Archive for the ‘Short Sales’ Category
Buying a Foreclosed Home
What is a foreclosed home?
A foreclosed home is a home that was taken from the homeowner and is now owned by the bank. After continually not be able to make their monthly payments over a certain period of time the bank will take possession of the home. When the bank has possession of the home it is then taken to an auction. It is typical for the home not to sale at the auction and is then put on the market as a foreclosed home. The bank is now responsible for the selling of the home, and will typically hire a real estate agent to help with the sale. Foreclosures in places such as Denver or Tennessee have foreclosures that are literally a large percentage of the homes for sale.
Tips for buying a foreclosed home
Some tips for buying a foreclosed home are; 1. “Hiring a real estate agent that is an expert in foreclosed homes” can be very beneficial. They typically will have all local listings available for you and access to the homes on the market. Agents such as those in Austin TX or Georgia can be very helpful to you when buying a foreclosed home. Remember, when 2. “buying a home that is foreclosed comes as is”, any repairs that will need to be done will be up to the new homeowner. Do not just buy a home because it is selling for a low price, make sure you know exactly what you are getting for that low price and costs of any repairs that you see need to be done. It may be valuable to 3. “know prices of homes around the foreclosed home.” This may help you know what kind of deal you are getting on the home. Coming prepared with a 4. “pre-approved mortgage” can save time and let the realtor know what price range to be looking for in a home.
More and more foreclosures are appearing on the market everyday. Now is a good time to buy a foreclosed home if you are looking for a home under market value. Foreclosures can be found all over the US! From Connecticut Homes for Sale to Southern California Foreclosures they can be found all over. California is top in foreclosures in the country. Places such as San Diego, Foreclosures are very common in For Sale Real Estate.
State-by-State Shadow Inventory and Recovery Potential
Total Shadow Inventory for the top 25 states:
Percentage of distressed sales (short sales and foreclosures) by state:
Number of months it would take to clear the shadow inventory at today’s sales pace. Note: this is assuming only shadow inventory is selling.
Bank of America Short Sales and their Dawdling Process
There are a couple of things Bank of America does that especially make the short sale transaction difficult. For one, Bank of America will not allow the same agent to represent both sides of the transaction. They won’t approve a short sale file unless there are two separate agents.
I’m sure they are doing this because they feel it will help them to get the best purchase price for each home they need to approve, and will help them stay out of potential legal issues. But, for real estate agents who have BOA short sales listed, this can be a royal pain when they have a buyer who is interested in a property they have listed.
Bank of America also requires that buyers get prequalified with BOA before they will accept a short sale offer. This is a pain for people who are trying to buy short sales, who are already prequalified with other banks, but it’s actually a smart move by Bank of America. For one, they know that the potential buyers are actually qualified, and they might actually get a few more loans out of the deal, helping them get business in a time of major losses.
If we step back and look at short sales from the view of Bank of America, it is a really tough situation they are in. They are losing millions every day. And while the policy’s they have are annoying for real estate agents, as a business, they have to do what they can to try and make a profit, or at least reduce their losses.
Now Bank of America has paid the attorney's fees to foreclose (estimated at a low end of $40K in my state) and will continue to face the same or worse market conditions. Not a good business move, but that's Bank of America for you. Wasting America's money!
They say that learning to do a short sale is very simple with Bank of America compared to other banks. But since they have been attacked due to their slow approval rate, short sale homes are processed painstakingly. In today's real estate world, purchasing short sales can really turn homeowners, buyers, sellers, and real estate agents upside-down.
Facing Foreclosure? The Neighborhood Non Profit Organization Can Help
The fact is, many Cache Valley residents are experiencing hard financial times. Even here in Logan, foreclosures are happening. Foreclosures are primarily caused by loss or decreases in household income. Many homes that are foreclosing, don’t actually have to go through foreclosure though. There are options for people having difficulties making their house payments, people just don’t know where to look. 57% of people going into foreclosure never ask for help due to embarrassment or other reasons.
One organization that can help those facing foreclosure is the Neighborhood Non Profit Organization. They offer FREE advise to those experiencing financial difficulties. NNHC Has special relationships with many lenders. They understand the HAFA program, they can better get lenders to cooperate with people facing foreclosures.
The Neighborhood Non Profit Organization examines each situation and goes through things like budgeting, and general finance as well as explains the different options home owners have. They also know how different lenders work, and what each individual bank wants to see. They can give advice towards encouraging a short sale, getting a loan modification, or a deed in lieu of foreclosure. This is the source for Box Elder and Cache County and is where people should go before the notice of default is even received. Another source to go for information about preventing foreclosures is:
You can call the Foreclosure Prevention Program Manager at (435) 753-1112
Deeds in Lieu of Foreclosure Are Becoming THE Way to Avoid Foreclosure
In the crazy world of increasing foreclosures, foreclosures are costly, they hurt both the bank and the person being foreclosed on. Short Sales, are the most common alternative to avoid foreclosure, but short sales are very time consuming, ineffective, and subject to lots of fraudulent behavior.
Another solution, that hasn’t been used much as a foreclosure prevention option is the “Deed in Lieu of Foreclosure” It’s so simple, and so much more beneficial to many banks and underwater borrowers, that it’s surprising they haven’t been used more. Apparently the light has been lit, and deeds in lieu of foreclosure are becoming a real, viable, alternative to foreclosure. Here is an excerpt from a Washington Post Article on Deeds in Lieu of Foreclosure, by Kenneth Harney:
Deeds in lieu also are surging because they provide a win-win for borrowers and mortgage investors that short sales often cannot match. Tops on the list: speed. Travis Hamel Olsen, chief operating officer of Loan Resolution, a Scottsdale, Ariz., firm that works with lenders to solve troubled borrowers’ problems, said deeds in lieu represent “a very expeditious way to move on” for underwater borrowers who are facing potential foreclosure.
“A lot of owners just want to be finished with it now,” he said. “They don’t want to deal with [the house] anymore.” They don’t want to deal with real estate agents or signs on the front lawn that reveal their financial squeeze to neighbors. They don’t want to haggle with potential buyers coming in with lowball offers. But they also don’t want to simply walk away — strategically default — because that will crater their credit files and scores for as much as seven years.
Greg Hebner, president of the MOS Group of San Diego, which also works with banks and investors across the country to resolve defaulting borrowers’ situations, said a key motivation is that lenders are stuck with massive backlogs of underwater homes that haven’t yet gone through foreclosure and been put on the market — the so-called shadow inventory.
Not only is it cheaper for them to do deeds in lieu to gain control of those properties, but with mortgage rates below 5 percent, they also will probably be able to resell them faster and on potentially more favorable terms in the summer and fall.
via Kenneth R. Harney – Kenneth Harney: Foreclosure alternative gaining favor.
Number of Short Sale Homes in Logan is Down
So I just ran the numbers to see the latest trends for Logan Utah Short Sales, and unless the MLS changed the way short sales are calculated, short sale numbers in Logan are way down. Of the 812 homes listed for sale right now, just 29 Logan Real Estate listings are short sales. This is nearly 33% less than last time I ran the numbers a month in a half ago.
Just 3.59% of the homes listed for sale in Cache County are listed as Short Sales. This is substantially down from the stable trend over the past six months.
This is really good news for the health of the Logan Real Estate market. Fewer short sales likely indicates fewer future foreclosures.
Banks are Trying to Get More out of Short Sales
A recent stat shows that 23.3% of all US homes are underwater, meaning that the owners of these properties owe more on their home than what it is actually worth. If these homeowners need to sell, they generally have to do it by means of Short Sales. Unless they have reserves of Cash stashed away, which thy usually don’t, this is about the only option to avoid foreclosure.
Because of the high numbers of short sales, banks are losing a ton of money. In my recent America First Credit Union annual newsletter, it was made apparent that the 2009 loss from bad loans was substantially worse than the year before.
Mortgage Insurance was created to insure banks losses from default home loans. However, the Mortgage Insurance providers are going out of business because they never anticipated losses would be this bad.
In effort too salvage some money, and make up for the lack of funds covered by mortgage insurance, Bank of America is attempting to collect promissory notes from the owners requesting short sales. One of our Cornerstone Agents is working with a client who owes more than $300,000 on a house. They currently have a short sale offer on it for $200,000. The bank is willing to approve the short sale, IF the owner will sign a 20 year promissory note for $55,000. This would give the default borrower a payment of about $250 for the next 20 years.
This is a good move by Bank of America, but the problem is that for borrowers like the one in this example, short sales are less appealing than just letting the home foreclose. At this point the borrowers credit is already shot, and the only thing they would be saving is the term “foreclosure” on their credit report. Is it worth $55,000 to avoid that term? Not for these borrowers.
From Bank of Americas standpoint, by not approving the short sale they are going to lose even more money by having to pay the legal fees associated with foreclosure. Then, after the foreclosure, they still have to sell the house at a price that is nowhere near worth what the owners borrowed against it.
While it is a good move to try and make the default borrowers more accountable, they have to do it in a way that will actually make sense. Making the guidelines too strict will just make things worse for all parties involved.
Logan Utah Foreclosure Rate Looks Pretty Good
I am always trying to stay on top of the national real estate news, and right now the big subject of topic is with Foreclosures and “Shadow Inventory.” Shadow inventory is essentially default homes that will eventually foreclose. Many national economists and housing experts are predicting that the foreclosure problem is only going to get worse. Many banks have held back on releasing foreclosure properties to the real estate market. When these foreclosures do start flooding the market as additional, undervalued properties, US home prices will continue to decline.
Nationally, around 30% of all home sales are distressed short sales or foreclosed properties right now. About 6% of the total housing market is “distressed.”Since 2006, national home values have declined by 30%, and according to Barclay’s, are likely to decline an additional 3-5% over the next few years.
Living, and practicing real estate in Logan Utah is really good news. Our short sale, distressed and foreclosure numbers are nowhere near the national averages. Our average home values have remained fairly stable.
Currently less than 6% of the homes for Sale in Cache Valley are short sales. Short sale properties make up a good portion of the future “shadow inventory”. If the short sales sell, they will never actually become foreclosures. Less than 2% of the homes for sale in Cache County are Foreclosures. According to Foreclosure.com, there are just 26 “preforeclosure” or default properties in the Logan area right now.
Unless things drastically change, increased foreclosure rate and “shadow inventory” shouldn’t really make much of an impact on the Logan Utah Real Estate market.