FAQ about Short Sales

FAQ about Short Sales
As a Realtor specializing in short sales I sometimes forget that short sales in general have only became commonplace in the Ashburn and Leesburg area for only a few years now. As a matter of fact I remember a conversation I had with a Denver Re/Max agent about how many short sales there were in his area about 5 years ago. I can remember thinking to myself how glad I was that we weren’t seeing them in Loudoun and Fairfax County. Well that’s all changed! I’ve read statistics that report that nearly 60% of all homeowners who purchased a home in the Loudoun and Fairfax area are upside down. The last Northern Virginia economic conference I attended we were told that home prices are now at April 2004 levels. I don’t think it takes a great deal of insight to know that there are a lot of people who can you use some short sale advice.
So, let’s get down to those questions!
• Is there a difference between a short sale and a foreclosure?o YES! A foreclosure will not just hurt your credit but will impact any background checks you need done for employeement. If you are even thinking of needing a security clearance a foreclosure is not something you want or need! If successfully done a short sale has much less impact on your overall future.• Short Sales never work!o This is the single biggest reason I hear most sellers just giving the keys to the bank. Simply giving up and leaving their fate to whatever the bank decides to do either now or in the future. For the most part the process for a seller is actually less painful in a short sale then a normal sale. Think about it, one of the most stressful parts in a normal transaction is the negotiation of the sales price and all the nonsense that goes along with it. In a short sale the buyer is working directly with the bank and the bank pays all fees including Realtor commissions and any improvements that might need to be done. It’s a no brainer if you are upside down and need to sell!• Do I need to hire a Lawyer to help negotiation with the lender?o NO. Some Realtors are using lawyers because they don’t want to deal (or are too busy) with the lenders directly. I personally handle all my cases. I feel it’s the best way to ensure my clients a level of service I can be proud of! And anyway, aren’t there enough ambulances for lawyers to chase?• I’m an investor will a bank approve me for a short sale? o Of course they will. Banks in general do not want your house PERIOD! A lender would like nothing more then to take a small loss up front then have to go to court to get your house.• I have two trusts is there hope for me?o If you had asked me this question before I took the CDPE –Short Sale Expert course I would have said no way. Two banks are impossible. Well, that was then and this is now! Two trusts are sometimes easier then one. For the most part if your house goes into foreclosure the 2nd lender gets nothing! This is great leverage when it comes to working with these lenders. Its also helpful that most of the lenders who specialized in 2nd trusts are either out of business or have written off most loans to very low levels. You got more questions? I’ve got answers! Leave your questions and I’ll update this post with your questions.
Take care,Chuck

Delinquencies Double on Least-Risky Mortgages, U.S. Report Says

For most of us in the Real Estate business this story does not come as a surprise! In these economic times the pain is shared by all. As a Realtor living and working in the Ashburn, Leesburg area for over 20 years there have been many times when I just couldn’t believe the types of loans being made or the prices being asked. In this article written by Bloomberg.com we are now entering the last two phases of this housing mess.
1. Prime borrowers are now running out of reserve funds or have given up paying a mortgage on a houses that is worth 20%-50% less then when they brought it. The Loudoun and Fairfax county areas have been buffeted by our federal jobs so I don’t think its as much job loss as in other areas. I am starting to hear more people ask whether it makes financial since to pay on a house that you might have paid $200K to $400K more for then what it is worth today (that’s an extra couple $1,000 a month in some cases!).2. We will also start seeing the readjustment of loans start happening within the next year. If you read my blog (Road to Recovery) there was an interesting PPT chart showing the avalanche of refi’s that will hit the market in the next couple years. Just about every loan that was made over the last 5 years was an adjustable rate loan.
So, can you say perfect storm. ** The new appraisal rules will make it harder (if not impossible to refi regardless of credit). **Interest rates continue to rise (we are at about 6% now we were at 4.5% a few months ago). **Now that the federal money has been given away banks are starting to not be as generous with the loan modifications. Most banks are only granting 5-year loan modifications, which will readjust in 5 years. This means if the value of your home does not change by as much as 50% in some cases you will be in the same boat in a couple years as you are in today. I’m not sure of anyone who thinks the market will bounce back 20%-50% in the next 5 years. ** I heard (unconfirmed by Indy Mac) two reports from different real estate agents that Indy Mac is no longer processing Short Sales but rather sending houses directly to foreclosure. Talk about a lose-lose situation! It should be interesting to see what these houses look like after Indy Mac evicts its borrowers( so much for good faith effort)!
What’s the answer to this mess…? How’s about a long-term plan by the lenders! Wouldn’t it be nice if banks just wrote off the bad debit (which they have for tax proposes) and just reset borrows with nice 30 year mortgage rates that they can pay rather then half measures that will prolong the pain. This whole mess is like watch my 7-year take off a Band-Aid.
I sure hope this is a short Band-Aid and not a long one!
Take care,
Chuck