Short Sale – Buyer Beware!

“Short Sale – Buyer & Broker Beware! by Walt Harvey”

 

“Recently, more short sale properties have come on the market. A short sale is a situation where a property seller needs to sell and the sale proceeds are not sufficient to pay off the existing mortgage. It is an alternative to foreclosure. The term short sale or short pay refers to a process whereby the mortgage company must agree to a reduced payoff in order for the sale to take place. All sale costs must be included and the seller receives nothing, except debt relief and not having a foreclosure on their credit record.

If you’re a prospective buyer on such a property, beware! The seller may accept your offer; you may invest $1000 in an appraisal and a property inspection, but you may not get the property because the mortgage company may not agree to reduce their payoff. The mortgage company is a third entity that is not a party to your contract, yet their decision will affect the outcome of the transaction. The mortgage company will review the short sale proposal and closing the sale will depend on their response.

Many short sales fail because the mortgage company representative is unfamiliar with the local market and responds with an unrealistic proposal. When buying a short sale property, don’t expect a quick answer and don’t expect the mortgage company to respond logically. They will seek any additional assets the homeowner may have. They may demand the seller to sign a personal note to pay back the shortfall. Remember, the mortgage company wants to recover as much of the loan as possible and if the property goes to foreclosure, well that’s another department’s problem….

Buyers, ensure that you have an escape provision if the process takes longer than you want or if a more suitable property becomes available.

Sellers, be realistic. Consult with your accountant and your attorney on the tax and legal ramifications of a short sale. You may have to be willing to undergo an asset evaluation and even be willing to walk away and let the lender have the property.”

 

I agree short sales are not the easiest or bestsituation to be in when buying or selling a home, but with time and hardwork anything can be done.

 

 

 

 

 

 

FHA Still Going Strong

As I was reading Realty Times today I came across a column by Kenneth R. Harney titled “FHA Still Going Strong”. 

 ”The country’s top housing official has an urgent message for potential home buyers: You may have heard that the credit markets were “frozen,” but FHA has been open for business throughout the credit squeeze, and so are Fannie Mae and Freddie Mac. In fact, FHA’s volume has tripled and the agency is now insuring well over a hundred thousand new loans a month.

In an exclusive one-on-one interview with Realty Times, Housing and Urban Development Secretary Steve Preston said that FHA, Fannie and Freddie — who account for a combined 90 percent plus share of the entire U.S. mortgage market — “have kept liquidity alive” for home buyers — and have virtually unlimited funds for new mortgages.

“There is no credit crisis” for individual home buyers who have at least three percent to put down, documentable employment, and at least a moderately good credit record, said Preston. “

While reading this column I began to think and realized that this information maybe helpful to the potential buyers in the central valley during this buyer’s market.

National Association of Realtors First Time Buyers Survey

Here are some interesting statistics from a recent report put out by the National Association of Realtors. The N.A.R. based these stats on almost 10,000 responses they received from questionnaires mailed out to recent home buyers.

Over the past twelve years, first-time homebuyers were responsible for buying 42% of all the homes purchased in the US.  In 2006 that number dipped to 36% but in 2007 it again increased to 39%.  70% of them bought a home because they wanted to own real estate and establish a household. 

Living Arrangements Prior to Buying their First Home

• 75% rented an Apartment or Home prior to purchasing
• 18% Lived with Parents

The marital status of first time home buyers is: 

• 51% Married Couples
• 11% Unmarried Couples
• 25% Single Female
• 11% Single Male

Medium Age of First-Time Home buyers.

• 52% were age 24-35 years old
• 21% where age 35-44 years old

A majority of them are planning for their financial future.  Many say they are concerned about Social Security not being around for them.  They don’t expect a free ride so they have been investing. 

Purchase Price Range of First-Time Homebuyer

• 38% purchased a home in the price range of  $100K to $175K

I hope you have found this information interesting and maybe even helpful to your present situation.

This is a great time to buy. If you’d like to see what’s currently available please give us a call and we can tailor a home search specifically to meet your goals.

 We look forward to working with you.

 

Tim Rushing REALTOR® (209)327-0875 trushing@prucalifornia.com

Another Look At Home Inspections

If you are planning to sell your home you may want to consider a pre-listing home inspection. Pre-listing inspections can be beneficial to both buyers and sellers alike. A professional home inspector will review the visible and accessible components of the home, and provide you with a detailed written report on their findings. This can create an atmosphere of openness and trust by showing prospective buyers your not trying to hide anything.

A pre-listing inspection can make your home stand out from others on the market. It also reduces the risk of having to re-negotiate the deal based on surprises found later in the process by a buyer’s inspection.

For more information regarding qualified home inspectors in your area or to obtain a copy of the “ASHI Standards of Practice”, log on to www.ASHI.org.

Consider A Home Inspection Before Buying

Although you may do a thorough walk-through before purchasing a home, it may be a good idea to hire a reputable Home Inspector. Your agent should also perform a visual inspection but once again, it will be limited. A qualified Home Inspector should be considered to do a more in-depth evaluation of the home. The inspection process will generally include an overview of the appliance and utilities associated with the home, as well as it’s overall condition.

What is a Deed in Lieu?

Have you heard the term “Deed in Lieu“?  This term is one you may hear more often  now in our current market. Basically a Deed in Lieu takes place when a lender who is foreclosing on a property decides to allow the current homeowner to deed the property back to the lender before the foreclosure is complete. This action is actually referred to as a Deed in Lieu of Foreclosure. This can be advantageous to lenders because they get the property back sooner from homeowners which reduces their losses. This can also be  advantageous for a homeowner because this option may be less damaging to their credit.

A Great Time To Buy A Home

      This is a great time for renters with a stable income to consider purchasing a home. With so many homes on the market, many due to foreclosures, you’ll find that this is in a lot of respects, an ideal market for first time buyers. With the good interest rates and the lower home prices, you may find a deal that you may not have otherwise been able to afford. Be cautious, however, not to buy beyond your means. Consider all the costs of home ownership, such as upkeep, and taxes and insurance, before you buy. For those who have money to invest, this may also be a good time to purchase a home as a rental.

Even Beverly Hills Has Gone Down In Value

Have you seen that even some of the wealthiest areas here in California are feeling the real estate crunch? Beverly Hills is undergoing some high-dollar foreclosures. And I’ve read that three of the nation’s richest zip codes saw steep price declines in recent months.

The Downside of Short-Sales

Many people think “short-sales” work like a traditional real estate transaction.  Unfortunately there are several downsides to pursuing such an offer.

Les Christie of CNN Money wrote an interesting article about some of the pitfalls of dealing with short-sales. Here’s an excerpt from that article:

 

Lenders say they want to help troubled homeowners, but they are delaying deals that could save everyone. Lenders are taking much longer than necessary to approve short sales, according to Duane LeGate, of House Buyers Network, a short sale specialist. In a short sale, a homeowner who cannot keep up with their loan asks the lender to take a dollar amount less than what is owed on a home’s mortgage, and forgive the remainder of the unpaid debt. Coldwell Banker CEO Jim Gillespie agrees that short sales are taking too long to complete. And he speaks from firsthand experience; a short-sale offer he made on a house in Marin County, Calif. in late fall didn’t win approval until April. But most buyers can’t, or won’t, wait that long.”That’s been our biggest challenge – keeping the buyers interested long enough as we wait and wait for an answer,” said Jeff Morrell, a Colorado Springs real estate agent who specializes in short sales.

Other pitfalls include the pricing. Most short sales are priced before the bank actually agrees to take less that what remains on the loan. Many are listed as “subject to bank approval” and the bank may very well reject your offer after waiting months for a response.   We certainly experience the same problems when dealing with short-sales here in Turlock, and across the Central Valley.

Should You Consider Buying a Home in the Current Market?

We’re definitely in a “Buyers” market. There’s a high availability of homes, many of them foreclosures, and interest rates are at historic lows. This is really a “second chance” for first time buyers to purchase their own home and a good opportunity for investors to pick up rental property. As a Realtor for Prudential California Realty in Turlock California I get to see the newest listings as soon as they go on the MLS and many before they are even listed through my network of agents who discuss whats “coming soon”.