devastate the economy if people listen to him. It’s also morally questionable, they say, for people to stop paying for their homes just because they’re worth less than what’s owed.

But Friday, at an ethics symposium hosted by the University of Arizona’s Eller College of Management, White delved deep into the morality of making such a choice. He argued there could be a social benefit if families walk away from homes that have plummeted in value – especially if those homeowners were counting on the investment to support them and their family into old age.

“It might be more responsible, in such a case, to put the money saved from renting, instead, into a retirement account,” White said. “So that one is not a burden on society or one’s children in old age – or so that someone can fund their children’s chance at a higher education. In other words, things aren’t so black and white.”

White, it seems, has become the spokesman on behalf of walking away from a mortgage. After the seminar he said he never really expected to play such a role. He thought the paper on underwater mortgages would fade into obscurity, like most academic works.

Of course, White isn’t the only one with an opinion about walking away from a house that’s dropped in value. Two of the other panelists at Friday’s event, a Tucson banker and the head of a local real-estate company, don’t stand to gain if the practice becomes widespread.

“I do have some conflicts with Professor White’s view of using the opportunity of not paying your mortgage, and preparing yourself for that act, only because the negative equity situation – the investment side of the home ownership – may hamper future wealth creation,” said Rosey Koberlein, the CEO of Long Companies.

Koberlein declined to make a blanket statement regarding the morality of walking away from a home. She said the circumstances that lead up to that choice vary with each case. She did point out that when homeowners sign a mortgage contract, nothing in the document gives them relief just because their house drops in value.

Also, a homeowners should understand that there may be legal repercussions if they used their homes’ rising value to make other investments.

“For many, many years, up until this long, hard meltdown, the borrower enjoyed the appreciation of the value of the home,” Koberlein said. “And enjoyed it without an equity share by the bank.”

And “banks themselves can be in a tough spot,” said John P. Lewis, the president and CEO of Southern Arizona Community Bank, which is in the process of combining with Bank of Tucson.  Federal regulations can make it tough for them to work with a borrower even if they want to, he said, because banks can get dinged and have to put up more cash to back up a modified loan.

On one point, Koberlein seemed to agree with other critics of White, saying if underwater homeowners start walking away from their mortgages en masse the economic consequences would be devastating.

“But why should homeowners bear the burden of the entire economy,” White asked? “Big corporations can walk away from a bad investment, so why not homeowners?”

A real-estate company in New York defaulted on $4.4 billion in loans even though it had the cash to pay its bills. And no one, said White, questions whether that company – Tishman Speyer Properties – took the moral course of action.
So why should it be different for a family of four that’s juggling bills, stuck in a house that’s worth half what they paid for it, and still trying to put a few bucks away for the future?

“It is unfair, in my view, to ask individual homeowners to prop up the housing market on their back, something they actually can’t do anyway,” White said. “It’s especially unfair if it means sacrificing their family’s financial security.”

You can view the article by Clicking Here!

I really want to know what you think.  Please sound off in the comments section below.

Open Houses Work

A lot of work goes into preparation for an open house but it is all worth it? Positioning a home to be at its peak condition increases exposure and with that the potential for sale.

Many times I’ve heard homeowners lament, “This place has never been this clean.”  And of course they get to enjoy the “freshening” of their home while it is for sale.  We have become a very visual, hands on society.  The traffic that an open house brings through a property provides important exposure and excitement.  Holding a home open also provides an opportunity for prospective buyers and people who know prospective buyers to see first-hand what photographs can’t show… spatial relationship.

Finding open houses can be a challenge in some communities.  Most jurisdictions do not allow open house signs to be placed in the public right-of-way.  They often overlook the minor infraction because it poses little threat to the security and safety of a community.  Oro Valley Arizona is taking a proactive stand on the matter, much to their credit.  By establishing a licensing program for right-of-way advertising, specifically aimed at temporary real estate signage, Oro Valley is working with the community to find balance.

Each community is a bit different but all homeowners should enjoy the benefit of a high standard of care when it comes to selling their home.  Knowledgeable professionals and homeowners prefer the Sign Ordinance language, “No sign shall directly impede pedestrian, bicycle or motor vehicle traffic when placed in the public right-of-way.  Signs may be placed between curb and sidewalk where space is available.  Signs may not be placed on any paved surface.”  This language provides a thoughtful, reasonable solution to signs placed everywhere along a road side.  After all, a temporary open house sign with home buyer traffic is a much better “brand” for a community than foreclosure and short sale signs.

Mark Finchem
Office: (520) 808-7340
MFinchem@longrealty.com

Adding Equity without added Expense

Can you accelerate adding equity to your home without spending a single extra dollar?  Yes it is possible and here is how:  You will need to know the purchase price of your home, how much you put down and how much you financed.  If you have a single mortgage and you are paying MIP or PMI (mortgage insurance) identify who you are paying it to.  If you don’t know contact your lender and they can tell you.

The next step is to contact a REALTOR and ask for the current comparable properties.  The difference between what you financed and the price you paid for your home is the Loan to Value Ratio.  When the value of your home increases and the debt you have against it decreases the Loan to Value Ratio increase.  So, if you put 10% down on a $200,000 home ($20,000) and the value of the home has increased to $218,000 plus you have paid down about $2,000 in debt the Loan to Value Ratio has grown to 20%.

Now you can turn to your lender and present your case.  Most mortgage notes will have a condition that allows the mortgage insurance to be lifted when the Loan to Value Ratio rises above 80%.  You can now add about $105 a month to the principal in what is called a PIP Reduction Plan.  Basically it is Principal + Interest + more Principal.  That is one way you can accelerate your mortgage loan pay off and build equity faster.

Make it a habit to contact your REALTOR once a year for a PMI checkup.

Mark Finchem
Office: (520) 808-7340
MFinchem@longrealty.com

Let’s Burn the Mortgage

Generally Buyer’s focus on the “Price” of a home and not the “Cost” of a home.  The two major considerations when buying a home are present and future, also called Price and Terms.  Price is that sum which one agrees to pay at the moment of closing.  It is the cash that moves from the Buyer to the Seller in that moment called the transaction.

Terms on the other hand are usually what happens after the closing action; not always, but usually.  Interest paid to the Buyer’s Lender would be one of the terms.  It was not dictated by the Seller, but it is part of the transaction nonetheless.  Over the life of a 30-Year, 5% Fixed Rate Mortgage on a $250,000 home the homeowner will pay approximately $434,825 (based on a 10% down payment).  While it is true that in most cases the home mortgage interest can be claimed as a deduction on the homeowners income tax filing, is there an alternative?

PIP (the payment of Principle + Interest + Principal) can save big money over a short period of time.  Paying the current months payment plus the following months principal in effect cuts the term of the loan in half just a little at a time.

At one time in the not too distant past homeowners celebrated the payoff of a mortgage with a mortgage burning party. What a great time to return to that tradition!

Mark Finchem
Office: (520) 808-7340
MFinchem@longrealty.com

Short Sales… Don’t Do It!

Short sales in Tucson!  If anyone tells you the lenders have to respond in a given time, DON’T believe it!!!  On April 24th 2010 there was an offer written and submitted to PHH Mortgage on behalf of my client.  According to all the new rules the lender had 21 days to respond.  The listing agent was told, ” We haven’t gotten to it yet.” She was also told that there would be a negotiator assigned to this account no later than June 7th.  As of today, no one from PHH Mortgage has responded to the offer.

OOOOOOOOOOOOOOHHH  the seller was notified today that the lender was foreclosing the property on Friday, the 25 of June.

I took it upon myself to e-mail the office of senator Jon Kyl both last week and again today to ask for assistance, and no response from there either. Last week I was told Senator Kyl wouldn’t be in Tucson again until vary late in the fall. To add an additional insult his Phoenix office told me the only way to communicate would be through his web site!! I guess I’ll  have to find some one who gave large amounts of money to his last campaign  before I can speak to the Senator in person!!  Our elected officials wonder why the public is so pissed off at them.  Maybe, just maybe they should take the time to talk with the average voter (By the way, Senator Kyl isn’t up for reelection this year.  He has a couple of years left on this term.)

If your thinking of selling your home on a short sale DON’T!! The time and brain damage isn’t worth it!!! Make a smart business decision and give it back to the lender, or let them take it!! Your purchase was a business decision just as it was the lender’s to make the loan and take the home as their security.  If I’m not mistaken, in just two years you’ll be able to purchase another home under the new purposed government guidelines.

My last word for today is your government has given the banks Billions… what help has been offered to you?

Ed Henne
Office: (520)918-5989
Cell: (520)465-8000
ed@edhenne.com

Feel free to comment below.  We love hearing from you.

Making Your Home Energy Efficient

Energy efficient renovations, especially here in Tucson, are more than just an investment in your home; they pay dividends here and now.  When it comes to summer remodeling, there’s no better way to invest your hard-earned dollars than by making your home energy efficient. An energy efficient summer remodel is truly a worthwhile endeavor as it will result in years of savings on your energy bills.

Some of the common items you can buy and integrate into your energy efficient renovation include:

-Insulation systems and materials
-Roofs that resist heat gain
-Biomass burning stoves
-Energy-efficient windows
-HVAC systems with the highest efficiency tier
-Solar panels
-Fuel cells
-Geothermal heat pumps
-Wind energy systems

Some of these improvements to your property also carry a premium.  They may be eligible for grants or tax incentives.

Mark Finchem
Office: (520) 808-7340
MFinchem@longrealty.com

Big Banks Accused of Short Sale Fraud

Brought to you by CNBC Real Estate Reporter Diana Olick

Just as regulators, lawmakers and all forms of financial oversight boards are talking about new regulations to guard against mortgage fraud and another mortgage meltdown, there appears to be yet a new mortgage fraud out there today, allegedly perpetuated by agents of, yes, the big banks.

I was first alerted to this by Jeremy Brandt, the CEO of several companies that bring short sale agents, investors and sellers together.

His companies include 1800CashOffer, HomeFlux.com and FastHomeOffer.com. Brandt has a huge network of short sale real estate agents, and over the past several months he’s been receiving all kinds of questions and complaints about trouble with second lien holders.

As we all know, during the housing boom, millions of Americans pulled cash out of their homes in the form of home equity loans and lines of credit. They also used “piggy back” loans in order to get even lower interest rates on their primary mortgages. Now, many of the borrowers in trouble, and many who are so far underwater on their loans that they don’t qualify for any refi or modification, are choosing short sales as a way out…

Read the Rest…

Hey Mark, is it time to buy yet?

We are at the beginning of a new cycle:

Think about the last time someone told you that you stand at the point of maximum opportunity.  Has anyone ever told you when the time was right and when you should make a move?

In a nutshell the Tucson housing market is alive and recovering for 2010, but the Job Recovery Package implementation (in front of the Arizona Legislature) is crucial for our long term health!

The December Monthly Statistical digest is providing clear and convincing evidence the Southern Arizona housing market is showing definite signs of improvement.  The December 2009 recap shows improvement in every statistical measure including…

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