What’s all this talk about Short Sales

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Short Sales, Bank Owned, Foreclosure, Bankruptcy…all start with one problem; Finances or the lack of funds to overcome the current and future expenses. Who hasn’t had some type of financial issues in your life? Unfortunately, these are some of the more extreme financial solutions. With foreclosures on the rise, short sales have become an option to relieve some of that burden.

Disclaimer; I am not a tax expert, CPA, financial planning expert, nor a lawyer. I suggest before you decide if a short sale is right for you, that you seek professional advice from your CPA, tax expert and lawyer. What I am giving you here is a peek into what could happen if this is the right choice for you.

Foreclosure is the final action that a bank takes to recover assets to cover the mortgage at which a homeowner promised to pay. There are other alternatives to foreclosure. One of the biggest problems with deterring foreclosure; Homeowner denial.

How many empty promises were made to the collection agency?

How many times has the phone rang and you didn’t answer it?

How many notices from the bank went unopened into the garbage?

For some reason it is our human psyche to ignore it and it will go away. THIS IS THE WORSE THING YOU CAN DO. Let me tell you a secret; Banks don’t want to own real estate. Now the catch-22, they don’t realize that either. You would think that they would want to help you before you start to have problems in today’s economy and housing situation. I have heard many stories that the bank wouldn’t even talk to the homeowner until they were at least one month behind on their payments. So, I guess you have to hurt your credit to fix your credit. (that is not my advice, that is just my reasoning.)

What is happening quite too often now is that homes have depreciated anywhere from 5-15% since 2006. (prices are actually that same now as they were in 2005 according to the January 2008 Housing report for Frederick County) What you have now is a mortgage that is worth more than the property is actually valued. This is creating problems with refis too. Some are looking to refinance their mortgage to help lower the payments which is great. The interest rates haven’t been this low for a long time. But now the problem, the appraisals are not matching up with what is owed on the property. In some cases you have homeowners that bought their home with no money down which means after all the charges, the loan was more than the purchase price. Simple banking math; you don’t pay much on the principal to lower your debt for the first few years only interest (even on 30 yr fix loans.) Now, if the homeowner tries to sell the property, the amount they owe is more than the market will pay. Hence the birth of the short sale. What happens now, the bank has to approve the sell of your property, because now they are looking to take a loss on your mortgage. This can be a tedious and nerve racking process for all involved. In the end the bank still might to decide on foreclosing on the property. They might feel this will yield them more money.

Now a shortsale doesn’t always relieve you of your financial burden. Banks might request that you pay back the difference between the sale price and the mortgage price or they may not. If you are relieved of the difference, it is still considered as income by the government and could be subject to taxation. Either way, it is much less than having the whole mortgage hanging over your head. This might not be the right choice for you or the only solution that is out there for you, but there are solutions. You need stop avoiding the banks…that is the worse thing you can do. A REALTOR educated on short sales can help show you options.

I will be back next week to talk about what to expect in a short sell as the seller and as the buyer.

February 7, 2008 · Filed Under Frederick Foreclosure, Frederick MD Real Estate, frederick real estate

9 Comments

Market Conditions around Frederick (foreclosures and REOs)

Today I will share some RealtyTrac Data. I have been tracking it for a few months. I am sure the foreclosures and short sales are only going to get worse before it gets better. You do have options before going to foreclosure…but you have to act before it’s too late. Short sales are one option. Some banks are willing to take less than you owe on your mortgage, if you are to sell you house. You have to do this before they start the Foreclosure proceedings. I know that when the phone rings you cringe…you can’t ignore it. Talk to your lender! They don’t want to own your property. Outcomes vary depending on lender and your personal situation…But you do have choices.

I have started set up another site strictly dedicated to foreclosures, auctions and Bank Owned properties. It is just in it’s infancy stages. I intend to amass resources, solutions and data around this increasing epidemic.

November 12, 2007 · Filed Under Frederick Foreclosure, Frederick Market Conditions

3 Comments

I want a Foreclosure in Frederick

If I had a dollar for every-time that was asked of me, I would be a rich man. In today’s market, it’s a very popular request. It’s an unfortunate experience for the sellers or should I say previous owners. Frederick MD is experiencing a large amount of Foreclosures, Short Sales and Auctions, but we’re not that bad off. Foreclosures, Short Sales and Auctions happen all the time, even in a good market. Nevada is the worse in the US right now with One foreclosure for every 185 households. (We are so low they didn’t list us on RealtyTrac.)

Right now on RealtyTrac, there are 89 properties listed as Pre-Foreclosure, 225 in Auction status and 31 Bank Owned or what is referred as REO (Real Estate Owned by the bank) These properties are in varying stages in each of the categories. Not all Pre-Foreclosures make it to Auction and Not all Auction Properties make it REO. Sometime homeowners have a hiccup with their career and eventually catch up and are removed from this list. Sometimes they are able to refinance, but sometimes not…

The interest only ARMs that were given out at such a fast and reckless pace in the early 2000s are now starting to hurt some home owners. Lending requirements have tightened up and interest rates that these home owners have after their loan is reset are way to high for them to continue to pay. So there is a troubled family attached to this property…

Now back to I want a Foreclosure in Frederick MD… Do you really want a foreclosure or do you want a good deal? What I find out is the fact most buyers want a good deal. There is this misnomer that Foreclosures are good deals. Remember, you are looking to buy a house from someone (a bank) that has never seen it, nor will they warrant any problems. They won’t fix any problems. Remember the prior owners didn’t have enough money to pay the mortgage…chances are they didn’t have any to do upgrades or repairs. You have to have a large down payment ($10-50,000) in order to bid at the auction on the County Courthouse steps (really). This is usually outlined in the Public Notice in the newspaper classified ads. If you win the bid, you have to produce financing…if not, lose your down payment. (others are bidding on the same home which is driving up the lowest acceptable price) Congratulations!!! Now you get to fix it up and move in!!! Of course the closing price will vary, but I would bet that the actual market price isn’t too much higher than the price you paid.

Now on the otherhand, if you just want a good deal…then let’s take a look at the 2300+ homes that are in better shape and will negotiate price, negotiate repairs and tell you the problems they have had with the home. It’s a great time to buy, just need to get out there and find it.