Top 10 Home Buying Tips For Short Sales – A Guide To Understanding Short Sale Foreclosure Real Estate

Modern homebuyers will inevitably come across one or more properties currently classified as a short sale. A short sale is an attempt by the current owner to sell a home in lieu of the bank taking it back through foreclosure proceedings, thus partially salvaging their credit rating and lifting the burden of heavy mortgage debt. The entire short sale process hinges on the hope that the bank will take a loss now, approve the sale, and eliminate the costly process of foreclosing, clearing, and reselling a home. Obviously, this is a big hope on behalf of prospective homebuyers as well and they need to understand some things in order to lessen the chance for disappointment of unapproved short sales. This is what they should know:

1. Price is usually set by the agent & seller, not bank: The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.

2. Loans owned by 1 bank usually better than 2: If the seller has loans owned by two different banks it is a lot more difficult to approve the short sale. This is something the agent or the buyer cannot control; it simply depends on the willingness of the bank or banks involved. While the reasons are beyond the scope of this guide, buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. A savvy Realtor can let you know this type of information.

3. Lowball offers get slow or no response: Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.

4. Agent must check comparables before submitting offer: The agent must be sure to check recent home sales in the area to give buyers a better idea of the properties that are selling. This will give the agent and the seller appropriate grounds for an asking price that will be more likely to be approved by the bank. Checking comparables will also give the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make them a more informed homebuyer.

5. Don’t hang your hat on the property: Short sales aren’t necessarily "short." It can sometimes be a very long process. Don’t get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic, the right property will come along. In most areas it is completely legal and risk-free to have multiple offers out at any given time with the proper contingencies.

6. Sellers with other properties or too strong of financials may not qualify for short sale and/or may be asked to pay the difference: Sellers that own more than a handful of properties or have an extremely large net worth will probably not be eligible for short sale. In some cases the seller will be asked to pay the difference of the sale. The seller might even need to sign a promisary note stating that they will pay back all or most of the debt. This has virtually no effect on the buyer as long as the seller cooperates.

7. "Approved" prices are quickest: It is important to remember that short sales are not always timely; however, making an offer on an "approved short sale" can be a quicker process. An "approved short sale" has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn’t end up buying the property. These types of short sales are some of the most highly desirable.

8. Some banks look want strongest buyers, some want strongest offers: The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer. As long as the buyer is surrounded by a good team we would advise them to do just that.

9. Repairs are seldom done, credit is more frequent: If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.

10. When you get approval, must close on time: During a short sale there is no leniency with the closing escrow date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after opening escrow. We’d advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don’t just assume it will happen.

Short sales can be a great opportunity to find your new home at a competitive price. A Short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. We hope that these tips will help you to remain positive and optimistic throughout the process. By Todd Foust and Jennifer McNamara

Houses stay for sale the longest in South Florida market

March 25, 2009 – South Florida remains the toughest market in the nation for selling a house, even as big price declines here are attracting buyers.The typical house in Palm Beach, Broward and Miami-Dade counties lingers for 193 days, according to a February report released this week by California real estate firms Real IQ and Altos Research.

That’s up from 156 days last summer and well ahead of second-place Chicago, where the average house stays on the market for 180 days.South Florida has had the nation’s slowest sales rate every month since the survey began in 2007.

Home sales in the three counties have picked up in recent months as bargain hunters respond to falling prices. Still, demand is relatively weak because distressed properties keep flooding the market as job losses mount, analysts say.

“We won’t be past all this until the foreclosures are pretty much gone,” said Jeff Levine, an agent for Illustrated Properties in Palm Beach County.“

Regular sellers have to be patient,” said Martin Hoffman, an agent for the Keyes Co. in Hollywood. “They’re going to have a hard time competing with all these foreclosures.”

San Francisco had the quickest sales rate, at 98 days, according to the survey. San Diego was the next fastest at 104 days. The survey also measured asking prices nationwide. The largest monthly drop, 4 percent, occurred in Las Vegas. It’s the 11th consecutive month that Vegas has posted the fastest rate of declining prices among major markets.

South Florida’s median asking price actually inched up 1.3 percent last month from January to $453,453. “It may be slow in Miami,” said Stephen Bedikian, a partner at Real IQ, “but thank God you don’t live in Vegas.” © 2009 Sun Sentinel, Fort Lauderdale, Fla., Paul Owers.

Mortgage Help: Do You Qualify?

President Obama's new real estate rescue plan offers two key possible benefits: More refinancing opportunities and greater chance for a loan modification.

NEW YORK (CNNMoney.com) -- The eagerly anticipated foreclosure prevention program unveiled Wednesday by President Obama targets 9 million borrowers for help - are you one of them?

The $75 billion effort, dubbed the Homeowner Affordability and Stability Plan, boils down to two basic solutions:

First, the government is aiming to help more homeowners refinance to take advantage of new low interest rates.

Second, it provides incentives to lenders and servicers to restructure your mortgage to more affordable levels.

Official guidelines won't be unveiled until March 4, but here's how to know whether you'll likely be able to take advantage of either of these options.

Help for those seeking refinancing
This part of the program targets borrowers who have kept current on their mortgages. Many of the homeowners in this group have been unable to lower their housing costs through refinancings because of falling home prices.

Right now, if you're underwater on your mortgage, owing more than the home's market value, forget about qualifying for a refi. In fact, at least 20% equity in your home is now a must, unless you're using an FHA loan. The new guidelines should help. Even homeowners with debt that exceeds home value by 5% could be eligible. And there will be no prepayment penalties. But your loan must be owned or backed by Fannie Mae or Freddie Mac.

The Administration estimates that this will enable up to 5 million homeowners to obtain lower interest rate mortgages.

Who's not eligible
Homeowners whose property values have dipped severely, putting them underwater by more than 5% are out of luck. Those with "jumbo" mortgages also don't qualify - only those with "conforming' mortgages do. To be absolutely sure what kind of loan you have, you need to check with your servicer or lender after March 4. But in general, until the past year, loans above $417,000 were considered jumbo mortgages, and Fannie Mae and Freddie Mac were not allowed to buy and guarantee them.

All borrowers will have to prove they have sufficient income to be able to keep up their loan payments, though what would be sufficient proof wasn't yet clear.

Mortgage modification help for at-risk borrowers
Homeowners in default or at risk of default may qualify for loan modifications, which restructure the terms of loans. Anyone with high combined mortgage debt compared to income or who is underwater may be eligible for a loan modification. Borrowers with high levels of other debt, such as car loans and credit card debt exceeding 55% of their incomes, may still qualify for a modification but they'll be required to accept debt counseling in a HUD-certified program.

If you qualify, your servicer or lender will reduce your monthly mortgage payments to 31% of your gross income. The payment would stay there for five years and then gradually revert back to the conforming loan rates in place at the time. The reduction would come mostly through interest-rate reductions, though in some cases, principal reduction also would be an option.

Borrowers would also receive incentive bonuses of up to $1,000 a year for five years for making payments on time.

President Obama estimated 3 to 4 million homeowners could benefit from the new modification procedures.

Who's not eligible
Speculators, those who bought homes for investment purposes, do not qualify for help -- all homes must be owner/occupied.

The program will also not reward homebuyers who were irresponsible in their borrowing. All applicants will be closely examined by lenders and those who acted unscrupulously by, for example, misrepresenting their incomes in no-doc loan applications, would not qualify.

And, in order to protect taxpayers from excessive expenses, no loans will be modified unless it results in a net savings compared with the costs of foreclosing. Finally, rates would not be lowered below 2%. That will disqualify many borrowers who simply can't afford any reasonable mortgage payment because of illness, for example, or job loss.

"[The plan] will not reward folks who bought homes they knew from the beginning they would never be able to afford," said Obama. "In short, this plan will not save every home."

No mortgages for amounts above comforming loan limits would be eligible.

Freddie Mac Will Let Previous Owners Rent After Foreclosure

Freddie Mac plans to let residents rent their homes after foreclosure

WASHINGTON – Jan. 30, 2009 – Freddie Mac today plans to announce a first-of-a-kind plan that lets homeowners and tenants temporarily stay in homes in foreclosure by renting them back, an effort to stop many of the sudden evictions that have come along with the housing crisis.

The program will let thousands of qualified former homeowners, as well as families renting from landlords, enter into a monthly lease on their homes after Freddie Mac has acquired them through foreclosure. Freddie Mac officials expect the program to help about 8,600 families in 2009.

The program gives homeowners and renters more time to find a new place to live and also keeps homes occupied. That’s a plus for neighborhoods where numerous foreclosures have led to empty, unmaintained, vandalized properties.

“For tenants, it’s a big difference,” says Mark Zandi, an economist with Moody’s Economy.com. “If this acts as a benchmark for other mortgage servicers, it would be a very positive development. It’s a win-win. “

Details of the program:

• Leases will be on a month-to-month basis.

• Tenants and homeowners will only have to pay market-value or existing lease rents, not the mortgage payments. Freddie Mac will hire a property management company to determine that amount.

• Tenants and homeowners must be able to show proof that they have enough income to pay the monthly rental amount.

• Freddie Mac will also explore loan-modification options that might be available for some borrowers.

The Freddie Mac initiative comes as the government is stepping up efforts to stem a wave of foreclosures that caught more than 2.3 million homeowners last year, up 81 percent from 2007.

The Obama administration has pledged to spend up to $100 billion to help people avoid losing their homes.

In mid-December, Fannie Mae also rolled out a policy that allows renters in a property that is being foreclosed on to rent that home rather than be evicted. It does not include homeowners. Up to 10,000 families are expected to be helped by Fannie’s rental policy; Freddie expects about a 30 percent acceptance rate.

The Federal Reserve this week announced a policy to help some distressed homeowners avoid foreclosure. The Fed said it would work with companies servicing mortgages now owned by the Fed to modify qualifying mortgages of homeowners that are 60 days or more delinquent on payments.

Fannie Mae Bans Evictions of Renters

When banks foreclose they will kick out anyone residing in the property. Now if that person or family happens to be a quality renter, why not let them stay in the property and pay rent directly to the bank. It's win/win for everyone. The renter(s) get a place to live and the bank gets the rent money plus someone to maintain and care for the property.

Now why did it take so long for these banks and the government to figure out that a good paying tenant helps reduce the loss to the bank???

Fannie Mae bans evictions of renters

WASHINGTON – Jan. 14, 2009 – Mortgage finance company Fannie Mae said Tuesday it has adopted a policy allowing renters to remain in their homes even if their landlord enters foreclosure.

The new policy will allow residents of about 4,000 properties to sign new leases with Fannie while the property is up for sale. Michael Williams, Fannie Mae’s chief operating officer, said in a statement that the change should “help bring a measure of stability to communities impacted by high foreclosure rates.”

Fannie Mae had indicated last month that it was planning to do so. Sibling mortgage financier Freddie Mac is working on a similar policy, company spokesman Brad German said.

But Amy Marx, an attorney with New Haven Legal Assistance in Connecticut, said Freddie Mac has not been responsive to requests that it do the same, and has continued with evictions of renters in recent weeks.

“We are thrilled that Fannie Mae has done the right thing,” she said. “Our hope that Freddie Mac will follow their lead.”

New Haven Legal Assistance and two other legal aid organizations in Connecticut represent seven tenants facing eviction on properties whose loans are held by Fannie Mae or Freddie Mac. The legal groups argue that financial bailout legislation passed in October requires the companies allow tenants to remain in their homes.

Some households, Marx said, haven’t been notified of Fannie Mae’s policy change by the real estate agents charged with selling the properties.

Fannie and Freddie said last week they will extend a suspension of foreclosure sales and evictions from single-family homes through the end of January. The companies had suspended foreclosures through the holidays.

The government-controlled home loan giants say the extension will allow borrowers facing foreclosure to keep their homes as they work to modify more loans.

Washington-based Fannie Mae and McLean, Va.-based Freddie Mac own or guarantee around half of the $10.6 trillion in U.S. outstanding home loan debt.

The pair were taken over by the government in September and placed in a conservatorship after mounting mortgage losses put them in distress that was a prelude to the broader financial crisis that hit Wall Street last year.