Short Sale

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May 13, 2011

When is it Time for a Reality Check?

Posted by martikilby under Buying a Home, foreclosure, loan modification, Real Estate Values, Short Sale | Tags: , , , , |
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For most people, buying a home is the largest purchase we ever make, and chances are it was largely an emotional decision.   There was something about the view, the trees, or the kitchen appliances; something spoke to us and we were ready to buy.  Over time, that emotional attachment increases as we put our personal stamp on the house and make it our home.  No wonder that the idea of losing a home through foreclosure can be emotionally shattering.

Grieving for the loss of a home and what it means to you and your family can be very upsetting.  Too often however, I see people avoid dealing with the reality of their financial situation simply because it is too painful to even contemplate.  These are the folks that ignore the letters and phone calls from their lenders and just pray that somehow it all goes away or that they win the lottery.

If any of this touches a nerve, it might be time to take a hard look at your situation.   Try to put aside the memories of holidays in your home, and ask yourself a few simple questions:

  1. Are you behind on your mortgage payments?  What about your property taxes, insurance and HOA dues?  Are you allowing maintenance items to accumulate because you can’t afford to fix things?
  2. Has your bank notified you and provided options to help?  Have you received a Notice of Default?
  3. Do you owe more than your house is currently worth?  Is the negative equity greater than 20%?
  4. Has your household income dropped in the last two years?  Are you dipping into your savings or other assets to make ends meet?  Do you doubt that your income will improve in the next 3-6 months?

If you answered “Yes” to one or more of these questions, it’s time to take action.  As difficult as it might be to face the reality of your situation, it is far less emotionally stressful to act now while you still have options and are still in control.  As soon as you miss a mortgage payment, the clock starts ticking on a countdown to foreclosure.  Wait too long to act and your options disappear.

If you live in San Diego County and are ready to discuss all the various options available, please give me a call for a no-obligation, confidential consultation.

Marti Kilby

Broker Associate, REALTOR

DRELicense # 01474222

619-846-9249

marti@kilby.com

 

May 10, 2011

The Secret to a Successful Short Sale

Posted by martikilby under Realtor, Selling your home, Short Sale, Short Sale Negotiation | Tags: , , , , , , |
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No secret, actually.  The success of your short sale all comes down to your listing agent.  Really.  Negotiating a short sale is one of the most challenging jobs in real estate today. An agent representing a short sale client is responsible for helping them get out from under a huge financial burden and save their credit, and responsible to the new buyers for closing the deal in a reasonable length of time.   Without the right agent representing your interests it’s easy for the deal to fall apart and your home go to foreclosure. 

Here are some important questions to ask a perspective agent before listing your home as a short sale: 

1)      What is their short sale experience and what percentage of attempted sales have they successfully closed?  This is not the time to hire an inexperienced agent as short sales are an intricate process that requires an understanding of lender procedures and requirements.

2)      Do they do their own negotiation, or do they work with a professional negotiator?  An experienced, professional negotiator may be a real plus as that leaves the agent with more time to focus on marketing your home and finding a qualified buyer.  Also, a professional negotiator will have established relationships with a greater number of lenders which can often help expedite approvals.

3)      Will the agent pre-qualify you for the short sale?  Although the lender will have the final word, an agent should be familiar with all required documentation and be able to pre-qualify you for a short sale.  If economic hardship cannot be proven it is unlikely that the bank will approve a short sale.  They should also be able to let you know if you might be eligible for HAFA.

4)      How will the agent determine the list price of your home?   Listing your home too low may get you a quick offer, but it’s likely the bank will counter and you may lose your buyer.  Remember, the bank needs to recoup as much of the loan amount as the market will bear.

5)      What is the process?  An agent should be able to explain the entire process and timeline and describe exactly how and when you will be updated on progress.  They should also be able to provide information about the pros and cons of moving early in the process or staying in your home until closing.

6)      How will they market your home?  Over 90% of buyers begin their home buying search online.  Make sure your agent can provide an extensive online presence for your listing.

7)      What is the outcome that you can expect?  The agent should be able to discuss the potential outcomes including 1099s and deficiency judgments. They should also make recommendations to you about seeking the advice of other professionals, such as a lawyer and accountant.

8)      And finally, can they provide you with references of past short sale clients?   Hearing from a satisfied client can go a long way to easing your concerns.

A short sale is a complicated transaction, but it needn’t be stressful.  Please don’t hesitate to contact me with your questions or concerns.  I have a 100% short sale success track record and look forward to hearing from you.

 

May 9, 2011

New Foreclosure Stats: What do They Really Mean?

Posted by martikilby under foreclosure, loan modification, Mortgage delinquency, Real Estate Sales Statistics, Real Estate Values, Short Sale | Tags: , , , , , , |
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May got off to an interesting start with the release of several foreclosure reports that frankly, seem a bit contradictory.  There was good news.  There was bad news.  And I’m not quite sure analysts have a handle on what it all really means to the housing market.

Let’s start with the good news:  Mortgage delinquencies are down.  According to data from Lender Processing Services (LPS), delinquencies are down by 20% compared to this time last year.  At the end of March there were 6,333,040 loans nationwide that were past due or in foreclosure.  Sounds like a lot, but that is the lowest level since 2008.  The report would seem to indicate that modifications are helping as 23% of loans that were 90 days past due a year ago are current today.

Now here is where it gets confusing.  The same report showed that at the end of March foreclosure inventory was at an all time high – 2.2 million loans.  This inventory represents loans that have been referred to a foreclosure attorney but have not yet reached foreclosure sale.  The number of new foreclosure actions was 270,681 in March which is a 33% increase over the previous month.  So foreclosures are up but delinquencies are down?

Another piece of bad news was delivered in a HUD report detailing sales of FHA foreclosed homes.  HUD manages the disposition of homes that had FHA loans that were repossessed.  At the end of February there were 68,801 homes in the HUD inventory.  That is a 50% increase over the previous year.  The monthly sale of HUD homes has dropped from ahigh pointof 8,893 last June to a low of just 2,632 in January.  Thus new foreclosures are entering the market at an increased rate while sales have significantly stalled.

One factor not considered in the LPS report was the increase in the number of short sales over the last year.  In addition to loan modifications, which have not been very effective, short sales are presumably impacting the decreased delinquency rate as more homeowners are opting to sell short earlier in the delinquency cycle versus riding out the foreclosure timeline.    If you are a homeowner that owes more than your home is worth and are struggling to make your payments, the bright spot on the horizon might just be a short sale should a loan modification not provide the relief you need.

For the real estate industry overall, this jumble of numbers would seem to indicate that we’re still a long way from recovery.  With foreclosures increasing and sales decreasing, a bloated inventory of homes on the market will likely keep prices fairly stagnant in most markets.

 

May 3, 2011

When the Bank Says “No” To Your Short Sale Price

Posted by martikilby under Short Sale, Short Sale Negotiation | Tags: , , , , |
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You have a buyer and their offer is submitted.  The bank has accepted the financials and reviewed the BPOs.  You’re happily waiting for a short sale approval, when out of the blue, the bank drops a bomb in your lap:  They counter with a sales price that is $25,000 more than the offer submitted.  What now?

Agents can find this very discouraging, and with lack of experience as to how to proceed, a counter can often kill the deal.  For the novice short sale agent, the first thought is often, “I’ll never be able to convince the buyer to pay that much more!”  But digging deeper into the buyer’s wallet is not the place to start.  Get ready to go to work; it’s time to prepare for negotiation. 

  • Make sure the price of the initial offer submitted is realistic.  Yes, short sales often do sell somewhat under market value, but the bank is not going to accept a ridiculously low offer.  Save everyone’s time and don’t even bother to submit a seriously low-ball offer unless you’re prepared for a counter.
  • Gather your ammunition.  Check current comps and make sure that your price point falls within range of active and sold listings.  If needed, do an additionalBPO, pointing out items that add or detract from value in all of the comps.  The comp that is most similar should also be closest in price.  Often times, bank BPOs are performed by agents who are from outside the area and might be unaware of certain neighborhood conditions that have a negative impact on value.
  • Make sure you have a list of all items that need repair on the property, or other concerns that might take away from the value.  For example, un-permitted room additions or proximity to a noisy business.
  • Speak with the buyer and the seller.  Before going any further in the negotiation it’s important that you carefully explain the situation to both the seller and the buyer.  Don’t let your seller panic.  Explain the steps you are taking to justify the original price to the bank and keep the buyer on board.  And likewise, make sure your buyer understands the price range of the comps and come to an agreement about how much more they might be willing to pay, if any.

Armed with solid comps, a list of repairs, and some wiggle room to negotiate price, your chances of getting the deal done are great!

 

April 27, 2011

Short Sales Hit a Record High

Posted by martikilby under foreclosure, Real Estate Values, Short Sale | Tags: , , , , , , |
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A survey released on Monday shows that nationally, nearly half of all home sales in March involved distressed properties; either foreclosed homes or short sales.  This is the second highest level seen in the past 12 months.   And while this might not seem like good news, the statistics actually provide a glimmer of hope. 

The Housing Pulse Tracking Survey reported that short sales rose from 17.0% of total sales in February to 19.6% in March, and at the same time REO sales fell from 14.9% to 12.0%.  this is an all-time high for short sales.

So why is this a good thing?   Short sales, though not as speedy as we would like, are resolved much more quickly than foreclosures.  An REO can sit empty on the market for months, often falling into disrepair.  REOs are used as comparables by appraisers and thus drag down neighborhood property values.  Smaller numbers of REOs would be a positive sign for improved home values in the months ahead.

Additionally, from the point of view of an individual, a short sale is usually preferable in terms of both short and long-term impact.    A few of the advantages include the fact that a short sale does not have near the negative impact on a borrower’s credit score as a foreclosure;  there is no set time limit that disallows a borrower from buying again, and a short sale is not reported on a credit report for 7 years, as is a foreclosure.

If you have any questions about short sales, or any other real estate questions, please don’t hesitate to give me a call at 619-846-9249.

 

April 17, 2011

Improving Short Sales: Not a Political Issue

Posted by martikilby under Bank of America, Short Sale | Tags: , , , , , , , |
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Believe it or not, a Republican and a Democrat are working together!  The two Representatives are sponsors of a bill that would require lenders to provide a decision of approval or disapproval of a short sale within 45 days of submission of the file.  Hallelujah! 

For those of us in the short-sale trenches, the most painful part of the process is the long period we spend waiting for the bank’s decision.  We meticulously prepare the file and then fax it off into a nameless abyss where it seemingly lies hidden at the bottom of someone’s in box.  Weeks later, we are informed that half of the information we submitted is missing from the file and would we please re-send it, or what we sent is now outdated (because they took so long to review it), and would we please send new pay stubs and bank statements.  It is a vicious process that can make a normally calm Realtor want to jump through the phone and strangle someone.

So yes, a decision in 45 days would be a Godsend!  The Bill is sponsored by Reps Tom Rooney (R- Florida), and Robert Andrews (D-New Jersey), who believe that by imposing a deadline on lenders, more short sales would be successfully executed and fewer homes go to foreclosure.   Although a few banks such as Bank of America have made an effort to improve their processing systems by utilizing a technology platform such as Equator, most banks rely on outdated systems and under trained personnel, ill-equipped to handle the thousands of short sales landing on their desks.  Thus in the current market, many short sale transactions fall-apart because the buyer gets tired of waiting and simply moves on, often leaving the homeowner to face foreclosure.

The Prompt Decision for Short Sale Act of 2011 is currently waiting to be referred to a Committee.  A similar act with the same name was introduced last September, but never came up for debate before the legislative session ended…let’s hope the support of the National Association of Realtors will help prevent this bill from a similar demise.

At the end of the day however, even if we have a shortened time period for decisions, any short sale is only as strong as the negotiator acting on behalf of the homeowner.  Please don’t hesitate to contact me for more information on how to improve your chances for a successful transaction.

 

April 4, 2011

Robo-Signing Fallout for Loan Servicers

Posted by martikilby under foreclosure, lenders, loan modification, Short Sale | Tags: , , , , , |
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As a result of the foreclosure robo-signing mess uncovered last September, loan servicers are facing new federal and state requirements outlined in a draft settlement proposal last week.  Here are the highlights that could provide greater protection for homeowners:

  • Servicers would agree to stop dual tracking.   Hard to believe, but currently many companies will pursue foreclosure, even while the borrower is trying to get a loan modification.    This new requirement would mean that foreclosure processing would be put on hold during the loan modification process.
  • Servicers would be required to review any loan modification that is denied.  They would also have to implement a system whereby the borrower would have 10 days to appeal a modification denial.
  • Most significant is the provision that would require servicers to “implement processes reasonably designed to ensure that factual assertions made in pleadings, declarations, affidavits, or other sworn statements filed by or on behalf of the servicer are accurate and complete.”  This would help alleviate the problem of minimum wage processors signing-off on foreclosures.
  • The proposal also states that servicers may not develop compensation programs for employees that encourage foreclosure over modification or other options.   And yes, that was in place at some institutions.
  • And lastly, servicers would be required to offer one point of contact to borrowers trying to complete a loan modification, short sale or forbearance agreement.   Finally!  This alone should improve the process, or at least lessen the frustration level of speaking with a different person every time the borrower calls.

Do I think this will improve loss mitigation for borrowers?  Let’s say I’m cautiously optimistic.  At the end of the day of course, any regulation is only as good as the enforcement that backs it.

 

March 24, 2011

Bank of America’s Cooperative Short Sale Program…Really Any Better?

Posted by martikilby under Bank of America, HAFA, Short Sale | Tags: , , , , |
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I was part of a Bank of America Webinar today during which they outlined the benefits of their new Cooperative Short Sale Program and took questions from way too many clueless agents.  To listen to the speaker, this new program is the greatest thing since sliced bread, but I think that remains to be seen.

The key difference between this new program and the traditional short sale program is that much of the work on the bank’s side that usually doesn’t begin until after an offer is submitted, can now begin before the home is even put up for sale.  This means that a homeowner with a B of A 1st mortgage who recognizes that a short sale is his/her best option can work with their Realtor and get the process started before actually marketing the property.  B of A will complete the valuation process and let the Realtor and homeowner know the suggested list price prior to listing, in theory speeding up the approval process once a qualifying offer is submitted.  In fact, with the review of the homeowner’s financials and the valuation completed prior to marketing, B of A is promising a response to an offer in 10 days.

The program is modeled to a large degree after the HAFA program, and like HAFA, the homeowner may qualify for a relocation fee in the amount of $2500, (HAFA is $3000).   Approval in the cooperative program would also halt foreclosure action and give the homeowner 120 days to find a buyer.  Unlike HAFA, the Bank of America cooperative Short Sale Program can apply to non-owner occupied properties.

While this all sounds pretty rosy, it was not exactly clear what happens when there is a 2nd mortgage held by another bank.  Are we to believe that they’ll speed up their approval processing to keep pace with B of A?  Ha!  And what about deficiency judgments?  In a HAFA short sale the bank has to agree not to pursue a deficiency judgment, promissory note, or the collection of funds from the borrower.  But in the B of A program, there are no such promises and the speaker today danced around discussion of deficiencies by suggesting that we all investigate the laws in our own states.  Pretty vague to me, and it has been suggested that B of A requires such in-depth financial information so that they better know who to target for deficiencies.

While I am hardly a fan of Bank of America, I’ll keep an open mind…but I’m watching closely.  I somehow just don’t trust that protecting the homeowner is their #1 priority.

For information about a short sale in San Diego County please don’t hesitate to contact me directly.

Here is an update on this post!

 

March 14, 2011

More Short Sales on the Horizon

Posted by martikilby under Home Ownership, loan modification, Real Estate Values, Short Sale | Tags: , , , , , |
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Research and analytics company CoreLogic reported last week that 23% of all homeowners owe more on their mortgage than their home is worth.  All together, the negative equity of our nation’s homes is around $750 billion. 

I don’t know about you, but I find it pretty scary that nearly one quarter of all homes have negative equity.  Even if those homeowners don’t default and continue to pay their mortgage, this is a huge deterrent to recovery for the housing market.  In a healthy market, many of these folks would be selling and buying, either trading up or downsizing, or simply moving to a different location.  Instead, 11.1 million homeowners are stuck in their homes, unable to sell because of negative equity.

As noted in previous posts, I don’t have a crystal ball and I’m certainly not an economist, but as I’ve mentioned, one possible solution seems pretty obvious:  Principal reduction.  Since the top of the market in April of 2006, home values have dipped by an average of 32.8%.  The majority of the people who are underwater today bought or refinanced at the height of the market…..what if their mortgages were reduced by 30%?  Do you think that would help reduce defaults and stimulate sales?  Of course it would!

Logically, this seems like a good idea.  If banks are going to lose the money anyway if a home is foreclosed or sold short, why not take the loss up front and bring some real stability back to the housing market?  Although a few banks have offered some principal reductions, it is rare, and I have yet to hear a really good answer as to why more don’t. If you understand what seems to be some twisted bank logic, please explain it to me.

In the meantime, I predict that we will see an increase in short sales. As banks are providing few meaningful loan modifications and with the economy still shaky, even those people intent on staying in their homes despite negative equity may be forced to sell because of loss of job, decreased income or relocation.  Fighting $750 billion in negative equity is a not a battle that will be quickly won.

 

March 8, 2011

The Emotional Up-Side of a Short Sale

Posted by martikilby under foreclosure, Home Ownership, Selling your home, Short Sale | Tags: , , |
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Over the past two years we’ve all become somewhat numbed by the landslide of bad news about foreclosures and the declining value of our homes.  And if you’re in the real estate business, you’ve eagerly watched for the monthly sales statistics, anxious for a glimmer of hope. But beyond the news articles and charts of numbers are the real stories of individuals and families and lives forever changed.

No one buys a home with the idea that they might lose it one day.  We all buy a house with a vision of it being the place we call home until we move-up, downsize, or for one reason or another, decide to move.  And because it is ours, we put a lot of love (and money) into making it reflect our tastes and lifestyles.  We paint, we plant, we remodel – we make it distinctly ours.

When threatened with foreclosure, there are a lot of emotions, depending on the situation; anger, fear of the future, sadness and a sense of loss are a few.  But the overwhelming feeling that people express to me is a sense of helplessness.  Losing their home is usually not their decision and they often feel powerless to control the direction of their lives.

For many, a short sale offers an opportunity to put a positive spin on what is otherwise a negative situation.  Instead of losing your home, you are making a conscious decision to sell it – you are in control of the situation.  You are choosing to sell and salvage your credit rating; you are choosing to rebuild your financial picture; you are choosing to close one chapter, put the hurt behind you, and move forward with your life.

Facing a financial loss such as losing your home to foreclosure can be devastating.  A short sale may have benefits that go well beyond your credit report by helping you start that new chapter on a positive note.  Please feel free to call or email with any questions.

 

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