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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.

Foreclosures of Raleigh Real Estate

by

Posted by Tim Burrell - Foreclosures are all over the national news.  Even President Bush is proposing legislation to help buyers with exotic financing avoid foreclosure.  NBC17 just did a story on how Foreclosures can hurt the values in our neighborhoods.   Consumer stories are all over the media about companies springing up to help homeowners in trouble, some of which just get the homeowner in more trouble.  What about Raleigh and the Triangle?

The number of foreclosures in Raleigh and the Triangle is down.  That is right, way down.  Because we are one of the best seller's markets in the United States, if a homeowner is realistic they can sell their home before they lose it to foreclosure.  Also, banks and other financial institutions do not want to foreclose on more properties, as it hurts their profitability.  If a property owner faces financial problems promptly and contacts a Realtor, a good Realtor can help persuade the lender to give the owner enough time to sell the property and pay off the lender.  So, homes are getting sold, not foreclosed.   This is good for the seller, who frequently gets some money instead of nothing in a foreclosure.  This is good for the lender, as foreclosed properties tie up not only the funds in the loan, but additional funds for reserves and government requirements, that can be used more productively by the lender.  It is also good for the Realtors who represent homeowners, and bad for the Realtors who sell REO properties acquired by lenders after foreclosures.

The news media needs to sell their stories, and bad news sells.  They indicate that foreclosures will hurt the value of a neighborhood.  Theoretically, it will not, as appraisers and those of us who do Broker Price Opinions (BPOs) for lenders do not use the sale prices of foreclosed homes when we analyze the value of other homes in the neighborhood.  However, if there are enough empty, foreclosed homes in a neighborhood it will make the area look worse, and affect the amount that a buyer will offer for a home.  Once again, since foreclosures are down in the Triangle area, this potential problem is decreasing.

One of the problems that causes Foreclosures is homeowners not facing reality.   It is hard to admit that a problem is serious.  So, some wait until it is extremely late to deal with the problem before they do anything about it.  As long as the foreclosure sale has not occurred, there is still time to try.  Even up to 10 days after the sale the owner can still close a sale and pay off the bank under North Carolina foreclosure laws.  I just sold a home in foreclosure by getting "the tenant from Hell" out of the property, clean it and repair it, then get it on the market less than one week before the foreclosure sale.  We received a contract before the foreclosure sale date, then persuading World Savings to allow the sale to close by postponing the foreclosure sale.  The owner did not get top dollar by getting so close to the deadline, but he did receive enough at closing to help him with his next house.  The buyer got a good deal on a good house in a nice section of Cary.  Also, the lender is fully paid.   So, one way we can all help with the problems in the mortgage industry is to face the problem early, get the house on the market, adn get it sold.  In a good market, it works well.

Submitted by Tim Burrell :

Clients always ask, is it a Buyer's market or a Seller's market?  In the Triangle, that depends on the price.  A Realtor's rule of thumb for the line between a Buyer's market and a Seller's market is when you have a six months supply of homes.  In other words, if homes keep selling at the same rate, if it will take more than 6 months to sell all of the propeties currently on the market, then it is a Buyer's market.

If you have a home priced over $400,000 in the Wake Forest area, there is a 14 month supply of competition, creating a strong Buyers market.  If you have a home priced from $150,000 to $250,000 in the Cary/Apex area, there is a two months supply for a strong Seller's market.

But, what is it like overall?  Balanced between a Buyer's and Seller's market.  For the four county area, there are 11,521 active listings, an increase of 10.7% from last year.  Most of the increase is in new homes for sale, with 23% increase, while resale homes have increased by only 4.4%.  At the rate all the homes are selling, there is a 6 months supply of homes.  Last year, there was a 5 months supply.  So, the market on the average has shifted, but you do not buy the average, you buy only one home.

So, the price range determines whether you are operating in a Buyer's market or a Seller's market.

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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