How to do a Short Sale
Posted at 11:10 AM, Nov. 7, 2008
WHAT IS A SHORT SALE?
A short sale is when a lender agrees to accept less from a homeowner than the amount that is owed on the mortgage. The property may have more than one loan, in which case both lenders must agree to a short sale.
HOW DO I DETERMINE THE LIST PRICE?
The best way to determine the list price is to enlist the help of an experienced Realtor® who can prepare a Comparative Market Analysys. This analysis, or CMA, will include comparable properties that have recently sold, are currently on the market, or have not sold because the price was too high for the market. The list price may be less than the underlying loans against the property, and it should be listed at a price that will attract buyers. An experienced real estate agent will be able to tell you what homes like yours have been selling for, and what price will attract the most buyers.
HOW DO YOU GET YOUR LENDER TO AGREE TO A SHORT SALE?
Homeowners who are considering a short sale need to provide their lenders with a hardship letter explaining why the seller cannot afford to continue to stay in the home. They will also need to provide the lender with bank statements, tax returns, profit and loss statement, list of assets, list of debts, etc.
The lender will also require that you have your home listed through your local Multiple Listing Service. They will not allow you to try to sell your home by owner. They want the property to be exposed to the greatest number of buyers, which includes the MLS. Some lenders won't agree to a short sale until there is an accepted offer on the property.
HOW LONG DOES THIS PROCESS TAKE?
Short sales, unfortunately, can take months to complete. From the time the property is listed to getting an offer, to getting the offer accepted by the lender can take from 2 to 6 months. It is dependent on a number of details; one of the major reasons that short sales take so long is that the Realtors® involved are not experienced in transacting short sales and haven't taken care of the necessary paperwork. Another reason is that there are so many short sales taking place that the lenders can't keep up with the demand. We have heard of offers that were submitted to the lenders becoming "lost" and the agents having to re-submit their offers and start over.
WHAT IF THE LENDER REJECTS THE SHORT SALE?
If the lender rejects the short sale, there are a few alternatives the homeowner can take. They can find out through their Realtor® why the lender rejected the short sale and re-submit the paperwork to the lenders specifications, they can choose foreclosure, or they can request a deed in lieu of foreclosure from the lender. These are issues that the homeowner can discuss with their real estate agent.
WHAT HAPPENS TO MY CREDIT WITH A SHORT SALE?
A homeowner in default is technically "in collection". These events are reported to all three bureaus as "Score Factor Code #22". The real difference between short sale and foreclosure on the homeowners credit is that the homeowner who has sold their home through a short sale is eligible to purchase another home in two years as opposed to 5 years for a foreclosure. Both foreclosure and short sale will stay on the homeowners credit report for 10 years.
If you would like additional information on short sales, or if you know of someone who could use the counsel of experienced real estate agents, please call of email us.
ST GEORGE AREA SHORT SALES
Posted at 11:30 AM, Oct. 31, 2008
Short sales are a huge part of our market right now. In fact, there are almost 300 properties that are being offered for sale through our MLS as "short sales". In case you are not real clear on the definition of a short sale, it is when a lender agrees to allow an owner of a property to personally sell the property for less than is owed instead of the lender forclosing on the property. Some of these sellers may be in default on their mortgage loans, but a majority of them bought at the top of the market or have taken equity out of the property through refinance. Now these home owners are needing to sell the property because of divorce, job transfer, loss of income, etc and they are upside down, owing more than their homes are worth.
Many lenders are asking sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation. Another often overlooked aspect of a short sale is that the seller must count the amount forgiven by the lender as ordinary income on their taxes.
Short sales take longer to close than bank owned properties because of the lengthy process the lenders have to go through to get price opinions or appraisals, and just because of the tremendous volume of short sales that are taking place nationally. Because of the time element, many buyers are electing to make offers on bank owned properties or homes that are not in a distressed situation rather than have to wait up to 6 months to hear from the lender on a short sale.
Short sales, while not good for sellers or lenders, are a great opportunity for investors, move-up buyers, and 2nd home buyers to take advantage of fantastic prices in this buyer's market. I have seen homes sell for more than 50% less than their value of less than a year ago. There is NO better time to buy real estate than right now!
Foreclosures in Washington County Utah
Posted at 2:00 PM, Aug. 1, 2008
The Spectrum reported on July 27 that the number of foreclosures in St George area had jumped 446% since last year. They said that that one in every 87 households in the St George area has received a foreclosure notice. How does this compare with other areas of the country?
The 2nd quarter of 2008 saw one in every 43 Nevadans receiving a foreclosure notice, the highest foreclosure rate in the country and 4 times the national average.
In California the rate of foreclosures is one in every 65 households, the nation’s 2nd highest foreclosure rate. Foreclosure activity in California increased 19% from the previous quarter and was nearly three time the level reported in the second quarter of 2007, according to Realtytrac.
With one in every 70 households receiving foreclosure notices, Arizona is the 3rd highest state foreclosure rate in the 2nd quarter.
Not far behind, Florida is the nation’s 4th highest state foreclosure rate in the 2nd quarter with one in every 78 households receiving a foreclosure notice during the quarter; more than twice the national average.
The top metro areas in foreclosures per household in the 2nd quarter of 2008 are:
1. Stockton CA, 1 in 25 households.
2. Riverside CA, 1 in 32 households.
3. Las Vegas NV, 1 in 35 households.
4. Bakersfield CA, 1 in 41 households.
5. Sacramento CA, 1 in 49 households.
While this downturn in the market is weighing heavily on those who are negatively affected, that is, those who are losing their homes, and those who need to sell their homes but are not in a distressed situation, it is a great time to buy a home if you are a first time buyer, a move up buyer, or an investor. The prices have softened since the boom in 2005/06 and the interest rates are the lowest they have been in years, plus Bush just signed a new housing stimulus bill which will give first time home buyers a $7500 tax credit.
The people who will be on the golf course bragging about all of the money they made in real estate five years from now, will be the ones who are taking advantage of the current market conditions across the country.
Is the end of the housing slump in sight? Some say that they expect the slump to last for a decade or more, and some are predicting that the end is right around the corner. The only thing that we know for sure is that there are buyers who want to buy, and sellers who want to sell, but the rules for the purchase and sale of real estate have changed. Lending practices have changed dramatically in the past few months. Buyers are being carefully scrutinized by Lenders and will need to be qualified in order to purchase a home, and sellers will need to be realistic about pricing their properties at current market value in order to attract buyers from making offers on their “distressed” competition.
So, are things really bad in the St George area real estate market? It really depends on which side you are on.
Utah Foreclosures on the decline!
Posted at 11:05 AM, Aug. 24, 2007
U.S. foreclosure activity increased more than 93 percent from July 2006 to July 2007, but at the same time, foreclosure activity in Utah actually dropped more than 58 percent, according to July 2007 data from RealtyTrac. In fact, this is the six month in a row that Utah has seen double-digit decreases in its foreclosure activity. Since January, Utah has also dropped from being the state with the 13th-highest number of foreclosures to being No. 23 in foreclosures. RealtyTrac reported that Utah was only one of seven states that had year-over-year declines in foreclosure activity. Of those seven states, Utah posted the largest decrease.
“States like Texas, South Carolina and Utah have seen slow but steady price appreciation over the past five years, making them much more attractive and affordable,” said James J. Saccacio, chief executive officer of RealtyTrac, in a prepared statement.
In Utah, Weber County had the highest foreclosure rate in July, with Salt Lake County and Wasatch coming in at No. 2 and No. 3 respectively. Many smaller counties — Box Elder, Carbon, Garfield, Juab, Kane, Millard, Morgan, Rich, Sanpete and Sevier — actually had zero foreclosure filings for the month. County
taken from the Utah Association of Realtors newsletter.
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