If you’ve been trying to sell your home, or just own one, then you’re no doubt concerned with the recovery of the housing market.   Here are ten critical questions that you should be asking about the current housing market:

1. Is the housing market getting better?

It has shown some signs of healing this year, but the much herald recovery is only temporary and fragile.

Home sales have improved greatly from the lows of 2008.  Unsold home inventory listed for sale is also down.  In some neighborhoods there are even bidding wars for foreclosed homes, which attract first-time home buyers and investors seeking rental properties.

However, nearly 7 million homes with mortgages are behind on their payments, representing 13% of all homes with mortgages according to the Mortgage Bankers Association..  Eventually, many of these homeowners will lose their homes and flood the market with a surplus of homes.  Unemployment has also continued to rise, and the housing market cannot recover until job growth resumes.

2. When will housing bottom out?

There probably won’t be any clear turning point.  The usual monthly indicators, such as home sales and prices, tend to bounce erractically from month to month, making it hard to discern the underlying trend.  And the housing bust will end at different times in different places.  House prices already might have bottomed out in the coveted suburbs of Virginia that surround Washington, D.C.

Generalizations about states or metropolitan areas don’t say much about what is happening in your neighborhood.  While those areas around D.C. may have stabilized, it will be years before all the unsold condos find buyers in Florida.

3. What signals should I watch to determine whether my local market is improving?

One way to get a sense of supply is to ask a good local real estate agent for data on how many homes are listed for sale in your town and how many months it would take at the current sales rate to absorb that supply.  Anything over 6 months is generally considered high, and it means that sellers will have to cut those prices.  Another way to tell is to count the number of for-sale signs and vacant houses.  If there are more than two on any block, this may be a bad sign, especially if the homes are not being up kept.

Keep your eyes out on the local job market as well.  The recovery for homes will not happen in your neighborhood if there aren’t any jobs.  So if you start to see an uptick in the number of “help wanted” signs or you notice new businesses opening up or a new factory comes into town, then you know that a recovery for the housing marketing in your neighborhood shouldn’t be too far behind.

4. How can I figure out the value of my home?

You will never the know the value of your home until you sell it.  You can always say your home is worth ‘X’ amount of dollars, but this isn’t true unless you find some one willing to pay you that.  What you’ll need to do is check with a local realtor to figure out the recent selling prices of a similarly styled and sized houses in your neighborhood.  Websites such as Zillow.com, HomeGain.com, and Cyberhomes.com provide estimates based on recent sales; however, these are sometimes way off.

If you really want to be more scientific you can always hire a professional appraiser, but it will cost you a few hundred dollars.

5. Does it matter whether I’m “under water”?

Don’t despair too much if you’re underwater as 20% of homeowners are currently underwater with their mortgages.  If you can afford your monthly payments, and don’t plan on moving anytime soon, then it shouldn’t be too much of a problem.  But it will be hard if not impossible to refinance your mortgage and take advantage of these record-low mortgage rates.

You may realize that your home may never recover to its peak price or anywhere close to when you bought it, and it may be cheaper just to rent a home in the area that is of similar size.  If that is the case speak with your tax and real estate attorney about your options for a short sale.

6. If I lose my home to foreclosure, how long will it take to repair my credit?

It will be three to five years before you can qualify for a home mortgage insured by the government, depending on your circumstances, and that assumes you have re-established a record for paying your bills on time.  The foreclosure will remain on your credit history report for seven years, and you will be paying higher interest rates as a result.  The quick answer to recovering from a foreclosure is to re-establish credit by paying your bills on time, keep balances low to non-existent, and don’t have too many lines of credit open.  For more detailed instructions check out The Clean Credit Clinic.

7. If I’m renting, is now a good time to buy a house?

Now may be a good time.  Prices in most areas are well below their peaks, even if they haven’t hit bottom.  Don’t kid yourself that you can time the bottom of the market perfectly.  But don’t feel any pressure to buy in a hurry, because the supply of housing is likely to remain high for years in many areas.

8. Can I get a tax credit if I buy a home now?

Under an expanded and extended program approved by Congress earlier this month, tax credits are available to many people who buy or sign a contract to buy a principal residence by April 30th adn complete the purchase by June 30th.  The tax credit is up to $8,000 for first-time home buyers and $6,500 for people who already have owned a home for at least five consecutive years during the previous eight years.  The credit is available for individual taxpayers with annual incomes of up to $145,000 or joint filers with incomes up to $245,000.

9. Can I get a mortgage on attractive terms?

If you have a good credit history, and a moderate debt-to-income ratio and the ability to fully document your income.  The last requirement is fairly easy for people who work for a salary and have had the same employer for more than two years, but it can be tough for self-employed people whose incomes vary substantially from year to year.

10. Should I invest in foreclosed homes?

No.  You should be an experienced investor or contractor before diving into the business of flipping foreclosed properties.  Homes that are sold at courthouse auctions are done so on an ‘as is’ basis, and there are no provisions for an inspection before you take ownership– so the home may end up costing you a lot more than you originally thought.

You should also have access to a lot of cash or a special short-term loan for investors.  You will need a lot of time, nerve, cash, and knowledge of the local market in order to pull off a successful flip.

Credit for these questions, answers, and content goes to James R. Hagerty (bob.hagerty@wsj.com).  “Ten Questions on the Volatile Housing Market”, Wall Street Journal

Related posts:

1. 1 in 4 Homeowners Are Underwater

According to First American CoreLogic, a real-estate information company based in Santa Anna, CA, some 10.7 million homes had negative equity during the 3rd quarter of the year.

Homes that are underwater are a serious threat to a housing recovery because these homeowners are more likely to walk-away from their mortgages.  They also affect the liquidity of the housing market as owners are not able to sell their underwater homes.  Prices have fallen so far that as much as 5.3 million homes are tied to mortgages that are worth 80% or less of their mortgage principal.

However, most U.S. homes have equity, and 24 million homes have no mortgages at all, according to the same First American report.

About 588,000 borrowers defaulted on mortgages last year, even though they could afford to pay, that’s 2x as much as in 2007.

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1. 10 Questions on the Sinking Housing Market

Called “Making Home Affordable,” the program is expected to save up to four million families from foreclosure and cost around $75 billion. The Home Loan Relief Plan by the Obama administration is said to only apply to mortgages made on or before January 1, 2009 and will be in effect until January 2012, unless extended.

The Home Loan Relief Plan’s role is to not only provide relief to helpless families, but also guard neighborhoods from the side effects of foreclosures: such as lower home values, blight, increase crime, and homelessness.

This Home Loan Relief program requires lenders and banks to decide whether lowering the financial burden on families — with help from the federal government — would cost them less than foreclosing on a home. If they determine that lowering the monthly payments does cost them less, they would be required to do so. If not, then the banks could still make the mortgage modifications—but at their own discretion.

Banks who conclude that foreclosure would be less expensive than modifying the conditions of a loan still would be required to examine other options before seizing the home.

Other options to the Obama plan include a short sale, in which the house is sold for less than the outstanding mortgage amount at no penalty to the lender, and a Deed-in-lieu of Foreclosure where the homeowner turns over the home voluntarily.

Ultimately, the purpose is to have at-risk homeowners spending no more than 31% of their gross monthly income on housing. Currently, many are spending between 40% and 50%.

Guidelines also state that can use cash incentives from the government to bring the percentage down to 38% by lowering interest rates, setting longer mortgage payback periods, or reducing the amount of principal owed. From the 38% mark down to 31%, the government will give lenders a dollar-for-dollar match in cash.

So far, 16 mortgage servicers, representing 80 percent of home loans nationally, have signed on to Making Home Affordable, according to Deputy Treasury Secretary Seth Wheeler.

To find out if you are eligible for the Obama Home Loan Relief Plan, visit Making Home Affordable

Have you applied for the Obama Home Relief Plan? How has it helped you?

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The City of Philadelphia has experienced some success from its pilot Foreclosure-Diversion program, and many other cities are beginning to take notice and considering implementing this program in an effort stop rampart foreclosures that are destroying home values, and subsequently their property tax base.

What It Is:

The Foreclosure-Diversion Program contacts a manager or other individual with the power to modify a home loan from the lender to sit down with homeowners (represented by pro bono lawyers,) in front of an arbitrator so they can try to find an affordable way for the homeowner to keep their home.

The Results

Over the inaugural year of this program, some 5,000 homeowners in Philadelphia participated in the program with 1,400 of them finding a way to avoid foreclosure. That’s a 28% success rate, not too bad. This does not include the 700 homeowners who were able to postpone their foreclosure auctions so they can continue negotiations. All said the program helped about 41% of the participants.

Granted this program started before the Obama Home Relief Plan, but it still provides a model that other cities and counties can model to protect the interest of homeowners in their districts.

Does your city or county have a foreclosure-diversion program in place? How does it compare to the one in Philadelphia?

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Should you be looking for specific answers to your situation, don’t just sit around and read a lot of information consult with a professional who can answer your questions based on your specific situation. The Homeownership Preservation Foundation provides such assistance.

The foundation’s counselors have enough training in mortgages and credit counseling to gain HUD approval and professional certification. They are also authorized and able to gain access to mortgage lenders, which is often difficult for homeowners acting on their own (though I provide a list of numbers in my free foreclosure book, link above).

You can reach them at 888-995-HOPE. Tell them StopForeclosureBlog.net sent you there.

You may also visit their website at www.995hope.org

It’s free so you should take advantage of their services.

Have you called HOPE? Share your experiences below or those with other counseling services!

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1. Stop Foreclosures in Florida — Helpful Points to Help You Get Started

The Bane Of My Existence

EDIT: Removed broker’s company name

I began my financial ruin in the Fall of 2006, shortly after moving to Florida to start my own company. I wasn’t sure what the company would do, but my dream was to own my business and “escape the corporate rat race”. I landed upon real estate investing because I had a friend in California whose family owns several apartment buildings and commercial buildings, and lived out their dreams from it and they started with just one house. At that time (Spring 2007) everyone agreed the bubble had popped and most believed home values were reaching their lows. Good deals were to be had every where. It was a buyers market.

I joined the local real estate investment club, Central Florida Realty Investors, and attended meetings regularly including weekend classes on how to flip homes, negotiate, market, rent, read contracts, etc. The advice and contacts were invaluable. And I don’t fault anyone there for my current situation; I didn’t follow what was taught, plain and simple. I asked advice on the deal that got me into this mess and most folks told me “No” or “Sounds okay, but there are better deals out there”. I soon incorporated an LLC, built a website, and began to make offers and scout neighborhoods. At this point I probably sunk ~$3,000 into real estate investing.

The single biggest problem that most people who get into real estate investing, internet marketing, MLM, or any other of these “make money at home” plans is that they fail to ever take action*. I, to a fault, take too much action. I go in head first and figure things out as I go along. This is fine if you have unlimited capital, but can be very dangerous if you don’t. I learn by doing, and I don’t have much patience to analyze things too long. I rather do a lot and see what sticks. I end up making lots of mistakes, quickly correcting them, but sometimes a mistake can be fatal. The trick is to hit success before my collective failures drain all of my cash.

Now before you fault me for this, keep in mind this is standard practice among the most successful people and companies. They call it “testing” or “gathering empirical evidence”. But in fact it is failing to success. Rarely does a business plan go as thought, businesses more often than not have to adapt quickly. With real estate it’s hard because by taking out a loan, I expose myself to six figures of financial risk, and there is no way around it. So it is something that I can’t really “throw on the wall” and see what sticks unless I had deep pockets. I should have just followed the basic principles I was told, and should not have let myself get convinced otherwise.

One bright Saturday morning during a class, the event sponsor gets up (he didn’t teach the class, only sponsored it) and pitches his services. He’s a broker and runs ***************, and offered a % of his commission to the buyer. He promises to take newbies under his wing and help to handhold them through deals. He proclaimed his many years of real estate experience and was an investor himself. He wanted to form partnerships with investors acting as their real estate broker– he finds the “deals” and you buy them. And everybody profits.

“Perfect!”.

By the following weekend I was in my car with him trying to decide on a home in a new subdivision. On our way there he explained to me our great strategy:

Dean, you have a great credit score (740) and little cash ($5,000) your best bet is to find a homebuilder in the area who is closing out and is desperate to move their inventory. They will offer to cover closing costs and with the percentage of my commission you’ll receive you will walk away from the closing with cash. We can do 100% financing, interest-only for 5 years, by which time the home market will rebound and you can flip for a profit. The interest-only loan will keep payments low, and you can find a renter to cover the costs or live in it yourself. So long as you purchase a house that’s not above $250,000 and has bedrooms on the ground floor, you will have an easier time selling it. Oh, and because the home will be purchased during a ‘close-out’ sale, everyone in your neighborhood will be locked in at the higher price they purchased their homes for, so you’re getting in at bottom price for that neighborhood. When these first homeowners begin to sell, your comps are going to be higher than what you paid for your home.

What is the flaw with this plan? What was I not thinking about? Keep in mind hindsight is 20/20, but if you believed the market was at its low (as most did) then this plan seemed fool-proof.

Part II will be posted shortly. Stay tuned.

* Yes, there are many things wrong with real estate investing, MLM, and internet marketing – for one they prey on the desperate and those looking to make a fast buck. Not to mention that all three of these niches have a sizeable “ponzi-scheme” component built in wherein people make millions teaching you how to make millions. But the truth is most folks don’t ever take action.

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Reach out to Texas Counseling Agencies: Texas homeowners who are currently facing foreclosure lawsuits can take assistance from various U.S. Department of Housing and Urban Development approved foreclosure intervention counseling organizations. These organizations provide free counseling to homeowners.

Be open to communication from your lender: Understand that lenders — even though notoriously short on patience and time apart from facing the ever increasing instances of foreclosure — are still your best friends and they would do all they can to help you resolve your financial situation. So contact them and talk to them. Open all correspondence and read up. Be armed with documented information that will be required before you even contact your lender.
Bring Your Mortgage Current: Try to pay up the pending mortgage amounts by whatever legal means possible. Raise money by taking up an extra vocation, apart-time job or some other way to try to salvage your debilitating financial situation and use that money to bring your mortgage payments current. Stay away from taking further loans to pay off your pending mortgages, except for some special low-interest credit extensions which your lender might give you. See if you can budget and save, jettison unwanted expenses and stop the foreclosure from happening.

Find a Buyer for your house: If you realize that it is completely out of hand and you just can’t seem to bring yourself to do what was stated above, you may look to sell your house. Seek a well-qualified, experienced and trust-worthy Texas based realtor who can do this for you. A previously written post titled “6 Ways To Sell Your House fast To Stop Foreclosure“, should help you in this regard.

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1. Stop Foreclosures in Michigan – Will You Let a Foreclosure Destroy You?
2. Stop Foreclosures in Florida — Helpful Points to Help You Get Started
3. 6 Ways To Sell Your House Fast To Stop Foreclosure

Avail Loans to help save your Home: The MSHDA has plenty of financial plans like secondary mortgages rescue loans to help you stop foreclosure in Michigan and save your home.

• Pick up the HELP loan: If you have a non-recurring situation or a temporary problem due to which you are unable to make your mortgage payments, you can contact a Homeownership Counseling Agency in Michigan to avail their HELP loan. This is to be used for temporary emergencies only and is limited to maximum of $3000 and is a non-interest bearing loan.
• MSHDA Assist finance Program: If you currently have an adjustable mortgage loan or a high-interest fixed rate loan MSHDA mortgage, MSHDA allows you to pick up another loan at much lower interest rate, based on certain qualifications and subject to approval, of course.
• MSHDA Rescue Finance Program: This is the other kind of loan MSHDA provides for homeowners who are qualified but are currently already due to pay their mortgages and are late by 30 days. They may pick this loan and refinance their mortgage by making it into a low-interest, fixed-rate loan.

Other ways to stop foreclosure in Michigan
If you contact an attorney or an MSHDA approved foreclosure prevention counselor, they might be able to asses your personal situation better and might be able to suggest a loan modification, reinstatement or cure, a forbearance agreement or a partial claim.A foreclosure can have devastating effects on your financial holdings, credit reports and credit records. It leaves a permanent scar on your reputation and hence you must try to avoid it all costs. Kick your finances back to life and take some pro-active action to revive your finances and bring your life back into your hands.

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1. Stop Foreclosures in California — Don’t Let Your House Slip From Your Hands
2. Stop Foreclosures in Florida — Helpful Points to Help You Get Started
3. Stop Foreclosure in Texas – Take an Active Approach to Foreclosure

Re-instatement of your loan: An obvious and easy way to bring your payments current is to pay the dues and bring your mortgage current. Bringing your payments to current would include paying up the due mortgage, late fees and any other fees the lender might charge you. The time available for you to do this in the state of California is usually 5 business days from the time your home can be put up for sale by a trustee.

Deed-in Lieu of foreclosure: Using this option, you may want to hand-over the deed back to the lender. By taking this approach you save your lender time and you get to stop foreclosure which harms your credit report.
Forbearance Agreement: Your lender typically allows you certain amount of time – 3-6 months in California – during which you make lower mortgage payments or no payments at all. The missed payments will add up with the payments that are due during the later part of your loan term.

If you are unable to make any payments whatsoever, lenders will foreclosure and snatch your home away from you. The exact time it takes to get to this stage is state specific in the U.S. In California, however, it takes about 4 months from the time the Notice of Default has been issued to you. Also, note that the lender is not allowed to float a deficiency judgment – which is a motion a lenders make when they lose money due to the property getting sold for a much lesser value on the market than its worth.

Related posts:

1. Stop Foreclosures in Florida — Helpful Points to Help You Get Started
2. Stop Foreclosures in Michigan – Will You Let a Foreclosure Destroy You?
3. 6 Ways To Sell Your House Fast To Stop Foreclosure

Apart from the usual reinstatement, loan modification and refinancing arrangements that are possible, you can stop this from happening by following the steps mentioned below:

Contact the Loss Mitigation Department: The first you should you do if you want to stop your home from foreclosure is to contact the loss mitigation department of your mortgage company. It is easier said than done, since most homeowners might not be able to reach the proper employees who might be able to help you.
Sell Your Home: You can sell your home even if after a foreclosure lawsuit has been filed against you. Even though you might lose your home, it is better than the devastating consequences a foreclosure can have on your credit report. You may pay up the pending mortgage payments with the proceeds from the sale.

Short-sale: In case you don’t find a buyer who can’t or is not willing to pay an amount equal to the mortgage payment due, you might want to consider a short sale. You must next to see if you can contact the mortgage company to negotiate for a reduced pay-off of the mortgage payment due. You could enlist the services of a Miami-Dade county realtor for this.

Deed-in-lieu of foreclosure: You have no equity in your home and you couldn’t arrive at any other solution to stop the foreclosure in Florida, you could choose a deed-in-lieu of foreclosure. As the name suggests, you will handover the deed (and hence your home) to the lender and avoid the foreclosure lawsuit against you. You will also save the time and foreclosure expenses that are bound to arise. This however affects the income you report to the IRS. It is best if you approach a tax professional or attorney to help in this regard. You can take help from Legal Services of Greater Miami, Inc.’s Low Income Taxpayer Clinic to find suitable professionals.
File a bankruptcy: You might, as a last recourse, file a Chapter 13 bankruptcy case. It can be filed until the day your home is set for a foreclosure auction sale. It would still mean that you must be left with enough money to cover your monthly expenses and also have enough money to bring your current mortgage due to current within 60 months according to Florida state foreclosure laws. The foreclosure process stops if you choose this method. Avail debt counseling before you take this step.

Related posts:

1. Stop Foreclosures in California — Don’t Let Your House Slip From Your Hands
2. Stop Foreclosures in Michigan – Will You Let a Foreclosure Destroy You?