DSnews reported – An alarming number of homeowners see strategic default as a viable option should their home continue to depreciate. Almost half of the homeowners participating in an online poll from Housing Predictor say they will walk away from their mortgage obligation if falling home values persist. See Full Story
I have a theory. The current model of doing loan modifications for people that are behind is fine. HOWEVER, the banks are rewarding the people who are NOT making their mortgage payments while the ones that are diligently continuing to pay their mortgage are pretty much getting forgotten or given short shrift. Homeowners that are current see the inequity of this. They think “To get any help I must give in and go delinquent”. Continue reading →
If you look at the amount of regular active listings below and closed sales of Single Family Homes you will see we are running between 60-68% of the sales being non-distressed properties.
Last year at this time the percentage of non-distressed sales were running at 52%. So the traditional/regular sellers are coming back to the market again. REO sales for last year were at 24%, compared to 15% this year.
Pat Chadwell, broker
Certified Distressed Property Expert
Realty World – Residential Specialists
San Jose, CA
408-927-6565 x 11 (direct)
You need to sell short sale. You are about to interview agents but how do you know who is right for the job?
I would submit the following things to look for –
1. You want a Realtor that is honest with what it takes to get through the process.
2. A Realtor that can do good pricing – pricing that will bring in the offers yet will also be in the ball park for the short sale lender. Have you ever seen an agent price a home way below the market – obscenely low? Those sales do not complete. They lose the buyer when the short sale lender objects to the offer price and counters it way higher. That agent is leading the seller toward the 78% of failed short sales in Santa Clara County.
3. Is the Realtor good with paperwork and have systems in place to get all that is needed and submit it in a good readable format to the lender?
4. Does the Realtor coach you into the best presentation of the home? Sure you don’t have extra funds to repair the property but you can make the home marketable – You still need to compete with other homes on the market and want a thoroughly committed buyer that will continue to want the home over the many months that they need to wait patiently.
You’ve gone through the grueling ordeal of getting a Realtor, getting the home prepped and on the market now the offer(s) arrive. Next to consider –
1. Who is the buyer?
2. Is he truly lender qualified?
3. Is he running all over the place writing offers on other homes?
4. Is he experienced enough to know things come up that need overcoming? Will he just bolt at the first hurdle or the 2nd or 3rd?
5. Has the buyer been counseled on the time it takes to complete a short sale? Can he be patient?
I cannot emphasize enough that you want a knowledgeable Realtor that will help guide you through this challenging process and look forward to try to avoid the pitfalls and land mines that present themselves along the ways.
What do buyers need to know before considering pursuing a short sale property? Is it a panacea or a black hole?
1. What are the possible consequences for the seller that would ultimately NOT make him take any approval given by his lender? Here are just a few questions-
a. Will there be a large potential deficiency on any loans, especially a 2nd loan?
b. Will the seller, with some reserves at his disposal, be unwilling to contribute any funds to see the home sale complete?
c. Is the seller actually trying to get a loan modification while the home is on the market?
2. How soon is the auction sale date? Often the lender will not postpone any auction date beyond one 30-day extension. Wells Fargo has policy on this point.
3. Who is the lender? How many loans are on the property? Some lenders are way more responsive than others. Bank of America, who took over Countrywide, has some 500 potential investors behind the scenes. Each investor has their own policy on dealing with short sales. Some are reasonable, some want 10% to consider taking a shorts sale, some want a promissory note signed by the seller to repay some of the debt, etc. Additionally when you are dealing with bank employees some are not properly trained which can lead to arbitrary answers.
4. What other liens exist on the property or against the seller? An HOA lien, child support, IRS liens are quite common. Some can be taken care of through time but you need time to work through it. I recently heard that some credit card companies are getting judgments against a seller and then recording a lien against the seller which shows up when the escrow company does its job to look for recorded liens. The credit card companies want to get a piece of the pie and can delay closing. Any liens can prevent closing altogether.
5. You must remember you are buying a home as-is. Usually with no upfront inspections. When the short sale lender approval is given the actual sale starts and you are under the gun to get your inspections. What happens if you find out about unknown issues – like a broken fireplace chimney or furnace that does not work?
6. What is the listing agent’s ability to get the job done? Is she submitting all the forms in a completed package? Is she responsive to all parties? Also is she proactive by giving comparable sales to any agents doing a BPO (broker’s price opinion)?
7. What about timing? A few lenders respond in a couple of weeks and most others take months. Do you need to have some predict on your moving date? Is your lease ending on your apartment? Baby on the way?
I do represent sellers with a high motivation after I look at the potential to close the transaction.
Regarding representing a buyer in a short sale, I will look at the above and determine the potential to actually close the sale. If anyone, especially the seller or listing agent is less than forthcoming to my questions, I skip the property. After all only 22% of the short sales are completing right now in the Santa Clara County. There are LOTS of pitfalls.
Who wants to put their client through 6 months of waiting to find out they will not get the home? At the same time while the buyer is waiting for an answer to the short sale interest rates may be going up so the buyer’s buying power was reduced in the meantime. That is my viewpoint on how I need to represent my clients fully.
Almaden Valley, the area that has the best schools that San Jose has to offer. While out previewing properties recently a fellow Realtor and I stumbled upon two properties that were bank owned in this quiet community.
The curb appeal of both was okay. Anticipating that both were going to be equally as “okay” we were surprised by what we saw.
The first one was priced at one of the lowest list prices for the area so I was excited to see it. The prior owners had removed doors, faucets, etc. While this did not strike me as odd what did strike me as not very smart was the home was not even really cleaned up or prepped for sale. Mound of dogs hairs were in the corners of the floor for instance. There was no spit-n-shine applied to this home. I look to the real estate agents that list such a home as owing a responsibility not only to the lender/owner they represent but also to the community to try to prep it to garner a higher sales price. That sales price will have an impact on the neighborhood.
We arrive at home #2 – listed in the high $800K range. Nice younger home from the exterior, nice location on a cul-de-sac BUT… The first thing we see is a gross dirty carpet in the living room and in the attached dining room were animal feces on the carpet. YIKES! Now that was pretty disgusting. How much would it have cost to clean up the droppings and do a deep cleaning of the carpet? A couple of hundred dollars? Instead the neighborhood will be a proud recipient of low sale for the area.
Tale of two bank owned properties in Almaden Valley – What do you think?
My client was told in July they were going to foreclosure auction in days. They moved out of the house. The home did not go to auction and they called me in October about doing a short sale. We got into contact in 5 days and had 3 offers – the highest was $20K above list. There were 2 Wells Fargo loans. After losing over a month going the HAFA route and being denied we were up against the wall time wise.
The foreclosure sale date was set for Jan. 2nd. Over the holidays we finally got 30 days to close and the foreclosure was stalled to Feb 2 (with no more extensions allowed). Wells Fargo was truly better than any other lender on a short sale that I have worked with. When it looked like we needed 1 more day on the 2nd approval (just in case) we did not close Wells Fargo Home Equity gave us another month.
The buyer on the other hand was out of control. Asking for $30K repairs, switching lenders mid-stream (and buyers agent chose not to tell me) and taking their time with new lender disclosure requirements. I can’t stress enough how the buyer needs to be willing to take coaching from advisors – namely the Realtors and not from “friends”.
We were lucky to have a title company (Old Republic) that did everything to pull off a miracle. Also the lender the buyers went to thanks goodness knew his job and helped too. He got the funder to suggest the loan package be deliver on the weekend to her house so we could fund Monday AM and record in the later afternoon. Even though all deadlines were off we still closed on Monday January 31. Today, February 2nd would have been the auction date.
Seller now only has a short sale on his credit but not a foreclosure. YAHOO!!!
Just like “Where’s Waldo?” I have to ask “Where are the REO title insurance companies located?”
I have found routinely the title insurance/ escrow companies for REO/bank owned properties are located in another county from the property. Baring that fact in mind they often do not know what are customary closing costs for our county. So I need to be really on the ball to confirm all costs on the buyer’s net sheet.
They also use notary signing services. One just sent out a mobile signing service to sign off my buyer. The file was documents the buyer was not familiar with and of course, the loan documents spelling out the terms she will be bound to for 30 years! The notary signing service representative we were given on the last sale was nothing more than a paper pushing machine. He would the supply the next sheet as quickly as my client could sign. I was constantly slowing him down so I could explain to my client what she was signing. I had to back track to the note for the loan to go over the buyer’s terms of the loan while the notary kept looking at his watch. I think he was probably one of only a few who are like that but I know have attention on who is used for my next sign off.
If you want good client representation give me a call.