Submitted by Maryann Little

In the current real estate climate, many investors and rehabbers are taking advantage of the deals that can be found. In the process, they are adding to the quality of many neighborhoods by taking an abandoned home that is bringing down values and turning it into a gem. For the investor who is considering purchase of a property out of a short sale transaction with the intention of selling it months later, there are a couple potential issues to keep in mind and prepare for.

1.  Insurable Title versus Marketable Title: After weeks, maybe even months, of carrying a property and putting work into it, the investor will get it under contract with a potential buyer. The title is then pulled by the buyer or buyer’s counsel. Because of the short time between acquisition and sale, there may still be mortgages on the title that were paid off upon the purchase, but have not been discharged from record yet. This situation is called insurable title- the investor likely can produce proof of payoff and title insurance, which covers or indemnifies the new owner and their underwriter. The new owner or their attorney, however,  may reject this approach and require the title be marketable, or completely clear of liens. In this situation, the investor gets stuck carrying a property for longer then they had planned while they wait for the paid off shorted lenders to get a discharge to record. The investor that is aware of this issue up front can alert their buyer and the buyers attorney of the situation so the investor knows before an offer is accepted whether the buyer will take insurable title and close on time.

2.  The Anti Flip Provision: Sometimes an investor will make an offer on a property that is in the process of short sale negotiation, therefore, no final payoff has yet been obtained. The investor has to understand going into this situation, that they may wait for months for the payoff to come. The smart investor would therefore be wise to put very little money down, include provisions in the contract alerting the shorted lender that they intend to resell, and avoid putting any money or time into the property until the final payoff is in hand.

Generally, the more an investor discloses to everyone involved about what his or her plan is with the property, the better off he or she will be. The more attorneys, agents, and buyers deal with short sales and learn from prior mistakes, the smoother the process will be all around. Short sales will perhaps lose their bad reputation as scary transactions, and be treated for what they are, a process that allows a property to be used for its best potential while allowing a seller in a bad situation to see light at the end of the tunnel.

Maryann Little is the VP of Mitigation and Negotiation at Short Sale Mitigation, LLC where she serves as a liaison between lenders and homeowners in New Hampshire and Massachusetts.

photo courtesy of woodleywonderwork

By: Maryann Little

I was recently asked the question: “should you ever raise your short sale price?” The normal reaction to this question would be: “In this market? Of course not!” Here are a couple examples I’ve come across in my recent experience, in which listing agents were forced to raise their prices:  

Hampton, NH (Seacoast) – 2011

This property was the first re-sale out of a condo complex that was built in 2006.  The condos originally sold between $650,000-$800,000 when they were brand new. The selling agent listed the property for $350,000, which was competitive based on other condo resales with comparable locations and layouts. We got two offers in.  The first was for $310,000, financed and the second was for $300,000, cash.

We went in to the bank  with the offers and immediately were told it was too low.  Their valuation showed it to be worth $400,000. After some discussion with the listing agent, he said, “let’s show them it’s not worth $400,000,” so we listed it at that price. The first buyer offer was eliminated because they would not increase their offer from $310,00. We didn’t receive another inquiry after increasing  the price.  People seemed to understand that it wasn’t worth $400,000.

We waited until about 2 weeks before the next auction and we submitted the $300,000 offer again. The new negotiator ordered a new Broker’s Price Opinion (BPO), which is the process by which an institution determines the value of the home without a formal appraisal. After the new review, the listing was within range.  By the time the sale closed, the bank and the buyer agreed on $317,000, and the homeowner had a perfect approval with no deficiency.  

Middleboro, MA – 2010

This sale was initiated in the fall of 2010.  After extensive conversations with the homeowners, and the listing agent, it was agreed to list it at $199,000 because the house needed some work.  An offer came in close to list price and was presented to the lender. Just like the first time, the offer was considered too low by the bank. The lender considered it to be a listing that was being rushed just to get it sold.

In this case, the BPO came in at and he said the $260,000 range, so we relisted at $254,900.  The listing stayed on the market, and from January 2011 to October 2011, small progressive price drops brought it back down to it’s original listing of $199,000.  We finally got an offer in October, at just about the same price as the first one, and closed early in 2012. he initial offer was essentially accepted 2 years later without anything changing.  

What this Means for Short Sale Sellers

In each case, relisting at the higher amount did nothing but waste the homeowners’ time, banks’ time, list agents’ time, and continued to drain the homeowners more financially. In some circumstances raising the price may be inevitable because of an aggressive BPO from the bank. All this will accomplish is showing the bank that the true value of the house is much lower than their agent believes. In the end the listing agent will likely be correct with the original listing, but a lot of time will have been wasted.

If you can avoid it, stay away from raising your short sale listing price at all costs!

Maryann Little is the VP of Mitigation and Negotiation at Short Sale Mitigation, LLC where she serves as a liaison between lenders and homeowners in New Hampshire and Massachusetts.

photo courtesy of: Images_of_Money

Guest post by Gabriel Knight of Mortgagefit.com

Federal administration has announced perhaps the greatest news of the year for the struggling homeowners and foreclosure victims of NH. Five big banks, through an agreement with the U.S. federal government, have settled to pay over $43 million to the New Hampshire state government.

The amount will then be distributed amongst the victims of foreclosure, mortgage defaulters, and struggling homeowners who are putting their best effort to save their home. The banks are actually about to pay almost $25 billion as compensation towards mortgage settlement.

Five banks, which have been penalized for fraud and misconduct, are the nation’s topnotch mortgage lenders. The banks are Citigroup, Wells Fargo, Bank of America, GMAC and JP Morgan Chase. Each of the banks is accused for practicing shady financial tactic referred as robo-signing. They have foreclosed thousands of NH houses without reviewing the mortgage documents correctly. As per NH Attorney General, Michael Delaney, thousands of NH homeowners have become the prey of this disreputable practice. Over 65% of NH mortgages have been unfairly conducted by these 5 banks.

After suffering couple of homeless years, the unfortunate NH foreclosure victims are now likely to have some restitution through this mortgage settlement, at last. As per Mr. Delaney, the NH state is about to spend almost $4.6 million to compensate the homeowners who have lost their house through foreclosure after 1st January’08. Each of them is likely to get a lump sum of approximately $18,000.

Many homeowners are feeling the impact of the regressing home values in nearly every housing market across the country. One trend that has grown very popular over the last 5 years has been “Short Selling” real estate. In a nut shell, a short sale is when a homeowner attempts to sell their home for less than their debt obligation to their lender(s). Years ago, this process had serious tax implications and was difficult to negotiate with lenders. However, the Mortgage Forgiveness Debt Relief Act of 2007 eliminated the major tax consequences of selling a primary residence short (for first mortgages). Coupled with the fact that many lenders are now well equipped to handle the onslaught of short sales hitting their desks, this process has gained popularity.

Most lenders will require that the borrower have a hardship in order to be considered for a short sale. Also, the property cannot be sold unreasonably below market value. The lenders in many cases will order an appraisal of the property prior to approving a sale. Often times lenders will not consider approval of a short sale if the borrower is current with their mortgage payments. Although, there are some instances where approval is granted for non-delinquent accounts. Remarkably, lenders are more responsive on delinquent accounts… For this reason, many homeowners are forced to miss mortgage payments so as to be taken seriously. The unfortunate byproduct is damaged credit.

In my opinion, lenders would be better served to allow these homeowners out of these homes at a reduced payoff without credit impact. In that case, these same owners could repurchase more affordable homes rather than renting. As more and more short sales are approved, the number of unqualified buyers increases. Just the same, when short sales are declined, foreclosure usually results and these would-be homeowners are now out of the home-buying market for years to come.

With foreclosures at record high the last several years, you may have heard the buzz word of the alternative option- a short sale. Essentially, a short sale is where the seller has informed the lender they can not make their mortgage payment, has proven a hardship as to why they are or will be in default, owes more than the home’s market value, and has no other assets available. The lender may then agree to accept less than the amount owed on the mortgage to satisfy the loan. This is called a short sale.

If you are shopping for savings on the purchase of a home, you might consider taking a look at “short sale” listings. Though not for the faint of heart, if you are a buyer with patience, access to sound legal advice, and are willing to consider taking on a few home repairs, a short sale listing may be your discounted ticket to home ownership.

However, a short sale does not typically happen in a short amount of time. If you are looking to close on a home in 30 days, this is probably not an option for you. Because your offer is waiting for not only acceptance from the seller but the seller’s lender, it can take 2-5 months (in some cases more) before you have keys to your new front door. Very few close in 30 days. Since there are no guarantees on when you will close, if you are selling your home and trying to time that closing with the closing of a short sale home, it can be difficult. This is something your real estate agent can help coordinate but it may require the buyers of your current home to be willing to wait until you can close on your new purchase.

Today more than ever, home owners are reminded that in order to have peace of mind, they should purchase an owner’s title insurance policy whenever they buy a home. This is especially true when buying a property that has been foreclosed.

Anyone who has purchased an owner’s title insurance policy when they acquired a foreclosed property will be protected if ownership issues arise due to a lender’s foreclosure documentation practices. An owner’s policy provides assurance that your title company will stand behind you if a covered title problem arises after you buy your home. The bottom line is that your title company will be there to pay valid claims and cover the costs of defending an attack on your title.

Title insurance compensates and provides legal representation to real estate owners and lenders against any financial loss that might arise because of undiscovered liens, encumbrances or defects in the title to the property. These defects can result in total losses, where a defective foreclosure or forgery means legal title is not actually conveyed, or they can result in partial losses where a neighbor’s garage or fence encroaches on the insured property.

For questions on title insurance or any of your closing questions, call Karen Kelley at Broker’s Title & Closing, LLC @603-434-1414.

Click here to read part 2

Third Reason: Scared Of Buying A Foreclosure. Buying a house that’s been foreclosed on can be a lengthy and sometimes quite cumbersome process. Buyers simply don’t want the hassle. Plus the recent foreclosure fraud scandal and the various foreclosure freezes by the big banks, i.e. Bank of America, certainly haven’t put buyers’ minds at ease. Buyers are afraid that a sale could be reversed, if it’s proven the bank unlawfully foreclosed on the previous owner. That’s why it’s so important to have a really good title company on your side.

What the savvy seller can do to help overcome this: If your house is not in foreclosure, in fear of being foreclosed upon, or is not in a short sale situation, you should be shouting that fact from the mountaintops! Have your Realtor place in your state’s multi-listing system in the public remarks that this is NOT a short sale or an REO bank owned property! This fact can be placed in any form of advertising your Realtor does for the sale of your home. If buyers are afraid of buying foreclosed homes, then assure them they have nothing to fear when it comes to buying your house. Now, what if your house is in fear of being foreclosed upon or is in a short sale situation. Promote the fact that the buyer will be getting a great deal! Make sure your agent is up to date and schooled on the various laws and procedures of short sales. An educated an experienced Realtor will help make the sale of such a property go as smooth as possible. Yes, it is a jungle out there and everyone needs an expert guide in times like this. For more information on how to sell your house before the bank takes it, call Prudential Verani Realty at 888-723-0306 or visit www.verani.com .

Click here to read part 1

Second Reason: Anticipating the Shadow Inventory. The term Shadow Inventory indicates the list of homes that banks are in the process of foreclosing on or homes that are about to be foreclosed on. Other homes that could be on this shadow list are the single family homes and condos that builders that have decided, for whatever reason, not to sell yet. Currently, some estimates indicate 2 to 8 million homes are on this shadow list in the US citing that about 2 million loans are in foreclosure, and another 2.4 million borrowers have missed at least 90 days of mortgage payments. For a complete list of REO properties currently on the market in the state of New Hampshire, visit www.verani.com. Buyers are sometimes hesitant to commit to one home for fear that the banks will release “the best home ever” and it would be too late for them to buy. (But if the right home comes up – get it! Another one like it may never be around again.) These shadow inventory homes that are eventually released to the market could be finer and better priced than what they have committed to buy or have already bought.

What the savvy seller can do to overcome this: Work with an agent that can deliberately stage your home or individual rooms. Remember, perception is reality. Also, small budgeted repairs or inexpensive upgrades will help increase the desirability of your home and help it stand out from the rest. And of course, make sure your home is priced right in comparison with the other homes for sale in your area. Even pricing your home at a little less than the going rate will give buyers the knowledge that they are getting more “bang for their buck”. Some real estate companies, like Prudential Verani Realty, will offer to do a free CMA for your home, to see where you stand when it come to pricing your home realistically in today’s market.

Historic lows! That’s where interest rates are right now. It’s a fact that the rate is less than 4.5% on a 30-year-fixed rate loan and below 4% on a 15-year fixed rate. Couple that with the fact that home prices have seemed to bottom out and you have what should be the perfect storm. Home sales should be going through the roof, but alas, they are only slowly rising at a snail’s pace. In October, The Northern New England Real Estate Network (NNEREN) even reported almost twenty percent of homes for sale in New Hampshire had slashed their price at least once…..so what’s the deal? Why aren’t buyers buying?

We’ll take a look at the reasons in a six part series and how savvy home sellers can overcome these dismal sale statistics.

First Reason: Unemployment rates. The New Hampshire Employment Security just recently released these numbers: The Construction sector employed 25,800 workers in September. That’s 100 more than a month ago and up 1,600 over the year. Manufacturing was also flat, with 67,700 jobs in September compared to 67,800 in the previous month. The good news is that there are 1,200 more manufacturing jobs in New Hampshire compared to a year ago. Retail, the largest single sector of the state’s economy, had an estimated 93,200 jobs in September, a loss of 2,000 jobs over the month, which ties in with the decrease in tourist traffic. The retail sector currently employs 1,600 more people than 12 months ago.

A short sale occurs when your lender agrees to accept a lower price on your home than the current mortgage balance. It can be a win-win scenario — the bank reduces a portion of “bad debt,” avoids foreclosure costs and keeps the home occupied, while you shed a housing payment you can’t afford.

If you are in a position of owing more on your property than you can sell it for and can’t afford your mortgage payments any longer, a short sale may be the solution for you. Each lender (or lenders if you have more than one mortgage) have their own set of criteria for working with a short sale. Every lender will require that your property be listed for sale at a price reflective of market conditions. A real estate professional with short sale experience will be able to assist you with providing a CMA (Comparative Market Analysis) or BPO (Broker Price Opinion) to determine the appropriate pricing for the home. Your agent can assist and ease the process of working with your lender or lenders.