From the category archives:

Short Sale questions and Answers "What is a Short Sale"

Is it REALY worth it….Loan Modification.

by Kris & Kim on November 14, 2008

With all of the hype of “loan modifications” and “government bailouts” you can’t help but feel that there is a solution somewhere that will save you from loosing your home. I’ve been watching the news, reading everything that comes across my emails and can only say that I get a little sick to my stomach at times.

One must really think about long term when faced with an opportunity to modify an existing loan. It’s such an emotional time, the fact that your going to lose your home is beyond anything I could put into words, believe me I know first hand! The stress seems to go away when you are told that if you just “sign here” you don’t have to move and you get to keep “YOUR HOME!” Wow, those are words that you’ve prayed for.

Here’s the hard reality;what do you do in a few years when you find that your so upside down in the home that you can’t refinance to a lower payment, or worse yet need to move and have no chance of selling unless you do a short sale….and who knows if the lender will be willing then?

As I work with our clients and their lenders on loan modifications, one thing has been consistent. Lenders are not in the mindset to help their current clients. They go off of black and white paperwork, if the borrower fits their criteria they offer up some type of a loan modification. I’ve never seen one, no never, that was an advantage to the borrower. They are a bandage at best!

Lenders are not willing to take into consideration the fact the home is 30 to 50% + upside down. They will usually extend the borrower a lower payment and add all of the “accrued” interest to the end of the loan. We have seen a few lenders discuss the possibility of reducing principal balance 5%, but have not had ONE accepted as of today.

The point here is there is no magic wand, no real fix for the mess of our housing industry. Loan modifications may work for some people, if they are not seriously upside down in their home.

Having lived through the loss of a home, and of course trying anything possible to keep what was “mine”. I look back and realize the blessing of not being given the chance to keep it. Now that the emotions have died down the fact is that if we would have kept that house at it’s upside down equity, I’m not sure if we would have seen it appreciate enough in our life time to have equity….it was nearly $200,000 upside down a year ago…and still dropping.

Those four walls that seemed to mean so much to us now sit empty like hundreds of other homes in the city. I’ve realized that it’s human nature to fight for things that are ours, no one wants to be told they don’t have a choice. Here’s the thing, you do have a choice, you can choose to get out of a bad situation that will most likely get worse before it gets better.

The market is still declining, most loan modifications are going to keep you locked into a home that is going to continue to drop in value. Think about your future.…you can most likely find a wonderful home to live in while real estate continues to drop. Then buy again for half of what you owe on the four walls that you leave behind.

Short Sales were not widely accepted a year ago. In today’s market, your lender is ready to get these bad loans out of their inventory. The President has also realized that people are in need of help and signed into action the mortgage relief act, this relieves home owners of the liability of gains. When your thinking about your “choices” try to step away from the emotions. If it makes financial sense to keep the home, just be very careful to check with your lender before you pay someone to do a loan modification for you. You will be able to talk to your lender/s and find out exactly what terms they will offer.

From the heart of someone who’s been through it…


{ 0 comments }

Can I live in my home while I’m Short Selling it, even though I’m not making the payments?

by Kris & Kim on October 11, 2008

Today I was talking to a fellow that called me to find out about how a Short Sale works.  I realized after talking with him for nearly an hour that there are a lot of people (real estate agents) that give out conflicting and incorrect information.  I don’t believe that it’s intentional in any way, but scary for the person that needs to be informed correctly regarding this very important subject.

Some of the topics that were of interest and concern to him….

The loan modification he was offered was not going to help him enough per month on his payment and he was going to have to keep all of the principal balance.  The payments he was currently making were taking nearly 3/4 of his pay per month.  So, he had basically depleted his savings and was now having to look for a new place to rent for a while, but found he was lacking the money it was going to take for deposit and first month’s rent to move…not to mention moving costs.

I assured him that as long as we had the home listed for sale, and it was able to be shown to clients, his lender  would not be ask him to leave the home even if he was not making his payments.  As I explained, it’s like an ordinary sale in most ways.  The main factor in a Short Sale is that the “bank” is really now the seller and as real estate agents now negotiate with the bank instead of him.

For some people, doing as little damage to their credit is very important.  So I would say to those of you that fit this category…if your able, stay current on all of your financial obligations.  If your like most of us that are facing mortgage payments that are increasing at the speed of light and it’s just not possible to make those payments, don’t.  But get your home listed for Short Sale as soon as possible and stay current on as many of your financial obligations as you can.

One last little tip, if you live in a home that has an HOA (Home Owners Association) do what ever you can to not let those get behind.  HOA’s hold quite a bit of power, and will slap a lien on the property in a heart beat!  And that lien will have to be paid before the sale of the home.

Hope this information is useful, as always, please email us if you have any questions!


{ 0 comments }

Foreclosures drop in California….State bill 1137 working….this month.???

by Kris & Kim on September 21, 2008

Foreclosure notices fell nearly 90% in California with the implementation of state bill 1137 on September 8th. I found a great chart that shows the huge decline in Notice of Defaults and Trustee Sales here in the state of Ca. Here’s the staggering fact! We went from 3k to 4k notices PER Day to just a few hundred PER day…

This is only temporary…

NOD is the first stage of foreclosure after a borrower misses three to four mortgage payments. Notice of Trustee Sale is the second stage of foreclosure that gives the borrower notice their home will be sold at Trustee sale shortly thereafter. Timeline for NTS comes about 120-150 days following the NOD or about 8-10 months after the borrower misses their first payment, depending on the efficiency of the lender. From NTS the home is sold at Trustee Sale in about 14-days or so.

As you can see from the chart below, the week following Sept 6th when the new law was enacted NOD and NTS activity falls off of a cliff, down 90% from the week prior. (data in partnership with Foreclosure Radar)

Notice the day before the law went into effect, the banks sent out two times the number of notices…hmmm. We see data anomalies like this all of the time, especially around end-of-quarter…BANKS!!!

This new law requires the foreclosing entity to perform significant due-diligence ahead of sending out foreclosure notices in the future. What this does, however, is simply postpone the problem a month or so if your looking at this from the lenders point of view.

Now, if you’re a homeowner that’s facing foreclosure….look at it as that extra time you need to figure out how you are going to avoid immanent foreclosure. If loan modification is not an option, it’s time to learn about Short Sales. Banks doing business here in California are being forced to find alternatives to foreclosure.

That is a very good thing for all of us.
Short Sales are becoming more accepted, major lenders have Streamlined the process…can you believe it! Our last Short Sale with Countrywide was a total of 3 weeks from taking the listing to getting approval from their new Short Sale department. Amazing, the lender that used to turn down offers, now has added employees to staff this “Special devision”.

Ok, back to the chart:

This will have a positive effect on the September monthly foreclosure numbers when they are reported the second week of October by Realty Trac and other data providers. Remember, CA makes up roughly 40% of all US foreclosure activity. However, it will make for a dramatic rise in the November numbers once they get caught up and in compliance.
Banks and servicers are doing all they can to quickly comply with the law and resume sending NOD’s and NTS’. These notices are required by law before their take back their collateral so rest assured, they did not want to stop sending these out and being on record. When they begin to stream out again we will know in real time.


{ 1 comment }

Bank of America’s new Short Sale Criteria sends California Homes to Foreclosure!

by Kris & Kim on September 5, 2008

Kris and I live in the “Inland Empire”; one of the hardest hit areas of the country. Being Real Estate Agents, our decision to become Short Sale experts was an easy one. Our lives are touched daily with calls from people that are loosing their homes. Using everything we’ve learned during our training and experiences that we deal with daily….trying to help people that truly want to avoid foreclosure…however, nothing to date has hit me like this news.

As of 9/1/2008 Bank of America has implemented new criteria for short sale acceptance. The criteria states that Bank of America will accept no less than a 10% payoff of a debt balance being charged off as collectible. The criteria also states that Realtor commissions shall not exceed 4%.
Here’s proof BofA is sticking to the new criteria…
bofadecline1

What’s going on in America? The state of California passed a bill that becomes effective on or around September 8th SB1137 ordering all lenders doing business here in California to find alternatives to foreclosure
sb-1137-became-effective-july-8th-as-an-urgency-measure1

Bank of America beat the law makers here in California by 8 days! Their new criteria became effective September 1, 2008.

A piece of information that we’ve learned over the past year; when dealing with mortgage lenders that hold the first lien on a property…most if not all, allow only 3% of the sales price to go to subordinates, some cap at a maximum pay-off of $1000. Way to go BofA, do you share this decision making information with shareholder? The shareholders that will soon feel sharp declines in stock prices…due to this stupid “un-thought” process

I’ve found some fuel to add to this fire that BofA has started and will most likely let burn ’till it hurts many.

Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn’t refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey’s 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA’s chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.

“People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can’t sell and they can’t afford the higher payments,” Brinkmann said in an interview. The unadjusted rate for new foreclosures was 1.08 percent, also a record, he said.

Foreclosures started on prime mortgages rose to 0.67 percent from 0.54 percent and the foreclosure inventory increased to 1.42 percent from 1.22 percent, the report said. The share of seriously delinquent prime mortgages was 2.35 percent, up from 1.99 percent.

Existing home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent, according to the National Association of Realtors in Chicago.

Sales of previously owned homes rose 3.1 percent in July to an annualized pace of 5 million, boosted by foreclosures that accounted for about a third of all transactions, the National Association of Realtors said in an Aug. 25 report.

Some content from Bloomberg.com


{ 0 comments }