Las Vegas existing-home sales fall; median price at $115,000

 

Las Vegas existing-home sales fall; median price at $115,000

February 27th, 2001 By Mantas Raulickis & LV-REO TEAM

The Las Vegas housing market started this year with sluggish sales and lower prices, although new-home prices rose 2.8 percent, Home Builders Research reported Thursday.

Las Vegas Short Sales, Short Sales Las Vegas

The firm counted 232 new-home sales in January, eight fewer than the same month a year ago, at a median price of $208,145, an increase of $5,693 from a year ago.

Consumer sentiment appears to be on the upswing, judging by the dramatic increase in traffic through new-home subdivisions in the last two weeks, housing analyst Dennis Smith of Home Builders Research said. Several builders held grand openings showing off new floor plans.

“What that indicates is consumers want to see some new and innovative product because they haven’t seen that much new,” he said.

Builders have backed off during the downturn, pulling just 232 new-home building permits in January. That number is expected to rise in the coming months as builders gear up for the spring selling season, Smith said.

Existing-home sales dipped slightly to 3,098, compared with 3,111 in January 2010, Home Builders Research reported. The median price fell by $10,000, or 8 percent, to $115,000. The price had been ranging from $119,000 to $126,000 for the past 19 months.

The drop in January’s median price bears watching as it could be an indication of further price declines in Las Vegas. Some national reports are projecting home prices will fall another 10 percent to 15 percent this year.

That would take the Las Vegas resale median down to about $103,500.

“It wouldn’t stay there long as investors would flood our city snatching up homes and flipping some while others would enter the rental pool,” Smith said. “We’re already getting investors, but I know investors that are sitting on their wallets waiting for the lowest prices they’ve ever seen. They want to feel comfortable they’re getting the best prices they can get.”

For prices to drop that dramatically, Fannie Mae and Freddie Mac would have to begin dumping their local inventories, the analyst said. He does expect to see a rise in bank-owned homes sold at auction.

“Reports of the overwhelming supply of shadow inventory homes we have all heard about for the last two years may begin to slowly materialize in 2011,” Smith said.

Las Vegas-based SalesTraq reported a median resale price of $109,000, a 9.2 percent decrease from a year ago and the lowest median since 1991. The firm showed a 3 percent increase in existing-home closings to 3,785 in January.

New-home sales fell 15.3 percent to 233, while the median price rose 3.1 percent to $208,145, according to SalesTraq.

Short sales , or lender-approved sales of homes for less than the principal mortgage balance, are starting to force a change in the Las Vegas housing market, SalesTraq President Larry Murphy said.

They accounted for 20 percent of January sales and commanded a median price of $120,000, higher than even nondistressed properties ($110,000).

Given that 70 percent of Las Vegas home mortgages are “underwater,” this may be a signal that there could be a significantly higher proportion of short sales in the future, Murphy said. That would be an impetus to push prices higher.

Nearly 8 percent of Clark County homes had received a notice of default in January. Although that’s considerably less than last year’s 20 percent, Murphy said he still sees a significant number of foreclosures hitting Las Vegas in the near term. Still, given the nature of the Las Vegas economy, he expects to see a higher proportion of short sales later in the year.

Las Vegas Short Sales, Short Sales Las Vegas,  http://realtyagent.las.mlxchange.com/

New HAFA Guidelines Effective Feb. 1, 2011

February 26th, 2011 by MANTAS RAULICKIS & LV-REO TEAM

The Obama Administration’s HAFA short sale program has been in effect since April 5, 2010 and was created in an attempt to encourage lenders to do short sales and prevent homes from going to foreclosure.

Las Vegas Short Sales

Since its inception, however, only 661 HAFA short sales have been completed nationwide – a fraction of the number the Treasury Department and the Obama Administration had hoped for.

Effective February 1, 2011, the federal HAFA short sale guidelines will be amended in an effort to include more borrowers in the HAFA program and therefore reduce the number of homes in the United States that will go to foreclosure.

HAFA or Home Affordable Foreclosure Alternatives program is a joint government & lender program which allocates both a $3,000 incentive for borrowers who complete a successful short sale, as well as up to $6,000 to go to the 2nd lien holder in the short sale.  It also specifies that the 2nd lender will not pursue a deficiency against the borrower.

The primary change in the HAFA program is the elimination of the debt to income hardship requirement for borrowers.  Previously, in order to qualify for a HAFA short sale, the mortgage payment on the first mortgage had to exceed 31% of the seller’s gross monthly income.

This financial hardship requirement has now been removed, so sellers who wish to do a HAFA short sale will no longer need to meet any arbitrary income or financial hardship ratio, which should dramatically broaden the spectrum of borrowers who will qualify for the HAFA short sale program.

Las Vegas Short Sales, Short Sales Las Vegas, http://realtyagent.las.mlxchange.com

New HAFA Guidelines – Answers To Frequenty Asked Questions

New HAFA Guidelines –  Answers To Frequently Asked Questions

 By Mantas Raulickis and LV-REO TEAM

February 20, 2010

Here are NAR’s FAQ’s for you to better understand what these guidelines REALLY mean for us, and our Buyer and Seller Clients. Way to go, NAR!!! 

1. What is HAFA?

 Initially announced on May 14, 2009, with guidance and standard forms issued on November 30, 2009, the program will help owners (referred to below as borrowers) who are unable to retain their home under the Home Affordable Modification Program (HAMP).

A borrower (the current owner) may be able to avoid a foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL) under HAFA.

The guidance and forms released on November 30 do not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac. Those enterprises will issue their own HAFA guidance and forms.

2. Who is eligible?

The borrower must meet the basic eligibility criteria for HAMP: 

Las Vegas Short Sakes

Principal residence.

First lien originated before 2009.

Mortgage delinquent or default is reasonably foreseeable.

Unpaid principal balance no more than $729,750 (higher limits for 2 to 4 unit dwellings).

Borrower’s total monthly payment exceeds 31% of gross income.

3. How is the program being implemented?

Supplemental Directive 09-09 (November 30, 2009) gives servicers guidance for carrying out the program. All servicers participating in HAMP must also implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include such factors as the severity of the loss involved, local market conditions, the timing of pending foreclosure actions, and borrower motivation and cooperation.

Short Sale Agreement (SSA). The servicer will send this to the borrower after determining the borrower is interested in a short sale and the property qualifies. It informs the borrower how the program works and the conditions that apply.

REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics

Request for Approval of Short Sale (RASS). After the borrower contracts to sell the property, the borrower submits a RASS to the servicer within 3 business days for approval.

Alternative RASS. If the borrower already has an executed sales contract and asks the servicer to approve it before an SSA is executed, the Alternative RASS is used instead. The Servicer must still consider the borrower for a loan modification.

4. How will HAFA improve the short sales process?

HAFA:

Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

Uses borrower financial and hardship information already collected in connection with consideration of a loan modification under HAMP.

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).

Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

Uses standard processes, documents, and timeframes/deadlines.

Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis; up to 3% of the unpaid principal balance of each subordinate loan).

5. What are the timelines for HAFA?  



Based on a servicer’s written policy, the servicer must consider every potentially eligible borrower for HAFA.

REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics

If a servicer has not already discussed a short sale or DIL with the borrower, it must notify the borrower in writing of these options and give the borrower 14 calendar day to respond, orally or in writing. If the borrower does not respond, that ends the servicer’s duty to give a HAFA offer.

Servicers must consider HAMP-eligible borrowers for HAFA within 30 days after the borrower does at least one of the following:

Does not qualify for a HAMP trial period plan.Does not successfully complete a HAMP trial period plan.

Is delinquent on a HAMP modification (misses at least 2 consecutive payments).

The borrower has 14 calendar days from the date of the Short Sale Agreement to sign and return it to the servicer.

The Short Sale Agreement must give the borrower an initial period of 120 days to sell the house (extensions permitted up to a total of 12 months).

Within 3 business days of receiving an executed purchase offer, the borrower (or agent) must submit a completed RASS to the servicer, including (i) a copy of the sale contract and all addenda; (ii) buyer documentation of funds or pre-approval/commitment letter from a lender; and (iii) all information on the status of subordinate liens and/or negotiations with subordinate lien holders.

Within 10 business days after the servicer receives the RASS and all required attachments, the servicer must approve or deny the request and advise the borrower.

The servicer may require the closing to take place within a reasonable period after it approves the RASS, but not sooner than 45 days from the date of the sales contract unless the borrower agrees.

The servicer must release its first mortgage lien within 10 business days (or earlier if required by state or local law) after receipt of sales proceed from a short sale or delivery of the deed in the case of a DIL. Investor must waive rights to seek deficiency judgment and may not require a promissory note for any deficiency.

Requests a short sale or DIL.

REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics

6. What are the HAFA rules re real estate commissions?

 

The guidance states that a servicer may not require a reduction in the real estate commission below the amount stated in the Short Sale Agreement.

The SSA states that the servicer will pay the commission as stated in the listing agreement, up to 6%.

If the servicer has retained a vendor to assist the listing broker, the vendor must be paid a specified amount from the commission.

Neither buyers not sellers may earn a commission in connection with the short sale, even if they are licensed real estate brokers or agents. They may not have any side deals to receive commission indirectly.

7. What are the required clauses for the listing agreement?

 

Cancellation clause—seller may cancel without notice and without paying commission if property is conveyed to mortgage insurer or mortgage holder.

Contingency clause—sale is subject to written agreement of all sales terms by the mortgage holder and, if applicable, mortgage insurer.

8. How much are the incentive payments?

Borrower Relocation Incentive–$1,500, paid to the borrower at closing.

Servicer Incentive–$1,000 for administrative and processing costs for a short sale or DIL completed under HAFA. Investors may provide additional incentives.

Investor Reimbursement for Subordinate Lien Releases—up to $1,000 for allowing up to $3,000 in short sale proceeds to be paid to subordinate lien holders. Subordinate lien holders that receive HAFA incentive must agree not to pursue deficiency judgments.

9. Do servicers have to treat similarly situated borrowers the same?

Yes, but not all borrowers will qualify for a short sale or DIL. 

Las Vegas Short Sales

Participating servicers must have a written policy, consistent with investor guidelines, that describes the basis for deciding whether to go ahead with a short sale in individual cases.

REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics

The policy may include such factors as the severity of the loss involved, local market conditions, the timing of pending foreclosure actions, and borrower motivation and cooperation.

10. What are the steps for evaluating a loan to see if it is a candidate for HAFA?

Borrower solicitation and response.

Assess expected recovery through foreclosure and disposition compared to a HAFA short sale or DIF.

Use of borrower financial information from HAMP. (May require updates or documentation.)

Property valuation.

Review of title.

Borrower notice if short sale or DIL not available (to borrowers that have expressed interest in HAFA).

11. Can the servicer complete a foreclosure during the HAFA process?

No. A servicer may initiate foreclosure, but may not complete a foreclosure sale:

While determining borrower’s eligibility and qualification for HAMP or HAFA.

While awaiting the return of the Short Sale Agreement by the 14 day deadline.

During the term of a fully executed Short Sale Agreement (while the borrower seeks to sell).

Pending the transfer of ownership based on an approved sales contract per the RASS or Alternative RASS.

Pending transfer of ownership via a DIL by the date specified in the SSA or DIL Agreement.

12. What about DIL?



Subject to investor requirements, servicers may accept a deed-in-lieu of foreclosure under HAFA, which requires a full release from debt and waiver of all claims against the borrower.

The borrower must vacate the property by a specified date, leave the property in broom clean condition, and deliver clear, marketable title.

REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics

Same incentives available.

13. What else should I know?



The deal must be “arms length.” Borrowers can’t list the property or sell it to a relative or anyone else with whom they have a close personal or business relationship.

The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, the tax may not apply. Forgiven debt will not be taxed if the amount of forgiven debt does not exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Check with a tax advisor.

The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment. There will be a negative effect on credit scores.

Buyers may not reconvey the property within 90 days after closing.

14. When does the program end? 

 

Short Sale Agreements must be executed and returned to the servicer no later than 12/31/2012.

15. Where can I find the guidance and forms? 

 

Go to www.Realtor.Org/Shortsales  for links to the guidance, these FAQs, a summary, and much more information about short sales.

Your Graceful Exit: Short Sales or Deed In Lieu

Your Graceful Exit: Short Sales or Deed In Lieu

 

By Mantas Raulickis and LV-REO TEAM

Your Path to a More Affordable Mortgage

Your Path to a More Affordable Mortgage

By Mantas Raulickis and LV-REO REAM

Avoid Foreclosure: Know Your Options

Avoid Foreclosure: Know Your Options

By Mantas Raulickis and LV-REO TEAM

What In The World Is HAFA?

What In The World Is HAFA?

Uploaded by Mantas Raulickis

Assisting Clients with Short Sales

Assisting Clients with Short Sales

by Mantas Raulickis and LV-REO TEAM 

Not all homeowners have the luxury of waiting out the recession in the comfort of their homes. Some can no longer afford their monthly mortgage payments. Others are facing foreclosure. Some may even have to relocate to find or retain gainful employment. These people must sell, and they typically have to sell in a hurry. In most housing markets these days, that translates into the painful prospect of selling the home for less than they owe on it. And very few homeowners can afford that option.

 

The solution may be one or more short sales – negotiating a deal in which the lien holders agree to accept less than full payment as payment in full on any loans taken out against the property. This may include the first mortgage, home equity loan or line of credit, and any construction liens. Although few lenders will go along with a short sale that enables the homeowners to profit, many are willing to agree to a deal in which the homeowner can break even if it enables the lenders to forego the expense and hassles of having to foreclose.

You may be wondering at this point what this has to do with you. As a real estate agent, you may be in an ideal position to assist sellers with their short sale needs. After all, most homeowners have no clue on where to start or how to effectively negotiate with their lenders. In addition, lenders are often skeptical when homeowners call, asking or demanding a short sale. Your status and reputation as a real estate professional gives you more credibility in the lender’s eyes. The lender is likely to be more willing to listen to a real estate professional who knows current market values and the price and timeframe for selling the property.

Negotiating short sales on behalf of your clients can benefit you in several ways, some direct and some indirect:

 

The homeowners are more likely to contract with you to list their home when you have offered valuable advice and a viable solution to a serious problem. 

You generate positive word-of-mouth advertising by assisting homeowners in distress. 

You help prevent foreclosures that can further depress home values in your market. 

You establish valuable professional relationships with lenders that have the potential of generating additional business and opportunities later.

Before contacting lenders and other lien holders on the homeowner’s behalf, obtain letters signed by the homeowners authorizing you to negotiate on their behalf. Then, spend some time crunching the numbers. You will usually have more success negotiating with junior lien holders, because they stand to lose the most from a foreclosure. The foreclosure could wipe out their lien against the property, leaving them with nothing. By negotiating a short sale with you, they can salvage at least something out of the deal.

Also, be prepared to have the lenders come back to you requesting that you lower your commission. Whether you agree to accept a lower commission is entirely up to you, but by being prepared for the possibility, you will be in a better position to deliver an answer … or a counteroffer.

Remember: We are all victims of foreclosure. By helping homeowners avoid foreclosure, you contribute to stabilizing your housing market, expediting its eventual recovery, and preserving the American Dream.

Many Hats of Selling Short Sales

Many Hats of Selling Short Sales

REALTOR® = Diagnostician + Technician + Clinician
By: Mantas Raulickis and LV-REO TEAM

One of the most challenging transactions that REALTORS® face today is a short sale. In this article, I will discuss the challenges facing listing agents and how to avoid listing properties that do not have a reasonable chance of closing once a buyer is found. However, before we discuss the many hats a listing agent must wear, let’s first define the short sale: a sale in which the total debt on the property, if sold, is greater than the value of the property in today’s market, and the property owner is unable to bring the additional funds to closing to pay all outstanding debt.

Diagnostician

To Diagnose the seller’s pain correctly, REALTORS® need to ask potential sellers very difficult questions. In this role, be mindful of the agency disclosures that must occur prior to asking a party for potentially confidential information. To qualify as a candidate for a successful short sale, a seller must:

• owe more on the property than the property will sell for in the market;
• be unable to bring funds to closing to pay off the outstanding debt; and
• have a valid hardship that can be documented.

REALTORS® often take listings from homeowners who are “upside down” in their equity position and want to sell their property. The REALTOR® takes the listing and the short sale inevitably fails. REALTORS® must explain to the property owner that loss of equity, although unfortunate, is NOT considered a valid hardship by lenders considering short sale approval. A valid hardship is a condition or event(s) that caused the homeowner’s payments to become (or soon become) unaffordable, i.e., employment changes, illness, death of an income earner or divorce. If the hardship is valid and can be documented, then the REALTOR® may consider listing the property.

Technician

When pricing a property, a listing agent should consider the details of the marketplace and put them into a thorough and understandable current market analysis (CMA). He or she must understand how to read the comparable sales, including all distress sales, to price the property correctly. It is essential that the property is priced to sell. The listing agent will need to support any contract price that eventually gets accepted by the seller as an accurate picture of value to the lien holder(s). In addition to a very detailed CMA, there is an abundance of paperwork and detailed reporting that must be completed by the property owner for all lien holders. The REALTOR® must believe that the property owner is willing and able to complete the paperwork necessary to document the hardship and supply to all lien holders the financial application and supporting hardship documentation to assist the lien holder(s) in determining if the property owner has an actual hardship. Most often, the paperwork that the property owner must complete is more detailed than the original loan paperwork. All lien holders must receive the entire documentation from the property owner in the form of a completed short sale package. Keep in mind that all lien holders may not ask for the same information, so the contents of each short sale package are determined by the unique requirements of each lien holder.

Clinician

The last hat the REALTOR® must wear is that of the clinician. As a former psychotherapist, I recognize the inherent challenges when working with individuals who may exhibit a great degree of anxiety, pain and perhaps shame as a result of their current condition. I also recognize the anxiety a REALTOR® feels when having to tell a homeowner the reality of loss in value of a property. Property owners, especially those who have purchased within the last few years, often face the fact that selling their home will cost them any equity they had. They also must face the very real possibility that if payments are unaffordable and there is an actual hardship, the best solution may be to sell the property to avoid foreclosure. That reality is a lot to manage! In the role of the clinician, the REALTOR® must show compassion and understanding and, at the same time, offer objective solutions to the property owner. In other words, be empathic. REALTORS® often share with me that discussing the foreclosure action with the property owner is extremely stressful, emotional and exhausting. In many cases, the REALTOR® is the same agent the property owner used to purchase the property, and it is extremely difficult to remain objective.

Objectivity is one of the greatest challenges for listing REALTORS®, but it is a must. It is very difficult to speak frankly with sellers who want their REALTOR® to show sympathy and save them from harm. Unfortunately, there are some people who have no valid hardship, have waited too long to get in touch with a REALTOR® and cannot do what it takes to get out of the bad loan. These folks may just walk away. REALTORS® must never assume the role of giving legal advice. However, make sure that property owners understand that walking away, although an option, is harmful and that they should discuss the legal ramifications of such actions with their legal advisors. The REALTOR® needs to remain objective and assist those homeowners in understanding their options and, if appropriate, list those properties that meet the necessary criteria: the property owner is ready to be helped, has a valid hardship and is able to pull together the paperwork and documentation that is required by the lien holders.

The bottom line is: every successful REALTOR® must wear three hats in today’s marketplace: diagnostician, technician and clinician. Be soft on the people, hard on the problem and be certain to work with the property owner to complete all necessary paperwork. To learn more about successful short sale transactions as well as REO transactions and the foreclosure process, be sure to look at the newest certification from the National Association of REALTORS®, Short Sale and Foreclosure Specialist Certification (SFR). Additional information about the SFR certification may be found at www.realtorsfr.org.

When The Seller Is Bankrupt

When the Seller Is Bankrupt

 

Understand the complexities of the deal before jumping in.

Posted by Mantas Raulickis and LV-REO TEAM

In today’s economy, there’s a good chance you’ll come across a home seller who’s going into bankruptcy or already in it.

Should you take the listing? Before saying yes, it’s smart to know what you’re getting into. Bankruptcy can complicate a transaction, but it’s still possible to work out a successful deal.

Foreclosure or Short Sale?

Bankrupt sellers you work with will typically owe more than their home is worth. Sellers in this situation are likely to want a short sale rather than allow their mortgage to enter foreclosure—a strategy that’s designed to leave a lesser mark on their credit history. They may not know that the negative consequences of a bankruptcy tend to overwhelm any credit-preserving benefits of a short sale.

It’s also worth noting that by pursuing a short sale, some sellers may hasten their exit from their house. If they were to let the house go into foreclosure, their bankruptcy status and the foreclosure process buy them time and protection from creditors, enabling them to stay in their house longer.

Given all this, bankruptcy attorneys are likely to recommend foreclosure rather than a short sale to their clients. You certainly don’t want to discourage sellers from following the advice of their bankruptcy attorney. But if the seller still chooses to pursue a short sale and exhibits a commitment to see the deal through, then a short sale can be a viable option.

If the Seller Has Home Equity

Although you may assume that bankrupt sellers don’t have any equity in their home, that’s not always true. If the seller has equity, bankruptcy might actually help smooth the sale because the bankruptcy’s automatic stay gives the seller time to close on a well-thought-out deal.

On the flip side, the seller could have a diminished sense of urgency to get a sale closed. Particularly in a tough market, a seller who’s not fully committed to seeing a deal through can make your job much more difficult. But if the seller is committed, the bankruptcy can work in everyone’s favor.

To get started, you need to work within the rules of the seller’s bankruptcy estate. Because the seller’s legal status puts the property in the estate, you—the listing agent—must work with the seller’s bankruptcy attorney and bankruptcy trustee. Be sure the trustee affirms that you’re the agent for the estate; otherwise you can face hurdles getting paid at closing. Whatever deal you structure, you’ll have to get permission from the court to close. As a result, the seller’s bankruptcy attorney will need to be involved, and that will mean additional attorney fees.

From the Buyer’s Perspective

Buying a home from a seller in bankruptcy comes with challenges, too, which makes your job trickier when you’re representing the buyer. If the bankruptcy filing comes after the two parties have entered into a purchase agreement, the bankruptcy by itself doesn’t automatically lead to termination of the sales contract. But if the seller can’t meet the closing date or other deadlines specified in the contract, which is often the case in bankruptcies, the buyer has a basis for backing out of the deal.

If the buyer wants to continue with the purchase, the transaction can close if the seller and the bankruptcy trustee are likewise motivated. But these transactions can come with considerable complexity, so it’s smart for the buyer to consult with a bankruptcy attorney. Clients who want to buy a home from a bankrupt builder face the risk of the builder being unable to complete construction or honor warranty obligations. You shouldn’t try to help your client evaluate these risks; recommend the buyer talk to an attorney.

Homestead Exemption: A Tool for Some Buyers

Most states offer some type of “homestead exemption” that helps home owners protect a portion of their home equity in the event of a bankruptcy. If you have prospects who aren’t currently home owners, have some savings, and are facing bankruptcy, you may suggest that they consult with their attorney to find out whether the exemption can work in their favor. It might be possible for them to invest their savings in a house and protect it from creditors. If that’s the case, you could have a motivated buyer on your hands.

Short Sales: When Is an Offer “Accepted”?

Short Sales: When Is an Offer ‘Accepted’?

When should you disclose a seller’s acceptance of short sale offer?

By Mantas Raulickis and LV-REO TEAM

Q. I recently sold a property that was heading into foreclosure and the buyer’s agent wanted the listing changed   to “pending” in the MLS as soon as the seller accepted the offer. But shouldn’t the status be changed only after the offer is approved by the lender?

A. With distressed properties, there can be confusion about when the offer is “accepted.” The seller is still the legal owner of the property in most cases, and must be the first to accept an offer. Yet the lender also must approve or agree to the transaction, since it’s being asked to take less than what’s owed on the mortgage. When the seller accepts an offer under these conditions and a contract is formed, the offer is “accepted,” though it has at least one unresolved contingency: the lender’s approval of the short sale.

Many MLS systems require listing brokers to change a listing out of “active” status upon the acceptance of any offer—including offers subject to lender approval, as in a short sale. Whether, and when, the listing status must be changed is a matter of MLS rules.

Regardless of what the MLS requires, though, the Code of Ethics Standard of Practice 3-6 requires that accepted offers be disclosed: “REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation.”

Even if your MLS doesn’t require the listing to be reclassified as “pending” or “under contract” upon acceptance of an offer in a short sale, if a cooperating broker contacts you about showing that listing to a prospect, you’re required to disclose the accepted offer.

You should consult with your seller client about what else to disclose about the accepted offer. It may be in the seller’s interest to disclose that the offer is contingent on lender approval as a short sale. This may encourage the cooperating broker to show the property, perhaps leading to another offer. If another offer is submitted, Standard of Practice 1-7 requires that you advise the seller to seek legal advice unless the offer is contingent on the termination of the accepted offer.

Making An Offer On A Short Sale

Making an Offer on a Short Sale? What You Need to Know

By Mantas Raulickis

Are you looking to buy a new home? Are you thinking that now’s a great time to find bargains? Before you make an offer, it pays to know a little about the seller’s situation.

If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

A short sale is different from a foreclosure, which is when the seller’s lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You’re a good candidate for a short-sale purchase if:

• You’re very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
• Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
• You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you’re serious about purchasing a short-sale property, it’s important for you to have expert assistance. Here are some people you want to work with:

• Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
• A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)
• Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short-sale properties include:

• Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
• Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
• No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

Short Sale Tips For Sellers

Short Sales Tips for Sellers

Posted by Mantas Raulickis

If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.

1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as: Refinancing your loan at a lower interest rate; providing a different payment plan to help you get caught up; or providing a forbearance period if your situation is temporary. When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if:

• Your property is worth less than the total mortgage you owe on it.
• You have a financial hardship, such as a job loss or major medical bills.
• You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest. A qualified real estate professional can:

• Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).
• Help you set an appropriate listing price for your home, market the home, and get it sold.
• Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).
• Ease the process of working with your lender or lenders.
• Negotiate the contract with the buyers.
• Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include: 

• A hardship letter detailing your financial situation and why you need the short sale
• A copy of the purchase contract and listing agreement
• Proof of your income and assets
• Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period. Even if you’re well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

• If you have only one mortgage, the review can take about two months.
• With a first and second mortgage with the same lender, the review can take about three months.
• With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don’t expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:

• You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.
• Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
• Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.

Short Sale Transaction a Tall Order

Short Sale Transaction a Tall Order

by Mantas Raulickis and LV-REO TEAM

Las Vegas Short Sales

A Las Vegas short sale could be a better deal than bankruptcy or foreclosure, but it can also sap your time, wither your credit score and well, cost you money.

To produce a down and dirty primer on short sales, we went to Intero Real Estate Services in Silicon Valley and checked in with other real estate and consumer professionals to get the experts to show us — and you — the ropes.

A short sale occurs when your lender agrees to accept a lower price on your home than the current mortgage balance, provided you meet the lender’s requirements and have a qualified buyer.

“Search for a buyer, especially those who have expressed an interest in buying short sale properties. The buyer must be willing to deal with extended deadlines and additional demands made by your lender,” said John Miklos, a RealtyU graduate and holder of its new Certified Short-Sale Professional (CSP) designation.

“Your lender is the key to a successful short sale transaction and it will need to feel confident in the new buyer,” added Wyss, also a real estate broker associate with Intero Real Estate Services in San Jose, CA. She’s also founder/broker of Vista Mortgage Solutions.

While recent cash incentives for you and your lender make short sales more enticing these days, incentives alone won’t get the job done.

To go the distance on a short sale, you must document you are a hardship case — but not because you falsified the original loan documents.

It can be a win-win scenario — the bank reduces a portion of “bad debt,” avoids foreclosure costs and keeps the home occupied, while you shed a housing payment you can’t afford.

“If done right, the short sale is a winning proposition for all, including the lender because the costs involved are certainly lower than that of foreclosing,” said Nancy Osborne, chief operating officer of Erate.com, a Santa Clara, CA-based financial information publisher and interest rate tracker.

Don’t come up short, prove your case

To prove your case, you’ll need to spend some time on a cover letter explaining your hardship and provide full financial disclosure; the original purchase contract; a balance sheet of your income and expenses; asset statements, proof of income; bank statements; two years of tax returns; and a professional who knows the ropes.

“Simply stating, ‘My house is worth less than the loan and I don’t want to pay any more,’ will not be acceptable. Lenders would rather foreclose than develop a reputation as an easy target,” said Zdenka Mahan, a real estate agent with Intero in Saratoga, CA.

Along with the required documentation, you stand the best chance of getting through the two- to seven-month short sale ordeal if the home is marketable; the second mortgage holder (if there is one) gets a cut or otherwise goes along with the deal; the same lender holds all mortgages; and there is enough time before foreclosure (at least about 4 months).

“A major reason why a short sale fails is the length of time it takes to get the lender’s approval. Long delays frequently cause the buyer to drop out of escrow and buy another home,” said Mahan, a short-sale experienced “Downtown San Jose (CA) Specialist.”

Buyers can also suffer lost opportunity.

“Buyers risk the opportunity cost of losing out on another property if they are tied up in a long, protracted short sale negotiation which could potentially go on for months,” said Osborne.

“The burden to make the deal work falls largely on the seller’s shoulders and their ability to do their homework up front, making things as easy as possible for a potential buyer,” Osborne added.

A short sale works in your favor if your mortgage debt is secured by your home and was used to acquire, construct or substantially improve your home.

Short sales that stop short

Wyss says don’t count on a short sale if you can’t prove hardship; you are current on your mortgage; are in bankruptcy; have recently completed a cash-out refinance or have a lien with a third party.

Because a short sale forgives a portion of the debt owed, that portion could be considered as taxable income and you should seek the advice of a tax attorney, certified public accountant, enrolled agent or other person fully schooled in the tax ramifications of a short sale.

According to FICO, the leading credit scoring system provider, there also may be some credit score implications.

While a short sale won’t be as damaging as a foreclosure or bankruptcy, expect some negative impact. Variables include how the lender reports the deal and what’s already on your credit report. Negatives compound.

Consumer Reports’ Money Advisor suggests that before you enter a mortgage modification or short sale, ask how the lender will report it so you can weigh your priorities.

If you need the break, take the deal sooner rather than later, even if it will hurt your credit score. Negatives on your credit file are removed after seven years. The sooner you get the clock ticking, the better.

Get a short sale team for the long haul

Wyss says the best approach to a short sale is by contracting with a real estate professional familiar with the transaction. As well as RealtyU’s CSP designation the National Association of Realtors offers a Short Sales and Foreclosure Certification Program (SFR).

However, the designations aren’t a guarantee you’ve found the most experienced short sale agent. Some agents without the designation are just as experienced, if not more so. Others are less experienced. Get referrals from friends, family members, co-workers and others you trust who have worked with an agent experienced in short sales or have a close friend with a satisfactory experience.

“A real estate agent needs to put together the most comprehensive short sale proposal possible to minimize the back-and-forth delays,” said Mahan.

You may also need legal and tax counsel. A solid professional team is best for determining the viability of the sale, assembling the package and pricing and listing the property to find a buyer.

Wyss says determine your home’s marketing position from comparative market analyses (CMA) used to price your home.

“If your home’s value is significantly less than debt tied to the property, you are a candidate for a short sale. Position your home so that it sells quickly, but at a high enough price so the lender will agree to the terms,” says Wyss.

Keep in mind, you don’t control the final decision.

You aren’t selling a home on the open market so much as you are selling your case to the lender.