Short Sales on Long Island

There has been a recent development in the Long Island marketplace that hasn't been seen here in a very long time. That development is called a "Short Sale" and that is the technical term that real estate and banking professionals use when describing what happens when a homeowner is in foreclosure and they can not sell their home for what they owe the bank. The reason this phenomenon is relatively new is that instead of home prices rapidly appreciating as they have done consistantly for the past 10 years they have now begun to depreciate. Let's say you bought your home at the height of the market last spring and paid $500,000 for it. In order to keep your payments affordable you took out an interest only mortgage and have been making the minimum payments ever since. Let's also say you availed yourself of 100% financing. Here you are 10 months later and you now owe $506,000 on your home. For some reason your financial situation has worsened and you can no longer afford to make even the minimum payments on your mortgage so you decide to sell your home so your credit does not spiral further downward. Guess what? Your home is no longer worth $500,000 it's now worth $475,000 and you still owe at least $506,000. You are now faced with some very ugly choices. You can pack up all your bags and leave while the bank forecloses or you can hire a professional real estate agent who has experience in "short sales" and will negotiate directly with the bank on your behalf. The "short Sale" will at least preserve your credit and may even allow you to walk away with a drop of money and your dignity more or less intact. The lesson to be learned from all of this is that you really should try not to get in over your head when you are looking to buy a home. Stick to your budget. Be realistic about your income. Keep some money tucked away for an emergency. Hire an exclusive buyers agent to negotiate the lowest possible price and best terms on your purchase so that at least you are not overpaying from the get go. Use an honest mortgage consultant who comes recommended and advises you properly. Make sure you get a home inspection report so that you can budget for expenses like a new roof or new windows. Know what you are getting yourself into before you do something foolish like buy the house next door to where you live just because you think you are getting a good deal. I have seen this kind of good deal completely backfire on the buyer because more often than not, the house next door is not a good deal. Know what you are buying and know what it is really worth. The last thing you want to become is a foreclosure statistic.

How Will the 2007 Real Estate Market behave?

Happy New Year to you and yours. May 2007 bring us a better year. I, personally would like to see more peace and less war, more prosperity and less poverty. However you are probably reading my blog for real estate advice not Beth's personal vision for the world. In 2007 I expect to see continued price drops which means that home prices will continue to fall. I also believe they will fall gradually not drastically. The average home on Long Island has already depreciated 20 to 25% with the higher depreciation rate in the $500,000 and over segment of the market. Sellers are getting very nervous and buyers are sitting on the sidelines feeling very unsure of themselves. What to do, what to do? Let's take a first time buyer with little money for a down payment and a job that pays a decent salary but nothing to write home about. Should you buy now or wait? Let's see.......... A decent 3 bedroom starter home in the Mastic/Shirley area will cost you between $225,000 and $250,000 today. If you were to say hire a really good buyer agent and they could negotiate a $199,000 price for you then your total mortgage payment ( assuming a 6% interest rate) would be approximately $1650 per month. If perhaps you waited a year to buy a similar home and your good buyer's agent negotiated the price down to $189,000 your monthly mortgage payment ( assuming a 7% interest rate) might actually be $1700 per month due to the difference a year would make on the prevailing interest rates. So my best advice to you is to buy a home when you are ready, willing and able. Good deals on desireable homes can come along at any moment but remember "Ya gotta be in it to win it"