A major topic in the real estate industry right now is the introduction of the Home Valuation Code Of Conduct (HVCC) on May 1, 2009. Why is this a major topic amongst agents who are actively closing transactions - because their transactions are not appraising for the sales price!
Since this code went into effect, we have had 4 transactions not appraise. I spoke with an agent yesterday who said they had 7 of the 8 they have scheduled for settlement not appraise. Two of the transactions we have came in $30,000+ lower - and one of them sold the first day on the market!
So what does this mean to you the consumer?
First, the road to recovery in the housing market was to get people who were afraid to buy a home out and into the market place. That was accomplished with the decreased prices and lower interest rates. Now the supply of homes on the market has significantly diminished, increasing the demand for the few homes that are available for sale. This increased demand - in most cases multiple contracts on homes - should cause values to increase if not at least level off. Now you have these new regulations put into place that are lowering the values even further. Another case of added "Oversight" thwarting the road to recovery.
The second thing that is important to you is that the appraisers being used are from areas other than where your home is listed. It's like using an agent from Nebraska to help you find a home in New York City - how does that benefit you?
This is a serious problem that is impacting the road to a housing recovery. What does this mean if you are thinking about selling your home - terms matter the most! Before you choose that higher offer over the safer one, remember that the appraisal is what matters most. Even if your home is priced correctly, the appraisal may come in low. Choose your buyer carefully and evaluate the entire contract...not just the purchase price.
For buyers it is simple - get ready for increased competition, and do not be afraid to go after the property you want with all guns blazing. With tighter appraisals, you will not be over paying for that home - in fact you are significantly under paying. You also have to be prepared to lose to the lower priced cash deal. It sucks, but it is a reality of the marketplace.
Jimmy Mulhern
Http://www.HomesInVirginia.net
Step 4 - Get Ready To Deal!
In our market right now, homes are lasting less than a week on the market. It is amazing how fast things are selling - even the distressed property's. This is helping those who are doing a short sale because the competition is keeping the price around market value. However, most of the time there will be offers even lower than what the list price is on a short sale because everyone is looking for that killer deal.
Most banks stance is that they will never take 20% below market value. Now that sounds like a lot, but it is not uncommon for a home listed at $300,000 to get an offer of $240,000 from an individual. Likewise, it is not uncommon for homes to be selling for $300,000 and the listing agent places it on the market for $200,000 just to get offers. That, I can assure you, will never fly with the bank and is a horrible plan of attack. Accepting a contract on your home is just like any other transaction. You have the rights to agree or disagree on any terms that a buyer offers you. Most agents representing buyers think that the offer has to be submitted to the bank no matter what - WRONG! The seller is the one who agrees on the contract to submit to the bank, and a good listing agent will accept a back up offer. Unless the bank calls for it, the property should be placed under contract and no other offers should be submitted to the bank. If you do this, it is very common for the process to start right back at the beginning. Banks are like children - too many options and they can never make up their mind!
You also have to be ready to deal with the banks...especially in a two trust situation. The most common problem that short sale agents face is trying to negotiate out a Paid As Agreed agreement from the bank to the seller. Too many times I have seen homeowners promised that they will not owe any of the short or that this will be forgiven. Sometimes it is, and sometimes it is not. But if the bank comes to you and says they will forgive the $125,000 you owe them for $10,000 interest free paid over 10 years in order to get the Paid As Agreed agreement do you really want to fight them? You have to be willing to listen to the bank since it will usually speed the process up as well. The goal is to get it all forgiven...but you have to keep it all in perspective. Any agent who tells you that they guarantee that it will be forgiven is blowing smoke - each bank is different, and each situation that a homeowner is in is unique. You also have to keep in mind that some banks will try to sneak in the right for a deficiency judgment down the road. Again, this is a deal killer and you have to make sure that it is removed from any document you receive...but negotiating out a deal that makes some payments to have this removed is always worth looking into...Oh and the scenario I outlined with the $125k down to $10k is an actual deal that took place so it is not too far fetched to have that proposed to you.
A short sale is a positive experience and a solid solution to the pain and mental anguish that the threat of foreclosure has on a family. No one wants to be in a short sale situation, but having the right team on your side can make the best solution out of any situation.
Jimmy Mulhern - CDPE
http://www.AvoidForeclosureInVirginia.com
Step #3 - Document, Fix, And Prepare
The number one mistake that is made when listing a short sale is the dreaded As-Is statement. The number one reason why short sales fall apart is because the buyer walks either when the bank takes too long, or they get nervous and feel as if they are making a mistake. A short sale is just like every other sale, it's just that the seller needs to get approval from the bank to short them. Buyers should expect the home to be just as nice as any other home for sale. A diligent agent will price the home according to it's condition and the time-line for which it goes to foreclosure. This would mean that homes that are priced below market value are there due to the work and repairs that need to be taken care of. In the even that the seller can not afford the repairs necessary, then there can be a negotiation involving the bank and the buyers for what will be taken care of. Selling the home As-Is is a safeguard for the seller...but you have to be willing to work with the buyers and make sure they make it to settlement. Unless it is related to the electrical, HVAC, or plumbing, you do not have to do anything. But you want to make the buyer feel comfortable buying your home and excited to get to closing.
Once you decide to contact an agent to help you with the sale of your home, you will need to document every bit of financial information you have. This is very important for the agent to qualify you for a short sale. The bank will not be too willing to accept your short sale if you have $80,000 in liquid assets, but in general retirement accounts are not counted and the banks are not able to access them. Remember, short sales are not just about people who received loans they could not afford. These are homeowners who sometimes have good jobs, but have to move. It is not always a situation where people can not pay their bills. It is very important that you take good notes and have all of your finances transparent for the bank to see.
When selecting your agent, the key is to choose someone with a detailed short sale packet. If they do not have one, find someone else. This is the key to agents success in this field. A detailed packet will give the bank everything they need to approve the sale of the home, and move your transaction to the top of the pile. Loss Mitigators see hundreds of packages a day...which do you think they will work on first, the one where they have to chase down information or the one that has everything already sitting there for them? The first document that you should sign is an Authorization Form. This allows your agent to speak to the bank on your behalf, removing you from having to make the daily phone calls and allowing you to get back to your life.
This is not a complicated process, but it does require organization and a system. Never give up, and make sure that you have all the information before you make your decision. There are people here to help...All you have to do is ask for it!
Jimmy Mulhern - CDPE
Http://www.AvoidForeclosureInVirginia.com
Step #2 - Contact An Expert And Get Answers!
Do not think that this is something you can do alone, and do not be embarrassed about your situation. Almost half the homes with a mortgage have some form of delinquency on them. There are many agents and organizations out there who are devoting their efforts to helping homeowners in trouble. It does not matter who you contact...but contact someone. This is not a promotion of our services...this is a plea to you to contact someone. Many people advertise that they are short sale experts or that they are successful short sale agents - the most important thing is that they have an action plan, and that their first intention is to find a way for you to keep your home. I have seen agents who advertise that they are successful short sale agents, but then have listings that have expired and gone to other agents that sold what they could not...that stuff does not matter. The key things that you need to make sure the agent you talk has is:
I want to re-iterate...there are many good agents out there who can help. You have to take the first step and contact them asking for help. There have always been foreclosures and distressed situations, and experienced agents are used to working in these situations. A short sale is no different, and you deserve to be treated no differently. If you need more information, visit our new website - http://www.NorthernVirginiaShortSaleHelp.com
Jimmy Mulhern - CDPE
Step #1 In Avoiding a Foreclosure - Evaluate your financial position and be truthful
The statistics are alarming - 70% of homeowners facing foreclosure do nothing!
Wow...it is hard to believe that this is becoming a reality in the market place. Then you have agents who have blogs on this very network telling people that short sales are a waste of time and never work out. So are people supposed to just give up? That is never the case, and there are people out there to fight to make sure that homeowners in trouble give everything they've got to avoid a foreclosure.
The truth is that a homeowner must take a step back and truthfully evaluate the scenario that they are faced with. There is a reason why 1/3 of loan modifications that take place still end up in foreclosure. When dealing with a situation, the best solution is only determined with an honest approach. For example...let's say that you have had an increase in your mortgage payment due to a rate reset. The lender can adjust that rate back as a way for you to avoid the increase in payment and avoid the foreclosure. But if your income has decreased, or other payments in your life have increased, is your situation any better?
Sometimes a short sale makes sense, if you are in some form of hardship. Values of houses have dropped tremendously, which means that homeowners are so upside down that the values would have to rise 100% to get back to level it was when they purchased the home. While no one wants to lose their home or sell it when they do not want to, these hardships can be a blessing in disguise. For example, homes purchased in 2005 and 2006 are the homes that are most likely to be adjusting or in pre-foreclosure proceedings. It is no coincidence that this also was the height of the market and the height of interest rates in the last 6 years. By selling your home instead of a foreclosure, you are able to get out of a loan that can not be refinanced until values climb, lower your monthly housing payment, save your money, and once you are financially back on your feet buy a new home. Most likely you will be still looking at housing values that are better than when you purchased your home, and be saving your credit in the process.
I am not advocating a short sale as a way of releiving debt - but I am saying that it is better than doing nothing!
Step #2 - Come back Monday to find out.
Jimmy Mulhern - CDPE Serving Virginia
www.AvoidForeclosureInVirginia.com
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