Lots of people have been asking about when do you have to have a deal signed and then when does it has to close to be eligible for the $8000 tax credit.

I am not an attorney nor do I play one on TV.  This is what I have read and heard from my mortgage broker friends.

A buyer have a fully executed contract in hand by April 30, 2010 for the transaction to be considered eligible.  Then the deal must close by June 30, 2010 in order to take advantage of the first time home buyer tax credit.

The primary key here is that you need a “fully executed” contract.  The typical REO or retail sale that gets done signed by April 30 should have no problem skating across the finish line.  Conversely, I bet most short sales will not make it.

Many short sales will agree to your offer, sign it, send it to the bank for approval and then wait.  If you as the buyer do not receive a signed copy, you do NOT have a fully executed contract in the state of Minnesota.  The way to fix this is to demand that the seller sign the contract and give you a copy, but make it contingent upon bank approval.  The contract can still be “subject to bank approval” for it to be binding and fully executed.  That is simply a condition of the contract like an inspection contingency.

I know you don’t want to hear this, but I believe that it is already too late to make an offer on a property that is a short sale and get it through the bank’s short sale department before June 30.  Some agents may disagree, but every short sale I have been involved in takes at least 4-6 months to close.  You would have needed to get an accepted offer on one January 1 or earlier to feel good that it will probably close by June 30 (even then it is a crap shoot!).

Wells Fargo announced last week that they decided to take the conservative approach with some of it correspondent channels and will no longer be purchasing some non-owner occupied loans in the secondary market.  All retail departments and some correspondent channels will remain unchanged.  Rob Bonahoom, with Cornerstone Mortgage, reports that this change may be a concern, by Wells Fargo, about mis-classifying some properties that could lead to RESPA violations.  Read his article here at the Investment Property Mortgage Guy.

This appears to be further tightening of standards that Wells Fargo announced on February 27, in which they were pulling some loan products out of some markets and increasing down payment requirements in others.  The February 27 report stated that underwriting standards are also being tightened in markets in Arizona, Colorado, Connecticut, Washington, D.C., Illinois, Louisiana, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Washington, Wisconsin and West Virginia, Reuters reported.

According to some estimates, about 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some experts argue it could take up to three years for all these homes to go through the foreclosure process, hit the market and be purchased by new owners.  This new bubble of foreclosed properties will increase the inventory of properties on the market (which is already too high), pushing down prices and lengthening time on market for homes to sell.  This will reverse the trend we have seen in the last 90 days, of falling REO inventory and increasing prices (at least in REO properties).

One example is that JP Morgan Chase hit its top month of foreclosures in the middle of 2008 and their numbers have been steadily falling.  Unfortunately, the bank is estimating that it could again beat that previous record by the fourth quarter of 2010.  Data released by RealtyTrac shows that banks are now slower to take properties back through foreclosure despite the fact that more and more homeowner are falling behind in their payments.  This new wave of foreclosures are less the result of ARM mortgages adjusting and over leveraged properties. They are the result of job losses or changes in income.

Maybe a wave 3?  I hope not, but there is an estimated 11 million US homeowners that now owe more on their mortgage than their home is worth.  Many of them will decide that keeping that home is not worth it and will become delinquent.  Hopefully some of these will opt to sell their home via a short sale instead of letting it go into foreclosure.  By the end of 2012, 39 percent to 50 percent of home purchases in Phoenix will still be foreclosed properties, J.P. Morgan Chase has estimated. Wow!

According to the National Association of Realtors, the inventory of bank owned or bank mediated (short sales) properties declined from 49 percent of the inventory of homes sold in March 2009 to 38 percent of the inventory in January 2010.  Additionally, the inventory is down to just a 7.8 month supply from a high of 11 months in July 2008.  A stable market is around 4 months; we still have some time to go.

These two 3 unit buildings were built in 2007 with all the amenities:

• 3 bedrooms per unit with a 1/2 bath and full bath in each one
• Each unit has its own laundry.
• Central A/C in each unit with new high efficiency furnaces.
• Commercial grade sprinkler system.
• Low maintenance vinyl siding and windows.
• 3 car garages.
• Average rent is $1200 per month.
• 5 of the 6 units are fully rented.

Best of all, they are located next to each other in NE Minneapolis.  You could own 6 units at one location that produce around $86,400 per year in gross rent!  See more of the details here:  55/59 Lowry Ave NE, Minneapolis

Contact me with any additional questions, 612-281-5419.

Jay Thompson is a top real estate agent in Phoenix.  I run into him occasionally online in various forums and blogs (although I doubt he knows who I am!).  Jay wrote a very thought provoking post on his The Phoenix Real Estate Guy blog about multiple offers.

If you have ever been in a competitive bidding situation  for a property and lost, you know how frustrating it can be.  There are more than a few of my customers that ask the question:  “How do we know there is another offer”.   Jay rants and then brainstorms about possible, but unlikely ways to validate that there truly is another offer over at The Phoenix Real Estate Guy.

Millions of Americans are now deeply underwater on their mortgage. If you’re among them, you need to stop living in a dream world and give serious thought to walking away from the debt.

No, you shouldn’t feel bad about it, and you shouldn’t feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family’s finances first. Read the rest at MaryAlice Short’s blog, the Minnesota Short Sale Expert.