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Tuesday, June 16, 2009
Short Sales Offer Solution to Foreclosure Crisis - Part 2
By Annalisa Burgos, FrontDoor.com - Published: 6/15/2009
WHAT SELLERS SHOULD KNOW
Get help now. Talk to your lender and/or a real estate professional as soon as you know you can't make your mortgage payments. Huerta says struggling homeowners oftentimes will only seek help after they've already maxed out their credit cards and borrowed $80,000-$100,000 from their life savings to get their head above water.
"You don't have to be living under a bridge," Huerta says. "You don't need to exhaust every dime you have or wipe out your life savings. The sooner you seek help, the more options you'll have."
Work with a short sale expert. Once you decide to pursue a short sale, contact the major real estate brokers in your market and see if they have a short sale specialist. Get recommendations, research online and interview at least three agents. Ask to speak to their previous clients.
Don't worry about paying commission. Unlike a traditional sale, the lender picks up the tab for the broker's commission, typically 5 percent.
Establish financial hardship. The specialist will go over your financials to make sure you have a legitimate financial hardship that prevents you from making your mortgage payments, i.e. you received a cut in pay, you lost your job, you have no 401K.
Be patient. Lenders are inundated. "In April, Countrywide and Washington Mutual received 1,000 short sale applications a day," Huerta says. While deals have been done in 60 days, the process can take as long as six months. If you're in a hurry, a short sale may not work for you.
Scrape up some cash. Yes, you're short on it, but even putting in $1,000 can do wonders for getting a deal done. And it's peanuts when compared to the write-off you're getting on your home loan. One of Huerta's clients took out an $80,000 home equity loan to buy a car and jet skis, lost his source of income and made no payments on the loan. As part of the short sale, the seller agreed to repay just $4,500 of that 80K.
WHAT BUYERS SHOULD KNOW
Commit to the process. If you decide to buy a short sale, understand that the process needs your help to move forward. Don't wait until 60 days after submitting an offer to order the home inspection. Having all your ducks in a row shows the lender that you're serious and boosts your chances of getting your offer accepted. "Put money in escrow. Show the bank you're a real buyer. Do the appraisal and home inspections," Huerta says.
Short sales give you more control than REOs. Homebuyers are attracted to bank-owned foreclosures because of the perceived bargain they offer. But that isn't necessarily the case. An REO is often sold "as-is" and may require substantial work, especially if it has been vacant for some time. A buyer could end up with a serious foundation problem and not know it until after the purchase.
"Short sales are owner-occupied, so they're taking care of the home," Huerta says. "They're in better condition. They may be priced more than an REO, but you can negotiate things like inspections."
Skip the bidding war. An REO will typically get 16 offers, and a buyer may end up paying more than market value for the property, as opposed to the short sale in better condition down the street.
It's worth the wait. Buyers often prefer REOs because it only takes 30-45 days to close. Short sales, on the other hand, can take 60-90 days, or longer depending on the agent. But if you can afford to wait, you could end up with a better property in the same area for less money.
Put your money where your mouth is. Just as a seller should contribute some cash, lenders want to see a buyer with some skin in the deal. "You'd be amazed with the kinds of deals I've done thanks to $1,000," Huerta says.
More info here
WHAT SELLERS SHOULD KNOW
Get help now. Talk to your lender and/or a real estate professional as soon as you know you can't make your mortgage payments. Huerta says struggling homeowners oftentimes will only seek help after they've already maxed out their credit cards and borrowed $80,000-$100,000 from their life savings to get their head above water.
"You don't have to be living under a bridge," Huerta says. "You don't need to exhaust every dime you have or wipe out your life savings. The sooner you seek help, the more options you'll have."
Work with a short sale expert. Once you decide to pursue a short sale, contact the major real estate brokers in your market and see if they have a short sale specialist. Get recommendations, research online and interview at least three agents. Ask to speak to their previous clients.
Don't worry about paying commission. Unlike a traditional sale, the lender picks up the tab for the broker's commission, typically 5 percent.
Establish financial hardship. The specialist will go over your financials to make sure you have a legitimate financial hardship that prevents you from making your mortgage payments, i.e. you received a cut in pay, you lost your job, you have no 401K.
Be patient. Lenders are inundated. "In April, Countrywide and Washington Mutual received 1,000 short sale applications a day," Huerta says. While deals have been done in 60 days, the process can take as long as six months. If you're in a hurry, a short sale may not work for you.
Scrape up some cash. Yes, you're short on it, but even putting in $1,000 can do wonders for getting a deal done. And it's peanuts when compared to the write-off you're getting on your home loan. One of Huerta's clients took out an $80,000 home equity loan to buy a car and jet skis, lost his source of income and made no payments on the loan. As part of the short sale, the seller agreed to repay just $4,500 of that 80K.
WHAT BUYERS SHOULD KNOW
Commit to the process. If you decide to buy a short sale, understand that the process needs your help to move forward. Don't wait until 60 days after submitting an offer to order the home inspection. Having all your ducks in a row shows the lender that you're serious and boosts your chances of getting your offer accepted. "Put money in escrow. Show the bank you're a real buyer. Do the appraisal and home inspections," Huerta says.
Short sales give you more control than REOs. Homebuyers are attracted to bank-owned foreclosures because of the perceived bargain they offer. But that isn't necessarily the case. An REO is often sold "as-is" and may require substantial work, especially if it has been vacant for some time. A buyer could end up with a serious foundation problem and not know it until after the purchase.
"Short sales are owner-occupied, so they're taking care of the home," Huerta says. "They're in better condition. They may be priced more than an REO, but you can negotiate things like inspections."
Skip the bidding war. An REO will typically get 16 offers, and a buyer may end up paying more than market value for the property, as opposed to the short sale in better condition down the street.
It's worth the wait. Buyers often prefer REOs because it only takes 30-45 days to close. Short sales, on the other hand, can take 60-90 days, or longer depending on the agent. But if you can afford to wait, you could end up with a better property in the same area for less money.
Put your money where your mouth is. Just as a seller should contribute some cash, lenders want to see a buyer with some skin in the deal. "You'd be amazed with the kinds of deals I've done thanks to $1,000," Huerta says.
More info here
Short Sales Offer Solution to Foreclosure Crisis - Part 1
By Annalisa Burgos, FrontDoor.com | Published: 6/15/2009
Despite its name, a short sale is by no means a "short" process. But unlike what you may have heard, getting a short sale approved by your lender is not as hard as you may think -- if your real estate agent knows what they're doing.
In order to orchestrate a successful short sale, you need a master negotiator, says Troy Huerta, short sale division leader at Coldwell Banker Residential Brokerage in San Diego. "Many agents forgot how to negotiate. There was no negotiating in the past. You would list a home at a ridiculous price and someone would pay it."
Those days are long gone. Home values are falling. Unemployment is at 9.4 percent. And according to RealtyTrac, there were more than 321,000 foreclosure filings in May, 18 percent higher than a year earlier. That's expected to get worse.
But there's a way to help ease this flood of foreclosures, Huerta says. Do more short sales.
In the past, lenders have been reluctant to do short sales. And why would they? They stand to lose a LOT of money. But the reality today is that if a lender doesn't do a short sale, it may get stuck with a property that is harder to sell or will sell for less than it could have gotten. (A buyer is more willing to buy a short sale in good condition than a bank-owned foreclosure that needs a lot of work.) Not to mention the cost of pursuing the foreclosure process.
Even Fannie Mae felt short sales could help reduce foreclosures. It launched a pilot program pre-approving short sales for homeowners in Phoenix and Orlando.
Now, lenders should be more motivated than ever to get these deals done -- as part of President Obama's economic stimulus plan, the federal government will pay lenders up to $1,000 for each completed short sale or accepted deed-in-lieu of foreclosure.
In Huerta's market -- San Diego -- about 70 percent of the properties for sale are short sales, 20 percent are bank-owned or REOs, and 10 percent are traditional sales.
On average, only a third of short sale deals actually close. In other words, the failure rate for the average agent doing a short sale is a whopping 66 percent, Huerta says.
The problem? "About 80 percent never counteroffer," Huerta explains. "The bank will tell them no and the agent stops there. But that's their job to say no."
Negotiating a short sale is essentially loss mitigation, Huerta says. The property is priced based on two to three broker price opinions (an agent's estimate of its current market value), which is less than what the seller owes. Interested buyers tend to start with a lowball offer and lenders want to recoup as much as they can, so it's the agent's job to negotiate a price that satisfies both parties. If the seller took out a piggyback loan or a home equity loan, multiple lenders are involved. And with the barage of short sale applications lenders get, you can see why the process can take as long as six months to a year.
But short sale experts who have extensive contacts within the mortgage industry and experience with these complex deals can close them quickly. Huerta and his team, for instance, work with lenders throughout the country, like Countrywide and Washington Mutual, and can get these deals done in 60-90 days, boasting a 90 percent success rate.
More info here
Despite its name, a short sale is by no means a "short" process. But unlike what you may have heard, getting a short sale approved by your lender is not as hard as you may think -- if your real estate agent knows what they're doing.
In order to orchestrate a successful short sale, you need a master negotiator, says Troy Huerta, short sale division leader at Coldwell Banker Residential Brokerage in San Diego. "Many agents forgot how to negotiate. There was no negotiating in the past. You would list a home at a ridiculous price and someone would pay it."
Those days are long gone. Home values are falling. Unemployment is at 9.4 percent. And according to RealtyTrac, there were more than 321,000 foreclosure filings in May, 18 percent higher than a year earlier. That's expected to get worse.
But there's a way to help ease this flood of foreclosures, Huerta says. Do more short sales.
In the past, lenders have been reluctant to do short sales. And why would they? They stand to lose a LOT of money. But the reality today is that if a lender doesn't do a short sale, it may get stuck with a property that is harder to sell or will sell for less than it could have gotten. (A buyer is more willing to buy a short sale in good condition than a bank-owned foreclosure that needs a lot of work.) Not to mention the cost of pursuing the foreclosure process.
Even Fannie Mae felt short sales could help reduce foreclosures. It launched a pilot program pre-approving short sales for homeowners in Phoenix and Orlando.
Now, lenders should be more motivated than ever to get these deals done -- as part of President Obama's economic stimulus plan, the federal government will pay lenders up to $1,000 for each completed short sale or accepted deed-in-lieu of foreclosure.
In Huerta's market -- San Diego -- about 70 percent of the properties for sale are short sales, 20 percent are bank-owned or REOs, and 10 percent are traditional sales.
On average, only a third of short sale deals actually close. In other words, the failure rate for the average agent doing a short sale is a whopping 66 percent, Huerta says.
The problem? "About 80 percent never counteroffer," Huerta explains. "The bank will tell them no and the agent stops there. But that's their job to say no."
Negotiating a short sale is essentially loss mitigation, Huerta says. The property is priced based on two to three broker price opinions (an agent's estimate of its current market value), which is less than what the seller owes. Interested buyers tend to start with a lowball offer and lenders want to recoup as much as they can, so it's the agent's job to negotiate a price that satisfies both parties. If the seller took out a piggyback loan or a home equity loan, multiple lenders are involved. And with the barage of short sale applications lenders get, you can see why the process can take as long as six months to a year.
But short sale experts who have extensive contacts within the mortgage industry and experience with these complex deals can close them quickly. Huerta and his team, for instance, work with lenders throughout the country, like Countrywide and Washington Mutual, and can get these deals done in 60-90 days, boasting a 90 percent success rate.
More info here
California Foreclosure Prevention Act - Helps Short Sales
The California Foreclosure Prevention Act, or Assembly Bill X2 7, which Governor Arnold Schwarzenegger signed in February, is meant to push banks and loan servicers into lowering mortgage payments of homeowners in financial trouble.
It may also motivate banks and loan servicers to negotiate short sales because of the pushing back of foreclosure. This is because some borrowers simply cannot afford the cost of the house they are in (even with a loan modification that would bring the lender’s recovery in line with what it would recover through foreclosure) or are so under water that they are not willing to make the payments even on a modified mortgage.
Even though Mathew Padilla from the OC Register says:
It may also motivate banks and loan servicers to negotiate short sales because of the pushing back of foreclosure. This is because some borrowers simply cannot afford the cost of the house they are in (even with a loan modification that would bring the lender’s recovery in line with what it would recover through foreclosure) or are so under water that they are not willing to make the payments even on a modified mortgage.
Even though Mathew Padilla from the OC Register says:
And the bill says it does not require a servicer to violate contracts for “investor-owned loans.” The most troubled loans are generally those investment banks packaged and sold, and if the servicing contract says foreclosure is preferable to a loan modification, nothing in the law stops foreclosure.We are seeing better response for Short Selling from lenders than in the past.
The law also says it does not require a bank to “provide a modification to a borrower who is not willing or able to pay under the modification.” I am not sure what “able to pay” means if the target debt-to-income ratio is 38 percent? Maybe if borrowers have to make other hefty payments — on cars, credit cards etc. — then they are out of luck.
HGTV - Short Sales Offer Solution to Foreclosure Crisis
HGTV Front Door interviewed Troy Huerta about helping other buyers and other agents increase their success rate and reduce the time it takes to close Short Sales. Here is part of the interview:
....Now, lenders should be more motivated than ever to get these deals done as part of President Obama's economic stimulus plan, the federal government will pay lenders up to $1,000 for each completed short sale or accepted deed-in-lieu of foreclosure.
In Huerta's market -- San Diego -- about 70 percent of the properties for sale are short sales, 20 percent are bank-owned or REOs, and 10 percent are traditional sales.
The failure rate for the average agent doing a short sale? A whopping 66 percent, Huerta says.
The problem? "About 80 percent never counteroffer," Huerta explains. "The bank will tell them no and the agent stops there. But that's their job to say no."
Negotiating a short sale is essentially loss mitigation, Huerta says, which is why the process can take as long as six months. But short sale experts who have extensive contacts within the mortgage industry and experience with these complex deals can get these deals done quickly. Huerta and his team, for instance, work with lenders like Countrywide and Washington Mutual and can get these deals done in 60-90 days, boasting a 90 percent success rate.....
Click here for the article
....Now, lenders should be more motivated than ever to get these deals done as part of President Obama's economic stimulus plan, the federal government will pay lenders up to $1,000 for each completed short sale or accepted deed-in-lieu of foreclosure.In Huerta's market -- San Diego -- about 70 percent of the properties for sale are short sales, 20 percent are bank-owned or REOs, and 10 percent are traditional sales.
The failure rate for the average agent doing a short sale? A whopping 66 percent, Huerta says.
The problem? "About 80 percent never counteroffer," Huerta explains. "The bank will tell them no and the agent stops there. But that's their job to say no."
Negotiating a short sale is essentially loss mitigation, Huerta says, which is why the process can take as long as six months. But short sale experts who have extensive contacts within the mortgage industry and experience with these complex deals can get these deals done quickly. Huerta and his team, for instance, work with lenders like Countrywide and Washington Mutual and can get these deals done in 60-90 days, boasting a 90 percent success rate.....
Click here for the article
Sunday, April 26, 2009
Distressed Properties - So Far in 2009
A study of the top 26 foreclosure markets revealed that foreclosure inventories are equal to 77 percent of MLS listings. In "bubble markets" with volatile prices, foreclosure inventories represent up to 89% of listings. Looking at the same 26 markets its estimated that foreclosure inventories alone represent between a 14.4 and 34.7-month supply of housing. The National Association of Realtors estimates that foreclosure and short sales represented 45 percent of existing-home transactions during the fourth quarter. As a result of the current economic climate, all indications are that its going to take a long time for this discounted inventory to clear, even with foreclosures representing a growing percentage of transactions.
Scoring Foreclosure Property Deals: Short sales are a new trend
As foreclosure inventory continues to grow, banks are becoming more and more interested in pursuing short sales. The largest banks and thrifts are substantially increasing their short sale activity. From Q3 2008 to Q4 2008 short sale transactions were up 61 percent. Short-sale property discounts ranging from 10 percent to 20 percent. Clearly, lenders want to recover as much of the mortgage amount as possible, but selling at a discount in this range typically still saves them money versus letting the home fall into foreclosure.
Insights from the Mortgage Bankers National Servicing Show
It was clear at the show that most servicers are expecting a significant influx of REOs in Q2 and Q3 as moratoriums begin to lift. With the large inventory levels, asset managers are applauding REO agents that are using any differentiating approach toward actively marketing their REO listings. We are seeing that loan modifications programs are rapidly expanding. Banks are proactively looking at their default portfolios and segregating loans into those that qualify for a loan modification, those that are likely candidates for short sale and those where foreclosure appears to be the only course of action for recovery. With this new shift, asset managers are expanding their business by getting into the business of processing short sales. We expect that this will bring new efficiency to the short sale process and likely a reduction in the typical length of time it takes to close these transactions."
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