I am seeing a good inventory of very nice condominiums in desirable locations. Many remodeled, move-in ready, 2 or 3 bedroom units can now be purchased for less than $100,000! If you are thinking about purchasing or selling a condominium in the current market, there are a some important things you will want to know.
First of all, financing for condominium purchases is becoming increasingly difficult. Since the Federal Housing Administration (FHA) is no longer doing “spot approvals” for FHA financing, the inventory for condo purchases that qualify for low down payment loans is scarce. The bulk of the inventory is for condo complexes that are not approved by the FHA or VA. The result is that a higher down payment will be required for financing. There are a few programs that provide 20% down mortgages for condos, but most investors are now asking for a minimum of 25% down. Even in the low price point of $100,000, this can be difficult for purchasers to come up with. After all, if a purchaser has that amount of money that they can apply to a down payment, most will opt for a single family detached home over a condominium, which in turn will typically appreciate quicker, and have a much better resale value.
To check to see if a condo complex is on the FHA approved list, go to:
https://entp.hud.gov/idapp/html/condlook.cfm
To check to see if a condo complex is on the VA approved list, go to:
http://condopudbuilder.vba.va.gov/2.2/frames.html
The second challenge is that investors have significantly tightened up the underwriting guidelines relative to condominiums. Most programs will require at least 60% of the units within any complex must be owner occupied. This may limit the appeal to investors who would otherwise be interested in purchasing condos for rental income properties. In addition to occupancy requirements, the complex cannot be involved in any sort of litigation, and at least 95% of all HOA dues must be current. There is a questionnaire that most Lenders will require to be completed by an officer of the condo association. If you would like to view a sample of the questionnaire, you can see it at:
www.TheOregonBroker.com/CondoQuestionnaire.pdf
It is important to know the market you are targeting when you are selling a condo, as well as the guidelines that will need to be followed if you are purchasing a condo. As always, I am here to help. If you, or anyone you know, are thinking about buying or selling a condo, please call or e-mail me. My goal is to make the complicated seem easy, without pressure, and keep you ahead of the market.
Best regards,
Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
9790 SW Nimbus Avenue
Beaverton, OR 97008
503-495-4973 Office
503-319-5848 Cell
Email | Website | Facebook | LinkedIn | Twitter | Blogger
Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Copyright© 2010, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.
Friday, July 30, 2010
Tuesday, July 20, 2010
Buy A Home For 50 Cents on The Dollar!
The first GNND (Good Neighbor Next Door) home that has popped up in the Portland/Metro area.
http://www.tenmanagement.com/listings/property-detail.do?list=2010-07-16&case=431-383701&code=OR
With this home, the list price is $157,000, as-is and no appraisal required. A short recap, how this works, your real estate Broker must submit your bid for you (assuming that you are eligible as described below) by clicking the link at the bottom of the listing page (Intent to Purchase) button. This will take them to a screen that will require your name, phone number, email, and social security number. This information is required with every potential and eligible buyer.
As you can imagine, if this is the first home in over 60 days in the metro area, there might be a few people interested.
Finally, why again all the hype? Because this $157,000 home will be purchased by you for $78,500, half price! There is a "silent second loan" that is a lien against the property but will automatically expire at the end of the 36th month and there will truly only be the remaining balance of the $78,5000 original loan left.
Here is the link again to check for Oregon properties: http://www.tenmanagement.com/listings/state.do?tab=1. I will continue to check weekly and notify those of you that are interested (still have many of you on my list), but if you have not notified me in the past, please let me know so I can update you as well.
A quick reference to eligibility is as follows per the HUD website:
http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm
Law enforcement officers, Pre-K through 12th grade teachers, Firefighters and Emergency Medical Technicians can contribute to community revitalization while becoming homeowners through HUD’s Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence.
How the Program Works
Eligible Single Family home located in revitalization areas are listed exclusively for the GNND sale program.
How to Participate in Good Neighbor Next Door Program
Check the listings for your area if you are interested in seeing or purchasing a home. If more than one person submits on a single home, a selection will be made by random lottery. You must meet the requirements for law enforcement officers, teachers, firefighters or emergency medical technicians and comply with HUDs regulations for the program.
Note: HUD requires that you sign a second mortgage and note for the discount amount. No interest or payments are required on this “Silent Second” provided that you fulfill the 36-month occupancy requirement.
Question: How Much of a Discount Can I Get on a HUD Home?
Answer: You can get a 50% discount off the HUD appraised value. For example, if HUD lists a home at $100,000, you can buy it for $50,000 provided, you occupy the home as your personal residence for the required occupancy period. If you qualify for any FHA-insured mortgage program, your down payment is only $100 and you may finance closing costs.
Question: What Kind of Mortgage Financing Do I Need?
Answer: You may use FHA, VA, conventional mortgages, or cash. HUD requires you to sign a Second Mortgage and Note on the discounted amount (which is $50,000 in the example above). No interest or payments are required on this mortgage if you live in the home for the entire 36-month period. You may be required to pay a pro-rata portion of the discount to HUD should you fail to fulfill the three year occupancy requirement.
Question: What is the Occupancy Period?
You must live in the home as your sole residence for a full 36 months. The purpose of the program is to strengthen communities by encouraging employed, professional law enforcement officers, teachers and firefighters/emergency medical technicians to live in the community. You will have 30, 90 or 180 days to move into the home you purchase, depending on HUD’s determination of the condition of the home and the level of repairs that may be required, if any. The 30th, 90th or 180th day is the start date for the occupancy period. You are released from all obligations under this program at the end of the 36th month following the start date. HUD views the occupancy obligation seriously and vigorously pursues violators to the fullest extent of the law.
Question: What Is an FHA Rehabilitation Mortgage and How Can It Help Me Buy a HUD Home?
Answer: The FHA 203(k) mortgage program helps homebuyers buy a home and have enough money to rehabilitate or repair it. Repairs must cost more than $5,000. The cost of the repairs and the mortgage are combined into a single monthly payment. Consider FHA’s 203(b) program if needed repairs are under $5,000. FHA also has a new Streamlined 203(k) program that is useful.
Question: Can I Sell the GNND Home after 3-years and Keep the Profit?
Answer: Yes. After you live in the GNND home 3 years, you can sell the home and keep any equity and/or appreciation.
Question: Do I Have to Use a Real Estate Broker or Agent to Buy a GNND Home?
Answer: Yes.
Question: Do I Have to Be a First Time Homebuyer to Take Advantage of the Program?
Answer: No. However, you may not own any other residential real property at the time you submit your offer to purchase a home and for one year previous to that date. For example, if you submit an offer to purchase a home on August 1, 2009, you may not have owned a home during the period from July 31, 2008.
Question: Where Are These Homes Located?
Answer: The HUD homes are located in designated Revitalization Areas. There are hundreds of Revitalization Areas located in the United States.
Question: Does HUD Provide a Home Warranty?
Answer: No. All GNND homes are sold “as is,” without any kind of warranty.
Question: Do I Have to Pay Earnest Money or Other Deposits in Order to Submit a Contract for a GNND Home?
Answer: Yes. The amount of the earnest money deposit required is an amount equal to one percent of the list price, but no less than $500 and no more than $2,000. HUD considers all offers to be a commitment to purchase a home if you are awarded the sale. Therefore, please carefully consider your offer and be aware of HUD’s policy on earnest money as stated here: If an offer is accepted, the earnest money deposit will be credited to the purchaser at closing. If the offer is rejected, the earnest money deposit will be returned. Earnest money deposits are subject to total forfeiture for failure of the participant to close a sale.
Question: Can I Bargain with HUD on the Price of a GNND Property?
Answer: No. You must offer the exact HUD list price when bidding on any GNND property. Then you get a 50 percent discount off of that list price.
Question: What if I leave the employment that made me eligible, for Any Reason, during the Mandatory 3-year Residency Period?
Answer: Nothing happens, but you must continue to live in the home for the full 36-month mandatory occupancy period. If you move out of the GNND home, you will have to repay HUD on a prorated schedule. In addition, you must certify that it is your good faith intention to remain employed as a law enforcement officer, teacher or firefighter/emergency medical technician for one year beginning with your purchase. Do no attempt to participate in the program if you know in advance that you will not be employed as required for at least one year.
Question: Some Agencies Have Other Home buying Programs. Can the GNND Program Work in Conjunction with These?
Answer: Yes, as long as you can meet all the GNND program rules while participating in these other programs.
Question: What Happens if a Participant Fails to Honor the 3-year Occupancy Requirement?
Answer: HUD can demand repayment of the discounted amount on a prorated basis. That means you would have to repay 1/36th of the discount you received for each month that you did not occupy the home. HUD also may initiate administrative sanctions including, but not limited to, barring the officer from participating in any HUD/FHA programs, as well as other federal programs. In any case of fraud or abuse, HUD will refer the case to HUD’s Office of the Inspector General for investigation and possible criminal prosecution. HUD may also notify the officer’s employing agency. Criminal prosecution and conviction for fraud and abuse concerning the GNND Program can result in a fine of up to $250,000 and/or two years in federal prison.
Question: How Does HUD enforce the 3-year Residency Requirement?
Answer: The participant must certify he or she is living in the GNND home as a sole residence at the time of purchase and each year after that. HUD can conduct spot checks to make sure the GNND home is your sole residence at any time during the 3-year period. You also must sign a note and mortgage for the discount amount. HUD may foreclose this mortgage if you do not comply with the 36-month occupancy requirement.
If you or anyone you know may be interested in this program, please call or e-mail me and I can put you in touch with the right people needed for the process.
Best regards,
Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
9790 SW Nimbus Avenue
Beaverton, OR 97008
503-495-4973 Office
503-319-5848 Cell
Mark@TheOregonBroker.com
http://www.tenmanagement.com/listings/property-detail.do?list=2010-07-16&case=431-383701&code=OR
With this home, the list price is $157,000, as-is and no appraisal required. A short recap, how this works, your real estate Broker must submit your bid for you (assuming that you are eligible as described below) by clicking the link at the bottom of the listing page (Intent to Purchase) button. This will take them to a screen that will require your name, phone number, email, and social security number. This information is required with every potential and eligible buyer.
As you can imagine, if this is the first home in over 60 days in the metro area, there might be a few people interested.
Finally, why again all the hype? Because this $157,000 home will be purchased by you for $78,500, half price! There is a "silent second loan" that is a lien against the property but will automatically expire at the end of the 36th month and there will truly only be the remaining balance of the $78,5000 original loan left.
Here is the link again to check for Oregon properties: http://www.tenmanagement.com/listings/state.do?tab=1. I will continue to check weekly and notify those of you that are interested (still have many of you on my list), but if you have not notified me in the past, please let me know so I can update you as well.
A quick reference to eligibility is as follows per the HUD website:
http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm
Law enforcement officers, Pre-K through 12th grade teachers, Firefighters and Emergency Medical Technicians can contribute to community revitalization while becoming homeowners through HUD’s Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence.
How the Program Works
Eligible Single Family home located in revitalization areas are listed exclusively for the GNND sale program.
How to Participate in Good Neighbor Next Door Program
Check the listings for your area if you are interested in seeing or purchasing a home. If more than one person submits on a single home, a selection will be made by random lottery. You must meet the requirements for law enforcement officers, teachers, firefighters or emergency medical technicians and comply with HUDs regulations for the program.
Note: HUD requires that you sign a second mortgage and note for the discount amount. No interest or payments are required on this “Silent Second” provided that you fulfill the 36-month occupancy requirement.
Question: How Much of a Discount Can I Get on a HUD Home?
Answer: You can get a 50% discount off the HUD appraised value. For example, if HUD lists a home at $100,000, you can buy it for $50,000 provided, you occupy the home as your personal residence for the required occupancy period. If you qualify for any FHA-insured mortgage program, your down payment is only $100 and you may finance closing costs.
Question: What Kind of Mortgage Financing Do I Need?
Answer: You may use FHA, VA, conventional mortgages, or cash. HUD requires you to sign a Second Mortgage and Note on the discounted amount (which is $50,000 in the example above). No interest or payments are required on this mortgage if you live in the home for the entire 36-month period. You may be required to pay a pro-rata portion of the discount to HUD should you fail to fulfill the three year occupancy requirement.
Question: What is the Occupancy Period?
You must live in the home as your sole residence for a full 36 months. The purpose of the program is to strengthen communities by encouraging employed, professional law enforcement officers, teachers and firefighters/emergency medical technicians to live in the community. You will have 30, 90 or 180 days to move into the home you purchase, depending on HUD’s determination of the condition of the home and the level of repairs that may be required, if any. The 30th, 90th or 180th day is the start date for the occupancy period. You are released from all obligations under this program at the end of the 36th month following the start date. HUD views the occupancy obligation seriously and vigorously pursues violators to the fullest extent of the law.
Question: What Is an FHA Rehabilitation Mortgage and How Can It Help Me Buy a HUD Home?
Answer: The FHA 203(k) mortgage program helps homebuyers buy a home and have enough money to rehabilitate or repair it. Repairs must cost more than $5,000. The cost of the repairs and the mortgage are combined into a single monthly payment. Consider FHA’s 203(b) program if needed repairs are under $5,000. FHA also has a new Streamlined 203(k) program that is useful.
Question: Can I Sell the GNND Home after 3-years and Keep the Profit?
Answer: Yes. After you live in the GNND home 3 years, you can sell the home and keep any equity and/or appreciation.
Question: Do I Have to Use a Real Estate Broker or Agent to Buy a GNND Home?
Answer: Yes.
Question: Do I Have to Be a First Time Homebuyer to Take Advantage of the Program?
Answer: No. However, you may not own any other residential real property at the time you submit your offer to purchase a home and for one year previous to that date. For example, if you submit an offer to purchase a home on August 1, 2009, you may not have owned a home during the period from July 31, 2008.
Question: Where Are These Homes Located?
Answer: The HUD homes are located in designated Revitalization Areas. There are hundreds of Revitalization Areas located in the United States.
Question: Does HUD Provide a Home Warranty?
Answer: No. All GNND homes are sold “as is,” without any kind of warranty.
Question: Do I Have to Pay Earnest Money or Other Deposits in Order to Submit a Contract for a GNND Home?
Answer: Yes. The amount of the earnest money deposit required is an amount equal to one percent of the list price, but no less than $500 and no more than $2,000. HUD considers all offers to be a commitment to purchase a home if you are awarded the sale. Therefore, please carefully consider your offer and be aware of HUD’s policy on earnest money as stated here: If an offer is accepted, the earnest money deposit will be credited to the purchaser at closing. If the offer is rejected, the earnest money deposit will be returned. Earnest money deposits are subject to total forfeiture for failure of the participant to close a sale.
Question: Can I Bargain with HUD on the Price of a GNND Property?
Answer: No. You must offer the exact HUD list price when bidding on any GNND property. Then you get a 50 percent discount off of that list price.
Question: What if I leave the employment that made me eligible, for Any Reason, during the Mandatory 3-year Residency Period?
Answer: Nothing happens, but you must continue to live in the home for the full 36-month mandatory occupancy period. If you move out of the GNND home, you will have to repay HUD on a prorated schedule. In addition, you must certify that it is your good faith intention to remain employed as a law enforcement officer, teacher or firefighter/emergency medical technician for one year beginning with your purchase. Do no attempt to participate in the program if you know in advance that you will not be employed as required for at least one year.
Question: Some Agencies Have Other Home buying Programs. Can the GNND Program Work in Conjunction with These?
Answer: Yes, as long as you can meet all the GNND program rules while participating in these other programs.
Question: What Happens if a Participant Fails to Honor the 3-year Occupancy Requirement?
Answer: HUD can demand repayment of the discounted amount on a prorated basis. That means you would have to repay 1/36th of the discount you received for each month that you did not occupy the home. HUD also may initiate administrative sanctions including, but not limited to, barring the officer from participating in any HUD/FHA programs, as well as other federal programs. In any case of fraud or abuse, HUD will refer the case to HUD’s Office of the Inspector General for investigation and possible criminal prosecution. HUD may also notify the officer’s employing agency. Criminal prosecution and conviction for fraud and abuse concerning the GNND Program can result in a fine of up to $250,000 and/or two years in federal prison.
Question: How Does HUD enforce the 3-year Residency Requirement?
Answer: The participant must certify he or she is living in the GNND home as a sole residence at the time of purchase and each year after that. HUD can conduct spot checks to make sure the GNND home is your sole residence at any time during the 3-year period. You also must sign a note and mortgage for the discount amount. HUD may foreclose this mortgage if you do not comply with the 36-month occupancy requirement.
If you or anyone you know may be interested in this program, please call or e-mail me and I can put you in touch with the right people needed for the process.
Best regards,
Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
9790 SW Nimbus Avenue
Beaverton, OR 97008
503-495-4973 Office
503-319-5848 Cell
Mark@TheOregonBroker.com
Friday, December 18, 2009
Buying Foreclosure Homes
“Foreclosure” happens to a homeowner when they have defaulted on the loan or loans on their real estate. The first phase of foreclosure happens after several payments are missed… after such time a “Notice of Default” is served to the Owner from the Lender. Once the Notice of Default is delivered to the Owner, it becomes public record, and there is a defined period of time that the Owner has to cure the loan including full payment of all past due payments, late charges, attorney’s fees, court filing, service, and trustee fees.
Very often, I receive inquiries for Buyers looking to take advantage of potential discounts that are perceived to be available on foreclosure properties. There are many websites that offer subscriptions fees for lists of foreclosure properties, with the lure that these properties can be purchased for pennies on the dollar. First of all, there is no need to pay money for these lists. They can be obtained for free from Title Companies, or at the County courthouse.
What you need to know is that statistically less than 2% of all properties that go into the foreclosure process with a Notice of Default actually get foreclosed on. Taking it a step further, nearly all of the 2% of properties that actually go to foreclosure sale are highly leveraged (the loan amount is close to, or even above the actual market value of the home). The bottom line is that it is very, VERY rare to see a property go to foreclosure sale where there is much, if any equity in the home. Combine that reality with the fact that most foreclosure homes are in very poor condition by the time that the occupant vacates the property. Even if you found that rare deal, you need to be prepared for the vast competition at the foreclosure sale (also known as the Sheriff’s Sale). To purchase a foreclosure property certified funds are required. Therefore, conventional financing is not an option.
Most of the time the Lender winds up with the foreclosure property at the Sheriff’s Sale for the amount of their loan on the property, plus costs. The Lender then processes the home, and will often complete necessary repairs on the home to make the property marketable. This can often take several months. As you might imagine, all improvement costs are typically added to the Lender’s bottom line. In the end, foreclosure properties may be priced higher than market value when they finally hit the market. The result is that foreclosure properties are sometimes not the great deal that the perception leads you to believe they are.
I know a couple of foreclosure hunters in the Portland area who spend a great deal of time and money soliciting those Notice of Default lists to try and secure the property before it gets foreclosed on. By a lot of time, I’m talking FULL time. When I say a lot of money, we are talking thousands of dollars a month in mailings alone. That being said, I find that they will secure 2 or 3 properties a year, after all of their work hunting and soliciting hundreds of Owners in default. I know this because they have come to me to resell the properties. And guess what… by the time these investors are ready to flip the property… their asking price is right back at market value.
My advice is that there are better deals, that are easier to be had, on the market RIGHT NOW, that are likely to be in better condition, and that can be purchased with far less hassle than foreclosure properties. I am happy to forward you the Notice of Defajult lists for free if you desire. However, we should meet first to talk more about what is required to compete in the foreclosure market.
Best regards,
Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
www.TheOregonBroker.com
Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest
Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.
Very often, I receive inquiries for Buyers looking to take advantage of potential discounts that are perceived to be available on foreclosure properties. There are many websites that offer subscriptions fees for lists of foreclosure properties, with the lure that these properties can be purchased for pennies on the dollar. First of all, there is no need to pay money for these lists. They can be obtained for free from Title Companies, or at the County courthouse.
What you need to know is that statistically less than 2% of all properties that go into the foreclosure process with a Notice of Default actually get foreclosed on. Taking it a step further, nearly all of the 2% of properties that actually go to foreclosure sale are highly leveraged (the loan amount is close to, or even above the actual market value of the home). The bottom line is that it is very, VERY rare to see a property go to foreclosure sale where there is much, if any equity in the home. Combine that reality with the fact that most foreclosure homes are in very poor condition by the time that the occupant vacates the property. Even if you found that rare deal, you need to be prepared for the vast competition at the foreclosure sale (also known as the Sheriff’s Sale). To purchase a foreclosure property certified funds are required. Therefore, conventional financing is not an option.
Most of the time the Lender winds up with the foreclosure property at the Sheriff’s Sale for the amount of their loan on the property, plus costs. The Lender then processes the home, and will often complete necessary repairs on the home to make the property marketable. This can often take several months. As you might imagine, all improvement costs are typically added to the Lender’s bottom line. In the end, foreclosure properties may be priced higher than market value when they finally hit the market. The result is that foreclosure properties are sometimes not the great deal that the perception leads you to believe they are.
I know a couple of foreclosure hunters in the Portland area who spend a great deal of time and money soliciting those Notice of Default lists to try and secure the property before it gets foreclosed on. By a lot of time, I’m talking FULL time. When I say a lot of money, we are talking thousands of dollars a month in mailings alone. That being said, I find that they will secure 2 or 3 properties a year, after all of their work hunting and soliciting hundreds of Owners in default. I know this because they have come to me to resell the properties. And guess what… by the time these investors are ready to flip the property… their asking price is right back at market value.
My advice is that there are better deals, that are easier to be had, on the market RIGHT NOW, that are likely to be in better condition, and that can be purchased with far less hassle than foreclosure properties. I am happy to forward you the Notice of Defajult lists for free if you desire. However, we should meet first to talk more about what is required to compete in the foreclosure market.
Best regards,
Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
www.TheOregonBroker.com
Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest
Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.
Friday, December 11, 2009
The Scoop on Short Sales
“Short Sales” are real estate listings that are trying to be sold for less money than what is owed on the property. The current owner has a loan (or loans) on the property that exceeds the listing or sale price. On the surface, the property seems like a really good value… almost too good to be true. The enticement of the possibility of purchasing a property for less than market value certainly seems very appealing. It is natural to get excited and hopeful about getting a great deal when purchasing real estate.
So what’s the downside? Unfortunately the odds that Short Sales will mature to an actual sale are against you. Recent statistics report that less than 30% of all Short Sale offers are accepted by Short Sale Lenders. Therefore more than 7 out of 10 are a complete waste of time. Statistics go even further by reporting that of the 30% of Short Sales that are accepted by Short Sale Lenders, 60% fail to close! It's not hard to do the math. The question becomes where to you, as a Buyer, want to focus your energy?
When you understand the dynamics of what has to happen, it becomes easier to understand why Short Sales hardly ever work out. Essentially, when an offer is submitted to a lender for Short Sale approval, the lender is put in the position of determining if they are willing to take less than what they are owed (a LOSS) to release the mortgage lien from the Short Sale property. Because the lenders often have an appraisal in the file that is higher than the offer price (because an appraisal was needed in order to fund the loan(s) to begin with), they are typically very reluctant to take less than what they are owed. The decision is further complicated when there is more than one loan on the property (i.e. a first mortgage plus a second mortgage, or home equity line of credit). Negotiating Short Sale acceptance on two loans is extremely difficult, and a complicated process to say the least.
Another dynamic that plays into the Short Sale dilemma is an interesting bit of information that an attorney provided at a conference I attended. Amidst all of the lending turmoil going on in the market over the last couple of years, Lenders have to be very careful to keep their assets in line with their debts. It is important to know that when a Lender transfers interest or releases their loan, they are accountable immediately for the gain or LOSS. This means that if they agree to accept a Short Sale, they have to account for the LOSS on their books at the time of closing. Losses are not a good thing for Lenders in this market… in fact, losses are precisely the reason why so many Lenders are closing their doors and going out of business. According to the attorney presenting at the conference, it often benefits the Lenders to let the property go to foreclosure, and take the property back as an ASSETT, vs. having to report a short sale as a loss on their books. In theory, it is better for the Lender to sit on the property, hoping that the market will get a little better so they can recover their loss, or at least break even on their loan, thereby not resulting in accountability for a loss. The most frustrating component of a Short Sale, is that the majority of the time, the Lender will not even respond to Short Sale offers! Instead, many offers continue to accumulate on the Short Sale property, of which each Buyer hopes to result in a great deal for the Buyer, and which the Lender hopes will be close to, or above the amount they are owed.
There was new legislation that was passed in January 2008, and further revised in April 2008, that provides that Agents must disclose Short Sale “language” in such listings. Unfortunately there are many agents that don’t follow the rules too closely. If you would like to read more about the summaries, you can see more at www.TheOregonBroker.com/shortsalesummaries.pdf.
I am happy to schedule a meeting to discuss how Short Sale transaction may or may not work for you. It is a complex phenomenon new to the industry, and never before seen by most homeowners or Realtors®, and is changing on a daily basis.
Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest
Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.
So what’s the downside? Unfortunately the odds that Short Sales will mature to an actual sale are against you. Recent statistics report that less than 30% of all Short Sale offers are accepted by Short Sale Lenders. Therefore more than 7 out of 10 are a complete waste of time. Statistics go even further by reporting that of the 30% of Short Sales that are accepted by Short Sale Lenders, 60% fail to close! It's not hard to do the math. The question becomes where to you, as a Buyer, want to focus your energy?
When you understand the dynamics of what has to happen, it becomes easier to understand why Short Sales hardly ever work out. Essentially, when an offer is submitted to a lender for Short Sale approval, the lender is put in the position of determining if they are willing to take less than what they are owed (a LOSS) to release the mortgage lien from the Short Sale property. Because the lenders often have an appraisal in the file that is higher than the offer price (because an appraisal was needed in order to fund the loan(s) to begin with), they are typically very reluctant to take less than what they are owed. The decision is further complicated when there is more than one loan on the property (i.e. a first mortgage plus a second mortgage, or home equity line of credit). Negotiating Short Sale acceptance on two loans is extremely difficult, and a complicated process to say the least.
Another dynamic that plays into the Short Sale dilemma is an interesting bit of information that an attorney provided at a conference I attended. Amidst all of the lending turmoil going on in the market over the last couple of years, Lenders have to be very careful to keep their assets in line with their debts. It is important to know that when a Lender transfers interest or releases their loan, they are accountable immediately for the gain or LOSS. This means that if they agree to accept a Short Sale, they have to account for the LOSS on their books at the time of closing. Losses are not a good thing for Lenders in this market… in fact, losses are precisely the reason why so many Lenders are closing their doors and going out of business. According to the attorney presenting at the conference, it often benefits the Lenders to let the property go to foreclosure, and take the property back as an ASSETT, vs. having to report a short sale as a loss on their books. In theory, it is better for the Lender to sit on the property, hoping that the market will get a little better so they can recover their loss, or at least break even on their loan, thereby not resulting in accountability for a loss. The most frustrating component of a Short Sale, is that the majority of the time, the Lender will not even respond to Short Sale offers! Instead, many offers continue to accumulate on the Short Sale property, of which each Buyer hopes to result in a great deal for the Buyer, and which the Lender hopes will be close to, or above the amount they are owed.
There was new legislation that was passed in January 2008, and further revised in April 2008, that provides that Agents must disclose Short Sale “language” in such listings. Unfortunately there are many agents that don’t follow the rules too closely. If you would like to read more about the summaries, you can see more at www.TheOregonBroker.com/shortsalesummaries.pdf.
I am happy to schedule a meeting to discuss how Short Sale transaction may or may not work for you. It is a complex phenomenon new to the industry, and never before seen by most homeowners or Realtors®, and is changing on a daily basis.
Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest
Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.
The Portland Oregon Metro Real Estate Blog
This blog is designed for real estate related information. Most will be specific to the Portland Oregon Metro real estate market, but some information may be extracted from the National Real Estate Market, and the National Association of Realtors®. In the event you would ever like more information specific to a topic, I can be reached through my website www.TheOregonBroker.com.
Best regards,
Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
www.TheOregonBroker.com
Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest
Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.
Best regards,
Mark Vandervest, Broker
RE/MAX Equity Group, Inc.
www.TheOregonBroker.com
Now… more than ever…
~ There is simply no substitute for experience. ~
“People Before Profit… Reputation Before Revenue!”
Mark Vandervest
Copyright© 2009, Mark Vandervest, P.C. – All rights reserved.
No portion may be reproduced without express written permission of Mark Vandervest, P.C.
Subscribe to:
Comments (Atom)
