A short sale is often used to avoid foreclosure to reduce the effect on credit scores. This allows one to buy a home again in the future much sooner than if one went through foreclosure. It is important to know that short sales, just like foreclosure, will result in a negative credit report against you. A foreclosure usually is more detrimental to your credit rating than a short sale, however, if you have several missed payments, when doing a short sale, your credit can be just as negatively affected.

Fair Isaac released a report that says the average points lost on a FICO score are as follows:

• 30 days late: 40 to 110 points
• 90 days late: 70 to 135 points
• Foreclosure, short sale or deed-in-lieu: 85 to 160
• Bankruptcy: 130 to 240

In a successful short sale, the lien holders agree to release your lien (the mortgage, home equity line of credit, etc.) on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency.

Even if a lien holder agrees to a short sale agreement, this does not mean they necessarily release you from your obligations to repay any deficiencies of the loans, unless specifically agreed to.  Creditors generally require you to prove that you have an economic or financial hardship preventing you from being able to pay the deficiency.

There are many other types of liens and other obligations that may be secured by real estate besides your mortgage loans, such as contractor liens, IRS tax liens, DSHS liens for unpaid child support, HOA assessments or other obligations. The type of debts and type of property will determine what remedies a lender may have if you fail to make the required payments. For a short sale to be successful, all lien holders will need to approve individual applications for a short sale, should they be asked to take less than what is owed.

A short sale in which the debt is forgiven is considered a “relief of debt” and the forgiven debt may be treated as income for tax purposes. The Mortgage Forgiveness Debt Relief Act of 2007 created a limited exemption to allow homeowners to pay no taxes on debt forgiveness; however, the exemption only cancelled debt used to buy, build or improve a principal residence or refinance debt incurred for those purposes qualifies for this tax exemption. For more information on the tax consequences of debt relief, seek professional tax advice and go to www.irs.gov and conduct a search regarding the Tax Relief Act.

The Home Affordable Foreclosure Alternative program (HAFA) was designed to give homeowners alternatives to a foreclosure, which include incentives for completing a short sale. If your home sale can close as a HAFA transaction, you will emerge owing no deficiency. However, it can be very difficult to qualify as a HAFA transaction because all lienholders must agree and often a 2nd or 3rd lien holder won’t agree. For more information on the options available, visit the HAFA program website.

Most large creditors have special loss mitigation departments that evaluate borrowers’ applications for short sale approval. Often creditors use pre-determined criteria for approving the borrowers and the terms of the sale of the properties. Part of this process typically includes the creditor(s) determining the current market value of the real estate by obtaining an independent evaluation of the property from an appraisal or BPO (broker price opinion). One of the most important aspects for the borrower in this process is putting together a proper real estate short sale package. The package should be well organized along with a hardship letter telling the creditor why a short sale is needed. Most agents now work together with real estate attorneys and can help you with this process.

There are many factors you should take into account when considering a short sale on your property: the lender’s policies regarding forgiveness of debt, the tax consequences, your overall financial strength, the lender’s willingness for processing a short sale request, and the number of other recorded liens on the property. It is possible for any one lien holder to prevent a short sale by refusing to agree to negotiate a reduction in their payoff to release their lien. If a Creditor has mortgage insurance on their loan, the insurer will likely also become a third party to these negotiations as the insurance policy may be asked to pay out a claim to offset the Creditor’s loss.

Short sales can have a high risk of failure from inability to obtain agreement from all parties or they might not be approved in time to prevent a scheduled foreclosure date. 

Although the time to process short sales has decreased, it can still take several months to a year for the process to be completed.

A short sale is a very complex transaction that involves numerous issues as well as legal and financial risks. We advise our clients to seek the advice of an attorney and tax professional before proceeding with a short sale, however we are happy to answer any preliminary questions you may have and offer free seller and buyer consultations to review your circumstances.

Kerstin G. Brooks
Brooks & Heinze Team
Skyline Properties, Inc.
Cell: 206.276.5827
www.propertyinseattle.com

Jumbo mortgage loans are back, but don’t let the down payment requirement fool you. They still have reserve requirements and other fun surprises that can create issues. Learn what they are and how to avoid them.

As a professional mortgage banker since 1997 in the Seattle and Bellevue, WA area, I’ve had the unique experience of watching jumbo mortgage loans go through waves of popularity in the last 5-7 years. To say the least over the last 3 years jumbo mortgage loans have been the most difficult loans to find and put together compared to their FHA, VA, and conventional mortgage counterparts.

Defining a Jumbo Loan

The good news is they are back, they are reasonably priced, and the interest rates are good. Before I review the issues the reader needs to be aware of, let’s define a true jumbo mortgage. In the Seattle & Bellevue MSA, conventional & FHA mortgages will lend up to a loan amount of $506,000. There is a conforming jumbo loan that has a loan amount range of $417,001 – $506,000. So for this article’s purpose, I am referring to loan amounts of greater than $506,000.

Down Payments

In general jumbo loans require a 20% or more down payment. There are some jumbo programs that allow for as little as 10% down, but don’t let the down payment requirement fool you. Many times there is an additional requirement on jumbo loans called “reserve requirements”. This means that after closing, a borrower needs to have a certain number of payments in the bank after the down payment and closing costs are accounted for.

Reserve Requirements

The reserve requirement is defined as how much money is left over in the borrower’s bank account after closing. The amount of money needed for the requirement can range from 6-12 months of total monthly payments for the new mortgage. The requirements can increase depending if the borrower owns additional properties. For example: The borrower may have investment properties or second homes which would increase the amount of reserve requirement. The reserve requirements may increase even further if any of the properties are underwater.

Sometimes the bank or investor of the loan will require the reserves come from specific types of accounts. It’s important to know which accounts are eligible for the reserve requirements. Will the investor accept a 401k or other retirement accounts or will they require the funds to be in a liquid account like a checking or savings account? Sound confusing? It is. But with a little preparation and planning a borrower can head off these types of issues far in advance of making an offer on a property.

Jeff McGinnis
MLO – 279369 CL-142878
Direct: 206-283-5626 (LOAN)
Fax: 425-818-7601 Wallick & Volk Mortgage Bank – Home of the 21 Day Purchase Xpress
600 108th Ave NE, Suite 110
Bellevue, WA 98004
www.mcginnismortgage.com

Buying a home is one of the most exciting things you can do. I remember when I bought my first condo – I was thrilled. I was excited about making the leap from renter to homeowner. Home buying is a great financial commitment and an intensely emotional experience.  When your emotions are involved in a purchase, there’s a possibility that those emotions can get out of hand and stress can taint the experience.

Experienced Buyer’s Agent with Great Communication Skills

 PLUS

 Fabulous Massage Therapist

 EQUALS

 Stress-free Home Buying

Selecting the right home for you and your family should be fun. Picking the right agent to work with and finding a way for you to stay grounded during the process are key ingredients.

Finding a home to buy is actually pretty easy with all the information so readily available online today. However, getting that home under contract, managing the inspection, jumping the hurdles of title and settlement are the “scary” parts where your agent really “earns” his/her fee.  A good and caring agent will be there to educate you and hold your hand step by step.  Good communication between you and your agent will make the process easier and less stressful for you.

Also, having some other way to ground yourself when you start to feel overwhelmed or conflicted is very important. Massage is great for lowering tension and anxiety. It also helps with staying alert, being more aware and concentrating – all important when committing to a big investment like a home. When you are calm and your mind is at peace you are more likely to make sound decisions

 For a free, no-obligation home-buyer consultation, contact Kerstin G. Brooks of the Brooks & Heinze Team at 206.276.5827 or find the team online at www.propertyinseattle.com .

 To schedule an appointment at Shift Massage, contact Kathy J. Rose at 206.399.8820 or find her online at http://www.shiftmassage.com .

Kerstin G. Brooks
Brooks & Heinze Real Estate
Cell: 206.276.5827
Web: www.propertyinseattle.com

Some hardships that may apply to you are divorce, illness, job loss, income cuts, etc.

This program can be the answer for someone with an FHA loan where they are no longer able to make payments on their loan and who are interested in participating in a short sale.

You can request a free consultation by calling Krisanne at 206.920.2541 or calling Kerstin at 206.276.5827 or sending email to info@propertyinseattle.com.

Or contact the Department of Housing and Urban Development at 1-877-622-8525.

If you decide to work with us on a HUD Pre-Foreclosure Sale, there are no upfront fees charged by us.

Not sure if you have an FHA loan? Contact us and we can find out or call your lender and ask them.

Brooks & Heinze Team
Skyline Properties, Inc.
Email: info@propertyinseattle.com
www.propertyinseattle.com

*We are not attorneys and always suggest you consult with an attorney before deciding the best course of action for you and if this program is the best fit for you.

Kerstin G. Brooks likes

Brooks & Heinze (Seattle Real Estate Team)

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Granted, renting has its benefits – mainly flexibility. If you are not able to commit to living in a given area for more than five years, you probably should rent but if you plan on settling for longer you should consider homeownership as a valuable investment and a hedge against inflation.

Buying real estate now is attractive because it is affordable and can be financed at favorable terms (chiefly low rates). It doesn’t just make sense to buy but you may not want to get caught without real estate when inflation sets in.

As a homeowner, if you have a fixed-rate mortgage, you have stopped the progress of inflation on one of the biggest items in your personal budget: housing expenses – you are not subject to rental increases like a renter. You also get some tax benefits when you buy residential real estate. As a home owner, you will still have to pay property taxes, insurance and maintenance costs, but those are likely to be significantly less costly than rent thirty years down the road when you have paid off your mortgage and own your home.

The buzz is that inflation pressures are real – google it.

We are not economists, financial advisors or CPAs – please check with reliable sources, we can refer you to the appropriate professionals.

Kerstin G. Brooks
Brooks & Heinze Team
www.propertyinseattle.com

Were any of your household appliances recalled?

It seems like every day some household appliance is recalled. Usually it is for minor issues, but sometimes it is for serious fire hazards.

If you are concerned about whether you have any such appliances in your home, I recommend that you use the Search Form available on the CPSC (Consumer Product Safety Commission) website. Just type in the model number and/or serial number and check.

You can also sign up for email announcements about CPSC recalls. The service is free and you will know these issues before they become front page news. As a Seattle Home Inspector, it is very difficult to keep up with all of the recalls, both past and present, and it is typically beyond the scope of a Standard Home Inspection and most Standards of Practice to identify them.

It is important for all consumers to be pro-active regarding recalls and use the available CPSC information to check for themselves. So use the Search Form and figure out if that dishwasher, wall heater, furnace or dryer is a “fire” waiting to happen.

Charles Buell can be reached at (206) 478-7371 or learn more about him at www.buellinspections.com.

Kerstin G. Brooks
Brooks & Heinze Team
www.propertyinseattle.com

The news reports positive data one day and negative data the next day for the real estate market. This back and forth leaves everyone on edge and confused at a time when people are hungry for relief and good news. Homeowners who have seen their home’s value decline and are upside down (they owe more than the home is worth) are hoping prices will go up. Buyers in the market are not willing to commit to anything because they hope (or fear) prices will continue to decline.

So, what is really going on? Where do we think the Seattle market is going? (Note, we are not economists and some of this information is being passed on from articles read, etc. but we did not create a bibliography. Some is pure speculation on our part, an educated guess. You are encouraged to read and do your own research from non prime-time media sources.) According to Zillow*, in the 3rd quarter of 2010, Seattle’s median home value was $273,000, posting a 4.3% drop in value from the 2nd quarter, and a 10.6% drop in value from this time last year. Zillow further reports 23.2% of America’s homeowners are behind on their mortgages. However, in Seattle that number is higher, with an average of 27.7% homeowners behind on mortgage payments. As we near the end of 2010, the housing market in Seattle and most of the rest of the country remains fragile at best. Slow economic growth, weak employment and foreclosures continue to put pressure on the real estate market. It is our opinion that it will take several years to see a considerable improvement and true recovery in the real estate market, but first we may be in for some additional downward movement in home prices. The Fed has announced a new program of Quantitative Easing II. Basically it is a plan to print more money and try to get inflation jump started. Most people think that inflation would already be rampant due to all the money that the Fed has created out of thin air, but the money the Fed printed and gave to banks, GM, AIG, etc. has not been circulating in the economy. Despite historically low interest rates, more people then ever cannot get loans, credit card companies keep slashing credit lines, people are paying off their debt at an astonishing rate (and not spending on buying more things) and the money the Fed wanted to circulate in the economy is not circulating. The money supply has significantly decreased, not increased, which is called deflation (the banks are hoarding it or putting it in the risky investments or the stock market to buy up their own stock). Now back to inflation (a lot of money circulating in the economy), which is what the Government wants in order to allow the United States to keep current on its debts. There is no way that the United States can ever pay back all it has borrowed and so to keep current on the debt service, the dollar needs to be devalued (inflation) in order to pay back the interest on our country’s immense debt. Did you know that our (government’s) debt is equal to $47,000 per person in the United States? That is $188,000 per family of four. But, we don’t have inflation yet (much to the chagrin of the Fed), we have deflation. Prices are going down. We will eventually see inflation and when that starts, real estate is a terrific investment because it keeps up with inflation. If we have inflation of 3% per year, typically real estate will keep up. So, for those of you who own a home and are happy there, don’t worry if on “paper” you are underwater because the values will return, with help of inflation.

Should anyone buy or sell in this market? There is no easy or blanket answer for this but for some people this is a good time to buy with affordable prices and favorable financing terms if they are looking at real estate as a long term investment (and they get a great deal). For move up buyers this may be a great time because although they may perceive a “loss” in the sale of their current home, they can more than make up the loss with a great “discount” on a purchase. Homeowners who are struggling might weigh their options of a short sale or foreclosure on their primary residence and get a “new start” with the burden of debt relieved. Schedule an appointment with us to find out if this is the right time for you to buy or sell.

Kerstin G. Brooks
Brooks & Heinze Real Estate Team
www.propertyinseattle.com

1. Clear debris out of you window wells, gutters, down spouts, and storm drains. This will allow the water to properly drain, minimizing standing water and stalling the freeze and thaw expansion process that often occurs during colder months.

2. Make sure the weather stripping on your windows and doors fit and is in good condition.

3. Clean your windows. Sparkling clean windows let in lots of sunlight that will help chase away winter’s doldrums.

4. Look for broken or cracked glass and damaged screens or storm windows. Also, check for loose putty around glass panes.

5. Remove garden hoses from spouts, drain and store for the winter. Insulate outdoor faucets, pipes in unheated garages, and pipes in crawl spaces.

6. Keep rodents out. In the winter months, all kinds of critters will be looking for a cozy spot. They don’t need a lot of space to get into or under your home. Make sure all exterior vents are screened, and that there are no gaps underneath garage doors. Pet doors are another favorite access point for rodents.

7. Install storm windows to insure proper heating efficiency.

Indoor Maintenance Tips

1. Get your heating system checked by a professional.

2. Replace your furnace filter.

3. Clean out any dust that has accumulated in vents to reduce exposure to indoor pollutants and cut down on winter colds.

4. Make sure you have proper insulation in both your attic and basement. While checking your insulation, if you see any dark, dirty spots, it may indicate you have air leaks coming into your home.

5. Remove hair from drains in sinks, tubs, and showers.

6. Test all smoke alarms and clean dust from the covers. Replace batteries as necessary.

7. Test all ground-fault circuit interrupters, especially after electrical storms.

8. Check your home around windows and doors for air leaks. An easy way to check for leaks is to move a lighter around the window or door frame and see if the flame moves with a breeze. If you find a leak, you can caulk it or you may have to replace the wood frame. Repairing these leaks can save you money on your energy bill during the cold months.

9. Don’t ignore your hose bibs and learn the location of your pipes as well as how to shut off the water. If your pipes end up freezing, you’ll have a better chance of preventing a burst if you can quickly shut water off.

10. Clean and reverse ceiling fans. Reset fans for the winter routine by giving fan blades a thorough dusting, and then switch them to a clockwise spin in order to push warm air downward from the ceiling.

Happy Fall Days, enjoy the colors,
Kerstin

Kerstin G. Brooks
Brooks & Heinze Real Estate Team
www.propertyinseattle.com

• Your Dwelling is covered under your policy and includes your home and structures such as a garages or deck that are attached to your home.
• Personal Property such as furniture and other contents are typically covered.
• Other Structures are covered under your policy and include buildings such as a garage or storage shed that are separate from the house.
• Family Liability Protection helps protect you if someone sues you for damages after being injured on your property.

Actual Cash Value vs. Reimbursement Provision

• Actual Cash Value typically means your belongings are covered for their replacement cost minus depreciation,. Deprecation is the decrease in the item’s value due to its age, condition or other factors.
• Reimbursement Provision typically means your belongings are covered for the amount it would take to replace them at the time of the claim. Premiums are usually higher for this coverage. 

Here’s how the Reimbursement Provision works:  

• At the time of claim filing your insurance company give you a check for the Actual Cash Value of the item.
• When you replace the item, a check will be issued for the remaining amount needed to make the purchase.

Deductible is your share of the cost. When you file a claim for a covered loss. You may be responsible for a set amount, called a deductible, to repair or replace whatever is damaged or stolen.

•  Not all coverages will have a deductible. However, a deductible will always apply to Dwelling, Other Structures and Personal Property coverages.
• The amount of any deductible will be shown on your Policy Declarations next to the coverage.  
• In most cases, you choose the deductible from a range of options. A higher deductible usually means lower insurance premium.

Need more protection? There are more optional coverages that you may be able to purchase either as add-ons to your policy or as a separate policy. the coverages listed may not be avaialble in all states and limits may vary:

Available as add-ons to a policy: 

• Extended coverage on jewelry; watches and; increases limits for jewelry, watches and furs
• Scheduled Personal Property; provides increased limits for personal property such as jewelry, cameras, antiques, recreational equipment and more.
• Identity theft Restoration; if your identity gets stolen, this coverage can help with legal work, phone calls and lost wages. 
• Water Backup; Helps cover damage in your home from backed up drains or broken sump pumps.
• Increased coverages on business property; Protects items you’re keeping in your home as business samples or for sales.

Seprates policies you can purchase:

Flood insurance, your insurance agent can help you purchase a separate policy through the National Flood Insurance Plan

Personal Umbrella Policy; If someone sues you over an accident and the settlement exceeds the liability limits on your auto and/or home insurance, this coverage can help protect your assets.

Insurance information was provided by Nate Bochsler from Allstate Insurance http://www.allstate.com/nbochsler

Kerstin G. Brooks
Brooks & Heinze Team
www.propertyinseattle.com

Home Loan Assistance can come in different forms such as refinance, short sale and loan modification. Depending on your situation, you may qualify for one or more of these programs.

Traditional Refinance

If you’re current on payments and have equity in your home, a refinance could help you take advantage of today’s low interest rates.

A refinance could help you:

• Lower your interest rate
• Save on monthly payments
• Change the term of the loan
• Switch from an adjustable rate to a fixed rate
• Consolidate debt
• Refinancing fees apply.

Making Home Affordable Refinance (Federal program)

If you can’t take advantage of a traditional refinance, you could qualify for refinancing through the federal government’s Making Home Affordable Program.

You could qualify for a Making Home Affordable refinance if:

• You have a Fannie Mae or Freddie Mac mortgage loan on your primary residence, second home, or investment property. Please contact Fannie Mae at 1-800-7FANNIE or Freddie Mac at 1-800-FREDDIE if you are unsure.
• You owe no more on your first mortgage than 105% of your home’s current value. (Example: you owe $105,000 on a home with a current market value of $100,000.).
• You are current on your existing mortgage.
• You are interested in a new fixed or adjustable loan at current low rates. Refinancing fees apply.

You can learn more about the federal government’s Making Home Affordable Programs at makinghomeaffordable.gov.

Making Home Affordable Modification (Federal Program)

If you are behind on payments, or are having difficulty making your payments, you could qualify for a free loan modification through the federal government’s Making Home Affordable program.

You could qualify for a Making Home Affordable loan modification if:

• You own and occupy your home as your primary residence.
• You are either current, at risk of imminent default, or behind in your mortgage payments, or are in foreclosure or bankruptcy.
• The unpaid principal balance of the first mortgage on your primary residence is $729,750 or less (loan limits are higher on owner-occupied multi-unit properties).
• You have verifiable source(s) of income to put towards a mortgage payment each month, even if that income has recently been reduced.
• You can provide copies of your most recent tax returns and will sign an affidavit of financial hardship.
• You have not previously modified your mortgage under the Making Home Affordable program.
• Mortgages on second homes, vacant homes, and investment properties are not eligible for modification under this program.

You can learn more about the federal government’s Making Home Affordable programs at makinghomeaffordable.gov.

Assistance through other programs (such as repayment plans, short sales and modifications)

Repayment Plan

A repayment plan allows you to make a regular payment plus a portion of the amount past due each month over a period of months. This option is based on financial information you provide and you may be required to make a deposit toward the amount past due.

Loan Modification (through your current lender)

This option is commonly used when there has been a temporary reduction in income or an increase in expenses. An effective loan modification could lower your monthly mortgage payment and cure any delinquencies on the account. Contact your mortgage company for details.

Short Sale

Some homeowners having difficulty making their mortgage payments decide their best option is to sell their home. If you decide to sell your home and the market value of your home is less than what you owe on your loan, a short sale could be an option for you.

In a short sale situation, your lender may agree to accept less than the total amount due on the loan to avoid foreclosure.

Things to think about with a short sale:

• You could be asked to make a contribution to help reduce the total loss.
• You must list the property for sale at fair market value with a real estate agent who must forward any offers to your lender for consideration.
• Acceptance of any offer will be subject to bank approval.
• Your agent’s commission may be limited by your lender.

Deed In Lieu Of Foreclosure (DIL)

If you’ve tried all available options and you’re still unable to sell your house, you may be able to sign the property over to your bank. To do so, you must have clear title to your home with the exception of your first lien.

Beware! Protect yourself against home rescue scams

Loan modifications are free; there’s no charge to you. Therefore, we urge you to beware of foreclosure rescue scams that charge a fee. Learn more about these scams at makinghomeaffordable.gov/beware.html .

For valuable information about avoiding unnecessary foreclosures, the options available to you to help you keep your home, and how to avoiding scams, contact the FDIC at 1-877-ASK-FDIC (1-877-275-3342) or go to fdic.gov/consumers/loans/prevention/index.html .

Some of these programs may have legal and tax implications. Consult with an attorney or CPA for more information. Your trusted real estate agent will be able to refer you.

Please feel free to contact the Brooks and Heinze Real Estate Team in Seattle, WA for further information.

Kerstin G. Brooks
Brooks & Heinze Team
www.propertyinseattle.com