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What You Should Know About Short Sale and Foreclosure

Dec 24

Posted by admin in Real Estate

It is not uncommon to see a price listing for a home that you consider too low for the neighborhood. You must know that buyers follow short sales to get a superior deal. Before you agree to that low price you should find out from your agents if the home is a short sale. Making an offer on a short sale, pre-foreclosure home is not unheard of but you must know the factors working behind it. There are many cases of Minnesota real estate buyers and Minneapolis short sale buys that I personally encountered where buyers had to wait up to six months even to close on a short sale.

A short sale is the lender accepting a discount payoff in order to free a debtor of a prevalent mortgage. Having a property listed with short sale terms means that even if the seller accepts your terms, the lender may or may not accept this offer. Be aware that the seller need not be in default to have stopped making mortgage payments before a lender will consider a short sale. A lender may consider a short sale if the seller is current but the value has fallen. The seller may have over-encumbered, owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it.  The lender is basically the one paying out the commission regardless of the commission the seller has said to pay. The seller is not getting any money with which they can pay a commission. The lender will most likely discuss the commission directly with the listing real estate broker since he is losing money, then talk about who will share the commission with the agent. Obtaining a home inspection is extremely important for the buyer and you will also need to pay up for other kinds of inspections.

Normally lenders will not agree to such a sale unless the seller is able to repay the deficiency of your sales price and the existing loans. Most sellers will also be asked to provide a hardship letter. The amount of debt is forgiven but the sellers may owe some pending taxes. The lender will need a time frame from you in which to respond and following that you will be allowed to cancel. The paperwork can sit on someone’s desk if the lender is under no pressure to make a decision.

You should do a little research on your own before making a purchase offer. A real estate agent can figure out more information on the lender and give you enough facts to decide on what kind of offer to make. You should make sure you get an agent with short sale experience that will benefit you. It’s makes matters much worse if your agent has no experience in that area. An experienced agent will make efforts to protect your interests and accelerate your transaction. You will require someone who can manage timely and regular follow ups on your behalf.

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Understanding Short Sales: From a Foreclosure Help Specialist

Dec 23

Posted by admin in Real Estate

If you are going through foreclosure, you are not alone. Many people are facing foreclosure; they’re feeling helpless and they don’t know where to turn or what their options are. Foreclosure hurts! You can’t eat, you can’t sleep, you have trouble functioning! The phone rings constantly, and you don’t even have to look at your caller ID to see that it’s your mortgage companyAGAIN! They are relentless! They interrupt your dinner, your family time, and your sleep!

Hundreds of thousands of people are in this terrible situation. There are many reasons people are in foreclosure, including unemployment, or circumstances like death in the family or divorce leading to financial distress. Many are in an adjustable rate mortgage (ARM) and the time has come for the interest rate to be adjusted. In many cases, it increases significantly and people are unable to make this much of a payment each month. When they try to refinance, to get a lower, fixed rate, they find that their home does not appraise high enough to pay off the existing mortgage. Being in this tough situation is overwhelming, to say the least. Wouldn’t it be nice to just be in your own home, having dinner with your family or just relaxing, without the phone calls from your lender?

You do have options and help is available no matter where you are in the foreclosure process. If you feel that you have exhausted all other options; if you feel that you should cut your losses and walk away from this debt and start over, you should consider a short sale.

A short sale is where your lender agrees to let you sell the house for less than he is owed if the market justifies the short payoff price and you qualify by showing financial hardship. Mortgage companies have a short sale department for handling these transactions.

If you are considering a short sale, you should work with a specialist who has experience in working short sales. A good short sale negotiator will help you with the process of compiling the paperwork for the bank and they will do a comparative market analysis on your home to support a short sale offer.
The short sale benefits both the homeowner and the lender. The homeowner is allowed to satisfy their debt with a short payoff and not have a foreclosure recorded on their credit report. If the short sale negotiator is really doing their job, they will get a written release from the lender to the homeowner, on the debt owed, so that the homeowner is not forced to pay the deficiency.

If the lender is wise enough to accept a short sale offer, then he cuts his losses now, rather than risk the declining values of real estate causing him to be stuck with property that cannot be sold for near what he was owed. Chances are great that he will not sell the property at all; it will sit empty for months, become vandalized, and maybe even condemned and demolished for a total loss.

A short sale is one option to consider if you do not want to continue living in your home. With a short sale, you do not get proceeds from the sale; your lender is taking less than what his is owed and giving you proof that your debt is fully satisfied. A short sale is a good way out because it stops the foreclosure process, and saves your credit report from further damage. And don’t forget, once this is behind you, you can relax to dinner with your family without being disturbed by phone calls from your mortgage company.

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An Insight into Bankruptcy

Nov 30

Posted by admin in Bankruptcy, Real Estate

In the light of the recent global economic meltdown, bankruptcy is fast becoming one of the most controversial phenomenons. People all over the country are filing for bankruptcy and the number is only increasing with the passage of each day. In this article, we shall be looking into filing for bankruptcy as well as the advantages and disadvantages that have been associated with bankruptcy. Yes, it might be surprising to read about the advantages of filing for bankruptcy, but since many are resorting to such techniques these days, it must be given ample importance too.

A person usually files for bankruptcy in order to escape from the torments that will be imparted to him by the debt collectors. People may opt for debt; they are of the impression that taking debt might help them in the short term. However, when the tide turns against them, the days are merely filled with perils from the debt collectors. In order to escape from them people usually opt for filing for bankruptcy – as mentioned earlier. In fact, filing for bankruptcy has been found to be helpful in many other ways also. One of the pioneers among them is stress management.

Once someone files for bankruptcy, then the mental agony will be temporarily eliminated. This is because they can stand cause as being bankrupt. Many countries have their own policies with the help of which people who are filing for bankruptcy are helped. In here, an organization will take care of the debtor and will make sure that no form of harassment is being imparted to the person who has filed for bankruptcy. This is especially helpful because such organizations will keep a strict vigil over them. In some of the cases, there have been instances where the debtors will be made to pay only a part of the amount.

Mutual agreement will be reached in between the debt collector and the organization that is taking care of the matters. If the other party is not willing to lower the debt amount, then the duration will be duly extended. There are various options such as these that are executed, and the person who had filed for bankruptcy will be protected at all the times. The creditors will have to agree with the terms and conditions that have been put forth by the organization. This is another major advantage of filing for bankruptcy.

That does not necessarily mean that anyone can take loans and walk away scot-free. Certain types of debts have been excluded, that is someone will not be able to file for bankruptcy if he or she has taken a student loan. The same is applicable to the loans that are taken in the name of the company. The organization that is in charge of the entire scenario has the power to sell off all the property that has been possessed by the debtor, and the money accumulated because of this transaction can be used for paying back the debts.

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Dealing with Foreclosure

Nov 30

Posted by admin in Bankruptcy, Real Estate

Foreclosure is something that must be avoided in the strictest sense. Various options are available which will help a debtor in avoiding this phenomenon. It can induce emotional trauma in the minds, to see hard-earned money being wasted away due to court procedures. Sadly it is happening all over the world and the only method to avoid foreclosure is to be intelligent while making financial decisions. People are known to take extreme steps when they come to know that their property will be subjected to foreclosure in the coming days. In this article, we shall be looking into reasons why such situations must be avoided.

People usually opt for foreclosure because they are being too much taunted and tortured in the name of their debts. According to some, this will induce peace of mind – something that is temporary in nature. The long-term effects of this will be disastrous. Bad credit history is one of the primary reasons why such extreme steps might be taken by a court of law. It will be wiser to look into the consequences to have a better picture of scenario in the long-term. The credit score will be revised and any changes to it can be implemented only within seven years.

A process of foreclosure will be always maintained as a public record, and this data will be fed to a centralized database. Major Banks and other financial institutions are connected to this database, and if you try to apply for loans or any form of credits in any part of the country, there is a high probability that the request might be cancelled. Keep in mind that this step will never be ignored by the banks or financial institutions and they always resort to such steps to weed out people with bad credit history.

Once a bad credit history has been associated with your name, then it is tougher to get them removed. It is like a taint that can never be removed easily. If you are thinking of opting for foreclosure to escape from bad credit history, then you are doing it wrong. It will only add to the burden and this is one of the major reasons why it should be avoided. The regulations and the restrictions which are in place for such people is stringent in the strictest nature and even if loans or credits are granted, the interest rates will be always on the higher side.

This is because people with foreclosure histories are seen as potential risks by the lenders. Some people will always try to make a fortune out of the misfortune that is being attributed to you. If you are thinking of switching jobs in the light of foreclosure, then be warned that it is a foolish decision. Even companies have started seeing them as potential risk factor and will not grant any jobs to such people. Virtually everything in your life might come to a standstill; hence, it is better not to opt for foreclosure if possible.

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Short Sales – How To Influence The Broker\’s Price Opinion (BPO)

Oct 7

Posted by admin in Real Estate

Ok, so you\’ve received the short sale requirements from the lender and you\’ve made friends with the loss mitigations rep that\’s assigned to your potential deal. Next, you are now ready for the lender to order a BPO on the property. Notice that I emphasize \”you\”, this is because I don\’t want you to miss out on a key opportunity to influence the overall outcome of your short sale.

Although many investors are aware of the benefits of influencing the BPO, few know exactly how it\’s done. The BPO is the single most influential component that the lender considers when deciding how much they are willing to accept as a reasonable short sale offer. If your offer is not in the ballpark of the BPO it will most likely be rejected. Many investors give up at this point and assume that the lender is not willing to accept a short sale. It\’s not that the lender is not willing to accept a short sale, it\’s that the short sale offer does not come close to the amount of the BPO. It\’s just that simple. There is a big difference between a lender not accepting a short sale and a lender not accepting the offer.

What exactly is a BPO?

BPO stands for Broker\’s Price Opinion. All this means is that a real estate agent or broker will assess the property and give their professional opinion of it\’s value to the lender. The closer that number is to your offer the better. You want the BPO to be as low as possible. Listed below is a snap shot of a BPO requirement.

1. Run comps and take pictures of the surrounding neighborhood, subdivision, or area.
2. Inspect the overall condition of the home and estimate the cost of repair. Take pictures.
3. Formulate their \”opinion\” of the property\’s value based on the information that was gathered.
4. Submit a detailed report of their research to the lender.

Here are 5 necessary steps to influence the Broker\’s Price Opinion (BPO)

Step 1:
Before your package is submitted ask your loss mitigations rep to order the BPO. Let them know that there is not a lock box on the door and you have the only key. Give them the best number to reach you and have the agent doing the BPO call to set up an appointment. You must be present for the BPO.

Note: There are two types of BPO\’s:

a) Full BPO – The agent does a full inspection of the home.
b) Drive by BPO – The agent only takes pictures of the outside and other homes in area.

Always request a full BPO. If a drive by BPO is done you will not have any one-on-one time with the agent, therefore eliminating any possibility of influencing the outcome.

Step 2:
Compile comps, estimated costs of repair, and any other relevant information that will justify a discount. If possible, visit the property prior to the BPO or at the least a half hour before the agent arrives. Make two lists for repair costs. One with all of the obvious repairs such as wall damage, carpet, paint, etc. The first list will be mostly cosmetic repairs. Make a second list of all repairs that the agent will not see with their naked eye (i.e.: roof and water damage, faulty plumbing or electrical fixtures, pests, mold, etc. This list will contain more serious problems. Be sure to have an itemized breakdown of the costs involved. Bring this information with you to the BPO appointment. Be prepared to explain in detail how you came up with your estimates.

Step 3:
Make sure if the house is occupied that the homeowner is not present during the BPO. You do not want the agent asking the homeowner any questions about the property or offering any unwanted information. All communication must be between you and the agent. Follow this rule each time and you will maintain leverage during your negotiation.

Step 4:
On the day of the appointment shadow the agent as he/she does their assessment. Bring a camera and take pictures of every room in the house. The agent will only take a limited amount of pictures and may miss something important. As you are walking throughout the house, point out the most important repairs only. Take notes and make them aware of other homes in the area that are comparable to your offer. Share with the agent the information about the house that you\’ve compiled. Doing these things will help establish you as a well prepared professional and help you earn respect with the agent.

Step 5:
Before the BPO is complete, ask the agent if they have a ballpark estimate in their head. They will most likely tell you that the numbers will be determined once they complete their report. At this time, ask when they will be finished and if you can give them a call at a specific time to get their final numbers. Note: The agent works for the lender and more than likely they will inform you that their report is proprietary to the lender. You have to feel that person out and see if they may be willing to share that information with you. It doesn\’t hurt to ask more than once if necessary.

Let the agent know that you are very familiar with the neighborhood and tell them what you think the property is worth. The agent doing the BPO knows only what they have researched and what they discover once they actually see the property. You will be surprised as to how much your opinion matters. I like to call it YPO (Your Price Opinion). If the agent views you as someone who is educated about the property and the activity in the neighborhood your opinion will be valued and taken into consideration when they make their report to the lender.

Hopefully I\’ve helped shed some light on this most important area of short sale negotiations and that you are able to apply what you\’ve read to your next deal.

Best Wishes!
D.C. Fowler
Author of Making Money with Short Sales
http://www.ShortSaleDeals.com

Writen By : D.C. Fowler

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How To Determine If Your Real Estate Investment Market Will Go Up Or Down

May 17

Posted by admin in Real Estate

These days it’s hard to know what is happening in the housing market. Is it rising or falling? There are plenty of people out there trying to predict what is going to happen. The problem is that they are looking nationwide or citywide. Investors need to know what is happening in their specific farm area, though. There are a number of factors that drive real estate prices up or down in any given area. Each market reacts to its own set of conditions, and even different neighborhoods and types of properties will react according to its own set of circumstances.

For the most part, changes in home prices tend to be determined by the inventory of homes available. There is typically a 6-10 month lag time in price changes. That is to say that if inventory increase, prices will decrease about 6-10 months later, and if there is a decrease in inventory, prices will increase about 6-10 months later. Investors benefit because they can use low short sale prices to sell houses quickly before the rest of the inventory catches up. There is a very simple rule of thumb you can use in your market in 2010. When there are 8 months or more of inventory available, prices will fall. If there are 2-3 months of inventory available, prices will rise.

In many areas the first round of the First Time Homebuyer credit could not quench the high demand for starter homes. If your are one of them, the feeding frenzy for lower end homes could continue. Since the credit was expanded to all buyers, sales and prices may be boosted because there will be a larger supply of both homes and buyers available. The impact of the credit might not be that large, though.

The cost of ownership is another factor that directly drives up the price of homes. In 2010, the U.S. Treasury will play a very important role in determining whether the market will rise or fall. There was been little incentive shown by the Federal Reserve to raise interest rates in 2009, but it might be different in 2010. The Fed might experience pressure to raise interest rates in order to attract more buyers of U.S. debt. Even just a small increase in interest rates could drive potential buyers out of the market. State income taxes and local property taxes could increase in the coming year as the local governments face pressure to balance their budgets in 2011. Any increase in property taxes will decrease the number of buyers in the market.

Last, but certainly not least, will be the impact of foreclosures on the housing market in many communities. I believe there will be spikes that occur in markets that heavily used the Option ARM for mortgages between 2004 and 2007 that are going to reset higher as interest rates push payments up. Communities still drowning in unemployment will also experience higher foreclosure levels.

These are just a few of the factors that will impact your local market conditions. Apply the ones that fit. Every market and micro-market will be different.

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Short Sale San Diego:do you know what a short sale is?

Jan 29

Posted by admin in Finance, Real Estate

With the current boom in foreclosures hitting the state, it’s likely that if you watch the news or read the news paper, you have potentially heard the term short sale. But do you really understand or know what a short sale is? For most they are still confusing. Put simply, a short sale is when a bank or banks, accept less that the total amount due on a loan when the property is sold. The bank will often accept the short sale to circumvent the time and cost of a foreclosure, but do require that the owner of the property show some kind of a difficulty, or reason that they won’t afford the home and need to sell. In a short sale, the bank will pay all of the charges that are concerned with the sale, including the Realtor’s commissions. With home prices down over 29% across the country, many householders are finding themselves in a situation where they don’t have any equity in their property. And even if they’ve a tiny amount, when a borrower is in default on a mortgage they not only owe the back payments but also may owe late penalties, back taxes, lawyer costs, for example.

This may add up quickly to eat all of the equity the borrower had in the property. If the borrower is not able to bring the account current the bank will then foreclose on the property. With a foreclosure, the bank can lose up to 40% of the mortgage amount thanks to the extra costs concerned with foreclosing on a property : lawyer costs, court costs, lost interest, eviction costs, property upkeep costs, and selling costs. Foreclosing on a property can take anywhere from some months, up to two years in some states. It is often in the best interest of the bank to accept the short sale. It can also be in the best interest of the borrower. They won’t have to endure the time and stress of a foreclosure and their credit would possibly not be as negatively influenced as it might with a foreclosure. It is faster and less complicated and does not subject the borrower to the humiliation of a foreclosure. How does it work? The very first thing the borrower should do when they won’t afford a property is to contact the bank instantly. The very last thing a bank wants to do is foreclose on the property. When contacting the bank, they have departments that work with folk who are behind on their payments to decide the situation and may be in a position to direct you to their departments. Sadly though , these departments are usually shorthanded, overworked, and have really poor systems prepared. Getting thru to someone and getting them to basically work on your file could be an extremely maddening battle. This is why it’s important to hire a Realtor, or Realtors that are experienced in short sales and dealing with the bank that hold your home loan. If they are experienced, they’re going to have the numbers and the contacts to get the deal done.

When you have told the bank, step one will be hiring a Realtor and placing your property on the market. With lots banks, they won’t review any forms or think about you for a short sale till your property has been listed on the market and a buyer has submitted an offer. Once which has taken place, there’s a lot of paperwork the bank will need together with the offer to think about the short sale. The data needed may include : Income documentation like 2 years of tax returns and W-2s, together with one month of pay check stubs to confirm the borrowers’ income. Bank records to confirm the borrowers’ assets.

Trouble letter this letter will describe for the bank the explanations the borrowers are in the monetary position they are in and will ask the bank to accept the short sale. Borrowers should make this letter sound as unhappy as feasible and back up the tale with any paperwork you will have like doctor’s bills, for example. Finance Worksheet this worksheet will show the borrowers net montly income vs. All the monthly cost, and should be used to show the borrower is not able to afford the property.

Fair market worth for the property depending on the bank they may need aComparative Market research from the Realtor justifying the cost of the property. Purchase agreement signed by all parties. Initial HUD1 – this may show the profits of the sale of the property after the mortgage is paid off and all of the closing costs and charges are paid. This can show the bank what they are going to be receiving as the short payoff.

Listing agreement. ( And many banks have their own express forms that are needed as well as everything above. ) Once the bank receives all the above info, they can hire an exterior 3rd party to finish either an appraisal on the property or a BPO ( broker’s price opinion ) to figure out the fair market cost of the property.

They’ll use the data provided above to make sure there’s a difficulty and they are going to compare the offer that is presented in contrast worth to establish if the short sale makes sense, or if they can get more by going thru foreclosure. Once the bank has reviewed all the info, they might or might not approve the short sale. If they don’t approve the short sale they can proceed with the foreclosure. If they do accept the short sale, the exchange will advance the same as a normal sale, you can close on the sale of your property and the lender will take the loss. So, is the borrower off the hook? Not really. The bank still has options to try and collect this shortage. As a condition of the short sale the bank may need the borrower to sign a note to reimburse the shortage or bring in money at closing. The bank might also require that the borrower agrees to the bank keeping their rights to chase a deficiency at a later time. This is the reason why it’s important to work with a team that is experienced in Short Sale and to consult a real estate lawyer to entirely understand all your options. There could also be tax implications in a short sale or foreclosure.

When the bank forgives the quantity of the shortage, they’ll report that amount to the IRS and the IRS will send out a 1099 showing the shortage as income.

Each person’s situation is dissimilar and they could be protected from needing to pay taxes on that amount thru the Mortgage Debt Relief Act or thru showing bankruptcy. I won’t offer recommendation on that and highly suggest that any person considering a short sale or foreclosure consult a tax pro to absolutely understand the consequences of a short sale or foreclosure.

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