Stuart Florida Real Estate » Short Sales

What You Need to Know about Short Sales

Eric Slifkin — Fri, 02 Mar 2012 13:21:37 +0000

What You Need to Know about Short Sales

By John Voket
In the previous segment, we looked at reasons to consider a short sale. But in this segment, we’ll hear from Charlotte, N.C. REALTOR® Jon Widdifield about what you need to know if you’re considering buying a short sale property in 2012:

1. The list price may not be the sales price; the bank may ask for more than the list price.

2. The bank makes the final decision, not the homeowner.

3. The home will typically be sold as is. If the homeowner does not have enough to pay the mortgage, they probably do not have enough to do repairs.

4. A short sale is not owned by the bank. However the bank must approve the sales price.

5. A short sale is not a short process; it can take several months to get to the closing table.

6. There will be bumps in the road when purchasing a short sale; you must be patient if you plan on purchasing one.

7. You can get really great deals on a short sale; just keep in mind it can be an arduous process.

8. Do not set your hear on a particular short sale until the deal is closed; the deal can fall through at any time.

9. Don’t give up. The process is difficult but these homes do get sold. And most importantly, if you’re considering transacting a short sale in 2012, Widdefield says…

10. Make sure you have an agent that is experienced in Short Sales. You need someone that knows what to do to get the deal closed.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Alternatives to Foreclosure – Considering a Short Sale

Eric Slifkin — Fri, 25 Feb 2011 23:37:58 +0000

In an effort to stave off foreclosure and lessen the impact on their credit rating, many distressed homeowners are turning to short sales as an alternative.

What is a short sale? A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

Basically, a short sale may be considered when the value of the mortgage is greater than the value of the property. When this occurs the homeowner may opt to sell “short” with the lender accepting less than what is owed on the mortgage.

Homeowners may become eligible for a short sale when they are delinquent on their mortgage payment (usually around two months) and can demonstrate the inability to pay their mortgage. The homeowner is also considered in pre-foreclosure when this occurs and the lender sends a notice of default or lis pendens (a document filed in the public records that notifies any prospective purchaser of property that there is litigation pending that could effect title to the property). A short sale can still take place during the foreclosure process except when the foreclosure is completed and the home is up for auction or the homeowner files for bankruptcy.

While dealing with a short sale may seem daunting, working with a real estate professional can help you through the process. You will want to choose an agent who has experience in this area. Many brokers now offer in-house short sale services to help expedite the process. There are also third party legal services that will lend assistance. In either case a fee is charged to the lender for this service.

Disclaimer: the author does not assume responsibility for any errors, omissions or contradictory interpretations of the subject matter contained herein. The information provided is for reference purposes only and is not intended to be used as a source of legal or accounting advice.

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

Five Tips for Buying a Foreclosure

Eric Slifkin — Tue, 25 Jan 2011 15:35:34 +0000

Purchasing foreclosed properties in Stuart, Florida can be a vexing process for many home buyers. Here are some helpful tips for buyers considering a foreclosure:

1. Ensure that you are working with an agent with access to accurate foreclosure information. Do not assume that all agents have foreclosure expertise or equal access to these listings.

2. It is typically easier to pursue bank-owned properties rather than short sales, which can take months to close (if ever). When it comes to short sales some banks will negotiate in a timely manner, but don’t even think about a short sale if you must close by a certain date. Bank-owned property transactions on the other hand are straightforward; the banks are tasked with selling these properties as quickly as possible.

3. Price is negotiable. Don’t assume that banks are firm on their price; you can offer less. For example, asset managers responsible for liquidating bank-owned Stuart, Florida condos are often willing to consider a lower offer. That said, low ball offers are often rejected outright. In most situations I would not offer less than 90% of list price as banks have been pricing these homes competitively. If the home is in good shape and in a desirable area you will most likely be competing with buyers offering full price or more.

4. Ask the bank to pay your closing costs. They may say no, but banks can be quite accommodating when motivated. At a minimum they usually will pay for title insurance.

5. Get pre-approved for a mortgage. When making an offer, whether a foreclosure or short sale, it is essential to be pre-approved. You may want to consider using the same bank as this may help during negotiations.

Definitions Related to the Foreclosure Process

Eric Slifkin — Wed, 12 Jan 2011 20:28:30 +0000

If you are a home buyer, chances are you have been looking at short sale and foreclosure properties or if you are a home seller you may be about to list your own property as a short sale or are considering foreclosure. Below are definitions of some of the more common terms you should be familiar with when considering such transactions.

Redemption

Redemption refers to the borrower’s right to buy back the property or, to bring the mortgage up-to-date while the property is being foreclosed on or, after it has already been foreclosed on by the creditors. The borrower is required to pay all charges or collection costs and to make up all payments that are due. The length of time that a borrower has to redeem the property varies from state to state and can be for a period of years or months.

Notice of Default (NOD)

A notice sent from the financial institution to a borrower when their mortgage payment is past due and, that the mortgage is in default. The notice states the date at which the foreclosure proceedings will begin if the mortgage is not brought up-to-date.

Real Estate Owned (REO)

REO refers to real estate that is owned by the financial institution (bank or Mortgage Company) including real estate obtained through the pre-foreclosure process or through foreclosure.

Bankruptcy

A legal declaration of an individual’s inability pay their debts. This usually leads to financial restructuring that in some cases lowers the amount required to discharge the debt. Consequently, a bankruptcy filing halts the foreclosure process in most instances.

Deficiency Judgment

This is a judgment lien against a debtor whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. State laws vary on these amounts; some states do not allow deficiency judgments for this purpose.

Murphy’s Law and Buying Distressed Florida Properties

Eric Slifkin — Tue, 28 Sep 2010 17:08:51 +0000

Having closed several hundred transactions over the years, I thought I had experienced just about every obstacle Murphy’s law could throw in the path of a successful closing. From intransigent sellers to inflexible buyers, we have worked our way through negotiations and dealt with whatever was thrown in the path towards settlement.

The latest wrinkle of course is the emergence of short sale (preforeclosure) and foreclosure (also known as “REO”, real estate owned, or bank owned) properties, which add to the mix of potential bottlenecks in a transaction. That said, here are some of my own experiences with Murphy’s law as it pertains to selling distressed homes:

Time Lines

Whatever deadlines you put on your offer will not be met. Even if a “short” seller accepts in a timely fashion, his lender may take weeks to respond. We include a separate addendum to cover this with an automatic 30 day extension but that is often wishful thinking. Foreclosures are quicker but the acceptance deadline will typically come and go before you get an answer.

Inspections

So your offer is accepted for that bargain foreclosure in the upscale gated community. The inspection report contains few surprises since you know it needs all kinds of work and are lining up your contractors and making plans. But the FHA loan you took has their own inspector show up and they demand you fix the roof, replace the water heater and repair the A/C unit before they will give you a loan commitment. The REO bank says fix it on your dollar, which you do, not knowing if we will even make it to closing.

The Title Work

We are ready to close but the seller’s title company says no, you are closing on the 15th per the contract. We remind them it says “on or before the 15th” and spend several days arguing about it until they relent. But the closing gets pushed back anyway because the lender keeps Emailing the loan package to the wrong address and the title company refuses to talk to them. It seems they do not like each other. This leads to a series of missteps and arguments with the title company. In my experience the title company has almost always been the one that helps keep the deal together and everything flowing. But in the wild west environment of short sales and foreclosures, the bank chosen title company answers to no one- they are there to serve the bank.

Closing Day

Finally we are closed but the buyer can’t move in because the loan is not yet funded, so they wait the required 24 hours only to discover the cash to close wire transfer never showed up. Several days pass before we discover the buyer’s bank never sent it. The funds are sent and the buyer has his house!

Parting Shot

All is right with the world and our commission check shows up. But wait – there’s more! It is $2,500 short because the title company claims we never wired them the buyer’s earnest money. We actually wired it three weeks prior but they chastise me and demand proof it was sent (I guess the final HUD statement was not proof enough and they neglected to check their trust account for the funds).

These are just a few examples of what it takes to get to a successful closing. The banks have been getting better at processing short sales and foreclosures but even under the best circumstances there will be hurdles. If you are looking to buy a distressed property, you need to consider what can and will go wrong in the transaction. If you need to be in a new home quickly, you may want to rethink your strategy.

Notes on the Short Sale Process for Home Sellers

Eric Slifkin — Mon, 27 Sep 2010 19:01:40 +0000

At first it was those toxic adjustable mortgages that drove thousands of homeowners into short sale or foreclosure situations. But with the worsening economy, increasing joblessness and ballooning energy costs, many homeowners previously unaffected by the mortgage meltdown are facing similar circumstances through no fault of their own. In an effort to stave off foreclosure and lessen the impact on their credit rating, many distressed homeowners are turning to short sales as an alternative.

What is a short sale? Basically a short sale is when the value of the mortgage is greater than the value of the property. When this occurs the homeowner may opt to sell “short” with the lender accepting less than what is owed on the mortgage.

While dealing with your lender may seem daunting, working with a real estate professional can help you through the process. You will want to choose an agent who has experience in this area. Many brokers now offer in-house short sale services to help expedite the process. There are also third party legal services that will lend assistance. In either case a fee is charged to the lender for this service.

Below is an overview of the steps typically required to complete a short sale.

Initiating the short sale will typically require

1. A hardship letter explaining your circumstances

2. Two months of bank statements (W2, 1099, tax return, etc.)

3. Budget Sheet

4. Authorization to Negotiate (allows your agent to communicate directly with the lender)

Note: the lender will typically have a series of forms for you to complete as well.

Supporting documentation you may need:

5. Broker Price Opinion or Market Analysis

6. Photographs of the home

7. Repair Estimates

Once you find a buyer:

8. Signed Sales Contract with Short Sale Addendum

9. Preliminary HUD-1 (details estimated closing costs)

10. Latest comparable listings and sales

Once you have submitted your hardship letter and supporting documentation to your lender it’s a waiting game. At this stage a loss mitigation officer may be assigned to your case or it may go into an administrative area until a buyer is procured or foreclosure occurs. While waiting for the lender’s approval, your agent will list and begin marketing the property (note: some lenders will not approve the short sale until a contract is pending). Once a buyer is found and the sales contract submitted for approval your agent will keep the process moving along with follow up calls to the loan mitigation officer.

Short sales are a challenge at best and the requirements differ from bank to bank, but lending institutions are finally beginning to respond proactively and are working in tandem with real estate professionals to speed the process. As this is being written legislation is underway that may ease the process and offer alternatives to short sale or foreclosure.

Buying a Short Sale or Foreclosure – The Risk and Reward

Eric Slifkin — Mon, 27 Sep 2010 13:06:31 +0000

The soft real estate market here on the Treasure Coast is attracting a wave of primary and second home buyers as well as investors who have been sitting on the sidelines waiting for an opportunity to buy a first home, “snowbird” retreat, retirement home or investment property.

Their patience is being rewarded with an abundance of readily available distressed properties at prices well below the $150,000 mark. These homes are typically short sales and foreclosures, which raises several questions about which type of sale to pursue and at what price.

Short Sale vs Foreclosure

Simply put, a short sale occurs when the seller’s lender agrees to a sale for less than the mortgage balance. It is the lender’s goal to minimize their loss on the sale. Unless they pre approve the listing price, it can take weeks or months to get an answer on your offer while they perform their due diligence. In the case of a foreclosure, the bank has taken possession of the property and lists it for sale on the MLS. The advantage here is that the bank has established a price; buyers can make offers just like any other home for sale and expect to close with no prolonged waiting period while they consider your offer. Whether a short sale or foreclosure, these homes are sold “as-is” and the bank is only interested in their bottom line.

Negotiating a Pre Aprroved Short Sales or Foreclosure

A pre approved short sale can be as good if not better than a foreclosure. Often the “pre approved” price was derived from a prior offer that fell apart, which may give the buyer a good idea of the bank’s expectations.

There is no emotion in negotiating a pre approved short sale or foreclosure. The ” pre approved” price is based on the bank’s best estimate of value, and is typically determined with a BPO (broker price opinion). BPO’s are provided by real estate agents the bank hires for just this purpose (note: a BPO is not an appraisal). That said, the bank does not care about inspections or cost of renovation, just getting the best price for the market. Whether a short sale or foreclosure you are buying the home as-is.

Tremendous opportunities are available when it comes to buying a distressed property as your primary, secondary or retirement home. While there is always risk in any investment, with the proper contingencies you can confidently make an offer knowing that if the house does not appraise or fails inspection you can cancel the deal and get your deposit back.

Buying a Short Sale – Are You a Good Candidate?

Eric Slifkin — Sun, 05 Sep 2010 14:22:35 +0000

With the goal of landing a bargain many buyers in today’s market are interested in purchasing short sale properties. But not all buyers are ideal candidates for such transactions. If your home buying criteria includes any of the following you may not be a good candidate:

-You have a lot of contingencies

-You need to sell your current home before purchasing another

-You need to close quickly

-You do not have resources to repair and rehab the property, if needed. Note: short sale properties and foreclosures are not always in need of repairs or rehab, so even if you do not have resources to cover those things, a short sale could still work for you, but fewer homes that match your situation would be available and the search more frustrating.

If you determine that you are a good candidate for buying a short sale and want to make an offer, here are some guidelines (among others):

- Attach a “Short Sale Addendum” to the contract that stipulates the amount of time you are willing to wait for the lender to review and process the short sale package (but if the timing is too short, the lender may not approve the short sale).

- When it comes to pricing, if the offer is too low, the lender may not approve the sale. Your Realtor should prepare a competitive market analysis (CMA) so you can be realistic with your offer.

-In negotiating a short sale contract, request that the listing agent not submit multiple offers.

-The lender may ask that you contribute to deficiencies due to second lien holders, unpaid home owner association fees, etc. These are negotiable items that can make or break a deal.

-Inspections, financing and other details require the same regimen you would follow in a “normal” transaction. Once the short sale has been approved it is crucial that time lines be established and followed.

With patience, due diligence and the guidance of your Realtor, buying a short sale can save you 10-40% over the price of similar properties in a normal sale.

Learn more about the facts and myths about buying a short sale and how to be a winning buyer in today’s market. Click here to download my free handout “Winning with Foreclosures”.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site at www.TreasureCoastHomeSales.com. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Options for Palm Beach County Home Buyers

Eric Slifkin — Wed, 16 Jun 2010 15:20:07 +0000

Still looking for great values on Palm Beach County real estate? If you desire a little slower pace, Palm City Florida real estate in Martin County offers a great alternative to the hustle and bustle of Palm Beach County living at substantially lower prices. Dubbed the “Treasure Coast”, the region is noted for its great schools, laid back lifestyle and recreational opportunities. Palm City is conveniently located with easy access to both I95 and Florida’s Turnpike, enabling you to be just about anywhere in the Palm Beach area in under 45 minutes.

Palm City real estate is a great value right now, especially in comparison to properties further south. This includes homes in sought after Palm City communities such as Cobblestone, Canopy Creek, Hammock Creek and Orchid Bay.

There are great opportunities to purchase a golf villa, waterfront property or luxury home in Palm City at a significant discount over what you might have had to pay several years ago. You can also find deals on new homes with many builders sitting on large quantities of unsold inventory.

International buyers from Great Britain, Germany and Canada have also begun to target Palm City real estate as a great way to take advantage of the current buyer’s market. With our location on Florida’s Treasure Coast we are offering some of the best real estate deals available in years from townhouses to luxury executive homes for sale.

For many Palm Beach area buyers this may be their best chance to grab the home of their dreams. Eric Slifkin is your source for all Stuart, Palm City and Martin County real estate with our free MLS search and free buyers representation services. If you are looking for Stuart real estate, Palm City real estate or other Treasure Coast area property call me at 772-288-1765 to find out how I can help you today.