Connecticut Real Estate Blog - Real Real Estate in CT

One alternative to foreclosure for homeowners is a short sale.  Here’s a quick explanation:

What’s a short sale?

A lender agrees to accept a sale of a property for less than the mortgage owed plus the expenses for having a short sale (realtor, appraisal & attorney fees, e.g.).   The lender may or may not absorb the entire loss - the lender may choose to go after the owner for all or some of the difference.  And the lender will expect that the homeowner can prove that they can no longer afford payments - and that the inability to pay is a recent development, not that the homeowner lied on the loan application

Why should a seller consider a short sale?

A short sale is an option when foreclosure or bankruptcy are the other alternatives.  A short sale is still a negative mark on a sellers’ credit but not as bad as either foreclosure or bankruptcy. 

What are the downsides of a short sale?

If the lender absorbs the loss and allows the homeowner to walk away, the IRS looks at the value of that as taxable income.  And as mentioned above, a short sale will affect the sellers’ credit.  There is also the fact that the seller will not be able to stay in the home - it is a sale.  And, a seller may still owe the lender money after the short sale.

How does a short sale occur?

A homeowner would contact their lender and if no other options are available (negotiating a different payment plan, e.g.), the lender may agree to a short sale instead of foreclosing.  A lender may still choose to foreclose if foreclosure would result in a better outcome for the bank.  However if they agree, the lender would then require the homeowner to sell the house.  The homeowner hires an agent, who agrees to sell the house for a lower commission generally. 

If a buyer can be found for the property, the buyer submits an offer to the seller who, if accepts the offer, then forwards the offer to the bank.  The bank then either accepts the offer or does not depending on what the offer amount is and what the appraised value is determined to be, taking 4-6 weeks.   If the lender accepts the offer, a closing usually takes place very quickly. 

Here are some articles worth reading today:

Taxes When You Sell Your Home at a Loss - Ouch.

Texting Getting More Expensive - Good.  I can’t stand sending or receiving text messages.

Is Raising Kids a Fools Game? - The message of this piece disturbs me slightly - it’s almost nostalgic about the days when children were used as farm hands or worked in mills and contributed to the economy.  However, the writer does point out that raising children is unbelievably expensive, asking whether having children is worth it. 

Pastor Puts Faith in Fixing Blighted Lots - A little initiative goes a long way.

The Connecticut Housing & Finance Authority is offering to help some borrowers with sub-prime loans by refinancing their adjustable rate mortgages into 30-year, fixed rate loans.  Starting December 1oth, CHFA will begin taking applications.

I don’t know the particulars of the program, other than it is geared towards first-time buyers of owner occupied housing, so if you have an adjustable rate mortgage and want to refinance, you will want to call the hotline at 860-571-3500. 

According to the Hartford Courant, CHFA expects to initially help about 300-400 people.  That doesn’t seem like a lot but it is when you think about how many people typically get CHFA loans - only 4,000 last year. 

Related to this story, the New York Times has an interactive map on their website of percentage of subprime mortgages by county nationwide. 

Also related, CHFA’s interest rate is currently 6%. 

Everyone is talking about housing prices in Connecticut.  Here’s a look at the numbers for single family homes in Hebron.

Sales Price Is Important, But So Is Square Footage 

The often reported sales prices and the comparison between one month to another or year to year do not take into consideration the size or type of house sold.  For real analysis, I think its important to look at the the sales price, the original list price and the median square footage for homes sold in any given month.

If you look at Hebron’s sales, you’ll see that month to month, there were fluctuations in sales price.  However, is that caused by a softening market or the fact that the median square footage for houses sold was not the same month to month?

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