BANKRUPTCY-AFFECTED FORECLOSURE SALES

A recent closed transaction in which we were involved revealed an interesting twist on a foreclosure sale involving a bankruptcy. The facts are these.

A homeowner filed personal bankruptcy. Because the debtor owed substantially more on his personal residence than its value, the trustee released the property from the bankruptcy proceeding. This is a common practice when an asset has no equity available to satisfy creditors.

Subsequent to the release, the property was the subject of an underbid at the sheriff’s sale. Why the lender made an underbid under these circumstances is unknown. Because of the personal bankruptcy the lender had no ability to later collect on the shortfall.

Due to the acumen of a Coldwell Banker Weir Manuel professional, the homeowner quickly put the property on the market and sold it for substantially more than the underbid, retaining the difference.

This technique is normally used to create the best financial situation possible for the seller with the understanding that the lender may pursue the homeowner at some future point in time for the shortfall. In this case, however, the lender would not be able to do so due to the bankruptcy proceeding.

It is important to point out that the seller was advised to seek outside legal advice in this case as we are neither attorneys nor experts in bankruptcy. Understanding all options available to sellers is critical to creating a selling scenario that is in their best interest.

There is a toll-free hotline that will provide critical information about individual bankruptcy cases. By calling 877-422-3066 one can find out if a person has filed bankruptcy, the names of the attorneys involved, and the name of the judge. This information can be accessed by name or social security number, and is free of charge.

VACANT HOME ORDINANCES COMPLICATE TRANSACTIONS

We are currently witnessing a rash of new municipal ordinances dealing with vacant homes. Some municipalities believe that by regulating vacant homes, their potential negative impact on property values may be avoided.

These ordinances typically feature a registration process, registration fees and inspection fees. In some cases, municipalities are even going so far as to require buyers to acquire certificates of occupancy in order to move into a home which has been vacant for a specified period of time.
The public purpose behind most of these initiatives is to ensure that vacant homes do not become a negative influence to surrounding properties and neighbors. While this is a legitimate goal, it also appears that a few municipalities have chosen to use these ordinances as revenue generators and/or a method by which code inspector salaries can be supported.

Because the requirements under these ordinances vary greatly from town to town, there is no way to summarize the details of each here. It is important, however, for home sellers, home buyers and their real estate agents to be aware of them. The terms and conditions of a purchase agreement may be affected by these ordinance provisions in some cases.

The real estate transaction continues to get more complicated every day. It is our goal at Coldwell Banker Weir Manuel to continue to stay abreast of every new development that affects the sale or purchase of real property and advise our clients accordingly.

THE OFFER - MORE THAN JUST THE PRICE (from Realty Times)

Fixating on price in real estate may cost you the deal:
* Sellers who decide that a specific dollar figure will buy their home and won't budge
from that bottom line may sell themselves short.
* Buyers who drop out of a transaction for a property they love because the seller's
counter-offer shocks them may be quitting before they have really started negotiating.
When a buyer makes an offer to purchase a house, condominium unit or commercial
property, the purchase price is a prime consideration, but it represents only part of the
total value offered to the seller. Problems may arise for both sides of the transaction
when this fact is forgotten.

Value Elements in an Offer
The value expressed in a buyer's offer to purchase, or in a seller's offer to sell, involves
5 key elements -- a financial package:

* Purchase Price, the stated amount of dollars offered by the buyer, represents a
significant contributor to value, but there are other important factors which can reduce
the amount the seller receives or which can compromise the transaction. It's not the
purchase price, but the net proceeds of the sale that sellers -- and savvy buyers --
should concentrate on.

* Closing Date, or the day ownership changes hands and the seller receives the
money, can represent cost or value to both parties. Savvy buyers usually attempt to
meet the seller's preferred moving date, especially when the seller has committed to
purchasing another property or needs the proceeds of the sale on a specific date. For
instance, a closing before that date may be expensive because the seller would have
to move out and store everything until they could move into their new home. That
double move and the inconvenience represent out-of-pocket costs and time lost that
make the actual purchase price lower than stated. A closing date later than the seller's
preferred date may leave the seller owning two homes - and paying off two mortgages -
at once. The seller may incur extra costs in arranging bridge financing to meet legal
obligations to close on their new home before they receive proceeds from the sale of
their current home. Choice of closing date may represent costs or value to the buyer as
well. Balancing this reality for both parties is key in negotiation.

* Inclusions and Exclusions to the sale also represent costs and value for both
parties. Appliances, heating systems and draperies are common seller inclusions
designed to boost value for buyers. If warranties for everything from a new roof or solar
panels to new appliances cannot be transferred to a buyer, these items become
"second-hand"and will probably represent less value to buyers. Buyers are also free to
include excluded seller items, like an antique light fixture, in the offer to purchase.
Deals have been lost to disagreements over light fixtures, fireplace accessories and
vintage furnishings, so prudent sellers remove contentious items before listing. A
buyer may offer less than list price and ask for nothing; a seller could sign back for
more money and include items to sweeten the pot. Value is very subjective for these
non-real-estate items and that's where negotiations can get heated.

* Terms and Conditions are clauses in the offer which cover "what if" risks for one
party and the obligations of both parties. These clauses detail what the buyer asks the
seller to do for the purchase price. Arrange a survey or include a treasured light fixture?
Sellers can create conditions in an offer to sell, but usually conditions are of greater
concern to the buyer, particularly if approval of a third partly like a lender or city
planning department is involved in determining the property's suitability. Conditions to
arrange financing or a home inspection are among the "ifs" that define the offer to
purchase. The degree of uncertainty attached to the conditions and the buyer's related
ability to close affect the value of an offer. For instance, a buyer who is pre-approved
for a mortgage of sufficient size offers less risk to a seller. However, if the purchase
price is significantly-above market value, the lender may not approve the mortgage, so
a condition for financing is essential to protect all parties. A full-price offer with
conditions that will be difficult to meet may hold less value than an under-list-price
offer with no conditions. Alternatively, if the conditions are merely formalities, the
conditional offer could represent greater value. Would you recognize the difference if
you were the seller? That's where the expertise of the real estate professionals
involved becomes valuable.

* Intent and Sincerity are vital aspects of an offer although difficult to quantify. How
determined is the buyer to buy, and why? How determined is the seller to sell? If either
party changes their mind after the contract exists and before the closing date, the
injured party has remedies in court. These legal steps may not make up for lost time
and, perhaps, a missed market. An investor or flipper may decide to cut losses and bail
out of the deal if the market drops significantly before closing. A seller may have
second thoughts if their plans to move fall through. For both parties, value should lie in
the certainty that the other party will close in spite of market shifts.

Yes, price matters, but there's a lot more involved in creating an offer that demands to
be accepted. That's why an experienced real estate professional is a valuable
contributor to success. Professionals can calculate, or at least estimate, the seller's net
proceeds after costs related to the offer and deduction of commission. This information
helps the seller accurately evaluate an offer to purchase. Understanding cost and
benefit for all elements of an offer helps a buyer intent on ownership to create the best
financial package possible.

Is Homeownership Still Part of the American Dream?

For some two hundred years, homeownership in this country was a desire of almost every American family. Due to the excesses of the past decade, some are now suggesting that the concept of homeownership should no longer be pursued.

We must be careful as a society that short term economic turmoil does not reset valued long-term thinking. The majority of Americans still hold homeownership sacred. Trulia just did a survey showing seventy seven percent of those questioned still believe that owning a home is a part of the American dream.

Some are questioning the American dream given that housing is in the midst of one of its worst markets ever. But the facts show that the last ten years have not treated the homeowner that badly. Obviously, people who purchased a home during the middle of the last decade have seen their value depreciate over the last several years. But, real estate was never seen as a good short-term investment.

If we look at housing values over the last 10 years, we find that even through these tough times real estate has averaged over fifty percent return as an investment.

The chart below compares real estate to other investments over those ten years.

Then why this challenge today? Well, at the turn of the century, when prices were appreciating in some areas by as much as 20% annually, many got caught up in the belief that housing values should double every few years for the rest of time. That belief created all sorts of reckless behavior.

Many purchased homes well beyond their financial means. Others decided that they would gamble on future values and interest rates by taking exotic mortgages, thus treating their homes as speculative investments. And others used their homes as ATM machines, continually withdrawing their equity in the form of home equity loans.

For too many, cast aside was the traditional viewpoint that a house was a home first and then a pretty good long-term investment. Traditionally, homeowners may have borrowed against the house to put a child through college, finance a wedding, or pay for medical bills. In recent years spending discipline for some has become more relaxed and home equity savings were spent on things that could only be characterized as frivolous.

While homeownership should certainly be viewed as a long term investment, a home primarily is a place to create a personal lifestyle. When structured properly based on solid advice from a trusted professional, homeownership offers the benefits of security, stability, control over one’s environment, equity buildup and income tax advantages.

For 200-plus years, Americans were eager to purchase property because they knew that on a long-term basis it would create wealth. That concept is alive and well in this country even today.