Tiffany Wilson - Green Real Estate, First Time Home Buyers & Investors

Here are the numbers from the example explained in this video:

Example #1 - Increase in interest rate, same home price:

Home Price: $500,000 Down Payment: 3.5% Amortization: 30 years</>

Interest Rate #1: 5.0%, fixed, 30 years Monthly PI Payment: $2,590.16
Interest Rate #2: 5.5%, fixed, 30 years Monthly PI Payment: $2,739.58

You pay $149.42 MORE per month when the interest rate goes up 0.5% - that's equivalent to just more than 2 McCafe Lattes each day!

Example #2 - Increase in interest rate, decrease in home price:

Home Value Depreciation: 3% Depreciated Home Price: $500,000 * 0.03 = $485,000

Interest Rate: 5.5%, fixed, 30 years Monthly PI Payment: $2,657.39

That's $67.23 MORE per month than if you were to buy the home at $500,000 with a 5.0% interest rate - which is equivalent to just under one mcDafe Latte each day!

"I want to stay away from short sales."

"I have heard that short sales are bad."

"My real estate agent says that we shouldn't bother with short sales."

I've heard all of these statements about short sales from Buyers. Short sales are also just as popular with my colleagues in the real estate industry. Of course no one likes to wait for a response on an offer - especially one that takes months! But these days, with the slim pickins that are available in some areas, Buyers just aren't finding what they want in the non-short-sale arena. In fact, many Buyers who were completely opposed to short sales a few months ago are opening up to them now, since they could have possibly been in a home by now if they would have put an offer on a short sale when they first began looking.

The funny thing is this opposition to short sales can provide some great opportunities for those patient folks. Many Buyers will prefer to go for the "low hanging fruit" - standard and bank owned sales. That's fine, but there isn't much of that fruit for all of the people looking for it. So the pool of Buyers that are open to short sales is much smaller, and can equate to less competition. And when we hear of multiple-offer situations all over the nation, it can be refreshing to not have that not be as much of a problem with the short sales.

The other thing that Buyers need to realize is that while they are waiting for approval on an offer on a short sale, they can continue to look at other properties. It is not uncommon for the Buyer that made the offer that was submitted to the bank, to walk. And usually this is because while they were waiting, they kept looking and found something else. So Buyers do have options while they are awaiting a response on a short sale offer.

This presents another opportunity for Buyers - backup offers. In a large number of short sales, the first Buyer changes their mind about buying the property, so the Seller needs to find someone else to sell the home to. If a patient Buyer has a fairly priced backup offer in on a home, they would be rewarded for their patience in this situation.

The final point I want to make to Buyers is that as of now, Buyers of short sales typically get better deals than Buyers of standard sales or bank owned properties. The reason is that all the negative aspects of the short sale process can make the home less desirable, typically translating to a discounted sales price. However, as the real estate market continues to change, and banks begin to streamline their short sale approval processes (like Wachovia), this price break may disappear as the negative aspects of the short sale disappear.

So Buyers need not be afraid of short sales. Instead, if they approach them in a thoughtful, planned manner, they can end up winners.

Tiffany Wilson has lived in the South Bay of Los Angeles County for over 11 years. She and her family enjoy the safety and rich family features that the beach communities of the South Bay have to offer, including a close and neighborly community. Also, having experienced an out-of-country move to California over 10 years ago, she is perfectly positioned to assist out-of-state and foreign buyers in their search for real estate in the South Bay and the additional surrounding communities of Los Angeles and Orange County. In addition, she specializes in working with investors and first time home buyers. She can be reached directly at tiffany.wilson@shorewood.com or 310-503-0557.

Short sales add a new degree of complexity to real estate transactions, in the sense that they introduce so many new and varying variables that no two short sales are alike. Complicating things even more is the fact that so many of these variables are so completely outside the control of the Seller, Buyer, and the Realtors involved.

However, it is possibly to do some general qualifying of short sales. Certain aspects make some short sales "easier" than others.

One attribute that many pay special attention to is the number of lenders that have a lien on the home for sale. The more lenders there are, the more complicated the short sale can get because each lender needs to approve the short sale. Both lenders want to get as much money out of the short sale, which can lead to disagreements between these lenders, resulting in the rejection of the short sale. So obviously, short sales where only one lender is involved generally simplifies things.

There are also certain lenders who are typically known in the industry to be more difficult to work with. It's not that they aren't open to a short sale, just that they are so overloaded with short sale files that need to be reviewed. A few years ago, it may take 2-4 days for these larger short sale lender to receive and acknowledge the short sale package that was sent to them. These days, many lenders are taking 2 weeks to acknowledge receipt - or even worse - non-receipt! This adds a lot of unnecessary, nonsense time to the entire short sale approval process.

When reviewing the short sale lenders, typically the smaller banks will be responsive in a more timely manner. Credit unions and local banks usually have a much smaller foreclosure file load, and can review them faster. Also because of their smaller size, it is easier to get in touch with a real, live person to get you the answers and updates you need - quickly!

Recently, more banks have begun adopting "fast track" short sale programs. These lenders have put into place systems whose sole purpose is to review short sales and make decisions quickly on the approval of that short sale. These typically have regional managers with some level of decision-making authority. If these fast track programs work, we can expect more and more banks to adopt them. Hopefully, they'll do it fast enough!

Read the next article in this series, Short Sales 101 - Part 4: Buyers, do not be afraid!

Tiffany Wilson has lived in the South Bay of Los Angeles County for over 11 years. She and her family enjoy the safety and rich family features that the beach communities of the South Bay have to offer, including a close and neighborly community. Also, having experienced an out-of-country move to California over 10 years ago, she is perfectly positioned to assist out-of-state and foreign buyers in their search for real estate in the South Bay and the additional surrounding communities of Los Angeles and Orange County. In addition, she specializes in working with investors and first time home buyers. She can be reached directly at tiffany.wilson@shorewood.com or 310-503-0557.

Just a few years ago, many Realtors had never even heard of a short sale, let alone selling or negotiating one. Now, short sales can be even more common place than standard sales! But that doesn't mean that just any homeowner can sell their home using a short sale. There have to be certain conditions in place for the home's lender to even consider the short sale.

First of all, the homeowner has to have some sort of hardship - job loss, illness, divorce, job relocation, etc. This change in their lives will have to be something that will have changed their financial situation, making it difficult to continue making their home loan payments. Anyone who wants to sell their home to move to another neighborhood "just because" is out of luck. In this situation you will have to either wait until the amount owed on your home is less than what you can sell it for, OR you can make up the difference yourself from your own funds.

In a short sale, time is always of the essence because as each month goes by that the Seller cannot make another home loan payment, their credit gets dinged. So the first step in facilitating a quick sale is for the home to be priced fairly, at a price that Buyers will be willing to pay.

When a fair offer has been received, it will be submitted to the bank, along with a "short sale package". The short sale package is a collection of information that the Seller will provide, containing among several things, copies of their recent tax filings, W2s, recent pay stubs, recent bank statements, and a personal financial statement (list of their monthly expenses and debt). This information will be used by the bank to get a "financial snapshot" of the homeowner. Obviously, if a Seller is requesting a short sale where their monthly net income vastly exceeds what their monthly loan payments are, then the bank would be unlikely to agree to the short sale.

Also part of the short sale package is a "hardship letter". Even though the bank is all about the numbers, they do understand that situations arise in their clients' lives that make them unable to make their payments. The hardship letter offers the opportunity to the Seller to explain that situation in their own words. No one ever decides one day "I'm not going to make my home loan payments, just for kicks." Instead, there is usually a reason which the Seller explains to them in the hardship letter.

Seeing as time is of the essence, it is important for Sellers to realize that they need to collect this information quickly, ahead of time, so that is it ready to be submitted once they receive an offer. The Buyer will also feel comforted knowing that the short sale package is ready to be submitted along with their offer, as they too want the short sale to proceed as quickly as possible.

Read the next article in this series, Short Sales 101 - Part 3: Not all short sales are created equally.

Tiffany Wilson has lived in the South Bay of Los Angeles County for over 11 years. She and her family enjoy the safety and rich family features that the beach communities of the South Bay have to offer, including a close and neighborly community. Also, having experienced an out-of-country move to California over 10 years ago, she is perfectly positioned to assist out-of-state and foreign buyers in their search for real estate in the South Bay and the additional surrounding communities of Los Angeles and Orange County. In addition, she specializes in working with investors and first time home buyers. She can be reached directly at tiffany.wilson@shorewood.com or 310-503-0557.