short sales – Parsons Realty

What’s In a Short Sale Package?

If you are considering a short sale your lender will require a list of documents that will need to be faxed with your offer. This is known as a short sale package.

Here is the typical list of documents required by most lenders.

Hardship letter (explanation of why you need a short sale)
Financial Statement
Last two months bank statements
Last two tax returns
Two most recent pay stubs
Buyer pre approval letter or proof of funds
HUD1 or Net Sheet
Purchase Contract
Listing agreement and authorization letter if listed by a real estate agent

The actual documents that are required vary from lender to lender. It is worth contacting them to find out exactly what they need and where to send it. Keep in mind if you send them an incomplete package it could delay your short sale approval.

Fannie & Freddie To Help Renters Of Foreclosed Homes

Freddie Mac & Fannie Mae are preparing a plan that will allow renters who live in bank repossessed properties to stay in their homes. They expect to have the plan completed before their self imposed moratorium on foreclosures expires on January 31^st.

The plans were revealed in the letter Federal Finance Housing Agency (FHFA) Director James Lockhart sent to Senator Christopher Dodd, chairman of the Committee on Banking, Housing, and Urban Affairs, accompanying the FHFA’s Foreclosure Prevention Report.

In addition to Freddie Mac’s proposed policy, the letter said Fannie Mae will offer monetary support for tenants that do not want to sign a new lease with the Government Sponsored Entity.

The report, which covers both Fannie Mae and Freddie Mac’s combined 30.6 million residential mortgages it secures, was filed last week, but covers last year through the month of October. It said:

– Loans 60+ days delinquent as a percent of all loans increased from 1.46 percent as of March 31 to 1.73 percent as of June 30 to 2.21 percent as of September 30 and to 2.39 percent as of October 31.

– Loans for which foreclosure was started as a percent of loans 60+ days delinquent declined from 8.29 for the first quarter, 7.81 percent for the second quarter and 7.12 percent for the third quarter to 6.44 percent for October

– Loan modifications completed increased to 5,639 for October from a monthly average of 4,475 for the third quarter – an increase of 26 percent.

– For modifications completed in October, 57.8 percent were modified with an interest rate reduction, and 43.2 percent were completed with a change to another term.

– The loss mitigation ratio for October was 52.6 percent versus a year-to-date monthly average of 54.4 percent. The ration is calculated at the total mitigation activities (payment plans, HomeSaver Advances, loan modifications, short sales, deeds in lieu, assumptions, and charge-offs) divided by the total of loss mitigation activities plus foreclosures completed and third-party sales.

Under the Economic Stabilization Act of 2008, Federal Property Managers, like the FHFA as GSE conservator, are required to report to Congress about the number and type of loan modifications and the number of foreclosures during the reporting period.

Recourse Loan or Nonrecourse Loan?

Knowing whether or not a loan is recourse or nonrecourse debt is critical when borrowers are facing foreclosure. Depending on the type of debt there could be tax consequences for a foreclosure or a short sale.

The main difference in a recourse loan and a nonrecourse loan is the liability. With a nonrecourse loan the lenders only way of recovering their loan is the security, in this case the property. With a recourse loan the lender is able to go after the borrowers assets if they do not receive enough from the secured asset to pay the loan off in full.

Whether or not a loan is a nonrecourse or recourse depends on the type of loan.

Notes secured by real estate are nonrecourse when the note is:

· The original purchase money loan on an owner occupied one-to-four unit residential property;

· A seller carry back note secured by the real estate sold; or

· A note containing an exculpatory clause, relieving the borrower of liability.

Examples of recourse loans are refinances of existing mortgages, home improvement loans, equity lines of credit, and loans, other than seller financing, securing a debt for purchase of property that is not an owner-occupied one-to-four unit property.

With recourse debt the lender is not limited to taking the property back and the borrower may be personally liable on the debt.

Here is a handout from the California Association of REALTOR’s that explains more about recourse and nonrecourse debt.

https://www.parsonsrealty.com/parsons_realty/taxes/car_faq.pdf

Update To Our Shasta County Public MLS

We just finished upgrading our Shasta County Multiple Listing Service (MLS) web site. The upgraded site allows you to search all available homes is Shasta County with the same MLS data that local REALTORs use. There’s no cost to you and we’ve added some really cool new features, check it out.

1. Create custom searches and you’ll see only see the properties you’re interested in.

2. Receive automatic email. On a 24/7 basis, all new listings that meet your custom search criteria are automatically emailed to you.

3. Modify your custom search at any time. You’ll be the first to know about the hottest new listings.

Start searching the Shasta County MLS here https://www.parsonsrealty.com/parsons_realty/188/shasta-county-mls/

Time To Sell, NOW!

My sister asked my opinion of home values in Redding about three years ago. At that time I suggested, “sell your home now and rent before the financial markets crash”. Needless to say, no one in my family followed my advice. The subject has come up again and I just sent my sister an email with my thoughts, see below.

Hello Sue and Uncle Tom,

Well, actually this is your second chance to sell your home (if you have equity). There will be a window of opportunity between now and when Obama’s plans go into play. We are already headed down a perilous financial path and the election of Obama pretty much guarantees financial suicide. However, his plan could possibly work out, more on that in a minute.

If you have equity in your home, sell now and find a nice rental. If you don’t have much equity in your home and the economy gets worse, as I expect, stay put as I can show you how to stay in your house without paying the mortgage for at least 9 – 10 months. I’m currently averaging 9 – 10 months with my clients now. The time span could be greater in the future. When I do a short sale for my clients we can often times keep them in their home for a year, MORTGAGE FREE.

Now here’s the best part. After my clients have lived in their house mortgage free, the lender offers them cash to move out. When the lender forecloses on the house they typically offer a certain dollar amount to the previous homeowner in exchange for the house keys. In the trade, this is known as “cash for keys” or CFK. If the previous homeowner moves out and hands over the keys, they receive a check from the lender. The dollar amount of the check is typically $3,500.00 or more! There’s your first month’s rent for your new place.

Another strategy involves skipping a few house payments and then have us contact your lender to do a “loan modification”. Right now we are negotiating loan modifications with APR rates between 2-4%. Don’t try to obtain these rates if you are a customer in good standing, it won’t happen. The lowest mortgage rates are strictly reserved for only the worst customers!

You will get the best loan modification if I do the negotiating for you. Most homeowners don’t stand a chance dealing with ruthless loss mitigators. I guarantee they’ll trick you into singing unsecured notes or modify your loan from bad to toxic. When they are done with you, bankruptcy will begin to look attractive (providing you qualify). They will take advantage of you in a heartbeat! But wait, there’s more! For a limited time if you act fast (within the next 10 months or so) we’ll throw in a principal reduction too. Really, I’m not kidding. With some good negotiating, I have been very successful in getting the lender to lop off an additional $30-$50 thousand dollars or more. This is a principal reduction, you never have to pay it back, it’ yours to keep just for trying my services.

Your credit rating will suffer using these techniques but we are finding credit card companies and even lenders are becoming understanding of these unfortunate circumstances. They’re already explaining the situation away by saying “oh, that was late 2007 or early ’08 when the mortgage meltdown occurred, it’s really not your fault.”

By now I suspect you think I am being facetious. Well, I’m not. I’m dead serious. This is how I have earned my living the last three years. I’m having my best year ever at the expense of the lenders and the tax payers bailout money! Oh, thank you GOD!

Now here’s why Obama’s plan could work. Things are already pretty bad and we could be facing a full-on depression, even without Obama’s help. If Obama is successful in crashing the economy (and I think he will be) the destruction will happen very fast. Just like tearing a bandage off a wound. It’s very painful but it’s over fast.

By crashing the economy, everything will become more affordable. As an example, I’m already able to sell homes to first time homebuyers again. Prices will fall across the board including health care. Thus, the burden on Social Security and Medicare etc. could actually become affordable again. And, if you sold your house, you’ll have cash to pick-up most anything you want for pennies on the dollar. Remember, cash is king during recessions or even survival in a great depression.

By collapsing the economy we will effectively “spread the wealth” by making affordable the things that only the middle class and wealthy could afford in the past. And…the economic cycle starts over again. Typically, the biggest hoarders of wealth are older individuals and they will be too old to do anything about it and will be dead in 15 years or less anyway. Problem solved!

Well, maybe. There are many things I can’t foresee and the plan could definitely backfire. Such as; the biggest contributors to today’s society, the top 3 percent of the population are rich enough to take a financial hit and still continue their comfortable lifestyle. However, when you do this to the top producers of the economy you also take away their incentive to do anything more. Therefore, since they are typically older individuals anyway, they could simply take their bat and ball and go home. And…enjoy the rest of their life while the masses fight over the diminishing handouts. If this scenario actually happens, you and I have little to worry about because it won’t get real bad until you and I are pushing up daisies.

In my opinion, the real losers will be the people that are currently under 48 years old while the young people, those under 23 years old will possibly end up with the best deal. That is…if the plan works. Unfortunately, it’s my opinion the plan will experience a wholesale failure for at least a generation or more. To guess what this scenario would look like you have to look no further than any third world country of your choice.

-Bill

Why the Appraisal Is So Important In Short Sales

At some point in your short sale process the bank will want to know what the property is worth. They do this by ordering an appraisal, Broker Price Opinion (BPO) or both.

Whether the bank sends out an appraiser or a broker to do a BPO the result of their evaluation will make or break your short sales success. Most banks won’t consider selling the property for less than 85% of the appraised value, some will ask for 90% or above. With that said, it’s critical that the appraisal or BPO comes in at a price that a buyer is willing to pay.

There are a few things that you can do to make sure the appraiser does not give an inflated opinion of value. First meet the appraiser at the property, and walk through the property. This gives you an opportunity to talk to the appraiser and point out any defects of the property. It is also a good idea to bring a few comparable properties they can use for their appraisal. This will save them work and will make sure that they are using realistic comparable properties.

You should also provide the appraiser with a copy of the purchase agreement. Appraisers are used to working backwards. Most appraisals are done for purchases or refinancing, in both of these instances the appraiser will have a target number, they then try and prove that the property is worth that amount. This is why most appraisals come in at the purchase price or very close to it, even if the property is worth more. With that said, the appraiser is more likely to value the property close to the short sale offer if they are aware of the offer.

The most important thing is communicate with whoever is doing the evaluation. Your short sale is almost sure to fail if the bank gets an appraisal much higher than your offer.