As a Simi Valley Home Buyer in this market you will be confronted by many homes for sale that are Short Sales.  Before submitting an offer buyers should be concerned and careful about the process they are about to enter.  The current market conditions for buyers has been difficult for many. Inventory levels have been extremely low and Buyers have not had much freedom of choice.

Short sales are not only stressful for buyers, but they are equally stressful for sellers. The problems of a short sale can be divided into a couple different classes.

• Experience of the listing agent
• The number, type and complexity of the lien’s against the property
• The tolerance level of the buyer

The experience of the listing agent is critical to the success of the short sale. In a short sale, a loss mitigation department is assigned to the particular property in question. The individual assigned has many properties to oversee. Knowing the work load these loss mitigators carry, a good listing agent will either have a short sale negotiator working on the file, or will have the time to dedicate an aggressive campaign of keeping their client’s file at the top of the lost mitigator’s stack.

An experienced short sale listing agent will properly price the property so as to not create delays with the loss mitigator. What is important is, that the bank has already hired out for several Broker Price Opinions (BPOs) and possibly an appraisal. THE BANK KNOWS THE MARKET VALUE. Underpricing these properties is a serious mistake on the part of the listing agent, both for the buyer and the seller as the bank will have no motivation to undersell the property when they have the option and power to foreclose.

How well did the listing agent pre-qualify the property before taking on the listing? A short sale may be doomed before it is ever offered for sale. The more loans and liens the property has against it, the more difficult it will be to obtain an approval to sell the property short. Most properties have a first deed of trust and many others will have a second deed of trust. The holder of the first deed can pretty much call the shots, because if they foreclose the junior lien holders will receive nothing. If the property has additional liens, such as judgments, taxes, etc.; then these junior parties  will most likely have to agree to take less than what is owed. In the case of Taxes, those will have to be paid and that will reduce what the other lien holder may expect.  In the case of a judgment, remember those judgements in California can be renewed and follow a person around a long time, so the judgement holder may not be willing to take a reduced amount.

Here is an example, the property has a first deed of trust  for $400,000, a second deed of trust for $100,000, a judgment from a lawsuit in the amount of $25,000. The home is  currently worth $400,000 with supporting appraisals and BPOs. The holder of the first deed knows that there will be costs involved to sell the home and some sort of settlement for the holder of the second and the holder of the judgment. However if the first forecloses, the second and the holder of the judgment will get nothing. What if the holder of the second or the holder of the judgment demand more than what the first will willing to give? In most cases the holder of the second will probably be looking at getting no more than $10,000 and the judgment holder a couple thousand dollars. While these types of complex short sales can close after lengthy negotiations, it is important to understand as a buyer what you are getting into. It is important as a buyer to know if the listing agent has either the personal skills to pull this off or people working with them, such as a negotiator to pull this off. It is also important to know going in that three liens against the property are going to be more difficult to get approval on than in the case there is only one lien.

The buyer’s tolerance level is going to be tied to the expectations created by the agent that is representing them. Being told that short sales are long and lengthy process is not enough.   Buyers should be educated on the process. Before the buyer writes an offer on a short sale, the buyer’s agent should get the background details on the property so the buyer knows what they could possibly be getting themselves into. Granted the buyer’s agent’s ability to get all the details will be limited,  as the buyers agent cannot do a proper public records search without the seller’s Social Security number and driver’s license. However, the majority of the information should be available from the listing agent and  from the information that real estate agents can obtain from title insurance companies. If the listing agent does not have detailed information on the number of liens against the property, then proceed with caution or maybe pass on the property until you can be satisfied with how big a task will be to negotiate a short sale.

I can only stress enough, with a short sale, is to go in with both eyes wide open.  Be prepared for a long process and know when to walk away.  you don’t have to stay away from a Short Sale if you know the things to look for and a Short Sale may be a better value than a foreclosure.

For more information on Simi Valley Short Sales links will be added:

• Taking A Short Sale Listing: “To Be or Not To Be?”
• What is a Short Sale & Can I Short Sell My Home?
  

Thanks for reading Simi Valley’s Premiere Real Estate Blog!

Author – Ted Mackel Simi Valley Real Estate Agent – Keller Williams Realty

Ted Mackel is a top producer at Keller Williams Realty Simi Valley,

specializing in Simi Valley Real Estate

(805) 432-7705

What is a short sale? A short sale occurs when the seller of a property owes more money against that property than what they can ultimately sell the property for.

Example,   you have a $500,000 loan against your property, but now it is only worth $400,000. Adding the costs to sell your property at $400,000, including any/all other existing debts against that property (property taxes, homeowners association dues, or any other liens);  the bank that holds your loan would have to agree to taking less than $400,000 against the $500,000 loan.

From the example above, it is easy to see that both you the property owner and the bank (your lender), are both in a tough situation. At this point the bank has to evaluate it’s position, your complete circumstances, and how they may mitigate their losses.

One of the bigger myths is that because the bank has a bad  asset or nonperforming asset, the bank has no choice but to capitulate to the demands of buyers because the bank has either already written off the bad asset or cannot carry the nonperforming asset for a long period of time.

For the last year we have had inventory shortages while the banks have had record nonperforming loans go to foreclosure or short sale. or try a modification program.  The banks appear to be controlling the flow of inventory as to not flood the market and not sink prices any farther.

Since the banks are not quick to cut their losses on their nonperforming loans, it is important to understand if a short sale is the right option for you? It’s really easy for a real estate agent to convince you to put your home for sale and lock you into a six month contract. However, without properly evaluating your situation, you could become that agent’s indentured servant in an unbreakable contract.

Before making the decision to try and sell your home with a short pay option, it is imperative to figure out what the probability is to sell your home short.

The following issues are important and can increase chances of your lender agreeing to a short sale:

• You experienced a real hardship and can you prove it (i.e. health, employment)
• You property is marketable and it does not have deferred maintenance or show poorly.
• After figuring all the costs of the sale there a minimum of 10% of the value of the second lien holder or most junior lien holder(s).
  • If not, can you contribute some money or would you be willing to sign a promissory note?
• You have more than one loan or they both with the same name holder.
• You can provide all documents necessary as required by your lender in a timely manner?
• If a notice of default is filed on your property, your lender allow you time to sell your property.
• You are not presently in bankruptcy or planning to file bankruptcy.

The following issues can hurt your chances of your lender agreeing to a short sale:

• You do not have legitimate hardship.
• You have not missed any payments on your loans and are presently current on payments. (If you are current this is not advise to default or make late payments)
• There’s not enough money to pay off your first loan and you still have junior liens.
• You are in bankruptcy.
• You completed a recent cash out refinance
• You cannot provide full documentation for your hardship package.
• You have liens or judgments with a private party.
• There is an notice default and your lender will not give you time to sell.
• You or your real estate agent priced your home dramatically under market value.

All the above conditions are not a definitive list of who can and who cannot successfully sell their home with a short pay option, it is a good outline to begin a plan. There are many complex legal and tax consequences associated with the conditions above. Nothing contained above is intended to be legal or tax advice. If you plan to short sell your home, you will need to contact attorneys, tax professionals and/or CPAs.

Last, the personnel in the loss mitigation departments at the banks across the country are overwhelmed and swamped with more than 75 files on their desks, sometimes over 100. They have little incentive to cooperate on a short pay. Complete thorough documentation, updated regularly and contact with the loss mitigator assigned to your file, several times a week throughout the process, is only part of what it takes to get a short sale approved. If you plan to go down the short sale path, persistence and tenacity must prevail throughout the process.

As I find related links I will add them here:

• Taking A Short Sale Listing: “To Be or Not To Be?”
• Three Important Concerns with Short Sale Offers

Thanks for reading Simi Valley’s Premiere Real Estate Blog!

Author – Ted Mackel Simi Valley Real Estate Agent – Keller Williams Realty

Ted Mackel is a top producer at Keller Williams Realty Simi Valley,

specializing in Simi Valley Real Estate

(805) 432-7705

What is a Short Sale?  What does it mean?

A Short Sale occurs when a home Seller, who needs to sell their home, owes more in debt secured by the home than what the seller can expect a buyer to pay for the home.  In other words when the sale occurs, the proceeds of the sale will not cover balance owed on the loan(s) and or liens against the property.  The lender and junior lien holders agree to take less than what is owed to them in this process.

The Seller at all times is still the owner of the property and the creditor’s loss mitigation departments are contacted to work out a settlement so the home owner can sell the property.  The only say the lender/creditors have in the sale of the property is if they will agree to take less than what is owed based of offers accepted by the sellers.  The seller is the home owner not the lender/creditors.

The lender in these cases where they agree to the terms of the short sale take a loss in the Short Sale to avoid the larger loss/costs of a foreclosure.  the main goal of a Short Sale is to prevent Foreclosure.

(Wiki Entries for HomeBuysBlog.com as made to help Home buyers and Home Sellers better understand real estate terms.  If you would like a term defined and placed in the Wiki.  Please contact me with your request. Wikis for Simi Valley Homes For Sale and Simi Valley Real Estate)

Watch the following video from www.commoncraft.comand share your comments.  You can use RSS to benefit you in your business, pastimes or personal needs.  On the business front you can subscribe to websites/blogs that report on information related to your work and stay much better informed as information will be delivered to you as it happens rather than you having to hunt it down.

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If you have ever watched public TV in California over the last 30 years on a Saturday or Sunday, then you will have no undoubtedly encountered Huell Howser. The greatest thing about Huell’s show is that he is a good ol’ boy from down south and his program “California’s Gold” is all about exploring California. Huell’s boyish curiosity and witty expressions “Amazing” made weekend afternoon TV fun.

If Huell was just starting out today he’d be a leading video blogger.

What is REO? Here’s one for the longtail and a sort of WIKI entry to my BLOG!!!

In any business it is hard not to slip into the industry vernacular and forget that our audience may not really be following. REO is an acronym for Real Estate Owned. Here in Simi Valley and Moorpark an REO property falls under the California process of foreclosure. California is a Trust Deed state. The term mortgage is a more universal term like Kleenex or Xerox for Californians.

When a person borrows money against a property the Loan is made and secured against the property with an instrument known as a Deed of Trust. The Deed of Trust has three partys. The Lender (Beneficiary), The Borrower (Trustor) and the Trustee – an entity or person who holds the Title to the property until the Loan (secured by the Deed of Trust) is paid.

In the event that the Trustor defaults on the Loan, the Trustee is vested with the right (power to sell) to foreclose (non Judicially) on the property with in the parameters allowed by the state of California. At the time the Trustee is entitled to set the date of sale, public notice is given. The minimum bid is set at the amount owed on the property plus payments in arrears, plus costs. This minimum amount is usually more that the market value of the property so the Beneficiary ends up with the property and then will either hire a real estate broker or private auction company to sell the property. Once the Beneficiary takes title to the property, the property is now known as an REO.