Hey guys how do you think this Bailout will mess with our ability to
Negotiate with Banks and Sellers? Too early to tell? Any thoughts what floor on prices will result? Are 2nd's protected by this bill?
On short sales so far the signals are this will increase the interest from lenders in short sales. However, they are going to be very stringent on making sure funding is available as advertised by the buyer.
This morning one lender notified a Field Guide member they will require the funds needed to close a short sale be deposited with them within 24 hours of the deal being negotiated. They are also demanding there be absolutely no contingencies or escape clauses of any kind. If the paperwork is submitted and the lender accepts, the deal is done and the buyer must close. The closing periods on short sales are going to be very short in the very near future. You better make sure you do your due diligence before the deal is signed. Soon I expect even submitting a short sale package will require a check for the full amount to be held until the lender accepts the offer.
This is great news for those with good sources of ready funds that don't require any kind of approval in order to use them.
If the bailout is approved in the next couple of days and signed by the President as promised this week. I expect to be getting BACK into short sales about early November.
So in the event of finance buyer, what are they going to do about that? Are short sales about to become cash only? I have no problems with that, I suspect it would make things cheaper, but in the event negotiations break down and I simply can't make a deal work at a price I like, I usually let regular retail buyers take them down. It would suck to lose that avenue.
If I can read between the lines, I would guess that Taz is also suggesting that the cost of borrowing money is about to sky-rocket and that the lender (loan servicing) decision makers will now have the ability to take quick action.
It sounds to me as if other people are expecting pretty much the opposite. I think some may feel as if the article in the proposed bill pertaining to principal reduction loan mods will actually put an end to much of the short sale demand.
I don't know that it will sky rocket but the cost of borrowing is going up. That makes a short sale more valuable to a lender. That will drive the requirement for short closings.
Thanks for all the response I Guess it might be too early to tell now that the deal fell through?? Well maybe some alternate plan will get passed that will still keep the banks somewhat on the hook so that they will still want to work with investors, Money partners are a great way to make short sales work. I guess I will just have to find some that are flexible with their loan requirements if this plan gets passed. If short sales go away due to this it might be a huge blow to REI ?? thanks again
Taz, what makes you think borrowing costs are going up? The main goal of the bailout was to loosen up credit. That would seem to keep borrowing costs in check, or maybe even make them fall like happened after FM & FM were taken over. I can see loans still being tight, and zero down loans to anyone who can fog a mirror won't happen. But, it would seem like rates for decent borrowers would fall.
I do wonder if banks will raise price expectations of both short sales and REOs in order to justify higher prices for those bad debts they're going to lay off on us.
Jon , I agree I think since their carrying costs will be less, they can probably just push off their bad loans to the govt straight away, It may be harder for us to justify really low prices, and the floor will be between 50- and 60 % since that is what I have seen or heard that the govt bailout will pay for those bad loans. ??
I honestly feel that Short Sales will diminish throughout this year and be a thing of the past by mid 2009...there will be all kind of ways to keep people in their homes and crooked refinances offered to avoid short sales after Bailout go through, watch
If I can read between the lines, I would guess that Taz is also suggesting that the cost of borrowing money is about to sky-rocket and that the lender (loan servicing) decision makers will now have the ability to take quick action.
It sounds to me as if other people are expecting pretty much the opposite. I think some may feel as if the article in the proposed bill pertaining to principal reduction loan mods will actually put an end to much of the short sale demand.
Short sales never have really happened in enough numbers to matter.
Whenever the "GURU'S" jump on a concept, expect to not to work, this is not different. Or you are hearing about a concept that worked for a short bit, in a narrow window.
A short sale in the scope of this crisis does the bank no good.....
I don't know that it will sky rocket but the cost of borrowing is going up. That makes a short sale more valuable to a lender. That will drive the requirement for short closings.
You guys will be amazed at what is "bankable" for a loan in the near term. These guys are fee based entities now, without the fee's there is no income.
They sold the Lions share of the income for a fee, anyone that stupid deserves this mess we are in.
Would you rather have the mortgage interest or 3 points?
So let me ask you this, if we mostly agree that house values are still largely inflated, how do you "de-value" down to Market value?
In other words, a home bought in Tallahassee, Florida for $250,000 in 2006 is likely worth $200,000 right now. Given that the borrower is 4 months late, what is the most likely means for "correcting" that loan?
So let me ask you this, if we mostly agree that house values are still largely inflated, how do you "de-value" down to Market value?
In other words, a home bought in Tallahassee, Florida for $250,000 in 2006 is likely worth $200,000 right now. Given that the borrower is 4 months late, what is the most likely means for "correcting" that loan?
The rewrite it a number that they can function against. Keep tabs of what they feel is owed, try and collect when the borrower sells
I believe that interest rates will decline--probably to the 4's--as they did after World War 2, and stay there for many years.
An absolutely GREAT newsletter is John Mauldin's "Thoughts from the Frontline." The man is brilliant and often invites guests to pen their thoughts.
http://www.2000wave.com/
Mauldin said in an audio speech that he thinks long term FRM (fixed rate mortgages) will go to the 4's of necessity. Depending on when in the cycle they're applied, low rates are a recovery tool. To stimulate housing, the monthly payments must be made affordable.
For one, short sales will continue in great numbers because property values will continue to fall well into 2010. Remember 5 year arms? Well, you will remember them when they are set to adjust again in March.
Second, the premise behind loan modifications are that people can afford a lower payment. Well Mr. or Ms. Politician, many homeowners will not choose to pay for a home that is worth less than 40% of what they owe. Loan mods are just that, modifications, they do not address the core problem. Devaluation!!
Third, the economy will likely become much worse. Earnings will disapoint Wall Street which will call for more layoffs over the next two or three quarters.
Fourth, 401k's, pensions, stock portfolios have taken major hits of 30% or more in recent weks. Baby boomers are too close to retirement to gamble whats left of their next eggs. Second homes will no longer be practical. They may choose to stay instead of retiring to Florida, Arizona, or California.
Finally, one of the priorities of the Federal Reserve is to stabilize housing. Empty and abandoned homes are a drain on the system and I know in my community that we have a surplus of homes in limbo. Taxes are not being paid and rents are not being collected. Lenders have been dragging their feet and we have yet to see the full effect of all the foreclosed and pre-foreclosed homes hit the market. I expect inventory in my city to grow or stay flat.
As long as inventory stays high and prices continue to fall, short sales will continue to give investors opportunites.
Second, the premise behind loan modifications are that people can afford a lower payment. Well Mr. or Ms. Politician, many homeowners will not choose to pay for a home that is worth less than 40% of what they owe. Loan mods are just that, modifications, they do not address the core problem. Devaluation!!
Amen Scott. I've been trying to preach about the myth of loan modifications for months now.
Sheila Bair and Barney Frank are trying to sell snake oil to distressed home owners. Loan mods don't work because the loans were unaffordable from the beginning (and that was when the borrower actually wanted the property!).
Most Short Sales have been hung in Limbo over the last month waiting for the Fed to roll out how they are going to help, the package passed, but hasn't had any action.
This week the Fed is dropping their rate again along with the Money flowing in from the Bailout...
I agree loan mod's do not work, first of all most are not "modifing the loan" what they are doing is lowering the interest rate and payment and making the rate fixed for a priod of time (2yrs, 4yrs or even 5) the majority of this loan mod's the principal still stays the same so if person owed 600K on thier home they will still owe 600K at the end of thier agreement, now what about property taxes as far as I know you can not "modify property taxes" when a lender agrees to a loan mod. they will now include an escrow account and the homeower will now have a much higher payment with a new lower interest rate, what does this mean to all of us more short sales, now one thing I have not seen discussed here is the Mortgage Relief Act this is very important to keep in mind, according to the IRS this will end on December 2010, so let's a homeower can get a loan mod in 2008 and he loss his or job in 2011 the IRS says now you will get a 1099 for difference of what you bought to what the bank took it back at, what does this mean the howeower would have been better to have completed a short sale in 2008 so that could qualify not to pay taxes on the 1099 they got. All day I have heard about the loans resetting and that people should not have gotten that loan, well what about people that are doing a loan mod. isn't just buyins some people time. Maybe we should look into loan mod. scams as well.