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
After a close brush with a deadline that could have impacted tens of thousands of home buyers, the U.S. Congress last night passed an extension of the Home buyer Tax Credit closing deadline.
The extension is included in the Home Buyer Assistance and Improvement Act (H.R. 5623) and will prevent as many as 180,000 home buyers from losing their eligibility for the tax credit through no fault of their own. These households had home purchase contracts pending as of April 30 and had until June 30 to close on their purchases to claim the federal tax credit. Under the legislation that passed last night, these households now have until September 30 to close.
The NATIONAL ASSOCIATION OF REALTORS® supported extension of that closing deadline because buyers are experiencing delays in getting their financing closed. The delays are the result of the large number of transactions that are short sales, which can take a long time to close, and the rush of transactions lenders are processing from buyers submitting contracts before the April 30 contract deadline.
The legislation, which now goes to President Obama for signature, is designed to create a seamless extension of the closing deadline; there will be no gap between June 30 and the date the President signs the bill into law.
NAR worked closely with congressional leaders on both sides of the aisle in supporting lawmakers’ passage of the legislation, which the association says will help provide additional stability to real estate markets across the nation.
Separately, the U.S. Senate also last night passed the National Flood Insurance Program Extension Act of 2010 (H.R. 5569), which extends the National Flood Insurance Program until September 30. This will allow home purchases in the 100-year floodplain to move forward. The House passed the bill last week.
When signed into law by the President, the bill, which will apply retroactively, will cover the lapse period from June 1 to the date of enactment of the extension. Without flood insurance, households buying homes in the 100-year floodplain cannot obtain mortgage financing.
More information on both pieces of legislation is at REALTOR.org.
Source: NAR
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. You can email me @ chance at ballard-company.com or http://www.myspace.com/chancegates
New Listings
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723 new listings were taken in May compared to 788 in April, an 8% decrease.
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The percentage of “Distressed” new listings was up slightly from April. 60% of new April listings were distressed – 294 Short
Sales, 150 Bank Owned/Other.
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Note: Beginning with the January 2010 report, properties reported as “Other” which includes “Freddie Mac’s and HUD’s” are
included with Bank Owned REO properties.
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Sold-to-asking-price Ratio
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May reported sales received an average of 97% of the seller’s asking price.
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Status of Pending
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Active Pending – short sale represents 66% of the total active pendings; Active Pending Loan equals 16%; Pending No-show
represents 13%; Active Pending call -4%; and Active Pending House -1%.
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Absorption Months Supply of Inventory (Unsold Inventory ÷ Sales per Month)
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As of May 31, there was 7.4 months of inventory based on the May sales rate.
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The National Association of REALTORS® describes a balanced market as between 5 and 7 months supply.
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Unsold inventory includes Active Pendings. This method of reporting months supply of inventory follows the industry standard
of including all pending sales in the active inventory. The calculation of month’s supply of inventory excluding Active Pendings
would bring the absorption down to 3.4 months supply of inventory.
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Conclusion
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May Median is holding at equal to May last year. This is the first time since 2005, the median price in a month has been equal
or higher year over year.
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Active inventory and pending total remain level with April and previous months.
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The number of new listings has declined month over month for the time since December 2009.
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On June 10, Sens. Harry Reid (D-NV) joined two other Senators to introduce an amendment to extend the closing dates for
homebuyers taking advantage of the tax credit. The amendment to the current tax package being considered in the Senate
would extend the closing date deadline from June 30 to September 30, 2010. There is growing concern that many home
purchases that took advantage of the tax credit will not close by the current deadline through no fault of the homebuyer. Stay
tuned to Reno/Sparks Association of REALTORS® Government Affairs Facebook page to get up to the date information.
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Data sourced from NNRMLS
Created by NLS under license for the RSAR
This report may be reproduced by RSAR Members.
The way I see things is as long as distressed properties continue to dominate the market the median sale price will be doing good to remain the same.
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. You can email me @ chance at ballard-company.com or http://www.myspace.com/chancegates
