Archive for month May, 2008

What is a Short Sale?

Wednesday, May 21st, 2008

A Short Sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers’ mortgage obligations and closing costs (such as property taxes, transfer taxes, and commissions), and the seller is either unable or unwilling to cover the difference.

Some short sales may also be in default on their mortgage loans, and be headed for foreclosure.  Others may not.  However, homeowners who bought at the top of the market, or who took out large amounts of equity with a recent refinance, and who now need to sell because of a divorce, loss of a job, or transfer, may find themselves “upside down” – owing more than the home is currently worth (especially once you add the closing costs).

Other types of sellers, those who may have assets such as stocks or high salaried jobs, may not understand that the lender is unlikely to let them just walk away without signing a note to repay what they owe.

If you are in any of these situations, please call me.  I specialize in Short Sale transactions, and can tell you quickly if this is right for you (it is not right for everyone).  Let me explain the process to you.  All your information will be kept in confidence.

Patience is a Virtue

Saturday, May 17th, 2008

Just as are Realtors, Lenders are also getting hit with a wave of Short Sales.  “Be patient.  The decision Process may take several weeks,” says Jim Satterwhite, VP of Prime Default Management at Chase.  Some lenders are dealing with as many as a quarter million delinquent loans at any given time.  It can be a challenge to obtain approvals from everyone involved in the Short Sale – including Investors and Insurers.  Satterwhite encourages practitioners to stay in contact with the servicer of the mortgage to keep everything moving.

Another common problem is submitting the Short Sale package just days from an impending foreclosure, he says, which is not enough time for the lender to reach a decision.  It is better to start the process before the foreclosure is past the ‘point of no return’.

Satterwhite recommends:

  • Find out if there are any liens on the property, which can become big problems for lenders and Real Estate professionals alike.  Secondary Lien holders may require money to minimize their losses and can balk at approving the short sale.  Frequent objectors include tax lien holders and mechanic’s lien holders.
  • Engage both Primary and Secondary lien holders at the same time because all parties will need to approve the contract.
  • When working with the Seller, ensure that all paperwork is completed and submitted on time.  Also, make clients aware that they may be asked to reduce the lender’s loss by making a payment or by signing a promissory note.
  • When working with a buyer, make a reasonable offer on the property.  A ridiculously low offer is a waste of everyone’s time.  “The servicer’s primary goal is to minimize the investor’s loss on a property with a distressed borrower,” Satterwhite said.  Therefore, the lender will try to obtain fair market value for the property, so offers way below fair market value just cloud the process.

Satterwhite’s guidelines are something we follow very closely.  If we are to achieve a fair transaction for everyone, and make it to the finish line, we have to be aware of the needs of all parties – including the lenders.

Let me know your thoughts on this article – post a comment!

Why Work with an Agent Specializing in Short Sales?

Wednesday, May 14th, 2008

Reasons Why Lenders Prefer to Work with Experienced Agents

 

In steeply declining markets, short sales are booming. Selling a home for less than the underlying mortgage often provides troubled home owners with their best chance of avoiding foreclosure and ruining their credit. A cottage industry of bankruptcy specialists and other self-described loan mitigators are trawling for clients, but lenders would often prefer to work with real estate professionals in negotiating short sales for clients.   Here’s why:

 

  1. Agents are licensed by the state.
  2. Agents adhere to a code of ethics.
  3. Agents carry errors and omissions insurance.
  4. An Agent has too much at stake to cut corners. A licensed professional is not likely to commit fraud that could put their entire career at risk.
  5. An Agent specialied in Short Sales does not need extensive training by the lender’s loss mitigation department.  Many departments simply move the file to the foreclosure stack when they realize the listing agent is not experienced in short sales because they have hundreds on their desk and do not have time to train the agents.

 

This is why many of my fellow Real Estate Agents refer their in-trouble clients to me, they know I can help their clients navigate the waters they would have to learn first.  So let me help you get through it.  Give me a call.

Why Are Short Sales So Troublesome?

Monday, May 12th, 2008

Short sales seem like a win-win for everyone involved, but as real estate professionals know, short sales can be hard to pull off. It can take months for the mortgage company to respond to an offer, and the lender or lenders often balk at the price.  This leads many agents not to “bother” with the Short Sale market.

 

Why doesn’t the process go more smoothly when it seems like a much better deal for everyone than foreclosure?  Here is what I have learned from years as an agent doing Short Sales.

 

  • Paperwork. Gathering all the information needed to evaluate a short-sale offer can take time, says Patrick Carey, an executive vice president with Wells Fargo. The loan servicer must first determine whether the homeowner really can’t continue meeting the loan payments, then get an appraisal or broker’s opinion of the home’s value.
  • Many steps, approvals. Mortgage servicers also try to ensure that the proposed sale is an “arm’s length” transaction between two parties rather than something like a sale to a relative on sweet terms. They must also determine whether the buyer has sufficient funds or the ability to get a loan. If all those hurdles are cleared, the servicer may still need to get approval from the investor that owns the loan and provide an analysis showing that the investor will be better off with a short sale than with another solution.
  • Complications often arise. There are additional complications if the borrower has a mortgage and a home-equity loan. In that case, both parties must approve the deal – which is a challenge when the sales price may not even be enough to cover the mortgage balance.
  • Minimize delays. Carey suggests that home owners contemplating a short sale immediately call the loan servicer to get the approval process started, rather than wait for an offer.

 

Take a look at my Frequently Asked Questions about Short Sales and learn more about how the process can help you.

Short Sales Might Help Curb Housing Slump

Saturday, May 10th, 2008

A growing number of lenders are approving short sales as an alternative to foreclosure, says Doug Duncan, Mortgage Bankers Association chief economist.  The move is a way for lenders to avoid having to take over and manage property. 

 

“The way banks see it, it’s better than if the house goes into foreclosure, stands empty, and sees its value spiral downward before it’s auctioned on the courthouse steps,” says Duncan, who expects rising delinquencies to spark an increase in pre-foreclosure sales.

 
Though short sales put additional downward pressure on the national median home price, Fannie Mae chief economist David Berson says they also lower the number of foreclosures and can help ease the housing downturn. Short sales are hard to track, though, because they’re not counted, making it impossible to know exactly how many occur.

 

This can help you work your way out of a mortgage you can no longer afford.  Give me a call and let me lend a hand.

Interviewing an Agent for your Short Sale

Thursday, May 8th, 2008

Some days ago, I was interviewed by a prospect looking for an agent to sell his house.  I appreciate that interview – everyone should interview the person they will employ to sell their house.  This gentleman, however, was having financial problems and most likely was going to lose his house if we did not start the short sale process very soon.

Some of his concerns were whether to work with the “Expert in this neighborhood” who knows his neighborhood (I had not sold a house in his neighborhood before) or to work with an expert in Short Sales, whether the photographs would be taken by a professional photographer, and how impressive the flyers and brochures would be.

I want to share with you some interesting facts and also some of my thoughts that came out of that interview:

  • There are 78 houses for sale in that neighborhood today, 7 of which are foreclosures
  • There is one other short sale in that neighborhood
  • There are 38 different Agents with homes listed in this neighborhood
  • On average, the active listings have been on the market for 8 months
  • 15 houses were sold in this high-end neighborhood (600k-1M) in the last 6 months, 7 of which were foreclosures
  • Each one of the 15 houses was sold by a different Agent

It seems to me that someone looking for a Real Estate Professional, and a specialist in Short Sales, should not be looking for the façade the agent presents – the fancy car and that big joke in the industry about being “the specialist in your neighborhood”.  You have to always have in mind that you are hiring that agent to sell your house not your neighborhood.

You can believe that every time I send in a Short Sale package to begin the negotiations with the lender, the forms do not ask what type of car I drive, if I go for a manicure every week, or how popular and known I am in that neighborhood.  What they focus on is how complete the packet is, how accurate the numbers are, and most importantly the negotiations I have had with the Buyer and their Loss Mitigation Department.  They want to know they are getting the best deal they will get, and that the deal will happen.  In this, the majority of these lenders know me because of the volume of short sales I do with them and the skills I have developed.

You might be tempted to ask me what kind of car I drive and how often I go to the Parlor?  Well, with the price of gasoline today, I get to choose between my Nissan Sentra and my Ford Explorer.  As for the Parlor, I would love to go see a manicurist every week – but how would I be able to give each of my clients all my attention if I went that often?

I can promise you that, rather than a fancy façade and polished prose, what you will get from me is a professional and knowledgeable team with a caring sense of service and accurate numbers you can rely on.

So what are you looking for in an Agent?  What interview questions would you ask?  Post them here and we will select the best one.  The winner will receive their choice of gift certificates: for a manicure at their favorite salon or a car wash for their fancy car.

Record High of Vacant Homes for Sale

Monday, May 5th, 2008

The number of vacant homes for sale in the United States set a new record in the first quarter of 2008, the U.S. Census Bureau reported Monday.

 

The Census Bureau reported that 2.9 percent of U.S. homes or 2.28 million properties, not including rentals, were vacant and for sale. It was the highest quarterly number as far back to 1956 when records of such vacancies were first kept.

 

The West had the biggest gain in vacancy rates among home owners, rising to 3.2 percent in the January-March period from 2.6 percent in the same quarter a year earlier. Vacancy rates inched up in the Northeast and remained steady in the Midwest and South.

 

The GOOD news about Short Sales is that you don’t need to leave your home.  As a matter of fact, it is far better if you do not!  If you leave the home, the lender may see it as “Abandoned” and immediately foreclose, ruining your credit.  Stay there and let me help you work your way through the Short Sale process without losing all your credit.  Take a look at my Short Sales FAQ to get an idea how I can help you, then call me.