ENJOYING LIFE IN ANDERSONVILLE AND LINCOLN SQUARE

Attention homebuyers. If you are looking for a wonderful living, working, entertaining space, there is a great townhouse for sale right down the street from me at 5003 N Ravenswood. It’s a great space if you work from home, with its large main floor office, right off the front door and next to the attached 2 car garage. And it’s just a short walk from the lovely 40 acre Winnemac Park, a great place to stroll among the wildflowers, bike or walk your dog, take the kids to the playlot, or watch Movies in the Park.

If you like to enjoy the outdoors, the townhome has its own private yard, plus top floor roof decks. Both are excellent for gatherings and entertaining. Also the yard work and snow shoveling is taken care of by the association for a mere $80 per month in association dues.

In addition, there is a balcony off the living room for grilling and privacy. There is a nice separation between office and living space, as you go upstairs to the kitchen, dining room, powder room and living room, along with 3 bedrooms, 2 full and 1 half bathrooms.

You can walk to the shops of Andersonville on Clark Street, amble down Ravenswood to view the lovely gardens, or take a few blocks’ walk to visit the Lill Street Art Studio where you can take lessons, enjoy a bit to eat, or purchase art. Email me at movewithmaggie@gmail.com if you want to see the townhome.

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

10 DEADLY MISTAKES BUYERS MAKE WHEN PURCHASING A HOME

Protect yourself from these ten common pitfalls…

MISTAKE NO. 1

Choosing a real estate agent who is not committed to forming a strong business relationship with you.

Here’s How to Avoid It

Making a connection with the right real estate agent is crucial.   Choose a professional who is dedicated to serving your needs – before, during and after the sale.

MISTAKE NO. 2

Making an offer on a home without being pre-qualified.

Here’s How to Avoid It

Pre-qualification will make your life easier-take the time to talk with bank or mortgage representatives. Their specific questions with regard to income, debt and other factors will help you determine the price range that you can afford. It is one of the most important steps on the path to home ownership.

MISTAKE NO. 3

Not knowing the total costs involved.

Here’s How to Avoid It

Early in the buying process, ask your real estate agent or mortgage representative for an estimate of closing costs. Title insurance and lawyer fees should be considered. Pre-pay responsibilities such as homeowner’s association fees and insurance must also be taken into account. Remember to examine your settlement statement prior to closing.

MISTAKE NO. 4

Limiting your search to open houses, ads or the Internet.

Here’s How to Avoid It

Many homes listed in magazines or on the Internet have already been sold. Your best course of action is to contact a real estate agent. They have up-to-date information that is unavailable to the general public, and they are the best resource to help you find the home you want.

MISTAKE NO. 5

Thinking that there is only one perfect home out there.

Here’s How to Avoid It

Buying a home is a process of elimination, not selection. New properties arrive on the market daily, so be open to all possibilities. Ask your real estate agent for a comparative market analysis. This compares similar homes that have recently sold or are still for sale.

MISTAKE NO. 6

Not considering long-term needs.

Here’s How to Avoid It

It is important to think ahead. Will your home suit your needs 3-5 years from now? How about in 5-10 years?

MISTAKE NO. 7

Not following through on due diligence.

Here’s How to Avoid It

Make a list of any concerns you have relating to issues such as crime rates, schools, power lines, neighbors, environmental conditions, etc. Ask the important questions before you make an offer on a home. Be diligent so that you can have confidence in your purchase.

MISTAKE NO. 8

Not having a home inspection.

Here’s How to Avoid It

Trying to save money today can end up costing you tomorrow. A qualified home inspector will detect issues that many buyers can overlook.

MISTAKE NO. 9

Not examining insurance issues.

Here’s How to Avoid It

Purchase adequate insurance. Advice from an insurance agent can provide you with answers to any concerns you may have.

MISTAKE NO. 10 Not purchasing a home protection plan.

Here’s How to Avoid It

This is essentially a mini insurance policy that usually lasts one year from the date of sale. It usually covers basic repairs you may encounter and can be purchased for a nominal fee. Talk to your agent to help you find the protection plan you need.

tips for making the selection process easIER: PICK THE RIGHT HOME

Bring a camera to document each home that you visit. Start each tour with a shot of the address plaque so you can easily identify each home later.

Take notes during each home visit. Record any notable features, architecture and design elements. List what changes you would make and what details really stand out. You will especially want to write down your first impressions of each home.

Pay attention to the home’s surroundings. Generally, avoid the most upgraded home on the block. Is it in a friendly neighborhood? Will parking be an issue? Is it a good area to walk your dog or have an outdoor get together? Is it in a good school district?

Visit homes that you were interested in again a few days later at a different time of the day. You may notice some nuances you missed earlier.

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

HOW TO BUY A HOME AT BELOW MARKET VALUE

Yes, buyers, it is possible to buy a home or condo at less than market value, without subjecting yourself to the often lengthy and usually unpredictable process of buying a short sale, or going to a real estate auction only to see that experienced, professional investors outbidding you on the best properties.

The secret to buying a home below market value, whether you are a first time buyer, a move up buyer or an investor, is to look for homes that are estate sales, in probate, tenant occupied, or have had a recent transaction fall through. Sellers of estate or probate properties may need cash sooner than later to settle an estate, and as a result will often sell for below market price.   Tenant-occupied properties generally don™t show as well as owner- occupied homes taking longer to sell, which can result in showing- weary tenants moving out before the lease is up, thus leaving a landlord without rental income. Given the prospect of going months without income yet having to pay the mortgage, a landlord is often motivated to sell at below market value.

Your real estate agent is your best friend when it comes to finding these properties. She may already know of properties like this that are already on the market. Your agent is out looking at homes in the area daily.   She may have already shown a home to a previous buyer, who may have rejected it as not meeting one of their requirements.   So their loss is your gain.

Ask your agent to set up customized searches of the Multiple Listing Service that are based on keywords such as probate, estate sale, deal fell through, or tenant occupied.   Then, as soon as one of these opportunities goes on the market, you will receive an email notification and can make an appointment to see it right away. To learn more about my properties, and request a custom search for properties that will sell below market value, visit our website.

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

FROM RISMEDIA – HOW TO USE FORECLOSURE DATA TO IDENTIFY INVESTMENT OPPORTUNITIES

RISMEDIA, May 17, 2011”In the current complex housing market, it is critical for real estate professionals to evaluate their individual markets for short-term and long-term real estate investment potential for their clients. In every fluctuating housing market, there are opportunities. The real estate professional who has a command of these nascent opportunities will be a sought-out source for advice-hungry buyers.

Home value shifts combined with employment levels and income growth can determine the short-term and long-term potential of a market. Ingo Winzer, President of Local Market Monitor, states that in over-priced markets, the momentum of home value changes is more important than income growth in determining future home values.

But home values and employment data in geographic areas as large as cities or SMSA are irrelevant to investors. Sophisticated purchasers need information for areas no larger than zip codes to make informed decisions.

How can a real estate professional provide information to investors that will spotlight homes with the greatest probability for strong near term and long term appreciation?

Home valuations at zip code level compared with the foreclosure inventory for that same zip code can render a glimpse into the vibrancy of housing in any zip code.

The quantity of foreclosure homes in any area gives a better picture of the employment in the area compared with city-wide employment figures. An area with less than one foreclosure per 10,000 dwellings indicates low unemployment for that zip code”even if pockets within the same city are experiencing high unemployment.

By comparing the asking price for foreclosures in a zip code to similar non-foreclosure houses in the same zip code, real estate professionals can gauge the short-term and long-term investment opportunities for that zip code. If there is no greater than a 20 percent difference between the two, the area will recover quickly. The smaller the percentage of difference, the more quickly that zip code will rebound.

To contact Elaine Zimmermann, email elainezimm@aol.com. For more information visit www.foreclosuresUS.com.

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

Copyright © 2011 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

FROM RISMEDIA – APRIL HOUSING SCORECARD SHOWS GROWING EVIDENCE OF ECONOMIC PROGRESS

RISMEDIA, May 10, 2011”The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury recently released the April edition of the Obama Administration™s Housing Scorecard”a comprehensive report on the nation™s housing market. Officials caution that the latest housing figures underscore fragility in the housing market and highlight the importance of the Administration™s foreclosure-prevention programs, which continue to help tens of thousands of struggling homeowners each month and play a critical role in setting standards for the mortgage industry.œThe housing data in this month™s Scorecard offer continued mixed signals and some signs of weakness in the market”despite growing evidence of progress in the broader economy, says HUD Assistant Secretary Raphael Bostic. œThe Administration has been consistently committed to helping American homeowners and borrowers who have been hit hard by the economic recession and housing crisis, and our efforts have helped millions to avoid foreclosure and gain a more stable footing. That said, we still have more work to do to reach the many households who still face trouble.

œThe numbers of homeowners both entering HAMP and converting from trial to permanent modifications each month are a powerful reminder of the role this program is playing in delivering much-needed assistance to families facing a housing market that is still very tough, says Acting Assistant Secretary for Financial Stability Tim Massad. œAnd by providing modifications that are sustainable for homeowners over time, HAMP is setting standards for the industry that ultimately mean more options for more families to avoid foreclosure.

The March Housing Scorecard features key data on the health of the housing market and the reach of the Administration™s foreclosure prevention programs, including:

¢ The Administration™s efforts have helped millions of families deal with the worst economic crisis since the Great Depression. More than 4.5 million modification arrangements were started between April 2009 and the end of March 2011”including more than 1.5 million trial modification starts through the Administration™s Home Affordable Modification Program (HAMP), more than 808,000 FHA loss mitigation and early delinquency interventions, and nearly 2.2 million proprietary modifications under HOPE Now. While some homeowners may have received help from more than one program, the total number of agreements offered more than doubled the number of foreclosure completions for the same period (1.9 million).

¢ Tens of thousands of new homeowners continue to receive real payment relief from HAMP every month”and are able to keep up those arrangements over time. In March, servicers reported more than 36,000 trial HAMP modifications and more than 36,000 permanent modifications with a median payment reduction of 37 percent”or over $500 every month. Since the start of the program, more than 670,000 homeowners have received a permanent HAMP modification, saving approximately $5.9 billion. More than 1.5 million homeowners have started a trial modification. With more than 84 percent of homeowners in their permanent HAMP modification after one year, HAMP modifications continue to perform well over time and are proving more sustainable for homeowners than traditional industry modifications.

¢ Housing market remains fragile as data through March paint a mixed picture of recovery. Home prices remain weak under continued strain from foreclosures and distressed homes. However, mortgage delinquencies continued a downward trend compared to early 2010 and foreclosure starts and completions remain below peak. As lenders continue to review internal procedures related to foreclosure processing, many foreclosure actions have been delayed. The decline in foreclosure processing is likely to be temporary as lenders eventually revise and resubmit paperwork in the coming months.

For more information visit www.HUD.gov.

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

Copyright © 2011 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

FROM RISMEDIA – HOW TO MANAGE UNEXPECTED HOME EXPENSES

home_expensesRISMEDIA, April 15, 2011”(MCT)”Homes are more affordable these days, the selection is abundant, and interest rates are still fairly low. For some people, it could well be a great time to buy.

But as too many struggling borrowers now realize, the cost of owning a home is hardly limited to paying the mortgage. There are a host of other checkbook-sapping details”both recognizable and unexpected”that can get overlooked in the excitement of buying a house, especially if it™s your first.

Ultimately, those things might mean the difference between home sweet home and foreclosure.

œIt is extremely important to explain to all buyers, but especially first-time buyers, that there are additional expenses other than their monthly mortgage payment, said Philadelphia-area real estate agent John Duffy.

Just because a lender has qualified you for a certain size mortgage doesn™t mean you have to spend that much on a house, Duffy said his agents caution buyers. œThere will be additional, unforeseen costs, such as repairs, decorating, improvements, utilities and the like, Duffy said. œWe like to tell them that we want them to enjoy their new home and not be house-poor.

Through the loan-qualifying process, some buyers, especially first-timers, become aware of the concept of spending only a certain percentage of their income on what is called PITI”principal, interest, taxes and insurance”maybe 33 percent of income, said Jerome Scarpello of Leo Mortgage in Ambler, P.A. The reason that percentage isn™t higher is that other expenses will be incurred with homeownership, he said.

œOf course, there are some folks who really need to be taught this, Scarpello said, recounting a story he heard of borrowers who brought their electric bill to the bank when paying their mortgage. œThey were surprised to learn, he said, œthe mortgage did not include electric, as their rental payment had.

The œT in PITI”taxes”can be extraordinarily expensive, depending on where you live. If you buy into a condo complex or a new-home development, you will have to factor in monthly homeowners association fees, as well. PITI and association fees are fixed costs, for the most part, although homeowners insurance rates and taxes can rise. Mortgage interest can change, too, if you don™t have a fixed-rate loan.

œI generally estimate high, said Jeff Block of Prudential Fox & Roach in Philadelphia, œbecause I feel it is really important for buyers to have a conservative estimate and a detailed understanding of what their costs will be.

Bruce Hahn, president of the grass-roots American Homeowners Association in Arlington, V.A., said home listings typically include historic costs for utilities, condo fees and taxes, œso it should not be hard for buyers to anticipate how much extra cash flow they™ll need to cover them. If that information isn™t provided, Hahn said, buyers should use all other possible means to determine or estimate them in advance. He urged buyers to set aside a œrainy-day fund for unanticipated major expenses, such as a broken heat pump or air conditioner or a roof leak. œHomeowners™ insurance plans often have lots of gaps, so there are many things they don™t cover.

For example, Hahn said, he was glad his homeowners™ insurance included flood coverage œwhen our basement stairwell drain was clogged with leaves and water backed up in our basement. However, œour insurance agent explained that flooding is what happens when the river rises, but what we had was ˜seepage,™ which the homeowners policy did not cover.

As Hahn cautioned, you need to be intimately familiar with deductibles as well as coverage limits, so your annual premium will likely be much higher than the state average when you finish crafting your policy.

You certainly can shop around for the best rates, and, in many cases, save money on the premium with a policy that covers your automobiles as well as your house.

But you should also allow for simultaneous unanticipated expenses, such as a car transmission failure and a fridge on the fritz. If you are living on the economic edge, enough of these disasters can push you over it.

œWe believe that $10,000 in liquid savings (a money-market account or the like) that can be turned into cash anytime with very little risk of capital loss is not too much, Hahn said, adding that $5,000 was the recommended minimum. Hahn™s group doesn™t advise using credit cards to meet emergency expenses, because their interest rates are high compared to what savings accounts pay today. œIt is better, he said, œto liquidate a savings account that is only paying 1 percent to pay for emergency costs than put them on a credit card and pay 15 percent.

Among expenses to factor into a home-buying decision:
-Utilities: Heat, electricity, water and sewer, telephone, cable television, Internet and cell phones. You also may have to pay a fee for trash collection and recycling.
-Food/entertainment: Dining in and out, movies, hobbies.
-Children: Day care, tuition, lunch money, supplies, clothing, sports gear.
-Health costs: Braces, eyeglasses, medicine.
-Debt: Credit-card payments, car/student loans.
-Maintenance/repairs/decor: Furnishings and appliances, landscaping, snow removal.
-Job expenses: Transportation (gasoline or transit costs), auto maintenance.

(c) 2011, The Philadelphia Inquirer.

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

FROM RISMEDIA – WHAT THE APRIL 18th FHA PRICE INCREASE MEANS FOR YOU AND YOUR LOW-DOWNPAYMENT HOME BUYERS

RISMEDIA, April 13, 2011”In one of the first articles I wrote for this column, I said that the majority of home buyers today without 20% to put down on a new home are getting an FHA loan. I also said that many of those home buyers”in particular, those with a 720 or better FICO score”could have saved money on a conventional loan with private mortgage insurance (MI). And now that the FHA is increasing their pricing for the second time in less than six months, this message is even truer today.While it™s typically the loan officer™s responsibility to know the ins and outs involved in mortgage lending, with the current market changing and the FHA taking further steps to reduce the number of loans they insure, it™s important for you to also understand these two simple points about private MI from companies like Radian. For example, come April 18th, Radian can:

1. Give your buyer 18% more purchasing power over the FHA.

2. Help you to qualify more home buyers and increase your sales by lowering a buyer™s monthly payment by up to 15% over the FHA.

Even in the healthiest housing market, it™d be hard to argue with numbers like this. Check out the comparisons below to see how the FHA increase stacks up in some real-life examples.

Based on a 30-year 95% LTV loan, a monthly payment of $1,600 and a FICO of 760; interest rate is 5% for all with the exception of LPMI which has a 5.5% rate.


Based on a 30-year 95% LTV loan, a base loan amount of $285,000 and a FICO of 760; interest rate is 5% for all with the exception of LPMI which has a 5.5% rate.

While there may be uncertainty about pending changes to home finance rules, there are two things that are certain. FHA prices are going up and, in many cases, conventional financing with MI will be the best option for you and your buyers. Secondly, with the Administration™s recommendation that Congress allow the FHA conforming loan limit increase to expire as scheduled on October 1, 2011, it™s clear that this change won™t be the last to ensure the FHA returns to its traditional, smaller role in the housing market.Now that I™ve had a chance to look at MI from a new perspective, and when you consider what numbers like these could mean for your bottom line”not to mention referral and repeat business from the home buyers you helped”I™m simply asking that you consider the options. Or better yet, ask your lending partner to compare the FHA™s new rates to a conventional loan with private MI. You (and your buyers) won™t be sorry you did.

Brien McMahon is chief franchise officer of Radian Guaranty Inc. More information may be found at www.radian.biz.

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

Copyright © 2011 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

FROM RISMEDIA – FIRST-TIME BUYERS DEMAND MOVE-IN READY STARTER HOMES

RISMEDIA, February 14, 2011 – The term “starter home” seemingly refers to an entry-level property-one that is affordable yet needs tender love and care. But amidst the many homes available in today’s market, current first-time buyers want places with a little less room for improvement. In a survey of 300 consumers who purchased their first home in the last year, 87% said finding a move-in ready home is important to them.This survey from Coldwell Banker Real Estate explored what was most important to new buyers to provide insight for those looking to buy or sell in 2011.

According to the National Association of REALTORS ® (NAR), first-time home buyers accounted for half of the market in 2010.

What Surprised First-Time Home Buyers

Several consumers experienced unexpected benefits after buying their first home:

  • 67% said the market afforded them the opportunity to buy a home sooner than expected
  • Half said they found a home in a more desirable neighborhood than expected
  • 61% were able to get the home at a better price than expected
  • 40% got more space than expected
  • 43% locked in a lower interest rate than expected

“There’s a real ˜a-ha’ moment for sellers revealed by this survey that the condition and quality of their home matters a great deal to first-time home buyers,” said Diann Patton, consumer real estate specialist, Coldwell Banker Real Estate LLC. “On top of that, our agents have reported that on average, first-time home buyers now look at more than 11 homes before making a decision, which is higher than in the past. They can be choosy about what appeals to them and are recognizing the benefits of the low prices and wide selection of homes in many areas.”

What They Want

In addition to move-in conditions, first-time buyer results revealed the old adage “location, location, location” still holds true:

  • 78% of respondents said the home had to be in an area convenient to shops and services
  • Three-quarters of buyers said it was important to be close to their place of work
  • Nearly two-thirds said it was important to be near “highly-rated” schools

Maggie Finegan, ABR, Move with Maggie Chicago Real Estate Team

Copyright © 2011 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

FROM RIS MEDIA: DECEMBER HOME PRICES UP IN DECEMBER 2010

RISMEDIA, January 21, 2011”Existing-home sales rose sharply in December 2010, when sales increased for the fifth time in the past six months, according to the National Association of REALTORS ®.Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 12.3% to a seasonally adjusted annual rate of 5.28 million in December from an upwardly revised 4.70 million in November, but remain 2.9% below the 5.44 million pace in December 2009.

Lawrence Yun, NAR chief economist, said sales are on an uptrend. œDecember was a good finish to 2010, when sales fluctuate more than normal. The pattern over the past six months is clearly showing a recovery, he said. œThe December pace is near the volume we™re expecting for 2011, so the market is getting much closer to an adequate, sustainable level. The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.

The national median existing-home price for all housing types was $168,800 in December, which is 1.0% below December 2009. Distressed homes rose to a 36% market share in December from 33% in November, and 32% in December 2009.

œThe modest rise in distressed sales, which typically are discounted 10 to 15 percent relative to traditional homes, dampened the median price in December, but the flat price trend continues, Yun explained.

Total housing inventory at the end of December fell 4.2% to 3.56 million existing homes available for sale, which represents an 8.1-month supply at the current sales pace, down from a 9.5-month supply in November.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said buyers are responding to very good affordability conditions despite tight mortgage credit. œHistorically low mortgage interest rates, stable home prices, and pent-up demand are drawing home buyers into the market, Phipps said. œRecent home buyers have been successful with very low default rates, given the outstanding performance for loans originated in 2009 and 2010.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.71% in December from 4.30% in November; the rate was 4.93% in December 2009.

A parallel NAR practitioner survey shows first-time buyers purchased 33% of homes in December, up from 32% in November, but are below a 43% share in December 2009.

Investors accounted for 20% of transactions in December, up from 19% in November and 15% in December 2009; the balance of sales were to repeat buyers. All-cash sales were at 29% in December, compared with 31% in November, but up from 22% a year ago. œAll-cash sales have been consistently high at about 30 percent of the market over the past six months, Yun said.

Single-family home sales jumped 11.8% to a seasonally adjusted annual rate of 4.64 million in December from 4.15 million in November, but are 2.5% below the 4.76 million level in December 2009. The median existing single-family home price was $169,300 in December, down 0.2% from a year ago.

Existing condominium and co-op sales surged 16.4% to a seasonally adjusted annual rate of 640,000 in December from 550,000 in November, but remain 5.2% below the 675,000-unit pace one year ago. The median existing condo price was $165,000 in December, which is 7.4% below December 2009.

Regionally, existing-home sales in the Northeast jumped 13.0% to an annual pace of 870,000 in December, but are 5.4% below December 2009. The median price in the Northeast was $237,300, which is 1.4% below a year ago.

Existing-home sales in the Midwest rose 11.0% in December to a level of 1.11 million, but are 4.3% below a year ago. The median price in the Midwest was $139,700, up 3.3% from December 2009.

In the South, existing-home sales increased 10.1% to an annual pace of 1.97 million in December, but are 2.5% below December 2009. The median price in the South was $148,400, unchanged from a year ago.

Existing-home sales in the West surged 16.7% to an annual level of 1.33 million in December, but remain 1.5% below December 2009. The median price in the West was $204,000, down 5.6% from a year ago.

Copyright © 2011 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

SHORTENING THE SHORT SALE – HOW TO CREATE A WIN-WIN SITUATION FOR EVERYONE INVOLVED

RISMEDIA, December 9, 2010-In today’s complex housing market, real estate agents are handling an increasing volume of short sales. While many agents view short sales as a win-win for both homeowner and buyer, they can cause many complications if not properly understood and executed. Since there is no provision in the mortgage agreement for a short sale, the primary lien holder-the mortgage servicer-must approve the homeowner’s request for one. Any additional parties with liens against the property, such as a second mortgage holder, must also approve the request before a short sale can commence. While each short sale scenario is unique and includes numerous variables, the primary benefit to the homeowner is simple-it lets them avoid foreclosure on their credit record at a time when a good credit history is critical for financial and personal reasons.

Homeowners rarely enter into this process on their own-instead they rely on real estate agents, attorneys and/or other vendors to communicate directly with the mortgage servicer. Since each servicer has their own guidelines and requirements, they play the lead role in approving or declining the terms of a short sale.

The Role of MIs in Short Sales
Generally, if the property was purchased with less than a 20% downpayment and required private mortgage insurance (MI), once the servicer determines the sale meets its requirements, they must request the mortgage insurer’s approval of the sale as well. That’s because the MI company is not obligated to pay a claim until a clear property title is acquired via the foreclosure process, and must waive certain coverage requirements each time they approve a short sale to preserve the insured lender’s coverage.

MI companies generally consider short sale requests for two reasons: for loss mitigation purposes and to provide the homeowner with an alternative to a potential foreclosure. With each request, an in-depth review of the following is conducted:

-Purchase amount relative to property value and seller costs, such as real estate commission: To determine if they are reasonable.
-Loan purpose: To determine why the property was originally bought, i.e., as a primary/second home or an investment property.
-Default situation: To determine the reason why a short sale is being requested.
-Homeowner’s financial situation: To assess the homeowner’s employment status, credit report, income and assets, checking account statements and tax returns to make a decision on the short sale.

Homeowner Contribution and Pitfalls
While many short sales occur due to the homeowner’s obvious financial difficulties, some involve “questionable” hardship, where there does not appear to be financial difficulty so severe as to make a financial contribution impossible. Mortgage insurers strive to make their approval terms favorable so a short sale can be finalized, but it’s important that homeowners with questionable hardship-determined by the in-depth review of the homeowner’s personal and financial situation-realize they may be required to participate financially in the workout. This is typically accomplished via a cash contribution, or execution of an unsecured promissory note to repay a reasonable portion of the loss.

Making Short Sales Work
Despite obstacles that can arise, one of the keys to short sale success is the turnaround time it takes to process each short sale request.

As one of the nation’s largest mortgage insurers, Radian is leading the way in expediting this type of workout. The company estimates it will review more than 11,000 short sale requests in 2010, typically responding to each within two business days with an approval or feedback as to what is needed to obtain an approval.

When it comes to short sales, agents are dealing with homeowners and buyers who, quite simply, cannot afford to wait days-or even months-for an answer. As a behind-the-scenes ally, Radian has the experienced resources in place to move quickly, providing immediate feedback to servicers so they can consider and issue their final approval in the fastest time possible. This ensures a win-win for homeowners, buyers, servicers and agents alike.

Brien McMahon is chief franchise officer of Radian Guaranty Inc.

Copyright © 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Maggie Finegan, Move with Maggie Chicago Real Estate Team