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Help! The Lender Wants More Money From Your Short Sale

by TeamForYOUrDreams

What if the bank demands more money from your Short Sale?

If you have a contract to sell your home in Raleigh, North Carolina for $200,000. You might feel that the sale is hard enough to face when you consider that it was once worth about $215,000 .  When the mortgage is larger than the money you will get from the sale it is a Short Sale. You submit the package to the lender who says they are going to disapprove the Short Sale because your sale price is way below their opinion of the market value for the home.  Maybe your lender believes your home is worth more than a similar size home in Cary.

What went wrong?  The bank wants to aviod giving the property away, so it gets an appraisal or a broker price opinion (BPO).   Many times that price is too high.  This was such a big issue in California that they had to pass a law that makes it a crime for a real estate agent to intentionally put too high a price on the property.  Why was this necessary?  The BPOs are frequently created by the real estate agents who will be the ones to sell the property if it is foreclosed.  In other words, if these agents caused the short sale to fail with a high value in BPO, these agents could get to list and sell the home. 

What do you do now?  Don't lay down and play dead.  Nearly every lender has a way to dispute the value in the appraisal or BPO.  Let's look at the method that Fannie Mae uses.

The standard Fannie Mae messages from their Valuation desk says that the Realtor needs to submit a package to the loan servicer and they say


"Complete packages includes a completed Submission form in Excel format and agent documents which may prove a lowered FNMA value. The qualifying criteria for a value dispute is as follows:
When disputing Minimum Net Reserve, at least one of the following documents must be included in the submission for review:
-Appraisal or Buyer's BPO (BPO that the Servicer did not order)
-CMA Report (w/ comp photos and descriptions), Listing History & Realtor Comments
-MLS Sheets of 3 to 6 Comps, Listing History & Realtor Comments
-Inspection Report with photos of repairs needed
-Detailed Contractor's Estimate with photos of repairs needed."

The real estate agent who has the property listed for sale will submit any one of the above items.  If the house is in bad condition, the simplest thing is to get a contractor to bid the cost of the repairs.  Appraisals are costly, so real estate agents typically submit a Comparative Market Analysis (CMA) with a history of the listing and some analysis by the real estate agent.  As an example, I have a Short Sale in Durham that is being reviewed by Wells Fargo.  The sales price in the contract is $100,000 and Wells Fargo believes the value is $115,000.  So, I sent them six comparable properties, three of which were sold in the last six months and the other three are for sale.  I included the showing service report of all of the times that the property was shown to a prospective buyer.  At one time, I had the property listed at $115,000, and  we had virtually no showings.  Every Realtor knows that if no buyer will even take a look at the property at that price, it will not sell for that much.  While real estate agents understand this, it is takes a little education to get a loss mitigation negotiator to believe it.

So, if your lender says it wants a higher price because its BPO indicates a higher value, that is not the final answer.  You challenge the value by furnishing the facts and figures like you see in the Fannie Mae procedure.  Then, you hope that the mistake will be corrected and your Short Sale will be approved.

For a more complete discussion of correcting BPO values in a Short Sale, go to http://shortsalesr.us/short-sale-dos-and-donts/bad-bpo-creates-a-bad-short-sale-decision/

The more Short Sales that get approved in the Triangle area of North Carolina, the less number of foreclosures and the faster the market will recover.

Is the Real Estate Market Going Up or Down?

by TeamForYOUrDreams

Which way is the real estate market going, up or down?  That depends on whose statistics you believe.  The Case Shiller index says the market has gone down in value for the last five months straight.  It is not surprising that the Case Shiller index is favored by the default servicing industry, those that see the glass half empty.  In other words, if you are selling in Raleigh, Cary or Morrisville, North Carolina it is a buyers market.   On the other hand, John Burns Real Estate Consulting says that their analysis is outdated.  That firm conducted its independent research in 97 markets across America and found that prices were rising in 90 of them.  From January to March, 2012, the real estate consulting firm says that the average price increased by 1.1%   They say that in the last month, prices are up in 93 of the 97 markets.  These folks see the glass half full.  In other words, if you are selling your home in Wake Forest, Garner or Holly Springs, North Carolina, it is a seller's market.

How do you explain the different conclusions?  They collect the data differently.  Case Shiller takes its information from closed sales.  Most sales take 30 to 60 days to close. Then, it takes 30 to 60 days to collect the data.  The John Burns Real Estate Consulting survey uses properties at the point when the sales contract is signed.  The consulting firm claims that their data indicates what is going on currently, while the other studies review past history.  The consulting firm says that the housing market recovery is under way, but it could turn at any moment, particularly if the media publicizes the Case Shiller index's pessimistic view of the market.

So, if you are selling in Raleigh, Cary or Knightdale, North Carolina, you want to believe the John Burns Real Estate Consulting survey.  If you are buying in Wake Forest, Garner or Holly Springs, North Carolina, you want to refer to the Case Shiller index to support your offer.  Who is right?  It depends on who you believe and whose method of collecting data is more reliable.

 

Short Sales Should Speed Up with Lawsuit Settlement

by TeamForYOUrDreams

Triangle Short Sales Will Become Shorter

One of the difficulties with short sales in Raleigh, Cary and the rest of the Triangle area is that the buyer of a Raleigh, Cary or other Triangle home has to make an offer then wait and wait for the lender to agree to accept a short payment.  In other words, the thing that is short about a short sale is the payment to the bank not the time for the sale to be reviewed. There is a lawsuit brought by the Attorneys General of most of America's states that is being settled with all the major banks.  The lawsuit was brought because of claimed violations of foreclosure procedures by these banks.  One fortunate sidelight of the settlement of this lawsuit that was mainly brought to correct the sale of bank owned properties (REOs) is a requirement that will make short sales faster for sellers in Wake Forest, Holly Springs and the rest of the Triangle area.  The faster the approval, the more buyers will see the process though to completion and there will be an increase in the number of short sales that close.

The following is a quote of the article in Realtor Magazine that picked up a feed from Real Estate Daily News

 " As part of a settlement with state attorneys general, the five largest mortgage servicers are adopting new requirements for short sales, which is expected to speed-up what has been known as a lengthy process.

Here are some of the new requirements for servicers under the settlement: 

  • Servicers must provide borrowers with a decision within 30 days after receiving a short sale package request. 
  • Servicers will be required to notify a borrower, also within 30 days, if any necessary documents are missing to process the short sale request. 
  • Servicers must notify a borrower immediately if a deficiency payment is needed to approve the short sale. They also must provide an estimated amount for the deficiency payment needed for the short sale. 
  • Servicers are also required to form an internal group to review all short sale requests. 
  • Banks will be considered in violation of the settlement requirements if they take longer than 30 days on more than 10 percent of the short sale requests. Violations can carry fines of up to $1 million and $5 million for repeat offenses." 

This report is good news. The biggest problem with short sale's loss mitigation departments is that the departments are understaffed, so the overworked employees have a hard time handling their big case load.  With penalties of $1 million to $5 million, these banks should greatly increase their staffing to spend the money on negotiators who will get more accomplished for their firm instead of paying penalties. Since a lender makes between 20% and 30% more from a short sale than a sale of the same property after foreclosure, this increase in the loss mitigation department will be a huge benefit the lenders because there will be more short sales and less foreclosures.  Meanwhile, it will benefit sellers in Chapel Hill, Durham and the rest of the Triangle area who will get faster approvals, buyers who will get new homes more quickly and Realtors who will have a shorter processing time and an increase in closings. 

This sounds great to me.  What do you think?

Short Sale Rules for HAFA Just Changed

by TeamForYOUrDreams

HAFA Short Sale Process Just Changed Again

The US Treasury issued Supplemental Directive 12-02 on March 9, 2012 to revise the Home Affordable Foreclosure Alternatives (HAFA) Short Sale program.   What does that mean for the HAFA Short Sale process?  More sellers will qualify for HAFA and more sales with junior liens will close.

A HAFA short sale applies only to a seller’s principal residence, so investment properties are not allowed.  The Treasury regulations that were first adopted for HAFA required the owner to occupy the home in order to qualify for HAFA. Every rule has an exception, and a HAFA Short Sale was allowed if the owner had moved over 100 miles within the last 90 days to get a job.  Later, this exception was modified to be that the owner was allowed to move within the last 12 months for any reason.  The latest revision says “There are no longer any occupancy requirements for HAFA eligibility.”   The home still needs to be the owners principal residence under Section 121 of the Internal Revenue Code, that requires the owner to live in the property for two years during the five years before the date of the sale.  You have to enjoy the complexity of an IRS rule, right?.   The directive does not discuss whether HAFA still requires that the seller must not have purchased another principal residence in the year before the sale, but I assume that is still applicable

What does this do?  More sellers will qualify for HAFA.  I did a short sale of a townhouse in Raleigh where the seller had moved out and took a new job, but she had not moved over 100 miles.  With the regulations that were in effect at the time, this Raleigh Short Sale did not qualify for HAFA.  With the current regulations, this Raleigh Short Sale would not have been eliminated on this basis.

Second and third loans are called junior lien holders because they are loans recorded against the property after the first loan.  The example that most people know is a Home Equity Line of Credit (HELOC) that is put on the property as a second loan.  The former rules limited the payment to all junior lien holders to $6,000.  Now, the regulations increase the amount allowed for these lien holders to $8,500.  This is the total allowed for the sum of the payments to all of the junior liens.  So, if you have a Cary Short Sale with a first, second and third loan, the total that can be paid to remove the second and third liens from the Cary Short Sale property is $8,500.

Do you agree that governmental regulations are sometimes odd?  The structure of HAFA qualifies for humorous.  HAFA is a program to allow Short Sales of the first loan on the property.  This HAFA policy restricts what can be done with second loans.  The lenders who own second loans do not have to follow these rules.  This is about the same as expecting the people who are driving in one state to obey the traffic regulations for the next state.  While it may be humorous, this change in the rules will permit the lenders who have first loans to pay more money to the lenders who have second loans.

What does this do?  More HAFA Short Sales will close on homes in the Triangle area of North Carolina because more money means more lenders will accept the proposed offer.  So, if you have an Apex Short Sale with a second lien of $80,000 and a judgment for $5,000, you may be able to get the junior liens to agree to your Short Sale in Apex with an offer of $8,000 to the second loan and $500 to the judgment because most junior lien holders will settle for 10% of the amount owed.

A HAFA Short Sale seller gets a relocation incentive of $3,000 paid at closing.  How do you get a Wake Forest Short Sale seller who is broke to move out of the house?  Provide some money to pay for the expense of moving  The new amendment to this policy allows the relocation incentive payment only if the borrower or a tenant is living in the property and they are required to move out when the Short Sale closes.   This change in regulations makes sense.  You pay for relocation only if someone has to relocate.   The result is that the lenders who approve the Short Sale will get more money in these situations.

What does this do?  The incentive to do a HAFA Short Sale just became less.  There might be a few Short Sale sellers in the Triangle who were encouraged to do a HAFA short sale by the $3,000.  Those owners of Triangle real estate might make a different decision.

There are less exciting changes to the regulations for monthly payments that allow the borrower to make the full payment during the Short Sale and the there is a change in the reporting of a HAFA Short Sale to the credit reporting bureaus. 

Is this good for Triangle Short Sales? Yes.  More sellers will qualify for HAFA, more sales with junior liens will close and the lenders pay relocation benefits only when someone relocates.

If you want to have a complete understanding of the entire HAFA Short Sale processs from start to finish, look athttp://shortsalesr.us/short-sale-how-to/how-to-hafa-the-process-from-start-to-finish/

Should a First Time Homebuyer Buy a Short Sale

by TeamForYOUrDreams

Should a first time home buyer make an offer on a property that is a short sale?  Short sales can be complicated, so some first time home buyers in Raleigh and the Triangle area of North Carolina sometimes avoid them.  Let me explain why.  A short sale has all the elements of a normal sale where the buyer and seller have to agree on a price and all the other terms. In addition to that, the agreement has to be approved by the bank that has a loan on the property i.e. the seller's lender has to agree to the deal.  More specifically, the lender has to agree to take the net proceeds of the sale.  The buyer is asking that lender to allow the sale to close in return for a "short" payment instead of a full payoff on the loan. While the payment is short, the time it takes to get the banks approval may be long.  As a result, many Raleigh and Cary first time home buyers do not want to wait for the approval.  If you want more detailed information on short sales, visit another of my websites at www.CreateAShortSale.com.

In addition to the delay in getting the approval, the approval is not a sure thing.  Across the nation, only 27% of short sales get final approval.  So, if you believe in following the national averages, you have a bit over a 1 in 4 chance of getting your Triangle short sale approved.  Instead of applying the national averages, you should look at the success rate of agents in Raleigh, Cary and other parts of the Triangle, as our listing agents are better trained so that more of the short sales are approved in the Triangle.  The buyers and their agents need to focus on the agent who represents the seller, called the listing agent.  That agent is the biggest factor in determining whether the short sale gets approved.  In other words, a first time home buyer in the Triangle needs to find out who has the property listed, because that agent is responsible for processing the short sale with the lender.  For example, you can count the number of short sales where I have not been able to reach an approval on your fingers.  So, I ran out of time to get the sale approved in less than 10 sales.  There are some other agents like me who get nearly all of their short sales approved.

Buying a short sale give a Triangle first time home buyer the opportunity to buy a home at a price that is usually below the market price.  In order to be successful with the purchase of a short sale property, the first time home buyers in the Triangle area of North Carolina need to analyze more than the property when they are deciding whether to make an offer on a Triangle short sale.  They have to first look at the property.  Then, they need to find out the success rate of the listing agent in getting short sales approved.

Instead of listening to me analyze the situation, listen to Rang, a Triangle first time home buyer who just bought his first condominium.  Feel free to let me know your ideas about short sale properties being purchased by first time home buyers.

http://www.youtube.com/watch?v=wW2GR35E0JQ

Displaying blog entries 1-5 of 5

Contact Information

Photo of Team For Your Dreams, Inc. Real Estate
Team For Your Dreams, Inc.
REMAX United
7721 Six Forks Road, Suite 110, Raleigh, NC 27615
Raleigh NC 27615
919-846-3272
919-812-5111
Fax: 310-347-4041