A few "Short Sale" thoughts.

OK folks, let's talk about short sales for residential property.  Unless you have been living under a rock, you have heard someone use the term "short sale" when describing a real estate transaction.  Although, that term is frequently used incorrectly, more often than not. . .the meaning (and reality) of the short sale procedure is also misunderstood.  Hopefully this will clarify some of the confusion.  First, a short sale simply means that someone is selling their home for a price that will result in net proceeds to the seller that is less than the payoff of their mortgage balance. . . .and second (but often overlooked) that person does not have the ability or resources to make up the shortfall.


WHAT?


THE MEAN MORTGAGE COMPANY ACTUALLY WANTS THE SELLER TO PAY THE DIFFERENCE IF THEY CAN?  

Yes they do.  Remember, the lender didn't buy the home. . .or loan the money with a "value" guarantee. . .they approved a loan for someone who promised to pay it back.  The closing documents did not have a clause that reads . . . . "borrowers only have to pay this money back if the value of the home does not drop"  The reality is that a bank will only consider approving a short sale for a homeowner/borrower who can prove that they are unable to pay via income, savings or other resources.  A short sale is not a "bail out" for people who own homes that have gone down in value. (or took out a 2nd mortgage for more than the value) The owner must provide written documentation of an existing hardship.  Cleverly titled as a "hardship letter". . .and written by the borrower describing their situation, it must be submitted to the bank along with tax returns, pay stubs, and financial statements disclosing all assets, before the lender will consider approving a short sale.  To make it a little more difficult, the lender will not actually consider approving a short sale unless there is a bona-fide contract/offer to purchase the home.  The home must be on the market and an offer presented.  That contract along with all of the other required documents will be collected by the listing agent who then will present the "case" to the mortgage company.  It is extremely important for someone pursuing a short sale to list their home with an agent who has the knowledge and experience in these transactions. It is a long and laborious process and even the most experienced agents run into road blocks along the way.  Mainly, because the "rules" keep changing. . . .and they are different from one lender to next.  A good "short sale" agent will know the right questions to ask and the follow-up procedures necessary to keep the process on track. 

SO . . . . . WHAT DOES THE MORTGAGE COMPANY CONSIDER WHEN EVALUATING A POSSIBLE SHORT SALE?

Great question, I am glad you asked! 

First, they want to be sure that the borrower is truly experiencing a hardship that prevents them from making payments or covering the shortfall.  Second, they want to verify that the home is selling at a "fair" price.  What we are generally seeing approved, are sale prices that will "net" the lender approximately 85% of what they deem to be "market value".  That is "net" of all costs associated with the sale.  It makes no difference on the amount. . .it is strictly based on their assessed current market value.  Take a look at it from the lender's standpoint. . .they are primarily trying to evaluate if it is better for them to foreclose and sell the home themselves, or accept the short sale amount.  One final punch in the stomach. . . .in most cases, the homeowner must be currently behind on their mortgage payments to be considered. .  . and . . . the approval (or denial) process can take as much as 6 months to complete. (sometimes more)  Most are completed more quickly than that. . .in the 2-3 month range. . . and every once in awhile we get lucky and get a response sooner than that.  I would recommend that you anticipate the 2-3 month range as most likely if you are in this situation.  I am not trying to cover all of the "in and outs" of short sales in this blog, (and the processes and procedures are constantly changing) but I wanted to clarify a few points and cover some of the highlights.  If you have any specific questions . . . or if you know someone else who might need assistance . . . please call or email me.

David Arnold
RE/MAX Greater Atlanta
David@HomerunAtlanta.com
678-784-4354 

Dabble This. . . .Dabble That. . . .But Why?

dab·ble - [dab-uhl] verb, -bled, -bling.

1. to work at anything in an irregular or superficial manner: to dabble in real estate. . . . . . .

I was recently having dinner with my wife (Nancy) at a local restaurant.  We were discussing my real estate business when our waitress jumped into the conversation to say "I am a real estate agent if you are looking for a home. . .I can help!"  I guess she was "participating" in our conversation too.  Of course, I had to ask her. . ."If you are a real estate agent, why are you waiting tables here?"  Her expression changed as she explained that she wasn't able to make enough money to support herself as an agent so she had to wait tables. . . but she still dabbles in real estate.  Wait one minute. . .she couldn't make enough money to support her lifestyle from selling real estate. . . so she waits tables. . .  and she thinks that someone should hire her as their agent?  This is not a derogatory commentary on people who wait tables, or folks who try different careers, or dual careers, or even those who dabble in real estate . . . if they can do it congratulations to them.  My question is simple. . .Why would anyone hire a "dabbler" to assist them with one of the largest financial decisions they will make?  If you were facing a complicated legal issue. . .would you hire someone who dabbles in the law? I didn't think so. . .even if the person had seen every episode of Matlock and Boston Legal.  No, you would want a full time professional Attorney who has the experience, resources, and knowledge to give you the best advice possible and represent you well.  Likewise, if you were notified by the IRS that you owed back taxes of $250,000 and were being audited . . .would you accept a referral to a former bookkeeper who still dabbles in filling out tax forms?  Of course not!  You would want a full time professional CPA with IRS audit and income tax experience. . . .and if someone referred you or recommend anything different. . .you would think they were crazy?  Wouldn't you?  Why is it different in the "home buying" world?  You have probably heard someone make a referral "similar" to the following upon hearing that a friend was thinking about buying a home. . . "Hey, you should talk to my "Aunt Jane" (fill-in any other relative or friends name) she has a real estate license.  She is not full time. . . she just does it "on the side" to give her something to do.   Hello. . .is anyone out there?  Sorry Aunt Jane. . .I really don't want to hire you to help me with this huge decision to "give you something to do"!!!  

Unfortunately. . ."getting a real estate license" is relatively easy.  Having a real estate business, with the necessary experience, resources, and knowledge is not.  It takes time, it is expensive, it takes hours of work and continuing education, hours of studying contracts, home values, market analysis, top negotiating skills, a full knowledge of the TOTAL process. . . from beginning to the closing table.    Sorry for the rambling. . . . but I am a little passionate about this topic. . . .if you couldn't tell.  Please help me elevate the expectations for hiring a real estate agent.  Simply having a license and a lockbox key to get into the pretty homes is not enough!  Take your time and find the professional that you deserve. .  . even if you hurt Aunt Jane's feelings it is the right thing to do. . .FOR YOU.  Call or email if you have any ideas, thoughts or questions.

OK. . .time to relax. . .think I will go outside and "dabble" in my garden for a while.  :)

David Arnold

RE/MAX Greater Atlanta

678-784-4354

http://www.homerunatlanta.com

Home Buying. . .When is a deal. . .Really a deal?

Many times a prospective home buyer relays to me that the only thing that they care about is "getting a deal". My question to them is, "how do you determine if you are getting a deal?" After a little thought. . .most reply that a deal is determined by how much we can "negotiate" the seller off of their list price. Is this the true identifier of a good "deal"? I say, that it could be the worst indicator of how well we did evaluating and negotiating a great price for a home. First, remember that listing prices on homes are not "created equally". . . some will be overpriced, some underpriced, and some just right. If you are considering an overpriced home. . .then yes, getting the seller down in price IS the best indicator of a deal. However, if you are considering an underpriced home. . . .paying the list price or slightly below could actually be a great deal. It's just more difficult to brag to your friends about the fantastic deal that you got on your home. You can't say "we got the seller down $20,000" or other similar comments. . . it doesn't feel right to say "we paid full price. . .but it was a great deal". . . most people cannot comprehend that possibility. Homes are frequently priced low for a number of reasons. . .distressed due to pending foreclosure, actual foreclosure, job loss, marriage changes, family changes, in a hurry to sell, etc. My experience has shown that it is easier to find a "well priced" home and negotiate reasonably for a great deal. . . than it is to expect the seller of an overpriced home to dramatically reduce their price. A good real estate agent will complete a market analysis to determine the value of a home prior to submitting an offer for their client. This is key to knowing how to negotiate and to set realistic expectations. For more information or to contact me with questions please visit
www.HomerunAtlanta.com