Short Sales and Preforeclosures

Buffalo Grove, Long Grove and Vernon Hills Short Sale Information

Buffalo Grove, Long Grove and Vernon Hills Distressed Properties

This past year I received the CDPE*Certified Distress Property Expert* Designation. I am now a member of this group and am learning everyday about the new governing laws for Short Sales.

There are some really good things coming down the pike, we are continuously completing short sale transactions and are helping clients without them going bankrupt.

Basically the turn around time for a short sale is 3 years and then our clients in Buffalo Grove, Long Grove, Vernon Hills and all the Lake County Illinois area can purchase again. In some cases not that long.

There are so many new things to learn. Below is a great article written by the president and CEO of CDPE Alex Charfen. He gives a great overview on Short Sales, Foreclosures and how Certified Distress Property Agents are what is going to make the difference in Lake County Illinois.

Myths Regarding Short Sales

A short sale can be an excellent solution for homeowners who must sell and owe more on their homes than they are worth. Unfortunately, a number of myths about short sales have developed, and it is important to understand the reality of this process should you find it meets your current needs.

Myth #1 – The Bank Would Rather Foreclose than Bother with a Short Sale

This is one of the most common misconceptions. The reality is that banks do not want to foreclose on your property because the foreclosure process is incredibly costly. Banks, investors, and even the federal government have all publicly stated that if a person is qualified for a short sale, the deal needs to be considered. Overwhelmingly, banks receive more on their investment through a short sale than a foreclosure.
The qualifications for a short sale include:

1. Financial Hardship – There is a situation causing you to have trouble affording your mortgage.

2. Monthly Income Shortfall – “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.

3. Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
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What is a Short Sale

Over the past year there has been a lot has been said about short sales and the difference between the short sale process vs foreclosure. These are words that were hardly used before 2008 and now we hear them almost daily on the news, on line and in the newspapers. I found this very simple explanation in the attached article which I hope will be helpful to you. I am well versed in this process and have taken classes and have my CDPE certification. Please contact me if you need help, as I would be happy to explain this all to you. We have a team of professionals that can help save your credit.

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Foreclosure Market Trends Report For September

There is so much in the news today regarding the foreclosure market and what is happening. I am a member of Realty Trac and have been actively working the short sale market in Buffalo Grove, Lake Zürich, Long Grove, Palatine and Vernon Hills. The enclosed NewsletterPdfConverter will give you great information and you can call or email me to get more specifics on properties that are available.

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Foreclosure and Short Sale Solutions

I just heard on the Today Show about a web site that can help with loan modification and eligibility. If you are having trouble with a balloon loan or are in pre-foreclosure take a look at this site. I also do have a lot of helpful information so give me a call.

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Should We Wait Until Next Year To Sell Our Home

I am currently at The Star Power Conference which is an Elite Group of Realtors from all over our country including Canada. These are Top Agents in their field and we are spending three days in sessions with Tops CEO’s and Economists learning how to address our changing markets and what we need to do to help our clients.

The general public thinks that if we wait for a year the market will get better. Today we head from the CEO at Re/Max. Dave Liniger stated as many others are saying that the next year in September the next wave of Balloon loans will mature and this will cause the foreclosure market to skyrocket.

He also said that the next 2 years will be like this year and we will not be in recovery for at least 3 years. So, with this being said if you need to sell your home, and decide to wait, the chances of the pricing being lower next year are almost a sure thing. The media is stating that home sales went up last month.

What they did not tell you was that the majority of the sales were short sales and foreclosures. If you need to sell you home, do not wait as that may be more expensive then you think.

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Information For Buyers and Sellers Regarding Short Sales

Most people do not understand the process of short sales, so this is some very informative information that was sent to my daughter.  

Having done a lot of questioning and research on why “Short Sales” are taking so long, I have discovered the following that may prove helpful as you consider the opportunities available to your buyers or sellers.

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.  

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