Welcome to the 2009 Annual Review edition of The Development Advisor, our quarterly report of the metropolitan Atlanta residential market. This report utilizes data based on transactions that closed in 4Q09 and compares it to that of 4Q08 as well as 1Q09, 2Q09 and 3Q09. We have compiled much of our information from our proprietary Universal Data Base, a system that pulls data for the entire metropolitan Atlanta market from both FMLS and GAMLS, deleting any duplication.

As we begin a new decade and look back over the past few years, many of us are relieved that one of the most challenging times in Atlanta real estate may be behind us. Overall, the results in the fourth quarter continued the improvement over the low points established in 4Q08 and 1Q09, signaling further signs of a slow recovery.

Similar to the third quarter of 2009, we continued to see mixed messages indicating a possible long awaited turn in the market. Absorption levels increased for new condo/ townhomes, but decreased for new single family and both types of resale. Average sales prices for new and resale condo/townhomes increased while prices for new and resale single family decreased. Even though sales prices are down overall compared to 4Q08, we have seen a light at the end of the tunnel with resale single family up 0.9%

The most significant news lies in the fact that current inventory levels continued their year long decline in 4Q09, with a 25% decline in all active listings compared to 4Q08. With building permits at historic lows and very little new construction condominium/townhome inventory being delivered in the foreseeable future, there was a 41.5% decline compared to 4Q08.

The extension of the tax credit and the expanded tax credit for current homeowners, combined with historically low interest rates and the second highest affordability index have created the perfect time to take advantage of homeownership. However, the pressures of high unemployment, difficulty in obtaining a mortgage, foreclosures and short sales continued to play a significant role in the uncertainty of the overall market’s improvement.

We hope you will find this edition of The Development Advisor informative and useful. Today’s market is unlike any we have experienced in the past, making it even more important to work with a sales and marketing partner that has a thorough and complete understanding of today’s challenges. We welcome any questions that you may have regarding this report and the future of the Atlanta residential real estate market.

Happy new year!

We are proud to share this exciting company news with you.  Based on our 2009 success, we are well positioned in 2010 to be the region’s new homes real estate sales and marketing leader.  The following is just a highlight of our accomplishments:

• During 2009, NRT Development Advisors lead the market in the implementation of creative repositioning strategies for developer clients with new construction communities, resulting in immediate increases in qualified traffic and closings.
• We successfully created an innovative sales and marketing platform for bank-owned new construction homes, achieving more than $125 million in sales.
• The company has expanded its territory to cover Georgia, Florida, North Carolina, South Carolina, Tennessee, Virginia and Washington, D.C. due to client demand.  
• We surpassed our 2008 sales in 2009.
• The company attained the status of #1 New Home Real Estate Company in Atlanta for all property types, as well as for Multi-family Sales according to Trend Graphics (which is based on FMLS data).  

Our ability to offer the highest level of resources and talent from a specialized team of new home professionals – as well as the industry insight and connections due to our partnerships within Coldwell Banker, NRT and Realogy Corporation – helped to expand our list of developer and bank clients, services and territory.  
 

It’s rewarding to work for a company that is an exception to the rule in such a challenging economy, as our 2009 success has lead to 2010 growth.  In the past year, NRT Development Advisors worked with real estate developers, investors and financial institutions to develop creative sales and marketing strategies that resulted in large volumes of homes being sold, while still preserving the integrity of developments and neighborhoods, and clients have tapped us to duplicate these success stories in other markets this year.

As metro Atlanta continues to grow, so do our means for getting around the town – which certainly changes the home search process a bit for both Realtors and buyers. Funny to think back and realize that it wasn’t that long ago that to prepare to show listings, I would actually purchase a local map to determine the location of the listing and the easiest routes to drive to the listing. In desperate times I would even call to get directions.

Now we no longer need the tried and true map or phone call, as we can rely on the following:

 1) Google Maps will actually illustrate a map of listings

2) One flick of a button and Mapquest gives us easy to use driving instructions

3) GPS provides a voice that actually gives us instructions as we drive to the listing; in fact, certain GPS systems will even show you nearby Coldwell Banker listings

But as so many things are continually changing within the home buying purchase process – from the way we physically get to homes to the way we finance them – it’s nice to know that good customer service will always drive the sale. Oh, and my map is now framed and I have a GPS that I have affectionately named “Herb.”

What is a Short Sale?

 A short sale is when the lender/bank will agree to sell the property for less than the mortgage amount that the seller owes to the lender. There are 2 different points of view on a short sale: Perspectives from the seller and the buyer. (We could actually say 3 and include the lender’s perspective!)

Seller

Desperate sellers are looking more and more at short sales as a solution to avoid foreclosure. A short sale will affect the sellers’ credit scores but will have less of an impact than a foreclosure in regards to the negative impact on your future credit. Financial hardship by the seller has to be proven to the lender to begin a short sale. As a seller, if you are behind on your payment and your financial condition has drastically changed, the lender may be more willing to agree to a short sale. Please be aware that lenders can and will opt for foreclosure if they can recuperate money from the mortgage insurer (even if the seller can get an able and qualified buyer to purchase their home at reduced sales price). In the current real estate market, be aware that if you are “upside down” between the current value of your home and what is owed on the mortgage, but you are still making regular payments, the lender will have no incentive to approve a  short sale, and if for any reason you have to sell, the lender will expect you to come up with the difference. If you are considering a short sale, make sure you list the home with a Realtor  who is a Certified Short Sale Specialist. The Realtor will know all the requirements and be able to help you get to the finish line, the closing!!

Buyer

As a buyer, when you are looking at a short sale, the first thing to understand in this process is that the lender is in the driver seat. Flexibility, patience and time are what you need as a buyer to go through the process of getting approval of the sale from the lender. Understand that the contract will have provisions that protect the seller/lender. One provision will state seller to have lender and any lien holder approve the sale and purchase agreement. Some lenders may require that the seller can entertain other offers that are presented to him even after the home is under contract. Remember the lender wants to make sure that he recovers the maximum amount of the outstanding loan.

 How do you make sure all these issues are addressed up front? Engage a  Realtor  who is certified in short sales! The Realtor will make sure that certain necessary language is incorporated in the contract language, such as: Buyer has the first right of refusal or a clause that stipulates no other offers will be considered by the lender. A Certified Short Sale Realtor will make sure that, when listing to promote a short sale or submitting an offer to the lender, the following items are included in the package:

a) Lender contact  who approved the short sale or at least can confirm receipt of short sale package

 b) Contact information for the Attorney who is engaged to do a preliminary HUD to be submitted to lender

c) Results of the title search, which is performed to make sure that no other liens are on the property that will affect the HUD Statement and bottom line of the lender

d) Current Property taxes , HOA Dues and information about who is the Declarant of the HOA

e) Handwritten Hardship Letter from the  seller

f) Complete financial disclosure of the buyer

g) Purchase Contract

h) Preliminary HUD

i) Proof of income for the last 2 years

j) 2 years tax returns

k) Copies of last 2 bank statements

 l) 3rd party authorization form

SO, what is next in the process? Sit back and have patience after an offer is made on a short sale!

For more information about purchasing a short sale, visit: http://www.cbbankowned.com

First, consult with your tax or financial advisor in advance to assess your financial situation and determine your target price range. In order to do so, you’ll need a copy of credit report, 1003 standard loan application, copy of W2 income statements (or 1099s if you are self employed), bank statements, and information about your past home purchases. Once you determine how much house you can buy, go ahead and get your loan application underwritten, not just pre-approved or pre-qualified. The lender is more likely to respond favorably when it has confidence that you can support your offer with proper financing.

Because banks will look at many factors in addition to the asking price, it’s recommended to come up with the largest down payment possible. 10 to 20% is recommended.

Many banks may be more likely to finance a home they own, as they have an interest in unloading the home in order to eliminate the costs associated with owning the home.

And there is often room to negotiate a lower down payment, interest rate, closing costs or asking price. Don’t be afraid to ask.

There are many advantages to purchasing an REO property:

 - Banks are in the banking business, not the real estate selling business, so they’re often anxious to get them off their books. Therefore, REO homes are often listed – and sold – below market value, which allows buyers to purchase much more home for the money.

 - And many banks may be more likely to finance a home they own, as they have an interest in unloading the home in order to eliminate the costs associated with owning the home.

 - The process actually isn’t that different than purchasing a home via the traditional home buying route. Align yourself with a knowledgeable real estate professional to help you determine how much home you can afford, analyze market value of the home you are interested in purchasing and prepare your offer. Once you submit that offer, you will still have the opportunity have the home inspected so you can come to the closing table feeling confident about your purchase.

 - Many REO homes are brand new construction single-family homes in beautiful communities or modern high-rise condominiums with the latest technology and in-demand features. So they’re the same homes that many buyers are looking for, only they’re on the market for only a fraction of their original values.

REO stands for “real estate owned.”  When a buyer cannot keep mortgage payments current and therefore a bank takes over as owner of the property, the property is considered REO.

Following are the five main steps to purchasing an REO property.

Step 1:  Get your financing in order.  When considering an offer for an REO property, banks will look at many factors in addition to the asking price – including pre-approved financing, substantial downpayments  and credit history.  Consult with your tax or financial advisor in advance to assess your financial situation and determine your target price range.

Step 2: Make an offer.  While banks are often motivated to sell REO, they’re not going to just give homes away.  When you find the ideal REO home for you, come prepared with a realistic offer in order to be taken seriously as a buyer.  A buyer’s agent can help you put together an acceptable offer that takes into consideration current market condition and comps, meets the requirements of the lender, and still offers you – the buyer- real savings.  Make sure your offer includes an inspection and appraisal contingency that allows you to withdraw should the inspection reveal major problems.

Step 3: Make the most of the escrow period.  Just like traditional real estate transactions, buyers have the right to back out of the contract within the contractual time if they find something wrong with the home, so make sure that you know what that time frame is.

REO properties rarely come with a seller’s disclosure, as the actual seller is now the bank, which hasn’t lived at the property to know the day-to-day conditions.  Therefore, it’s wise to have an inspection done.  If you find something wrong, most REO contracts will include a right to cancel and receive your deposit back within a set period of time, which is often 10 days.

But due to the current economy, REO properties run the gamut of conditions.  So many of the REO properties on the market now are new construction homes that don’t carry any baggage of past owners.

Step 4: Be prepared for the waiting period, and possible a counter offer.  Buyers must recognize that they are dealing with a large group of people and not just one seller; therefore buyers need to be patient throughout the REO purchase process.  It may take as few as 7 days or as much as two months before you hear back from the bank.  The listing agent should be able to provide insight about how long the process will take with the individual bank.  Ofter, banks will counter the bid, in effort to receive a higher offer to cover their costs and also show investors that they’re attempting to get the highest price for the property.

Step 5: Get ready for a quick closing.  Once an offer is accepted, the bank may need four to five days business days to obtain final approval.  But once the offer is approved, the closing process will move quickly.  Many banks will ask for a closing within 10 to 30 days, and then it’s home sweet home!