A n increasing number of “upside-down” homeowners

are choosing to walk away from mortgages, a trend that may cost REALTORS®

more than a simple lost commission. • A recent report by New York-based Morgan

stopped making mortgage payments, while staying current on other forms of debt. •

ASSOCIATION OF REALTORS®’ Strategic Defense Panel. “It’s generally a decision [by a homeowner/

Grand Isle, LA

According to government estimates the Deepwater Horizon oil spill has released between 41 and 120 million gallons of oil into the Gulf of Mexico since April. And oil is expected to continue leaking until the relief well is completed sometime in August. While oil continues to flow from the sea floor, the long-term consequences of the spill are still unknown.

But what will be the impact to area real estate? Short-term, area sales have all but dried up as buyers take a wait and see approach to their potential purchases. And longer-term, studies point to a drop in home prices for several years. According to one study (available to members for free via ProQuest) published in by the Appraisal Journal in 2001 on a much smaller spill in Maryland, area homes can expect to see a 10 percent decrease in value for beachfront property. A recent forecast report by CoStar Group comes to a similar conclusion, estimating the spill may cost the area up to $4.3 billion over the next three years in terms of depreciated land and home prices. Their best advice? Don’t panic, and if you can avoid it, don’t sell.

However, commercial real estate is driven much more by the area’s dependence on the broader oil industry. So far office and industrial users has seen little adverse impact from the spill. Vacationers who would have filled hotels and shopped in local retail stores have been replaced by the vast army of clean-up crews and officials in charge of containment. In fact, while some studies suggest residential prices will decrease as a result of the oil spill, NAI Global’s chief economist goes so far as to say the area’s commercial real estate should suffer no long-term impact, either positive or negative, as a result of the spill.

For more in-depth coverage on the spill and to read how local REALTORS® and local Associations are coping, be sure to take a look at Erica Christhoffer’s multi-part report in our sister blog, Speaking of Real Estate. She will also have an article in the August September issue of REALTOR® Magazine. For even more coverage, the New York Times has a great interactive feature on the spill with maps, video, reports and frequent updates.

In the last few months Information Central has been receiving some calls from members concerned over two different claims have been made about recently enacted or pending legislation that would impact home sales. Both are false.

The first says that the Energy bill currently making its way through the senate would  require home energy audits prior to sales. This is false. The bill rather provides for some state-administered matching grants to homeowners who make energy efficiency improvements to their homes. The bill also mandates new construction to meet certain energy efficiency guidelines, but prohibits time of sale labeling. The legislation is currently pending in the senate.

Secondly, some claim that the recently passed healthcare bill includes a 3.8% transfer tax on the sale of all homes. This is also false. The new Medicare tax applies only to high income (those with incomes over $200,000 for individuals, or $250,000 for households that file taxes jointly) with ‘net investment income’. As the first $250,000 of any sale of a primary residence is automatically excluded ($500,ooo if filing jointly) from capital gains, the only people who might pay this new tax are the very wealthy who sell a property at an enormous profit. Factcheck gives examples of who might pay:

• A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
• An “empty nester” couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.

To help combat these false claims, NAR Government Affairs has created a handout [links to PDF]. Rest assured if there were any radical changes to the home buying and selling process, the National Association of REALTORS® would be on top of it, letting its members know the truth.

Washington, July 01, 2010

WASHINGTON (July 1, 2010) - Following a surge driven by the home buyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator, dropped 30.0 percent to 77.6 based on contracts signed in May from a reading of 110.9 in April, and is 15.9 percent below May 2009 when it was 92.3. The falloff comes on the heels of three strong monthly gains as home buyers rushed to take advantage of the tax credit.

The data reflects contracts and not closings, which normally occur with a lag time of one or two months. However, many closings have been delayed recently from a rush of buyers into the system and slow processing of short sales, in addition to the heavy volume and a more thorough loan underwriting process. As many as 180,000 buyers who signed contracts by April 30 may have missed the June 30 closing deadline for the tax credit. However, Congress passed legislation yesterday to extend the deadline for delayed contracts and President Obama is expected to sign.

NAR chief economist Lawrence Yun said, “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June,” he said. “Surprisingly, though, some local markets such as Portland, Maine, and Jacksonville, Fla., actually experienced an increase in contract signings from a year ago without the tax credit.

“Existing-home sales that close in June will remain elevated, but we’ll then see a notable decline for July and August.”

Congress also reauthorized the National Flood Insurance Program. Many lenders were hesitant to approve mortgages on homes needing flood insurance without congressional action and numerous sales have been on hold. The action is retroactive to a temporary authorization that expired May 31, and also is expected to be signed by the president.

Yun noted the tax credit has broadly stabilized home prices. “Without the tax credit, there will be more aggressive price negotiations between buyers and sellers. The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year. We’ll also keep a close eye on market conditions on the Gulf Coast.”

Through May of this year 495,000 net private sector jobs have been created; NAR’s forecast for employment growth is about 1 million additional net new jobs over the balance of the year and another 2 million in 2011.

“If jobs come back as expected, the pace of home sales should pick up later this year and reach a sustainable level of activity given very favorable affordability conditions,” Yun said.

“In most areas of the country there will be no sharp snap back in home prices in the upcoming years, although some local markets have experienced double-digit gains this year,” Yun said. NAR forecasts the national median home price to rise only 4 percent cumulatively over the next two years.

“One factor that could lead to price acceleration in upcoming years for some markets is if the very low levels of new home construction were to persist for another year or two,” he added.

The PHSI in the Northeast fell 31.6 percent to 67.0 in May and is 14.8 percent lower than May 2009. In the Midwest the index dropped 32.1 percent to 70.8 and is 20.2 percent below a year ago. Pending home sales in the South fell 33.3 percent to an index of 82.5, and are 14.4 percent lower than May 2009. In the West the index declined 20.9 percent to 85.3 and is 15.1 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

# # #

NOTE: References to local markets are from unpublished data. For more information, please contact the local association of Realtors®.

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Existing-home sales for June will be reported July 22 and the next Pending Home Sales Index will be on August 3; release times are 10 a.m. EDT.

What day should you negotiate to close escrow in order to meet the needs of the buyer and seller?  When negotiating a contract, the actual day of the week that the close is on is not often considered.  More typically, contracts call for 30 or 45 or “x” day escrows.  But, considering that:

1. Most buyers prefer to move into their new home on the weekend, and
2. Most sellers want to get their funds as soon as their sale closes,

we at Glen Oaks Escrow suggest taking a look at the specific day that you are projecting to close with your “x” day escrow, and attempt to avoid a Friday close.  Thursday or earlier is often best.  This is because you allow for a day from the recording of the sale for a seller to receive their money and a day of wiggle room for the buyer in case any part of the process encounters a snag.  In the case that a hiccup with any part of the closing process does occur, this leaves at least an extra business day to close before the weekend.

Other considerations:

Should we close at the end of the month?

Some people are concerned with closing at the end of the month. The benefit of closing at the end of the month is that the buyer does not have to come in with as much money to pay for outstanding interest that may be due. Closing at the end of the month is generally not a problem if all the documents are turned in on time. However, buyers and sellers should be aware that generally the county recorder’s office has more volume on the last day of the month.  Confirmations of recording tend to come later in the day as a result, and the risk of delays in proceed disbursements can increase as a result.  Of more common concern to most buyers and sellers is to avoid closing on a Friday and perhaps facing a delay that would force the buyer and seller to wait until after the weekend to close.

Holidays

Be sure to take holidays into account when negotiating a closing date as well.  The county recorders office, banks, and often escrow are closed for all public holidays and this can impact your closing date.  If for example, you plan to close on a Thursday, but the next day is a holiday, you might prefer to target a Wednesday close in order to best plan for the property closing before the long holiday weekend.

The escrow agent will present all the details of your closing to you and explain the process step by step. Keeping in mind the best day to close however will help your escrow go more seamlessly.

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What is the Statement of Information?

Upon the opening of escrow, Buyers and Sellers receive their initial escrow package - the Statement of Information (also known as the Statement of Identity) is included in this package for completion and return to the escrow holder.

The statement of information is a one page document which requests the party’s name, date of birth, social security number, current and previous addresses etc.

Who requires the Statement of Information?

The Title Company of record requires this completed form to ensure successful and expedient transfer of title. This document assists in eliminating untimely delays in closing of real estate transactions.

How does the Statement of Information work?

The Statement of Identity establishes and confirms identity. Confirming identity will assist the Title Company to eliminate/resolve matters that affect real property such as child support liens, judgments, bankruptcies etc., filed against persons who have the same or similar names.

This is important as such liens and judgments are recorded against real property and against individuals on a daily basis.

Why Should Buyers/Sellers Complete the Statement of Information?

Consider these scenarios:

Scenario #1: Seller is Robert Smith. The title company runs a name check on Robert Smith. Title company finds recorded liens and judgments filed against a Robert Smith that must be paid.

How will title eliminate our Seller, Robert Smith against these potential liens? Title will compare social security numbers, previous address, etc. (as per Statement of Identity) to determine which Robert Smith is liable for payment of said liens/judgments.

As result, our Seller Robert Smith has been eliminated as the potential party owing thousands of dollars due to liens.

Scenario #2: Buyer/Borrower is John Williams. Once again, title runs a name check and discovers that a John Williams has defaulted on his child support payments. Upon further investigation it has been determined that YES this is our Buyer/Borrower. Now escrow has the heads up to advise their Buyer/Borrower to bring his account current and also escrow can then secure an updated statement that will be sufficient for title transfer.

In conclusion:

The title company requires that buyers/borrowers and sellers fill out the Statement of Information to be able to complete their fiduciary duty to return clear title for the real estate transaction. The documents the title company requires comes from the escrow company after it has been completed by the Buyer or Seller, so your Escrow Officer can discuss the Statement of Information with you. Each transaction is case specific. Your Escrow Officer can clarify the points that are needed to finalize the transaction.

If the Statement of Information requirements give you cause for discomfort, talk to your Escrow Officer about the specific needs of your escrow. Your Escrow Officer will be able to explain the Privacy Act Notice with which Glen Oaks Escrow is in compliance.

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NEW YORK (CNNMoney.com) -- The number of Americans who own homes fell in the second quarter of the year to the lowest level since 1999, said a government survey released Tuesday.

The Census Bureau said the home ownership rate fell to 66.9% in the second quarter of 2010, down half a percentage point from the previous year. The home ownership rate was 67.1% in the first quarter of the year.

In the second quarter rates were highest in the Midwest, where 70.8% of people are homeowners, and lowest in the West, where 61.4% of people own.

Rates in the South and West were lower than a year ago, while the Northeast and Midwest stayed the same.

Vacancies: The vacancy rate in non-rental units also fell in the second quarter, to 2.5%. Meanwhile, the vacancy rate in rental homes stayed steady at 10.6%.

Almost 86% of U.S. homes were occupied in the second quarter, with owner-occupied housing comprising 57.3% of all housing units. Renter-occupied homes were 28.3% of all units.

A separate report released Tuesday, the Case-Shiller index, showed home prices rose 1.3% in May compared with the previous month. 

NEW YORK (CNNMoney.com) -- Slick TV commercials and online ads tell delinquent borrowers that they can save their homes by filing for personal bankruptcy. But is it true -- or just too good to be true?

True!

Bankruptcy can bring foreclosure proceedings to a halt, end harassment from debt collectors, and give borrowers time to make up missed payments and reorganize their finances. In some cases, bankruptcy can also help mortgage borrowers save their homes permanently.

It's not, however, going to help every troubled homeowner. If, for example, the homeowner's biggest problem is not enough money, bankruptcy is not going to solve that.

"It's the best tool there is for people behind in payments but who have ongoing income," according to Binghamton, N.Y., attorney Peter Orville, "those who had been making payments and who could be making payments again."

The first thing a bankruptcy filing accomplishes is to stop the foreclosure process. Lenders can't foreclose or even try to collect debt until permitted to do so by the court.

But first, you have to decide what type of bankruptcy to file for. There are, basically, two types to choose from: Chapter 7 and Chapter 13.

A Chapter 7 bankruptcy delays foreclosure. but eventually it usually results in the liquidation of most assets, according to attorney Stephen Elias, author of "The Foreclosure Survival Guide." Borrowers almost always lose their homes in a Chapter 7.

Some bankruptcy attorneys, like New York-based David Pankin, prefer Chapter 7 because it gets rid of all unsecured debt, leaving only secured debt, such as mortgages, exempt. In this scenario, borrowers still owe their mortgage payments but they can likely afford to make them because all the other debts have been discharged.

But for most experts, Chapter 13 is usually more effective at helping people keep their homes. It gives them time to repair their finances, usually three to five years, during which the court agrees to an income-based budget with monthly payments made to trustees.

The trustees pay the bills, first paying off the secured debt. After that, the trustee pays off unsecured debt, starting with back income taxes.

Next in line comes unsecured debt like credit cards and medical bills. By then, there's usually little cash left and these bills are paid at less than the full rate, often as little as five cents on the dollar.

Borrowers, if they kept up on their payments, can emerge from bankruptcy with their homes still in their possessions.

One thing courts cannot do is "cram down" loan balances on primary residences. That is, reduce mortgage debt to what the home is worth. Neither can they lower interest rates, in most cases, nor lengthen the term of the loans.

They can, however, "strip off" second mortgages, like home equity loans or lines of credit, when home values fall below the first mortgage balances, according to Elias.

"This allows the judge to get rid of the second mortgage," he said. "If there's not enough equity to secure the second, it becomes unsecured debt."

That can be a huge advantage for borrowers. Homeowners may have, for example, a $200,000 first mortgage balance and another $50,000 on a home equity loan. If the home value has dropped to less than $200,000, the judge could rule that all $50,000 of the second is unsecured. Then, it can be paid off at the same pennies-on-the dollar as other unsecured debt.

But there are other downsides. Bankruptcy can lop as much as 240 points off credit scores. And bankruptcies can remain on credit reports for 10 years, said Pamela Simmons, a California real estate attorney, while all other black marks disappear after seven years or less.

There is also a potential tax advantage to filing for bankruptcy rather than going to foreclosure, according to Simmons. When a home is repossessed and the lender forgives the portion of the mortgage balance above its market value, a tax liability can be triggered. Any difference between what people borrow and what they repay is considered income.

Congress is temporarily allowing that unpaid debt to be forgiven -- but only for money specifically spent on the home purchase or on home improvement.

Millions of people, however, refinanced mortgages or took out home equity loans and used the money to fund vacations, pay college tuition, buy cars or boats or simply to live the good life. That money is taxable.

Simmons had a recent client who was allowing his lender to foreclose on him and called her about the timing, asking whether he had to vacate by the day of the auction.

In passing, she asked him how much he owed on the house. He said he bought it for a million but had taken out another $2 million, most of which had not been spent on the house. When she told him he would owe taxes on it both to Uncle Sam and the State of California, he was dismayed

She rushed him into her office and they did the paperwork so he could file for bankruptcy.

"If they discharge that deficiency in bankruptcy, you don't owe tax on it," said Simmons. 

NEW YORK (CNNMoney.com) -- Foreclosure filings climbed in 75% of the nation's metro areas during the first half of 2010, according to a report issued Thursday.

RealtyTrac, an online marketer of foreclosed homes, said that California, Florida, Arizona and Nevada continue to lead the nation in the rate of foreclosures. Las Vegas was the worst-hit city.

But now unemployment has replaced toxic mortgages as the leading cause of foreclosures throughout the country, according to spokesman Rick Sharga.

"Las Vegas has seamlessly shifted from having a high level of foreclosures due to bad loans," said Sharga, "to defaults caused by a high level of unemployment." Some 14.5% of its work force was idle in June, up 2.1 points from last June.

Las Vegas had one filing for every 15 households in the metro area. The second highest rate was in Cape Coral/Fort Myers, Fla., with one for every 20 households. Two California cities, Modesto and Merced, tied for third with one filing for every 22 households.

The good news is that most of the worst-hit cities have actually seen their foreclosures rates decline, as the subprime crisis fades.

But while those cities have seen slight improvement, other areas are getting hit harder by the economy.

"Look at a place like Salt Lake City," said Sharga. "The foreclosure rise there appears to be entirely related to the economy," not because people can't afford their subprime loans.

Salt Lake's unemployment is up this year, rising 0.2% to 7.1% in June, even as the national unemployment rate dropped 0.2% to 9.5%.

Lenders filed foreclosure notices for one in every 48 Salt Lake City households during the first six months of 2010, a 55% increase over the same period in 2009.

Besides Salt Lake City, other metro areas where foreclosures have soared primarily due to the economy include Chicago, which saw filings climb 23% year-over-year to one in every 48 households. Charleston, S.C.'s, rate climbed 17% to one in every 68 homes, while Albuquerque saw a 157% jump in filings to one in 80 households.

Each of these cities has rising unemployment. Chicago's unemployment stood at 10.6% in June, more than a point above the national rate, while Albuquerque's unemployment jumped to 8.9% from 7.9% in the last 12 months and Charleston's rate stands at 9.5%.

Still, the report found that there are some remarkably untroubled markets, many of them in the Northeast, Midwest and Texas, where home prices never really bubbled during the boom and have not fallen very far during the bust.

Utica, N.Y., had the lowest filing rate of any of the 206 cities in the report, just one in 4,859 households. Burlington, Vt., recorded one foreclosure for every 3,305 homes, while Charleston, W.Va., had a rate of one in 2,799 households.