Idaho Short Sales: The Mortgage Originators Role in the Process

Here is a point that is often overlooked as we as agents and buyers work through the short sale process, the role of the buyer's loan originators  in the process. An experienced one can assist greatly in accomplishing the goal that everyone has but can sometimes seem elusive. GETTING THE DARN DEAL DONE!

Buyers,  there are lot of short sales out there, and in most cases a lot of potential buyers for those homes. The use of an experienced mortgage officer and an experienced buyer's agent can help tremendously, contact me today!

Courtesy of KCM Blog

A key component to the success of a short sale involves working with a Mortgage Originator who is well versed in the short sale process. The short sale negotiation process is a patience testing task. The complications are many, however if the buyer is securing mortgage financing and is working with an originator that understands that short sale process the buyer and seller can be rest assured, in most circumstances, that the transaction will get to the closing table.

There a 5 key questions to ask when choosing an Mortgage Originator for the purchase of a short sale transaction.

1.) Are they versed in the Anatomy of the Short Sale process?

The proper mortgage origination process pertaining to a short sale purchase is a bit different than a normal non-distressed property purchase. However, it is always my belief that in order to lead the cavalry one must have sat in the saddle. Putting this in terms of the short sale process, in order to originate a loan for a buyer who is interested in a short sale, one must understand the entire anatomy of the short sale process. This includes the challenges that the sellers faces regarding financial difficulty and hardship, the challenges that the selling agents face regarding listing and negotiating the short payoff and most importantly the strict timelines that come along with a short sale transaction.

2.) Will they issue a “TRUE” pre-approval prior to Short Sale approval?

A complete short sale package should include a mortgage pre-approval for the buyer if the buyer is securing mortgage financing to purchase the property.  The originator should have taken a full mortgage application, documented income, assets, reviewed the buyers credit and submitted the file through the appropriate automated underwriting service (ex DU,LP) prior to issuing a pre-approval letter to the buyer.

The pre-approval process for a short sale transaction should not be any different than the pre-approval process in a non-distressed sale. Having said this,  we have closed over 2500 short sale transactions nationwide. Many times, because of the long timeframes that are involved in a short sale, originators are not properly pre-qualifying the buyer prior to short sale approval. Originators are waiting until the short sale is approved by the short selling bank to submit the client profile to underwriting and is some cases to even issue a complete pre-approval. That is too late!  In every circumstance the pre-approval process should be done thoroughly before the short sale approval.

3.) Will they order the appraisal prior to Short Sale approval?

In a non-distressed sale typically, once the purchase contract is signed, the Mortgage Originator or their processing team will then order the appraisal for the property so that it may be reviewed by underwriting. Underwriting will then make sure the property is acceptable as collateral based upon the loan that is being applied for.

This process should hold true if the buyer is buying a short sale. Many times however, the appraisal is not ordered until the short sale is approved by the short selling bank. Often, this will delay the closing timeframes.  Also, consider this, if the short selling bank based upon their appraisal, counters they buyer with a higher price, the buyer who has already had their appraisal done will have the ability to issue a rebuttal based on their appraisal.   The Buyer’s/Lender’s appraisal is a great tool to negotiate value disputes with  short selling banks.

4.) Will they communicate with the Short Sale Negotiator?

There is one line of communication that is a must during a short sale.  This is the communication between the Short Sale Negotiator and the Mortgage Originator. The Mortgage Originator should be in touch with the negotiator on a weekly or bi weekly basis to obtain the status of the negotiation. It is imperative that the originator be informed of such deadlines as closing dates, approval expirations, BPO time lines, contract changes etc.

5.) Will they keep the Buyer engaged throughout the process?

In a non-distressed sale the timelines are usually short from pre-approval to closing. The potential buyer will obtain a pre-approval for mortgage financing; they will shop for a home, make an offer and then close on the property.  Most cases this process takes between 30-60 days.

In contrast, the short sale purchase timeline could take the normal 30 to 45 days of shopping but, from the time a buyer puts an offer on a property to the time they actually close could take 90-120 days. During this time frame, the mortgage originator must keep the buyer engaged. The information gathered in the pre-approval process meaning paystubs, bank statements etc. will need to be updated appropriately so that when the short sale bank issues their approval the buyer is ready to close on time and within the approval guidelines.  All too often short sale negotiators are asked to obtain short sale approval extensions from the short selling bank because the buyer could not close on time. Most of this stems from the Mortgage Originator scrambling to obtain last minute documentation that could have been avoided if the buyer’s credit file was routinely updated throughout the entire short sale process.

In closing, with the abundance of short sale transactions permeating the marketplace, it is imperative that all interested parties to a short sale work with a Mortgage Professional that understands this segment of the marketplace. By keeping the 5 questions above in mind, you may alleviate the possibility of a short sale transaction failing because of buyer financing falling apart.

 

 

April sales come roaring back…17% increase…really!

Thanks to Marc Lebowitz of the Ada County Association of Realtors for this April roundup.

Sales in April 2012 were 645 in Ada County, an increase of 17% compared to April 2011.   Year-to-date sales are 2,012; 11% over the first three months of 2011. Dollar volume for April was up 33%! New homes sold in April increased 78% over new homes sold in April of 2011!!...and are up 56% YTD. Historically, April sales outpace March by an average of 10% or less.  April 2012 sales increased by 25% over March 2012. Nationally we know that one job is created for every two homes sold.  With 2,012 sales so far in 2012 we have helped to bring 1,000 jobs to Ada County.  We also know that for each homes sold there is a $60,000 cash infusion to the community; based on YTD sales we have added $120Million to our valley’s economy so far this year. Of our total sales in April… 36% were distressed….down 6% from March 2012. In April 2011, 56% of our sales were distressed. There was an interesting reversal in the make up of distressed solds.  In January 56% of distress properties were REOs and 44% were short sales.  In April the ratio was 60% short sales and 40% REOs. Whether this is a short term effect or a real indication that we are clearing our the “shadow inventory” remains to be seen in coming months. Pending sales at the end of April were 1,195; an increase of 5% from the end of March. In general pending sales in April are the highest of the year.  The percentage of pending sales in distress decreased 2% from March, totaling 31% overall. We were averaging close to 50% of pendings in distress over that last five months; but have decreased steadily since January.  Of Pending sales in distress, short sales outnumbered REO’s 2 to 1. At the end of April, we had 25% more sales pending than at the end of April 2011. April median home price was $158,777; up 19% from April 2011; and up 4% from March 2012. Median home price is up 15% since January of this year and above $150,000 for three months running. New Homes median price for April was $193,308; a decrease of 4% from April 2011. The number of houses available increased slightly for the first time in a couple of years. At the end of April our total active inventory was 1,993 homes. This is up 6% from March and 25% less than last year at this time.  Possibly the increase in median price is enabling some real move up buyer activity. At the same time, the percentage of distressed active inventory dipped 3% to 30%. This is the lowest number we’ve seen in several years. We have been hovering between 33% and 36% for the last year. We remain well below the 40% levels set last spring….when we were on the increase. Of our Distressed Inventory 93% is Short Sales and only 7% is REO. The price point with the largest increase in available properties is $200,000 to $250,000 which added 50 units in April. In Ada County we now have less than 3.4 months of inventory on hand. The price category in shortest supply is <$119,000 with 1.7 months. In the range of $120,000 to $159,999 we have 2.7 months. All price points up to $250,000 have less than 4 month’s supply. We have benefited for nearly two years from inventory levels much lower than national average. Multiple offers are much more prevalent; now becoming the norm. Based on April sold data, our most desirable price point is <$120,000 at 26% of all sales; down 4% from last month.  The next largest price point sold is $120,000 to $200,000 which increased by 20% from March.  The biggest increase was in sales between $200,000 and $250,000; which were up 200% from January 2012. Comparing Sales to Inventory, for key price points… @<$120,000 we sold 66% of all that we had in April; for $120,000 to $160,000 we sold 50% of all that was available; for $160,0000 to $200,000 we sold 40% of the total available. There is no longer any doubt that, in Ada County, we are going to have a heck of a spring season…and the future is looking brighter by the day.

 

Boise-Meridian-Nampa Real Estate, Sales are Brisk!

Well business has been booming, I have had buyers buying, and listing homes that are quickly selling. On many of the low to moderate priced homes multiple offers situations have become the norm. A couple of examples, I have a new listing in Nampa at $89,900, I have three offers to present to the seller tomorrow and will likely have at least one more prior to that. (I have had 4 agents call about this morning.)

On Friday I wrote an offer for some folks on a home in Meridian, $240,000. It is a short sale  and received at least two other offers besides ours.  Ours was accepted and now we proceed down that path.

I am including a national story about sales being up and comparing the headlines and the cautionary notes and tomorrow I will be putting a local story of Ada County's sales and stats. My last post highlighted Boise as one of the 10 top turn around cities in the nation. Please give me a call if you are looking to buy of sell, I can help!  208-602-0055  or Roger@lowesflatfee.com

We believe the housing market is recovering. We believe that sales will be robust through the rest of the year. However, we also believe that the increase in demand will not impact prices in a big way as we think there will also be an increase in the supply of homes coming to the market. This increase in supply will offset the increase in demand. The increase in supply will be fueled by two categories of inventory:

1. Foreclosures entering the market as a result of the National Mortgage Settlement


2. Pent up supply of homeowners who have been unable to sell their homes over the last several years

There have been several recent headlines making strong statements about home values in the country. We must be sure to read the ENTIRE report – not just the headlines. Here are four headlines and the portion of the report that reflects the caution in their ‘cautious optimism’.

HEADLINE:

LPS Home Price Index Shows U.S. Home Price Increase of 0.2 Percent in February; Early Data Suggests Further Increase of 0.3 Percent is Likely During March

CAUTION:

“Reasons for caution are clear, as we’ve been here before. Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011 – trends that all ended by summer, after which all the gains – and then some – were lost. As is true this month, those temporary increases were on low sales volumes – about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.”

HEADLINE:

Foreclosure hotspots show signs of housing turnaround

CAUTION:

“However, much will depend on the continued health of our economy, specifically job rates, and how lenders will release their foreclosure inventories now that the 49 state AG Agreement has been signed.”

HEADLINE:

Fiserv Expects Home Prices to Stabilize

CAUTION:

“On the other hand, nearly one-half of the metro areas, or 191, saw prices decrease by more than 2 percent, including double-digit losses in Atlanta (-12.8 percent), Reno, Nevada (-10.8 percent), and Tucson, Arizona (-10 percent).

In the fourth quarter of 2011, the average price of a U.S. single-family home fell four percent from the year-ago period, and Fiserv Case-Shiller projects a further decline of 0.8 percent by the end of 2012.”

HEADLINE:

Home Prices in March Show Monthly Gain: CoreLogic

CAUTION:

“Even with price gains above 5 percent for leading states and CBSAs, Capital Economics said in response to the CoreLogic report that over the year, prices are more likely to stabilize rather than make a dramatic climb.

“There are fears in some quarters, triggered by recent disappointing GDP and payrolls data, of a sharp slowdown in economic growth which could derail the fledgling improvement in the housing market,” said Paul Diggle, property economist for Capital Economics.”

 

Boise makes TOP 10 TURNAROUND MArket

 

Troubled Idaho Homeowners-10 Common Myths-Short Sale vs Foreclosure

A great treatment of many of the myths surrounding short sales, also from the folks at KCM Blog. Many of our homes here in the Boise-Nampa Metro area are still in this situation so it is good to know the facts.

It’s likely you’ve heard the term “short sale” thrown around quite a bit. But what, exactly, is a short sale?

A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.

To be eligible for a short sale you first have to qualify!

To qualify for a short sale:

• Your house must be worth less than you owe on it.


• You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc… also qualify.

Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. We take the most common myths surrounding both short sales and foreclosures and give a brief explanation. LET’S BUST SOME MYTHS!!

1.) If you let your home go to foreclosure you are done with the situation and you can walk away with a clean slate.  The reality is that this couldn’t be any farther from the truth in most situations. You could end up with an IRS tax liability and still owing the bank money. Let me explain. Please keep in mind that if your property does go into foreclosure you may be liable for the difference of what is owed on the property versus what is sells for at auction, in the form of a deficiency balance! Please note this is state specific and in most states you will be liable for the shortfall, but in some states the bank may not always be able to pursue the debt. Check your state law as it varies widely from state to state.

Here is an example of how a deficiency balance works

If you owe $200,000 on the property and it sells at auction for $150,000, you could be liable for the $50,000 difference if your state law allows it.

Not only could you be liable for the difference to the bank, but in some situations you could also be liable to the IRS! Although there are exemptions (mostly for principle residences) under the Mortgage Debt Forgiveness Act, there are times when you could be taxed on both a short sale and a foreclosure, even in a principle residence situation. Since the tax code on this is a little complicated and I am not a CPA, I advise always talking to a CPA when in this situation as you are weighing your options. Hard to believe?  Well, believe it or not, the IRS counts the difference between the sale and the charged off debt as a “gain” on your taxes. That’s right-you lost money and it’s counted as a gain! (I didn’t make that rule, that’s a wonderful brainchild of the IRS). Banks and the IRS can go as far as attaching your wages. Not to mention if you let your home go to foreclosure you will have that on your credit, as well.

Guess What?  A short sale can alleviate your liability to the bank, in most situations. There are also exceptions to this, but in most cases banks are releasing homeowners from the deficiency balance on a short sale.

2.) There are no options to avoid foreclosure. Now more than ever, there are options to avoid foreclosure. Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option. Either way, there are more options today than there have ever been to avoid foreclosure.

3.) Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale.Banks would rather perform a short sale than a foreclosure any day. A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money. Banks have more foreclosure inventory than ever before, and certainly do not want any more. Banks more than ever welcome short sales. Qualifying for a short sale is easier than you think, you need to have a true financial hardship, or a change in your finances and your house has to be worth less than what you owe on it. Not only do consumers, but banks also now have government incentive to participate in short sales.

4.) Short sales are not that common. At this present time, short sales range from 10-50 % of sales in various markets and it is predicted that in 2012 we will have more short sales than any other year, to date. Due to economic changes in the last few years, this is something that is affecting millions of Americans. Short sales are in every market, and are not just limited to any particular income class. This has affected everyone from all facets of life. A short sale should be looked at as a helpful tool, not a negative stigma. That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.

5.) The short sale process is too difficult and they often get denied. Though the short sale process is time consuming; it is not as difficult as the media would have you believe. The problem is that most short sales are denied because of a misunderstanding of the process.  It is true that if the short sale process is not followed correctly there is a good chance of getting denied. An experienced agent knows how to avoid this. Short sales require a lot of experience, and a special skill set. If you are looking to go the option of a short sale make sure your agent is skilled and experienced in this area.

6.) Short sales will cost me money out of pocket. A short sale should not cost you any out of pocket money. In fact, you could get between $3000-up to $30,000 to participate in a short sale. In many ways, a short sale may put you in a better financial position than prior to the short sale. Almost every short sale program now has some type of financial incentive for the home owner, as long as it is a principle residence, and we are even seeing relocation money being paid on some investment/second homes. As a seller of a property you should never have to pay for any short sale cost upfront to any professional service. Realtors charge a commission that is paid for by the bank. In most communities there are also non-profits and HUD counselors who can help you with foreclosure prevention options for free. The only potential cost you could incur is if the bank would not release you from a deficiency balance in the short sale, which is happening less and less now.

7.) If I am behind on my payments, I can perform a short sale any time. The farther you get behind on your payments, the harder it is to get a short sale approved. The closer a property gets to a foreclosure the harder it is to convince the bank to perform a short sale. As they get closer to a foreclosure sale more money is spent, thus deterring them from doing a short sale. If you think you need to perform a short sale, time is of the essence; the sooner you start the process, the better. Waiting too long can trigger the ramifications of a foreclosure, losing the ability to do a short sale as a viable option.

8.) I have already been sent a foreclosure notice so I can’t perform a short sale. For the most part just because you received a foreclosure notice or notice of default it does not mean that you do not have time to perform a short sale. The timeline and specifics do vary from state to state, but having done short sales all over the country, I have seen banks postpone a foreclosure to work a short sale option as close as 30 days prior to the scheduled foreclosure auction, but the longer you wait the less chance you have. If you have received a legal foreclosure notice, please reach out to a professional right away. The longer you wait, and the closer you get to foreclosure, the fewer options you have. If you have received a notice to foreclose this means the bank is filing paperwork and starting the process to take legal action to repossess the house. You still have time at this point to prevent foreclosure, but do not hesitate! The closer you get to the foreclosure date the harder it becomes to negotiate with the bank for whichever option you choose.

9.) I was denied for a loan modification, so I know I will get denied for a short sale. Short sales and loan modifications are handled by two separate departments at the bank. These processes are totally different in approval and denial. If you got denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification, as some loan modifications are denied because they cannot reduce the loan low enough based on the  consumers income.

10.) If I go through a short sale I cannot buy another house for a long time. The time to buy another house depends on your entire credit picture and can vary from 12-24 months. There are even a few FHA programs that allow for a purchase sooner than that. I have worked with clients who went through a short sale and bought another house in less than 12 months.

These are just a few of the common myths surrounding short sales and foreclosure. With the options available today, no homeowner should ever have to go through foreclosure, and hopefully this information can help a few more homeowners think twice before walking away from their home not realizing the possible long term ramifications a foreclosure can have.

I have successfully assisted many home owners negotiate a short sale and I am in  the process of taking several more thorugh the process. Give me a call today if you are in this situation, time is of the essence.  602-0055 or roger@lowesflatfee.com

 

Boise Home Buyers! Don't overlook these!

What Buyers Often Overlook in Home Purchases

DAILY REAL ESTATE NEWS | FRIDAY, MAY 04, 2012

While many buyers may be swayed by the home’s appearance, financing, and location when choosing a home, housing experts say they often overlook other important factors that may keep them happy for years to come with their home purchase.

A recent article at U.S. News & World Report lists tips for those often-forgotten aspects of home ownership. Here are some of those overlooked aspects:

• Zoning of nearby areas: What you see today may not be what you see a few years from now. Communities’ and neighborhoods’ landscapes can drastically change in a few years. And while some of these changes may be good — such as the addition of a nearby recreation park or school — some may be viewed as a negative, like a new highway overpass behind the property, the article notes. By reviewing upcoming plans and existing zoning at the city’s urban development department, home buyers can get a better idea of what the future may hold for the surrounding area of the neighborhood they choose.


• Remodeling rules: Some community associations may set limitations on what you can do to property, particularly if the buyer ever wants to make exterior changes like adding a garage or guest house. Purchasers who are looking to have a house grow with their family’s needs through the years may want to investigate any such rules beforehand to make sure that they’ll be able to add onto their home as needed.


• Impact of crime rate: Home purchasers may be concerned about making sure their new home falls in a low-crime-rate area but they may fail to realize how it can also impact their monthly budget. For example, “living in a high-risk neighborhood can send monthly bills upwards, like inflated auto insurance premiums,” the U.S. News & World Report article notes.

 

Look Nice vs. Perform Well-Idaho Homeowners Decide

How to turn must-do home improvements
into things of beauty

(ARA) - When it comes to home improvement, you can spend money in two basic ways: on things that make your home look better and things that make it function better. Under the first category, you'll find all the things you want to do, like replacing narrow casement windows with a lovely bay window. Under the second, falls all the things you must do, like replacing those drafty windows with something more energy-efficient.

When "want to" and "have to" meet, they create the opportunity to make a smart buying decision - and choose an upgrade that will look good and improve the livability of your home. The key to making smart home improvement decisions is to recognize these opportunities and take full advantage of them.

Here are a few "have to" improvements that have the potential to turn into a good-looking, energy-efficient, enjoyment-enhancing "want to."

Replacing the hot water heater.

You probably don't care what a new hot water heater looks like sitting in your garage or basement - or wherever it resides in your home. But the right replacement water heater can help your house achieve a lovely shade of green. High energy-efficiency water heaters can help reduce energy usage, thereby trimming your energy bills and your home's environmental impact. Solar water heating systems take the beauty a step further by using the power of the sun, collected through low-profile solar panels on the roof, to heat water - at a monthly savings that's about 80 percent less than the cost of traditional heaters.

Getting some light in here.

Do you really need a bunch of scientific studies to tell you that a home filled with natural light just feels better? Probably not. Illuminating your home with natural light is a smart buying decision on multiple levels. First, you don't pay to power the sun. Second, natural light delivers a host of mood-enhancing benefits. If you have the wall space, by all means add some windows.

But for rooms where a window is impossible (like a powder room) or where you don't want to sacrifice privacy (like a master bathroom) a tubular skylight is a good alternative. Some, like Velux's Sun Tunnel products, are easy enough to install that a seasoned do-it-yourselfer could accomplish the task. They cost less than traditional skylights and bring natural light to hard-to-light areas like closets, hallways and other small spaces.

Getting some air in here.

Just as natural sun is good for your mood, ventilation can be good for your health. An Energy Star qualified venting skylight is a great way to passively vent stale, moist air from inside your home, especially from baths and kitchens. While some skylights are "fixed," those that do open can be controlled by a remote to open when you want fresh air and close when you want to retain warmth. They can also close automatically in case of rain. In addition, they introduce free light into your home. Adding blinds - also remote-controlled - can help you better control the amount of sun a skylight admits into your home. And blinds are not just functional - you can get them in colors and patterns to complement your decor while increasing energy efficiency. Compared to other venting solutions, a skylight is a relatively low-cost, great-looking way to address ventilation issues while adding drama to a space. Log on to www.veluxusa.com to learn more about skylights.

When one door opens ...

Beat up, weathered garage and front doors not only look bad, they can be a source of air leaks that make your heating, ventilation and cooling system work harder. Exterior doors aren't something you buy every day, but they can have a big impact on how your home looks and on its energy efficiency. They can definitely be a smart buying decision if you opt for doors that not only look good, but are also highly rated for energy efficiency. If you're not sure how to choose, look online, where you'll find guides for buying garage doors and front doors.