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How to Sell a House, When You Have to Sell It Now

Seven tips for homeowners who can’t wait until the market turns around

By DAVID CROOK
July 14, 2008; Page R1

So you say you’re selling your house?

Hey, it could be worse. You could be selling a Hummer.

If you’ve been waiting for a good offer to come through, this probably isn’t exactly big news to you: This is the worst home-selling market since Herbert Hoover was president. In much of the country, prices are already way down and probably heading even further south. Houses are sitting on the market for months longer than sellers expected.

And don’t think this is just a momentary lull, a short slowdown before the market recovers and then takes off again. What you see today is the market you have, for now and, quite possibly, for a long time to come.

“At best, I think we’re a year away from the bottom,” says Sally Bodmer, who has sold Tampa-area real estate for 31 years and has never seen a worse selling climate. She operates mainly in the newer suburbs on the far eastern edge of the metropolitan area. It was a super-hot area in 2005, when developers couldn’t build houses fast enough. “Now,” she says, “you can’t give them away.”

To be sure, things are not awful everywhere. Prices in metropolitan areas bypassed by the Big Bubble — places such as Charlotte, N.C., or Rochester, N.Y. — have held relatively firm or risen modestly through the Big Bust. And in some of the worst markets, elite properties and houses in the best neighborhoods may still buck the trends.

But even the perennial playgrounds of the upper crust aren’t immune. According to Zillow, a real-estate Web site, prices in Palm Beach, Fla., are down about 10% from last year. Prices are down 13% in Santa Barbara, Calif.

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So what’s a home seller to do? What does it take to sell a house today?

If your job or life circumstances leave you no alternative other than to sell in this market, you must be prepared to go well beyond the usual feints and gimmicks if you want to get potential buyers in the front door and, ultimately, to the closing table. By all means, feng shui the living room, bury a statue of St. Joseph in the front yard and bake brownies before the open house.

But if you really want to sell the place, you need to think and act like a salesperson. Most important, you must separate your emotional attachment to your family home from your financial interest in your family’s largest asset. Selling a house is business, and you must approach the sale in a businesslike manner.

Here are seven points to keep in mind:

1. DON’T WAIT AROUND.

Even in the better housing areas, it’s taking a long time to sell houses; and in the hardest-hit metro areas, inventories of unsold homes are stretching well past 180 days.

So, don’t try to sit out the market. That’s what hundreds of other timid sellers are doing, each of them hoping — somehow, some way — that hanging on the sidelines will improve prices and, ultimately improve his or her chances for selling success. It won’t. Not if you expect to sell anytime soon. If you want your place sold, the best way to make sure that happens is to put it up for sale.

Obviously, you should take advantage of your local market cycles — early spring is usually better for selling in much of the country — but otherwise don’t try timing the market. You won’t have any better luck than a stock trader who’s always holding out for the market highs or lows.

2. FIX IT UP AND CLEAN IT UP.

Buyers are taking your house out on a date. It has to make a good impression.

Don’t spend a lot of money — absolutely no big-ticket renovations — but do see that everything is in good repair. And give the place a new paint job and a general sprucing up. (Caution: This won’t necessarily give you any pricing advantage over less fixed-up places, but it will attract buyers and keep them interested.)

As you get closer to the date that the house actually goes up for sale, start moving out by decluttering the place. No buyer wants to see a house filled to the rafters with other people’s things. They want to imagine their stuff filling the place. “Stage” the place with only enough furniture to make it look livable; put the rest in storage.

3. PRICE IT CHEAPLY.

Don’t fight the market by trying to price your house at bubble-era levels or by factoring in all those improvements you made. It won’t fly.

Set a realistic, salable price on day one. Don’t let the house hang around on the market as you gradually lower the price. Forget what you think the house should be worth or what it was worth three years ago. That’s not what it’s worth today.

Smart buyers will be looking for bargains. So you must set your price below comparable nearby properties. Look at the asking prices of neighboring houses, and set your price to beat them. If prices in your area are generally down 20% from where they were at the bubble peak in 2005, then price your house 25% to 30% below its peak bubble value. Your area down 40%? Be prepared to take just half of what the house was worth three years ago. Yes, it’s painful. But if you want to sell, you don’t have much choice.

And remember: In much of the country, renting is still a better deal right now than buying. As you try to settle on a price, look at rents on comparable properties. Buyers are not likely to be counting on huge price appreciation, as they did during the bubble, so they may be less willing to take on the higher monthly costs of home buying and owning. You must set a price that makes someone’s prospective mortgage and home-owning costs look like a better deal than a month’s rent.

4. HIRE A TOP REAL-ESTATE AGENT.

Get the best, most aggressive selling (listing) agent you can find.

When everything was selling before it even hit the market, of course, you didn’t need the best. You just needed the cheapest. But not these days.

Fortunately, in this market, real-estate brokers are even more anxious than you. They’re eager to get whatever work they can, so don’t rely on your cousin with the real-estate license or your best friend’s wife.

Ask, instead, for the local real-estate office’s top salesperson. All offices have one or two sellers who greatly outperform their colleagues. That’s who you want.

Interview various agents and insist that they present you with a well-conceived marketing plan that goes way beyond the usual Internet page, one or two open houses and a yard sign. (Think about using a professional photographer for multiple shots on the primary Web listing, your house as the featured “home of the week” in the local newspaper, a decorating segment on a morning chat show, a stop on the local garden club’s spring tour.)

Sellers of higher-end properties should be able to negotiate a lower commission percentage, but this is no time to quibble over a couple of percentage points. Also, offer the agent a big bonus if he or she sells the house in 30 days or at your asking price. Offer other agents bonuses if they bring in the ultimate buyer.

5. PROMOTE. PROMOTE. PROMOTE.

Don’t rely on the agent to do all the work. The agent should pay the usual marketing costs, but you should be prepared to pony up for extras, especially if you insist on more expensive or untraditional promotions.

You want the house listed regularly in local newspaper classifieds and, if it’s a special, high-end property in a desirable location, in national publications, too.

Make sure your house is on the leading real-estate Web sites; Trulia, Zillow, Cyberhomes, Eppraisal and Realtor.com are some of the top ones.

Beyond that, get really creative. Advertise in corporate newsletters and intranet listings. Check in with local relocation firms that help transferring corporate executives find new homes. List the house on eBay. Put it on Craigslist. Put it in your church bulletin.

Trophy house in an upscale neighborhood? Hire a string quartet for the open house. Something a bit more midmarket in a family-friendly subdivision? Put a clown on the corner handing out brochures.

6. PLAY THE BANKER.

As bad as things are, there’s one big factor in your favor: the tight credit market. If you have no mortgage you have to pay off, your strongest selling point might be your ability to finance all or a substantial part of a buyer’s purchase.

You’re a lot more flexible than a bank that has the Federal Reserve looking over its shoulders, so you might even be able to charge a higher interest rate than a commercial lender as well as command a higher sale price. (You’ll need a real-estate lawyer to make sure everything is done to protect you and an accountant to set up a payment system. Peer-to-peer lenders such as virginmoneyus.com have systems to handle mortgage payments.)

Worst case? Your borrower defaults and you take the property back. And sell it again.

7. TAKE THE OFFER.

If any qualified buyer comes in with a reasonable offer, be prepared to accept it.

You don’t want to lose the deal by digging in your heels over a few dollars. Every real-estate office keeps records that show the percentage difference between asking and selling prices, so it’s easy to figure what’s an appropriate offer and what’s not.

Negotiate, of course, but recognize that the buyer has a lot more clout than you do. Your house, as wonderful as you think it is, is worth only as much as someone is willing to pay for it.

And that, unfortunately, will probably be a lot less than you think.

–Mr. Crook is editor of The Wall Street Journal Sunday and author of “The Wall Street Journal Complete Real-Estate Investing Guidebook.” He can

Posted on Thu, Jun. 19, 2008  

BY MONICA HATCHER 

They slashed prices and the buyers came. Coldwell Banker’s 10-day presummer sales event that ended June 10 netted 66 sales contracts on 597 properties. Not too shabby for a market in the doldrums, according to Gus Rubio, Coldwell’s senior vice president for the Southeast region. He said contracts were dribbling in by the day. Whether future prices drop, jump or stabilize, people know “they bought at a price that was lower than anything on the market and they got the most value for their money.'’ The sale, which was widely publicized with newspaper, radio and Internet ads, was an attempt to draw those buyers waiting for further price declines into the market sooner.

To participate, sellers agreed to drop asking prices at least 10 percent for homes valued at $750,000 or less. Those with homes worth more could drop prices by 5 percent. The event itself implied further price declines, which some in the real estate profession criticized. Rubio even described it as opportunity to buy property “today at tomorrow’s prices.'’ But the results may indeed suggest, as some real estate professionals have claimed, demand has been pent-up over the years as values soared beyond the reach of most buyers, and that price declines will breathe new life into a stagnant market.

Coldwell Banker, the largest real estate brokerage in South Florida, was responsible for one of every three sales in the region last year, according to data from the Florida Association of Realtors and the Real Trends 500 report, making their unusual sales-event noteworthy. Rubio said the homes under contract span the price range from the mid-$200s to more than $1 million.

Open houses were scheduled at many participating homes and buyers were offered a range of discounted services and products with their purchase. The average traffic per open house ranged between five and seven people.

A Palmetto Bay home listed for about $450,000 drew 42 people to its open house. ‘’Not even in the heyday, when we were in the real estate boom and things were selling in minutes, do I remember having 42 people at an open house,'’ Rubio said. ‘’With the 10 percent reduction — and it was already at a low price — it was 26 percent below anything within four or five blocks,'’ Rubio said. Some real estate experts have predicted prices will fall another 15 to 20 percent before they bottom out.

None of the homes in the sale were bank-owned properties or foreclosures.

© 2008 Miami Herald Media Company. All Rights Reserved.
http://www.miamiherald.com

The White House temporarily suspends a rule that imposes a 90-day waiting period before foreclosed homes can be sold to receive government loans. 

Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48% from the same month last year, and up 7% from April, foreclosure listing company RealtyTrac Inc. said Friday.

By Paul Owers |
South Florida Sun-Sentinel June 16, 2008

Setting the right price for a home sounds simple, but too many sellers aren’t doing it.They insist that their properties are special and holding value, even though the median prices for existing homes have plummeted 26 percent and 24 percent, respectively, in Palm Beach and Broward counties since late 2005. These stubborn sellers ask for too much money, ignoring the list prices of nearby homes, not to mention their real estate agents’ advice. It’s a short-sighted strategy, one that ultimately costs tens of thousands of dollars in a depressed housing market like
South Florida, agents say.

“The worst thing to be in this market is one of those homes that’s been listed for six, eight, 10 months with no consummated deals,” said Beverly Rothstein, an agent in Broward and
Palm Beach counties. “That’s when the vultures come out, and you have to sell the house at a deep discount that you wouldn’t have had to take if you had priced it right from the beginning.”Olga and Manuel Delacruz listed their three-bedroom Greenacres home in central Palm Beach County for $199,000 about four months ago. When it didn’t sell, they dropped the price twice. Now they’re asking $169,999, which is where they probably should have started, their agent, Douglas Rill, said.The Delacruzes and other owners of lower-priced homes are likely competing with an increasing number of foreclosures. Lenders don’t want to hold these properties, so they’re slashing prices. Individual sellers must do the same if they have any hope of finding buyers.

“There’s no bigger issue for sellers right now than pricing,” said Willis, host of CNN’s Open House and author of Home Rich: Increasing the Value of the Biggest Investment of Your Life.In the book, Willis writes about price break points, which are psychological limits that buyers often set for themselves. She said a buyer may be willing to spend up to $499,000 on a home but will balk at $500,000, even though the $1,000 difference is barely noticeable on a 30-year mortgage.

“The big question I always get from sellers is, ‘At what point should I be willing to cut my price?’” Willis said. “But that’s the wrong mindset. You’ve got to go into the market at the right price.”Terry Story can relate. The agent in Palm Beach and Broward counties wanted to list a Boca Raton home last summer for $575,000, but her client held firm at $625,000. Story knew that was too high, even though there weren’t a lot of comparable sales in the area to go by.Meanwhile, a similar house across the street was priced more competitively from the start and sold quickly for $482,500. Story’s seller could do nothing but cut his price, finally finding a buyer to pay $460,000 after six frustrating months.

Virginia Goss first tried to sell her Boca Raton house on her own, but had no luck. So she listed it with Story, who suggested she put it on the market in the low $300,000 range. Although that was much lower than she preferred, Goss listened and immediately sold the home, albeit at a loss.“It’s hard to swallow a loss, but we’re moving on,” Goss said. “There’s value in that.”

Paul Owers can be reached at powers@sun-sentinel.com or 561-243-6529.Is your property overpriced? Terry Story of Coldwell Banker Residential Real Estate said sellers can use the following guide to determine whether their properties are overpriced:Buyers don’t perceive value if the home gets no showings. The price must come down substantially.

The price is in the ballpark if the home gets a few showings but no second looks. Sellers should still lower the price. The home is priced right if it’s getting steady showings and repeat visitors. Expect an offer.Visit the new House Keys blog for more on your property at Sun-Sentinel.com/business/realestate 

By Paul Owers |
South Florida Sun-Sentinel 8:55 PM EDT, June 12, 2008  

Home prices in
South Florida “easily” could be 20 percent to 30 percent higher by 2013, the chief economist for the National Association of Realtors said Thursday.

Addressing local real estate agents during a conference at the Biltmore Hotel in Coral Gables, Lawrence Yun countered the persistent pessimism of experts who insist the region’s housing market will continue to struggle before rebounding slowly during the next few years.

“He does his best to present a positive spin on data that’s not based on reality or fact,” said Delray Beach housing analyst David Levin.

 Yun called 2008 a “year of cleanup” and says the second half will be better than the first because mortgage markets are improving nationwide and across
South Florida. Foreign investors and Baby Boomers will boost home sales during the rest of 2008, he said.

Area housing experts agree that sales will pick up once prices drop to a level that’s acceptable to most buyers. And a recent report from Deutsche Bank indicates that
South Florida home prices still have to fall substantially to return to the affordable price levels of 2000 to 2003.

Palm Beach
County, prices would have to fall 38.1 percent from now until the end of the housing slump, the report says. Broward County prices would need to drop 36 percent.

Paul Owers can be reached at powers@sun-sentinel.com or 561-243-6529.. 

By AMY HOAK
June 8, 2008

Sluggish housing markets are filled with listings that are lingering on the market, prompting many home sellers to ponder a price cut.

A seller’s reality check may come after the listing produces very few showings or a prospective buyer is lost to a competing — and lower-priced — home down the block.

“It’s a very price-driven market,” says Mike Golden, co-founder and co-principal of @properties, a Chicago-based real-estate brokerage.

No longer are buyers letting their emotions interfere when they decide to buy a home — they’re looking for deals, he says.

Many sellers whose homes are sitting on the market without a buyer in sight had unrealistic expectations from the start, real-estate agents say.

“We still have sellers who are in denial of the market and don’t want to price properties where they need to,” says Susan Jacobs, broker-owner of an Assist-2-Sell brokerage in
Manassas, Va. Her clients are often shocked to learn how much prices have fallen.

How can sellers tell if their homes are overpriced? Look for the following signs:

1. Not enough showings. A home is likely overpriced if it doesn’t get any showings in the first couple of weeks it’s on the market, Ms. Jacobs says.

Even more proof a price cut is needed: people are interested enough to take information from brochure boxes in front of the home, and there have been a substantial number of hits on its Web site listings, but buyers still aren’t scheduling showings, she adds.

A real-estate agent will often have access to data on how many hits an Internet listing gets.

If a home doesn’t make a buyer’s “showing cut,” and buyers don’t think it’s worth the time, hassle or gasoline to schedule a visit, it’s likely overpriced, says Dave Crumby, broker-owner of another Assist-2-Sell brokerage, in
Tempe, Ariz.

“If you can’t get people into your home, it’s highly unlikely that it will sell,” he says.

2. Some showings, but no contract. Perhaps the number of showings isn’t a problem, yet there still have been no offers.

“If you’re getting showings but not getting a contract, that means you’re still not quite low enough,” Ms. Jacobs says. “You’re close, but there’s so much competition out there.”

Consider this guideline from Becky Flores, a real-estate agent at a San Antonio-based Keller Williams brokerage: “Ten showings and no offer or two weeks with no showings, you are probably overpriced for the current market. This is true especially in this very competitive market,” she says.

3. Similar homes are now selling for less. In markets where the median price is falling, it’s important to regularly monitor what homes are selling for, Mr. Golden says. Real-estate agents should provide clients with up-to-date information on the market to determine whether the home is still priced correctly.

“Historical data isn’t quite so powerful anymore. You have to look at what is selling now, and what it is selling for,” Mr. Golden adds.

In
Phoenix, there’s a big difference between the average price for active listings and the average price for pending sales, Mr. Crumby says.

Monitor pending sales daily, and make sure your home is competing well with the homes that buyers are taking action on, he adds.

4. Repeated negative feedback. If buyers who do walk through the home have the same negative reactions to it, that could be another red flag that the price needs to be dropped, Ms. Jacobs says.

Buyer feedback, collected from a real-estate agent, may reveal that other houses in the same price range have updated kitchens or bathrooms and the home in question hasn’t kept up with the times.

To address the disparity, sellers can either remodel or cut the price.

“You can sell anything anywhere. If the price is right it will sell,” Ms. Jacobs says.

5. You’ve cut the price, but not enough. If a price cut is in order, don’t cut by small increments. Several smaller decreases could make a seller look desperate, but a larger decrease will generate more interest, Ms. Flores says.

“A $2,000 price reduction is nothing in the grand scheme of things. Even on a $100,000 house, I’d lower by $5,000 at least, if it isn’t moving,” she says.

“Your first three weeks are critical. You’ll have your most showings with the most potential, qualified buyers — those that are out there waiting for something that matches their needs to come on the market,” Ms. Flores says.

“Don’t blow it by overpricing.”

• Read more at marketwatch.com.

By J.W. ELPHINSTONE – Jun 9, 2008
NEW YORK (AP) — Pending home sales unexpectedly increased in April to the highest reading since October, an industry group said Monday, but they remain more than 13 percent below a year ago.The National Association of Realtors’ seasonally adjusted index of pending sales for existing homes rose to 88.2 from a March reading of 83.0, the lowest since the index was started in 2001. The index stood at 101.5 in April 2007.Wall Street economists polled by Thomson/IFR had predicted the index would remain steady at 83.A reading of 100 is equal to the average level of sales activity in 2001.The April index in the West climbed 8.3 percent from March and is 4 percent higher than a year ago. In the
Midwest, the index jumped 13 percent, but is still lower than in 2007. The South posted a 4.6 percent gain, while the Northeast index declined 1.9 percent.NAR Chief Economist Lawrence Yun noted that pending sales contracts have ticked up in areas with the largest price declines such as Detroit and
Las Vegas.“Bargain hunters have entered the market en masse,” he said. “Sharp price reductions are leading to a quicker discovery of price equilibrium points.”Yun forecasts that the median price of an existing home will drop 8.4 percent in the first half of the year before stabilizing. In 2009, prices will rise 4.4 percent to $213,900, he predicts.Existing home sales this year are expected to total 5.40 million and then increase to 5.74 million next year, Yun said.

by Prashant Gopal

By April, 2009, hundreds of thousands of option ARM mortgages will begin resetting, bringing on a fresh wave of foreclosures……

The American homeowner must feel like one of those characters in an old cartoon who has just been hit by a falling piano. After dusting himself off and touching the large bump on his head, he probably doesn’t expect another piano to be dangling overhead. But he’d be wrong. But what’s often funny in a cartoon is anything but in real life. With the subprime mortgage crisis already crippling the
U.S. economy, some experts are warning that the next wave of foreclosures will begin accelerating in April, 2009. What that means is that hundreds of thousands of borrowers who took out so-called option adjustable-rate mortgages (ARMs) will begin to see their monthly payments skyrocket as they reset. About a million borrowers have option ARMs, but only a fraction have already fallen due. That was the catch to option ARMs; borrowers were offered low initial payments that would recast higher after several years. Many home buyers thought they could resell their homes before their payments increased. But instead, many of them got trapped. According to Credit Suisse (CS), monthly option recasts are expected to accelerate starting in April, 2009, from $5 billion to a peak of about $10 billion in January, 2010. Some of these loans have already started to recast. About 13% of option ARMs that were issued in 2006 were delinquent by 60 days by the time they were 18 months old, Credit Suisse said.

California: Problem’s Bellwether

Among the states expected to be worst-hit is already battered
California. Today, outstanding option ARM loans in the U.S. total about $500 billion, about 60% of which were sold to
California homeowners, according to Credit Suisse. Option ARMs were especially popular in the state, where they were heavily marketed during the boom by such companies as Countrywide Financial (CFC) in Calabasas, Calif.; Washington Mutual (WM) in Seattle; and Wachovia (WB) in Charlotte, N.C. Moreover, on top of their ARMs, many homeowners also refinanced their homes, driving themselves even deeper into a debt they thought they could escape by flipping their homes. But
California won’t be alone. Homeowners are also frighteningly vulnerable in states such as Arizona, Florida,
New Jersey, and others. The Mortgage Bankers Assn. said on June 5 that the option ARM problem is growing. The group reported that the national rate of foreclosure starts for prime ARMs, including option ARMs, increased to 1.55% in the first quarter, up from 0.53% a year earlier. In
California the foreclosure start rate in the first quarter was 2%, vs. 0.5% a year earlier. In
Florida, the rate was 2.57%, compared with 0.5% in the first quarter of 2007. “California, Florida, Arizona and
Nevada combined…represent 62% of all foreclosures started on prime ARM loans, and 84% of the increase in prime ARM foreclosures,” the group said. The option ARM loan defaults could accelerate next year even if subprime defaults subside, said Chandrajit Bhattacharya, vice-president and mortgage strategist at Credit Suisse Securities. He said
California will see the bulk of the option ARM foreclosures and the rest will be spread out across the country.

Underwater and Gasping for Air

“Most of the public is thinking that the subprime thing is over, but this is another thing waiting,” Bhattacharya said. “The problem for these borrowers is that once you go underwater, it’s very hard to refinance, and if you cannot refinance there is very little option for you.” But it gets worse. Option ARMs, which were originally designed for self-employed people with fluctuating incomes, gained popularity with other workers during the peak of the real estate boom in 2004, when rapidly rising home values would have otherwise kept many buyers out of the market. The loans, which were generally given to borrowers with better-than-subprime credit, give homeowners the option of making a minimum monthly payment, which covers none of the principal and only a portion of the interest, the rest of which is added to the loan balance. With years of unpaid interest accumulating and house prices falling, some homeowners have seen their equity disappear and now owe even more than their initial loan balance. The loans automatically recast after five years, but many will recast sooner as loan balances hit specific principal caps—typically between 110% and 125% of the initial loan amount. Many of these loans are expected to recast within the next two years, meaning that borrowers’ monthly payments will swell to include both principal and interest.

Walking Away from a Collapse

Some borrowers say they signed up for the complicated loans without understanding the terms, or expected to be able to refinance or sell their homes before the loans recast. Instead, home prices fell and the credit crunch made refinancing impossible for many borrowers. Some homeowners are simply walking away because with their equity vanishing, there’s little incentive to stay. William Purdy, a lawyer at Simmons & Purdy in
Soquel, Calif., a firm that specializes in home refinance issues, said some borrowers with option ARMs are defaulting before the loans recast because they couldn’t afford even marginal increases in the minimum payments. “It’s a ticking time bomb inside your house that you can’t get rid of,” Purdy said. “They can try to slow down the inevitable, but sooner or later their loan is going to cap. …This year is going to be a blood bath. Next year, we’ll start out just about the same.”

Crushed by the Slump

The option ARM was initially a blessing and then a curse for Deborah Shaw, a 52-year-old systems analyst for
Santa Cruz County, Calif. In 2004 she bought a $575,000 two-bedroom house with her boyfriend with a 40-year fixed mortgage. But when she and her boyfriend split, Shaw could no longer make the payments. She refinanced into an option ARM, which allowed for a $1,600 minimum payment (she was paying $2,300 on the fixed loan). Shaw planned to avoid a recast by selling the house in a couple of years, but the housing slump changed everything. Shaw now thinks her loan has already recast, which means that her monthly payment would more than double. Shaw doesn’t know for sure, because she stopped answering her lender’s daily phone calls and, since April, stopped making payments entirely. She says foreclosure is her only option. “I call the house my albatross,” Shaw said. “I feel a sense of relief knowing I won’t have that house to deal with anymore. I’m not looking forward to moving and selling everything. But I am looking forward to not having stress about something I can’t afford.”

New FHA Loan Guarantees

But options are available—even if refinancing isn’t possible. Lenders have been working with borrowers to reduce loan amounts and interest rates and, in some cases, simply accept the deed in lieu of foreclosure. The Mortgage Bankers Assn. says it appears that a growing number of homeowners are avoiding foreclosure by getting help from the Hope Now hotline (888 995-HOPE), a mortgage-counseling phone line backed by lenders and the federal government that gets 4,000 calls a day. Hotline counselors help borrowers negotiate with banks and offer advice on refinancing options. Even though foreclosure rates are rising in California and
Florida, they’ve slowed elsewhere, the bankers association said. Some callers to the hotline have complained about long wait times, but the group says it has beefed up its counseling staff and now gets to calls quickly. Other option ARM borrowers could benefit from government plans now in the works. A bill approved by the House in May would allow the Federal Housing Administration to guarantee up to $300 billion in new loans to help homeowners facing foreclosure. Borrowers could get more affordable loans worth no more than 90% of the home’s value, meaning that participating lenders would have to take a significant loss on the loan. The bill was sponsored by House Financial Services Committee Chairman Barney Frank (D-Mass.). Senate Banking Chairman Christopher Dodd (D-Conn.) has a similar measure.

Foreclosure Is Not Inevitable

“The fact is that people didn’t really understand the transaction at the outset and were counting on being able to refinance when the loan got recast,” said Colleen Hernandez, president of
Minneapolis nonprofit Homeownership Preservation Foundation, which owns and operates the hotline. “That combination means a lot of risk, a lot of danger in the situation. But it isn’t inevitable that they foreclose, and foreclosure isn’t the best option.” Moe Bedard, founder of LoanSafe.org in Corona, Calif., a free online forum that helps homeowners negotiate loan modifications, said the larger problem is that banks, many of which laid off scores of loan officers, are so swamped that many borrowers can’t get the attention they need. Many
California homeowners, including some with $2 million homes, are simply making their minimum payment, waiting for the recast. Then they plan to walk away, even if it damages their credit, Bedard said. “A lot of people are just walking,” Bedard said. “It’s just a business decision; they don’t have a lot of skin in the game.” But for many others it will be devastating. Gopal writes about real estate for BusinessWeek.com in
New York .