Short Sale 101: BTW...What is a short sale anyway?

When you're up to your elbows in jargon, idioms, and the practical vocabulary of any specific industry, you can forget the fact that not everyone on earth knows what you're talking about.  So here's a bit of an introduction to short sales for those of you who are (rightly so) confused about the terms and ideas you may hear around the water cooler.

What is a short sale?
A short sale is a sale of real property (typically your house) from which proceeds are less than the balance of debts secured by liens (your mortgage or mortgages) against the property. If the property owner cannot (or isn't willing to) afford to completely repay the liens, and the lien holder(s) agrees to release it's lien on the property and accept less than the amount owed on the note, you have an approved short sale.

If it was that simple, they'd all be done and gone.  The short sale process is certainly not that simple...nor that easy. Although short sales have been part of the real estate industry forever, they can be quite complicated.  Today's real estate market, still heavily weighted with short sales, demands a much, MUCH higher level of expertise than in the past.  It is your agent's job to keep you informed, advised, and most of all protected.  If you don't think you're receiving that level of service...fire them!

I've seen many, many homes that should have closed as a short sale (or short pay transaction) not get approved, ultimately resulting in the foreclosure of the listed property.  There are far too many people I've bumped into over the last few months who've obviously had their short-sales mishandled. This failure to close  and subsequent foreclosure is often accompanied by buckets full of heart-ache and resentment by all parties involved.   After your deal is botched is NOT the time to start asking questions.  That's why I'm here.  Click here to e-mail me a questions directly.

• What is a short sale
• Banks -vs- Investors
• Why do banks take so long to approve the seemingly misnamed "Short Sale?"

First let me start out by reiterating very crudely and simply that a short sale is when a property is sold at a price that leaves the seller "short" on funds to close.  Example: The seller's mortgage balance is $655,000 but the home's current market value is $415,000.  There's a $240,000 deficiency which makes this a short sale; a sale short of the balance of the debt.

Secondly, let's clear up the difference between a "Bank" and an "Investor".  B of A, Chase, Citi, Wells Fargo.or J.P. What's his name...(whatever name they've slapped on the front of your branch at the local strip mall)...may or may not be the investor behind your mortgage(s).  These enormous multinational corporations 'service" the loan for the investors.  Who are the investors?  You've got a better chance of having a dinner on Beale St. with the Elvis than ever learning who the investors are.  OH...but if you did...your debt would probably be sold to another 'investor' before you got approval for the servicing bank anyway.  It's best to just drop it.  Do what the servicing bank says, do it now, and do it right the first time.  The bank will, in turn, smile and move things along smoothly.

Lastly, a short sale is a complete misnomer.  They are typically not short.  That said, I've have them approved in as few as 8 days, and as long as several months.  The length of time it takes for approval depends on many things including the competency and speed of the following:

• The listing agent
• Possible third party negotiators
• The servicing banks' document collectors
• Your single point of contact at each bank
• The time it takes for internal approval
• The time it takes for final review and a decision by the investors
• Possible counter offers
• Changes on HUD statements from Title
• and on and on and on.

These are just a few thoughts that will help you get up to speed with the terms and complex nature of the short sale process.  With all of this in mind, remember this: Getting your short sale approved is completely irrelevant if you can't get it to close!

Tips and Strategies for getting your short sale to close will follow this post.

As always, I'll leave you with a little taste of wisdom:

“You will get all you want in life, if you help enough other people get what they want.”

~ Zig Ziglar RIP

Until next time, and thank you in advance for remembering me when the topic of real estate arises.

Andy Blasquez ~ The last Realtor you'll ever need to look for.
DRE# 01826135

www.andyblasquez.com

Email me at andy.blasquez@gmail.com
Click here to reach Macky Hensel.

Please Follow me on Twitter and Re-Tweet these blogs.
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Finally, please comment or ask questions.  Other readers may be wondering the same thing.  I love the feedback, critical or otherwise, and love the interaction: I love this job.

Thank you always for your support.

What's the difference between a Short Sale and a Foreclosure from a homeowner's point of view?

Like everything real estate related, this is a complicated question, but the answers don't need to be. 

Let me very, very briefly explain the differences; the practical differences between a short sale and a foreclosure from various points of view. This information comes from several years of practical experience, seminars with title companies and bank executives, and processing short sales.  My clients repeatedly tell me that what they really want most is the truth.  Well, sometimes the truth is hard to hear, but hear it goes. Oh yea.  I know we're a bit litigious so here's my disclaimer... clearly expressed:  If you have a tax question, as a CPA.  I'm a Realtor.  I know home values, marketing strategies, and C.A.R. contracts. I can tell you what your home is worth, and I'm usually right...but I'm not a CPA or an attorney, so when I'm stating my opinion, it's my opinion.

From a home owner's point of view:

Foreclosure:

MANY, many people find or have found themselves in a situation that is horrible to be in; unable to make their mortgage payments.  It really is one of the most stressful circumstances I've ever experienced or witnessed as a professional.  What the government doesn't see, and the banks don't care about is the devastation that the mortgage crisis has left in it's wake.  The fallout from these stresses causes problems far beyond and more serious than a poor credit score.  I've seen couples and families fall apart, people lose self respect, resort to drugs and/or alcohol to escape the inescapable.  I've watched business owners walk away from their homes as well as their businesses because they're just spent!  "No matter how hard I work, there's no way out.  Screw it!"   Homeowners were giving the proverbial finger to the banks.

Sadly, even with help and information out there, with laws in place to protect our citizens, some still feel it's easier to simply bury their heads in the sand and deal with the consequences as they come.  The truth is, foreclosing is virtually never the best option.  There are VERY few, if any benefits to foreclosing.  "But my uncle's cousin Jethro stayed in his house for 7 years without making a payment!" Good for him!  That never happened and  ship has sailed.  Banks work much more swiftly now!

When the bubble burst, banks did not have the infrastructure to handle the volume of defaults that were being thrown at them.  Not long after that (and trillions of dollars in bail-out money) banks "merged" and again couldn't handle the load.  Now how long can someone stay in home before being "thrown out"?  Each circumstance is different.  Could be 90 days after your first missed payment that an auction date is scheduled.  After that, you've got 21 days.  Could be more, but when it comes to that pesky little question like, "Where are my loved ones and I going to live?" I tend to lean toward the conservative side.  If you miss a payment, your in default.  If you miss 3 in a row, your property can go to Trustee Sale (auction). At that point it can be purchased on the court house steps.  Then...it is simply somebody else's house!

What about a short sale?
A short sale, although it is a bit more work, is 180% from a foreclosure.  It means that you're going to work with the bank; to provide information; to ask "how high" when they say jump!  It means that you're going to be a part of the solution.  Later, I'll discuss the benefits of your cooperation and how that's seen from others' points of view:

• From a lender's point of view
• From a landlord/employer's point of view
• From a home buyer's point of view

In a short sale, you are almost un-qualifying for your mortgage.  Some circumstance (hardship) has occurred and we simply want to share that with the bank; asking them to allow us to sell you (their) property for a price "SHORT" of what's owed.  You may have a financial hardship (job loss, curtailment of income, etc) or it may be physical (job relocation or transfer, change in family circumstances, change in healthy, etc.) After you provide the needed documents to the bank and secure an offer on the property, the bank determines if they will accept the offer. (it is paramount that you work with an effective Realtor in the process) then your house is sold.

Looking at the bullet list above,  imagine how the 'behavior' of foreclosing versus the "behavior" of working together with a bank to find a solution would be received by each of them.

From a future lender's point of view:
Foreclosure - This new loan applicant already walked away once! What's going to prevent them from doing that again?
Short Sale - It appears as though this applicant has gone through quite a bit. That's unfortunate. Where do they stand now?

From a prospective landlord and/or employer's point of view:
Foreclosure - They gave up.  When things got hard, they gave up rather than trying to work toward a solution.
Short Sale - Seems like today almost everybody has lost a home.  That's unfortunate.

From someone who may be looking to buy your home:
Foreclosure - So this house was foreclosed?  I wonder how well it was cared for?  I wonder if it was maintained the way it was supposed to be?
Short Sale - Short sale?  They're never short!  They take forever, but we may be able to close this one at a price a little below market value.  PLUS...if our offer is accepted and we have to wait 3 or 4 months, in this market it's only going to be worth more!

Now I KNOW that people were foreclosed on when the debt relief act and the senate bills weren't in place. That's a real shame.  I know people that were misguided as well.  I know personally that when banks weren't equipped to handle the volume of defaults...they simply foreclosed without even processing pending short sales.  Ok...yea...Bank of America REALLY dropped the ball a couple years back.  That said, they've gone from zero to hero.  Again, the infrastructure is there!

If you have questions or a unique circumstance to share, please give me a ring.  I haven't seen it all; nobody has.  But I've seen most of it, and continue to work through these deals smoothly and effectively as my clients have stated.

I'll leave you with this Taste of Wisdom, 

" Set your goals so big that you cannot achieve them until you grow into someone who can!" 

 ~ Unknown

Until next time, and thank you in advance for remembering me when the topic of real estate arises.

Andy Blasquez ~ The last Realtor you'll ever need to look for.

DRE# 01826135

www.andyblasquez.com

Email me at andy.blasquez@gmail.com
Click here to reach Macky Hensel.

Please Follow me on Twitter and Re-Tweet these blogs.
Please Add me as a friend on Facebook 
Finally, please comment or ask questions.  Other readers may be wondering the same thing.  I love the feedback, critical or otherwise, and love the interaction: I love this job.

Thank you always for your support.

Is the Real Estate Market Getting Better?

Not if you're an investor, or looking to do your first flip!  If you're trying to buy auction properties (foreclosed homes) on the courthouse steps, the environment is like the proverbial feeding frenzy.  Lots of buyers. Very few homes.  Investors' margins are dwindling as the supply of foreclosed homes at auction continue to dry up.

However, if you're in a position to sell, you're in the strongest seller's market that I've seen in the 6 years I've been practicing real estate.  How might today's market conditions help you in your current circumstance?

"I'm upside down in my home. Should I short-sale now even though the market is going up?" 

That is a complex question that depends on a number of important circumstances, unique to each homeowner.  That said, considering that the Mortgage Forgiveness Debt Relief Act of 2007 applies to homes that close escrow on or before December 31st of 2012, and the limited supply of homes on the market are driving prices up quickly, I can guarantee one thing; it's definitely time to stop guessing and get the facts.  My partner, Macky Hensel, and I are truly experts at closing short sale transactions. (see our contact information below to have your questions answered).

"Should I sell my home now that I'm in the black?"

This seems like is a more cut and dry question, but this answer too depends on a number of critical factors as well.  Although we're in an excellent market to sell, home values are still well below where they had been several years back. As a rule, a down market is an excellent time to upgrade, but not an ideal time to "get out of the market." Lets look at a simplified illustration of how upgrading in this market, even though it's a seller's market, is ideal:

Imagine that you want the buy a larger house, or you'd like to move to a more convenient or sought after area, so you're selling your current residence. We'll call this property "A", which was originally purchased at $500,000, but now has an assessed value of $300,000.  This is a difference of 40% or $200,000.  One might say, "We are going to lose $200,000 if we sell." But now you'd like to purchase property "B", a home that originally sold for $800,000.  For simplicity's sake, we'll say that this property also dropped by 40%.  That puts the new purchase price at $480,000.  This is a difference of $320,000.  One might say, "We saved $320,000 when we bought."  Compound that virtual savings with the literal savings of historically low interest rates, and you may just land that home you've dreamed of...locked into a 30 year fixed rate mortgage...at or below 4%. 

US 30 Year Mortgage Rate data by YCharts

The example above is a simplified example of how to upgrade in this market. There are many variables that change the value of a given property, but this example is not unrealistic at all.  In fact, in many communities the larger, more sought after homes took the biggest hit. In other words, the bigger they are, the harder they fall.

Perhaps the best thing you could take from this post is that the real estate market is simply a market; not good or bad; not better or worse.  "Is the Real Estate Market Getting Better?" By itself, it has no "quality".  Your unique circumstance; your point of view make it so.

I'll leave you with this "Taste of Wisdom" from Mark Twain:

" Always tell the truth. You'll surprise some and amaze the rest." 

Until next time.

Andy Blasquez ~ The last Realtor you'll ever need to look for.
DRE# 01826135

Click here to e-mail me.

Click here to reach Macky Hensel.


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