If you have made the decision to do a short sale, there is another tough decision to make. Representation. Who are you going to use to represent you in the sale of the home, negotiate, and do whatever it takes to close the sale (within legal parameters, of course).
In days past, sellers chose real estate agents using what I call “voted most popular”. You know, if you see their face every where they have to be really good at selling houses…right? To be very blunt, it really didn’t take a super amount of “skill” to sell homes in our past market. If an agent was intelligent and professional with even a small amount of follow through the home would sell. Things have certainly changed….and many of these “voted most popular” agents have not adapted to the new requirements and knowledge it takes to close the sale. Agents are still taking listings, listings that are obvious Short Sales, but unfortunately for the seller they represent, do not have the training and skill required to accomplish a successful Short Sale.
Choosing the agent is crucial. The agent needs to be aggressive in both marketing and negotiating. The Realtor will not only have to negotiate offers that come in on the property, but the Realtor will also have to show, prove and negotiate with the bank to lose money. That is key. The Realtor will be on hold ALOT. The Realtor will need patience, and have the ability to be firm. This is not a case where you can leave a voicemail and expect a call back.
The Realtor will have to be relentless at all hours of the day, especially if the bank is located in another state
This means negotiation during dinner, before bed and very early in the morning. We have been on the phone negotiating offers at 5AM Pacific Standard Time. You have to seize every opportunity to reach an agreement, voicemail is NOT an option.
Now is not the time to go on perception of a well know real estate agent. Don’t rely on “popular” agents in this market.
Choose an agent that has completed a minimum of 6 Short Sales recently, the market is changing daily and your agent must be familiar with lenders and the process of a Short Sale that is required by these lenders.
As a home owner deciding to sell your home in San Bernardino County, you're faced with many questions...
•· What's my home worth?
•· Do I have enough equity to pay the Real Estate Agents commissions?
•· Am I upside down in equity...if so...what do I do?
The fact is San Bernardino County is facing the worst home value drop in the US with a decline of almost 46% from its peak in 2005-2006 according to John Burns Real Estate Consulting. Chances are if you purchased or refinanced during the "Golden Years" you're in a negative equity position or will be soon. What spurred this colossal loss of equity? Simply said...too many loans approved to unqualified buyers created a surge of demand driving prices up to unrealistic values resulting in "false" inflation and "false" demand for inventory.
I call this "false" as there were enough homes in inventory both new and existing during this surge of demand. Local home builders built for this "false" demand on their own predictions that there was no end in sight. The fact is these home builders' projections along with "liberal" loan terms spurred this crash.
Currently, in Ontario alone, there's 24 months of inventory of Single Family Residences or SFR's (excludes Condo's and townhomes)...what does that mean? If SFR's in Ontario continue to sell at the current average of 37 homes per month....which is likely...and not another "For Sale" sign is planted in a yard, Ontario has 24 months of inventory. Here is another fact...138 new SFR's are being added per month to the current 24 months of inventory. At this pace, Ontario will shortly have 3 years of homes in inventory.
Is San Bernardino County alone? No, over 50% of US homeowners are "upside down" in their equity. In fact, America's percentage of equity has fallen below 50% for the first time since 1945. Generally speaking, more than 50% of your neighbors along with millions of other home owners are paying the price.
What are we facing? Merrill Lynch recently released a report projecting continued drops in current home values:
"Merrill Lynch believes that home prices are still far above historical norms when compared to other measures such as rent or GDP. By our calculations, it will take about a 20 to 30 percent decline in home prices to correct this imbalance"
More facts:
•· Grab your snorkels ...over 30% of the "sub-prime" loans written in 2005-2006 are already underwater.
•· Nearly 3 million homeowners were behind on their mortgages at the end of 2007 with 1 million at risk of imminent foreclosure.
•· As of the end of 2007, 5.82% of all mortgages were delinquent, a 23 year high.
•· .83% of these delinquencies were in the foreclosure process...an all time high.
Are you feeling this? You're not alone.
So why sell? Buyers are still buying! They're the folks that got sidelined during the Golden Years or were real savvy and saw the stupidity that the rest of us didn't. These "liquid" folks are like Bull Trout floating in the riffles of a stream plucking up the bounty of good deals from the bank owned properties and short sales floating by.
You still need to sell yet chances are you're in a "no equity" position and can't pay the high commissions of a Real Estate Agent...you have options;
•· Turn the property back to the bank i.e. a "deed in lieu of foreclosure"...not that easy!
•· Let the property go to foreclosure...and destroy your credit for the next 10 years.
•· List the property as a "Short Sale" with a Real Estate professional and let your Real Estate Agent negotiate with the bank to pay their commissions...
A Short Sale may be the answer for you...
It's common place to see short sales in our current market. What is a short sale? It's when a bank accepts a lower than owed price for the property and in return releases their stake in the property. Done...not yet! You might receive an IRS form 1099 for the difference of what you owed and what the bank accepts by the next buyer at the end of the year. What you say? The difference is looked at as a "gain" in accounting terms. The bank took the loss...you have the gain.
Then what's the advantage of a Short Sale? In December 2007, President Bush signed into law The Mortgage Relief Act of 2007. What the law allows is that if you're in a hardship position with your sole and primary residence and you sell or lose it to foreclosure then your "gain" will not be taxed. That's a summary and should be read and understood.
What is a hardship? You can't have a laundry list of real properties and your garage can't be filled with the latest in European sports cars.
In today's market, Short sales are good for everyone including the bank.
•· The seller get's to dump the property.
•· The buyer get's a good deal.
•· And the bank doesn't want another foreclosure...banks lose thousands monthly on their Real Estate Owned (REO) properties...watering the grass, turning on the lights, the cost of marketing the home, etc...
Recently my wife Kim and I (we're both Real Estate Agents) were hired to list a home by the sellers in the eleventh hour of foreclosure. We discussed an offer received with the bank (a steal for the buyer) and the bank agreed to pull the home from the court house steps. The bank would rather accept a short sale than sell it at the Trustee Auction. Worse yet, not have it sell at auction and add it to the banks growing inventory of REO's.
As a home owner wanting to sell in today's market, you have a solution...Short Sale. One caveat, you must hire a qualified Real Estate agent trained in the art of Short Sales. They take some skill, business acumen and lots of time...typically up to 90 days...but the rewards are felt throughout the entire transaction...the seller is relieved from their burden...the bank is potentially saving money...and the buyer gets a good deal...but your agent must be committed and understand the process of the short sale. Do you qualify for a Short Sale? Don't hesitate to email me.
By Kris Darney
Real Estate Agent
Platinum Real Estate
www.KandKDarney.com
Most of us in America, especially here in the Inland Empire would agree that the housing market has not bottomed out yet. A source that we use daily to help us when we are doing market analysis for our Short Sale Listings recently published that foreclosures are affecting every part of the state. Foreclosure sales nearly doubled in both Marin County 96 percent increase), and Orange County (up 82 percent). I'm sure that we aren't the only real estate agents, or homeowners that have wondered how much a foreclosure actually costs...it seems that it's quite costly. Certainly you have to wonder why lenders and the investors they represent are not grabbing onto Short Sale offers as quickly as they are received. According to the Joint Economic Committee of Congress, the average foreclosure cost $77,935 while preventing a foreclosure runs $3,300....Crazy! Check out the quote from Sean O'Toole, founder of foreclosureradar. "We expected a significant increase in auction sales based on previous default patterns" said Sean O'Toole,
founder of ForeclosureRadar. "Unfortunately, the continued increases in defaults tell us that the worst is still ahead. It is time for lenders to accept this reality, and start approving short sales rather than forcing more than two-thirds of troubled homeowners through the entire foreclosure process." Let's all hope that the lenders of these properties see the light when it comes to the $$$ it takes to process that foreclosure. Kris and I have been very fortunate, although some lenders do take more than 90 days to work through their "process", they are agreeing that accepting a Short Sale is more desirable for them the investor as well as the seller.
My husband Kris and I specialize in listing Short Sales. We also work with buyers regularly and would like to share some very valuable information to anyone that may be facing loosing their home. We have been calling on countless listings that are either in default or very close to receiving an NOD. This is not surprising, the horrifying reality is that more than 25% of these homes are NOT listed as a short sale and will be lost to foreclosure! It's unbelievable the response we get when we call on a home in this situation. One agent told us last week that she was "trying to avoid a short sale". Well, the home was in default, and priced nearly $300,000 over any comps for the area. These poor sellers are counting on their agent to help them get out of this upside down properties. As licensed real estate agents we have an obligation to our clients. We must help the seller understand the long term affects of a foreclosure. If you're reading this and you're an agent with no interest in working a Short Sales, please let your seller know this. A Short Sale is not an easy task, but if it's done correctly the seller and the new buyer will walk away feeling good about the transaction. One of the great things about a Short Sale for the seller is that the bank pays all of the real estate agents commissions. For a list of most asked questions and answers regarding Short Sales visit our website @ kandkdarny.com
Current Ontario Home Sales Trends for 2008 by Kris & Kim Darney
With the coming of summer also comes the activity in home sales and listings. The current market trends are supporting this dynamic in our recent study.
New May 2008 MRMLS* listings are on a dramatic rise increasing 61% since January 2008. This phenomenon shows 2 dynamics. One being, the summer months increasing activity for relocation and job changes. Not particularly a phenomenon in itself. The 2nd is the dramatic increases of "Distress or REO" properties entering the market. Of the 222 new listings in May 2008, 114 or 51.3% fall into the "distress or REO" criteria. This is a dramatic sign of the times and will only increase over the next few years as the "shady loans" of the past catch up to the homeowners who obligingly signed up or fell "victim."
As is the trend for the late spring and summer months, May '08 showed and increase of 28.6% in Ontario home sales. The sold figure will undoubtedly increase as more "distress and REO" properties influx the market. Typically the banks, who are ultimatley responsible for these homes are somewhat eager to let their Real Estate Owned (REO) properties go at a bit of a discount from current market appraisals.
If you are hoping to cash in on the "Mother Load" from these labeled properties, don't get your hopes up. Banks are realing from their losses and are squeaking out every dime they can to mitigate their losses. In other words no 50 cents on the dollar buys just yet.
We're projecting this to change with the ever increasing inventory of REO's...so hold tight and be prepared with your financing to take advantage when it hits.
*MRMLS serves the San Bernardino, Riverside, Western Los Angeles and N/W Orange Counties.
**Distress properties include Pre-foreclosure and Short Sales.
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Kris & Kim are licensed Real Estate agents in California. They're knowledge and experience in Real Estate Short Sales have elevated them to an expert status in the industry. DRE# 01464957 & 01458057
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