First, how much will you need? As a very rough guideline, you’ll need at least 3.5% of the purchase price for a down payment. That would be for an FHA loan; conventional loans require at least 5% down. Of course, the more the better. You will also need roughly 3% to 4% for closing costs and prorates (which are the fees you pay to get the loan, order an appraisal, pay prorated property taxes, etc.). Sometimes your agent can help you work a deal out with the seller to pay part or all of the closing costs and prorates for you and increase the sales price by the same amount. This allows you to finance the closing costs instead of having to pay them out of pocket. So, between the down payment and closing costs, figure you will need between 3.5% and 7.5%, at least.

Check into down payment assistance. Do a Google search with the terms, down payment assistance, adding the name of your city, county or state and see what government programs are available to help you with your down payment.

Save at least the difference between your current monthly housing expenses and your anticipated housing expenses as a homeowner. Roughly estimate how much your monthly expenses will be after you buy a home, including your mortgage (principal, interest and mortgage insurance), property taxes, homeowners insurance, HOA dues, increased utilities, monthly reserves for maintenance, etc. Make sure you are saving at least the difference between this amount and what you are currently paying for your monthly expenses. Not only will this help you accumulate your down payment faster, but you will already be used to budgeting this amount every month for housing.

Sell stuff! Sell stuff on Craigs List or eBay and either let the proceeds sit in your PayPal account (open an account if you don’t already have one) or move it over to another online money market account. Not only will this help you add to your savings, it will be a constant reminder of how much of your money you have spent on “stuff!” Free yourself from the clutter of things you don’t need or want anymore before you move into your new home.

Hook up with a good real estate agent early. Many buyers don’t think they’re ready to contact a real estate agent until they have their down payment together and their financing pretty much in place. Wrong! A good agent begins his or her work with you right from the start, steering you to a good mortgage broker, educating you about what down payment assistance and other resources might be available, helping you evaluate when you will be ready to make the leap into home ownership. If you contact an agent who seems less than enthusiastic about helping you through the early stages, then you’ve learned that agent isn’t for you.

Questions?  Feel free to contact me at (503) 860-2640 or pat@patflynnrealtor.com.

The tax credit amount for active military is the same as for other home buyers: $8,000 for first-time home buyers and $6,500 for repeat (“move-up”) home buyers.   Also, qualified service members who receive orders to move within three years and move out of their home are not required to repay the credit.

Questions?  I’d love to hear from you.  Please contact me at pat@patflynnrealtor.com or 503-860-2640, or visit my website at www.patflynnrealtor.com.

Questions?  I’d love to hear from you!  Please contact me at pat@patflynnrealtor.com or 503-860-2640 or visit my website: www.patflynnrealtor.com.

While fewer new homes were built in the past year in the Portland metropolitan area than in the previous year, the market share of third party certified homes increased, for the third year in a row. Twenty three percent (23%) of all newly constructed homes in the Portland metropolitan area sold between May 1, 2009 and April 30, 2010 received a third party certification.

The term “certified home” refers to homes that received an Earth Advantage, Energy Star, or LEED for Homes designation, or a combined Earth Advantage/Energy Star designation. Certification and sales information is reported by participating real estate brokers to RMLS. The Portland metropolitan area region includes Multnomah, Clackamas, Columbia, Washington and Yamhill Counties in Oregon and Clark County in Washington.

Homes with a third party certification sold for more than their non-certified counterparts, both in the new home and existing home markets. New homes in the six-county Portland region sold for 18% more, while existing homes with a certification sold for 23% more.

The Portland area RMLS first began collecting information about home certification in the spring of 2007. It is the first RMLS in the country to do so.  Earth Advantage Institute is an independent, nonprofit resource group that certifies homes and communities based on conformance to ENERGY STAR®, Earth Advantage®, or LEED® for Homes standards.

Questions?  Contact me at pat@patflynnrealtor.com or 503-860-2640.

I had a home energy review myself and it was great. An Energy Trust advisor came out and did a one-hour visual inspection of my home, including insulation, my heating system, windows, air sealing, ventilation, moisture problems, etc. In my case, he recommended underfloor insulation and gave me a list of Energy Trust contractors (“trade allies”). I had the insulation corrected, had some air leaks sealed up and my ducts retaped, and was reimbursed almost 50% by Energy Trust! Not to mention having lower energy bills and a toasty bedroom floor now!  Energy’s Trust Home Energy Review brochure is at the end of this article.

To schedule your free home energy review, sign up at Energy Trust/Residential/Home Energy Review.  Please be sure to tell Energy Trust that you were referred by me.  (In the box, “How did you hear about Energy Trust’s Home Energy Review?” I’d appreciate your filling in “Real Estate Professional” and my name, Pat Flynn.)

If you have any questions or I can help you with your real estate needs — buying or selling – I’d love to hear from you at 503-806-2640 or pat@patflynnrealtor.com. You can also visit my website, http://patflynnrealtor.com.

Radon is a colorless, odorless and tasteless gas that occurs naturally through the breakdown of uranium in rock, soil and water all over the U. S.  Accumulating in basements and throughout homes to often dangerous levels, it is a very serious health hazard as the #1 cause of lung cancer deaths in non-smokers and accounting for a whopping 20% more deaths in the U. S. each year than drunk driving.

The good news is, radon is easy and inexpensive to test for.  Homeowners can buy a radon test kit at the hardware store for about $25, place it in the house for 48 hours, then ship it off to a laboratory for analysis.  Buyers can hire a radon testing and mitigation company to perform a similar test in a home they are buying, paying about $175.  More good news is that, if radon levels are dangerously high (4.0 pCi/L), mitigation is fairly inexpensive and easy to accomplish, basically through the installation of a receptacle under the building to pull in the radon gas and a vent with fan to redirect the gas up and over the home, dispersing harmlessly in the air. 

For more information about radon and how to test for a mitigate it, follow this link to the EPA’s brochure, A Citizen’s Guide to Radon.   Questions or comments?  I’d love to hear from you: pat@patflynnrealtor.com or 503-860-2640.

Exemptions to this rule:
1. Homeowner occupants or tenant occupants may do the work themselves without certification.
2. A residence where there are no children under 6 and no pregnant women as regular residents is a possible exemption.
3. If the area disturbed is less than 6 square feet indoors or 20 square feet outdoors, the project is exempt. Note: Window replacement on pre-1978 homes is never exempt.
5. There are a few additional less likely exemptions.

To learn more, obtain the EPA brochure at http://www.epa.gov/opptintr/lead/pubs/renovaterightbrochure.pdf.

If you want to stay in your home but can’t afford your payments, there is a good chance your lender will be willing to refinance or modify your loan to help you do that. After all, it is in their best interests for you to keep your home and continue making your mortgage payment, even a reduced amount. Please read my article, “New Options for Burdened Homeowners,” which outlines some of the options available to you at http://patflynnrealtor.wordpress.com/2010/01/19/help-for-burdened-homeowners/

If you don’t want to remain in your home, and it looks like your home will sell for less than what is owed, and you are unable to keep paying your mortgage, then a short sale might be an option. A short sale is when a property is offered for sale at a price that is less than what is owed on the property. Your lender might be willing to approve such a sale rather than go through an expensive foreclosure process. If you can’t demonstrate a hardship that prevents you from making your payments, though, a lender will not approve a short sale. (After all, why should they agree to take less when you are able to repay them the full amount?) Also, lender approval of a short sale doesn’t mean you’re automatically off the hook for the shortfall. You will walk away from the transaction with no further obligation to your lender(s) only if you negotiate and obtain such an agreement in writing. (More about this below.)

It’s true that short sales are more involved for all parties than normal transactions; however, they are no longer the lengthy, nightmarish undertakings they were just a year or two ago. This is because lender representatives are becoming better trained to handle short sales, the process has become more standardized, the federal government is offering incentives for lenders to avoid foreclosure through short sales and other options, and more real estate agents are becoming trained and knowledgeable about navigating the ins and outs of short sales.

Hire a real estate agent certified in short sale transactions
If you are planning to market your property and you suspect it might be in a short sale, make sure you hire a real estate agent certified to handle short sales. Remember, the listing agent is essentially the “project manager” for any sales transaction from start to finish and his or her competence in short sales can mean the difference in a relatively smooth or hellishly stressful experience for everybody. Even if all other parties – the seller, the buyer, the buyer’s agent, the lender’s representative – all do their parts diligently, an inexperienced or inattentive listing agent can sink the deal by not properly managing the details and the deadlines.

Your confidentiality is completely protected
In the State of Oregon, the moment you talk with a real estate agent – even if you don’t end up engaging the agent to sell your property – the agent is bound by the duties of agency, such as confidentiality. For instance, the agent cannot discuss your “situation” with a prospective buyer or anybody else without your permission. You are assured that any details you share will be kept strictly confidential, which can be important to you during what might be a sensitive and stressful time. The agent may, however, disclose that the property is a short sale offering – in fact, the agent is required to.

Discuss your situation and your goals with your agent
The purpose of a short sale is to get you out of your current unsustainable situation, to give you a fresh start, to “cut your losses.” You will be eligible for a FHA loan in as little as two years if you should so choose.

One of the things your agent will do is make sure your documentation is in good order – we don’t want that to be a sticking point with the lender. Your agent will ask questions, review documents, compare income/expense numbers (for example, does savings account information match last year’s tax return interest?). If you have junior liens on the property, the short sale will be more involved. Junior lienholders may ask you to make up part of the shortfall, with cash or a new note. Also of relevance is the kind of lien(s) it is: is it recourse or non-recourse debt? Your attorney or agent will need to identify these , as each one represents a hurdle that must be dealt with. Your agent will probably offer specific advice about dealing with HOA dues.

Many sellers wrongly believe that if a lienholder approves a short sale, that they (the seller) will have no further financial obligation. This is only true if the lienholder(s) accepts the proceeds in full satisfaction of the amount owed and release the seller from liability in writing. Your agent and your attorney will negotiate this with the lienholder(s).

What about in a non-recourse state, you might ask? In a non-recourse state (or limited-recourse state, such as Oregon), if a lienholder obtains a deficiency judgment and forecloses (repossesses) the property, this fully satisfies the debt. This does not apply to short sale transactions, where there is no deficiency judgment. Ideally, the lender will accept the sales proceeds as full satisfaction of the debt and cancel the promissory note. If not, the lender may sue against the note for the difference between the amount owed and net sale proceeds to lender. The lender can pursue for six years or sell a successful judgment to a collection company who can pursue for 20 years.

Your agent’s responsibilities
Broadly speaking, your agent’s role is Project Manager in the task of getting your property sold for a fair price, as quickly and smoothly as possible for you. He or she will be the main interface for you, the buyer, the buyer’s agent, the lender’s loss mitigation department, and whatever real estate related professionals (inspectors, etc.) might be involved. He or she will track that everyone is doing what they need to do, follow up to solve the inevitable glitches, and keep nudging the process along until it is done.

Here are some of the specific tasks you should expect from your agent:

1. The first thing your real estate agent will do is prepare a CMA (competitive market analysis) to estimate the fair market value of the property for current market conditions. A thorough CMA is crucial for two reasons: first, you will know what sales price to offer the property for to get it sold quickly, and, second, the CMA will demonstrate to the lender that the offer you will be asking them to approve is a fair and reasonable one. Lenders will have their own mini-CMAs done to estimate the property value. These are called Broker Price Opinions or BPOs. The BPO may very well be higher that the CMA your agent has prepared, so the CMA must be highly credible.

2. Your agent will calculate a Seller’s Estimated Net Sheet, which will, in the case of a short sale, tell you the amount of the shortfall: the difference between the expected sales proceeds and the amount owed on the property plus sales expenses.

3. With your written permission, the agent will contact the lender’s Loss Mitigation Department and begin running interference for you, learning the lender’s general requirements for a short sale transaction. Sometimes, the lender will not engage the agent until there is an offer on the table.

4. The agent will assess and document needed repairs and get repair estimates.

5. He or she will request that Loss Mitigation Department communicate with the Foreclosure Department that a short sale is in process and follow up that any foreclosure proceeding has been postponed. (Otherwise a solid deal could go down days before closing.)

6. Effective Marketing. Needless to say, this will be one of the most important actions your agent will take. He or she needs to market the home aggressively, to attract the best, most solid offer possible

7. Evaluate offers, applying the “reasonable chance” test. What will the bank accept? Remember, they will do whatever makes the most financial sense for them, considering the BPO, repair costs, holding costs, your financial position, and so forth. They will evaluate the offer by applying the “Reasonable Chance” test – does the transaction have a reasonable chance of closing? The lender is looking for a reasonable time frame (60 days or less is not reasonable), buyer preapproval (is an appraisal already done?), loan application underway, few or no contingencies (no home inspection or interest rate contingency), earnest money by check, not promissory note, etc. are all indicators of a potentially solid transaction.

Your main task is to assemble documents
One third of all short sales that go into escrow fail. The #1 reason is that lenders do not get a complete, accurate, persuasive short sale package from the seller and their agent. This confers responsibility on both you, the seller, and your agent: you need to be motivated and willing to get the paperwork together. Your agent will probably advise that you also consult with an attorney.

Your agent will give you a list of documents to assemble, probably before taking the listing. This may delay marketing the property for days or weeks but will confirm your commitment, get you engaged in the process (which can be therapeutic) and get the transaction going in the right direction with the best chance of success.

What documents will be needed? Think of this as applying for a loan, only with more paperwork. Documents will include:
• Tax returns for last 2 years
• Paycheck stubs (or other evidence of income) and bills for last 2 months
• List of assets and liabilities (your agent will give you a worksheet)
• List of monthly expenses (your agent will give you a worksheet)
• Hardship letter (your agent can give you a sample)

Please note that, since the information must be current (3-4 months), you may need to pull together some of it again down the road.

Summary (what makes a short sale successful)
Although short sales are, as I said, more involved than conventional transactions, a good Seller-Agent team has the best chance of success. With your agent steering the process, your main role is to get the paperwork together and be otherwise cooperative and motivated to move the transaction along to its successful conclusion.

Here are the elements that make for a successful short sale:

1. Hardship. You must be able to demonstrate that your financial situation makes it impractical to keep the property. If you are able to make the payments but simply want to “walk away” because you owe more than the home’s value, the lender will not approve the transaction.
2. Seller motivation. You must be willing to work with your agent to package the short sale.
3. Good pricing. The property must be attractively priced – “not a steal, but a deal.” Your agent needs to show that the offer amount is a fair and reasonable one, and that it makes financial sense for the lender to approve the transaction rather than let it go into foreclosure.
4. Aggressive marketing. Effective marketing will entice potential buyers to jump on the bandwagon to snag this opportunity before it gets away.
5. Transaction management. The transaction is largely at the mercy of the competence and efforts of the listing agent – he or she must keep the transaction together, often working with buyers and buyer agents not experienced with short sales and lender representatives who are overworked (and often also inexperienced with the process).
6. Qualified buyer. Lenders will be looking for a buyer whose offer has no contingencies, will accept the property as is, has already been preapproved for and has applied for a loan, demonstrates a willingness to wait a potentially lengthy time frame.
7. Completeness of short sale package. The lender is presented with a contract, signed by the Seller, and a well-documented short sale package and narrative explaining the necessity and desirability of the proposed short sale.
8. Two or fewer liens. Properties that have more than two liens, such as a first mortgage, a second mortgage or home equity line of credit (HELOC), and unpaid property taxes, will be more challenging because all lien holders have to approve the short sale.

Please understand that I am not a legal expert and you need to get the help of a legal expert to help you with a short sale.  This information, which is accurate to the best of my knowledge, is intended only to provide general information about short sales. I hope it is of value to you.  Please visit my website at www.patflynnrealtor.com or contact me at pat@patflynnrealtor.com.

The Department of Housing and Urban Development (HUD) announced the change on January 15, explaining that it is being made to help stabilize home values and preserve neighborhoods by allowing quick resale of foreclosed properties. Without the waiver, sellers are less willing to accept offers from FHA bidders because this means holding the property the required 90 days. HUD acknowledges that bank-owned properties are usually sold “as is” to people who fix them up and resell them and that the regulations were hindering the very people who are keeping neighborhoods from deteriorating.  The temporary waiver will allow homes to resell as quickly as possible, helping to stabilize real estate prices and revitalize neighborhoods and communities.  It will also help buyers, especially first-time buyers, to buy homes.

To protect against flipping, the waiver imposes the following conditions:

• Transactions must be arms-length (no identity of interest between the parties in the sales transaction, the property was marketed openly, no recent pattern of flipping with the property, etc.)
• If the sales price is 20% or more above the seller’s acquisition cost, the lender meets specific conditions (show proof of extensive rehab work, current appraisal, etc.).
• The waiver does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

For more details about this temporary waiver, go to the HUD website or email me at pat@patflynnrealtor.com.