By David Welch, Orlando Real Estate
Guest Writer

Many potential buyers are still concerned about their job situation, even if their company has not announced any layoffs. When unemployment is almost in the double digits, people worry a lot more about their job situation. The supply side of the equation is affected by psychology too. Most sellers still believe their home is worth more than their neighbors’ homes, and many do not think that the foreclosures or the short sales in their neighborhoods impact the value of their homes. Appraisers do account for the condition of distressed properties, but many are in good condition and reflect the true market value of the neighborhood. The concern about employment, warranted or not, limits the demand for homes. The persistent denial that values have gone down is creating the excess supply of homes available for sale.

New jobs will not change the minds of sellers that place too high a value on their home, but they will ease the minds of potential buyers. Right now employers are also wary about hiring as economic numbers teeter back and forth. It is also an election year that could be critical to the balance of political power in Washington. I am sure there are employers waiting to see what happens in November before they begin to make hiring decisions. Either way, added jobs will equal added home sales.

David Welch is a self-proclaimed Real Estate Optimist in Orlando, FL.

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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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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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Q:

A: Regarding appraisals, here’s an interesting situation on a short sale: the property evaluation happens when the offer has gone into a negotiator to evaluate the value of the property. And then evaluation is given to the investor’s end of that property.

If the process takes a long time and the market is trending down, you might have to get another evaluation by the bank and then an appraisal by your lender. So there might be two or three different evaluations of the property during the process and that can affect the outcome of the sale; the price can go down or sometimes up, and there’s negotiation with the lien holders later on in the process. 

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

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A: People are selling because they’re in a situation where they have to short sale. You know, taking that emotional and financial burden off of your shoulders, it’s more important than ever to find a great Realtor who knows what they’re doing and is involved in this business on a full-time basis so they can help you with every step of the process.

This is about a win-win, so everybody in any transaction feels good about the process, even though it can be challenging, and a little bit more challenging than we’ve had in previous markets.

It’s an opportunity for sellers to move out of a situation that’s causing personal stress and be able to get that done with their integrity intact and also the knowledge that they handled everything correctly from start to finish.

Katey Shinn is a REALTOR® with Keller Williams in Pleasanton, CA.

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Good news: less Americans are underwater on their mortgages. Bad news: many still are.

Unfortunately, 21.5 percent of Americans are still underwater – many of whom have been forced to consider a short sale of their home.

Last month, the New York Times quoted Jonathan J. Miller, president of the appraisal firm Miller Samuel and a market analyst, as saying that 2010 might well be dubbed the “Year of the Short Sale.” Indeed, short sales are up 600 percent since 2008.

Miller went on to say that “a short sale is going to be the only way for many people who bought at the peak and who are now underwater to move on with their lives if they have to relocate or downsize.” And it’s a good thing that there is this option. Short sales can be a much gentler alternative to foreclosure for both sellers and lenders. This is because a short sale generally has less of an impact on the borrower’s credit history and offers larger net proceeds to the lender.

And – at the end of the day – short sales get the borrower out of a situation where they can no longer afford their mortgage, offering relief for many families. This is a very good thing.

However, short sales are not for the faint-of-heart. It can take months from the first inquiry to the final signed paperwork – and the process can be aggravating.

A short sale can take so long to complete because many mortgages are owned by multiple lenders, each of whom must agree to the process, the amount of the sale, and the timeframe. Also, banks are overwhelmed by – and backed-up with – foreclosure filings and applications for loan modifications. Basically, business is buzzing. As I mentioned earlier, short sales are up 600 percent in two years. That takes a lot of people’s time and resources.

But the year is more than half over and, indeed, it could be the Year of the Short Sale. Depending on the way you look at it, this could be a real win for our economy. Though the seller generally walks away with nothing, they get out from under a mortgage that has been bogging them down. The bank gets more than they would from a foreclosure. And the buyers – they can get some really good deals. In fact, investors are snatching up short sale properties with hopes of making some extra income renting it out short-term with the idea to sell it when the market rebounds.

So are short sales part of the answer in turning the economy around? I’d like to see how the rest of the year goes before committing to an answer. But I’d love to hear your thoughts on the matter. I’ll share your comments on future posts and answer questions. Let’s keep the conversation going.

Bob Stahl is a REALTOR® at Keller Williams Arizona Realty in Phoenix, AZ.

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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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Q:

A: Generally not. A short sale is a process to avoid foreclosure because of some form of hardship that the seller is going through.

But that’s not always the case, sometimes people are relocating out of the market area and the house they’re in has lost value. They’re moving to another area, and they have to liquidate that property. In that case if the homeowner is making the payments all through, the short sale  much less effect on their credit. But it will affect their credit in some ways.

It’s very important that a homeowner who’s having to relocate should talk to a mortgage professional prior to initiating the short sale so they understand the consequences of what will happen and how it will affect their credit. Another factor is what’s  already going on with their credit. If their credit is a little challenged at this point, during the short sale, it might just be the thing that causes their situation to be such that they can’t buy for a couple of years .

There’s not a one size fits all  answer. It has to be evaluated and assessed on an individual basis.

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

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 Q: I am currently paying off a mortgage on a condo that is worth much much less than when I bought it. On top of that, I am also looking for a new job, and will have to pay this mortgage using some of my savings for a while. What would be the best way to let go of this place that will cause the least amount of damage to my bank account and to my credit score?
~Randie

A: Randie, you are in a situation that a lot of others are in, and I am sorry that you are there. However, there are a few options:

• You can rent the property for a year with a property management company. They usually charge 10% of each month’s rent.
• You can sell it for market value or you can do a short sale on the property.

I am open to discussing your options with you to come up with the best way for you to get out from underneath your condo. Let me know if I can help.
~ Amy Downs

Amy Downs is a Realtor® with Keller Williams Realty in Dallas, Texas.

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A: Randie, depending on the circumstances, if you qualify you may want to consider a short sale; be aware however that the lenders don’t usually agree unless there is a hardship of some sort: loss of job, divorce, illness causing you to lose wages, relocation (may be a distance factor also – out of state, etc.). This will affect your credit rating as it is a “settlement for less than owed” on your credit report after the sale.

The lenders also may not even consider a short sale as you are current on your payments, they don’t have to; as long as you are paying, they don’t see a need for the short sale.

If you can, sell for market value and pay off the mortgage, even if you have to bring a little cash to closing; you may want to give that a try first.

Consult with an experienced Realtor and be sure they know how to work a short sale if you choose to attempt that type of sale. Good luck.
~ Valerie McGillivray

Valerie McGillivray is a Realtor® with Stone Ridge Properties in Newburyport, MA.

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Staten Island REALTOR® Anthony Licciardello points out that posting ads on public utility poles is illegal, so where will it lead those who seek this sort of “help” with a possible distress situation?

“Well for those choosing to explore what exactly happens when you call, I’ll save you the anxiety, and tell you what you’ll hear. Usually, like any good scam starts, you will hear a robot recorded message giving you a host of options like: press one if your behind in your mortgage or in pre-foreclosure; press 2 if your home is in disrepair or you leave overturned garbage pails on the lawn; press 3 if you like to leave your wallet on the mailbox next to the sign you saw while taking down this number…etc. I guess I’m laying it on a bit thick, but I’m sure you get the point.

A point of note: Do ‘We Buy Homes’ cash companies actually buy homes?

The answer is maybe, but likely much below market value, and in some cases only 50% of market value. If you’re in a pre-foreclosure situation and need to short sell a home, banks do a separate appraisal in approving the sale. Most banks will not approve a short sale significantly below market value.  As a matter of fact, they might not even approve a short sale below the appraised value. If the bank disapproves the short sale, they may request the buyer come up with more money. If you’re locked into a contract and the bank disapproves the short sale, it may ultimately lead the buyer to walk. You may lose precious time in completing a sale prior to auction. Realtors who know and understand the short sale process will be able to quickly navigate the sale of a home when necessary.”

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