Recession Foreclosures

Purchasing a short sale property can be profitable since they are usually sold at discounted prices. However, the short sale process can be frustrating and long so above all be patient. The average short sale takes at least 90 days.

Finding the Property

Starting the short sale process begins with finding the right property. Not too difficult these days. Here are several resources for finding short sale properties:

- Internet
- Realtor
- Wholesaler
- Bank
- County Recorder’s Office
- Drive by neighborhoods you are interested in looking for signs that say “For sale by owner”, or look for vacant and/or abandoned properties.

Qualifying the Property

Once you do locate a property, make sure that the seller calls their lender to find out if the property qualifies for a short sale. If it does, then you can make an offer to the seller and start the process. If not, go on to the next deal.

Your Offer

There are a few strategies to keep in mind when negotiating with the seller’s lender so that you are successful.

- First, before you even make your offer, have a local Realtor provide you with the comparable sales in the area so you know what to offer or check online with the tax assessor or country recorder’s office to find recent sales in the area. The lender will get their own BPO(broker price opinion) as well.

- Next, keep your offer at or slightly below the current market value.

- If you have cash, then I suggest you purchase the home with cash as it will give you an edge over any other buyers that may also make an offer on the property.

- Keep the closing short. Lenders like short closings.

- Be prepared to purchase the property in an “as is” condition.

- Add an assignment clause and an escape clause that the offer is contingent upon your attorney or your partner’s review. This way you can assign the contract to another buyer if you want or get out of the deal if you find a better deal.

Short Sale Package

If you are going to negotiate the short sale, then you will need to send the short sale package to the seller’s lender. Be sure to include the following in the package:

1. Hardship letter signed by the seller.
2. Seller’s authorization letter authorizing the lender to negotiate with you.
3. Seller’s last two paycheck stubs.
4. Seller’s most recent bank statement.
5. Seller’s W-2 or 1099 forms.
6. Seller’s last two years’ tax returns.
7. Copy of purchase and sale agreement.
8. Any brokerage listing agreement.

Short Sale Strategies

Once you have submitted your offer, keep calling the lender to make sure they received the short sale package. Call every day until a negotiator has been assigned. Be patient and courteous.
Once you do get a response, don’t accept the first counter offer the lender makes. It may take a couple rounds of countering before you get the price you want. Know when to walk away if the lender is not willing to negotiate at your price. There are other short sale opportunities.

Check out http://kenswholesaledeals.com for more up-to-date information and real estate deals

Everyone likes a story with a happy ending: Boy meets girl, they fall in love, get married and live happily ever after. The story is a little longer if boy and girl try to buy a short sale house and then live happily ever after. That story is not as simple. Patience is the main ingredient in any story involving a short sale.

First of all, a short sale is when the seller owes more than house can be sold for and the lender agrees to accept a loss on the house. President Obama recently announced further measures to help beleaguered homeowners, including encouraging lenders to accept short sales. The benefit of a short sale is that homeowners avoid foreclosure and the completely ruined credit that goes with it.

However, the “short” in short sale refers to the loss to the bank, not the quickness of the sale. Because buyers are dealing with the seller’s lender as well as the seller, paperwork does not move quickly. “The problem is it’s never clear who in a bank has the authority to approve a short sale,” said Howard Glaser, a mortgage industry consultant in Washington and a former HUD official in a recent Associated Press article. Federal standards “would speed the process for buyers and sellers by making it more efficient.”

The number of foreclosures continues to accelerate across the country. The AP reported that number of foreclosures was up 32 percent in April compared with the same month last year. Of course, the Austin foreclosure rate is not that high, but Central Texas is facing its fair share of the housing crisis.

The number of short sales, pre-foreclosure homes, on the market is likely to increase in the months ahead as the economy continues to be shaky. A short sale may be a good deal for a buyer, as in most cases the owner has stopped making payments and the home is vacant. It is in the lender’s best interest to get the defaulted loan off the books and accept an offer, but that doesn’t mean they will jump at any offer.

It can’t be stressed enough the importance of having a qualified real estate agent, and that is certainly the case when dealing with short sales. If a buyer decides to make an offer on a short sale home, the real estate agent needs to do a little research. First, a title search will indicate how much is owed to the lender, who the lender is and whether there is more than one mortgage on the house. A buyer should know that complications can arise if more than one lender is involved.

Another thing the real estate agent needs to determine for the buyer is comparable recent sales in the same neighborhood. These, more than anything else, will help determine the best offer price for the house. For example, if a home is listed for $200,000, but the last sale in the neighborhood was for a home with the same square footage for $175,000, then the buyer can be confident in making a lower offer. The agent should include comparable sales in the offer package sent to the lender.

Although a short sale home is still in the seller/owner’s name, everything from the offer to any repair addendum to the final close has to be approved by the lender. It is crucial that the seller’s agent has good lines of communication with a lender representative, usually someone in the loss mitigation department, to move the process along.

There can be a happy ending with short sales for both the buyer, who can get a good deal, and the seller, who can be saved from foreclosure. The story on short sales, however, can be a long one.

Inside San Antonio is a small brokerage in central Texas. Their website provides information on San Antonio real estate along with information on San Antonio schools and a real estate blog.

Article Source: http://EzineArticles.com/?expert=Jill_Black

I have a simple strategy that I use when I want to get a short sale sold. Here is the process:

1. List the Property
2. Get an Investor Offer on the Property
3. Collect current Financials & other Short Sale Documents
4. Submit entire short sale packet to lender(s)
5. Order BPO/Appraisal and lender’s BPO/Appraisal
6. Start a “Dutch Auction” list price weekly reduction
7. Negotiate lowest acceptable net price to lender
8. Compare Highest & Best offer with lender’s approved price/value
9. Close transaction

Here is a short summary of the reasoning behind each step:

1. List the Property For Sale

The lender wants to know that we are doing everything we can to facilitate a sale. If the lender knows that it is listed and marketed on the MLS then we have the best chance of finding a qualified end buyer. They also know that the offers from a listed property represent “market value” and are more willing to negotiate a good settlement value.

2. Get an Investor Offer on the Property

Investors will always offer a low price on any property in order to get the best deal available. At this stage of the game it doesn’t matter, we just need a legitimate offer that we can submit to the lender to get the short sale process started (we are always honest and never fabricate an offer). We also want that offer to be low so that we can find the lowest acceptable value that the lender will approve.

3. Collect current Financials & other Short Sale Documents

The financial information needs to be current so it is collected when we have an offer. I have a network of investors so I know I’ll have an offer within a couple days of listing the property so I begin to collect this information immediately. The short sale documents include all the financial information to “prove” to the lender that the seller can no longer afford to keep the property and that they need to sell it. These documents also show what happened to the seller because they could afford the property when they bought it and now they can’t they afford it. All information needs to be truthful and honest.

4. Submit entire short sale packet to lender(s)

All the information is submitted in one packet to the lender. This keeps information from becoming lost and allows the process to move forward more quickly. Since most lenders are backed up with other short sales and foreclosures, the first several calls to the lender will just be checking on information and making sure that all information then lender needs has been submitted. Any missing information can quickly be resubmitted.

5. Order BPO/Appraisal and lender’s BPO/Appraisal

While almost no one does this, we order our own BPO on each property. We want to have an independent opinion of value and price. The 1st mortgage lender will almost always order their own BPO (an appraisal if the loan is over FHA limits) to establish value. With our own BPO in hand we will meet the BPO agent and show them the property and give them a copy of the BPO as a second opinion. We will point out those things which are important to the value of the property but that may not be obvious to someone not already familiar with the property. Our main objective is to get an idea of where that agent feels the value of the property will be (although they never tell us their value). We also use our BPO to send to any junior lien-holders so they are also aware of value (which makes negotiations with them go more smoothly).

6. Start a “Dutch Auction” list price weekly reduction

To get the best price available we need to have competing offers. Once the BPO has been completed by the lender we start to lower the price each week until we start to get offers on the property. If we don’t see any offers during the week we lower the price. (I like to lower the price on Thursday so that anyone looking for homes to view over the weekend will see the price change and come to see the home.)

7. Negotiate lowest acceptable net price to lender

Once all of the paperwork has been received by the lender the case/file is assigned to a negotiator who then orders the BPO/appraisal. (Note: We hold any subsequent offers until the negotiation is concluded to establish the best possible pay-off/settlement the lender will allow for the seller.) Once the BPO has been received by the lender we begin the actual negotiations. We know that the lender’s BPO value represents the price that the lender believes they can sell the property for (should they take the property back through foreclosure).

We know that the lender’s bottom line is below that number because the foreclosure process is very expensive (attorney’s fees, property insurance, loan interest to Fed, selling costs, commissions, concessions, and dropping property values…not to mention the problems the lenders are having with too much bad debt on their books). Those costs generally add up to 15-20% of the property value (they can be significantly higher in upper-end homes). The lender will negotiate a value that is as high as possible but at least higher than their bottom line through the foreclosure process. Once they agree to a net value it is logged into their system.

8. Compare Highest & Best offer with lender’s approved price/value

Once we have determined the lender’s bottom line we will compare that value with our highest & best offer on the property. If the H&B offer is significantly higher than the lender’s approved bottom line then the investor will buy the property and resell it to the buyer with the H&B offer. However, if the H&B offer is not significantly higher then the lender’s bottom line then the H&B offer is submitted to the lender for approval and that buyer will close a single transaction. (Significantly higher means about 12-15% of the property value. The investor will have costs associated with 2 closings: 1% 1st closing costs, 3% money costs, 1% 2nd closing costs, 3% commission to 2nd buyer’s agent and the investor’s profit. So if the investor finds their own buyer they can reduce the sales price by 3% and still be profitable.)

9. Close transaction

Finally we close the transaction, either with or without the investor. The seller should be done with this settlement and no further negative reporting from the lender (our agreement with the lender states something to the effect of “satisfaction in full to seller”). Because the lender is writing off the “bad debt” lost in the negotiations, the seller may see a 1099 tax form which shows the lender’s loss as income for the seller. If the property was the seller’s principle residence then that “income” may be excluded from their taxes (some restrictions apply so consult your tax advisor).

Conclusion

At the end of the day this process is not 100% successful. However, it is a process that gives the seller the best chance of getting an approved short sale from their lender that is sellable in today’s market.

Khayyam Jones is a real estate investor and Realtor in the State of Utah. He specializes in distressed property investments including fixer-uppers, foreclosure/short sales, and small infill development.
Website: http://KhayyamJones.com
Blog: http://utahrealestateinvestor.blogspot.com

Article Source: http://EzineArticles.com/?expert=Khayyam_Jones

The Housing and Economic Recovery Act of 2008 gave the green light to FHA to expand the funds necessary to avoid foreclosures in the current housing market crisis. The Act also offers big tax breaks and incentives for first time home buyers. This offers a sigh of relief to homeowners that are facing foreclosures. Now they will be able to modify their loans, even under FHA, and get a comfortable FHA-insured 30-year fixed-rate mortgage.

To qualify, homeowners can not owe more than the current market value of their homes. However, there is a catch to all of this generosity; borrowers must agree to share potential profits from future sales of their homes with the FHA. FHA is not the actual lender but rather insures the loans and guarantees the full amount. This is beneficial to both borrowers and lenders alike. Borrowers get lower interest rates and lenders assume less risk.

Since President Obama has been in office he has made efforts to help homeowners. Those loans that are backed by Freddie Mac or Sallie Mae are protected through various finance mortgage revision plans. If you have an FHA mortgage then you can check out the modification loan, HOPE for Homeowners, which is a unique FHA arrangement that refinances mortgages by equity division.

Today many people are looking at an FHA loan modification just to stop a possible foreclosure and to change the stipulations of their loans to accommodate their earnings and have enough money for their mortgage payments. Often this can mean the difference between saving your home and losing it.

Prior to your getting behind on your existing mortgage payments, call your lender and clarify your situation. If there is a situation that you are facing, that could mean your income is reduced for good then explain that too. This is the time to inquire about an FHA loan modification. You should always try to do this before you get behind in payments.

Sometimes you have to push the envelope a little bit so be persistent! Do some research online and find out exactly what your options are. If you are ignored then ask someone else but don’t give up! Ask the representatives at your bank and follow up with phone calls. This is too important to just let it go. It could mean the world of difference in your life!

Get free consultation today and save yourself from bankruptcy, foreclosure or other pressures of debt. Here are highly reputable sites for expert help…

Loan Modification — Free Consultation

Debt Settlement — Get Free Consultation

Chimezirim Odimba is a finance expert.

Are you considering buying a new home? If so, there is truly no better time than now – particularly if you are a first time home buyer. Not only are housing prices at a record low, the First Time Home Buyer Credit will also provide you with up to $8,000 in tax credits when you purchase your new home. What could be better than receiving an $8,000 discount on your home purchase? How about this – the government is now allowing first time homebuyers to use the credit to make a down payment on the home of their dreams.

HUD Secretary Shaun Donovan recently deciding to allow first time homebuyers to use the $8,000 credit to help cover the down payment and other closing costs associated with purchasing a home – a decision that is being viewed as a victory for consumers by the National Association of Home Builders.

“The biggest obstacle for first-time buyers is coming up with a down payment,” said Joe Robson, who is the Chairman of the National Association of Home Builders as well as a builder in the city of Tulsa, Oklahoma. “We commend Secretary Donovan for acting decisively to enable buyers to access the tax credit at the time of closing. This will help to stimulate home sales, stabilize housing and get the economy back on track.”

In order to take advantage of the new First Time Home Buyer Credit rules, buyers must purchase their home through one of the following agencies or lenders:

• FHA-approved lender
• Federal, state and local government agency
• FHA-approved non-profit organization

When purchasing a home through one of these agencies or lenders, you can receive a short-term loan referred to as a “bridge loan” of up to $8,000. The amount of the bridge loan will be dependent upon the selling price of the home so it will only be equivalent to the amount the buyer can expect to receive through the First Time Home Buyer Credit legislation.

In addition to being able to use the funds received through the First Time Home Buyer Credit as part of the down payment required to meet the FHA’s 3.5% minimum down payment, first time home buyers can also use the fund to buy down their interest rates at the time of the closing.

Additional details regarding the exact process of accessing the First Time Home Buyer Credit funds is are expected to be released next week. In the meantime, the announcement is one that is certain to get interested buyers to take the leap and purchase the homes they have been dreaming of.

Shane Pollock is part of the Greater Raleigh Realty Team, and is a resident of Cary, North Carolina. Greater Raleigh Realty specializes in Cary NC Real Estate and Relocation Services. For more information please visit our Greater Raleigh Real Estate website.

The combination of low prices and low interest rates is unusual and not likely to be duplicated again in our lifetimes. In addition, the government has created some terrific programs available only to first-time homebuyers.

The First-Time Homebuyer $8,000 Tax Credit: The First-Time Homebuyer $8,000 Tax Credit:

The Housing and Economic Recovery Act was passed in late 2008. However, Congress expanded the provisions of it the first few weeks of 2009. Whereas money originally needed to be repaid, now it does not – and the credit was increased from $7500 to $8000. If you don’t have an $8000 tax liability, not to worry – you get the difference back in the form of a refund! Here is how it works:

- You must be a first-time homebuyer (defined as not having owned a principal residence within 3 years prior to the date of purchase).
- The home must be purchased between April 8, 2008 and before Dec 1, 2009.
- The credit is 10% of the purchase price up to a maximum of $8,000.
- To receive the full credit, your adjusted gross income must be $75,000 or less if you file singly or $150,000 for a married couple filing jointly. The credit is phased out for AGI’s between $75,000 to $95,000 (filing singly) or between $150,000 to $170,000 (filing jointly).
- If your tax liability is less than the credit, you will receive a refund for the difference!
- You must live in the property as your primary residence for 36 months or you will be required to repay the credit.
- You must purchase the home from an unrelated third party.

FHA Loans:

Although FHA loans are not restricted to first-time buyers, their low down payment requirement and easier underwriting standards make them ideal for most first-time homebuyers – particularly in today’s stringent lending environment. And the interest rates are very competitive. FHA does not make the loan; they insure the lender against default. Therefore, many lenders make it easier for you to qualify.

And FHA is an excellent loan product for a first-time homebuyer. The program is not limited only to first-time buyers, but it is limited to buyers purchasing their primary residence. Investors are not able to take advantage of the favorable terms of an FHA loan. What are those terms?

- You only need put 3.5% of the purchase price as a down payment – and the money can come from a family member.
- It is easier to qualify for the loan. You may still be able to qualify for a loan, even if you have had credit problems or a bankruptcy.
- Interest rates are competitive with conventional mortgages. (However, you should compare interest rates from different FHA-approved lenders to make sure you’re getting a good deal.)

- A buyer with credit problems can take advantage of much lower interest rates than a traditional sub-prime loan.

- You will be required to pay for mortgage insurance which is charged as an upfront premium of 1.5% – 1.75% of the loan amount and then as a monthly fee included in your monthly mortgage payment.

- Some allowed closing costs or credits can be added to the loan amount.
- You must occupy the property as your primary residence – however, there is no time restriction as with the Tax Credit.
- Approved condos and 1-4 unit properties qualify.
- The condition of the property must meet FHA guidelines.
- FHA loan limits apply. These will vary from region to region but have been increased recently to make the loans more widely practical.

FHA 203(k) Loans:

For properties in less than perfect condition, FHA offers a Rehab Program known as a 203(k) loan. This program provides all the benefits to buyers of an FHA loan as outlined above while also funding the cost to repair and rehab a property.

It’s a nice program especially for first-time buyers because you are able to borrow the money you need for any repairs right up-front. And, since you are required to use FHA approved contractors and an FHA approved inspector, you know that the work will be done correctly.

- The property must be an FHA approved condo development or a 1-4 unit property.
- You must occupy one of the units as your primary residence. These loans are not available to investors or rehabbers.
- You only need a down payment of 3.5% of the final loan amount. For example, if your purchase price is $100,000 and your rehab costs are $50,000, you will need a down payment equal to 3.5% of $150,000 – or $5,250. Don’t forget, this money can come from an immediate family member! (FHA loan limits apply.)

Eligible Improvements

As a rule, luxury items are not eligible. However, the homeowner can use the program to paint, add rooms or decks even if the home does not need any other improvements! All health, safety and energy conservation items must be addressed prior to completing any other general home improvements.

The 203(k) program has been around a long time. Many agents and lenders have steered away from it because of the complicated paperwork involved in the program. However, FHA has streamlined the process considerably and it is possible to close a loan in a normal time frame – often in less than 60 days.

Although there is additional paperwork and added inspection fees, many of those can be rolled into the loan. And it provides a tool so that a typical homebuyer can take advantage of the bargains available in foreclosed properties.

Rarely has there been a better time to be a first-time homebuyer. Let me help you – or someone you know – take advantage of the opportunities available in today’s market! Get Your free report “Why Rent When You Can Buy?”

Visit my website for all your Chicago Real Estate needs at http://www.MyChicagoRealEstateAgent.com