The Do’s and Don’ts of Buying a Short Sale

Frieda Lencioni, Modesto Office - call (209) 524-6454

Frieda Lencioni, Realtor for Century 21 M & M Real Estate Modesto, says, “The most important thing for a Buyer to consider before moving forward on a Short Sale is to make sure that your Buyers Agent is (very)experienced in this type of transaction”.

Short Sales for Buyers can be very challenging to say the least, if not frustrating. As a buyer in this type of transaction, your Realtor should prepare you ahead of time letting you know of the many potential problems and/or hurdles you may have to overcome. As the Buyer, you will be better prepared to survive this type of transaction.

It is important to interview potential agents prior to retaining their services as a Buyers Agent, and know that you will be working with this person 60-180 days…sometimes longer. Your agent should know and understand the Short Sale market. In fact, it is also a good idea to interview your Lender and make sure that they are knowledgeable in the Short Sale process.

Susan Santucci, Oakdale Office, call - (209)614-7957

Susan Santucci, Realtor for Century 21 M & M Real Estate in the Oakdale office, provided the following list of Do’s and Don’t for the Buyer in a Short Sale transaction.

DO’s

1. Be prepared to have more than one offer out at a time.

2. Be prepared to wait up to 6 months especially if you are working with a large institution.

3. Be prepared to pay for the home inspection.

4. Be prepared to pay for your own Home Warranty.

5. Make sure that your Buyers Agent is calling the Listing Agent at least once a week regarding your offer(s).

6. Be prepared to pay for some of the Sellers Closing Costs or Escrow Fees

NOTE: Some Banks will not pay Closing costs or Escrow Fees and they throw this little wrench in right before the home is ready to close. In a Short Sale the sellers usually does not have the extra money, so if YOU as the buyer really want this home, you may have to come up with some extra cash right at the end. However in most cases you can buy a great deal  on a short sales sometimes for as much as 50% to 60% off .

DON’Ts

1. Do not fall in love with the first home you see.

2. Do not buy anything new during the time you are looking for a house. This will change your credit history.

Sally Frampton & Brenda Pintabona - Two Award winning realtors that enjoy what they do!

3. Do not use your charge cards for any large purchases; if in doubt ask your Agent or your Lender?

4. Do not change jobs unless you talk with you talk to your Agent or Lender.

5. Do not lose patience with your Realtor if he/she is doing their job. Remember that buying a Short Sale can be a tedious process, and there may be many starts and stops during the process of closing the sale.

Feel free to ask questions, make comments or suggest new topics for this blog. Just use the Comment box below, or send an email to newsandviews@c21mm.com. Why not subscribe to this blog? Just enter your email address in the Email Subscription box (above and to the right), and you will be notified anytime we add new articles.

The Short Seller; A Sellers Option

Susan Santucci, Oakdale Office, call - (209) 614-7957

According to Susan Santucci, Century 21 M&M Real Estate Agent in Oakdale, CA, “For home owners that can no longer afford to keep their mortgage payments current, a Short Sale is an option to consider in order to avoid bankruptcy or foreclosure.”

Essentially a Short Sale in real estate means the lender is accepting less than the total amount due. Unfortunately, not all lenders will accept Short Sales, and not all properties qualify for a Short Sale.

NOTE: For your protection, it is important that Short Sale candidates seek professional counsel; an attorney and/or an accountant.

One of the biggest obstacles in a Short Sale is a Second Mortgage holder.  If there is more then one loan on the property, the secondary loans must be negotiated and resolved before the first Lender can agree to the Short Sale.

Susan Santucci further states that “if the home owner can qualify for a short sale and at the same time maintain all of their other financial obligations (credit cards, car loans, etc.), their credit may not be completely destroyed. The Short Sale will affect their credit for at least  a period of three years as opposed to seven to ten years with a foreclosure or bankruptcy.”

If you are a seller in a Short Sale transaction there are steps you will need to take;

Find a Real Estate Agent well versed in Short Sale transactions and then get ready to personally submit the following:

A Letter of Authorization from the Seller authorizing the Lender permission to talk to the real estate agent handling your transaction.

A hardship letter. This is a statement of facts that describes your financial situation and makes a plea to the lender to accept less than full payment.

Proof of Income or Assets. This is a statement where you list all of your current income and all of your expenses. Lenders want to know if you have any savings accounts, money market accounts, stocks and bonds, cash or anything of tangible value.

Copies of Bank Statements. Initially you should copy all of your bank statements for the last three months, later on the lender may ask for more documentation.

The following documents that will need to be supplied by your real estate agent:

An estimated closing statement (HUD1)that shows the sales price you expect to receive and all costs of the sale, unpaid loan balances, outstanding payments due, real estate commissions, etc.

Purchase Agreement & Listing Agreement

Jennifer Ceccarelli & Kim Andrade - Our team starts the new year and new decade with great smiles ...for more go to Flickr.com

In general, this type of transaction is just like any other real estate transaction. All of the factors that come into play in a standard real estate transaction are just as important in a Short Sale including, but not limited to; intelligent pricing, condition of propertymarketing and the showing of the property.

This biggest difference in this type of transaction is the Sellers participation in the process. The Seller must provide the necessary financial documents required by the existing Lender in order to justify the necessity of the Short Sale. And it should be noted that a Short Sale transaction normally takes between four to six months to complete.

Consider subscribing to this blog. Next week we will discuss the Short Sale from the Buyer’s point of view. Feel free to email us at newsandviews@c21mm.com , or leave a comment or question in the box below.

Buying Foreclosures, REO’s

Frank Beltrami, Oakdale office, call (209) 844-1749

Frank Beltrami, Century 21 M&M Real Estate agent in Oakdale states “With the large number of bank owned homes (REO’s) on the market, low interest rates and the $8,000 Homebuyers Tax Credit, we have a ‘perfect storm’ situation for first time homebuyers.”

The California foreclosure crisis is in full swing with no end in sight.

In July 2009, the number foreclosure filings seemed to peak. After that, for four months in a row, we saw declines in foreclosure activity most likely due to the federal loan modification incentive (HAMP), the new California law requiring a 90 day delay before a foreclosure sale, and the large number of homes already in the foreclosure pipeline.

Then in December 2009, foreclosure filings increased 14% from November.

Real Estate Owned (REO) simply means that the lender reclaims the property through the foreclosure process.

During 2010, 2.4 million homes nation-wide, are expected to be lost through the foreclosure process. John Melo, CEO of Century 21 M & M states, “Due to this ongoing foreclosure crisis, most of those homes will be in the high end of the market and it has been predicted that home prices in that high end, homes over $400K, will continue to fall during the spring and summer of 2010.”

With foreclosures dominating the housing market, bargain hunters will find lots of opportunity in this market. The question is, how do you find and buy a foreclosed home (REO)? And what precautions should you take to make sure you are getting the best deal?

  1. Most important, find a real estate agent that specializes in REO’s. A lot of these Realtors have long-term relationships with the banks. See Century 21 M&M’s list of Bank Owned homes, and agents handling Bank Owned Homes.
  2. Get pre-approved (not pre-qualified) for a mortgage. Unless you plan to pay cash, you will need a recent pre-approval letter from a lender. This letter describes how much money you can borrow based on the lender’s assessment of your credit score, income and expenses.
  3. Larry Matos and Ricardo Jimenez (Modesto office) presenting Coats for Kids Grand Prize to Osborn School in Turlock, Mrs. Mezzapesa, 6 & 7 grade.

    Have your real estate agent look at recent home sales of comparable properties in the area, also known as ‘comps’. When you know the comps then you can write a competitive offer base on recent sales.

  4. Remember, most REO homes are for sale ‘as is’. With so many REO’s on the market and many of them in sub-standard condition, it is important to budget accordingly. Go over every inch of the property with a qualified contractor who can spot problems and tell you how much it will cost to remedy them.
  5. Finally, be patient and be prepared to write many offers. After you have carefully calculated what you want to spend, stay focused. Today’s low prices represent golden opportunities, but often attract dozens of buyers who may bid until the home is no longer a bargain, or in your price range.

We look forward to your questions and opinions, please feel free to use the Comment Box below. For future notifications of Northern California Real Estate News and Views – use the Email Subscription feature (upper right-hand corner).

New RESPA Rule, Effective January 1, 2010

As of January 1, 2010, Century 21 Mortgage, Century 21 M&M Real Estate Agents and all of the mortgage and real estate professionals (nation-wide) have a new final RESPA Rule established by HUD “To Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs.”

The Real Estate Settlement Procedures Act, (known as RESPA) was originally passed in the U.S. Congress in 1974. It was created to stop the practice of inflating the costs of real estate transactions and obscuring price competition by facilitating bait-and-switch tactics which facilitated kickbacks to lenders, realtors, construction companies and title insurance companies.

For example:

Someone applies for a loan advertised by the lender at the 5% interest rate, then in the process, the borrower is told that they must use a certain title insurance company chosen by the lender for which the fee is $5,000 (whereas the normal rate is only $1,000). That title company then pays the lender $4000 (in kickbacks).

RESPA made this practice illegal. The intent of the law was to make the costs of the services clear to the borrower, so as to allow price competition due to consumer demand and drive down the costs of the services by parties involved in the real estate transactions.

However, the kickbacks still occurred in new and more subtle forms, so as of January 1, 2010, we have a new (and final) Rule prescribed by RESPA. This new Rule requires the use of two forms; the new Good Faith Estimate (GFE) of settlement charges and HUD-1 Settlement Statement.

Simply put, the GFE clearly discloses key loan terms and closing costs. And, closing agents are required to provide borrowers with the new HUD-1 that clearly compares consumers’ final and estimated costs.

Dave Will, Century 21 Mortage - call (916)300-9697

Dave Wills, Century 21 Mortgage Consultant from the Sacramento area says, “Basically you can’t argue with RESPA, they have always intended to be fair and their actions are for the benefit of the consumer. The most positive aspect (of this Rule) is that it creates uniformity and consistency in the information from lenders to the consumers, and that is never a bad thing.”

Wills further states “The nice thing about working for Century 21 Mortgage is that I have never had to worry, we always deliver in the end, the exact same thing we quoted to them (the borrower) in the first place.”

John Melo, Century 21 M & M CEO says,  “whenever customers are protected with up front disclosures everyone wins! Less chance of criminal activity by unscrupulous loan agents…”

In the final analysis, these new forms (the GFE and HUD-1) were implemented to help borrowers understand and shop for mortgages. The final result should be; better mortgage products, lower interest rates and lower settlement charges for borrowers.

For more information go to – RESPA, Real Estate Settlement Procedures Act and feel free to start a discussion in the Comment Box below, or visit our Facebook Group – Northern California Real Estate News & Views, and click on the Discussion tab.