Short Sales: Know Your Options
February 26th, 2010 categories: Finances, Foreclosures, Home Selling, Loan Modifications, Real Estate, Short Sales
With the recent decline in foreclosures due to banks holding back some REO (real estate owned) inventory, agents have begun to re-tool their marketing to target short sales. Clear guidance is the key to getting your home sold via a short sale so when hiring a broker to sell your home ask if they will be personally handling the transaction. It’s imperative to let the broker know the date of the last payment made or how many payments you are behind. These details will determine the success of your short sale so providing as much information up front will help speed the process. Below are some of the pitfalls facing sellers as their broker attempts to negotiate with the banks to sell short.
Each lender has its own criteria and level of tolerance for short sales. Multiple levels of approvals with varying conditions are common in short sale transactions. Once a sale is submitted and uploaded to the system, it must fit the pre-determined criteria dictated by the banks loss mitigation dept. Loss mitigation is the first department that grants approval. The initial package typically takes about 3 weeks to be uploaded to most banks systems. Recently banks have begun to streamline the process and are utilizing online software which is supposed to speed response time. This is relatively new so we hope to see time frames shrink as new requests are processed.
Every short sale is unique and the amount of time it takes to get the home closed will depend on how many liens are attached to the property. There are so many possibilities when it comes to lien holders but here are a few that hold sway. Home equity lines of credit (HELOC), Home Owners Associations (HOA) that can have multiple assessments attached, tax liens (income, estate or corporate franchise tax) real property taxes and mechanic’s lien holders. Additionally, any unpaid utilities will need to be paid and if maintenance has been neglected and the city has to mow the lawn there will be a lien for that service attached.
There are additional pitfalls that can also prevent the short sale by way of lender required mortgage insurance on the loan. The way this works is that the bank is obligated to allow the mortgage insurer to be party to negotiations. This is part of the servicing agreement initially set up by the mortgage insurer with the bank. The reason being that the insurer will have to pay out a claim to offset the lender’s loss in the short sale. Some mortgage insurers require a side note to be executed in order to transfer title. This is another item of negotiation that can halt the transaction so knowing upfront if there is mortgage insurance certainly helps.
The failure rate of short sales is relatively high due to the complexity of the processes involved. Numerous parties to the transaction, fickle buyers unable to perform or worse walking away from the purchase complicate an already frustrating experience. Inexperienced agents who do not understand basic procedure can jeopardize the sale because time is of the essence. Auctions do happen and most of them are for homes that failed to sell short.
Short sales do adversely affect a person’s credit score although the negative impact is typically less than a foreclosure. Short sales are a type of settlement and remain on a credit report for seven years. Some lenders are designing loans for those customers who have experienced a short sale with some buyers able to re-purchase in as little as 13 months. The determining factors are keeping your other credit obligations under control and no late payments exceeding 90 days. Of course, you have to qualify your income and work history but the banks realize that there is a distinct need for these loan products and it will grow as we get out from under this current market.
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Five Common Defects in Homes to Avoid
February 18th, 2010 categories: Folsom Lake, Home Selling, Home buying, Real Estate, Sacramento
Growing up in a family of tradesmen has given me an advantage in matters of construction and enabled me to help clients think through a particular design flaw or anticipate potential construction issues. One of my pet peeves is shoddy workmanship but sometimes home buyers are so dazzled by the process that they fail to see obvious flaws. The old adage that the devil is in the details works well when it comes to finding potential problems when purchasing a home, so I thought I’d offer the top 5 hidden defects that can shipwreck your home purchase.
Top on the list is foundations. Talk to any concrete expert and you will learn a lot about curing times and it’s relationship to the strength of a home foundation. Living in this valley has taught me many things and one of them is that you don’t pour a foundation in the middle of July and expect it to dry property without a lot of babysitting…with a hose. Concrete needs to cure slowly so when I purchased my last house I was ecstatic that the foundation was being poured in February. Cracks in foundations are allowed to a certain degree (hairline) but when the gap gets to 1/8 inch then you start to have issues with moisture and pests. One trick is to look closely at the garage floor for separation because this is your clue into the rest of the structure.
Roofs are at the opposite end and can cause major damage to the structure if not installed correctly. A few years ago I listed a home for a client and we found that the entire parameter of the roof needed to be replaced due to incorrect installation of the original flashing. The builder had flipped the flashing upside down so instead of the rain running off the edge, it was held there and wicked back up the roof. The homeowner didn’t have a clue since she had purchased the home when it was relatively new. Roof inspectors will check for those and other issues at the time of purchase. Don’t assume because a home is new that the roofing is installed correctly or is not damaged.
Water is the most intrusive element known to man and poor drainage can cause numerous problems from mold and mildew to undermining a foundation. Homes that have a down slope are more prone to water problems but equally important are runoff and standing water issues. I once looked at a home in the bay area and had my soils engineer out to take a look. His assessment was that the foundation was sound and that the fireplace cracks were nothing to be concerned about. It was only after the fireplace had fallen off was it found out that there was an underground spring running under the home. Needless to say I was very happy to not have purchased that home.
Pest reports reveal intrusion from pests, dry rot or any other critters known to destroy real property. In certain parts of the country it is expected to have a home treated for termites, or as is customary in our area, to deal with dry rot. When my seller’s get a pest report back that has a repair bill around $1000, they might wince but that’s considered average for this area. When purchasing a home with obvious deferred maintenance it’s not a bad idea to ask to be present when the pest inspector comes. Seeing the damage can educate you to the causes so you can do preventative maintenance.
Finally inadequate systems, such as wiring, plumbing, or HVAC can empty you pocket fast. When purchasing a home that has been retrofitted or remodeled find out if these systems have been updated along with the new cabinets. Permits for this type of work is required but sometimes “Tim the tool-man” decides he can do the work for less. Recently a buyer client purchased a home and as part of the negotiations demanded that the repair work be done by a certified professional and not the homeowner. Unfortunately the home inspector revealed the seller’s skill level and it was apparent he liked Lowe’s and wasn’t so much concerned with accuracy. Keep these tips in mind when shopping and you will prevent additional cost and much frustrations.
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Silent destroyers of your home
December 31st, 2009 categories: Folsom Lake, Folsom Lake Homes, Home Selling, Home buying, Real Estate
The condition of a home is something people pay close attention to when purchasing ,and sometimes try to ignore when selling, so it’s prudent to keep a close watch on the condition of your property. This time of year offers a great opportunity to observe the condition of your home from an up-close perspective as you hang your Christmas decorations. Of the many things that are investigated it’s the silent destroyers that cause the most harm, but can be prevented with some simple maintenance. Here’s a brief punch list of things to watch for when putting up the decorations so you can start budgeting time or money to take care of them after the holiday.
Water is the most intrusive element known to man and gutters are a wonderful invention to control it around your house. They function to keep the water from pooling at your foundation but aren’t effective if they’re clogged with leaves and debris. I once paid to have a client’s gutters cleaned on a home she was purchasing since I knew she would never sacrafice her manicure. Pine needles are especially toxic since they leech acids which rust and gutter guards don’t completely prevent their intrusion. There are many handyman companies that will clean them but make sure whoever you hire to check out their insurance policy…it could be a very costly mistake should they not carry one.
Most people think of getting pest inspections done just prior to listing their home for sale but did you know it is recommended to get one every 5 years? I never thought twice about getting one until I isted my 17 yr. old house for sale. Since maintenance is something I’m very attuned to I didn’t think I’d have any issues until the inspector found Borer beetles. Fortunately for me the beetles had a terrible sense of direction and made a right turn upon entering my trim board on the corner of my home. I guess it’s their natural inclination to go up, which saved me from having to tent my house. That saved about $6000 which is the average cost of tenting a 2 story structure.
Another critter that loves to live with you is the dreaded termite. My neighbor was sprucing up the house for the holidays and as she was wiping off the window sills noticed some holes bored through. The pest inspection found a colony of termites had infested her walls due to the Oak trees on her property. Apparently termites like to switch it up and find Doug Fir a nice diet change from Oak. Since her home was on a slab foundation she had to have holes bored into her concrete and poison injected under her foundation. The fun didn’t end with that becasue she had to wait 3 months to see if it took…which it didn’t. After a second application had to be done she finally received a clear report . Her new carpet was not exactly the Christmas present she was hoping for.
These are just some of the horror stories I hear from clients regarding deferred maintenance. So take some extra time to tune up the exterior while taking down the decorations and save yourself some serious money this new year.
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Real Estate Holiday Slump
December 12th, 2009 categories: Home Selling, Home buying, Investors, Real Estate
The myth that homes don’t sell during the holidays is just that, so why don’t people take advantage of the natural marketing that occurs during this time of year? It might seem like a good idea to take your home off the market or hold off from putting it up for sale altogether, but here are some reasons why keeping that For Sale sign up can work to a seller’s advantage.
Black Friday signals the beginning of decorating to impress friends and family and this is a natural segue way for selling a home. Colorful lights and pleasant smells all create the “ideal home” which translates into open escrows and closed sales. New holiday towels spruce up the house and keep the decorating budget in check. Take advantage of the emotional connection your home offers and don’t forget the cinnamon spiced pinecones on the entrance table.
Initially, getting the house ready can create a sense of orderliness but having to leave every time someone wants to see the house grows old quickly. Holiday shoppers are serious, pre-qualified and ready to buy. Having showings at this time of year reduces the number of “tire-kicker” showings. You can also get away with restricting the showing times, as most people are more respectful for family gatherings.
Did you know that January is the biggest transfer month of the year? Transferring employees use the holidays to shop for their new home and feel pressured to find a home by the end of the year. Additionally, as Dec. 31 draws closer buyers want to have some time for family so make the extra effort to finish inspections quickly. Not only do you have a pool of committed buyers but they start to panic knowing they have to close by yearend so tend to be more agreeable.
Investors are another group of buyers that focus on quick closes at the end of the year. I had one client who didn’t want to face his CPA until he closed escrow and with the limited time frame was willing to soften on some of his demands. These serious buyers do not have enough time to start their search over so are more willing to negotiate.
Many sellers hold off listing their property until the spring due to family obligations and entertaining. This means less competition during the winter months, therefore less for a buyer to choose from. So take advantage of the slow down and showcase your home with your favorite holiday décor, you might be pleasantly surprised by how convenient it is to sell during the holidays.
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