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Hot During the Holidays!

As the Holiday season quickly approaching, we have many clients ask, “is it a good idea to sell my home during the holidays?’ In short, yes, it is a great idea to sell you home during the holidays. Given that packing and moving is part of this process and can be stressful at times, with the lack on inventory on the market, selling during the holidays can be a great way to start the new year. I recently read an article by Dave Ramsey (financial planning guru) and here are a couple points that he makes about selling during the holidays:

The Tip: Thanks to reduced competition, motivated buyers and a warm and cheery holiday home, you can sell your home faster and for more money during the holiday season.”

3 Key Reasons:

1. Less Competition

You’re not the only homeowner who’s considered taking your home off the market during the holidays—most don’t want the hassle. And most new sellers will decide to wait until the first of the year or even springtime to put their homes up for sale. That’s great news for you because you won’t have to compete with dozens of other homes just like yours to get buyers’ attention. Reduced inventory means more buyers checking out your home, either online or in person. Keep their attention by making sure your home is priced to sell and that your home is in “show” condition at all times.

2. Motivated Buyers

Anyone who takes time out of their busy holiday schedule to shop for a new home is serious about buying now. Perhaps they are buying a home for tax reasons or are relocating to start a new job in the new year. Maybe they’ve been looking for months and just haven’t found that perfect home yet.

3. Your Home Looks Great

Emotion plays a huge role in which home a buyer purchases, and you can capitalize on that by making your home cozy and cheery during showings. Tasteful decorations and a minimum of clutter will allow buyers to see their own families celebrating the holidays in your home next year. Make sure your decorations enhance rather than detract from your home’s best features, and remember to remove them as soon as the season is over.”

If it is a traditional equity sale, or short sale, selling your home during the holidays can be a great way to end the year on a positive note. If we can be of any assistance in helping you assess the timing of selling your home, please do not hesitate to write us here at ShhortSale.com.Happy Holidays.

Jeff Grant, President, ShhortSale.com

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PROOF: Banks Forcing Sellers Into Foreclosure

A couple months ago we at ShhortSale.com blogged about how a Bank of America employee was incentivized to push homes into foreclosure instead of proceeding with a short sale. Well, it seems as though Bank of America has done it again… According to a recent LA Times article, ‘A former Bank of America employee who had dealt with delinquent mortgages has been arrested on federal charges of accepting more than $1 million in bribes to allow homes to be sold far below their market value.Kevin Lauricella worked at a BofA facility in Simi Valley where he focused on short sales, said Ariel Neuman, an assistant U.S. attorney in Los Angeles.

Short sales are transactions that allow borrowers in default to satisfy their mortgage debts by selling the property for less than they owe. 

A 28-count grand jury indictment, unsealed Tuesday, listed 18 properties allegedly sold in late 2010 and early 2011 at prices below those the bank would have approved. Lauricella is accused of enabling the sales by improperly approving short sales and falsifying bank records. Most of the homes were in the San Fernando Valley, but others were in Corona, Coto de Caza, Beverly Hills and Bel Air.“The buyers would either resell the homes at the actual property values or in some cases would refinance the property at the actual value, thereby extracting profits on the deals,” Newman said.’ To read the full article, click here
 
This is the biggest reason that ShhortSale.com enjoys working for you as a Consumer Advocate, and information like this simply confirms that our efforts are necessary and appropriate. If we may help you in any way, please let us know.
 
Abe Woody, Managing Negoitator, ShhortSale.com

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Short Sales: Setting Proper Expectations

The most common problem that arises with short sales concerns unrealistic expectations regarding the time of the transaction. Buyers need to understand the entire process, and the reasons for potential delays.

From a seller’s perspective, part of the sales pitch should include that the price discount includes the potential relatively long road to closing. The horror stories of the past when transactions went into their eighth month have been replaced with ninety days realistic, but know that time may get stretched out.

Much of this decrease in expected transaction time is the banks becoming more efficient with the paperwork and negotiation process. The reality of the large number of short sales has created the demand for the bank to accept the inevitable and cut their own transaction costs

Much of this blog is dedicated to anticipating problems and solving them in advance. Discuss with the buyer that they should expect between ninety and 150 days of transaction time. Set the expectation that the transaction takes longer than a traditional real estate deal.

Reinforce that you have discussed the guidelines with the bank and they are ready to accept the deal within the guidelines. Also, state you cannot speak for the bank’s future actions, but you have vetted the deal in advance. Show the due diligence letters you have written to confirm the understanding.

Commit everyone to the deal as early as possible, but understand the unknown factor may require adaptations later.

Abe Woody, Managing Negoitator, ShhortSale.com

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Did You Short-Sell? Buy Again After Only 1 Year!

Great news for ‘Boomerang’ Buyers - former home owners who have gone through a short sale, foreclosure, or bankruptcy in the past few years and are looking to buy again. Just Wednesday, HUD announced : 
“As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost their homes to a pre-foreclosure sale, deed-in-lieu, or foreclosure. Some borrowers were forced to file for bankruptcy to discharge or restructure their debts. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has been negatively affected. FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”
 
The “Back to Work – Extenuating Circumstances” program is designed to help Boomerang buyers who have experienced short sale, foreclosure, bankruptcy, loan modification, or other derogatory credit event, can now qualify in 12 months after the event. This provision waives the three year waiting period FHA had in place prior to this announcement and the program is here through September 2016! FHA is allowing for the consideration of borrowers who have experienced an Economic Event and can document that:

• Certain credit impairments were the result of a Loss of Employment or a significant loss of Household Income beyond the borrower’s control.
• The borrower has demonstrated full recovery from the event.
• The borrower has completed housing counseling.

According to an article I read today, ‘boomerang buyers are predicted to account for nearly one in every five home sales in the metro San Diego area this year—double the projected U.S. rate.’ With the market picking up and with buyers that had experienced an unfortunate circumstance during the housing collapse, there is now great hope. This is an enormous  step for our real estate market as well as for our nations economy. If you have any questions about the possibility of using this new program, please do not hesitate to reach out to us.

Abe Woody, Managing Negoitator, ShhortSale.com

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Are Bank Employees Incentivized to Foreclose?

The pretense that banks are concerned with distressed homeowners is all but gone, just ask any owner entangled in the short sale process. This isn’t a new trend, in fact banks have been enjoying the fruits of the bail out for years; foreclosure to them is not a bad option even in poor markets. Mortgage insurance, federal incentives, Fannie Mae (now Fed controlled) input to offset carrying costs and getting the property back can significantly reduce or eliminate a loss even in declining or stable markets. In appreciating markets….well the bottom line moves into the black.

The rate of short sale completion is down and the time it takes for those completed is up. Blame it on a designed process that frustrates and stifles participants, on inadequate or incompetent staffing or on the simple decision that the banks see foreclosure as a viable option. This is occurring nationwide, especially in “hot” markets – and San Diego is a perfect example. Despite a stable to rising market, almost HALF of San Diego homeowners are underwater. Not all will head to foreclosure of course; some aren’t moving and will ride it out. Others however, may not have a choice. A short sale is often the first step after they realize they’re going to be in trouble if and when they move. Few can anticipate what to expect from the “we want to help you” lenders.

Just last month, the Huffington Post wrote an article about how former workers at Bank of America alleged that they were incentivized to push homes into foreclosure by lying to the homeowners about their current mortgage status, payments and documents for rewards:

“Six former Bank of America Corp employees have alleged that the bank deliberately denied eligible home owners loan modifications and lied to them about the status of their mortgage payments and documents. The bank allegedly used these tactics to shepherd homeowners into foreclosure, as well as in-house loan modifications. Both yielded the bank more profits than the government-sponsored Home Affordable Modification Program, according to documents recently filed as part of a lawsuit in Massachusetts federal court.The former employees, who worked at Bank of America centers throughout the United States, said the bank rewarded customer service representatives who foreclosed on homes with cash bonuses and gift cards to retail stores such as Target Corp and Bed Bath & Beyond Inc.”

I would hate to think that this is true, but we have definitely worked files where the bank continued to delay any action on a short sale file, even though they had the sufficient documentation to proceed accordingly. To hear about a major bank deliberately lying to homeowners for a reward is DISTURBING!

I believe it. In fact, I’ve been talking about this kind of bank behavior for years! Just ask any of my 500+ past clients. That is the biggest reason that I enjoy working for you as a Consumer Advocate, and information like this simply confirms that our efforts are necessary and appropriate. If I may help you, please let me know.

Jeff Grant, President, ShhortSale.com

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Is Now the Right Time to Buy?

As you might have seen or heard, the summer ‘selling season’ is in full effect and the real estate market continues to have a tremendously low amount of inventory for sale. According to the California Association of Realtors, annual home sales are now down about 6 percent while the median home price is up 24 percent – with a record low inventory. What is interesting is that the number of real estate agents saying that now is a good time to buy has declined, while the number of agents saying now is a good time to sell, has spiked dramatically. While prices have soared in the last year, sales have not. According to C.A.R., inventory is down about 60 percent from 2007 – when we started seeing the housing bubble in full bloom. With record low interest rates, buyers are more incentivized to buy – it’s only human nature to want to get ‘in on the game.’ But because of these low interest rates and a lack of homes for sale, we are seeing bidding wars driving up sales prices and usually the winner is an ‘all cash buyer.’ This is not to discourage the financed buyer because there are homes out there for the taking – they (homes) just need to acted upon fast and be willing to pay above or at true market value.

According to Stan Humphries (Zillow’s Chief Economist), The housing market is… recovering quite nicely, trying to get back to normal, Humphries said. “But there two big factors distorting the market… The first is negative equity… and the second big distortion is incredibly low interest rates. However, just being above water may not be enough to comfortably sell because of down payments, real estate commissions, taxes and other fees tied to sales, Humphries said. Having at least 20 percent positive equity, Zillow analysis says, is especially important for those who are selling to move to a home of equal or greater value.” In short, as we start seeing interest rates creep back up, and with sellers building more equity, we will start to see the market level out a bit – seeing a truer market that accommodates both buyers and sellers somewhat more equally.

So, is it the right time to buy? Yes – if the deal is right! Interest rates are bound to go up eventually, so take advantage of these record lows now.

- Abe Woody, Managing Negoitator, ShhortSale.com

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Short Sales Increasing, Foreclosures Decreasing

As we’ve all read and heard, the overall real estate market is improving – slowly and steadily – but a shift is underway. Real-estate data firm RealtyTrac, which specializes in foreclosure information, has released its 2012 U.S. Foreclosure and Short Sales Report and it indicates that short sales are supplanting foreclosure-related transactions (in this example – in the state of CA).

A short sale is, in essence, a kind of foreclosure without the the bank getting stuck with the property. It also, statistically, generates more money for the bank compared to a foreclosure, because they do not incur legal costs, rehab costs, holding costs, and even further opportunity costs of their capital. In a short sale, the lender agrees to accept less than what’s owed on a home — but the homeowner (their RE Agent) locates a willing buyer. One thing I’ve learned from closing nearly 500 short sales and having a current pipeline of many more, is that the process can take a while. But for borrowers who are underwater on their loans a short sale can be one way out of a bad financial situation. It can also delay the foreclosure process, generate money for the seller at closing (between $3k – $35k), and mitigate the overall negative effects on one’s credit (compared to a foreclosure).

RealtyTrac reports that short sales boomed during the third quarter of 2012. They increased 20 percent from last year and accounted for 14 percent of all residential sales. Today, we see statistics stating the foreclosures are down a whopping 17% since last year! This is due in part to short sales preventing them.

But the dreaded fiscal cliff could “stifle this trend,” RealtyTrac’s Daren Blomquist said in a statement. That’s because the Internal Revenue Service can forgive the difference between what short sellers owe and what they sell for. But if we go over the cliff, the IRS could ding them come tax time. We are set to do so at the end of this year, so now is the best time ever to short sell.

Jeff Grant, President, ShhortSale.com

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Great News for 2013!

Great News! As of January 1, 2013, the Mortgage Debt Forgiveness Act was extended until December 31, 2013. Thus, continuing to protect short sellers from paying taxes on the deficiency of their short sale. If the bill had not been extended, homeowner’s electing to short sale, would have to pay taxes on the ‘short’ amount between the difference of the sales price of their home and their loan amount. For example, if a homeowner takes out a loan for $400k and a few years down the road sells their home for $300k, then they would be liable to pay taxes on the $100k of ‘forgiven debt.’ If a homeowner cannot pay the mortgage in the first place, then how will they be able to pay these taxes? Answer: they can’t. By extending the Debt Relief Act, the government is sending a message to lenders, distressed homeowners, and real estate professionals that short sales are the preferred method to assist homeowners in getting rid of a mortgage they can no longer afford. The tax exemption, along with lender incentives (some banks will give incentives from $3K up to $35K to short sellers), encourage homeowners to be proactive about avoiding foreclosure. Fewer foreclosures will help stabilize home prices and less homeowners in default will mean a decrease in the shadow inventory.

As of late, we have started seeing home prices slowly creep back up – adding validity to how this extension benefits our real estate market. We are very excited about 2013 here at Shhortsale.com and if you would like to explore your options about a possible short sale, we are here to help.

- Abe Woody, Managing Negoitator, ShhortSale.com

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But, What if I Don’t Have a Hardship?

Generally, sellers need a verified hardship to do a short sale however; there are ways to do a short sale without a hardship. First, understand there is no guarantee that a bank will agree to accept a short sale and release the loan under circumstances that involve a hardship, much less those without a hardship. Every bank is different and Investor guidelines vary from file to file. Here are some types of hardship: Unemployment, curtailment of income (new job, pay cut, partner’ loss of job), illness or medical emergency, job transfer (voluntary or involuntary), divorce (separation or marital difficulty), exotic mortgage terms and military service.

In some cases, a hardship is a matter of perception. A hardship is defined as a condition that is difficult to endure and it could entail some sort of physical or mental pain. You don’t have to be living in a cardboard box under a bridge to have a hardship. In one case, we proved to the bank that the neighborhood in which our client lived had a high crime rate, thus causing them great stress. Hardship. We got short sale acceptance.

So, what about a financial hardship in a short sale? Maybe you own an investment proeperty that is ‘underwater’ due to whatever reason. Or, maybe you voluntarily took a new job in another city and you had every intention to pay the current mortgage, but due to the ‘down’ market and a large loan you were forced to short sell? If we can show the bank a homeowner’s insolvency (expenses outweighing income), we are able convey the inability to pay the mortgage. This is an honest and ethical strategy that we will use to your advantage, one that will validate a hardship!

Abe Woody, Managing Negoitator, ShhortSale.com

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Buying a Short Sale: Separating Yourself From The Pack

So you’re in the market to buy. Interest rates are low, and prices are more-affordable than ever. Though statistics show that distressed listings (short sales and REOs) are only 30% of the overall market, trying to find a home to buy makes it feel like over half of the available listings are! So, how do you buy one of these short sales? What are ‘tricks of the trade’, and what will give you the best chance at getting one?

The first important point to understand in buying a short sale is that for the most part, sellers and their respective listing Agents are not focused on selling price (as long as the offer price is justifiable to the bank!). What is more important is working with a buyer who is patient, flexible (in contract terms and even price), and who has hired a buying agent who is cooperative, responsive, and who knows short sales.

The second most-important part of buying a short sale is to react in a timely manner. As a listing agent myself, I’ve learned to value quick responders as it is typically indicative of how they’ll be moving forward in the transaction. Short sales have unique hurdles such as updated proof of funds, affidavits/addenda the banks require, and sometimes unrealistic response requirements set by the bank. The quicker the response, the better chance I have at closing the short sale.

Another important point with short sales is to not validate listing/asking price as much as one would in a traditional equity sale. Many times I have to list a short sale high simply because the bank has required me to. My frequent price drops from there is a strategy to prove the true market value to the bank. On the other hand, I may list a short sale for an aggressively low price if the seller has a foreclosure date of only a few weeks away, and I must procure an offer ASAP in order to delay it.

The fourth point worth discussing in regards to buying a short sale relates to the closing costs. Though every buyer would like the banks to permit/pay for a home warranty and other miscellaneous fees, most of the times they do not. Offer accordingly. If your offer is contingent upon the bank approving those fees, you are probably offering too much.

Last (and most important?) point in buying a short sale is to work with an experienced Buying Agent. It is no secret that many Agents are scared of short sales, though few will actually say it (considering us Agents are compensated only when a transaction closes, many agents will say whatever they must in order to get the business). It is critical to work with an Agent who knows the ins-and-outs of short sales including how a bank values the home, the responsiveness required by the bank, the specific lender traits and idiosyncrasies, the value of successful communication, and more. When an Agent who understands the value in all of those points presents an offer, they will be greatly valued – sometimes even more than an offer for a higher amount.

Jeff Grant, President, ShhortSale.com

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