How Do Short Sales Work?

Monday, April 19, 2010

Hello Hampton Roads,

How do Short Sales Work?
First let's define what a short sale is before going into the details of how short sales work!  A short sale occurs when the property is sold for less than the mortgage amount (it is sold short the mortgage) with the approval of the lender. A short sale must have lender approval because even though the buyer and seller may agree, if the lender doesn’t approve the sale, it won’t happen. The short sale process can be long and arduous but the with advent of the HAFA (Home Affordable Foreclosure Alternatives) program, recently in effect since April 5, 2010, the time lines for eligible short sales are greatly reduced! A short sale is a foreclosure alternative with benefits for the homeowner, the lender, and the community as a whole.


The homeowner avoids the stigma of foreclosure and as well as the negative impact to his or her credit. The lender will recover more than if the property goes into foreclosure—for some lenders the recovery loss from a short sale may be 60% while the recover loss from a foreclosure is just 30%. The community benefits as well because homes being sold as short sales tend to be better kept than foreclosure properties since in many cases, the homeowners are still living in the house and the properties are not a scourge on the neighborhood. Additionally, the US Treasury estimates that each foreclosure decreases the value of surrounding properties by 9%, therefore every foreclosure avoided helps stabilize communities towards a faster recovery.

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Sidebar: In addition, is important to understand the pros and cons of Foreclosures vs Short Sales .
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Now let’s look at the short sale process.

In order for a bank to consider a short sale, these considerations must be met:

• The seller must have a verifiable, bona fide hardship
• The seller owes more on the home than it is currently worth
• The seller is either behind on payments or will be behind on payments in the near future.

(Note this is usually for primary residences only—many banks will not allow a short sale on an investment property)

The next step is to request the short sale package from the bank which essentially documents the seller’s financial situation. Each bank has their own guidelines and lists of required paperwork, but examples of standard requested documentation are as follows:

• Letter of authorization, which lets your agent speak to the bank.
• Pre-liminary HUD -1 Settlement Statement or Net Sheet
• Seller’s financial statement
• Seller's hardship letter
• 2 years of tax returns
• 2 years of W-2s
• Recent payroll stubs
• Last 2 months of bank statements
• Comparative market analysis or list of recent comparable sales

Once the seller has obtained an offer to purchase from a qualified buyer then the following events take place:

• The buyer’s offer is submitted to the bank along with other documentation such as a copy of the listing agreement, required addendums, buyer’s pre-approval letter(s), copy of earnest money check and the seller’s short sale package. If the package is incomplete, the bank will not look at it.
• If there is more than 1 lien holder involved the package must be sent to each one who will be effected by the short sale.
• Follow up with bank to confirm receipt of file. This can take a week or more.
• File is assigned a Negotiator. This can take 30-60 days
• BPO is ordered—this can take up to another 30 days
• File is reviewed –this can take up to 2 wks to another 30 days
• The bank issues short sale approval or rejection.

If you or someone you know owes more on a home that it is now worth, feel free to contact me if you have any questions or need any help!

Thanks for Reading,

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Serving your Hampton Roads and Virginia Beach Real Estate needs.

Hampton Roads Home Sales Rebound in March 2010

Saturday, April 17, 2010

Hello Hampton Roads,

Hampton Roads Home Sales Rebound! Could we be seeing an uptrend in housing sales? REIN (Real Estate Information Network) our local MLS, just released its housing data for the Hampton Roads Real Estate Market for March 2010.  The good news is that real estate sales up from a year ago!

According the numbers above, an increase is seen in almost every category except for the Median Sales Price of residential homes in Hampton Roads. In this case we see a slight decrease of 1.64% from $213,500 to $210,000.  Below is a table showing the Median Sales Price of residential homes per city:

 Although the median sales price of residential homes may have dropped slightly, the absorption rate or  months of inventory has decreased!  Months Inventory indicates how many months it would take to sell the current number of homes on the market at the current sales rate—this figure helps determine whether it is a buyers or sellers market; a sellers market has a Months Inventory less than six, and a buyers market is greater than six. The numbers show that it is still a strong buyers market.

If you are looking for a new home, now is a good time to buy—distressed property sales continue to exert downward pressure on prices, and loan rates continue to be at historic lows, although they have been increasing slightly over the last month. The Federal Reserve chairman Ben Bernanke has indicated that the Fed will keep interests rates low for the next six months or so, but many analysts believe rates will rise.

If you have been considering buying a home, now is good time to do so.  Feel free to contact me and I will be happy to help you with your next real estate purchase.

Thanks for Reading,


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Serving your Hampton Roads and Virginia Beach Real Estate needs.

Help Prevent Foreclosure

Wednesday, April 14, 2010

Hello Hampton Roads,

How do you Help Prevent Foreclosure?
With a wave of foreclosures on the rise, if you find yourself having trouble paying your mortgage, you may want to consider ways to help prevent foreclosure.  To find the best solution for you, start by keeping track of your financial records:

• Evaluate your budget to eliminate unnecessary, discretionary spending and prioritize expenses like your mortgage payments. 
• Determine if you can set aside extra earnings to save your home.
• Check your mortgage to see if there are any disputes to resolve or taxes to pay. Settle those while you still can in order to prevent accumulation and higher payments.

Doing the steps above will help you to avoid your lender filing a Notice of Default (NOD). This document is filed in public records and says that the borrower is behind the mortgage payments and the lender will seize the home unless the loan is brought current.

However, if it appears that you’ll unable meet your mortgage obligation, you should talk to your lender as soon as possible and seek approval for any of the ways listed below to help prevent foreclosure:

Forbearance

If you still have the means to catch up on loan payments (e.g. you got a new job, expecting a bonus or tax refund), forbearance will allow you to make partial payments, or postpone payments, as long as that the lender agrees.

After forbearance, the loan may be reinstated generally if a lump sum payment (penalties, fees, back payment) is made to bring the loan current. Otherwise, a repayment plan may be offered; this is when you may not be able to afford the reinstatement lump sum payment but can start making payments to catch up; the lender may let you pay an additional amount each month until you are able to fully pay your mortgage.

Loan Modification

Loan modification is when the lender allows the terms of a loan to be changed such as a reduced interest rate or an extended loan maturity date or to add past due payments to the balance of the loan.

Deed in Lieu of Foreclosure

When your lender accepts a deed in lieu of foreclosure, the property reverts to the lender in exchange for having the lender cancelling/ forgiving the debt. Sometimes, you may be required to list your home for a short period of time before the lender will accept a deed in lieu of foreclosure.

Short Sale

A short sale is when a lender is willing to accept a discounted payoff on a mortgage thus selling the home “short” the mortgage amount, and avoiding the legal expenses of foreclosure, and has the benefit of the owner avoiding the credit blemish due to foreclosure. This option may or may not relieve the owner from the obligation of a deficiency judgment; meaning that the owner may still be liable to pay for any losses.

Re-Finance or Sell Your Home

If you have equity in your home, refinancing or selling your home may be viable ways to help prevent foreclosure.   However, refinance loans may be difficult to qualify for given today’s tight credit market or may even result in higher monthly payments.

File for Bankruptcy

Filing for bankruptcy, Chapter 13 can be used to temporarily suspend the foreclosure process since foreclosure is suspended until you are discharged from bankruptcy.  However, Chapter 13 still requires a repayment plan and there will be a bankruptcy on your credit.

Again contacting your lender early in the process is the best way to help yourself and ensure the greatest number of options are open to you.  You should also seek legal and professional advice.  Furthermore, the US Dept of Housing and Urban Development (HUD) has a link on it’s site with offers for free “Foreclosure Avoidance Counseling”


Thanks for Reading,


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Serving your Hampton Roads and Virginia Beach Real Estate needs.