Sometimes we forget that foreclosure is the other side of short sale.  As real estate agents, many of us work with buyers wanting to purchase short sale properties.  The reason, in most cases, is that buyers are looking at short sales to get a great deal or "steal" a property.  The chance of getting a great deal is slight even though it is possible.  We have found that the best deals for investors are on bank owned properties.

Sellers on the other hand, rarely think about the short sale.  They simply want to walk away from their property without any obligation to repay the existing mortgage.  They're fed up,   angry and embarrassed.  In some cases this is possible to simply walk away, but there are some situations in which the seller will still owe money after closing.  The Sellers would certainly negotiate differently if they understood this. 

 The Seller must qualify for short sale relief?

- The lender will look at the Sellers situation to determine if they qualify for a short sale.  Their financial situation scrutinized income, employment, expenditures, savings and net worth all play into the decision. 

 The lender makes the final decision on the price and terms of the sale?

 - The bank may consider a short sale if there is $400,000 owed on the property and the lenders appraisal shows that it is worth $300,000 today. 

- As the days on the market grows, the lender may be in a mindset to accept less but not deep discounts.

- The condition of the property and market trends in the general area my play into the decision.  A good house in a good neighborhood will generally sell for close to fair market value.

 The lender can come after the Seller for payment of the net balance due?

- The lender may require full payment of the debt if the Seller can NOT prove that they are financially incapable of paying. 

- A second mortgage or a refinance in which the Seller took cash out may be reason for a "Deficiency Judgment".

- They can file the judgment up to 7 years after the close of the short sale.

 Hire a qualified real estate agent.

- The agent must understand the process. 

- The marketing strategies incorporated by the listing agent can be a big part.  Looking at this $300,000 property with an existing mortgage of $400,000; The lender may take a long time to reply or not reply at all if the agent lists the property at $240,000 and the Seller accepts and offer of $210,000.  The listing agent did NOT try to protect the banks interests. 

 Consult legal council.

- A real estate attorney will explain the situation and the Seller's options.  They will map out the best plan for the seller.

- They will negotiate with the lender for them and be sure that every step is taken to eliminate the chance any future deficiency judgments or negotiate a smaller balance in interest rate for the Seller in cases where the judgment is inevitable.

 In Summary: A distressed property facing foreclosure, especially one that is new on the market with a price that seems too good to be true, isn't the best option for your buyer.  See my blog post "... Patience.  The lender is only looking at their bottom line.  Their vantage point is through data only and their strategy is to reduce loss for the company.  In most cases, the Seller has little incentive to negotiate a high price and very little leverage.  The Buyer must be sure to enlist the help of a qualified agent with short sale experience.  Many agents don't understand the process and make strategical mistakes in the process. 

If you're thinking about listing or buying a property to be short saled, contact Tom Perry today. TomPerry@RealtyExecutives.com  Tom and his team is ready to assist you to explore your options.  See our website to search for properties and to see more of my blogs.   www.teamBePicky.com

Short Sales seem complicated for 2 reasons.  First they'e sometimes counterintuitive and second we make them more difficult than it is.  The following are some critical client questions that come up often.  Without the correct answers to these questions and strategies to get you to your personal goals, your home purchasing process will be frustrating.

What is a short sale? 

Any closed transaction in which the lender accepts less from the borrower for a property than is currently owed.  A foreclosure can be a short sale and usually is.  A bank owned property is NOT a short sale.

Can I get a great buy on a short sale? 

Possibly.  However, if the bank thinks there will be demand for the property, they will hold out for a higher price.   Even when it makes absolutely no sense to you and me.  Thus, a well kept property in a good area may sell for market value or close to it.  However, a fixer in a less appealing area might sell at a            discounted price.  The bank has time, little information, process and a big cash problem.

 What properties are best for investments? 

Investors can usually do best with properties in disrepair.  It's a math question.  What might they net when all is said and done.  Keep in mind that the Bank Owned properties with lengthy market times are always a better buy.  In addition, those with major work are less attractive to the masses.

Are sale prices for resale homes a lot higher than foreclosures? 

Foreclosure properties in good condition with market times less than 60 days will usually sell for a price close to or the same as area resale's.  Today, it's the foreclosure prices are driving the market.  The resale list prices are usually higher and the short sale prices much lower.  However, the list price of the home doesn't mean much for most short sales.  It's common for a full price offer on a short listing to be countered by the bank 20% or so higher than the list price. 

How long is the closing process for a short sale? 

There's the million dollar question.  Be Patient!  It's typical for the initial reply from the bank on an offer to be 60 days or more.  The future negotiations can take months.  Closing is usually within 30 days once we have mutual acceptance on the price and terms.  So, again, be patient.  The banks are flooded with these properties.  The each have their process to follow and thee are no cutting corners.  It takes time.

What do I need to know when making an offer on a short sale? 

You and your agent need to know a few basic things before making your offer. 

What is owed on the property               Days on the market                    Listing history

Condition of the property                      Activity in the neighborhood      

Have there been any other offers.         Broker price opinion of the property,

Can I expect the bank or the Seller to pay for any work orders on the property? 

No.  That being said, in some cases we are able to get the bank to pay for heat, water and roof issues.  It's usually when the property can't be financed as is and the bank want to get it SOLD.   I stick with my first answer, NO.  However, If the situation is right, we'll make it happen.

The Buyer must be patient and prepared for a long drawn out process that will seem to be unfair and frustrating at times.

1. The price seems too good to be true.  In most cases it is because the agent has been reducing the price in hopes of getting an offer.  The majority of the lenders, especially the holder of junior liens, will NOT give a price or discuss price before there is an offer on the table.

2. A full price offer might not be enough.  Remember, the bank isn't the listing agent of a short sale property.  It's the seller and their agent making all the decisions.  There will almost always be a problem if the price has been reduced far below what is owed on the property or worse yet, listed initially at a low price.  The Seller's signatures and the promises of the agents are insignificant.  The lender is now involved and they will protect their bottom line in spite of logic.

3. It can take months for a lender to respond to your short sale offer.  There may be approval from several people or agencies to get an approval.  Investors, Private Mortgage Insurers, FHA, VA, FNMA, Freddie Mac are among the most common.  It simply complicates the process if there is a second mortgage involve.

4. Negotiations seem unfair and NOT in good faith.  You may spend a couple weeks negotiating with the Seller.  The offer than goes to a third party negotiator that is in contact with the lender(s).  They counter with more money or different terms and negotiate with you over the next month.  You reach agreement and the lender finally receives the purchase and sale agreement.  They do their final calculations and counter with a higher price or a change in terms.  This certainly seems unfair but it's the only system we have.

5. Your Buyer's Agent does NOT have access to the lender.  I may seem that your agent isn't doing enough for you.  Why are they not on the phone talking to and negotiating with the Seller's lender?  It's because the Buyer's agent does NOT have access.  Even if they did, the lenders rep wouldn't want to talk to them.  The banks process is set and the decision to accept an offer is made by that process.  It's documented.  Yur Buyer's agent only has access through the Listing Agent and sometimes the third party negotiator. 

6. The Seller and the lender will NOT want to pay for back taxes, assessments and other liens against the property.  The Seller is walking away from the property and has no incentive to pay any monies owed against the property.  The penalty is the same with or without payment.  The lender is just looking at bottom line. 

7. They lender(s) will have a target net for that property.  The lender will walk away from a purchase and sale that does NOT meet that price.  It's all about bottom line and a little about terms.  Notice that short sale properties in good condition and good areas are selling for the same or slightly less than a normal resale property.

This list could go on and on.  I hope that you get the picture.  You just might concider purchasing a normal resale property if short sale properties in good neighborhoods that are in good condition are driving the prices.  Knowing that the property will close without all the unknowns and frustratons can be worth thousands in the long run.  There are still those cases where the Buyer waits months for the process to conclude only to find that the sale fails and they ae back looking for a home.

Be patient and be sure that this is the path you choose.  Wath for my blog on purchasing bank owned properties.

We are finding that a quick consultation clears the doubt of most home owners that are facing foreclosure.  The real question is "What are my options" and "What does it all mean to me"?

What if I not late on my payments?

How long can I stay in my house?

Will the bank want repayment for the amount they don't get paid?

Does the bank pay all my fees?

Can I make a little money from the sale?

The questions go on and an.  The most important thing for you to know is that time is your enemy.  The clock is ticking.  You MUST make a decision soon or run the risk of a 7 year foreclosure on your credit history.

Just contact us at shortsales@BePicky.com to set an appointment for our FREE ... NO obligation - NO hassle ... consultation.  We will look at the information you have received from your lender and explain the options that are open to you. 

You're new at real estate investing and want to get a great buy on a house.  Short sales seem to be the way to go, BUT ...  When is the best time to buy?  There are two things to keep in mind.

Do you know someone that is facing foreclosure?  Or maybe someone you think is in financial trouble but too embraced to talk about it.  Be a friend and let them know that with a foreclosure, it's not time to drag your feet.  Time is of the essence!

There are three distinct periods they are facing. 

First, when they know there is a problem and they're doing everything they can to solve it.  But, they know that they're in trouble. This is when the fear and embarrassment starts.  It's hard to talk about.

Second, is when they get the notice of default letting them know that they have 30 days to bring the account current or sign a forbearance agreement to repay the amount owed.  Neither option is usually realistic for them.  There isn't enough money to make the regular payment.  They can't pay more each month and probably can't get a large lump of cash to bring the account current.  Now it becomes more real.  "We are losing our home".  They need a friend.

The third begins when they get home and there is a foreclosure notice stapled on their garage.  Their heart drops.  "What are we going to do"?  During this whole time they may not tell a soul about what they're going through.  Some simply drag their feet thinking it will somehow be OK. They now have 90 days to cure the debt, sign a forbearance agreement, get the home SOLD or walk away.  Curing and forbearance are simply out of the question in most cases.  So, Selling the home in a short sale if the answer.  We can help them but it takes 90 days or more.  So let's get on it.

To find out more about foreclosures and short sales go to www.BePicky.com .  Scroll down to the foreclosure box and click ...  To discuss your options email Tom Perry at ShortSale@Bepicky.com

The bottom of the market: That specific time that the prices are the lowest so you can buy the most house for the money.  That's all fine ...

Last week the interest rates increased more than 3/4 of a point.  That's huge.  Do the math.  A $400,000 loan at 4.75% increases to 5.75% and it cost you $8,100 over 5 years.  The tough part is this;  If you qualified to the limit at 4.75% for the $400,000 ... with the increase to 5.50% you can only purchase about $365,000.

So the market may have come down but the increase in interest rates has more than washed that away.  The home you can buy may be of lesser quality that those you could buy 2 weeks ago.

I've been saying for the past 3 months, "It's Time".  To find out more about us and our services, go to www.BePicky.com.  Contact Tom Perry directly to schedule a meeting to discuss your options.

Face it.  This financial crisis is not just affecting the less fortunate or lower demographics in King County.  With the thousands of layoffs and business closures, most of us are finding struggles.  It's what you do with it that matters.  Some simply run or turn a cold shoulder.  Others abandon what they know to be right and make decisions that they are ashamed of.  But the majority, when given the opportunity, faces the struggle and come out ahead. 

If you know of someone facing foreclosure, encourage them to contact me.  My Team, The Real Estate Consulting Group (RECG), will help them understand their options and assist them through this frightening maze.  Go to www.BePicky.com for more information about the options open to those facing foreclosure.  Scroll down to the yellow Foreclosure box ... and click.

They're NOT! 

If the listing agent doesn't do their job the process WILL bog down and everyone gets frustrated and testy.  Be sure that you are dealing with an established Short Sale Agent.  There are now certification classes and ways to learn the process without putting buyers and sellers through the trials of agent mistakes.

Knowledge, communication with the right bank contact and a good poker player ... thats all you need!

For more information go to www.BePicky.com and scroll dwn to the YELLOW Foreclosure Box.  You can gat a report that explains the process. 

I talk to buyers and investers every day that say, "This looks like a good deal but, I'm waiting till we hit the bottom of the market".  What does that mean?  They think that they will be smart enough to choose just that right time to buy just the right property with just the right loan.  May the force be with you!

There are several factors to consider.  Three basic factors are

1. The Market Trends: Close analysis is needed to even be close to reality.  National, State, County, City and neighborhood statistics may all conflict. Recovery has seemed to start in many places acros the country.  What about the area that interests you? Be sure to pay close attention to Area, Size, Age, Condition, number of sales closed and prices. Agents MUST know these numbers ... Buyers will flock to you and refer you because you have value!

2. Interest Rates: Even more important and volitol are mortgage interest rates. While the buyer waits for the market to bottom the interst rates may go up. We saw 4.5% and it's likely that we will see 5.5% in the near future. What would that mean?  At a $300,000 loan amount, that 1% increase would cost an additional $183.00 a month which is $10,980 over five years.  They will also require $600 a month more income to qualify. If the additional income isn't a possibility then decrease the purchase amount by $35,000 ($265,000). 

3. The Inventory: The proprties that are available for sale today might be not be available when you've determined that the market has hit bottom. The best propertie priced right sell first in any market! Investors are simply looking at their balance sheet and buyers are buying a home, in any case they can outsmart themselves and miss a great opportunity.   

Bottom Line: Don't fool yourself.  No one will know when we hit the bottom untill we look back.  I know you know that but we all want to make great decisions and brag about the great deal we made.  There are more stories that start with "If I had only ... ".  Hindsite is 20/20.  Find an agent that knows the market, is an experienced negotiator and you will trust to guide you through the process.

For information about Tom Perry and Team BePicky go to www.BePicky.com

You will find some awesome tools to keep yourself current with the market.  Be brilliant.  Know more that most agents.  

1. MLS Market Snapshot: You will receive a FREE interactive report showing all the real estate activity in your area every month.

2. Forclosure Search:  Sign up for a FREE 7 day tril on RealtyTrac the #1 search engine for Pre-Forclosure, Bank-Owned, and auctions. 

3. Real Time Property Search updates: Simply put in your search perameters and receive instant results FREE with daily updates.

To take advantage of these FREE reports, go to www.BePicky.com

Are we there yet?  How 'bout now ...