Archive | Short Sale
If you are struggling making your mortgage payments you need to seek help as early as possible to avoid foreclosure. Fannie Mae, an insurer of home loans, has released a new interactive tool online to help you determine what your options are. KnowYourOptions.com The website is designed to be a virtual one-stop-shop for anyone facing financial hardship and in need of foreclosure prevention solutions.
The site is available in both English and Spanish and includes tools like educational videos, mortgage calculators, financial forms and checklists. A virtual assistant will walk you through the site.
Not all mortgages are insured by Fannie Mae, but this is a great general resource. The site does provide a Fannie Mae Look-up Tool so you can find out if your mortgage is insured by Fannie Mae so you can take advantage of the Fannie Mae specific programs that are detailed on the site.
Again the key for anyone homeowner who is facing difficulties or anticpates that they may have an issue in the near future is to seek help as early as possible. This website is a great first step.
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The National Association of REALTORS released some updated infomation on the affects of short sale, foreclosure, bankruptcy and deed-in-lieu of foreclosure on FICO scores and the ability to purchase another home.
Short Sale (Deed-inlieu of Foreclosure Guidelines are similar) – According to the report the affect on your FICO score from short sale depends on how the sale is reported to the credit bureau. If reported as “not paid as agreed” the score could go down 100+ points. Late payments will also affect the FICO score and are reported for 7 years, with thier impact lessening over time. Buyers looking to purchase after a short sale will have to wait to purchase another home. If purchasing using FHA financing the wait is 3 years (possibly less if not in default at time of short sale). For a Fannie Mae insured loan buyers need only wait 2 years if putting 20%+ down, 4 years if putting between 10%-20% down, and 7 years if putting less than 10% down. If getting a Freddie Mac insured loan the wait is 4 years, 2 years if extenuating circumstance are documented.
Foreclosure – A foreclosure stays on your credit report for 7 years, with the impact lessening over time. A foreclosure could lower your FICO score 100+ points. Buyers looking to purchase after a foreclosure will again have to wait. If purchasing using FHA financing the wait is 3 years. If getting a Fannie Mae insured loan the wait is 5 years from the foreclosure sale date, 3 years if there are extenuating circumstances. Additional underwriting requirements may be required. The wait for Freddie Mac insured loans is similar with a 5 year wait, 3 years for exentuating circumstances.
Bankruptcy – Bankruptcies stay on your credit report for 7 years (10 if there was a full discharge of debt). Bankruptcies generally have a greater negative affect on the FICO score in comparison to the above mentioned issue. Buyers looking to repurchase after a bankruptcy using an FHA loan will have to wait 2 years from discharge date with a chapter 7 BK and 1 year with a chapter 13 BK. If getting a Fannie Mae or Freddie Mac insured loan there is a 4 year wait for chapter 7 or 11, and 2 year wait if chapter 13. Some allowance are made for exentuating circumstances.
Extenuating Circumstances – include serious illness or death of a wage earner, but do not include an inability to sell a house due to job transfer or relocation.
For a full copy of this report please feel free to contact me.
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According to data from the Northern Nevada Regional Multiple Listing Service, short sales posted the highest number of sales for June. In sales of residential, stick-built homes in the Reno-Sparks area there were 575 sales in June. Of that 43.2% were short sales, 33.6% traditional sales and 23.3% were REO/bank owned sales.
The median price of all sales in June in this category was $170,000. Median prices for traditional listings topped the charts at $219,950. Median for short sales was $151,000 and REO’s was $148,000. The average days on market for all lisitng types was 146 days. REO’s were on the market the least amount of time with an average of 85 days on market. Traditional sales averaged 109 days and short sales averaged 208 days.
Short sales have become very significant in our market. In June 2009 only 103 short sales closed, that is a 240% increase in the number of short sales that have closed this June over last June. Unfortunately the number of days on the market for short sales has not improved year over year – 204 days average last year compared to 208 days average this year. Although we would all like to see this improve, the complex nature of short sales may continue to keep these market times high.
Short sales are definitely a major part of our market. Working with an “experienced” short sale agent is key to the success of a transaction when either buying or selling a home today. Prospective buyers and sellers should ask their agent to show them how many transactions they have closed on either the buy or sell side of the transaction.
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In the State of Nevada real estate agents have specific duties they are required to provide to all parties and more specifically to the client with whom they are representing. These duties are clearly defined on the Duties Owed By a Nevada Real Estate Licensee. This form is provided to all clients, in every real estate transaction and is a required document by the State of Nevada.
To all parties in a short sale the agent must act in a manner which is not deceitful, fraudulent or dishonest, while exercising reasonable skill and care. The agent must also disclose to each party in the transaction all material and relevant facts.
Reasonable skill and care would require the agent to seek training on short sales as they are much more complex transactions than a regular purchase or sale. The agent should be familiar with marketing strategies for short sales, the short sale process, bank requirements, and diligently follow up through the transaction. The agent must disclose to each party material facts – what lien holders are involved, has a Notice of Default or Sale been filed against the property, what is the homeowner’s hardship. In addition to any other facts that might be pertinent – are their other liens, is the agent using an 3rd party negotiator, is the seller current or delinquent, is this the seller’s primary residence, does the seller qualify for HAFA? These are all material and relevant facts in a short sale.
In addition, the agent is charged with additional duties to their client – the buyer or the seller.
- Exercise reasonable skill and care – again the agent should seek education on short sales.
- Not disclose confidential information without written consent of the client – in a short sale transaction the seller authorizes the agent to discuss confidential information with the seller’s lien holder.
- Seek a sale, purchase…at the price and terms stated in the brokerage agreement or price acceptable to the client. This is done through agents listing the property in MLS, marketing the property etc.
- Present all offers made to, or by the client as soon as practicable, unless waived by client. The listing agent has the obligation to present all offers made to the seller. If the seller accepts an offer then subsequent offers should be presented for back up position. Only one offer should be forwarded to the seller’s lien holder.
- Disclose to the client material facts of which the licensee has knowledge concerning the real estate transaction. The licensee should inform the seller of the legal and tax implications of a short sale, how the short sale process works etc.
- Advise the client to obtain advice from experts relating to matters which are beyond the expertise of the licensee – it cannot be stressed enough that agents should not be giving legal, tax or credit counseling advice to clients. These are all areas where clients should be referred to a licensed professional.
- Account to the client for all money and property the licensee receives in which the client has an interest. When representing a buyer on a short sale, if the earnest money is not going to be deposited until short sale approval is procured, the agent should clearly identify who has these funds.
Agents should clearly not be giving sellers advice on the legal, tax and credit implications of short sale but directin them to the great FREE resources available in our community. On the buyer’s side, agents should be collecting as much information about the short sale as possible to help thier buyer’s make informed short sale purchase decisions.
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The new Home Affordable Foreclosure Alternative (HAFA) program introduced by the Treasury starts today. This program was designed to help homeowners who did not qualify for the Home Affordable Modification (HAMP) program or were unsucessful at completing a trial modification. The new HAFA program allows the homeowner to apply for and get a pre-approved short sale on their FIRST MORTGAGE.
The key to the new HAFA program is that the homeowner must meet the HAMP guidelines to be considered, which are as follows:
- Property must be the homeowner’s primary residence.
- The first mortgage must have originated before 2009.
- Mortgage payments must be delinquent OR default is reasonably foreseeable.
- Unpaid balance is not more than $729,750.
- Homeowner’s TOTAL monthly payment (principle, interest, taxes, insurance and HOA dues) MUST EXCEED 31% of thier GROSS MONTHLY INCOME.
Timelines for this program are set at much shorter periods than traditional short sales.
- Within 30 days of the request to be considered the servicer must respond to the homeowner.
- 14 calendar days from the servicer’s response the homeowner must sign the “short sale agreement” and return it to the servicer.
- At this point the homeowner then lists the property.
- Once an offer is recieved the homeowner must submit it to the servicer within 3 business days.
- The servicer then has 10 business days to accept or reject the offer.
If the servicers can meet these deadlines it will greatly improve the market for these short sale properties. (I for one am currently in the watch and see mode.)
Here are some other key points that must be considered….
- Homeowner gets a $1500 incentive for relocation assistance at the conclusion of the sale.
- Homeowner must negotiate separately with any second mortgages etc.
- If there is mortgage insurance the insurer must waive their rights to recieve additional payment.
- Must be an arms-lenght transaction.
- Servicer/Investor must agree not to pursue a deficiency balance against the homeowner (this is huge!)
Contact me for more detailed information and to see if you might qualify for this program.
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With a new decade just begun, it’s interesting to look back at where we’ve been these past 10 years. In 2002, there were 1023 single family homes sold in the Truckee/Lake Tahoe area, with a median price of $397,500. By 2006, we reached the peak of market value, at a median price of $680,000. Now, at the end of 2009, we’re down to a median price of $512,000, a total decrease of 25% in median value from the high in 2006, yet a 29% increase since 2002. However, this year has also seen an increase in number of homes sold (787), up 20% from the low in 2008 of 655.
In looking at the Tahoe Donner subdivision in Truckee, which comprises the largest percentage of the sales in the overall area, the statistics are similar. In 2002, there were 302 single family homes sold, with a median price of $495,000. The highest median market value was reached in 2005, at $765,000. At the end of 2009, the median price is at $568,500, again, a 25% drop since the high in 2005, yet still a 29% increase from where we were in 2002. And similar to the picture for the entire area, the number of homes sold in 2009 in Tahoe Donner (225) was up 16.5% from 2008.
During the past year, we’ve seen our share of distressed properties come on the market, although not near as many as many areas of our state and country. Of the 787 single family homes that sold in 2009, 127 (16%) were foreclosures and 85 (11%) were “short sales”. We currently have only 23 foreclosure properties active on the market (3% of the total inventory available), and 102 “short sales”, comprising 14%.
As we look towards this new decade, we’re excited about the opportunities in our industry that will hopefully allow many more buyers to realize their dreams of home ownership, be it here in our mountain paradise, or wherever their dreams may take them.
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As a Real Estate Broker, focused primarily on distressed property sales, I can honestly say that I have. August – October of this year I was just about as busy as I have ever been in the business of Real Estate. Most the people I chat with in Mortgage, Title, Inspection Services, etc. say the same thing. The transactions were typically affordable in nature but it was nice to see a lot of them. More importantly there was a sense of urgency in the market-place. In certain price ranges and neighborhoods demand clearly exceeded supply. When considering the following points I can’t help but feel as if another shoe is about to drop.
- The extension and expansion of the credit has left some recent buyers wondering why they were in such a big hurry. Meanwhile some would-be buyers are feeling a little less confident. All are worried they will or have paid too much.
- Housing demand is typically created by one or more of the following: Household formation, employment opportunities, attractive financing and the lure of home equity. All of these are lacking in my market.
- I sense that many if not most of the recent first-time buyers would have eventually purchased a home regardless. The looming expiration of the tax credit served to get them of the fence. This created a somewhat false demand.
In short I do think we’ll suffer a bit of a hang-over this next year. As a generality banks are holding a bit firmer to their prices when dealing with fore-closed properties. I do expect interest rates to rise at some point. Short sales are just as mixed up as they ever have been. It will be interesting to see how things turn out for the big auto companies after the “cash for clunkers” revenue stops showing up on their bottom line. Perhaps an indicator for the near future in our housing market.
That said, if you’re in the market for a home now, don’t be too concerned. Your income should be secure. The monthly payment should be conservative in relationship to your income. It needs to be the right house at a fair price. If all those pieces fall in place, I say go for it. Prices will inevitably rise & fall and I think the joy of home ownership has been relatively under-rated lately. Planting a tree or shrub wherever you wish, knocking a hole in the wall to hang the family heirloom or driving down your street to the “best” house on the street; some things are priceless.
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A good article for the Wall Street Journal.
Digging yourself out of a mortgage mess.
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Thirty-nine Dickson Realty agents have recently earned the prestigious Certified Distressed Property Expert (CDPE) designation, having completed extensive training in foreclosure avoidance and short sales. This is invaluable expertise to offer at a time when the area is ravaged by “distressed” homes in the foreclosure process.
Short sales allow the cash-strapped seller to repay the mortgage at the price that the home sells for, even though it is lower than what is owed on the property. With plummeting property values, this can save many people from foreclosure and even bankruptcy. More and more lenders are willing to consider short sales because they are much less costly than foreclosures.
In the Northern Nevada area, currently it is estimated that close to 1,800 homes are in danger of foreclosing. It is happening in all price ranges. Local experts say that even high-priced homes are not immune.
Dickson’s new CDPE designated agents: (shown)Teri Shields, Jeff Geisler, Tammy Olivas, Claudia Byrne, Chris Barns, Victoria King, Jill Deeter, Dan Rider, Andrea Green, Helen Graham, Beth Nitz, Amy Shocket, Mary Robinson, (not shown) Bonnie Beck, Cindy Henderson, Donna Clark, Ivy Cohen, Cyndi Dawson, Gary Edwards, Pam Eikleberry, Denise Fox, Jan Houston, Jen McDonald, Mandie Jensen, Christy Klinger, Anne Lavoy, Gerry Martin, Margie McIntyre, Dee McNeely, Brenda Mee, CJ Risley, Darlene Sharp, Jan Sluchak, Alison Elder, Norm Nicholls, Lil Schaller, Kane Schaller, Emily Sterling, and Maryann Truitt.
“Our job as REALTORS® has changed over the past several years. In our area, our number one goal is to help homeowners stay in their homes. If we are unable to do that then assisting them in a short sale may be a very viable option. A short sale doesn’t impact a homeowner’s credit as disastrously as a foreclosure does. A short sale usually nets the original lender more money and it does not devastate the neighborhood pricing. However working with lenders in a short sale situation can be very frustrating for sellers, for buyers and for real estate agents. We believe successful short sale closings require specialized training and we were pleased to have had 54 agents in this two-day training.” said Nancy Fennell, president of Dickson Realty. “In addition to this two day training, our firm holds monthly “short sale conversations” at each of our branch offices. We have sent our managers to short sale training around the country and we have pooled that information into our Short Sale Toolkit. Because policies and procedures change daily in this market, we find meeting monthly is a tremendous advantage for our agents. We are proud that our agents believe as we do in training, training and more training.”
Alex Charfen, founder of the Distressed Property Institute in Boca Raton, Fla., said that REALTORS such as these Dickson agents with the CDPE designation have valuable training in short sales that can offer the homeowner much better alternatives to foreclosure, which virtually destroys the credit rating. These experts have a better understanding of market conditions and can help sellers through the emotional experience, he said.
The Distressed Property Institute opened in January 2008 and provides training on-site and online. The CDPE is the premier designation for Realtors helping homeowners in distress and handling short sales.
To find our CDPE agents, visit us online at www.dicksonrealty.com or call any of our local offices: Caughlin Ranch 775.746.7000; Damonte Ranch 775 850.7000; Sparks 775.685.8800; Montreux 775.849.9444, or Truckee 530.587.
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So I’m trying to explain our market conditions to an entry level buyer. In this case he’s considering homes in the $120,000 range. Key points for him to consider:
Overall, inventory is relatively low with less than two months supply on the market now at this price point.
In this price range, in some areas we are actually seeing appreciation. It’s not uncommon to see multiple bids and often the price is actually bid up from the list price.- We may have some challenges with the purchase appraisal.
- The well priced, active inventory is dominated by REO’s & Short Sales
Sans the distressed inventory this is exactly how we counseled buyers when the market was hot (in my market ’03 – ’06). Kind of ironic under the circumstances and one would hope that consumers and real estate professionals proceed with some caution
The five year ARM’s originated during the boom are beginning to reset now. For many if not most homeowners a lack of equity makes refinancing impossible. Meaningful loan modifications are still pretty rare and short sales still anything but “short”. With this in mind we will undoubtedly see increased foreclosure activity and that will likely create another drop in median value. So how should we proceed?
Fist of all Buyers & Agents should talk about this. Some areas and types of properties are more vulnerable than others. For example smaller, poorly funded condo associations may really struggle if a significant number of homeowners stop paying dues.
Secondly focus on the monthly payment and long term tax benefit rather than the market value of the property. We often see monthly payments equal to or less than monthly rental value. For the moment we shouldn’t consider home equity our nest egg.
Buy conservatively. I know, there are a few ½ priced mansions out there and that can be alluring. I like to recommend that the buyer at least consider the possibility of hard financial times ahead. Contemplate job status, reserves and the length of time the buyer anticipates owning the home. I have a physician client that recently told me for the first time in his career he now has big gaps in his daily appt schedule. It seems that few people are immune from this downturn.
In short I think we all must keep our wits about us and learn from the recent past. Those that ignore history are doomed to repeat it…
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Tuesday, August 3, 2010 By: Amy Shocket
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