Short Sales

The Calm Before the Storm?

Mar 29th, 2012
by edsmith.
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Due to the cessation of foreclosures following the robo-signing scandals of 2010, the backlog or “shadow inventory” of bank owned properties has grown significantly. Locally, actual foreclosure sales are down over last year by 50%. However, lis pendens (foreclosure) filings are now up 100%.

This would tend to indicate that we are in a lull, the period in which the lion’s share of the foreclosures have been absorbed by the market and when the banks are resuming foreclosure action. With the banks more aggressively pursuing delinquent homeowners, many expect a surge this year in bank owned inventory. Another consequence will likely be more short sales as more delinquent sellers begin looking for ways to avoid foreclosure.

The impact that this may have on Emerald Coast real estate values will depend much upon demand. Demand has been steadily increasing  over the past two years. Should this trend continue, the negative impact of additional distressed inventory on the market may be negligible.

Can a lender deny my short sale just because I am not behind on payments?

Mar 14th, 2012
by edsmith.
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A lender can decline a short sale for just about any reason, so long as it doesn’t violate federal discrimination laws.  A lender is under no obligation to approve any short sale or modify the terms of any existing loan contract. If a lender does approve a short sale it is because that lender believes it to be in their best financial interest to do so.

We have consummated quite a number of short sales involving borrowers who were not behind on payments. In those cases, we were able to demonstrate to the lenders that the borrowers would soon become delinquent should the short sales not be approved.

For more on this topic, visit www.DestinFloridaRealEstate.com or email us at smith@realtor.com

 

A reader asks … Are short sales a better deal to buy than bank foreclosures?

Feb 18th, 2012
by edsmith.
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Oftentimes yes. Lenders can be more motivated to approve a short sale as it can save them time and money as opposed to the foreclosure path.

However, according to RealtyTrac most major lenders are accelerating their foreclosure actions this year to the tune of about 25%. This more aggressive foreclosure activity is expected to result in a 60% increase in short sales.

While this may not necessarily bode well for property values in the near term, the market cannot fully recover until the distressed and shadow real estate inventory is absorbed.

For more on this topic, visit www.DestinFloridaRealEstate.com or email us at smith@realtor.com

Question: Will I get a 1099 at the end of the year if I short sale my house?

Feb 5th, 2012
by edsmith.
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Answer:  If your lender forgives part of the debt against you, they are supposed to issue a 1099 to alert you and the IRS of the canceled debt which is theoretically taxable. However, in the case of your principal residence (resided in for at least 2 of the last 5 years) you may be able to exclude up to $2 million of debt forgiven under the Mortgage Forgiveness Debt Relief Act of 2007.  But do not wait … The Act expires at the end of 2012 if not extended by Congress.

Who Pays for Past Due HOA Fees on a Short Sale?

Dec 30th, 2011
by edsmith.
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The foreclosing lender will often pay up to a point, but we have seen many cases in which the back HOA fees exceed $50,000. We are working on one now with a $65,000 HOA lien on it!

The lenders know that they only have to pay for the most recent twelve months in past due HOA fees should they foreclose the property, so they are often less than enthusiastic about paying more than that. Knowing this, many HOA’s will negotiate the fee down to facilitate the transaction.

It is often a win-win if the HOA can come out with much more than the stautorily mandated twelve months worth of fees. However, in a short sale, both buyers and sellers should be prepared to contribute should the foreclosing lender and HOA reach an impasse.

PMI Group, Inc. Files Chapter 11

Nov 25th, 2011
by edsmith.
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According to PMI, their Chapter 11 bankruptcy filing is in response to the seizure of two of its subsidiaries by their primary regulator in Arizona last month. The subsidiaries include PMI Mortgage Insurance Co. and PMI Insurance Co., who make up a significant share of the private mortgage insurance market in the U.S.

 

According to PMI, they now wish to “raise additional capital from new investors in order to allow a third subsidiary, PMI Mortgage Assurance Company, to serve as a platform to write new mortgage insurance nationwide”.

 

The Arizona Department of Insurance said that PMI will be making claim payments “at 50 percent”. Presumably, that means that the unpaid balance of the claim will become part of the bankruptcy creditor claims. It is interesting that none of PMI’s subsidiaries themselves filed bankruptcy, only the parent company. While PMI states that they will continue to operate in the ordinary course of business, as a debtor-in-possession, their operations will be under the scrutiny of a Federal Bankruptcy Court.

 

Sitting on approximately $735 million in unsecured notes that are now due and payable, it is yet unclear as to how PMI’s move will impact the many lenders around the nation who are presently seeking claims reimbursements. Also in question is how this may impact the many tens of thousands of short sales that PMI has insured. If bankruptcy court approval will now be required for claims authorization, the short sale process nationwide and along the Emerald Coast as well could be dealt yet another unwanted setback. Time will tell.

Is it true that the banks will pay you to short sale your house?

Nov 23rd, 2011
by edsmith.
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Yes, it is possible, if you qualify. In fact, we were selected to participate in a pilot program designed to assist distressed homeowners in the area. Many of our short sale sellers are receiving what is referred to as “relocation assistance” dollars at closing. We have assisted sellers who have received amounts of from $2,000 all the way up to $20,000 and even $35,000 at closing. 

 

For information on short sales, bank foreclosures and general real estate topics, please visit www.FloridaBrokers.com or email us at smith@realtor.com

As The Market Turns

Oct 27th, 2011
by edsmith.
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According to Realty Trac, foreclosure filings have surged by 17% in what is being interpretedas a possible end to the review process that has hampered and bogged down the process for more than a year.  A review system was initiated by most of the major lenders in response to the robo-signing debacle that they faced last summer.
 
Many in the know do believe that major lenders are gearing up to accelerate the foreclosure process next year. Consequently, many of them are also gearing up to approve higher numbers of short sale transactions. As an example, Bank of America will complete approximately 100,000 short sales nationally in 2011, but has plans to complete 160,000 short sales in 2012.

We are buying a short sale in Destin. Why are we required to agree to not re-sell it for 90 days after we close?

Jun 9th, 2011
by edsmith.
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Many lenders are requiring that such restrictions be imposed on the sale of their distressed properties to help eliminate mortgage fraud. Some lenders are now requiring a twelve month prohibition on the re-sale of their distressed properties.   
 
According to Freddie Mac’s Fraud Investigation Unit http://www.freddiemac.com/singlefamily/preventfraud/spotlight.html , if you contract to purchase a short sale and re-sell it (have it under contract) for more money prior to taking possession, you have committed mortgage fraud.
 
For information on short sales, bank foreclosures and general real estate topics, please visit http://www.floridabrokers.com   or email Ed and Terri Smith at  smith@realtor.com 

How long after a short sale can I qualify to buy a new home?

Feb 8th, 2011
by edsmith.
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The answer depends upon which type of financing you wish to pursue. After completing a short sale as a seller, for example, VA and Conventional (Fannie Mae and Freddie Mac) mandate a two year wait. Another arm of the federal government, FHA, mandates three years.Non-conforming products such as that for jumbo and condo loans can be almost anything, depending upon the individual investor. From what we are seeing in the market though, non-conforming loan investors are requiring waiting periods of somewhat longer than that of the government sponsored loans. We have seen waiting requirements for non-conforming loans of from five to seven years. You may also expect higher than average down payment requirements.

To be on the safe side, short sale sellers should be prepared to face greater levels of credit scrutiny for a period of up to seven years after the successful completion of a short sale.

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