Why Local Elections Matter

While elections for national and statewide office often capture our attention and stir our emotions, it's the races closer to home that actually have the biggest effect on us - and our wallets.

Municipal elections touch the value of our homes, our schools, the streets we drive on and the police and fire departments that protect us. Good local leaders can help communities flourish, while irresponsible public servants can drive them into fiscal insolvency.

Right now is not an easy time for our cities and villages. Like everyone else, they are still feeling the effects of the recession and looking for ways to make ends meet. To close their budget gaps, many are considering service cuts as well as tax hikes and other means of generating new revenue.

Unfortunately, that new revenue is often drained from the pockets of local homeowners in the form of property taxes and measures such as water bill deposits and building permit fees.

It's not fair - nor is it a good idea - to balance a budget on the backs of homeowners. Just ask your local REALTOR what effect that could have on your ability to sell your home in the future.

Due to the nature of our work, we closely align with the needs of homeowners. From fighting to protect mortgage interest deductions on the national level to thwarting onerous taxes and codes locally, REALTORS serve as homeowners' tireless advocates. We watch your back by monitoring local government activity for issues that might interfere with private property rights, or affect your ability to buy, sell or maintain your home.

We urge you to pay attention to local elections and vote on April 5th. Take some time to study the backgrounds of - and meet - candidates for city council, county board and school board, for example. Be sure and ask important questions such as:

• Do your candidates support property tax increases? If so, why?
• Do they support regulations that make it tougher to sell foreclosed homes?
• What is their position on transfer taxes?
• How do they feel about the regulation and requirement of home inspections?
• Are they considering any new property maintenance codes? If so, what are they?

Now more than ever, it's important to pay attention and make your voice heard - and your vote count. Let's work this spring to elect capable leaders who can help boost the value of our neighborhoods without placing an undue burden on homeowners and our communities.

Are You the Right Fit for a Short Sale?

Are you thinking about buying a home in a short sale? Be prepared - you might feel like you're on a roller-coaster ride when you're going through the process, but in the end the deal you get could make it worth all the potential headaches.

If you're not familiar with the term, a short sale is when a lender agrees to accept less than the amount owed on a mortgage in order to avoid the costs of foreclosure.

Banks are in the business of lending money, not managing properties, so they generally like to avoid foreclosure when possible. A short sale lets them cut their losses, and helps the seller avoid the credit damage that a foreclosure can cause. The upside for you, the potential buyer, is that homes sold in short sales are priced to sell as quickly as possible!

If you are thinking about buying a home in short sale, here are a few questions to ask yourself:

• Do you have the time? Short sales can be a great deal for the right buyer, but only if you can deal with the red tape. The lender, the seller, and the buyer all have to agree on a price, which takes time. If you are in a hurry, purchasing a home in a short sale is not for you.
• Are you willing to roll up your sleeves? Short sales are sold "as is" so make sure you hire an inspector and know what you are getting into beforehand. Many homes sold in short sales are "fixer-uppers," and you can't look for help from the lender, who is trying to minimize costs, or the seller, who is in financial hardship.
• Do you have help? Short sales can be extremely complicated so it's my recommendation (shameless plug) that you proceed with the help of an experienced REALTOR as well as an attorney.

West Chicago Outreach Event November 6, 2010

West Chicago area residents can get information on programs to help them save their homes from foreclosure and stay afloat in today's tough economy at a free Community Services Fair on Saturday, November 6, 2010, from 9 a.m. to 1 p.m. at West Chicago Community High School, 326 Joliet Street. Activities will be held in the Commons area of the school.

From 10 a.m. to noon, **DuPage Homeownership Center will present Preserving Homeownership foreclosure prevention workshop. In addition, throughout the morning, attendees can obtain information on the Making Home Affordable foreclosure prevention initiative, as well as state and local programs to help with home repairs, energy assistance, school fees, job searches and other concerns.

For additional information, contact DuPage Homeownership Center Board Member Kathe Doremus at kdoremus@inlandbank.com

 

**DuPage Homeownership Center is a nonprofit organization that provides a full range of services to promote responsible sustainable homeownership, with an emphasis on serving first time homebuyers,  low and moderate income households and homeowners in crisis. DHOC is certified by the U.S. Department of Housing and Urban Development to provide prepurchase and default counseling.

FHA Launches Program to Help Underwater Homeowners

Homeowners who are "underwater" on their mortgages and facing foreclosure may qualify for assistance under the new Federal Housing Administration (FHA) Short Refinance Option. For the full release, please visit http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-173

Launched earlier this month, the program is designed to help homeowners who are current on their mortgages, but are experiencing financial hardship because property values in their community have declined.

The Short Refinance Option offers non-FHA borrowers the opportunity to refinance into a safer, more secure mortgage product.

To qualify, borrowers must be current on their existing mortgage, owe more than their home is worth, and have a minimum credit score of 500. Additionally, their lender must agree to write off at least 10 percent of the unpaid principal balance of the first mortgage.

With many mortgages underwater nationwide, the program is designed to prevent "strategic defaults" and stop homeowners from falling further into negative equity.

To determine if you are eligible, contact your lender.

Underwater Mortgages

A few months ago a special aired regarding homeowners walking away from their mortgages because they were what is called "underwater". The homeowners in the special were NOT in financial hardship. The term underwater is referring to owing more on your house than what it is worth. The special was downright disturbing, especially since I am one of those "underwater" homeowners that bought when the market was hot. I have never had an inclination to walk away. I love my house, my kids love it and we are in it for the long haul! If nothing else, that special reaffirmed my belief to continue to pay down our mortgage.

With that said, I found this article on Houselogic, a website developed by the National Association of REALTORS, which I think gives some very useful and hopeful facts!

Most Think Walking Away From Underwater Mortgage is Wrong

If you rely solely on the headlines, you might be tempted to think that most people who owe more on their home than its current market value were walking away from their mortgages and allowing property to go into foreclosure.

Turns out, that's not the case, according to the National Foundation for Credit Counseling's 2010 Financial Literacy Survey.

The survey also asked under what circumstances, if any, it's okay to default on a mortgage. Only 23% of respondents answered that foreclosure is justifiable if the property is now worth less than what is owed on it. Further, 15% replied that there is no justifiable circumstance under which it would be acceptable to default on a mortgage.

The survey also found the overwhelming majority of consumers, even those in financial distress, still consider their mortgage payment a priority. When asked if they were unable to meet all of their financial obligations, would they be more likely to keep their mortgage current, or their credit cards current, 91% of respondents said they would pay their mortgage first.

"Taken together, the NFCC survey data brings us some encouraging news: Consumers still place a priority on making their mortgage payment, less than one-fourth think that defaulting on a mortgage is justifiable simply because the property is underwater, and a significant number take mortgage obligations so seriously that they find no acceptable reason to default on a home loan, "said Gail Cunningham, spokesperson for the NFCC. "Americans continue to prioritize their obligation to service their mortgage loan, and this is indeed good news for homeowners, mortgage lenders, and the housing market overall."

The 2010 Financial Literacy survey was conducted by telephone within the United States by Harris Interactive on behalf of the NFCC between March 4 and March 8, 2010 among 2,028 adults ages 18+. Results were weighted for age, sex, geographic region, and race where necessary to align them with their actual proportions in the population.

Foreclosure Rescue Scams

It's always sad when scams have to be addressed, especially when many homeowners are financially strapped and are trying to avoid being foreclosed on. It is imperative that if you are having mortgage problems, that you address them with your mortgage company right away. Additionally, should you choose to seek assistance from an outside source, that you are using legitimate options. According to an article published by houselogic, 2.8 million properties were hit with foreclosure notices in 2009. Scam artists specifically target those consumers so it's well worth your time to invest the time and effort to research legitimate options and don't make any hasty decisions.

The article goes on to report that the U.S. Federal Trade Commission has identified 71 companies running suspicious foreclosure rescue ads, and the Better Business Bureau counts foreclosure rescue rip-offs among its top 10 scams.

For details on these scams, please follow this link.

The U.S. Department of Housing and Urban Development (HUD) website has a list of HUD-approved counseling organizations listed by state. To view the list, visit www.hud.gov/counseling.

Myths About Short Sales Part 2

This post is a continuation of my Short Sale Post from November 11th.

Separately, the seller may incur tax liability as a result of the short sale. The shorting lender will take the loss on the property and use it as a tax deduction. When this is done, they will issue the homeowner a 1099C. This stands for Cancellation of Debt. The seller must claim this loss on the next year's taxes as Ordinary Income. Yes, you heard me correct, Ordinary Income. For example, if the lender took a $100,000 loss on a property, it will look as though the seller made an additional $100,000 that year on their income tax. However, Mortgage Forgiveness Debt Relief Act of 2007 does relieve certain borrowers from this. First, it must be your principal residence. Sorry, investment properties do not qualify. Second, the debt must be "purchase money" or money that was reinvested into the house if a refinance took place. Third, if the seller is insolvent at the time the short sale occurred. When the 1099c is received, Form 982 must be filed in conjunction with it to qualify for this relief. Since I am not an accountant, I would always advise a seller to seek information about this from a tax professional. You can look up more details for yourself at www.irs.gov.

So hopefully, now you see these are two separate issues. Your seller may or may not be responsible for the deficiency of the loan, and may or may not also be responsible for the tax liability on that loss as well. Please, if you are in this situation, seek legal and tax advice immediately whenever entering into this type of transaction.

Myths about Short Sales

As a consumer, you should be aware of a few common myths about Short Sales. I see two common mistakes in the short sale process fairly consistently. I will cover the two mistakes in this post and then will address the tax liability portion in a subsequent post.

1. "The only way you can do a short sale is if you are delinquent on your payments. So, if you are current, please stop making payments."

Yikes! Are you cringing in your seat like I am? There are several issues lurking here. First, REALTORS are not Attorney's. This is legal advice. And the fact is YOU CAN perform a short sale when a borrower is current on their payments. The key component you need in a short sale situation is a hardship from the borrower. There can be several reasons for a hardship. Some examples are job transfers, death and loss of employment. A borrower should stay current, if they are able to. The shorting lender will make the determination based on their hardship, and future financial status. Staying current on the mortgage will not decrease your chances of the short sale getting accepted, in fact, it can tremendously help the borrower in the long run with less damage to their credit. Staying current can allow the borrower's credit to bounce back sooner rather than later.

So, the bottom line here is: Before you stop making your mortgage payments, consult an Attorney. The Attorney will advise the best course of action. And you can do a short sale if the seller is current.

2. "You will not be responsible for the deficiency (the amount that is owed verses what the lender receives in the short sale) on the short sale, because President Bush passed Mortgage Forgiveness Debt Relief Act of 2007."

Untrue, there are two separate issues here; it is often confused as one. First there is the deficiency. Second, there is the tax on the deficiency. We will cover one at a time.

The deficiency, again, is the amount that is owed verses what the lender receives in the short sale. The seller very well may be responsible for the difference in that debt. In general, there are three things that can happen with that deficiency. First, the lender will give what is called a Full Release, not to be confused with a Lien Release. A Full Release is the lender waiving their right to any further recourse to the amount that is owed. In this case, the seller is not responsible to pay back the difference.

Second, is a Lien Release, or what I like to call "leaving their options open". A Lien Release will allow the seller to sell the property because the lender will "release the lien", but does not release them from the liability of the deficiency. The lender may not specifically state what they are going to do about pursuing the borrower for that debt, but the lender has left the deficiency to be determined at a later date. This does not necessarily mean they will, but it means they can. Third, the lender may ask for a promissory note to be signed at closing, for the balance or for a portion of the balance. Upon payment of this promissory note, typically, the lender will then allow a Full Release to be given to the seller. In any case, always remember every lender is different. Even doing multiple short sales with the same lender can result in different scenarios. The loan is most likely serviced by that lender and owned by an investor. Each investor has a different set of guidelines the servicing lender needs to follow. So, shorting with the same lender may result in a different option for each seller. Please make sure the letter is shared with an Attorney. The seller's Attorney should review the results of the short sale approval and advise the seller on the pros and cons of the outcome.

The tax deficiency portion will be covered in a subsequent post.

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Dryvit® Inspections - What is it and Why Should I Get One?

 What is “Dryvit®/EIFS”?

 Dryvit® is a manufacture of insulated exterior cladding products and their name is used generically to describe all the products that are manufactured on the market. In actuality there are close to forty manufactures of these products that fall under a category of products known as; “Exterior Insulation and Finish Systems”, or simply put EIFS (pronounced Eeef-is). 

Several years ago it was discovered that some EIFS clad homes had developed issues if the EIFS was not properly installed or more importantly maintained. There were several class action lawsuits against the manufacturers, while none were found guilty, several had settlements and large amounts of monies were paid out.

Now here we are and depending on who you talk to we are either in the middle or leading edge of the end of the latest recession. Either way, several of these homes are on the market today as foreclosures. It is almost a guarantee that those in foreclosure have not been maintained to the industry standards and are-in-need of a full comprehensive EIFS inspection to discover if there are any underlying problems that are not visible to the eye by just walking around. Even those listed homes not in foreclosure should be fully inspected prior to purchasing.

Why a specialist?

Because it takes special testing equipment andknowledge of how the EIFS’s work with other critical building components to properly evaluate these exterior cladding to determine if there are any under lying concerns. A good place to start your search for a qualified inspector is: http://www.dryvitinspections.com.

These homes should not be written off, they offer superb “Green” benefits to new buyers as shown by the US Department of Energy. They offer substantial energy savings to the consumer and through various warranties and maintenance programs they can be of little concern to a new buyer. In the past it was not uncommon for a seller to remove this cladding from the home in a belief it helped the home sell. This was done at a great expense to the seller and did not guarantee the maintenance issues were resolved. In some cases it actually presented larger problems. In today’s “Green”movement it is not unusual for the EIFS cladding to once again make an appearance in new home construction for those wishing to have one of the most energy efficient exterior wall cladding on the market today. For this reason and more importantly the true understanding by a homeowner on how to maintain these truly energy efficient homes, they are regaining their popularity in the housing market today.  Be the expert, and follow this simple process: inspect, repair and maintain.

DuPage Program Offers Great Deal on Rehabbed Foreclosures

DuPage County has received a $5.2 million federal grant to rehab foreclosed homes and bring them back to productive use.  Under the new Neighborhood Stabilization Program (NSP), the County will purchase bank-owned properties, fix them up, and sell them to home buyers.    

NSP offers an attractive financing package that includes a zero-interest deferred second mortgage provided by DuPage County.  This special financing can help boost your purchasing power.  

Visit www.dhoc.org to download an information package with all of the program details!