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2012. Year of the Short Sale

February 23, 2012
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All signs point to 2012 being the year of the short sale.

Back in 2007 no one had ever heard of a short sale and the process was a complete disaster. Real estate agents didn’t know how to price short sales or get them approved by the banks. The whole process was a mystery because there was a complete lack of communication from the banks and they had no idea with thousands of defaulting loans. So many horror stories came from the early days of the housing crisis and home owners were on the loosing end, and the final chapter was foreclosure.

Real estate felt like the wild west. Prices were falling through the floor and loans were defaulting left & right. Banks were so far behind on handling home owners who fell behind on their payments and because they had no systems in place the only option was to foreclose. Most owners didn’t know what to do when their mortgage company wouldn’t answer phone calls or would send them into voice mail loops for days and weeks at a time and could never speak to a live person. Home owners became frustrated beyond all belief because there were no answers to the problems they faced.

5 years later the game has changed. Banks have realized that it’s more expensive to foreclose than helping home owners to complete a short sale or modification. Between attorney’s fees, loss of revenue from a paying mortgage ( some times for 2 full years), property damage, and endless management fees until the home finally sells as foreclosure. Systems & procedures have been established to give home owners more options than ever when they can no longer afford their mortgage and the major banks are extremely cooperative when payments fall behind. Many of the mortgage lenders are now calling when this happens to offer owners a way out with incentives up to $35000 in moving expenses for completing a short sale. In November, short sales accounted for more than 9% of single family home sales and were up 32% from the year before, according to CoreLogic. Short sales are being approved now more than ever providing home owners a way out.

The short sale process is being refined down to the finest detail so home owners have a way out now and prevents the dramatic decline in values that foreclosures represent ( up to %40 loss of value). Programs like HAFA, HAMP, & HARP are designed to free home owners from burdensome mortgages and receive moving expenses (up to $3000). Banks are offering cash incentives ($3000- 35,000) for home owners who complete short sales and streamlining the process so home owners have direct answers in short time periods. BofA, the largest servicer of home loans, did 107,000 short sales last year. That was up from 92,000 in 2010, which was double the 2009 volume, it says. New legislation has even been proposed to have answers in writing with in 75 days of an offer being submitted on a short sale.

Under water homes have more options than ever to get a fresh start, get out from a mountain of debt created by an economic down turn & a bad mortgage. However time is of the essence because the mortgage debt forgiveness act of 2007 is set to expire at the end of the year. This prevents owners from having to pay taxes on the difference of what they sell for and what they owe.

An opportunity exists for people who are behind on mortgage payments or soon will be. The opportunity to sell a home for less than what is owed while having the least impact to credit scores and receive cash to help with moving expenses. At no other time during this financial down turn have so many advantages been offered to struggling home owners.

Jeff Donnellan  Re/max

http://www.webhomesearcher.com

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Short Sale Start to Finish. A Home Owners Guide to Short Sales

February 9, 2012
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5 Million Home Owners Likely to Face Foreclosure

By Jeff Donnellan RE/MAX  www.webhomesearcher.com

I attended a RealtyTrac webinar earlier today and the host projected that up to 5 Million home owners could face foreclosure between now and 2014.  This figure is shocking, but not surprising.  Most economists project the true unemployment rate at 13-14% including everyone who has stopped looking for work or is under employed.  The report showed slides how foreclosures mirror the unemployment rate.  To throw one more devastating blow to a weak housing market, millions of loans with teaser rates or ARM are about to reset to much higher rates ( average increase of $1000 per month).

The 1st option for any home owner who is having trouble making payments but is able to stay in their home should be to use HARP or HAMP the government sponsored refinance or modification programs.    If staying in your home is not realistic and you need to sell a short sale is a much better option than letting the home foreclose.  The major banks are supporting this as I detailed in an earlier blog “Why Would a Bank Accept a Short Sale“.  Chase Bank is even offering up to 5% ($45000 in some cases) of the loan amount back to the owner at closing if they complete a short sale.

The short sale process can be long, complex and is always evolving to better refine the procedure and speed of the transaction so here is what a home owner attempting a short sale should expect:

1. Contact your bank.  Let them know there are problems and you’re listing your home as short sale.  This will alert their loss mitigation department to assist in this matter. The longer you wait the less time you will have to sell your home and avoid foreclosure.  See if you qualify for HAFA.  Home owners can receive up to 3k in moving expenses.

2.  Contact an experienced short sale Realtor who can guide you through the process.  Be careful not all Realtors are short sale experts.

3.  Your bank will require documentation.  A hardship letter explaining why you are unable to make payments, 2 years tax returns, 2 recent bank statements, 2 recent pay stubs & a financial worksheet.

4.  The next step will be to list your home for sale.  Make sure your agent does a CMA and lists the home near market value.  This will show your bank you are trying to get top dollar and not creating a fire sale or blind auction.

5. Home values may be shifting in your market so make sure to use regular price drops to stay current with surrounding home values.  This will also create a record to show your bank you tried to sell for market value.

6.  Getting an offer from a qualified buyer is extremely important.  Check out their financing to make sure it’s solid.  I see a lot of transactions fall apart because of weak financing.

7. Negotiate the highest possible offer before accepting.  Make sure the buyer gives earnest money and does their due diligence right away.  It’s important to know the buyer is committed to stay with the process and flush out problems early on.

8.  The next step is to submit the offer to your bank.  It may take time to have a contact assigned but be persistent with regular calls.

9. The 1st sign the bank is processing the short sale is when they order a BPO or broker price opinion.  A real estate agent not associated with the transaction will do an independent  valuation and submit this as a starting point for the negotiation.

10.  Usually with in 10-14 days after the BPO the bank will ask for additional documentation and counter or accept the buyers offer. They outline terms, release of liens & waive the deficiency.  Usually 60 days in from step 8 offer submission.

11.  After all terms are agreed upon everything will be submitted to the investor ( owns the loan ) &  a short sale approval letter will be issued.

12. Closing has to happen 30-45 days after acceptance so make sure the buyer has their financing ready.

Choosing the right agent is everything.  National average for successful short sale closings are 30-40%.  Realtors with the CDPE (certified distressed property expert) have a 75-80% success rate.  Let the right person guide you through the complex process and save you from foreclosure.


Is Your Mortgage Weighing you Down? Short Sale v.s. Foreclosure

February 3, 2012
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What Home Owners Need to Know about Avoiding Foreclosure

By Jeff Donnellan RE/MAX

25% of Home Owners are underwater on their mortgage due to 5 straight years of home price declines and home prices have reverted back to 2001-2002 values in most markets.  This means that anyone who  has purchased a home in that time & didn’t make a large down payment owes more than what their home is worth.  During this time  many Americans have lost their job, experienced wage reduction or other hardships that made paying their mortgage extremely difficult.  This is nothing to be ashamed of because most people in this situation spend all of their savings just trying to keep their home.

Our neighbors are suffering in silence. 1 out of every 7 homes in the U.S. is in some state of foreclosure.  7 out of 10 do absolutely nothing about it.  It doesn’t have to be so.  Their are foreclosure alternatives such as a short sale, renting the home or a deed-in-lieu.  A foreclosure is an extremely traumatic event for a family and the worst thing that can affect your credit score (worse than bankruptcy).

Reason Against Foreclosure

  • A foreclosure is worse than bankruptcy
  • A foreclosure is public record for 10 years
  • A foreclosure could jeopardize future employment because employers check credit.

Reasons for a Short Sale

  • Home owner is in control of the selling process, allowed to sell and move with dignity
  • Less impact on credit score. Can drop as little as 50 points v.s. foreclosure 300 or more
  • Owner can qualify for another mortgage in 2-3 years, 7-10 after a forclosure
  • Short sale will be recorded as ” Paid in Full” or “Settled”
  • Owner can receive up to 3K to moving expenses under HAFA guide lines

Most mortgage companies and banks are now more cooperative than ever by participating in programs such as HARP, HAFA, & HAMP.  These programs are meant to help home owners  refinance or modify their mortgage and stay in their home or short sell their home if the hardship is too great.  In a previous blog  Why Would Your Bank Accept a Short Sale I detailed why banks don’t want to foreclose and how they are trying to help home owners relieve the burden of a mortgage they just can’t afford.

To find the best option contact an experienced short sale Realtor.  Since each person has a different situation, an experienced short sale Realtor can make recommendations what is best for you.

This Article was written by Jeff Donnellan RE/MAX CDPE (Certified Distressed Property Expert).  Find more information about Foreclosure prevention and short sales at www.webhomesearcher.com