A: The purchase process for a short sale is sometimes several months. There are some banks that are fast tracking short sales. That is pretty exciting because it’s almost like a regular sale. You can wait three, four, six months, up to a year for a short sale. That is happening less now, but generally it is a several month process.

Short sales are good in a situation where you can’t move for three to six months, your kids  might be graduating from school, changing school districts. Oftentimes, it’s a long, drawn-out process.

The process for purchasing a bank owned property is relatively quick. There are times when you put in an offer and you have to wait for the bank to approve the offer, and sometimes that delays a few weeks or so. Generally you’ll get an answer fairly quickly. You’ll go into escrow and close in 30 to 45 days.

Jeff Green is a REALTOR® with PMZ Real Estate in Tracy, CA.

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A: The purchase process for a short sale is sometimes several months. There are some banks that are fast tracking short sales. That is pretty exciting because it’s almost like a regular sale. You can wait three, four, six months, up to a year for a short sale. That is happening less now, but generally it is a several month process.

Short sales are good in a situation where you can’t move for three to six months, your kids  might be graduating from school, changing school districts. Oftentimes, it’s a long, drawn-out process.

The process for purchasing a bank owned property is relatively quick. There are times when you put in an offer and you have to wait for the bank to approve the offer, and sometimes that delays a few weeks or so. Generally you’ll get an answer fairly quickly. You’ll go into escrow and close in 30 to 45 days.

Jeff Green is a REALTOR® with PMZ Real Estate in Tracy, CA.

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If you’ve watched the news lately,you’ve probably heard about the government’s Making Home Affordable Plans.  But do you know what they are?  If you are a struggling homeowner, do you know if you may qualify? 

REALTOR® Erin Harbuck advises you find out all the facts because education is power!

“There are two main components to the Making Home Affordable Plans: Refinance and Loan Modification. 

Refinance:  This option is for homeowners who are current on their mortgage, but have been unable to refinance, by conventional means, due to a decrease in their home’s value, for instance.  Many homeowners who purchased a home 5-7 years ago may have gotten a great interest rate at the time.  That rate, however, is possibly 2-3% higher than today’s rate.  Do you realize that on a $200,000 mortgage, a decrease of even 2% on your interest rate will reduce your mortgage payment by over $250 per month?

Are you eligible for a Home Affordable Refinance?

• Are you the owner of a one to four unit home?
• Are you current on your mortgage payments?
• Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?                      

If you can answer “yes” to all three of the above questions, you may qualify for a refinance.  Talk to your mortgage company to find out your next step.

Loan Modification:  This option is for homeowners who are struggling to make their payments, perhaps due to an increase in their interest rate or decrease in their income.

Are you eligible for a Home Affordable Loan Modification?

• Did you obtain your mortgage prior to January 1, 2009?
• Is your home your primary residence?
• Do you owe less than $729,751 on your mortgage?
• Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowners association dues, if applicable) more than 31% of your gross income?

If you answered “yes” to the above questions, you may qualify for a Home Affordable Modification.  The goal of a modification is to reduce your mortgage payments to 31% of your gross income by either reducing your interest rate, extending your mortgage term or even forgiving a portion of the principal balance (although the last option is up to your mortgage company’s guidelines and generally, is not offered if the modification can be accomplished by other means). 

For more information on the Making Home Affordable program, visit:  www.makinghomeaffordable.gov“

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As a first-time home buyer, you are looking to get the most for your money; but you might be wondering how safe is it to buy a “distressed property?”

Concord, Massachusetts REALTOR® Mary Sheppard explains why distressed properties are a good buy right now.

“Here is a stat that says a lot about the market today: 45 percent of all properties recently sold nationwide are distressed. A recent Keller Williams survey estimates that 300,000 distressed properties are entering the market each month.

Distressed doesn’t imply that the property is in bad physical condition. It means that the mortgage is in bad financial condition; the bank has foreclosed, or the owners have reached a short sales agreement with their bank.

The numbers vary across the country. Some states (e.g. CA, FL, AZ) have distressed property rates over 50 percent. Some states (e.g. NY, PA) are under 20 percent. My own state (Massachusetts) is in the mid-30’s.

Purchasers like distressed properties because they generally sell at a substantial discount to market value, averaging 20 percent lower.”

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North Carolina REALTOR® Sherrell Smith says when it comes to your home, there are certainly things that you can do to ease the uncertainty.

“First, look at your full financial picture, along with the all of your available options. NOW.  The sooner you take an objective look at the situation and your options, the sooner the remedy can begin. However painful it may be, it is crucial that you open the mail and answer the calls.  Keep abreast of what is happening, know where you stand, and find out what assistance is available.

I cannot stress enough to stay in contact with your lender and get assistance as early as possible! Although it is human nature to avoid asking for help, in the end you are wasting valuable time and may be limiting your options for assistance. Remember, foreclosure doesn’t happen overnight.

Also, be very truthful to yourself and your lender when completing documentation.  Our emotions may say keep the house at all costs, but reality may indicate that now is the time to pursue other options – such as a loan modification or a short sale. 

Knowing all of your options will help you make the best decision possible. I’ve met with customers who chose a loan modification only to continue to struggle to meet their obligations. They wished they would have known their other options or had acted sooner.  Conversely, there are some homebuyers who chose a short sale only to find that their perceptions of market values based on national home values were inaccurate and would have made a different choice if given the chance for a “do-over.”

Our respective financial situations and personal goals dictate the path we should take.  Take some time out and determine your fundamental goals whether they are peace of mind, financial or emotional investment in our home, or something else. Let that guide you in your choice, but act now.

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Manteca, CA REALTOR® Jeffrey Reyes believes that using a loan modification to avoid foreclosure has gotten a lot of bad press lately.

“I share the same serious questions that homeowners ask me all the time, ‘Why don’t they work?’ and ‘What is the bank looking for? What is the secret formula?’

So I went on a search to the answer to those questions and here it is. According to a large mortgage lender, the formula that they use is fairly simple to pre-qualify a loan modification  When you add the current loan principle balance with all late payments, charges and fees together, if the total is less than the original loan principal, then you pass.

Unfortunately in the lending world of five years ago, when interest-only loans were all the rage, no one has paid down their mortgage principle enough to make that formula work. That’s the first big problem.

The second big problem with a loan modification is it’s not a principle reduction. When you have to move for some reason a few years from now, you still owe the full principle left on the loan. This illustrates that a loan modification to avoid foreclosure is really just delaying the inevitable.

The third and maybe biggest issue in the whole loan modification process is the investor. Let’s assume that you fit the initial criteria and you are put into a trial loan modification. You make your payments on time every month for six months and then we all know what happens next. The bank denies you and you now owe full payments for the last six months on top of the old late fees and other missed payments. WHY? Why were you denied? You did what they asked, right? The reason is not the bank mostly, but the investor.”

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Q: We are in the process of buying a foreclosed house. The house needs repairs to meet FHA requirements. We were told that we could make the  needed repairs on the house to meet loan requirements. Then two weeks before closing we are told we cannot do this. This is after getting quotes and documents from the bank. If we go past our closing date we will be charged $50 a day until closing. What can we do?
~ Kelly

A: First of all let me say that it’s unfortunate that you are in this situation to begin with. As an experienced REALTOR® I can tell you that I would normally not recommend a foreclosure home to any of my FHA clients unless the  bank is willing to make repairs prior to putting in an offer.

This is a common problem with bank owned properties and there are some banks that will help out to a certain point, like putting in a stove and a refrigerator, and some that will do absolutely nothing.

My first question to you is whether you are being represented by a Realtor and whether your lender was aware that the home was a bank owned? Either of these professionals should have been able to advise you as to the pitfalls with trying to purchase a REO (bank owne) propery using an FHA mortgage.

Most banks will not allow a third party, being you the buyer, to make any repairs to one of their REO properties prior to closing. It’s both an insurance and liability issue for them and for you. If you were to make the repairs and the loan never funded or for some reason the deal falls through you would be out of your investment and the bank could be involved in litigation that would tie up the property.

Unfortunately the only thing you can do is to try to get the bank to do the repairs or walk away from this one and learn for the next one. You should at least be able to get your deposit back as long as your contract was an “As Is” contract.

If you have issues getting the bank to agree to repairs or to refunding your deposit, talk to the Realtor’s broker and complain.
~ Lou Sansevero

Lou Sansevero is a Realtor with The Realty Gurus in Sarasota, FL.

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A: Kelly, I’m genuinely sorry to hear about your situation.  The problem seems to be that you needed a 203K loan, which gives you a mortgage for the full amount of the cost as well as required repairs.  It is not the “norm” for one to be allowed into a home to make repairs for which they don’t own the home yet.  I strongly suggest you seek the guidance of an attorney to find out what your options are. Good luck!
~ Maria Picardi-Kenyon

Maria Picardi-Kenyon is a Realtor with RE/MAX Tri County Realtors  in New Jersey.

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Eileen Smith, a REALTOR® from Tucker, GA cautions “Don’t let one of these myths land you and your family in foreclosure”:

“A short sale can be an excellent solution for homeowners who must sell, and owe more on their homes than they are worth. Unfortunately, a number of myths about short sales have developed, and it is important to understand the reality of this process should you find it meets your current needs.

Myth #1 – The Bank Would Rather Foreclose than Bother with a Short Sale – This is one of the most common misconceptions. The reality is that banks do not want to foreclose on your property because the foreclosure process is incredibly costly. Banks, investors, and even the federal government have all publicly stated that if a person is qualified for a short sale, the deal needs to be considered. Overwhelmingly, banks receive more on their investment through a short sale than a foreclosure.

The qualifications for a short sale include:

1. Financial Hardship – There is a situation causing you to have trouble affording your mortgage.

2. Monthly Income Shortfall – ‘You have more month than money.’ A lender will want to see that you cannot afford, or soon will not be able to afford, your mortgage.

3. Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

Myth #2 – You Must Be Behind on Your Mortgage to Negotiate a Short Sale - While this may have previously been the case, today lenders are looking for verifiable hardship, monthly cash flow shortfall, or pending shortfall and insolvency. If you meet these three requirements and believe that you soon may be unable to afford your mortgage, act immediately. Any delay could limit your options. Do not wait until the countdown clock to foreclosure has started and you have even less time left.

Myth #3 – There is Not Enough Time to Negotiate a Short Sale Before My Foreclosure – This is a myth that probably hurts homeowners the most. Many do not realize that foreclosure is a process, and that there is time to make decisions that may result in better outcomes. The foreclosing party—in most cases a lender—can stall a foreclosure up to the final day of the process. Today, many lenders will stall a foreclosure with as little as a phone call from you explaining that you are trying to sell, and almost all lenders will stall a foreclosure with a legitimate contract. For real estate professionals who understand foreclosures and short sales, there is time available until the foreclosure process is complete.”

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Kentucky REALTOR® Daren Bailey says no, but points out some things you might want to consider before deciding whether to buy or not.

“If you have good credit, money in the bank and want a new home, there might be an opportunity for you.

Recent news has focused on the ’shadow inventory’ looming down a dark alley waiting to pummel the real estate market. From what I have read there are a few different definitions of shadow inventory, but a simple explanation is that it is made up of the foreclosed homes the banks have taken back in inventory but have not put on the market to sell yet. Others also include homes that are in default, but have not started foreclosure or completed the foreclosure process but are heading that direction. Estimates are 2 million to 8 million homes make up the shadow inventory. Low end or high end, we are talking a bunch of homes.

For buyers that are in good financial shape, here is where your opportunity may be. With banks trickling these homes on the market, that should put downward pressure on home prices. For the banks, the purchase price is more of a business decision and emotions are taken out. In addition, traditional homeowners are looking for a bottom line net to either take to their next purchase or pay off the current mortgage or mortgages and they have less flexibility. Where the banks can take a loss, typical homeowners cannot without going through the long drawn out short sale process.

I also think recent home sale prices for first time buyers has been inflated a bit because they knew they were getting the $8000 tax credit. First time buyers are going to be stingier and be able to negotiate better.

So, if you are considering buying a home, do your homework, know the area you are looking in as well as the home prices; and when a deal comes, you are ready to make your move and help get rid of the shadow inventory that is coming.”

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We recently answered the following question on REALTOR.com® Blogs. Here are some additional answers:

Q: Is it common for a Realtor/owner to have the utilities turned on when showing a house? Or does the buyer usually have to do that? Also is cash an acceptable payment or is a cashier’s check more appropriate?
~ Taylor

A: Hi Taylor – great question! About 99% of the time the utilities are left on by the current Sellers. Cash is always an acceptable form of paymen,t however to protect all parties I recommend certified funds.

I hope you found this response helpful as you move forward with the buying process!
~ Kristi Porter

Kristi Porter is a Realtor with Keller Williams Legacy in Shawnee, KS.

A: Hi Taylor – This is a question that has several answers. A homeowner, when occupying a property, almost always has the utilities on. Usually even when a homeowner vacates the property, the utilities are on. There are situations when a house has been foreclosed on, or a house is under contract with a relocation company, that the agent representing the lender or the re-lo company will then have all utilities turned on in his/her name. The agent will then be reimbursed for these expenditures by the Lender or the re-lo company.

In today’s climate, we have situations where sellers abandon their homes prior to a foreclosure or a short sale, or a property that is vacant and the seller/agent is attempting a short sale. In this case, the agent may have the utilities turned on; but there is no guarantee that the agent will be reimbursed, or make the sale. In this case we do have some properties without the utilities turned on, and when we get an offer from a buyer, the buyer will have the utilities turned on prior to doing any inspection on the property.

The only time you would write a check (rather than cash and it could be a personal check) is if you were reimbursing the agent for the cost of utilities and you did not directly call the utility company. Every situation is a little bit different and that’s why there are several possibilites.
~ Lesslie Giacobbi

 Lesslie Giacobbi is a REALTOR® and owner of The Giacobbi Group in Orange County, California.

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