FORECLOSURE vs. SHORTSALE

ISSUE

Credit Score: 

• Foreclosure will probably lower your FICO score from 250 to 300 points and will affect your credit score for 3 plus years
• With a successful short sale, only late payments on mortgage will show and after sale, the mortgage is usually reported "paid as agreed", "paid as negotiated" or "settled" with a 50 point score hit for 12 to 18 months

Credit History:

• A foreclosure remains as a public record on a person's credit history for 10 years or more
• A short sale is not reported on a person's credit history.

Current Employment:

• Employers have the right and regularly check the credit of employees in sensitive positions; a foreclosure may be grounds for reassignment or termination.  If a person is a police officer, a military member or working for a government agency such as the CIA, any security clearances will be revoked and the person reassigned or terminated.
• On its own, a short sale is usually not reported on a credit report and will likely not affect employment

Future Employment:

• Many employers require a credit check of all job applicants and a foreclosure will likely preclude hiring.
• A short sale is not reported and should have no effect.

Deficiency Judgement:

• In South Carolina, the bank has the right to pursue a deficiency judgement and chances are they will.  As foreclosed homes sell at lowers prices and the market is still declining, the result may be a higher judgement.
• In a short sale, it may be possible to convince the lender to fore go their right to pursue a deficiency judgement.  Short sales often sell close to market value, making any deficiency judgement lower.

Insurance:

• Insurance companies are now checking credit records and a foreclosure will likely boost car insurance rates and other types of insurance as well, such as a renter's policy
• A short sale is not reported and should have no effect

Loans:

• A foreclosure makes one ineligible for a Fannie Mae backed mortgage for 5 years; other types of mortgages will have a higher perhaps prohibitive rate
• A successful short sale generates a 2 year waiting period for a Fannie Mae backed mortgage and likely will not affect other loans as it's not reported.  However, if asked, a borrow should answer truthfully.

So, in every instance, it's worth it to make every attempt to work with your lender to avoid a foreclosure, no matter how difficult that may be.  Start early.

Grand Strand Market Report, January 2012

After declining during the second half of 2011, the number of single family homes and condos on the market increased slightly in January 2012, however, the 2012 inventory is still below January 2011 by almost 6%.  Good news if this trend continues.

Sale prices increased Horry and Georgetown Counties except in top end properties; another good trend; top end homes will respond in time.  The number of sales of single family homes was up almost 14% in January as compared to last year, but distressed (foreclosures & short sales) properties accounted for 37% of all single family sales.  While this is the best January sales performance since 2007, those distressed sales kept the median home price to $163,700, up slightly from a year ago. 

Condo sales numbers are similar, slight increase in inventory with a median sales price of $94,900, a 10% drop from January 2012.  The price drop was fueled by distressed sales and the large number of cash buyers--over 70% of all condos were sold for cash.  The high percentage of condo cash sales is interesting, probably mostly real estate investors who hope to turn a profit in a few years.  Time will tell, stay tuned. 

Technology Notes

Have trouble keeping up with the modern world? Does your "smart" phone have a mind of it's own? Have trouble figuring out how to get your CD collection into your walkman, er, ipod?

Check into OLLI, that is Osher Life Long Learning Institute at Coastal Carolina University which provides scores of short courses for adults during the day and evening at three locations along the Grand Strand.  I heard about a class for android tablet users, signed up and spent three delightful afternoons at CCU's 79th Street campus with instructor Kathleen Libby, a seasoned instructor and self admitted "geek."  The classes cost a few bucks, but I learned numerous tricks about my android tablet AND almost all of them were directly applicable to my android phone. I've now figured out what a widget is, how to "sync" my portable devices with my desk top and how to print from the "cloud."

Kathleen's tip on wire management for all those wires under your desk was alone worth the price of the course--visit the drug store for some of those clips that ladies use to hold their pony tails in place; that's right, they come in all sizes and snap open and closed.  You can go from an unsightly mess of cables to a neat solution in a skinny minute.

More information on OLLI at www.coastal.edu/olli or call 843-349-2767.  

Popsitive Trends in 2011 & 2012

Clearly 2011 was a challenging year, but there is a lot to be positive about looking ahead to the rest of 2012.  Housing statistics are starting to look good and the length of the housing down turn itself points to turning the corner, maybe this summer.  Washington's fiscal policy remains indecisive, but most major economic indicators are showing stability and positive, though admittedly weak trends.  The pace of growth is slow, but that's to be expected in an economic recovery from a financial crisis. 

Some good trends:

• Households are paying off their consumer debt even though credit is becoming easier to obtain, including home equity lines of credit which grew for the first time in years in the 3rd quarter of 2011. 
• Consumer sentiment picked up sharply in the last half of 2011, to a 6 month high in December.  Still low, but maybe consumers believe the economy will pick up in 2012.  Increasing confidence can become self fulfilling.
• The labor market is slowly coming back--December jobless claims were at their lowest level since 2008, but unemployment remains persistently high and gains are often due to declines in the number of people in the workforce.  It's going to take years until we get unemployment down to where it should be, 2 or 3 percent, and until we do, those folks can't buy houses and will have trouble keeping the ones they have, both downward pressure on the housing market.
• Housing prices continue to decline, a trend that will continue until we work off the backlog of foreclosures, short sales and the shadow inventory  (homes that folks want to sell which they took off the market, waiting for higher prices).  Until all of these houses are sold, prices will remain under pressure.  Housing recessions are always long and this one is no different.  But the good news is, affordability is rising dramatically due to lower prices and rock bottom mortgage rates.

Home prices may not stabilize completely in 2012, but we're getting closer--rising affordability itself will put a floor under prices, maybe this summer.  Stay tuned.

Better Year in 2012?

No question about it, new home construction around town has picked up since the first of the year.  While noting like boom days a few years back, builders are back to work, perhaps at pre boom levels, building homes in all price ranges.  Hard data are difficult to gather and it's difficult to say what's causing this up tick in construction, but several things may be driving buyers.  First, folks may just be tired of waiting, second, interest rates remain historically low for those who qualify and third, some of the new homes sitting on the market have been sold and inventory levels are down from a year ago.

One thing for sure, the market is more competitive than ever as the many foreclosures and short sales continue to push prices lower. Home buyers are all looking for a good deal and all expect to spend less money than a few yearts ago, so builders will have to squeeze their profit margins and be ready to bargain.  Buyers who are serious have their financing lined up and ready to sign, something we haven't seen in a while.  If one developer can't make the deal happen, the next one will.

2012 may not mark the end of our troubled housing market, but it may mark the beginning of the long awaited stabilization of house prices and better markets down the road.