2. Limiting Marketing Exposure

Often made by inexperienced real estate agents or FSBO (for sale by owner) sellers, this is a mistake that can be very costly. Newspaper ads, open houses and flyers on your front lawn are nice amenities when selling a home in today’s market but are ineffective in attracting qualified buyers. The truth is that your neighbors will be the first people to take a flyer, the open house will invite mostly unqualified buyers and the newspaper ads are ignored by the real buyers who are looking online or getting emails from their agents.

Seasoned realtors know that there isn’t a silver bullet to attract buyers but will instead cast a wider net utilizing several marketing strategies. The multiple listing service is the first step for all agents and only those that subscribe to this service can list homes for sale. Other online websites such as Craigslist or Realtor.com offer some additional exposure as does websites from the larger brokerages but again you need to be aware of who you are attracting to your home. The bottom line is that serious, qualified buyers know they need a real estate agent to access the best homes for sale and contact one as soon as they are ready to go shopping to buy.

Compromise in marketing yields a ” you get what you paid for” result so why take the risk? The average FSBO will list his home in the newspaper for a month before giving up with dismal results. Some agents make limited marketing sound attractive because they appeal to the uniqueness of their home and everyone wants to think of themselves as unique. Unfortunately it results in limiting exposure and you lose precious time. Social networking is a huge draw today but again it’s hard to sell a home without actually walking through it so my preference has always been face to face networking which is something I spend a lot of time focusing on.

I hope you gained some knowledge from this post, especially if you are considering putting your home up for sale. If so, I would love to chat with you regarding how I might help so don’t hesitate to give me a call or send an email.

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As a real estate professional I work with many buyers and sellers every year and often hear stories about the seemingly small mistakes of past real estate transactions that ended up costing aggravation and more importantly money. In the spirit of prevention I offer this special report to those of you who are not my client yet and hope you will find it informative and help you to see that I am concerned that your transaction goes as smoothly as possible.

1. The Wrong Price

A surefire way to get less than the fair market value for your home is to overprice it in the beginning. It sounds contradictory, but it is true. There are several reasons for this. First, if you home is more expensive than the similar homes in the neighborhood, fewer buyers will choose to even look at it. Why would they waste their time? And the buyers that do decide to look at your home will likely use it for comparison to justify their decision to purchase a different home.  “See? A similar home but a lot more expensive. We should get the one we saw yesterday – it’ a bargain compared to this one.”  Additionally, the longer your homes remains unsold, the less interest it will generate among buyers. Eventually, when it’s been on the market longer than the other similar homes, buyers will start to think that there is something wrong with it.  You are then forced to face the real possibility of being forced to sell it for less than its real value. So the lesson is to be sure your home is priced correctly from the beginning saving time, aggravation and money.

Overpricing is not the only pitfall that sellers fall into, some even underprice their homes. How do you know your home’s real value…by getting a professional Comparative Market Analysis (CMA). A CMA will show you what similar homes in your area are selling for and how long it takes to sell them. You will be able to see the range of values that your home falls into and then determine an accurate asking price. I offer CMAs for homeowners free of charge. Just give me a call or send a request via email and I’ll prepare it for you at no cost or obligation.

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If you want to sell your home because your property value has decreased to less
than what you owe then read on to find out if you qualify.

Have you been denied for a loan modification and want to try something else to
avoid foreclosure… then a short sale might be your solution.

Afraid your home value has decreased and you won’t be able to sell…perhaps a short sale is your solution.

If any of these sound familiar, discover more about the
process and potential benefits of a short sale. Not quite sure how a short sale
works…then keep reading and I’ll do my best to answer your questions along the way.

What’ exactly is a short sale?

A short sale is just that—the sale of your home for a price that falls
short of the amount you owe on your mortgage. What’s the benefit to you? You get
to settle your mortgage debt and avoid foreclosure, even if property values have
declined in your area.

So, how does it work?

1. Your Realtor will help you to estimate the value of your home’s sale price.

The next step is to secure a buyer for your home. (The
buyer will sign a purchase contract and provide proof of financing, such as a
pre-approval letter for a new home loan.)

2. Submit your completed short sale
application package to your mortgage lender or servicer which includes:

• Application
• Last 2 months recent bank statements
• Proof of income: paystubs, tax return, etc.
• Listing history
• Executed purchase contract
• Purchaser eligibility certification
• Proof of buyer financing
• Estimated settlement statement from your title/excrow company.

3. Your Realtor will submit your package along with the necessary estimates from the title company to your lender/servicer.

Why is a short sale better than foreclosure?

Now that you know the basics of applying for a short sale, you might be
asking… how is this option better than foreclosure?

When foreclosure occurs, a homeowner is forced to vacate the property
and may encounter legal issues and costly fees involved with the foreclosure
process. This is undesirable for both the homeowner and the lender.

In a short sale, a homeowner enters into a mutual agreement with the
lender to end the mortgage. This is reflected on your credit report as
“negotiated settlement of debt,” which may be less damaging to your credit than
foreclosure.

For more information on the credit or tax implications of pursing a
short sale to avoid foreclosure, please speak with your tax advisor or a real estate attorney.

I want to apply for a short sale. How do I start?

First it’s important to keep in mind that when
you apply is very important. Once you’ve decided that you want to pursue a short sale, apply as soon
as possible. If foreclosure proceedings have already begun on your home, please
note that most banks want your short sale  APPROVED at least 15 days prior to the
foreclosure sale date so time is of the essence.

For more information regarding short sales see:http://folsomlakehomes.com/2010/02/26/short-sales-know-your-options/

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Since California is still rated at the #3 spot in the nation for foreclosure activity you would think the buyers have an advantage and can hold out to find the perfect house right? WRONG!!!

If you’re a buyer in the Sacramento valley and your price range is under $300,000 then you better get moving because you’ll soon experience the same lock out that fueled the last crazy market.

I’ve been shopping hard to find a home for a few buyers in that price range only to meet with multiple offer situations and over-bidding. Of course we’ll see how those over priced offers fare once the appraisal is ordered but buyers beware…it’s getting competitive out there!

The tax code (Section 25C) states that the credit is available for 30% or up to $1500.00 for a lifetime limit. If you’re in the process of building this is not something you can apply towards your building costs as it is specifically intended for existing principle homes. One thing to beware of is that not all Energy-Star rated products qualify for the tax credit, so check their website before you buy. Also, it prohibits most installation costs so keep that in mind when shopping.

 Among the items included that don’t ordinarily come to mind are skylights, smart vents or whole house fans and wood burning stoves and fireplace inserts. I know what you’re thinking…wood burning stoves? In this valley? Yes, Martha, the manufacturers have vastly improved them to the point that some meet the federal requirements for efficiency and most importantly the tax credit. This is also an exception where the installation can be included so long as it is a requirement from the manufacturer to ensure safe functioning.

 So how does all this relate to short sales? Well, if you’re in the process of purchasing a short sale it might not be a bad idea to keep energy efficiency in mind when doing your inspections. For example, if you find that the home you are considering needs new windows and your budget doesn’t allow for that after closing there are loans structured specifically for that need. Rolling the costs into the loan keeps cash in your pocket and the tax credit will help at the end of the year. Lenders who specialize in home improvement loans can walk you through the process.

 One last thing to remember is to ask for the manufacturer’s certification that the item qualifies for the tax credit. The items installed must also meet the requirement that they remain in use for at least five years. For more information go to NAHB’s website at www.nahb.org/remodel

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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As Halloween approaches it appears that some of the homes on the block will have the porch light out for reasons other than avoiding tricker treaters. 

Inventory is down in Folsom CA and short sales and foreclosures currently represent just under one half  of all residential home sales.  The spookiest information I found was the amount of bank owned homes (REO’s) in Folsom which currently stands at 896!  According to Realist there are currently 232 pre-foreclosures in Folsom which means that the homeowners are behind in their mortgage payments and a Notice of Default (NOD) has been filed. Their are also 192 homes that are set to go to auction.  I usually see most of these homes go back to the bank because buyers are leery of purchasing a home without full disclosures available on the condition of title.

The latest numbers for Sept. 2009 show that there were 64 homes sold in Folsom CA, of which 14 were bank owned.  Short sales accounted for 12 homes sold which is encouraging because most likely those homes were still occupied and maintained up to the sale. The rest of the properties were fair market sales which include investors selling previous bank foreclosures.

There is some positive news on the horizon which includes a possible extension of the $8000 tax credit for buyers. The discussion includes allowing all buyers to participate so that could help those move up buyers re-examine their options. One other piece of good news are the current interest rates which are still hovering at the 4 3/4% to 5 1/2 % range. These are not the frightening rates that were available when I purchased my first home…they were around 11%…now that’s scary!

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Short sales are here to stay and many agents who previously wouldn’t touch them are realizing  they now ARE the current market. For those of you who do not know what a short sale is I’ll briefly explain: When a lender agrees to take less than the amount owed on the loan or “short” from the buyer. The seller does not receive any money, is not liable for the difference and the buyer gets the house free of any liens. My blog today is focusing on the lenders and their perspective when it comes to approving a short sale and transferring the title to the new buyer.

There are a number of “investors” who are purchasing short sales but never intend to hold on to the property. There are also a number of desperate real estate agents who are not making it and have agreed to work with these investors. Let me explain how they set up these fraudulent transactions.

Real estate agent A lists a home for sale advertising it as a short sale. Investor Joe submits a low-ball offer with the listing agent to the bank. The agent continues to advertise the property for sale with the intent of finding a buyer who is willing to pay more than the investor. The investor gets an approval from the bank, sells the property to the new buyer and makes a tidy sum on the difference. The only problem with this scenario is that it’s fraud. Don’t forget the seller signed a contract to pay back the loan therefore any money made from the sale of the home is rightfully due to the bank until the loan is paid in full.

The interesting part is that the banks are finally getting hip to what is going on and including language on the approval letters against this practice. I just received one such approval for a short sale and the lender clearly outlines how the transfer of title is to be conducted and prohibits any third parties from receiving any funds. This implies that if a seller is aware of any such transaction that they can be held liable for fraud. That’s a nasty little word and in all honesty I don’t ever want to be involved in any litigation that includes that word.

So how do you beware of unscrupulous agents? The first rule of thumb is to check out the agents license with the Dept. of Real Estate  (DRE) and see if  there are any previous disciplinary actions against him. You can also go to the local real estate board and check for complaints against the agent.  If the agent is not a member of the local board then you have no recourse should he do something unethical.

Remember that a short sale is STILL A SALE and you are hiring someone to represent you in this real estate transaction. Your agent should be able to tell you what to expect and explain the process clearly. If they seem a bit fuzzy then you know they are not experienced. If they tell you they have an investor they are working with, ask them to explain the process to you, and if it sounds like what I just outlined then beware of fraud. You are hiring the agent to represent you so cover yourself and hire someone with integrity to represent your interests. The old adage is true: You can delegate responsibility but you can’t give it away.

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Seven Myths of Short Sales Exposed

Having just completed my designation for the Certified Distressed Property Expert (CDPE) I wanted to share more about short sales and expose some myths that you might have heard. The Distressed Property Institute  recognized the need to train real estate agents to handle the current crisis and has received overwhelming approval by the National Association of Realtors in endorsing this certification. The president of Remax currently sits on their board and encourages all agents to obtain this designation.

Myth #1 -Foreclosing is easier than a Short Sale

The reality is that banks do not want to foreclose on your property because the foreclosure process is incredibly costly. Banks have all publicly stated that if a person is qualified for a short sale, the deal needs to be considered. Overwhelmingly, banks receive more on their investment through a short sale than a foreclosure. There are three pre-requisites needed to qualify for a short sale:

• 1. Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
• 2. Monthly Income Shortfall – “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
• 3. Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

Myth #2 – You Need to Miss Payments to Negotiate a Short Sale

This was the way it used to be but today lenders are looking for a verifiable hardship. If you have a monthly cash flow shortfall, a pending shortfall and show you are insolvent you meet these three requirements. If you believe that you soon may be unable to afford your mortgage, act immediately. Any delay could limit your options.

Myth #3 – There is Not Enough Time to Negotiate a Short Sale Before My Foreclosure

This probably hurts homeowners the most. Many people do not realize that foreclosure is a process, and that there is time to make decisions. The foreclosing party-in most cases a lender-can stall a foreclosure up to the final day of the process. Today, many lenders will stall a foreclosure with as little as a phone call from you explaining that you are trying to sell, and almost all lenders will stall a foreclosure with a legitimate contract.

Myth #4 – Listing a Short Sale is Embarrassing

Recent estimates show one out of five homeowners in the U.S. is in the same situation. You are to be congratulated for admitting you need help, taking action, and finding a professional who can work with you toward a solution. In our area we are seeing up to 70% of all listings on the MLS in a short sale status.

Myth #5 – Short Sales Never Get Approved

This is a complete falsehood. Are short sales more difficult to execute? Yes. Do you, as a homeowner, need to learn about a new process? Yes. Are they impossible? Absolutely not. While there are no guarantees in any transaction, more and more short sales are being approved regularly. This is far from an impossible process. Professionals who have the CDPE Designation are fully trainied in methods to help homeowners in distress and process short sales.

Myth #6 – Banks are Waiting on a Bailout and Not Approving Short Sales

The reality is that banks (and the U.S. government) are trying to do anything they can, within reason, to avoid foreclosing on properties. Denying a short sale in the hope that some future legislation would pass and pay them for losses is preposterous. Freddie Mac recently hosted a national training Webinar for real estate agents where they expressly stated the organizational goal of “eliminating distressed assets through modification or short sale.”

Myth #7 – Buyers Agents Are Not Showing Short Sale Properties

This is a myth that potential sellers hear all the time. Smart agents are getting calls from buyers who say they only want to look at foreclosure and short sales. For buyers, short sales and foreclosures have become synonymous with “good deals.” Listing with an experienced agent who is educated in the short sale process will provide you with a great chance of quickly seeing a contract on your property.

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Related articles:

http://folsomlakehomes.com/2009/05/06/foreclosures-fixer-scams/

http://folsomlakehomes.com/2009/04/28/short-sales-impact-on-credit-scores/

http://folsomlakehomes.com/2009/04/14/california-prevention-act/

http://folsomlakehomes.com/2009/02/16/loan-modifications-vs-short-sales/

Whenever I tell someone I’m a broker the first comment is usually something like “I wish I had money to buy a house in this market” and I agree the rates are exceptional, the prices in our area are down and the selection is pretty good from a buyer’s perspective. The next question is usually something along the lines of: “Do you have any good deals?” And that’s when I realized that offering a deal of the week might not be such a bad idea…so here goes!

For you investors or first time buyers I do have a deal and it’s currently the 3rd lowest priced single family home in Folsom CA. Located at 205 Fargo Way in Folsom CA the gross living area is 1316sf and the lot size is .176 acres. The kitchen is original but there is an addition that opens into the expanded family room. The backyard has mature landscaping and there is a 2 car attached garage. The hall bath has been redone and there is pergo flooring in the main areas.All of the work required to close escrow is in place and although this is a short sale the approvals are in the file and this is ready to cross the finish line.

My goal is to offer a deal of the week in our geographic area so that investors and first time buyers can have a heads up on finding a great home before it goes pending sale. There are others in the towns surrounding the lake and if you’re looking to find something specific you can enroll to receive properties emailed directly to you the minute they go live on the MLS. Given the low interest rates and additional tax incentives it’s a hard combination to find so now is the time to take advantage. One more thing…no one is going to ring a bell to let everyone know we’re at the bottom…it only happens in hindsight.

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