Short Sales

First of all, this is a misnomer.   In terms of time, there is nothing “short” about it.   The term “short” refers to the fact that at the advertised price, the proceeds from the sale will not be enough to pay off the liens against the property secured by the mortgages.   Therefore, any offer accepted on the property will be “subject to lien-holder(s) approval of a SHORTpayoff” of tose liens.   In a nutshell, they have to convince the banks to take less than what they are owed.

Homeowners who are attempting to sell in this manner are trying to avoid a foreclosure and the home being taken back by the mortgage holders (banks).   This can be a win-win, because the owner  can significantly reduce  credit damage, and the bank can avoid the expense and trouble of taking physical possession of the property and then liquidating it lat a later date. To qualify for a short sale, the owner has to have a valid hardship, and a bona fide offer on the property at or near current market values.   The lien-holders will verify this by asking the owner’s to provide full financial disclosure, and the value of the property will be verified by one or more Independent appraisals or BPO’s (Broker Price Opinions).   This process can take 3-8 months or more, depending on the bank(s) involved, and the skill of the listing agent or negotiator in these types of transactions.

Because you are buying the home from the owner of the home and not the banks, you can oftentimes negotiate for better terms than a bank-owned home.

When buying a  Short Sale  home consider:

• The contract price may not get approved and it may require a raise in price to get approved after waiting months.
• You will likely get a full seller’s property disclosure statement
• You will likely  be able to negotiate to include appliances and personal property
• The home will generally not be abandoned and will be in a better state of maintenance
• There is less competition from other buyers
• You may have to invest money in inspections or appraisals that are not refundable only to have offer disapproved
• Lienholders  may limit or deny the paying of buyer loan closing costs in the approval

As a CDPE (Certified Distressed Property Expert)  and an expert  negotiator on short sales  on behalf of my seller clients, I can often ascertain the true situation about  potential short sale homes  my buyer clients are interested in.   This allows me to advise my buyer clients on the potential time frame and likelihood of short sale approval  of a particular home and whether it is worth pursuing.

Foreclosure/Bank Owned/REO Properties

Bank-owned homes are homes that a financial institution actually owns through the process of foreclosure.   These are also known in the industry as REO properties which is corporate accounting parlance for “Real Estate Owned”.

When buying a Bank-Owned home consider:

• Contract time to closing is generally much less than a short sale.
• The bank will require special purchase agreements and addendums that limit their obligations and exposure
• You will be buying the property “AS-IS”
• It is unlikely you will be able to negotiate any repairs
• Bank owned homes that need repairs may not be able to be financed by some loan programs due to condition (FHA for example)
• Generally the home will not come with any appliances or personal property, it may not be included in the contract  and if  any exists in the home the bank will not guarantee it will be there at closing.
• Banks may limit or deny the paying of buyer loan  closing costs
• There are sometimes title issues related to the foreclosure legal proceedings that can delay the closing or in some cases require the bank to suddenly cancel the sale to you
• Sometimes banks agressively price homes low to creat an “auction” type environment and will not respond to offer in a timely manner.   It is not uncommon for there to be multiple offers on bank-owned homes.

Auctions and Bank-Owned home lists & websites.

If you are interested in buying a bank-owned home the best place to start is with ME and my Advanced Home Search. Foreclosed Home and Bank Owned Home Auctions and Specialty Lists are largely a marketing gimmick by  Loan servicing companies or some Realtors.There is no “magic secret” or “special website” or “list” to get on to find Bank-Owned homes.    In almost all cases, ALL Bank-owned homes get listed by a Bank-designated Realtor and listed for sale on the MLS just like all other homes. This means we can generally  look at and submit offers on these homes at any time, and do not have to wait for the auction, or the home to show up on some special list or website.

It concerns me that the pullback of mortgage giants Fannie & Freddie may “kick the real estate market while its down”, but I am all for less government involvement in the real estate and mortgage business.   I just hope what comes out of this is still a mortgage market that gives good rates & down payment terms to those people who deserve it!

Also, not to get political, but is this the first time in the Obama administration that they are proposing “less” government?

See full article here

About RE/MAX Results

RE/MAX Results operates out of the Twin Cities area of Minneapolis and St. Paul as well as Western Wisconsin. Based upon the principles of entrepreneurship and customer service, RE/MAX Results has grown to 22 offices and over 600 Sales Executives.

For 25 years, RE/MAX Results has been leading the way with some of the highest producing Sales Executives in the country. RE/MAX Results is committed to selecting the most capable people in real estate, providing the best, most streamlined operational infrastructure, management by participation, and the highest standards of professionalism in the industry.

Headquartered in Eden Prairie, RE/MAX Results has offices in the Crocus Hill and Highland Park areas of St. Paul, Anoka, Elk River, Edina (50th/Vernon), Edina (France Ave.), Eagan, Champlin, Cambridge, Apple Valley, Eden Prairie, Maple Grove, Minneapolis (Uptown), Minneapolis (St. Anthony Main), Northfield, Rogers,   Plymouth, Shoreview, Wayzata, Woodbury, Hudson and Ellsworth, WI.

Lots of great info!   Check out the last 2 pages for the best information about year over year price stats!

2010 Housing Report Here

This post borrowed from the Minnesota Realtors Association, with thanks and credit to Chris Galler.   Remember this on Tuesday Nov 2nd!

The Truth About the 3.8% Tax on All Home Sales by Christopher Galler Chief Executive OfficerWe’re being flooded by calls and emails about whether the new Health Care Bill has a federal tax on the proceeds from the sale of your hoe. The statement goes something like this:

UNDER THE NEW HEALTH CARE BILL – DID YOU KNOW THAT ALL REAL ESTATE TRANSACTIONS ARE SUBJECT TO A 3.8% “SALES TAX”?YOU CAN THANK NANCY, HARRY & BARACK (AND YOUR LOCAL CONGRESSMAN) FOR THIS ONE.IF YOU SELL YOUR $400,000 HOME, THIS WILL BE A $15,200 TAX.As with most things found circulating through the “blog-o-sphere” of our partisan world, this is not entirely true. It is also not entirely false. The new Health Care Bill does include a new 3.8% tax on SOME high income earners ($200,000 single/$250,000 married) after the current capital gains exclusion of $250,000 for sin gels/$500,000 for married. You can review an accurate portrayal of the new tax at: http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/Of real interest to REALTORS ® is the willingness of government to look at housing benefits for tax revenue. In 2009, the Minnesota House of Representatives passed a bill calling for a significant reduction and redistribution of the Mortgage Interest Deduction and elimination of the property tax deduction in Minnesota. This bill was not accepted by the Senate, but it did pass the MN House of Representatives. President Obama’s Budget (not yet passed into law) includes a 5-year reduction in the Mortgage Interest Deduction at the federal level. And, as we noted above, there is an increase in the taxes paid for some homeowners in order to help fund the Health Care Bill.As demographics change and government looks for items to tax, real estate is no longer viewed as an untouchable cornerstone of the American Dream. Instead, government at the state and federal level are increasingly willing to chip away at real estate tax benefits. This strategy slowly erodes the benefits in a way that many don’t realize until it is too late to stop. It reminds me of the story about cooking forges. Toss a frog in boiling water and it will jump out, place a frog in a kettle of cool water and it will adapt as the temperature rises – even to its inevitable destruction.Let’s not be frogs waiting to see what happens.

When your house no longer suits you, you can move or remodel. Find out which big change is the right investment of your housing dollars.

Just about everything else”remodeling costs, the hassle of living in a construction zone, or the ability to live happily without one more bathroom–is a personal preference. After all, your home isn™t just your largest investment; it™s also the place where your family lives.

1. Will remodeling make your home better than everyone else™s?

To make the right move-or-remodel decision, you have to know:

• Your home™s value. Easy.  Let me  estimate it and tell you how it compares with the value of the other homes in your immediate neighborhood.  We can also estimate what  your house  might be worth after the improvements, too.

• Your neighbors™ home value. Hit some open houses. Seeing the inside of area homes will inspire you; help you make good choices about finishes, room sizes, and how much to spend; and, admit it, entertain you.

• Your remodeling costs. Once you™ve got your renovation vision, get a quote from a home improvement contractor or, if you™re remodeling it yourself, tally the costs of the items on your supplies shopping list.

Then add the remodeling costs to the value of your home. If the number you get is more than 10% above the average value of homes in your neighborhood, you™re over-improving and probably won™t be able to sell for what you put into the remodel.

Here™s why: No one wants to buy the most expensive home on the block (your home) if they can spend the same money to get a similar home on a block of higher-priced homes. Would you pay $200,000 to live on a block where all the other homes are valued at $100,000? We hope not.

Make home improvements that are typical for the neighborhood. Don™t put granite countertops in a trailer, and don™t put laminate countertops in a Trump Tower condo. Your tour of open houses gives you a chance to verify that your planned remodel isn™t an over- or under-improvement for the neighborhood.

2. Do you love where you live?

Want to keep your kids in the same school district, but can™t find or afford a bigger, better house? Love the neighbors? Have an easy commute to work? Stay put. If you™ve soured on the traffic, the neighborhood™s crime rate, or the nosy neighbors, move on.

3. Do you have room to expand?

If your remodeling plans include increasing the overall size of your home, the size of your lot may be the deciding factor in whether to move or remodel. If you live in a 1,500 sq. ft. ranch on a 3,000 sq. ft. lot, you might be able to add a second story to turn it into a 3,000 sq. ft. two-story, but you™re not likely to add 1,500 sq. ft. at ground level. And if you have a septic tank and well, the location of those will limit how and where you add onto your home (or cost you a bundle to move).

4. Can you afford to move?

Consider these moving costs: sale costs for your existing home, shipping your household goods, buying window treatments and possibly furniture for the new house, costs to fix up your existing home before sale, higher utility costs (if your next house is bigger), insurance cost differences, and property taxes.

I have been dabbling in property management and leasing for several years, and I have had good luck finding tenants with Craigslist.   However, this new MLS feature will allow all agents to cooperate matching tenants and landlords, just like they do buyers and sellers.

If you know anyone who needs help renting their property, please let me know.   Sometimes it makes more sense than selling it given the current market conditions.   I can handle all the details, showing property, drafting lease, etc..   The fees for this are very minimal compared to selling.

See Star Tribune article here

This is a touchy subject.   I help a lot of homeowners avoid foreclosure by doing short sales (getting lenders to accept less than what is owed on the loans).  This can be done if there is a legitimate financial hardship-(medical  reasons, loss of income, forced job relocation, etc..).  However, there is a rising trend that some people without hardship are choosing to quit paying their loans and walk away.  If this catches on, it will have a HUGE negative impact on the housing recovery, as more of these homes become  foreclosures  that banks are forced to liquidate.See the article in the Star Tribune here

I personally think the couple whose story is told in this article is being irresponsible.   They are a 2 income family (high income it would appear), and their only real hardship is that they don’t like it anymore in North Minneapolis.   They already had kids when they bought there, so why are the schools a problem now?   With their incomes, they could pay the loan on this house down quickly and wait for some price recovery to happen.

Since I have been engaged in short sales over the   last several years, there has been no greater frustration for me and my clients than trying to work with Bank of America.   Now I know short sales are frustrating (trust me on that), but Bank of America never ceases to amaze me with how illogical their practices are.  It appears this is not isolated to the short sale area.

Click here for an article about a local couple who was stung by good ‘ol BofA on a loan modification deal

 This story also highlights a rapidly evolving problem with loan modifications, short sales, and credit reporting.   I get asked a lot what type of impact short sales will have on people’s credit, and I honestly tell them I cant say for sure.   Every bank appears to report it differently, and even Fair Isaac (FICO scoring company), doesn’t really have guidelines in place for all of this yet, it appears.   The only thing I can say for certain with credit scores and Short Sales is that a Short Sale is ALWAYS better than walking away and letting your home mortgage go to foreclosure.