Real Estate BluesThe real estate industry is reeling from the collapsed subprime mortgage market and the broader economic downturn, with more than 3.9 million unsold homes on the market, according to a recent report by the National Association of Realtors. For African-American realtors in New Jersey, a state that faced about 14,000 foreclosures during the third quarter of this year, survival is all about strategy.

“Because there are so many homes on the market, we have to be a little more strategic in our selling,” says Bill Collins, a realtor at ERA Queen City Realty in South Orange. “We sometimes give agents higher commissions or offer lower price points to get people in the door.”

Few could have predicted the extent of the fallout when, years ago, many homebuyers obtained loans with adjustable rates that they were unable to repay once the interest rates on mortgages began to adjust upward. With massive defaults on these loans, banks and other mortgage lenders implemented and are enforcing stricter rules for borrowers. “It has just been really difficult for anyone who got a two-, three- or five-year, adjustable-rate mortgage,” says Kirk Charles, a loan officer with New Jersey Lenders Corp. in Little Falls. “Some of these people tried to refinance within two years, but that proved difficult because they didn’t have the equity in their homes and they couldn’t get the No Income Verification Mortgage any longer because it’s not offered for people in their credit category.”

The situation hasn’t been any easier for new buyers. “Nowadays, most lenders are requiring that buyers come up with larger down payments,” says Yvonne (Donna) Marshall, a broker with Exit Platinum Realty in Montclair, N.J. For example, lenders who once required borrowers to put down 5 percent now are asking for 10 percent, while those who required 10 percent are asking for 15 percent.

“A lot of people, especially in the inner city, don’t have that kind of money to put down on a home,” Marshall says. As a result, borrowers often end up trying to get money from more than one source. Couple that with closing costs and higher credit-score requirements and it becomes very difficult for them to obtain a home.

Marshall’s strategy is to stress to prospective buyers the importance of maintaining a good credit score, which, she says, is the first thing lenders review. A buyer who has been good at paying other bills is more likely to meet their mortgage payment, Marshall notes.

Some realtors try to get the seller to lower the asking price to bring it closer to what buyers are willing to pay. Others try to get as many people as possible interested in a particular property. “By doing that you end up with a situation where you’ve got people making offers closer to the asking price,” Collins says.

A big part of a realtor’s job, Collins adds, is working closely with the client’s lender to get them to understand the dynamics of the local market. “There are a number of short-sale sellers in our portfolios, so that’s requiring us to do lots more negotiating,” he says.

A short sale occurs when a homeowner owes more on the house than he can sell it for and arranges with his mortgage lender to discount the loan balance. The homeowner sells the house for less than the outstanding balance of the loan and turns over the proceeds of the sale to his lender.

President Bush recently signed a housing bill intended to help nearly15 percent of homeowners in danger of foreclosure within the next year. The measure offers $300 billion for the government to back cheaper mortgages, a low-income tax credit and $3.9 billion to help communities rehabilitate foreclosed homes. In addition, homeowners experiencing difficulty with payments could trade their loans for more affordable mortgages through the Federal Housing Administration, provided their banks agree to the trade. Homeowners would have to prove they could pay the new loan and show that more than 31 percent of their income is going toward their current mortgage.

The bill offers some hope for homeowners, but realtors are sticking to their survival game plans. “We still have to be more competitive,” says Marshall.