Charlotte Real Estate, Foreclosures, Short Sales

Catch-22 Pricing for Short Sales

Some lenders want to see MLS history that shows that the property has been on the market at fair market value prior to a listing that has been discounted 25 or 30%.  The belief is that the property should have been introduced to the market as a regular sale first then as a short sale.  Two issues arise from this.  Most homeowners do not want their home on the market while they are working on a loan modification.  By the time the homeowner receives the news that a work-out plan is not an option, the foreclosure process has already gotten started.  That leaves the listing agent with very little time to market the property at fair market value.  Especially in this housing market. 

We have encountered dozens of homeowners throughout that past 2 years in the above scenario.  Getting a lender to postpone proceedings in light of a new short sale listing is not a good business decision on the part of the lender.  Even if a sale is not desired, homeowners should talk with an experienced agent about a short sale listing while working on a loan modification.  Some loan modifications can take weeks and then the answer is no.  Numbers are numbers.  Ask the lender what are the ratios needed to even do a loan modification along with income requirements.  Chances are, if you are one of the borrowers on the loan has had a decrease in employment or loss of employment, a loan modification will not be offered to you.  Other work out plans such as a forebearance, will allow you to go a certain amount of time making reduced payments or without making any repayment on a loan. To qualify for a forbearance a lender will want to see that you will be able to resume payments at some point in the near future.

Property Liens and Preliminary HUD/Net Sheet

Lenders need to have all the facts when a property is sold short.  That includes a properly prepared net sheet just as one is prepared by an attorney for a regular transacted real estate sale.  This should include any taxes due on the property, commissions to agents, and most importantly any existing liens on the property.  An existing lien unknown until closing can kill a short sale deal.  Contrators who have not received payment, outstanding IRS liens, etc.. need to be on the net sheet and subtracted from proceeds if the seller is insolvent, unable to meet debts.  Funds may have to come from the agent or agents, homeowner or buyer should a lien arise prior to closing.  Most short sale acceptance letters specify a range of proceeds that the lender is expecting.  If the lien is large and out of range to be paid by the proceeds, the short sale may not happen.

If you are interested in short sales for purchase or for your property, please request information here.

We are going to be sure to see a spike in short sales and loan modifications for 2009.  Not only because those are two viable options for homeowners seeking relief for delinquent payments on their mortgage or trying to avoid a foreclosure on their credit report.  But because it just makes sense.  Now we have to get more of the three people in the marriage to work better on making it work; the Realtor, homeowner and lender.

Why Some Short Sales Fail

Not Truly a Short Sale
Some short sales fail because they are not truly short sales.  At any given time, I can do a search within our MLS and find dozens of listings with agent remarks of "short sale" with a days on market of 180 days.  The process just doesn't last that long.  A seller can not decide that they do not want the property any longer, find an agent to list it as a short sale, but not be in default.  Ask the listing agent how long the house has been on the market and has a substitution of trustee assignment taken place yet.  There are too many properties legally in pre-foreclosure for the lender to take on a homeowner who just simply wants to sell short due to depreciation in the market area.

Missing Paperwork and Poor Communication
Missing paperwork and poor communication can kill any short sale deal.  The listing agent should have a full short sale package ready to submit or a pre-liminary package already submitted.  Lenders vary on how much information they want and when they want it.  Some do not want a great deal of paperwork until an offer is made on the property.  Some want it all and will immediately assign a negotiator to the file to work with the agent.  Some lenders now have a separate short sale department that works with electronic submission from a dedicated website.  The most important step is to make first communication with the lender that the property is on the market as a short sale and follow the steps outlined from that point on. 

In my next post I'll talk about pricing and liens.

The Home Builders Association of Charlotte is protesting provisions in the $819 billion economic-stimulus bill passed by the U.S. House of Representatives last week.  Over 1,000 petitions will be delivered to members of the U.S. Congress outlining the objections to the bill.  The HBA of Charlotte greatly believes that a $7500.00 credit to home buyers does not represent all home buyers.  The Home Builders Association of Charlotte is protesting provisions in the $819 billion economic-stimulus bill passed by the U.S. House of Representatives last week.

More Job Loss
There are literally millions of people employed within the housing industry.  A industry struggling to stay alive.  Those employed include Realtors, appraisers, inspectors, home contractors, etc.  With the building industry on the decline, hundreds of thousands of workers in the field face losing their jobs. The Home Builders Association of Charlotte is protesting provisions in the $819 billion economic-stimulus bill passed by the U.S. House of Representatives last week.

The American Recovery and Reinvestment Act includes $544 billion in spending and $275 billion in tax relief. The U.S. Senate is working on a similar package, with the goal of getting a final bill to President Obama in February.

We have been waiting for "The Stimulus Bill of 2009".  The bill to stimulate the economy during the horrible, slow recession that feels more like a depression for many.  We have elected our local, state and national representatives to represent us, the people.  What we have asked for is "change"  Change we can believe in.  Currently, we are still giving the new administration time to settle and meet feverishly with advisors and experts.

What Does the Proposed Stimulus Bill Currently look like now?
Create a 4% Mortgage
Senate Republicans are pushing for lenders to offer a 30%-year fixed mortgage for a limited period of time.  That sounds  a little like the adjustable mortgages that got a lot of people into this mess!  The cost of such a provision hasn't been determined yet, but the aide said Senate Republicans would seek to structure the proposal in a fiscally responsible way, without specifying exactly what that meant.

Expand home buyer credit: Senate Budget Committee Chairman Kent Conrad, D-N.D., said last week he would propose an expansion of a temporary $7,500 first-time home buyer credit.  He stated that it needed to apply to all purchases of primary residences.  Some Republican senators have called for an increase in the credit to $15,000.

Moratorium on Foreclosures
Senate Banking Committee Chairman Christopher Dodd, D-Conn., told reporters last week that he would like a provision in the stimulus package that would impose a 90-day moratorium on foreclosures.  Hopes are that homeowners and lenders would use that time to modify loans.

Most importantly, there is way too much pork in the bill.  Some things are needed, some are not.  Here is a breakdown as it stands now:

• $87 billion for Medicare outlays and related spending
• $20 billion toward nutrition assistance program (food stamps)
• $2.8 billion to expand broadband Internet service in rural areas
• $4 billion for programs "to develop rural communities..."
• $3 billion for grants to improve the criminal justice system
• $3 billion for grants to fund science and technology research
• $1 billion for periodic censuses and programs
• $1 billion for programs of the National Oceanic and Atmospheric
• Administration
• $1 billion for the Community Oriented Policing Services program
• $2 billion for "other activities"
• $4 billion to the Department of Defense to repair, maintain, and renovate its facilities; for energy-efficiency projects, including the modernizing of heating/cooling and electrical systems; and for improving
• Army barracks
• $43.9 billion for the Department of Energy (DOE),
• $4.5 billion for the Army Corps of Engineers
• $500 million for the Bureau of Reclamation
• $8.7 billion to promote energy efficiency and conservation at federal facilities and to support small businesses
• $1.1 billion for a variety of programs administered by the Department of Homeland Security
• $8.4 billion for the Clean Water and Drinking Water State Revolving Funds (SRFs)
• $6.6 billion would fund various programs, including capital improvements and maintenance for the Forest Service and National Park Service, the Superfund program, and wildland fire management
• $20.4 billion for programs administered by the Department of Health and Human Services
• $4.6 billion for employment and training programs administered by the
• Department of Labor
• $20 billion to renovate elementary and secondary schools
• $17.6 billion for Pell grants and other student financial assistance and facilities at post-secondary institutions including federal student loan programs
• $29.1 billon for other education programs aimed particularly at elementary and secondary education
• $6.0 billion for military construction projects of the Department of Defense
• $1 billion for the Department of Veteran Affairs (VA) to maintain and repair VA medical facilities and cemeteries
• $276 million would be provided to the Capital Investment Fund for specific information-technology (IT) projects
• $224 million would be provided for construction requirements of the International Boundary and Water Commission, United States and Mexico
• $30 billion for highway construction
• $13.1 billion for other transportation programs administered by DOT
• $11.2 billion for housing assistance programs administered by HUD
• $5.2 billion for grants to states and cities for activities related to community development
• $41.2 billion per year for 10 highway programs at the state and local level
• $10.4 billion per year for transit programs at the state and local level
• $39.5 billion available to states each twice a year to help them balance their books
• $7.5 billion in each year would be reserved for incentive grants to be given to states on a competitive basis in fiscal year 2010, based on states meeting specified criteria in how they spent their initial allocations
• $2.3 billion "emergency" spending for the Temporary Assistance for Needy Families (TANF) program
• a variety of tax credits for desired behavior
• additional unemployment benefits