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Answers to 5 Common Questions About Default

by The Mike Parker Team

Unfortunately, in today's slowly recovering economy, many homeowners continue to find themselves in financial trouble. As a Member of the Top 5 in Real Estate Network®, I have worked with many clients over the past few years to help resolve their financial dilemma in the best way possible. There are many options available to distressed homeowners -- unfortunately, most people are not aware of what these options are.

To help clarify confusion and shed light on optimal homeowner options, real estate finance expert Marian Anthony, answers five questions distressed homeowners often have:

1. Should I intentionally default on my home mortgage?
You’ve probably heard of people "intentionally" or "strategically" defaulting on their mortgage, willing to take the hit to their credit in favor of freeing up cash flow in the short-term. Rather than defaulting, however, homeowners should talk with their real estate professional about the potential for a short sale. A short sale could lead toward the debt showing as "settled" on your credit. Walking away and allowing the bank to foreclose still allows the second lender to render a judgment -- and possibly garnish your wages. You may also have to file for bankruptcy to recover from the credit nightmare.

2. As a borrower, what are some ways I can gain leverage with my lender?
One way to gain leverage with a lender is to establish a "substitute mortgage" -- a security pledge that is offered to the seller's lender with a third party for a lesser amount of the current payment. Over time, this will result in a significant amount of collected funds that can be used as negotiating leverage to release the borrower from the debt, or dictate terms for a favorable loan modification.

3. Why have loan modifications and foreclosures become the predominant answer for so many in distressed property situations?
The reason why loan modifications and foreclosures have become the answer for so many is because many real estate professionals erroneously consider the short sale process to be too complex. It is essential to work with a real estate professional who is equipped with the right forms and contact information, and who knows how to orchestrate a short sale transaction.

4. Why is a short sale strategy more advantageous than a foreclosure?
The reduced payoff in a short sale can release you from the debt obligation. This often allows you to re-establish your credit faster and re-enter the market much wiser. A foreclosure can ruin a homeowner's credit and take much longer to recover from.

5. I’ve heard borrowers in default need a 'General Public Disclosure?' Why?
Many people are not aware of the alternatives available to them when facing foreclosure. Knowing your options, as detailed on a General Public Disclosure document, can make all the difference in establishing a deal that's in the homeowners' best interest.

Remember that every distressed homeowner's situation is unique; therefore, it is essential to contact a real estate professional -- and often an attorney -- to determine the best possible solution for you. I am happy to assist, so please feel free to contact me, and please pass this important information on to others in need.

Good News for Second-Home Owners and Buyers

by The Mike Parker Team

According to a recent survey from the National Association of REALTORS® (NAR), the market share of vacation- and investment-home sales held steady in 2010. Although sales volume declined with the overall market, vacation-home sales accounted for 10% of transactions last year while the portion of investment sales was 17%, both unchanged from 2009.

As a Member of the Top 5 in Real Estate Network®, I am committed to keeping my community informed on market statistics that will affect their real estate investment decisions. NAR's "2011 Investment and Vacation Home Buyers Survey" -- covering existing- and new-home transactions in 2010 -- revealed that foreclosure or trustee sales accounted for 17% of investment purchases and 11% of vacation-home sales in 2010, compared with 5% of primary purchases. In other words, second-home buyers purchased more distressed homes at discount than did buyers of primary residences.

Also worth noting, all-cash purchases have become prevalent in the second-home market in recent years; 59% of investment buyers paid cash in 2010, as did 36% of vacation-home buyers.

These statistics clearly indicate that there are buyers out there taking advantage of today's market opportunities to buy second homes, either as once-in-a-lifetime investment opportunities or to make a long-desired lifestyle change. According to the survey, the median vacation-home price was $150,000 in 2010, down 11.2% from $169,000 in 2009, while the median investment-home price was $94,000, which is 10.5% below the $105,000 median in 2009.

As NAR Chief Economist Lawrence Yun explains, "The fall in home prices has opened opportunities for more families to enter the second-home market. Even if purchases are delayed due to economic circumstances, the underlying long-term demand -- the desire for purchasing second homes -- remains because people in their 30s and 40s will reach the prime age for buying and will drive the second-home market in coming decades as conditions permit."

The NAR survey reveals that lifestyle factors continue to be the primary motivation for vacation-home buyers while the desire for rental income drives investment purchases. Vacation homes were more likely to be located in a rural area while investment homes were more likely to be in a suburban location.

Whether looking to buy or sell a vacation home or investment property, today's market may be the optimal time to do so. If you'd like a closer look at second-home opportunities in our area, please contact me. Be sure to forward these informative statistics to others who may be interested as well.

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Photo of Mike Parker - CRS Real Estate
Mike Parker - CRS
HUFF Realty
60 Cavalier Blvd.
Florence KY 41042
859-647-0700