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Good News and Bad News: Fannie & Freddie’s HAFA Short Sale Program Just Announced

Recently, Tim Burrell updated his blog to discuss Fannie Mae and Freddie Mac’s versions of HAFA.  This blog post can be read below:

“At the REO CON summit, the short sale presentation discussed how Fannie Mae and Freddie Mac loans were exempt from the HAFA short sale program that was put into effect by the Treasury on April 5, 2010.  Fannie Mae has just created its own version of HAFA with regulations that you can find at http://shortsalesr.us/FannieMaeHAFA.pdf.  Similarly, Freddie Mac has created its version of HAFA with regulations you can read at http://shortsalesr.us/FreddieMacHAFA.pdf.

Does this addition to HAFA make Realtors happy?  In general, the terms are similar to the Treasury’s short sale program that is supposed to expedite the review and approval of short sales by pre-approving the seller for the short sale and establishing the amount the lender will accept at the time the Short Sale Agreement (SSA) is entered into.  In other words, you qualify the seller and get the amount needed from the sale at the time you list the property.  However, there is a difference with Fannie and Freddie.  With the Treasury’s program, the lender considering the short payoff may tell the Realtor how much they will settle for.  For those of you who do a lot of short sales, they will specify the amount they want to be paid at closing as shown on line 504 of the HUD.

In the Fannie and Freddie program, the servicer is prohibited from telling the seller, buyer and Realtor what this amount is.  Instead, the servicer will establish an asking price based on the condition of the market in the area.  Who is better at setting an asking price: (1) the Realtor who works there every day or (2) a Loss Mitigation negotiator with files from all over America?  When the contract is submitted, you hope that this asking price results in the Minimum Acceptable Net Proceeds (MANP).  If you do HAFA short sales, you have to love the acronyms 🙂 .

Having the Broker Price Opinion or appraisal already done at the time the offer is presented is a benefit, and the servicer does not tell the Realtor what they will accept as net proceeds in most of the non-HAFA short sales (except for FHA short sales where you know to the penny).  So, in this manner the program gives a benefit of the BPO already being done and the same result as the old fashioned short sale where you play “guess again” on the amount the lender wants.  But, it could have been better if Fannie and Freddie followed the Treasury’s lead.

The other bad news is that the servicer tells the Realtor how to market the property, and supervises the marketing plan.  Again, who knows better what will work (1) the Realtor who has developed an effective program or (2) the loss mitigation negotiator who just took the HAFA training course.   The guidelines mandate that the marketing program includes ” a “For Sale” sign, Multiple Listing Service(s), flyers, print ads, open houses as well as appropriate usage of the internet;”  Few will argue with a for sale sign and putting it in the MLS, but open houses work less than 2% of the time according to NAR statistics.  Print ads have dramatically fallen because they are not that effective.  However, if you want to comply with the Short Sale Agreement you will do these things, because the agreement can be cancelled if you violate it.

Another problem is that a seller cannot be considered for a Fannie or Freddie HAFA short sale if a foreclosure is pending that could sell the property in 60 days, or if the state laws would allow a foreclosure in the next 60 days.  States like Texas can go from a dead start to a full foreclosure in less than 60 days, so does that mean you cannot do a Fannie or Freddie HAFA short sale in those states?

There are some great benefits.  The servicer must respond to an offer within 10 business days.  That beats the months of waiting we do now.  The servicer must allow at least 45 days to close the sale after approval, with a maximum of 60 days.  Also the foreclosure must be postponed during the sale period, which is at least 120 days.

The financial incentives are similar. The seller gets $3,000 in moving assistance.  The servicer gets more under Fannie and Freddie than the Treasury by receiving $2,200 for an approved short sale, as opposed to $1,500 for the Treasury.

So, like everything else in short sales, there is some good news and some bad news.  But, at least there is a program that provides some tools that a savvy Realtor can use to help a borrower in trouble.

If you need an encyclopedia of information on short sales, go to www.CreateAShortSale.com  and for the complete  Fannie Mae guidelines go to http://shortsalesr.us/FannieMaeHAFA.pdf and for the Freddie Mac guidelines go to http://shortsalesr.us/FreddieMacHAFA.pdf.

I hope this helps.

Tim Burrell

www.ShortSaleNegotiatingSpecialist.com

Raleigh, NC 919-812-5111″

2010: The Year of the Short Sale

Charlotte Short Sale makes for a good Charlotte Real Estate InvestmentA Charlotte Short Sale is getting easier to purchase. According to RealtyTrac, 2010 is going to be the year of the short sale due to the large number of pre-foreclosure properties on the market. It is estimated that one in four US homeowners owe more than their home is worth. Now could be a good time to consider purchasing (or selling) a short sale as future home prices are expected to increase 9-12% in 2011. Simply put, this could be a great time to buy a Charlotte Real Estate Investment.

One of the biggest challenges in a short sale has been the time it takes to close a transaction. The challenge in completing a Charlotte short sale has been twofold: 1) getting the buyer and seller to agree and 2) getting the bank on board to agree to sell the home for less than the purchase price (and thus take a loss on its loan). It can be especially hard motivating a bank to sell if you do not have experience negotiating with banks.

But our team is beginning to see turn-around times decrease in a Charlotte short sale transaction.  Communication with banks has improved, and so has the technology involved in processing short sales. A new technology platform called Equator has been rolled out by banks to facilitate processing of paperwork involved in a short sale transaction.

Also, banks are beginning to see that a short sale is in their interest. The bank makes on average 30% more from a short sale when compared to a foreclosure. An added bonus in a short sale is the condition of the property. Charlotte foreclosure homes are often trashed and subject to vandalism since these properties have been abandoned, but a short sale home is often occupied by the owners until the closing.

Banks are responding quickly to offers due to enhanced technology, but banks are also more receptive lately to aggressive offers from buyers as the number of homeowners underwater increases. Also, the implementation of HAFA (Home Affordability Modification Program) has provided incentives to the sellers, buyers, and the banks that will make a Charlotte short sale smoother.

Given that the market is finally moving in the direction of buyers, you may want to consider a short sale, especially in a Top 10 Market like Charlotte.

Charlotte Real Estate Investment and Short Sale Opportunities

The time has never been better to take advantage of the many Charlotte real estate investment opportunities.  According to FinestExpert.com, Charlotte is a Top 10 Market for Real Estate Investments.

The FinestExpert data would confirm that Charlotte is an ideal buy-and-hold real estate market.  For the first-time homebuyer, a property could be found for less than it would cost to rent if the cash flow is right.  For the investor, a strong buy-and-hold market could be an ideal starter property.

But before moving to invest in this undervalued market, make sure you understand the basics of a real estate short sale, and then get the help of a licensed Realtor in the Charlotte area.

Essentially, a short sale involves purchasing a home for a sum that is less than the amount owed on the home.  Why would someone want to sell a home for less than what is owed?  The reasons are sound.

A bank may be able to save a lot of money by letting a house go in a well structured short sale. If the property ends up on the court house steps, they could lose much more.  That does not count the costs of staff, legal work, etc. The trick is being able to do two things well: 1) negotiate a good price for both parties involved in the deal, and 2) be able to keep the paperwork moving through the bank in a speedy manner.

This is where a licensed Realtor can help.  A qualified Realtor can help you navigate the waters quickly and easily, and make a challenging process seamless.  A realtor can also save you money.  A well negotiated short sale can allow you more money to put into improvements, especially those qualifying for tax credits under the economic stimulus plan for 2010.

This is a great time to find Charlotte real estate investment opportunities, whether you are a soon-to-be home owner or an investor looking for properties to add real estate to an investment portfolio.

Short Sale NC: Advantages of Working with a Local Realtor During a Short Sale

In the current real estate market, the purchase of a home by a short sale transaction can make a lot of sense. Buying the home at a less inflated price can save you money. If you really want to succeed, you might want to consider working with a Realtor when completing a short sale in NC.

If you were not going to work with a Realtor, what other options would you have? You may or may not get lucky enough to find a home owner smart enough to negotiate such a deal on their home, but they will NOT be looking out for your best interests. It is not necessarily going to be an easy task. At best, you will still need some legal representation.

You might also end up talking to a real estate investment company or specialist. In this case, you may be working with someone who has the expertise to negotiate with your lending company, and guide the transaction through to closing. You gain some legal and technical expertise here, but there is a catch. The real estate investor is not required to be licensed, and therefore does not have to abide by the same code of ethics as a Realtor. These folks are strictly in the deal to turn a quick profit. They can have a buyer waiting for your house, as the property is closed. The REI route has also become quite the “get rich scheme.” There are lots of people that teach the basic concepts of real estate investment to anyone.  Chances are, you may end up working with someone with little to no experience negotiating a short sale transaction.

The final thing to consider is that, most of the time, banks like working with Realtors for short sale NC transactions. They realize the Realtor will be paid a fairly consistent commission for their work, versus the type of profits that real estate investors can often turn. If they know they are working with someone licensed, with a good reputation in the local community, you will often get a better deal from the bank.  Working with a Realtor during short sale can make the transaction a win-win for you and your lending institution.

April 7, 2010

Charlotte Short Sale and Impact of HAFA

In this difficult economic environment, many Charlotte homeowners find themselves underwater on their mortgage.  Many homeowners have heard about a short sale, and ask if this is a better option than a foreclosure.

The simple answer is Yes.  A short sale is a much better option for a homeowner than  a foreclosure. Here’s why:

1) Credit:  If your house goes into foreclosure, this could negatively impact your credit for up to 10 years.  A short sale on the other hand is less severe.  A short sale may only impact your credit for up to 2 years.  If you short sale your home and maintain your financial worthiness, then you can re-establish good credit in a shorter amount of time.

2) Another consideration is how long you need to stay in your home.  If your house if foreclosed upon, then you will be forcibly removed by local law enforcement.  Yet, with a short sale, you can remain in the house during the sale negotiations.  Clearly a short sale is a much more practical option.

3) There are additional financial considerations of a short sale versus foreclosure.  In a foreclosure scenario, you will get a deficiency judgment for the entire amount you owe.  This amount will need to be declared on both federal and state taxes.  If your lender agrees to a short sale, you might have to pay income tax on any resulting deficiency.  But there are some exceptions that will allow you to avoid paying this tax.  According to the Mortgage Forgiveness Debt Relief Act, you may qualify for an exemption if the loan was secured by your primary residence.  Under this act, you can exclude up to $2 million in forgiven debt.  In this scenario, you do not have to pay income tax on the deficiency.

It is best to get the most amount of money for your property in a short sale to cover any deficiency judgments.  One way to do this is to work with an experienced real estate professional who can get you multiple offers on your property.

Now is a great time to consider a short sale if you are a homeowner.  The Home Affordable Foreclosure Alternatives Program (HAFA) aims to make short sales easier for homeowners and the banks involved in structuring the loans.  Not only will HAFA make it easier to complete a short sale, but borrowers can get a $3,000 “relocation incentive” and servicers (ie- banks) will get $1,500 for handling a short sale.  This program will go into effect on April 5th, so if you are a Charlotte homeowner behind in your mortgage, this could be a great time to consider a Charlotte short sale.

Disclaimer:  For all financial issues or concerns, it is advisable to consult with a tax attorney and/or CPA.  Content in this article is not tax advice, and is only a representation of possible outcomes during a short sale or foreclosure situation.