Chance Gates' Blog

RISMEDIA, May 13, 2010—With short sales making up almost 35% of home sales in March and the country with a national foreclosure problem, I Short Sale, Inc., one of the largest short sale firms in the U.S., sets the record straight on common short sale myths.

1. You must be default on your mortgage to negotiate a short sale. Short sales are not a function of default status on a mortgage. They are the result of the bank mitigating a potential default situation that, in the long run, will cost more money to the investors. We have completed many short sales in instances when the borrower was not in a default situation.

2. Listing my home as a short sale is embarrassing. Anytime we get ourselves into a tough financial situation it can cause some embarrassing feelings. It is important to remember that those feelings will not help us get back onto stable financial ground. We need to overcome our feelings and do what is right to protect our financial futures.

3. Buyers aren’t interested in short sale properties. Short Sale properties are often times available at a competitive price to other properties on the market. In many cases, short sale properties are very well cared for and have not had to endure the deferred maintenance of a REO property. Short Sale properties are in great demand in the marketplace.

4. There’s not enough time to negotiate a short sale before foreclosure. A good negotiator takes into account the timeline affiliated with a foreclosure. There is always a chance that a short sale can be negotiated. However, the only way to know for sure is to try.

5. The bank would rather foreclose than complete a short sale. Banks do not want to foreclose on property. It is expensive and carries a high level of liability once the bank owns that property as an REO. Wherever possible, banks are seeking other loss mitigation options before foreclosure.

6. Short sales are impossible and never get approved. Short sales are complicated, but not impossible. We negotiate short sale approvals every day.

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.  I can be reached by email at  chance at ballard-company.com or http://www.myspace.com/chancegates

Related Links:
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In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

I know I said this before but a person need to hear something 3 times before they remember.  In the Reno/Sparks area about 1\3 of all real estate transactions are short sales.

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

RISMEDIA, March 12, 2010—(MCT)—With the highly touted federal mortgage-modification program falling short of its target numbers, the government has looked into alternatives to foreclosure and come up with a possible, though not original, solution: the short sale, a transaction in which the lender accepts less than the balance owed on the mortgage.

Beginning April 5, 2010, under new Treasury Department rules, short sales will be presented as the potential next step for homeowners who are rejected by or fail to make the grade for the federal Home Affordable Modification Program (HAMP).

RealtyTrac chief economist Rick Sharga suggested that offering the short sale program is the administration’s acknowledgment that its current mortgage-modification effort “can’t solve the foreclosure problem by itself.”

Kevin Gillen, vice president of Econsult of Philadelphia, said there was both statistical and anecdotal evidence that lenders have been holding off on foreclosure proceedings. “No doubt that part of this is due to staff shortages relative to the volume of delinquencies, but it’s also due to uncertainty over near-term government policy,” he said.

Sharga sees positive elements in the new guidelines: Both homeowners and mortgage servicers will have financial incentive to participate in short sales; there are limited payouts for second lienholders and paperwork is standardized, which makes it easier for everyone to comply.

The new Home Affordable Foreclosure Alternative program will run until Dec. 31, 2012. Among its provisions:

-The lender must offer a short sale in writing to the borrower within 30 days after the borrower either is ruled ineligible for mortgage modification under the HAMP program or has been ruled unable to sustain payments under a trial plan.

-A borrower may receive up to $1,500 to assist with relocation expenses.

-Incentives of $1,000 will be offered to lenders for each completed short sale. For each deed in lieu of foreclosure, in which the borrower voluntarily transfers the property to the lender, $1,000 will be paid to the lender.

-A lender with a second lien on the property will get up to $3,000 of the short sale proceeds, or can pursue a short sale outside the program if it doesn’t agree to share.

-The lender will not be permitted to reduce the real estate agent’s commission after an offer on a property has been received.

Currently, short sales don’t make up a big piece of the real estate market, either regionally or nationwide, for a variety of reasons. One is they tend to be difficult and time-consuming. “I handled a short sale of a condo in Bensalem PA that took a year,” said real estate broker Christopher J. Artur. Typically, there is “so much aggravation and red tape involved that some buyers get so fed up they walk away.”

Nationally, just 14% of all existing-home transactions in January 2010 were short sales, the National Association of Realtors says. In the Philadelphia region, they made up 6.9% of total homes for sale at the end of January, said Art Herling, regional vice president at Long & Foster Real Estate.

“I call short sales ‘organized chaos,’” said Noelle Barbone, office manager of Weichert Realtors’ Media office. Each lender works short sales differently, “at their own pace, and it depends on how behind the homeowners are on mortgage payments, if the house is worth less than they owe and whether or not foreclosure paperwork has been filed.”

The new program is unlikely to make short sales easier, even as an alternative to foreclosure. “What one needs in a short sale is time,” Barbone said. But these days, as buyers race to meet the April 30 agreement-of-sale deadline for the federal tax credit, time is money. “I had first-time buyers recently with 20% down, and we found two houses they liked,” said Cheryl Miller of Long & Foster’s Blue Bell office. Both were short sales, however, and neither the seller nor the agent could give a definite timeline for even seeing an executed agreement of sale, she said. “Timing is pretty critical for the first-time buyer and viable houses that are short sales are remaining unsold” as a result, Miller said.

Sharga doesn’t think the new short sale program will be the answer the government seeks. “While we’ll likely see an increase in the number of short sales, I doubt that the reality will live up to the hype.”

(c) 2010, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

In the Reno/Sparks area  about 1/3 of all real estate transaction are short sales.  These improvements to the process are badly needed as most short sales take 3 to 4 months to get third party approval.

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

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Sales

Below is a summary of the October market conditions

• • October ended the month with 553 sold transactions up 9% from the prior month. Sales were up 59%

over the same period last year.

• • Sales Mix:

o Bank Owned unit sales were down in October to 181 as compared to 189 in September. Bank

owned sales represent 33% of the sales, down from 37% in September.

o Short Sales were at 134 in October, up from 125 reported in September. Short sales represent

24% of the mix in October as compared to 25% in September.

o No Special Condition (None) sales increased in October to 198 as compared to 155 in

September. Sales reported as “No Special Condition” represented 36% of the sales, up from

31% reported in September.

Median Price

• • October 2009 median price was down 3% to $180,000 compared to $186,000 in September 2009.
• • Median price is defined as the mid-point, half of the sales for the time frame (October) are below and

half are above

Sales by Price Point

• •The number of sales in the under $150,000 price range has increase for

three consecutive months – October (194 sales), September (178 sales) and August (166 sales). There

was an increase in sales $151,000 – $200,000 for October (134 sales) compared to September (113

sales); $201,000 – $250,000 for October (91 sales) compared to September (94 sales).

• • 34 closings were over $450,000. In the over $450,000 price range, 6 of the closings were Short Sales

and 6 were Bank Owned.

Pendings

• • There were 652 new Active Pending sales reported for the month of October, up 3% from the prior

month.

• • 79% percent of October pendings are distressed (short sale and bank owned).

Listings

• • 614 new listings were taken in October compared to 709 in September, a 13% decrease.
• • The percentage of “Distressed” new listings was up 3%. 61% of new October listings were distressed -

225 Short Sales, 147 Bank Owned.

Source  http://rsar.net/uploaded/documents/RSAR%…

Too many people now of days are getting those irritating phone calls from debt collectors. Other are just barely making the monthly mortgage payments on a house they owe more on, than its worth.

Don’t walk away and let the house go into foreclosure. This will prevent someone from being able to buy another house for at least 4 years.   Plus the money the lender loses on the resale of the foreclosure, the IRS counts as earn income and my charge taxes on the difference.

If a home owner is a couple months behind with his mortgage payment here is a couple of things he can do to keep his house. First call the bank to see if they will refinance the loan.  If the bank is not cooperating don’t threaten to walk away from the house. The second thing to do is for the home owner to go see his senator.  He might be able to help get the bank to refinance you house. The Senator might even get them to reduce the principle of the loan to be comparable with Reno/Sparks Nevada Real Estate prices.

If steps one or two doesn’t work or if a person doesn’t want to live in the house. Sell the house for less than owed. This is called a short sale. This will allow a person to buy another house in two years instead of four. It is still advisable to see a lawyer and a CPA to make sure the debt is forgiven and the IRS doesn’t tax the seller on the forgiven debt. I would NOT recommend taking on a short sale purchase without your own representation of a knowledgeable licensed Nevada Real Estate Agent.

As a Reno – Sparks real estate consultant I encourage any question or comments on the Reno – Sparks real estate market or any of the articles I posted here.

I can be reach at  chance at ballard-company.com

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 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

Being a Reno/Sparks real estate consultant I always appreciate any question or comments on the Reno/Sparks real estate or any of the articles I post.

Send all questions to chance@ballard-company.com

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Being a Reno/Sparks real estate consultant I always appreciate any question or comments on the Reno/Sparks real estate or any of the articles I post.

Send all questions to chance@ballard-company.com

Chance Gates does welcome any questions or comments on the Reno/Sparks real estate market or on any articles that may be posted.  Send your  emails  to  chance at ballard-company.com