Real Estate tradition, in this part of the country says that “…there’s no point in having your house on the market in the winter between Thanksgiving and the Super Bowl…” I’ve always thought this was a silly myth and have always advised my clients – both buyers and sellers of the fallacy of this thinking. I started my real estate career on December 12th, 1982. I was offered a position with a new home builder in Glen BurnieMaryland in the winter when a really good interest rate on a home mortgage was around 13%. I’m pretty sure the real reason I was hired was not any great expectations about me doing a bang up job but, because I was “dumb enough” to take the job in mid-winter with minimal commitment from the builder, and the regular staff was all going on a company paid tour of Mexico. Being a recent college graduate and not being familiar with all the “Facts of life”, as known by the real estate industry, I did not know that no one was supposed to be out buying houses in December of 1982. I sold twelve homes that month – who knew!
They kept me on when they came back.
Anyway enough about me, here’s the point. The winter can be a truly breath taking good time for residential real estate. The transactions are typically quick, clean and fast.
Top Reason # 1 for doing real estate in the winter: Residential real estate can be a bit like driving down a turnpike for buyers, sellers and agents, because as there are more people on the road traffic tends to slow down and small bottlenecks become more pronounced. When the highway is very crowded many people make mistakes or get frustrated and everyone on the road suffers. So to buy real estate in the winter buyers have a slightly more limited pool of inventory to pick from but they have a much better pool of inventory. Typically the sellers who have their homes on the market in the winter are serious sellers, they are not putting their home on the market to “try things out and see what happens” they want or need to sell and are generally more prepared to handle issues reasonably.
Top Reason # 2 for doing real estate in the winter: Good properties just don’t sit around as long. Think of it this way: if a buyer has been thinking about looking for a home and has been scanning the web for months or has been out looking or a home with an agent or even made some offers that fell through due to any number of reasons, when a good property comes on the market these folks can see it and generally will snap it up. There’s an old saying in retail sales: an educated consumer is the best customer. These real estate consumers are self educated and well educated. Buyers at this time of year can pick out a deal and don’t wait.
Top Reason # 3 for doing real estate in the winter: There’s simply less competition. Look back at reason # 1: would you rather drive down a crowded highway in rush hour or a busy highway on a sunny day. The psychic effect of having a well negotiated clear transaction with less pressure is huge. Many times it takes home buyers and sellers years to recover emotionally from a messed up transaction. Yes there are the Holidays but you’ll also have an open road.
Remember it’s still a home, it’s not really supposed to be just an investment. You aren’t going to steal a house if you’re a buyer and you aren’t going to be the only game in town if you’re a seller – ultimately both buyers and sellers can and do wait if they don’t get what they feel is fair. All the regular rules apply to transactions, but residential real estate in the “Off Season” can be very worthwhile.
Technology is likely to have a significant impact on the structure of the real estate industry in the coming recovery for a number of reasons. Real estate transactions have basically two related and separate parts the seller side and the buyer side.
The Buyer Side will not be as greatly impacted by change as the seller side due to some factors which are basic to the process. The impact of technology on the buyer’s side will primarily be on the media not on agents and buyers. Most people who have been involved with the real estate industry over the last ten or fifteen years have known that print advertising has declined in efficacy dramatically. Virtually all buyers begin and continue their home searches on line. Broker and real estate franchise that have been tracking the source of their business for many years have seen that buyer leads that came primarily from print advertising before the internet have seen the number of viable leads from print advertising drop to a very small number of viable buyer leads. The last and most effective use of print advertising has become open house events or very short term immediate demand sort of inventory like rentals. Buyers still however require the assistance of a licensed real estate agent to help them work their way through a real estate transaction and access and view properties as well as negotiate and consummate a real estate transaction. Fees for trained and competent Buyers Agents are likely to remain in the 2.5% to 3.5% of the transaction price that they have been in for many years due to the high time consumption and relatively high failure rate that Buyer Sides of transactions experience.
The Seller’s Side of real estate is likely to see the greatest changes. For a decade or more before the Great Recession large banks had been trying to repeal laws that barred them from providing real estate services such as listing and selling homes for their customers. Now as a result of the unprecedented number of foreclosures in the hands of banks they have become The Dominant Sellers of real estate in theUnited States. Fanne Mae and Freddie Mac established 6% as the official normal commission that they would accept on both short sales and foreclosures and required that commissions be spit equally between buyer’s side and seller’s side in a real estate transaction. Every real estate agent in the United States has been trained that establishment of “Normal” or “Set Fees” has an anti Trust violation since the late 1970’s however the big banks and Fanne Mae and Freddie Mac have been seen as exempt from these laws. This has resulted in a situation where the majority of listings that sell are listed by Bank/Lenders that own them at a nominal rate of 6% with local real estate agents and agencies but using a conduit of third party companies that collect hefty referral fees on their listings leaving the selling agencies to work with 1.5% to 2% of the actual sales price rather than the 3% to 4% that they have historically have had to work with since the end of World War II. These agents and agencies have been able to do this because of the downward changes in their cost structure do to the changes in technology.
It is unlikely that as non-institutional home sellers are able to re-enter the home selling market as prices stabilize and even rise in the foreseeable future that the advantage to both consumers and Realtors of lower fees on the listings side of real estate transactions will be lost, that have been made possible by the reduced operating costs possible for Realtors due to the changes in technology.
By Dick Thackston CRB, ABR, ABRM, Broker NH, MA & VT
buyer, buying, deal, home sales, off season, real estate, residential real estate, seller, selling, Winter
I see America changing every day when I talk to home buyers. American’s expectations about housing are switching rapidly from the “American Dream” of Mom, Dad, kids and a house in the suburbs, not as much because of the financial decay of the last three years, but rather because the current generation of Home Buyers, the so called “GenY”, has moved away from the highly conformist expectations of their grandparents – the “Baby Boomers” – to a highly diverse, multicultural, multidimensional society.
The Baby Boomers experience, viewed as a cultural event or milestone, has had more impact on American society, real estate and home ownership than any other event in American society since the Civil War. Boomers were raised with these expectations and typically only owned three or four homes in their lives – this is the generation that had mortgage burning parties when they paid off their homes and built a pool.
The Gen X’ers, the children and grandchildren of the Baby Boomers, never fully adopted the lifestyle of their elders. This is the generation that came of age in the boom years of the 80’s and 90’s. This generation used credit cards, car loans and mortgages like no generation before. This is the generation the treated their homes as Piggy Banks and expecting to buy low and sell high on every home they would ever own and they expected to own a lot of them too! Gen X’ers as a group expected to stay in multiple homes for short periods – three to four years max – disposable lifestyles. Their generation is much smaller then the “Baby Boomers” as a group but has had a disproportionate impact on the housing market. While these Gen X’ers have had an immediate short term negative effect on housing and the American Economy as a whole, the effect on real estate will be short term because this is a small generation. The dramatically different “Generation Y”, aka “The Microwave Generation”, influence is already being felt on the real estate market and the economy as a whole.
“Generation Y” is much larger than the Gen X’ers and has a completely different agenda. Financially, socially and educationally, Gen Y is dramatically different than either of the two prior generations of Americans. Gen Y is much more likely to have an IRA or a 401K than either of the earlier generations and at a much earlier stage in life: Baby Boomers expected a pension, Social Security and the equity in their home to carry them through retirement; the Gen X’ers expected to flip houses to infinity and beyond with minimal reserves and limited funding of retirement accounts.
“Generation Y’s” effect on housing will be as dramatic as that of the post World War II baby Boomers or greater. The Y’s are happy to not own a home any time soon if at all. It’s more important to the Y’s to have flexibility and cash. This is a generation that has student loans like no other before but that’s because as a group they view education not as just as important but imperative to their lives. Lifestyle choices such as access to services, an elegant downtown – clubs and shopping – is more important than owning a home. Y’s as a group are looking for housing that meets those criterion rather than a quarter acre lot and a three bedroom house.
Sure, Generation Y’s expect to own homes, but it is not an urgent first order of business as it was for their parent and grandparents. Generation Y’s perspective on real estate ownership is colored by their willingness to rent. (Sixty plus per cent of renters want to own their own home someday according to a recent survey by PulteCorp.) The Y’s interest in savings is reflected in the much higher contribution rates to IRA’s and 401K’s than either of the prior generations combined with their much higher student loans and need for “a lifestyle” that is more cosmopolitan and focused on convenience than the Generations of “Boomers” and “X’s” that came before them.
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
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On July 1, 1973 the Current Use Law became effective in New Hampshire. The Current Use law was designed to keep New Hampshire’s rural character in tact while allowing owner’s to use the land quoting from the preamble to the law itself: “It is hereby declared to be in the public interest to encourage preservation of open space, thus providing a healthful and attractive outdoor environment for work and recreation of the state’s citizen’s, maintaining the character of the state’s landscape, and conserving the land, water, forest, agricultural and wildlife resources.”
The effect of the Current Use law has been to provide a lower tax rate on larger tracts of land so that property owners would not be forced to subdivide and sell off their property in order to cope with large property tax bills. By keeping land in an undeveloped condition family farms have been preserved as well as woodlands, wet lands and other tracts that might well have been lost over the last thirty-nine years.
Over half on the land in New Hampshireis enrolled in the Current Use program and it has been the foundation of the State of New Hampshireprivate property based land conservation program.
The following are characteristics of the State of New Hampshire’s Current Use Program:
Generally speaking a parcel must be of at least ten acres, exceptions to this are wetlands of any size, tree farms of any size and parcels of less than ten acres that produce more than $2,500 in agricultural products. Open undeveloped land that is less than ten acres as well as any area covered by buildings does not qualify for Current Use.
If an owner acquires abutting parcels of less than ten acres the additional parcels can be added and would qualify for Current Use or if an owner has a number of abutting parcels of less than ten acres each but the entire contiguous amount owned is ten or more acres then the property is eligible for Current Use.
What is a contiguous parcel? Contiguous parcels under the Current Use Law are defined by the NHSPACE.org website as “more than one parcel of land, which is connected, even if a highway, rail bed, river or water body divides it. This means land that touches any of your property boundaries, or is across the road or on the other side of a pond, stream or river, on both sides of railroad tracks, or across a political boundary.”
If a property owner enrolls his property in Current Use it does not mean his land is now “Open to the Public”. When a property owner enrolls his property in Current Use it is still private property – remember the focus of this law has been keeping New Hampshirelarge undeveloped tracts in private hands – the property owner still has the right to determine how his property will be used just as he would if it were not in Current Use.
For more details on New Hampshire’s Current Use Law visit NHSPACE.org
By Dick Thackston CRB, ABR, ABRM
Broker NH, MA & VT
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By Dick Thackston
2012 is likely to be defined, in the real estate world, by three “E’s”: Expectations, Employment and Europe/Economy. No matter what your political belief system is, no matter how much or how little money you have, these three factors will permeate American life and the economy more than any others in the next eleven and a half months.
Expectations: In the world of sales there is an old truism, “To live with the classes sell to the masses!” those will be the watch words for real estate this year. 2012’s real estate will almost certainly only be about first time buyers and large volumes of REO properties being sold to investors. Both first time buyers and investors have some striking similarities: both groups feel they are buying at the bottom of the market and both groups have an expectation of housing prices increasing over the next three to five years and both groups have an expectation of rents remaining and going higher. (Personally, I agree with both groups.) First time buyers not only have the family formation/nesting instinct driving them into purchasing, but they have the ever increasing cost of renting versus home ownership. Most first time home buyers are renters now and are looking at homes that will have monthly mortgage payments 15-20% below their current rent. Landlords/Investors are looking at the exact same equation from the other side and seeing that almost anything they buy now will have positive cash flow of at least 10% and often up to 20%. The group that is melting away at this time is the investors looking to buy, fix and flip, the risks are too great of carrying a vacant property or over improving and taking a hit in what is in fact a flat market, and of course move-up buyer’s remain effectively locked out of the market for the foreseeable future. Until move up buyers can sell and move there is likely to be no updraft in the real estate market, but when it does begin it will be huge.
Employment: In New Hampshirefor sure, the Northeast in general and for the nation probably, employment getting better.New Hampshire has experienced job creation. Not dramatic but some. GivenNew Hampshire’s favorable tax and business environment it’s not really surprising that it would be one of the first parts of the country to recover. New England more generally seems to be getting better although not at the same rate as New Hampshireand the nation, well let’s face it would be hard to screw things up much more – which is a perverse kind of improvement actually. So as workers become more secure in their outlook on employment, they become more confident that they can cope with a mortgage payment and the other cost associated with home ownership, and are feeling much better about leaving their apartments and Mom’s basement. This is having a very noticeable effect on stabilizing the market at the bottom.
Economy: The macro-economic environment remains dicey. I almost headed this section “Europe” as my third “E” but really it’s bigger than all that. The United Sates is no longer insulated from the rest of the world economically. I doubt that this was ever really true, but we felt it was true and we certainly acted as if it was true. The United States remains the world’s largest economy however it remains subject to outside shocks: Tsunami & nuclear disaster in Japan, economic slowdown in China and most dramatically European debit crisis – country by country bad news out of Europe send shocks through our financial system and impacts our banking sector. The largest of these in public perception is Europe which is unlikely to be resolved anytime soon and will continue to drag on the world economy. China seems to have better managed its financial affairs – easier in a totalitarian state – and seems likely to have a softer economic landing than Europe.
What’s the take away from all this? Housing is stabilizing now; sales volume is likely to increase significantly; good deals from a buyer’s perspective are likely to remain the norm for the next eight to twelve months; no real appreciation in real estate as an asset class is likely and value added efforts for renovations will remain high risk till after the end of 2012.
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By Dick Thackston CRB, ABRM, ABR
Short Sale Success Story:
Short sales have become a major part of my companys business.
In 2007 I realized that more and more of the owners I interviewed during listing appointments were helplessly under water on the loan on their home.
During the Savings & Loan crisis of the late 80s and early 90s I first experienced short sales. Back then, it was mostly small business owners who had second business loans against their home and as the economy slowed, their businesses slowed or failed, and the bank came after their houses. This is where I learned to do short sales. Up until then, personally, I had never even imagined not being able to sell a house and not clear the loan balances and I had been in the business over ten years at that point.
So I learned to negotiate with lenders to help them understand Fair Market Value and accept the reality of the situation – not the ideal for anyone, but half a loaf is better than none.
So when I started to see homeowners under water again four years ago I felt it would be important to start trying to negotiate short sales – again. Unfortunately both home owners and lenders were still stubbornly unrealistic about the situation at that time. Many of the homeowners I initially advised to consider a short sale ultimately lost the property singing the “I need, I own, I won’t” chorus regardless of market realities, or they spent valuable months and years following the market down. Needlessly doing needless damage to their credit by loosing their home to foreclosure, most had they followed my initial advice would have in fact walked away from a sales with some money, less than they had expected but some money – far better than a short sale or total loss through foreclosure.
Some of the short sales I initially proposed to banks wound up going to foreclosure as well. Costing the lender $50,000 to $100,000 in equity that could have preserved for their company, however banks had a problem too because many had just done refinances or made new loans they would say something like “we have an appraisal that is only six months old” not recognizing how quickly the market was changing in those days. What a tragedy! What a tragedy for all parties!
So now Short Sales are commonly accepted as better than foreclosure and few, if any, lenders are waiting for the market to recover. The biggest issue with Short Sales remains sellers that are too slow to take action. I got a call today from a seller that is schedule for foreclosure sale in ten days. He turned down a short sale about a year and a half ago and now he wants to try and find a buyer and complete a short sale negotiation in ten days? Not going to happen. I suggested that he simply needs to plan on the foreclosure and arrange to move out of the house. Banks at this point are far more realistic than sellers and far more prone to look realistically upon a short sale and work on it realistically. Bank of America and Citibank have made tremendous improvements in their systems for handling short sales. In both cases they have gotten to be the best in the business to deal with, when a few years ago I really don’t think they allocated any serious resources to the Short Sale process.
Bellows Falls, buyer, buying, Dick Thackston, Financial, First Home Buyers, foreclosure, home sales, housing market, Keene, Massachusetts, Mortgage, New Hampshire, News, Peterborough, real estate, REALTORs, REO, savings & loan crisis, seller, short sale, Thackston, Vermont, Winchester
The Great Recession that has shaken the American Economy and Housing Market over the last five years has taken many would be home buyers out of the market and loaded the Home Buyer psyche with skepticism however it has not generated an increase in the demand for buyer brokers. In fact if anything the willingness of buyers to contract with Buyer Brokers appears to be in decline and the willingness of agents and agencies to provide buyer brokerage services appears to have declined.
Buyer Brokerage, properly understood by the consumer and properly handled by the Buyer Broker is an excellent program and an excellent service for any home buyer in today’s market.
The top ten things when getting involved in Buyer Brokerage follow:
# 1. Find a Buyer Broker that you feel you can know like and trust. This person is going to need to have both your attention and confidence. Remember you’re not hiring them to be your best friend you’re hiring them to help you make solid business decisions.
# 2. Understand that you are HIRING the Buyer Broker which means you will be responsible for PAYING the Buyer Broker. Most agents will be happy to accept as compensation whatever fee is offered through their local MLS however sometimes listing brokers will not pay a fee or will not pay a reasonable fee and it will be your responsibility to handle this cost. Discuss this in detail when you hire the Buyer Broker.
#3. ONLY HIRE A BUYER BROKER WITH TRAINING IN BUYER BROKERAGE. Lots of agents and agencies will agree to be paid as a buyer broker but very few have actually training in Buyer Brokerage. The top level of training for a Buyer Broker is an Accredited Buyer Representative Manager a designation offered exclusively through the National Association of Realtors, Real Estate Buyer Agent Council.
#4. Have some idea of what you want and were you want to live. It’s the Buyer Broker’s job to help you figure out the best value for you but you need to understand your own needs and wants so the Buyer Broker can help you figure things out.
#5. Listen to the Buyer Broker. Most Buyer Brokers can send you to good service providers: Loan Officer’s, Title Companies, Home Inspectors etc and do so to help you get good service – no other reason, really.
#6. Find out if your chosen Buyer Broker requires a retainer and how that’s handled. Many Buyer Broker’s require a retainer when you contract for services. Most refund that after a successful closing, some do not establish how this item is handled when you sign your contract.
#7. Establish the level of service you expect and the level of service your Buyer Broker is ready willing and able to provide. Some buyer brokers will check zoning, building permits and title issues; some will not work with For Sale by Owner and non-MLS listings be clear about how these issues are handled.
#8. Establish an exit plan. Sometimes relationships just don’t work out or sometimes your situation will just change. Be clear at the beginning of your relationship with the Buyer Broker how things can be ended if you don’t feel the relationship is working out.
#9. Understand the agency laws in your state. Every state has different rules governing the actions and relationships of the real estate agents with the public – no two are exactly the same.
#10. Make sure you know who the boss is. When contracting any licensed professional for services make sure you know who they report to and who regulates Buyer Brokerage in your state. There is NO STATE where Buyer Brokerage is regulated by the REALTORS.
American Economy, Bellows Falls, buyer, buyer broker, buying, Dick Thackston, economy., financing, First Home Buyers, first time buyer, home buyer, housing market, Keene, Massachusetts, monadnock region, New Hampshire, Peterborough, realtor, recession, The great recession, Vermont, Winchester
By Dick Thackston
Its a buyer’s market – true – but what does that mean to you if you’re a home buyer? Are you looking to get “a great deal” and tell all your friends that you bought a house from a bank for $20,000 or are you looking to buy a home that you can live in and build equity and “have a life” over a reasonable period of time? Do you have the temperament of or for being an investor or do you not have the willingness or ability to take risks and experience losses? These are all REALLY, Really important questions you need to be able to answer if you thinking you want to play in this market.
First let’s consider what’s a good deal. Certainly you can buy a house for under $50,000. Many properties are being sold for small fractions of what they last sold for or were mortgaged for at the top of the market. DO NOT BE CONFUSED ABOUT WHAT THIS MEANS! These homes are in poor condition; most were not really qualified for the mortgages they had based upon condition but one of the characteristics of the B & C lending market of a few years ago was that they did not require homes to be up to speed. The loans were made on the hope that the borrowers would fix them up or that the housing market would inflate further or more likely both.
To buy these homes now for the most part you need lots of cash: cash to buy them and cash to renovate them. You also need to know that you may be years from getting your cash back. Normally lenders will require that your ownership and repairs be “seasoned” for at least a year before they will allow a new loan. Also, you will need to know that just because you want to make certain repairs that will “make it yours” it does not mean that you will be adding significant or any value in today’s real estate market. Roof’s, septic systems, electrical work, plumbing are all things that are expected by most home buyers to be in fair or better condition when purchasing home so you don’t get extra credit for those.
What if you miscalculate on your repairs? You eat the loss. That’s why these are called investor specials you and can win or loose. I work with several teams of investors who take on these projects. They are well capitalized and they have a plan for doing the work, they have studied each property sixteen ways from Sunday and if doesn’t look like it will work exactly as they have calculated they don’t do the deal. If your plan is to buy and work on it, will you really be prepared to live in a construction site for the next three to five years? The work always takes more time and money than the average buyer expects – even in normal times – and these are not normal times – and what typically happens is that people get bored or overwhelmed and the sell at or slightly above their costs and move on because home prices have inflated. There is no expectation that home prices will be inflating anytime soon. Most experts plan on housing to stay about where it is right now for at least another three or four years. It may get worse first.
Buying the house you want may prove to be a paradox. The value of well maintained homes has not declined as much as the averages would lead you to believe. Why, you may ask, is this? Simple if people who bought their homes in the last ten years, for all the right reasons, still have their jobs, still like their neighbors aren’t dead or getting a divorce why would they sell in this market? They don’t. Remember that in our area,Central New England, unemployment is some of the lowest in the entire country – generally under 5%.
When you hear about the million houses projected to be going to foreclosure over the next year that sounds like a big number, but remember that home sales in this country have regularly topped 5 million in the last generation, so while the number of foreclosures is huge relative to all the homes that exist in this country that are privately owned, it’s a relatively small number. The truth here is that as a country we never expected to have any significant number of homes go to foreclosure.
What does that mean for you as a home buyer in this market? It means that if you want a home now you can get a good value but you need to know who you are how, much you want to spend, and how long you want to stay in a home before you think you might need to or want to sell. Prudence is certainly important and the most important aspects of buying a home in today’s world are that you plan on using it as a house not a piggy bank and know that it’s a place to live for three or more years, maybe the rest of your life, maybe a decade, maybe till the kids are out of school. You won’t make $10,000 trouble free dollars by painting the bedrooms neutral colors and selling the house in a year.
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By Matt Polsky
Mortgage Commentator and Our Guest Blogger from VAMortgagecenter.com
Using a VA Home Loan to Purchase Your Vermont Home
Vermont is home to lush landscapes and excellent communities, making it a long-standing residential hot spot for outdoor enthusiasts. New England is also home to numerous military bases and many military members. Family of service members have also been drawn to Vermont as it provides them the peace and quiet they desire, which other more populous New England states may not afford, while still offering all modern conveniences of the region. For military members wishing to move to Vermont, they should consider using the VA Home Loan program to finance their purchase.
Why Choose a VA Home Loan?
VA home loans specifically cater to the needs of military members, more so than any conventional lending program. In 1944, the VA home loan program was established to meet the needs of military members, and does so by offering unique, money-saving benefits not found in other conventional home lending programs.
With a VA home loan, eligible borrowers can expect to benefit from competitive interest rates and flexible mortgage terms, in addition to other benefits, including:
In addition to the above listed benefits, the VA home loan program also has higher loan limits than other lending programs in its class. Although often overlooked, this is highly beneficial to military members interested in purchasing a home in Vermont, where home prices can average up to $400,000 in certain areas.
The Quick and Easy VA Loan Process
Obtaining a VA loan is a quick and hassle free process that begins with a simple call to a VA Loan Specialist. After the initial phone call, eligible borrowers can expect to purchase a home in five easy steps. Although the process may vary for certain borrowers, the VA loan process generally consists of:
- Obtaining your Certificate of Eligibility
- Finding the home you wish to purchase
- Submitting a VA home loan application
- Allowing time for processing and approval
- Closing the loan
According to VA Mortgage Center.com, VA loans can be secured in as little as 30 days, however, eligible borrowers should allow at least 60 days for the transaction to complete.
Am I Eligible for a VA Loan?
If you are military member, there is a good chance that you are eligible to receive a VA home loan. The VA home loan program was designed to provide easy access to affordable home financing, and because of that mission has some of the most lenient eligibility requirements of any other lending program. To initially qualify for a VA home loan, all military members have to do is submit their Certificate of Eligibility and meet one of the following service requirements:
- Have served at least 3 months on active duty during war time
- Have served 181 days on active duty during a time without conflict
- Have served 6 years in the military Reserves or National Guard
The VA home loan program does not have any income or credit requirements; however, most VA-approved lenders will expect potential borrowers to have a credit score of at lease 620 for loan approval. Even if military members do not meet credit requirements, they are still encouraged to apply for a VA home loan as even those with a history of bankruptcy or foreclosure have still been approved.
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By Dick Thackston
Bankruptcy doesn’t generate much real estate business from people who file who don’t want their properties anymore because they’ve already let them go to foreclosure.
In 2005 Congress significantly changed the Bankruptcy Code. Means tests were added for Chapter 7 filings as well as any number of other dramatic changes intended to make it harder for individuals to file for bankruptcy. In part this lead to the increased level of consumer lending both on credit cards and against housing. The operative assumption on the lenders side was that individuals and families would not want to loose their homes, that home values would always go up and that consumers for the most part would not be able to dispose of credit card debit in Bankruptcy due to the means test. That’s not how things have worked out.
Enter the “Great Recession” and the fickle and rational nature of the modern American Consumer.
The first action the Great American consumer took was to run up their Home Equity Lines and subsidize their credit cards with these monies. Credit cards became such a mainstay of American thinking in the last ten years that life without these seemed un-imaginable. Credit Cards became more important than homes. As the market tightened Americans started trying to sell their homes in a declining market so they could pay their credit cards off or keep them current and when that stopped working, to the astonishment of more or less everybody, Americans stopped making mortgage payments but kept their credit card debt current so “we can still use our cards to buy stuff”.
The next part of the process went like this: stop paying your mortgage, apply for government aid and stall off foreclosure for many times as much as a year, then try for a short sale, short sale fails, let the house go to foreclosure, stay in the house, wait for bank to pay you to leave, just before they throw you out file for bankruptcy and extend the time frame for several more months, leave with no obligations to anyone for mortgage or credit cards. Keep car, move to new city, start over again.
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By Dick Thackston
I’ve gotten a consistent stream of questions from buyers about buying real estate out of Bankruptcy Court and the reality is there aren’t a great number of these, in fact they are quite rare. There are a couple of reasons bankruptcies don’t generate much in the way of real estate sales: most people who want to keep their homes don’t loose them in bankruptcies and people who don’t want their homes let them go to foreclosure before bankruptcy.
People who want to keep their homes can and often do use the Bankruptcy Court to stop a foreclosure. Filing for Bankruptcy is done electronically and can be done right up to the last minute by a competent Bankruptcy Attorney and “stop the clock” so to speak. I also emphasize “competent Bankruptcy Attorney” because going to Bankruptcy Court is a highly specialized field and I have seen many people use attorney’s who are not familiar or do not do normally practice in this field make a mess of people’s filings and needlessly loose assets.
There are two basic kinds of Bankruptcy: Chapter 7 total liquidation of debit and Chapter 11 reorganization of debt; in either case a homestead and many other types of real estate can be retained. New Hampshire has a fairly reasonable homestead deduction $75,000 per person, so a couple can have up to $150,000 in equity in their home and not be forced to sell. More often than not over the last several years people have had little or no equity in their homes so families that want to keep their home can continue to make their payments and dispose of most other non-secured debt in a Bankruptcy filing of either kind and not loose their home.
There are a couple of other situations regarding Bankruptcy and real estate that are worth considering as well non-homestead property would not be subject to homestead protection and non-reaffirmation of debt after discharge. In the case where an individual completing a Bankruptcy owns a property but owes more or almost as much as it may be worth it may be possible to retain the property, as long as the loan remains or can be made current, simple because there is no economic incentive for any other creditor to pursue taking his property – there’s literally no money in it. The idea of re-affirmation of debt means that in the Bankruptcy a property owner tells the lender on his property he will re-affirm his personal guarantee of the original loan. While this may be noble it may not actually be required by the lender, it will have minimal if any positive impact on the post Bankruptcy credit score and can create a real problem in the person who filed later wants or needs to sell the subject property and still has no equity. I had a customer who had owned his own business and filled a Chapter 7 Bankruptcy after his building business fell apart when the “Great Recession” started a few years ago and he had two mortgages on his house. When he obtained employment outside our area and had to sell his home as a short sale he found that he had not reaffirmed his first mortgage and the readily wrote off $100,000 however his second mortgage of $20,000 which he had reaffirmed wouldn’t take a dime off and he had to pay the whole amount off.
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