Chance Gates' Blog

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RISMEDIA, September 8, 2010–Real estate professionals know that a short sale transaction can take months for it to be approved and closed.

The reality is that short sales usually take three to four times as much as a regular sale to finally get to the closing. From the time the Realtor actually gets the property under contract to the time the lender approves, it could take anywhere from 30 days to six months, depending on how fast the borrower provides critical information for lender and Investor approval.

Even then, you still have one more variable to account for which is the buyer waiting for all this time to get the contract approved by the lender. For this, setting the expectations is a key factor in any short-sale transaction.

Buyers Expectations
Buyers who make an offer on a short-sale property need to know that lenders have to “reverse underwrite” a short-sale and make sure that they are allowing the sale to happen close to market value. I say “reverse underwrite” because instead of determining affordability, they will look for “un-affordability.”

They will check the seller’s financials to verify that they can’t afford the house anymore and consequently, they will order a price opinion from a broker or certified appraiser, commonly known as BPO (Broker’s Price Opinion) to make sure the house is being sold close to market value. If the offer is too low compared to what is owed, it will make more financial sense to the Lender to just foreclose the property and re-sell it as an REO (Bank-Owned Property). All this will happen while the buyer is still waiting for a response so it is very important to set the expectations correctly from the beginning to avoid losing the buyer close to the end of the process.

Seller’s Expectations
On the other hand, it is important to also educate the Seller and set the expectations with them from the beginning. They need to understand that the Lender takes its time responding, but when they do, they usually give a 72-hour timeframe to respond or provide the missing documentation. If the documentation is not provided within the specified timeframe, it usually ends up in a closed file and countless work-hours lost. Another common situation that is happening very often is borrowers being served with foreclosure paperwork from either the lender or homeowner’s association while the short-sale is being processed. It is crucial to let them know that this might happen so that they are prepared for it and receive the documents knowing that they are in the best hands. Foreclosure and short-sale are parallel processes and one does not cancel the other. Sometimes a short-sale might delay a final sale date, but it will definitely not stop the Lender from starting the foreclosure proceedings.

Closing the Short Sale
Short sale success comes from educating not only the seller but also the buyer and everybody else involved in the transaction. Setting the right expectations is the most crucial part of a short sale. There are many hours involved in processing a short sale and the last thing you want is a seller or buyer walking away because the expectations were not set correctly.

As a Reno/Sparks real estate professional, I encourage all questions and comments on the Reno/Sparks real estate market or any of the articles posted in this blog.  Please feel free to use my back door to the MLS and search house available in the Reno/Sparks and all Northwest Nevada neighborhoods.  I can be reached by email @  chance at ballard-company.com or http://www.myspace.com/chancegates

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By Paige Tepping

RISMEDIA, May 26, 2010–When it comes to investing, everybody has certain goals and aspirations. However, we have found that there are certain guidelines every aspiring real estate investor needs to know:

1. Compare property values and rents
Financial statistics only go so far; the best measure of a property’s market value is often the sale prices of nearby properties. The same holds true for area rents. A low price can often be justified by a reasonable rent; renters who can afford a high rent can afford to buy instead, so reasonably priced rent is a must.

2. Pay attention to tax laws
Don’t base your tax investment on current tax laws. The tax code is constantly changing, and a good investment is a good investment regardless of the tax code. The right property with the right financing is what you should look for as an investor.

3. Specialize in something you know
Start in a market segment you know. Whether you focus on fixer-uppers, foreclosures, starter homes, low-down payment properties, condominiums, or small apartment buildings, you’ll benefit from experience by specializing in one aspect of investment real estate properties.

4. Know the costs before getting started
Know the financial statements inside out. What are operating expenses? What are loan payments? Vacancy costs? Taxes? What does the cash flow statement look like? These are key issues that must be addressed before making a solid investment.

5. Know where your tenants are coming from
If the last rent increase was recent, your tenants may be considering a move. If tenants have a short-term lease, they may be living there simply to attract unsuspecting buyers. It is also important to collect the tenants’ security deposits at closing.

6. Assess the tax situation
Taxes are an integral part of successful real estate investing, and they often make the difference between a positive cash flow and a negative one. Know the tax situation, and see how it can be manipulated to your advantage. It may be a good idea to consult a tax advisor.

7. Investigate insurance coverage
If a seller’s coverage is based on lower-than-current replacement value, your insurance cost may increase when you pay a higher purchase price.

8. Confirm utility costs
Ask the local utilities to verify recent utility expenses, especially if any of these costs are included in your tenant’s rent.

9. Consult your accountant
Taxation is a key element of successful real estate investing, so be sure to find an accountant who is well-versed with the constantly evolving tax code.

10. Inspect
Make sure that you always perform a thorough inspection of the property before buying it. Never, ever buy any property without at least examining the site. In some cases, hiring professional inspectors to examine the structural mechanical system may be a sound investment.

As a Reno/Sparks real estate professional; I encourage all questions and comments, on the Reno/Sparks real estate market or any of the articles posted in this blog.

As a new buyer researches the Reno/Sparks real estate market, he will notice a lot of house are in foreclosure or are being sold as a short sale. A short sale is a home where the market value of the property is LESS than the loan amount owed to one or more lenders. And buyers often believe that these are the best deals, along with foreclosures. Don’t be scared off by these short sale properties as they may turn out to be a great deal for you.
If you are making an offer:
• Make sure you make the offer contingent on the short sale being approved by the lender and set a time frame for approval
• An addendum form is advised to outline the short sale contingency terms and conditions
• It is still prudent to conduct a home inspection even though the lender will probably require an “as is” sale – you still want to know what you are buying and what repairs need to be made
• It is possible the seller will not be able to do any repairs or even have the power and other utilities turned on for the inspections. So be ready to turn them on in your name. (After receiving short sale approval).
I would NOT recommend taking on a short sale purchase without your own representation of a knowledgeable licensed agent. There is too much at risk for you, the buyer.
As a Reno – Sparks real estate consultant I encourage any questions or  comments on the Reno – Sparks real estate market or about any of the articles I post.  You can email me at chance@ballard-company.com

The next step is to determine the price to list the house. Once again this will be less than the homeowner owes on the mortgage. Knowing it is tough to find a buyer, for a short sale, the sale price will usually be to the lower end of the market. This will hopefully generate more interest in the house. However this price will have to come with in, a percentage of market value. The percentage could differ depending on which bank holds the mortgage.

As a Reno/Sparks real estate consultant I always welcome any comments or questions on the Reno/Sparks real estate or any of the articles I posted.  You can email me directly at  chance at ballard-company.com

Hopefully if there is more than one mortgage on the house, both are with the same bank. If the first and second mortgages are held with two different banks then the problem I discussed in “When Buying a House that is a Short Sale” come into effect.

As a Reno/Sparks real estate consultant I always welcome any comments or questions on the Reno/Sparks real estate or any of the articles I posted.  You can email me directly at  chance at ballard-company.com