May 21, 2010 by MichaelS.Dunn.

This is my reply to a question about short sales that I recieved a week ago. Thought it would be good info to share:

Hi ,

You’re in good company with the loan modification being denied. I just saw figures that indicated what a failure that program was. Only a small percentage of people that went through the entire application process actual had their loan successfully adjusted and in many cases the adjustment wasn’t enough to help and the homes went into foreclosure anyway.

The good news is that the short sale program with the new HAFA guidlines is working much better. I recently helped two different families get out from under upside down properties with a short sale and the process is much more stream-lined and efficient than it used to be.

Basically, how I handle short sales is to sit down with you and go over the financials and your expectations. If we decide that a short sale is the best option for you ( rather than a modification, deed in lieu, etc.), then I would want to list the property for sale at a price that we think it would sell  for relatively quickly, or in whatever time frame you need.

Then I prepare the short sale package and application to send in to the lenders. This is pretty intensive and needs to be done the way each bank wants it to maximize our chance of getting approval. The package will contain almost everything you submitted for the loan modification (so don’t throw any of that info out) plus some property and comparable information from me to help make a case for a low price.

Then there is usually a month long process of negotiations between myself and the lenders trying to determine who is going to be forgiving the debt and how much of a hit each lender will take. This is the tough part.Once we get approval from the lenders, they will usually tell us what price they will take as their bottom line and what needs to happen for them to accept the short sale in exchange for a release of the lien and the debt.

A couple of important things to keep in mind:

1.      A short sale is usually a much better alternative to a foreclosure for most owners. The short sale process does much less damage to your credit report and in many cases allows you to buy a new home relatively soon after the short sale.

2.      The short sale program works the best for owners who are selling their primary residence rather than an investment, rental or 2^nd home. There usually needs to be some form of hardship as well. (Reduced income, increase in living expenses, health care costs, etc.)

3.      You want to make sure that the bank does not pursue a deficiency judgment after the short sale is complete.

4.      You will likely not be able to make much money on this but again, it is much better than letting it go into foreclosure. The new HAFA program, which Wells Fargo, Chase, Bank of America and most of the large mortgage lending institutions are participating in, allows for up to $1500 to be paid to you from the lender at the time of closing if this property is your principal residence. ( My last client walked away with $980)

5. Make sure you are working with a realtor that has experience doing short sales. Ask them how many short sales they have closed. If they can’t tell you straight out, or they haven’t done any…keep looking. It is also good if the realtor has specific training for foreclosures/short sales, like those with the SFR designation. It is also a good idea to have an experienced attorney involved. 

I usually charge a % of the sale price for my services, which is paid from the proceeds that would otherwise go to the lender.

I would like to hear more from you, regarding whether this is your principal residence, how far behind on payments you are and what your goals are given this difficult situation.Please feel free to call me to discuss this further.

-Mike 

Posted in Short Sale, Selling | No Comments »

May 17, 2010 by MichaelS.Dunn.

RISMEDIA, May 5, 2010—Pending home sales increased again in March 2010, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of Realtors®. The Pending Home Sales Index (PHSI) forward-looking indicator based on contracts signed in March, rose 5.3% to 102.9 from 97.7 in February, and is 21.1% above March 2009 when it was 85.0; this follows an 8.3% increase in February. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit. “Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” he said. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”

The PHSI in the Northeast declined 3.3% to 75.1 in March but remains 27.2% higher than March 2009. In the Midwest the index increased 1.2% to 98.9 and is 18.5% above a year ago. Pending home sales in the South jumped 12.7% to an index of 121.2, which is 28.3% higher than March 2009. In the West the index rose 1.9% to 99.9 and is 8.8% above a year ago.

“Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. “As bank balance sheets strengthen, it is just a matter of time before lending of non-government-backed mortgages steadily opens up.”

The National Association of Realtors, “The Voice for Real Estate,” is one of America’s largest trade associations, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Posted in Market Data, Selling, Buying | No Comments »

May 08, 2010 by MichaelS.Dunn.

It’s a bit of a misnomer, since Federal Housing Administration (FHA) loans are not loans at all. What they do is insure loans so that lenders can offer mortgage assistance to people who:

• Have fair or poor credit
• Have a low down payment (must have at least 3.5%)
• Have undergone bankruptcy
• Have been foreclosed on

Essentially, the federal government insures loans for FHA-approved lenders so that lenders reduce their risk of loss if they lend to borrowers who could default on their mortgage payments. The FHA program has been in place since the 1930s to help stimulate the housing market by making loans accessible and affordable. Traditionally, FHA loans have helped military families who return from war, the elderly, handicapped, or lower-income families, but really, anyone can get an FHA loan - they are not just for first-time home buyers.

Posted in Buying, Mortgage | No Comments »