Lender Information
Information For Buyers and Sellers Regarding Short Sales
July 6, 2010 by Sharron · Leave a Comment
Most people do not understand the process of short sales, it is important whether working with buyers and sellers on a short sale that you explain what a short sale is, how is works and how long you could potentially wait for a successful short sale.
This information below is very useful and I recommend that all of my clients read up on short sales so they know what they are getting into with regards to time that is takes to get a definate answer from the bank and understanding what a short sale is.
Q: What is a short sale?
A. With real estate prices currently at 2005 levels, many homeowners find themselves needing to sell, BUT discover they owe more than the homes current value. Reason’s for selling can vary from a job transfer, to a homeowner no longer able to make mortgage payments due to job loss, recent divorce, business failure, or a Sub-prime ARM reset.
If the reason for selling can be documented and attributed to a distressed situation, a homeowner may qualify for debt forgiveness. To do so, requires the homeowner to prove that they do not have, or will not have the money now or in the near future to pay back the difference between the homes value and the mortgage balance.
Q: How is the process initiated?
A: Before any conversation with the lender, the home is listed for sale. While the home is listed for sale, the homeowner and their agent should prepare a “short sale” packet, including the seller’s financials and a “hardship letter”. Upon receipt of an offer, the seller can sign off on the terms of sale, but terms are not official without the lender’s approval.
The sale status now becomes Pending: Back-Up Offers Requested, as most lenders will require listing agents to submit all offers until approved by the lender. In the meantime, the short sale packet is place in a que and awaits review by the lender. An initial response from the lender usually takes between one to three months, but can take longer as we have all discovered.
Q: When does the bank become involved?
A: Lenders typically do not talk to the seller or listing agent until there is a purchase offer in hand. The list price may be far less than the bank is willing to initially accept, which could cause confusion with the buyer.
When a purchase offer is received by the lender, a Broker’s Price Opinion is ordered, and the lender assigns a negotiator to work with the lender, investor (eg. FNMA) and the buyer to help them come to terms. Once the lender approves a price, they send an approval letter with an end date by which the transaction must close.
The timeframe for an inspection and financing contingency typically begin upon lender approval. Because of the lengthy wait, or because of negotiations involving the lender’s higher BPO, it is not unusual for the first buyer to walk away. Many agents have found that the price the lender is willing to accept, decreases as the foreclosure date draws closer.
It is the BUYER’S agent’s job to research the seller’s financial situation to determine the likelihood of the bank accepting the desired price. It is essential to explain the process to both buyers and sellers to manage expectations and eliminate last minute confusion.
It’s important to know that lenders will negotiate, so start an offer below your walk away price. Today, lenders are beginning to realize that losses are greater with a foreclosure, than with a short sale. Because of the large number of pending foreclosures, lenders are more inclined to work with interested buyers before the process reaches foreclosure.
Q: Do most short sale require the buyer to skip an inspection?
A: Because homes in distressed situations are often not cared for, it is highly recommended to get an inspection. The inspection can be done upon mutual acceptance with the seller, to avoid waiting the 1-5 months for lender approval. Obviously this could put the $400-$500 at risk, should the transaction not close.
Should the inspection uncover needed repairs, you may find that the seller is not in a position to make those repairs. In this case, it may be possible to re-negotiate the price with the lender, but it is more likely that that the investment in an inspection will do little more than alert the buyer as to the condition the home and what items need to be addressed in the future.
Q: Some say that only 10% of the short sales come to sale and the rest become bank owned. Is this a realistic success ratio?
A: Short Sale Buyers need to be flexible!!! They are wise to look at other options while waiting on the lender response. And because of this, the numbers are skewed because so many short sale buyers walk away when they find a better opportunity. When worked properly, your success ratio will dramatically increase.
What Are the Lenders Doing to Real Estate Values in Buffalo Grove and Elsewhere
May 16, 2010 by Sharron · Leave a Comment
We all live in a different world today when it comes to selling homes in Buffalo Grove. As a Buffalo Grove Realtor it is not easy to explain the home selling process and new values of homes from where they were two years ago.
If you recently purchased real estate, then most likely the value of your home today is lower then what you paid for it. Short Sales and Foreclosures are now considered as home comparables by the lenders. The banks do not care that you may have put in $50,000 in recent improvements; they are just looking at numbers.
I recently had two lender appraisals done on two of the properties that I sold and both appraisals came in under what the buyers of these homes paid for them. Today we have two appraisals, the first one being from an appraiser and the second one from the underwriters at the bank. The underwriters are making the final decision in the loan committees.
Real Estate Values in Buffalo Grove are Determined by Appraisals
What is so very difficult for our Buffalo Grove Home sellers to understand is that if the bank decides to come back with a different home value then the buyer will only get the loan based on the what bank says and not the sale price.
In today’s Real Estate market the Buffalo Grove home buyers are not willing to pay over the appraised value made by the bank so we go back to the beginning. The sellers do not want to reduce the price and the buyers will not pay more.
In the End, the sellers have to agree if they want to sell their home. What the banks are not telling you is that they are now sitting on millions of foreclosures that will be coming on the market and the Commercial Real Estate Market is about to start a massive foreclosure process.
This is going to drive the residential housing market in Buffalo Grove and elsewhere for years to come, so if you want to sell your home; waiting is not going to be financially beneficial.
With Elections due to happen in the near future and new banks being built on every corner, maybe it is time for us to speak up. Our Money bailed out the banks and the control they now have over our lives and retirement funds is totally out of balance.
If you are would like to find out more information about your Northwest Suburban home in Illinois contact me your Buffalo Grove Realtor, Sharron Kelley at 847-465-3638 or email me at sharron@northernillinoishomes.com. For more real estate information visit my website at www.NorthernIllinoisHomes.com.
Are The Banks Actually Encouraging Foreclosure for Their Own Financial Benefit?
April 6, 2010 by Sharron · Leave a Comment
For quite a while we have all been wondering why the banks are not taking the offers that we are bringing in on our short sales and taking so long to make a decision.
Today I can honestly say it is about greed and I now have a perfect example as to what our banking system is doing to all of us.
I have a wonderful townhome listed in Buffalo Grove that is a Short Sale and has been beautifully updated. When I look at the comparable sold properties in this subdivision as of today they are all priced in the low $200,000 range with only one sale in the past 12 months. So the realistic selling price is questionable as are most sales today. We have a very good offer and this is a Real Cash Offer.
The lender on this property is Bank of America.
The truth of the matter is that there is Mortgage Insurance on this property so Bank of America has no motorization to sell it, as guess what, they are going to get paid off Big Bucks. Then they will foreclose and dump the property in the market and reduce the price of everyone’s home that lives in this Buffalo Grove Subdivision.
What is going on today with the banks is sickening and they are getting away with destroying our industry and the values of homes in this country. Did we the American People not bail out AIG? We are sitting by and watching the Banking Institutions of this country determine our home values and they are just running the show.
This needs to stop!
Does anyone have any suggestions?
Buffalo Grove Real Estate Appraisal Information
February 9, 2010 by Sharron · Leave a Comment
Here is some great infomation that will help out buyers when looking in Buffalo Grove or any Lake County Illinois Area. I was featured in Chicago Agent Magazine this month and was lucky enough to get some great answers about appraisals in the Buffalo Grove and Lake County Illinois Market and wanted to share it with everyone.
Q: SHARRON KELLEY CRS,
CDPE, The Sharron Kelley
Team, Coldwell Banker
Buffalo Grove, 847.465.3638,
sharron@northernillinoshomes.com
Q. How has the appraisal process changed
and why are appraisals coming in low?
A: SHERYL ACKERSON, Vice
President of Mortgage
Lending, Guaranteed Rate,
Inc., Skokie Branch, 847.972.5707,
Sheryl.Ackerson@guaranteedrate.com
The prevalence of foreclosures in the
current market is the major reason
for the decline in appraised values. In the past 18 years,
when there was a foreclosure an appraiser would typically
be able to explain that this property was an uncommon
exception to the market. In other words, both appraisers
and lenders ignored this comparable. Now, nothing can
be ignored and short sales and foreclosures are dominating
the marketplace. Not only are appraisers using three
sold comparables, but typically most also will show three
current listings. If one of the new, current listings is a REO
bank-owned property, it is there to serve as an indication
of where the market is going.
In addition, in the past, upgrades or improvements to
a home such as a finished basement or a new state-of-the
art kitchen could easily add $35,000 to $50,000 to a home.
Now upgrades seldom matter. In this manner, every house
is affected.
Q. How do we get buyers to understand the appraisal process
in today’s market?
When working with a potential buyer, we educate them
that an appraisal is an independent, impartial evaluation.
Only facts and figures matter; square footage and above
grade bathroom counts have more to do with determining
the appraised value than if there is a finished basement,
new carpet and custom paint. Additionally — the timeliness
of the sale — the closing date — is a principal,
controlling factor. In today’s market, a comparable sale
over 90 days is old news. In the past, lenders would allow
comparables up to a six month period.
Another issue is the concept of “declining market.”
An appraiser states that a house is in a declining market
or in a market with an oversupply of inventory. In these
instances, some investors are requiring an additional 5
percent down payment. This is happening more in the
high-end market.
If you are looking to buy or sell a home in Buffalo Grove, Vernon Hills, Long Grove or anywhere else in the Lake County Illinois area please contact me, I would love to help you out.
Latest Home Sale Statistics through November in Buffalo Grove, Vernon Hills, Long Grove Area, Libertyville and Mundelein
December 10, 2009 by Sharron · Leave a Comment
Every month we get a report from the Realtor Association of Northwest Chicagoland and it shows an overview of what is going on in our market and also compares the closed sales year to date with a comparison of last year. One of the biggest issues we currently have is the banking and appraisal industry.
Northern Illinois Home Sales
The majority of our towns are stated a declining market which in fact reduces the appraisal by an additional 5%. Out of the last five homes we have put under contract only one appraisal came in at purchase price. Basically the banks do not want to lend money and are reducing the value of everyones home and who created this horrible mess? I am suggesting to all my clients that they have an appraisal prior to putting the home on the market so they can see how the banks are looking at the value of property.
Please read the Northern Illinois Home Sales Report [PDF] and call me with any questions.
Tax Credit for First Time Buyers Almost Over!
September 17, 2009 by Sharron · Leave a Comment
Tax Credit for New Home Buyers
Don’t let the U.S. Government Keep Your $8,000
Earlier this year, the government offered an unprecedented $8,000 to prospective home buyers just like you to help them get into a home.
And on November 30th, they’re taking it off the table.
It’s up to $8,000 that you can use for a downpayment or closing costs on your next home purchase:
No Repayments if you live there for 36 months
No Interest, because it’s not a loan
No Strings Attached, you can even get the money up front
They couldn’t have made it any easier for you to get the money. The only problem is that in less than 80 days it goes away forever.
What’s worse is that if you don’t act soon, you could lose out all together.
