Short Sales/Foreclosures Guide

Understanding Short Sales

1. Talk to people

After enduring a financial hardship and finding out that your home is underwater, your first steps should be to talk to three key parties: a CPA, a real estate attorney and a qualified real estate agent.
“Each state has its own laws regarding the lender’s ability to come after the borrower for a deficiency after the sale or foreclosure, so it is highly recommended that homeowners discuss their situation with all three of these people. Consulting with these three parties will help you to confidently go forward with the short sale, or to learn early on whether or not you should go another route altogether.

2. Find the right agent

If your discussions lead to a decision that a short sale is the way to go, it’s time to choose the best real estate agent available. While many agents will tout themselves as short-sale experts and tag on fancy titles and certifications to their names, many times these are nothing more than titles granted after completion of a course. If you want to use titles as guidelines, keep an eye out for Certified Distressed Property Experts (CDPE) or National Association of Realtors Short Sale Specialists.
Beyond titles and organization names, it’s important to ask questions like, “How many short sale listings do you currently have?”, “How many short-sale listings have you lost to foreclosure?”, “Can I have the names and phone numbers of your last five short-sale listing clients?”. The short-sale process lives and dies with the listing agent. Also, be wary of scammers who offer things that sound too good to be true.
Your Next Call is to LandMark Realty (734-981-5333), our Short Sale Dept. has a 100% closing rate. If we agree to help you Short Sale your home we are completely confident that we can in fact do so. We do not take a listing to add another listing to our files (We list homes to sell, not just list them).

3. Find the true value of your home

Before embarking on the long process of a short sale, homeowners should verify the value of their home. This can be done in several ways. If you’re trying to do as much work on your own, you can use tools like Whats my home worth located on LandMark Realty’s Home Page to approximate the value of your property by comparing it with the values of similar, neighboring houses. You can also look to LandMark Realty your real estate broker to give you an estimate. A third option is to get an estimate from an independent appraiser. One way to do this is to search the Appraisal Institute website to find an appraiser in your area. “Too often I will see homes listed way below market value marketed as a short sale,” says Scott Cleland. “The banks are not dumb and they are looking for as close to market value as possible.”

4. List the home at the right price

The price that the home is listed at is a key step in the short sale process. It should be slightly above market value, and the price should be lowered at pre-determined intervals until an offer is received. This will appease your bank by showing them that you tried to do your best to get them the most for your home.
“Not only do you need an attractive sales price to entice a buyer to go through the shenanigans inherent in a short sale, but you need to satisfy the bank’s appetite for profit,” says Scott Cleland, for LandMark Realty. “If you can’t give the bank a decent sales price, the bank might reject the short sale.”

5. Get your package together

Once an offer is received, it’s time to start building your short-sale package. Your lender will require a number of documents, including a hardship letter, your tax returns from the last two years and your last two pay stubs, among other things. When all is said and done, the whole package could be 60 to 80 pages long, yes we love paperwork in this business “not”. It’s essential that all required documents are included in the package, as banks will look for any and every reason to put off your short sale.

6. Wait

Now it’s all about patience, a key part of the short-sale process. It could take about 30 to 45 days for the lender to get your short-sale package, put all the information on their system and assign the sale to a negotiator — in some cases, it could take up to three-Six months. It is the nature of the beast but as the saying goes, “good things come to those who wait”.

7. Negotiate

The negotiator from the lender will offer a broker-price opinion (BPO), or an appraisal, of your home. Typically, if the offer you’ve received is within 5 percent of the BPO and if all necessary information is given to the lender, the short sale will be approved. If the offer is too low, the lender could counter with a higher sale price. This may lead to some back-and-forth negotiating, and buyers may come and go, but keep your agent close and don’t get discouraged. This is all part of the game. The entire short-sale process could take six weeks, while others may take a year or longer.

 

Short Sales: Nightmare or a Path to Financial Solvency?

Short sales, the hot potatoes of the real-estate market, are becoming easier to handle. Over the next three years, look for the number of short sales and mediations to grow, as the last reset of those toxic adjustable-rate mortgages comes due and major banks and their servicing divisions get more cooperative.

But throwing a line to upside-down homeowners isn’t happening out of the goodness of lenders’ hearts. They’ve just figured out that it’s a smarter way to do business.

Scott Cleland agent and short sales division consultant with LandMark Realty, says that over the past three years, lenders have learned that Letting homes go into foreclosure left them holding properties that continued to devalue, and in many cases degenerated physically when left unoccupied. Not to mention the public pressure against allowing foreclosed homes to blight neighborhoods and decrease property value. “Lenders have realized that a short sale is much better,” said Scott.

 

Life After Foreclosure:  Tips for Finding a Rental

For the thousands of families affected by foreclosure, finding a new home can prove difficult and time-consuming. Many landlords require credit checks for tenants, which can seriously limit your options after defaulting on a mortgage. For those unlucky enough to fall in this transient category, Lynnette Khalfani-Cox from our sister site WalletPop shares seven secrets to finding a rental fast.

1. Investigate apartments online.

In recent years, a number of online apartment rating services have flourished, making it easier for prospective tenants to learn a lot about a housing unit prior to even seeing it in person. So before you hit the pavement to go apartment hunting, use a service like ApartmentRatings.com or ApartmentSearch.com to discover everything from how much the rental units cost each month to whether an apartment accepts pets.

2. Offer a higher deposit.

Some landlords may take you more seriously if you offer a higher-than-requested deposit. Do what you can to prove that you have funds available to pay your rent on time, and the foreclosure on your credit history may not hurt you as much.
Since it’s taking much longer now for banks to repossess homes, perhaps you have the option of what’s known as squatter’s rent available. If so, giving the landlord a higher deposit means the landlord can adequately cover any losses, if you end up breaking your lease agreement. Give your landlord some peace of mind, and you may find it much easier to secure the rental property you want.

 

Buy a Foreclosure, Get a Break on Closing Costs

Freddie Mac is stepping in to make buying a bank-owned home a sweeter deal for you, reports Inman News. The agency is offering help with closing costs for buyers of Freddie Mac-owned properties. The catch is, you have to act fast. Offers must be in by July 31, and purchases have to close escrow on or before Sept. 30. See Inman News for the full story.

Hoping to boost sales of foreclosed homes, Freddie Mac is offering up to 3.5 percent in closing-cost assistance to homebuyers and a $1,200 bonus to buyer’s agents for offers on HomeSteps properties received by July 31 with escrow closing on or before Sept. 30 2011.

On the purchase of a home priced at $150,000, for example, HomeSteps will pay up to $5,250 toward closing costs. Investors are not eligible for Freddie Mac’s HomeSteps summer sales promotion — only homes sold to owner-occupants qualify.

Similar closing-cost incentives offered by Fannie Mae on HomePath properties this spring require escrow to close by June 30, with Fannie Mae advising that offers submitted after May 15 may not meet that deadline.

 

Advice from the Big Kahuna: Foreclosure King Leo Nordine

Forget Warren Buffet. When it comes to real estate advice, ears are cupped in the direction of Leo Nordine, the Hermosa Beach, California, real estate agent also known as the King of Foreclosures. Nordine defies the image of a successful real estate agent. He runs around barefoot most days, drives a Prius and a minivan, doesn’t use a cell phone, and puts surfing ahead of work. He also has closed more than 4,000 home sales, averaging upwards of 300 a year, all of them foreclosures. He’s been featured in publications as unlikely as the New Yorker for being one of the country’s leading housing market timers.

AOL Real Estate spoke with him recently, on the heels of the news that housing prices fell 3 percent last quarter–the biggest drop since 2008 — and that 28.4 percent of single-family home owners are upside down on their mortgages.

When will the real estate market hit bottom?
Nordine: It’s already hit a soft bottom. The government realized that we would have a full-on Depression if it didn’t slow down the foreclosures, so it came up with all these plans for loan modifications, short payoffs. One of Washington’s really good ideas was offering the tax credit for first-time buyers; a bunch of people were able to jump into the market on that. But all that’s happened from all the government’s efforts is that we’ve managed to stem the flow of the bleeding.

Q. Why should anyone buy a house now?
I’m actually not that keen on buying anything. I think a better course is to take any spare cash you have and use it to pay down your debt. Sure, it’s still fun to own a house, fix it up the way you want. And there are tax advantages to owning a house, so if you have a steady income, that’s not a bad reason to buy a house. But if you’re struggling financially and have debt, don’t do it.

Q. Adjustable-rate mortgages are making a comeback. What do you think of them?
A. People have such short memories, don’t they? The only reason people want an adjustable loan is because they can’t qualify for or afford a fixed-rate mortgage. If you can’t afford a fixed-rate loan, you can’t afford to buy the house. Period.

Q. What about an ARM for a couple in their 60s who won’t live long enough to ever pay off a 30-year-fixed rate loan? Why shouldn’t they consider a lower-rate ARM?
Because in 10 years, they will be a couple in their 70s forced out of their home and living on the street. It’s back to that old thinking that your house will appreciate in value. Haven’t the last five years taught us anything?

Q. What advice do you have for people with homes they can’t sell?
If someone lives in it, get the house in as good condition as possible — and make it as empty as possible. Cleaner, brighter houses sell faster. Above all else, price it to sell it. Get over what you think it should be worth. Get yourself an aggressive agent who will tell you the truth about what the price needs to be for it to move quickly. This isn’t a good market for overpriced listings.

Q. Can you foresee us becoming a nation of renters?
I certainly see more Americans becoming renters. The government pushed home ownership as a dream. It encourages stability. But I have still rented for more of my lifetime than I owned. There is something to be said for the freedom to be able to move on a moment’s notice and not having the tax burdens of home ownership. There’s lower overhead, lower burden of debt. There is a lot to be said for renting.

Q. You grew up in a low-income family, raised by a single mother. You’ve talked about being a boy and buying T-shirts for school for 25 cents at the thrift store. Describe your financial philosophy today.
A. I’m conservative. I long ago discovered that for me, it felt better to save than to consume. I admire the people of China for how thrifty they are, how they incur very little personal debt. They save up for the things they want. In practical terms, I still like real estate as an investment. I don’t trust commodities and stocks that can jump or fall in one day. I love real estate because it moves like a glacier. If you are paying attention, you can see the direction the real estate market is headed. It doesn’t get there overnight, so you have time to make adjustments.

 

Foreclosures Down, but Don’t Cheer Yet

Foreclosure activity has fallen to a 40-month low, but not because of any recovery in the housing market, a new report finds. Rather, the slowdown comes from massive delays in processing foreclosure paperwork.

In April, overall foreclosure filings – including default notices, scheduled auctions and bank repossessions – declined for the seventh month straight to 219,258, a 9 percent decrease from March and a 34 percent decrease from April of last year. Banks seized 69,532 homes last month, a 5 percent drop from March, according to data provider RealtyTrac.

 

Mortgage Lenders Pressed to Cut Balances for Distressed Owners

The nation’s five largest mortgage lenders may be forced to reduce loan balances for distressed homeowners as part of an agreement with state attorneys general and the Obama administration to settle claims of faulty mortgage practices, a top state official involved in the negotiations said Tuesday.

The proposal is part of a set of remedies that banks would have to agree to in order to settle the state and federal probes launched last autumn, which found that the largest mortgage firms illegally seized the homes of at least dozens of borrowers and engaged in shoddy practices that short-changed troubled borrowers.

 

‘Walking Away’ Loses Couple $116,000 in Cash

Walking away from your underwater home, even temporarily, can have serious consequences. Just ask Willard and Holly Brown, who lost $116,000 by walking away from their house in Clarkston, Wash.
The Browns, who owned a home with a filed homestead exemption — which protects a home from creditors in certain circumstances — fell into some financial troubles with their company WW Cedar, based in Idaho.

Unable to pay back a $200,000 small business loan from Wells Fargo secured by their home, they figured they were underwater between that debt and their mortgage with Alaska USA Mortgage Company, so they walked away. Although they claimed they left temporarily, the court ruled otherwise based on a contested series of events.

 

Bernanke Blames Housing Market for Slack Economy

The housing market is one of two main factors hindering an economic recovery, Ben Bernanke told a luncheon audience in Arlington, Va., today. The Federal Reserve chairman said, “In some areas, for example, high foreclosure rates have produced significant numbers of vacant properties, depressing surrounding home prices, attracting crime, and creating financial burdens for local governments….
The foreclosure rate remains very high, and many homeowners who have avoided foreclosure find themselves ‘under water,’ meaning their mortgage debt exceeds the value of their homes.”

Bernanke cited high unemployment as the second factor holding back a recovery: “Our economy is far from where we would like it to be, and many people and neighborhoods are in danger of being left behind.” The Fed chairman suggested that community leaders and businesses could help improve circumstances that led the economy to grow at a slower rate than predicted for the first quarter of 2011.

Think you know your neighbors? FICO Labs, a unit of the Fair Isaac Corp., is implementing a new technology that will measure the likelihood of a homeowner walking away from their mortgage, even when they can afford the payments.
The concept is known as strategic default, and it has been difficult to predict in the past. But according to the latest research, the typical strategic defaulter is a far savvier borrower than previously imagined.

As more homeowners find themselves saddled with underwater mortgages – cases in which the home is worth less than the debt — the prospect of simply walking away has broadened for many Americans.

But make no mistake – no matter which risk profile you fall into, defaulting on your home loan will have a lasting impact on your financial future.

On paper, the housing crisis is a labyrinth of mismanaged paperwork, reams of foreclosure filings and stacks of ongoing investigations. But for families involved in the very real struggles of homeownership, foreclosure takes on an entirely new dimension. Two weeks ago HuffPost Business solicited photos from its readers of the foreclosure crisis in their hometowns. The following is a photo chronicle of foreclosures across the nation.

The vast numbers of foreclosures that have flooded the market since the recession took hold have finally started to subside – but a full-blown recovery may still be far in the distant future.

Foreclosure filings in the first quarter have dropped below early 2008 levels, according to a report released Thursday by housing analytics company RealtyTrac. The filings, which include default notices, scheduled auctions and bank repossessions, reflect 681,153 properties, down 14.8 percent from the previous quarter and 26.9 percent from the beginning of 2010. In real terms, one in every 191 residential properties received a foreclosure filing during the quarter.

But the slowdown in foreclosure filings doesn’t necessarily mean the market is on the rebound. In fact, a driving factor behind the decrease in foreclosures is the ongoing federal investigation of the nation’s largest lenders in connection with faulty foreclosure paperwork.

 

Michael Connelly Sets New Novel Amid Foreclosure Crisis

Apr 14th 2011 2:35PM

The world of foreclosures is not exactly tailor-made for engaging fiction. Unless you’re Michael Connelly. Author of The Lincoln Lawyer (now playing at a theater near you) and more than a dozen other best-sellers, Connelly seized on the foreclosure crisis as the setting for his latest thriller, The Fifth Witness.

“I write very contemporary novels set in the time they come out,” says Connelly. “This is obviously a big financial catastrophe in this country, so it kind of stands out.”

He also had personal reasons for choosing the topic. “When I was a kid, my father was in the construction industry, which is very volatile,” Connelly told AOL Real Estate. “We just avoided foreclosure a few times. It was deeply humiliating when they would have to come pin something on your door about a public auction of your house.” He says now, “It kind of left a scar.”

The fourth Connelly novel to feature defense attorney Mickey Haller, The Fifth Witness finds Haller transitioning his flagging criminal defense practice in Los Angeles into the growing field of foreclosure defense.