Linda Fredericks

How does buying a "short sale" affect the buyer? So many buyers are asking this question and it’s a good one. Sometimes us REALTORS sound like we are speaking a foreign language. We talk about ARM’s, Buy Downs, BPO’s, CMA’s, Negative Am, and so on. It’s worth explaining rather than using our “industry dialect”
Lets first talk about “short sales” and how it affects buyers. A short sale is simply a transfer of ownership with the seller’s lender agreeing to accept less then the total amount owed on the seller’s loan or loans. All of the seller’s loans on the property must be paid or satisfied by the banks in order to convey a “clean” title to the buyer. There are situations when the proceeds of the sale will not satisfy the seller’s payoff. So the seller is “short”, thus a “short sale”. For any buyer purchasing such a property it can be a blessing in disguise.

● GETTING GOOD VALUE - The buyer is likely to get these properties below appraised value. Ultimately the bank has the final say on all the terms of the agreement.

● BEING PREPARED - The sales process takes longer then traditional sales. Since there is one more person involved, obtaining an accepted sales agreement takes longer. In light of the fact that many lenders across the nation are flooded with Short Sales and Foreclosures, the one property that you are buying is of little priority to the bank. It is only one drop in the bucket that is already full to the rim. We sometimes wait weeks or even months to get a response from a bank on an offer on a property.

● ACCEPTED AGREEMENT - Once the bank agrees, the buyer then proceeds with the terms of the agreement just as they would with any other sale. Inspections, appraisal, and all the usual details spelled out in the sales agreement. Keep in mind, the property may or may not have utilities turned on. Many times the buyer will turn on the utilities in order to do inspections. In some cases, the buyer is so thrilled with the terms of the sale they may elect not to have utilities turned on for inspections. This is on a case by case basis to the satisfaction of the buyer and in compliance with the terms of the agreement. In most cases, the buyer will be purchasing the property in its “as is” condition. Expect no repairs to be done by the seller or the bank. This is one reason the buyer will get a good value. The bank will have their process. After receiving a complete package from the listing agent and the seller, it is highly likely the bank will order a Broker’s Price Opinion (BPO) or an Appraisal. Then the bank will present to their investor for approval of the contract. This all sounds easy, but is a time consuming process that can take weeks or even months. When the REALTOR tells you the property has been assigned to a short sale negotiator, then the ball will begin rolling. Until then, time is frozen, and no progress occurs. Having successfully closed many short sales in Baton Rouge, La, I have learned to teach agents and buyers to expect enormous delays in the process. Remember “patience is a virtue”.

● CLOSING THE SALE - The bank must also approve the final sales documents before the closing takes place. Primarily they are interested in approving the HUD which is a statement showing the details of all money involved in the transaction. Since it’s a short sale, they definitely do not want to see any proceeds going to the seller. Will the buyer be faced with any unusual title issues? As long as a reputable closing agent does their job, the answer is no. One of the jobs of the closing agent is to verify that the title conveyed is clean with no liens or encumbrances. The buyer can also buy an owner’s title insurance policy from the closing agent. So when you accept the keys to your home at the act of sale, you can feel good about your home.

● HOME OWNERSHIP - It’s been said that the misfortune of one can be the fortune of another. This can be true to buyers who are buying such properties. Just remember, your penance is weathering the time factor and remaining patient. This is can prove to be money in the bank for you. Happy house hunting!

As published in a national publication, Baton Rouge is one of the best places to be living to weather the national turmoil we are now experiencing. Now with interest rates in the 4% and 5% range, investors can work on increases their wealth in local real estate.

If you have an interest rate higher then 6.5% it is time to consider a refinance. Do the math. Calculate how much is the difference of your mortgage payment from your existing rate compared to the new rate. Then caluclate how long do you need to keep that mortgage to break even. This will tell you if it is beneficial to refinance or keep what you have. How long do you expect to own that property? This is an exercise all of us should be doing TODAY.

These low rates will not stay here for long. I am joining in too. I am working on a 1031 tax deferred exchange and suggest other do the same. Now is the best time to re-evaluate your situation. Is it best to refi, upsize, downsize your personal home or simply acquire additional investments? Whatever fits the bill for you, now is definitely the time to take "action". Join me in doing the same. We will continue Building Wealth!

Life is always changing. Our industry is forever changing. Usually the changes
are for the best. In looking back when we purchased our first home in 1970 we
applied for a VA loan. Believe it or not the spouse’s income (my secretarial
salary) was not used to qualify. I was told I might get pregnant, lose my job and
have no income. CAN YOU BELIEVE THIS? Yes it is true. We qualified on my
husband’s $650/mo salary. When we applied the interest rate was 8%. From the
day of application to the date of closing, the rate dropped one full percent and we
got 7% interest for 30 years. We were thrilled! By the way, I proved them wrong. I
did get pregnant. I took off from work 4 weeks and went right back to work. LOL
In the 70’s financing was so easy. In fact, many did not need to apply at all. All
that was needed to assume an existing loan, was to pay $50-$100 transfer fee
and the original mortgage was “transferred” to the new buyer. Today's typical
closing cost was not applicable. Cost to the buyer was minimal. A real deal for
buyers. WOW! We didn’t know how good we had it!
Moving on to the 80’s we experienced interest rates of 18%+. This is when we
began with our “Creative Financing”. We did “stock pledges”, “buy downs”,
“ARM’s”, “owner financing”, “bond for deeds”, “wrap-around mortgages” and
anything else we could imagine. We helped families buy homes without paying
the exorbitant high interest rates. This proved to be most beneficial for our
clients.
Then, in the mid 80’s, remember all the foreclosures? After lenders allowed
simple assumptions with no credit approval, look what happened. Many were
truly not financially capable of paying their mortgage. To make matters worse,
we then experienced the oil bust. RTC (Resolution Trust Corp) came to town
and we worked and found families needing housing to move all their foreclosures
from the market. Once again, we succeeded.
In the 90’s we continued with a boom, appreciation of home values and easy
methods of financing for home mortgages. In fact, it was way too easy to anyone
to get a loan. Look what happened. Once again people were given mortgages
who truly could not afford the mortgage payments. Predatory lending practices
made the situation much worse.
2005 brought Katrina and another boom hit Baton Rouge. Here we are, 2008 and
living in what is considered to be one of the best cities to live to weather the
downturn in the national economy. Nationally we are faced with many
challenges. But here in Baton Rouge we have succeed many past challenges.
Today interest rates to purchase homes are 4.375% for 30 yr fixed. AWESOME!
The real reason people move is because of lifestyle changes. People who wish
to upsize or downsize have a window of opportunity staring them in the face. I
believe those people will take advantage of this opportunity. Those who chose
not to do so will be kicking themselves next year as change is sure to continue!
Enjoy your holidays. May you and your family have a Merry Christmas and
Prosperous 2009!

ECONOMIC OUTLOOK - 27th Annual Edition 2009-2010 published by LSU, Department of Economics, authored by Loren C. Sctt, James A. Richardson, & M Dek Terrell, is "hot off the press". This outlook provides statistics and data to support the conclusion that our local eocnomy is thriving. Here are some tidbits from this report. "Baton Rouge: Construction + Good Diversity = Solid GrowthIt states that "the Baton Rouge MSA has the largest concentration of chemical industry in Louisiana. Because the petrochemical industry is very capital-intensive, when it expands, so does the industrial construction". Other major factors are the location of the State Capitol, the two major state universities, LSU and Southern Universities, and one of Louisiana's largest commuity colleges. "The MSA's 2007 population of 770,037 was up 39,921 over July 2005, a 5.5% increase. Forecast for 2009-2010 , the Baton Rouge region will add 2400 jobs and will follow that with an additional 6800 jobs in 2010". This report lists multiple industrial projects, infrastructure projects, commercial projects, and special projects, all bringing in mre new jobs. More jobs mean more people will need housing. All of this adds up to a healthy and solid situation for our local area. The Baton Rouge Community keeps saying "we have decided not to participate in the national recession!"

With interest rates in the 4% and 5% range families can afford to buy the home of their dreams. At 5% the payment is $5.37/1,000. This means that on $100,000 loan the principal and interest is $537; on $200,000 it is $1,073.64 and on $300,000 it is $1610.46. AWESOME!