Buyers Wonder, Are Short Sales Worth It?

You're all ready to househunt, and of course everyone is talking foreclosures being the way to go. Hard to avoid them really! But what about short sales. Are they worth the trouble? And what IS a short sale anyway?

Short sales - a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth.

These sales dominate the housing market. But they aren't for everyone. What you should know:

1. Typically the homeowner is underwater and has experienced a financial hardship such as a job loss. In order to limit the damage to his credit rating, the homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.

2. Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant - and sometimes vandalized - property, a short sale isn't a distressed home that will sell it at an extremely low price. According to the data from RealtyTrac, short sales typically sold for nearly 10% less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35%.

3. Home buyers wanting to purchase a short sale must have patience! In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.

4. Even with the challenges associated with short sales, buyers should not avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR can help buyers avoid frustration and surprises down the line.

I have been trained as a Certified Distressed Property Expert and have experience in both short sales and foreclosures. Let me know if you have any questions about purchasing short sales or foreclosures!

To read more about short sales:

http://realestate.aol.com/blog/2011/08/11/short-sales-are-they-worth-the-trouble/

FORECLOSURE MYTHS: WHAT'S TRUTH?

Although there are a number of programs available to help homeowners who have defaulted on their mortgages keep their home, the large amount of misinformation tends to result in troubled homeowners failing to contact their lender until it is too late.

• Some homeowners believe, incorrectly, that contacting their lender early in the process will draw attention to their situation and result in a quicker foreclosure. In reality, contacting the lender or servicer is an important first step, and the sooner, the better. Contacting the lender provides the homeowner with an opportunity to explain their situation and the steps necessary to deal with it.


• It is a common misconception that missing one mortgage payment will lead to foreclosure. However, the foreclosure process doesn't begin until payments are 90 days delinquent. Lenders generally have a financial interest in keeping homeowners in their homes, so making contact as early as possible could help lenders modify terms of the mortgage or devise a repayment plan.


• Once homeowners are behind on their mortgage payments, it becomes challenging to dig out of the hole. Some homeowners try to solve this by depeleting their savings or dipping into their retirement accounts to become current on the loan. Most financial experts advise against this.


• Delinquent homeowners may think they should stop making mortgage payments to get their lender's attention, which often isn't the case. When possible, homeowners should stay current on their mortgage payments and continue to contact their lender on a regular basis.


• Homeowners who have applied for assistance or loan modification programs in the past and were turned down are advised to reapply. Program parameters are constantly changing, so the rules might have been liberalized since the last time the borrower sought help.


• A number of free, government-sponsored housing services are available through the Dept. of Housing and Urban Development (HUD). A list of HUD-approved agencies can be found at http://www.hud.gov (Read the full story http://lat.ms/ihLJTs

Don't hesitate to contact me if you have questions about foreclosure and whether or not a short sale could help your situation. I am a Certified Distressed Property Expert and have had a lot of experience helping homeowners in these situations!

SELLERS! Don't Get Scammed!

Misfortune seems to bring out the good in most people; however, there are always some out there who wish to turn someone's misfortune into good for themselves alone!

A new study by CoreLogic shows banks and distressed home sellers will lose more than $375 million this year by selling undervalued houses to third-party buyers, which generally result in a quick sell and profit and tend to be fraudulent sales.

According to law enforcement and banking industry experts, the fraud works like this: Investor groups partner with local real estate agents whose job is to spot borrowers in financial distress and persuade the homeowners to sell to investors in a short sale at a low price. Then, the agent contacts the bank with the investors'
short-sale offer. So far so good. At least it appears so!

Meanwhile, the agent finds a buyer who wants to purchase the property for a higher price than that which the investor buyer is paying for the property, but the agent never presents this offer to the bank, nor does he tell the homeowner about this buyer. This new buyer knows nothing about the investor. To back up the investors' low offer - the only offer the bank is aware of - the agent produces an appraisal that confirms the low valuation. The bank then approves the sale and the investment group purchases the property. After the closing, the investors then sell the house to the other buyer at a higher price. The agent and investors then split the profits. The original homeowner never knows what hits them!

How do you keep this from happening to you? Or your friends who may be considering selling their home "short" in order to keep from foreclosure? Use a REALTOR you can trust. One who has experience in Distressed Property Sales. One who is looking out for the best interest of the seller.

I have had many years of experience in foreclosures, pre-foreclosures and short sales, on both the buyer side and the seller side. I am a Certified Distressed Property Expert. And most importantly, I can be trusted. Call me with any questions you have about your property - what it is worth, should you short sell or foreclose? Can you get a loan remodification? What options do you have? I would be glad to help you!

Scam or Savior? Short Sale Negotiators

When an agent lists a property as a short sale, it involves working many long hours on very thick files. Since many agents do not know the proper protocol for handling short sales, this need was filled with a middle man: enter the "short sale negotiator." If you don't know a Certified Distressed Property Expert, how do you weed out the good from the bad?

Licensing: All negotiators need to be licensed real estate agents and their license number should be displayed. Don't let them tell you that they don't need a license to negotiate debt forgiveness, or to process paperwork. That goes for any agent who is handling your short sale.

Compensation: Your agent or negotiator should not hit you up for money before performing any services. Real estate agents get paid when the deal is closed. No close; no paycheck. If you are a buyer and a negotiator asks for compensation, say no and go look for another house. Trust me, you don't want to get into a contract like this!

MLS Issues: If you are a buyer and the listing agent of the property you want asks you to pay for the short sale negotiator, that may even be against MLS rules. I would find another property if I were you.

Track Records: It's usually a good idea, right? In this case, the short sale negotiator scammer may be very good at making up what the bank wants to hear about the sellers they represent, so their record may look impressive. Sure, they've closed a lot of deals. But are they ethical?

Short Sale Flips: I'm not against flipping. I've done a few. Buyers are happy, the contractors I hire to do repairs, carpet and paint get work, and I make a small profit. However, some bad eggs are using short sales to make big bucks. They arrange to have a "buyer" bid on the property at a very low price and do not show the seller or the bank any other real offers. The "buyer" buys at that very low price, and the negotiator and his "buyer" partner turn around and sell the property for a higher price. That stinks.

A Final Word! If you are in the distressing predicament of having to unload your property for less than you owe, the only way to be sure you are being taken care of in an ethical and legal manner is to hire a REALTOR who is also a Certified Distressed Property Expert. These professionals, of which I am one, have gone through training on how to take a seller through the process of getting their home sold so they will not have to go through the devastating effects of a foreclosure. I have personally helped many sellers in this position. Is it a lot of work? You bet. However, as long as there are sellers who need my expertise in this area, it is my mission to help all I can, despite the thick files and long hours needed to get these escrows closed satisfactorily.

Before You Walk Away From Your Mortgage ...

Fannie Mae Increases Penalties for Borrowers Who Walk Away

Seven-Year Lockout Policy for Strategic Defaulters

Fannie Mae announced policy changes designed to encourage borrowers to work with their servicers and pursue alternatives to foreclosure. Defaulting borrowers who walk-away and had the capacity to pay or who did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure. Borrowers who have extenuating circumstances may be eligible for new loan in a shorter time frame.

The purpose of this new policy is to highlight the importance of homeowners working with their mortgage company.

There is no doubt that walking away from a mortgage is bad for borrowers and bad for communities, not to mention the example that is being set for a whole generation watching mom and dad not do all they can to fulfill their responsibilities. Homeowners facing documentable hardship who make a good faith effort to resolve their situation with their mortgage provider will be able to preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.

Fannie Mae says that it will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments, something that could hang over the heads of those who walk away from their mortgages for years to come.

As a Certified Distressed Property Expert, I can relieve homeowners in these situations from the burden of communicating with their mortgage providers - something that discourages many borrowers as banks are famous for not answering phone calls or refusing to speak with borrowers until they are behind on their mortgages. At the very least, I have the experience to help navigate the waters one step at a time for you. One of my clients actually was able to negotiate with his lender to keep his home after he had almost given up hope and we had it up for a short sale (owed more on the home than we could sell it for)!

In these troubled times, I am happy to be able to use my skills to help upside down homeowners develop a plan of attack rather than giving up. It does pay you in the long run, credit-rating-wise, to work things out with your lender, even if it means you end up selling your home for less than you owe.

Call me if you or someone you know needs help.

These policy changes were announced in April, in Fannie Mae's Selling Guide Announcement SEL-2010-05.

Revealed For the First Time: How Bad Foreclosure Hurts

I am often questioned about what a foreclosure would do to a credit rating. Not much has been made public concerning this issue and I have had to refer my clients to their tax professional for questions concerning foreclosing or declaring bankruptsy. And now for the first time, we are given a peek behind the financial curtain, thanks to CNN Money.

Here is a basic average hit your credit will take:

30 days late: 40 - 110 points

90 days late: 70 - 135 points

Foreclosure, short sale or deed-in-lieu: 85 - 160

Bankruptcy: 130 - 240

Mortgage borrowers can lose their homes three basic ways:

1. Foreclosure.

2. Short sale, where the home is sold for less than than is owed and the bank (generally) forgives the difference.

3. Deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.

Some borrowers may think that because they never missed a payment, they can "walk away" from their homes with relatively little impact on scores. Not true. When a deed-in-lieu or short sale is reported as a partial payment, it's treated as a serious delinquency, just like a foreclosure.

Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 for the 780 score.

However, the worst thing that can happen to your credit score, according to the article, is bankruptcy because the effects are long-lasting. In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.

What Does It Matter If I Lost the House Anyway?

It matters! Absorbing a big credit-score hit can make many transactions more costly. It's not just paying more for credit card debt and auto loans, insurance can cost more as well.

The average savings for someone with a good versus mediocre credit score is about $115 a year for auto insurance and $60 for home, according to Loretta Sorters, of the Insurance Information Institute.

A low credit score can even make it harder to rent a home because landlords often use credit scores to weed out prospective renters. Ouch!

Despite the problems a poor credit score can cause, if you are in a totally unaffordable financial situation it's better to recognize that and cut your losses quickly; don't prolong the problem.

Although it certainly is easier to walk away, your credit score will certainly fare better if you sell your home before it forecloses. Banks have now come on board and are simplifying the process for sellers and agents. I have done many successful short sales for clients who have been underwater in their mortgage. If you believe you are headed for foreclosure, give me a call and I will help you determine if a short sale would be in your best interest.

http://money.cnn.com/2010/04/22/real_estate/foreclosure_credit_score/index.htm

Taking Advantage of SHORT SALES

Short sales. We hear alot about them these days, but what are they again? It is something you need to know because short sale opportunities are on the rise. If you or someone you know is fearing forecloseure, encourage them to talk to their lender. Many lenders are realizing that they'll save money the sooner they can get a property off the books. So, when they fear a homeowner may be headed for floreclosure, they may fix a sales price lower than the mortgage balance and put the property on the market for a quick sale. That is what a "short sale" is: a property on the market that has a sales price lower than the mortgage balance.

I know you know someone who is losing their home. We all do. And we probably all know someone who has just "walked away." Two thirds of homeowners in default (so late on their payments and property taxes that the property is flagged for foreclosure) never even contact their lender!

What is in it for the homeowner? Well, if the lender does agree to a short sale, the homeowner avoids foreclosure, the lender avoids the carrying costs, and the neighborhood avoids another abandoned property on the block. We have done some successful short sales and had a few that the lender decided to let foreclose. In our success stories, our clients have appreciated the service we provided by doing all of the leg work with their lender(s).

This market is going to be with us for awhile and we have learned how to handle these sales and handle them professionally. Several of our buyers have put offers in on short sales, and they are in demand because of their attractive pricing. Multiple offers are the norm when the property is priced right and in good repair.

Please do not hesitate to call me with any questions about whether or not you or someone you know would benefit by selling short. It is just one more way that I enjoy being Your Personal Realtor!

(My thanks to Dave Liniger, RE/MAX, for the idea and some of the content of this post!)

Housing Affordability Best in Four Years!!*

Some brave financial analysts are coming out of the gloom closet. The chief economist for the Cleveland-based bank National City Corp (NCC, Fortune 500), Richard DeKaser, said that "housing valuations are almost back to long-term norms." 'Valuation' is defined as the difference between what a home should cost and its actual price. He said that current affordability is *"the best in the past four years." Three hundred and thirty housing markets were surveyed and showed price declines and improved affordability during the last three months of 2007.

DeKaser did caution that home prices could fall even further. Remember. this is nationwide, so price declines and hitting bottom will differ widely. As in all market fluctuations, more desirable areas will bottom out before the less desirable areas. In our San Diego market, it is even possible that we will see the bottom of the lower-priced market hit before the luxury market, which took longer to respond to the pricing adjustments.

Local agents are currently scrambling to field the multiple offers on the attractively priced and better-maintained short-sale and bank-owned properties. It is anybody's guess how long it will take to inch up to the properly priced, non-foreclosed homes in higher price ranges.

DeKaser points out that the biggest gains in affordability occurred in our own state of California (as well as Michigan and Florida). These areas have also been some of the hardest hit by foreclosures. The best bargains currently, according to the survey, are in Louisiana and Texas, where homes are undervalued by approximately 30%!

If you or anyone you know would like to look for investment property in these areas, we can connect you with a REALTOR you can trust who will know that market inside and out.