SHORT SALES AND THEIR EFFECT ON YOU, NOW AND IN THE FUTURE

January 1, 2014 by

SHORT SALES AND THEIR EFFECT ON YOU, NOW AND IN THE FUTURE

If you are a current homeowner living in an area where there are many “Short Sale” home sales occurring (and foreclosures) this is certainly affecting the value of your Real Estate. The lien holders on a “Short Sale” are agreeing to allow the owners to sell their home for less than what is owed and in many cases for less than current market value. This then drives the market value lower and lower. Until the Foreclosure Sales and Short Sales taper off this is going to continue. Even if a buyer is willing to pay top dollar for a home in your neighborhood, if they are financing the property the appraiser is now struggling to find comparables to justify the price the buyer is willing to pay. If the appraised value falls short of the negotiated sales price the buyer may not be able to procure the loan which forces the seller to re-evaluate his negotiated price to determine whether to sell in today’s market.

If you are a current homeowner that has made the decision to sell your Real Estate in a “Short Sale” scenario here are some things you will want to investigate thoroughly. What is my future debt responsibility? What are my tax implications? How will this affect my credit now and in the future? The internet is truly a gift when it comes to finding answers; let’s look at the credit issue. Based on data compiled by Fair Isaac Corp., which developed FICO scores, and VantageScore, the scoring model used by three of the major credit bureaus – Experian, TransUnion and Equifax – if a lower sales price than outstanding balance was negotiated (Short Sale), but a delinquency was reported it would affect the credit approximately 50-140 points; there will also be an impact on the score depending how many late or non-payments were reported prior to the close of escrow. You could possibly turn around and be able to purchase in as little as 12-18 months (a Fannie Mae or Freddie Mac backed loan is a minimum of 2 years). If the home is foreclosed on the damage is a bit more severe and would affect the credit approximately 150-300 points plus damage of the late or non-payment history already reported. Typically this will affect your purchase power for a minimum of 3 years.

The Distressed Property Institute, LLC reports that Credit History on a Foreclosure will remain as a public record on a person’s credit history for 7 years or more. A Short Sale is not reported on a person’s credit history. There is no specific reporting item for “short sale”. In most cases a loan is typically reported “paid in full, settled” or “paid as negotiated”. For more information on Foreclosure vs. Short Sale regarding future loan potential, credit score, credit history, security clearances, current employment and future employment visit the Certified Distressed Property Expert at www.cdpe.com.

 

Short Sales and Their Effect on You, Now and in the Future

 

 

John Marcotte
Marcotte Real Estate Group
720-771-9401

john@boulderhomes4u.com

Search for homes on my website @ www.boulderhomes4u.com

When thinking of Real Estate, think of John Marcotte
I’m never too busy for your referrals.

 

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Short Sale Secrets Most Realtors (and Banks) Will Never Tell You

April 16, 2013 by

Short Sale Secrets Most Realtors (and Banks) Will Never Tell You

 

colorado shortsale tips for buyers and sellersShort sales have become a recurring theme in my recent posts, but for good reason. Almost half of the homes for sale in the Denver Metro MLS are distressed, meaning a foreclosure or a short sale.

For Buyers

1. The List Price is Arbitrary –The list price on a new short sale is almost always based on the listing agent’s best guess at what will (1) attract an offer and (2) the bank will approve. When you see that new listing or price reduction with a price that is so low you think it’s a typo, it doesn’t mean the bank will actually approve it for that price. Often, this is done to get an offer FAST.

2. Not All Offers Get Submitted (or even presented to the seller) – You have heard of the term “gatekeeper”? Well, the Listing Agent is the gatekeeper in a short sale. Yes, legally the agent must present all offers to the seller, but not all agents do. It’s not right (and is even illegal), but some agents wait until they find their own buyer to double end the deal and then have their owner/seller accept that offer. Shady? Yes. Does it happen? Unfortunately yes. Make sure your buyer agent is barking up the right tree to confirm your offer is presented. However, at the end of the day, if the gatekeeper doesn’t want to go with your offer, it’s just not gonna happen.

3. Cash Is King – As noted above, in Colorado, the listing agent and the seller determine which offer to accept and send to the bank for short sale approval. Many times a lower cash offer will be accepted in favor or a higher financed offer. Why? Because there is a lessor chance of the deal falling out. If the seller and agent believe the offer is still within range that the bank will accept, they would prefer to go through all the hoops only once with one offer instead of a 3 month ordeal to get an offer approved, and then the buyer can’t qualify for a loan and they start all over.

For Sellers

1. The Owner Is Still The Boss (not the bank) – When an offer comes in, YOU DON”T HAVE TO ACCEPT IT! You can treat it like a normal sale and reject it, counter it, or accept it. Often, when I receive an offer on one of my short sale listings, we counter it. We take out inclusions like refrigerator, washer & dryer, etc. We move up dates for inspection, appraisal, closing, etc. Everything is still negotiable just like a normal sale and only once you and the buyer have accepted/signed a final contract or counter does it become a binding contract and get submitted to your mortgage holder for approval.  The banks are notorious for playing hardball, but you Mr & Mrs Seller still have control in what offer, terms, inclusions, etc that you will accept.

2. It’s Based on Hardship, Not Being Underwater – When a bank reviews the offer submitted above and determines if they will approve it/counter it/etc….they are really looking at the seller’s financial hardship. They want to know with certainty that the seller does not have other alternatives based on their financial situation. Just because someone is under water and owes more than it will sell for is not the main reason a bank will approve a short sale. It is based on a valid hardship as to why a short sale is necessary for the owner.

3. Your Debt Isn’t Always Forgiven – It pains me to write this one, but not all short sales forgive the amount owed. If you owe $300k and the bank gets $250k from the sale, many people assume that the bank will write off that $50k as bad debt. Well, nowadays banks are sometimes asking for the seller to bring a % of that to closing. Some are also asking the seller to sign a promissory note for the % of that deficiency and make monthly payments after closing. Does it happen a lot? No. But it does happen sometimes, and often on a non-owner occupied short sale (investment property).  These terms are not known until the short sale has been reviewed and approved by the bank. They will send an approval letter outlining the terms. If you (the seller) don’t like the terms, YES you can negotiate to get more favorable terms…and NO…you don’t have to go through with the sale if you can’t get terms that you like.

4. It’s Not Always Best To Accept The Highest Offer – Sounds silly but here’s why (from a real life example I had) We received an offer on a short sale listing, accepted it, and sent it to the bank for short sale approval. We received approval on it, but at the same time, received two other offers that were both higher than the first. We then called for a “highest and best” from all offers, meaning they all give us their best and final offer and we would determine which we would go with. One of the subsequent offers gave us a highest and best higher than the first was willing to increase to. We kicked out the first offer and submitted this new higher offer to the bank. The bank now approved that higher price. Life is good right? Wrong. We told the winning offer they are approved and those buyers got impatient and bought another home. Neither of the other offers were willing to increase their offer to the new approved price so I told the bank we need to re-issue the approval on the lower priced offer we initially had. Guess what they said? NO!

Why did this happen. Once the bank sees an offer price, they feel that is what the home is worth. If that high offer price falls out and no other buyer will pay that much, you are stuck because the bank thinks the home is worth the higher price and won’t approve a lower price until MONTHS go by and the home fails to sell at the higher price they want.

What’s the moral to this one….I may get in trouble for saying this….but sending in the highest offer is not always the best strategy for a seller. Many buyers on short sales get impatient and often the first buyers walk away before you have approval. So, the offer you submit should be at a price that, if approved, you are confident another buyer will be willing to pay too.

5. Submitting More Offers To The Bank is Not Better – There are several reasons for this. First, See#4 above. Second, the bank then feels it’s a highly competitive property and they negotiate harder with both the buyer AND seller on terms of the short sale. Third, you want the bank to focus on one offer and take it from start to finish with approval. Every time a new offer is submitted to the bank they start the 60-90 day process over and these are the stories you hear about short sales taking a year or longer for approval.

Search for Boulder county foreclosures

 

John Marcotte

720-771-9401

Search all Boulder homes for sale 

 

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CoreLogic Reports 54,000 Completed Foreclosures in February

April 1, 2013 by

CoreLogic Reports 54,000 Completed Foreclosures in February

foreclosure_paperwork CoreLogic® recently released its National Foreclosure Report for February, which provides data on completed U.S. foreclosures and the overall foreclosure inventory. According to CoreLogic, there were 54,000 completed foreclosures in the U.S. in February 2013, down from 67,000 in February 2012, a year-over-year decrease of 19 percent. On a month-over-month basis, completed foreclosures fell from 58,000* in January 2013 to the February level of 54,000, a decrease of 7 percent.

As a basis of comparison, prior to the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006. Completed foreclosures are an indication of the total number of homes actually lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 4.2 million completed foreclosures across the country.

Approximately 1.2 million homes were in some stage of foreclosure in the U.S., known as the foreclosure inventory, as of February 2013 compared to 1.5 million in February 2012, a decrease of 21 percent. The foreclosure inventory as of February 2013 represented 2.8 percent of all homes with a mortgage compared to 3.5 percent in February 2012. This was the 16th consecutive month with a year-over-year decline. Month over month, the foreclosure inventory was down 1.8 percent from January 2013 to February 2013.

Highlights as of February 2013:

• The five states with the highest number of completed foreclosures for the 12 months ending in February 2013 were: Florida (95,000),California (90,000), Michigan (73,000), Texas (57,000) and Georgia (49,000).These five states account for almost half of all completed foreclosures nationally.

• The five states with the lowest number of completed foreclosures for the 12 months ending in February 2013 were: District of Columbia (96), Hawaii (469), North Dakota (482), Maine (542) and West Virginia (588).

Article printed from RISMedia: http://rismedia.com

 

Boulder homes sales continue to be on the rise!

 

John Marcotte

720-771-9401

Search all Boulder homes for sale 

 

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Factors Banks May Consider for Short Sale

January 28, 2013 by

Factors Banks May Consider for Short Sale

What makes a lender decide whether to take
a discount on a mortgage? What formula do
they use to decide how much to take? These
are tricky questions. Each of these transactions
must be evaluated on a case-by-case basis,
and there are a number of variables involved in
each one.
A borrower is often in default or will be soon
when the lender decides to take a discount.
There may be instances where there is no
default; this usually means that the borrower
is upside down on the mortgage and what is
owed exceeds the value of the house.
There are a number of factors that a lender may
consider when deciding whether to discount a
loan and by how much, including the borrower’s
overall financial condition and circumstances,
the property’s “as is” value, and the cost to
market and re-sell the property. Also, two short
sales at the same bank may actually be held
by different investors, so the percentages and
“formulas” for approval may vary even with the
same bank.
A short sale is usually the lender’s last resort
before foreclosure. Overall, the goal is to show
the lender that a short sale is the quickest and
best way to mitigate their loss. Some lenders
will only approve a short sale when foreclosure
is not economically feasible because the
borrower is insolvent and one or more of the
following may have occurred:
• The property was purchased or refinanced at
the top of a seller’s market at an over-inflated
price, and a substantial drop in value has
occurred.
• The property was financed as an interest-only
adjustable rate loan and the borrower has no
capacity to refinance at a lower interest rate.
• The property was refinanced at more than
100% of its value.
• The property is located in an area where
property values have dropped due to local
economic conditions, or the home’s value
has decreased to an amount below the loan
balance due.
• The property’s “as is” condition has deteriorated
to a point where it is not feasible for
the lender to put it in a marketable resale
condition.
• The proposed purchase price is more than the
lender would be able to sell property for after
foreclosure.
• Any sales commission proposed in a contract
is less than what the lender may typically have
to allocate after the foreclosure process is
complete to market and sell the property.

The lender will also do a market analysis of
the property. The Broker’s Price Opinion (BPO)
may be the single most influential component
the lender considers when deciding how much
they are willing to accept as a reasonable short
sale offer. The lender hires a real estate agent,
broker, or appraiser to assess the property and
give their professional opinion of its value to the
lender.
Documentation
Most lenders ask the borrower to document
their hardship prior to approval of the sale. The
lender will request at least the following information
for consideration of a short sale:
• a personal hardship letter that defines what
the hardship is and proof of the hardship
claim, if available;
• a Third Party Disclosure for authorization to
speak to the Realtor or other representative
about the loan status;
• a completed financial worksheet of net
income and monthly expenses;
• copies of the last two years’ Federal Income
Tax returns with all schedules;
• copies of last two months’ payroll stubs, or
profit-and-loss statement if self employed;
• copies of last two months’ bank statements
for all accounts;
• a copy of the sales contract signed by both
the seller and the buyer; and
• estimated closing costs showing a detailed
breakdown of all projected costs including
Realtor commissions for listing and selling
agents.
Once the lender has the above information, it
could take three to twelve months to negotiate
and close a short sale, depending on the lender.
It really is a “numbers game,” with the lender in
control.

Courtesy of Land Title Guarantee Company

 

John Marcotte

www.boulderhomes4u.com

720-771-9401

 

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