Archive for July, 2009
How to Sabotage a Short Sale
Looking to waste months on a short sale in the Tampa Bay area? Are you seller who wants to drive the buyer away before bank approval? Or are you a buyer looking to wait months on end with a low probability of success?
To increase the chances that a short sale falls apart, follow these 7 monumentally bad ideas below:
1. Make sure you have a listing agent who lacks experience with short sales. What does it matter if the listing agent submits incomplete packages, piecemeal, to the lender?
2. Do not let the seller sign the contract. If the seller does not sign the contract, then it is not a contract (just an offer), and the buyer can walk without repercussion. If the seller doesn’t sign, then most lenders will not even consider the offer. Worse, they many not notice or tell you for months. And if the seller does not sign the offer, then the home can remain an Active Listing in the MLS and the Realtor can keep marketing the home to find a better offer.
3. Don’t bother asking for an escrow / earnest money deposit. Why insist that a buyer put anything at risk to show they are serious? Just write that a small escrow will be delivered a few days after bank approval – that way the buyer can walk away scott free. It’s only fair, right?
4. Insist on a quick closing date (60 days) or on rapid short sale approval time line (30-45 days). This is bound to speed up the bank’s approval process…if they realize the buyer can’t wait!
5. Insert a clause in the contract stating the buyer can withdraw at any time and receive the escrow deposit back immediately – that will undoubtedly demonstrate the buyer is seriously invested in the deal.
6. Ensure that the listing agent submits multiple offers to the bank. Surely multiple offers will not: (a) indicate the home was under priced, (b) encourage a high counter offer, and (c) drag out the approval process.
7. Make a very low ball offer. Why not? After all banks are desperate to unload these homes, and besides they are receiving federal bailout money! And it’s not like the seller cares – right?
Follow these 7 tips to decrease your chances of closing on a short sale, or contact Team Bohannon at Coldwell Banker to proceed with confidence.
White House Prods Lenders to Move Faster
Frustrated with delays on mortgage modifications, refinancing and short sales? Think that banks are unresponsive? You are not alone. Treasury Secretary (and noted tax dodger) Timothy F. Geithner is pressuring the country’s largest banks to speed implementation of the federal foreclosure prevention program known as Making Home Affordable.
Many Tampa homeowners have applied for mortgage modifications from Bank of America, J.P. Morgan Chase, Wells Fargo and 21 other lender who have signed up for the program which pays lenders to modify mortgages by reducing interest rates or extending the term of the loans. Follow the link for the juicy details http://tinyurl.com/lbdn8t. For information about short sales, foreclosures and modificatons, contact Team Bohannon at Coldwell Banker today.
Are Foreclosures & Short Sales a better buy? The Lexington Oaks Example.
People call me all the time saying “I want to buy a foreclosure”. The calls tend to spike when Oprah talks about the issue. While there are many hidden costs to purchasing a short sale or a bank owned foreclosure, are they still a better deal? Leaving aside the uncertainties of short sales and the disrepair of foreclosures – can you really steal one of these homes?
To find out, we will dissect recent sale data in Wesley Chapel’s Lexington Oaks, a bedroom community just North of Tampa. Lexington Oaks was built by Pulte Homes from 1999 to 2004. Between January 1 and July 16, 2009, there were 30 closed sales of single family homes in Wesley Chapel’s Lexington Oaks:
- 21 were sold by normal homeowners
- 2 were bank owned (foreclosed / REO homes)
- 5 were short sales
- 1 was owned by a corporate relocation company
- the highest sale price was $298,000
The 21 homes sold by normal homeowners sold:
- for an average price of $179,776
- for average price per square foot of $89.09
- for 95% of the final listing price (5% discount)
- in an average of 133 days on market
The short sale, bank-owned, and corporate relo homes sold:
- for an average price of $180,544
- for average price per square foot of $82.31
- for 99% of the final listing price (1% discount)
- in an average of 169 days on market
While this is a small dataset, the raw numbers indicate a slightly better price per square foot on distressed sales. However, a closer look at the homes reveals that 6-out-of-7 pool homes were normal homeowner sales that had a higher price per square foot and skewed the data. If we normalize to account for the pool homes, the price advantage of distressed properties evaporates. We will check this data against other Tampa Bay area neighborhoods in future posts.
Another eye-popping statistic is the list price to sale price ratio. I have to restrain from laughing when people call wanting to offer 50% less than the asking price on a bank owned property. This data set is typical of our recent experiences when trying to negotiate with banks on already low prices: the average home sold for 1% less than the final listing price. If we expand the study to look at all bank owned (REO) sales in the Wesley Chapel’s 33544 zip code during the same period, the average REO home sold for 2% less than asking price.
Curious about how these numbers compare to the market peak of 2006? If we look at Lexington Oaks home sales during the same period in 2006, there were 60 homes sold:
- for an average price of $291,446
- for average price per square foot of $142.83
- for 97% of the final listing price (3% discount)
- in an average of 66 days on market
- the highest sale price was $500,000
Prices are down 38%! While it is possible to make a great buy on a short sale or foreclosed home, this data shows that normal homeowner listings should not be ignored. Act now to take advantage of a great selection, low interest rates, low prices, and the $8000 first time home buyer tax credit. Contact Team Bohannon at Coldwell banker at (813) 979-4963 today.
- by Dale Bohannon
Foreclosures in the Tampa Bay Metro Market
Florida has the 3rd highest foreclosure rate in the nation. The Tampa Bay area has had 33,906 foreclosure filings between January and July 2009. One in every 39 households is behind on mortgage payments according to RealtyTrac. See Tampa Tribune article on foreclosures in Tampa http://tinyurl.com/omqxo9
Accelerate the First Time Home Buyer Tax Credit
If you have not owned a home in 3 years, then you might qualify for the first time home buyer tax credit. While the $8000 tax credit is great, many buyers do not want to wait until next April 15th to recoup the $8000. Our trusted CPA partners may have some solutions for obtaining the $8,000 quicker: after closing, you can amend your 2008 tax return and receive the money in a few weeks. In fact, here are 4 options provided by Amol Nirgudkar, CPA & Managing Partner at Reliance Consulting:
- File an extension for 2008.
Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit. - File now, amend later.
Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit. - Amend the 2008 tax return.
Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return. - Claim the credit in 2009 rather than 2008.
For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.
The IRS website stipulates the tax credit:
- Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.
- Applies to homes used as a taxpayer’s principal residence.
- Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
- Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
The credit is claimed using IRS Form 5405. Here is a link to the Q&A from the IRS wepage on the subject:
http://www.irs.gov/newsroom/article/0,,id=206293,00.html
As always, please verify this information with your trusted tax advisor before taking action. Call Team Bohannon in Tampa Florida to take advantage of low prices, low interest rates and the tax credit today.
Making Home Affordable Refinance Program Expanded
Have you though about re-financing your Fannie Mae loan to take advantage of today’s low interest rates? Were you ineligible because your home had dropped too much in value to appraise? The Making Home Affordable Refinance program is designed for homeowners who are current on their mortgage, but who are not able to take advantage of today’s low rates because they are currently upside down on their home.
If your mortgage is held by Fannie Mae, then the Making Home Affordable Refinance program was previously applicable only for homes that had loan-to-value ratios between 80 percent and 105 percent. Since most homes in the Tampa Bay area have declined 30-50%, this made most everyone ineligible for refinance. The revised program allows loan-to-value ratios up to 125% on a 1st mortgage.
Act fast, as the Home Affordable Refinance program ends in June 2010. Follow this link to refinance your Tampa area home today:
http://makinghomeaffordable.gov/refinance_eligibility.html
Is an “Approved Short Sale” easier to buy?
Question: Is an “Approved Short Sale” easier to buy? I’m looking at a home in Tampa that says approved short sale – can close fast…is this true?
Answer: Not so much. Short Sales are approved on a case-by-case basis. A lender will approve or decline a short sale based upon a specific contract for a specific buyer. If you see a home marketed as an “Approved Short Sale”, you need to know that this is a Realtor marketing term used to convey the impression that it might not take 3 months for the lender to decide on an offer.
Most Realtors use the “Approved Short Sale” term to signal a home had a previous offer and the lender eventually responded with an acceptance or a counter offer. There is a common belief that the next buyer’s offer may have a quicker decision from the lender. In fact, we have had dozens of cases where the lender starts the process over again (with new requests to the seller for updated account statements, a new BPO, and a new negotiator).
If an agent is marketing a home as an “Approved Short Sale”, they are saying that the seller has had a previous offer and the lender went through the process of:
#1) Evaluating the seller’s hardship
#2) Ordering an appraisal or BPO (broker price opinion)
#3) Assigning a negotiator
#4) Analyzing the facts against the guidelines
#5) Presenting the offer to the “investor” who owns the note
#6) Responding to the offer.
If that buyer does not close on the property, the seller’s agent then knows that the lender has accepted the seller’s hardship; and that (at one time) the lender has agreed to a price. This is comforting, but it is not a guarantee that the process will be any faster, or that they will accept the same price the next time an offer comes along.
When a new offer comes in, especially if more than a week has elapsed, most lenders start the process over again by:
#1) Requesting updated financial info from the seller
#2) Ordering an updated Appraisal or BPO
#3) Assigning a new negotiator
#4) Analyzing the facts against the guidelines
#5) Presenting the new info to investor
#6) Based upon current business conditions / policies, the investor decides to accept or counter.
For help navigating the short sale process, contact Team Bohannon at Coldwell Banker today.
Homepath – Special Financing on Government Foreclosures
Act now for special financing on Fannie Mae foreclosures in the Tampa metro market. Go to Homepath.com to see if a property is owned by Fannie Mae and qualifies for HomePath Mortgage financing. Enter a target zip code to search for available foreclosures. For example, here are the foreclosed homes, townhouses and condos in New Tampa (33647) that qualify: FannieMae New Tampa Foreclosures.
HomePath financing is available on Fannie Mae homes with the Homepath Mortgage logo. HomePath benefits include:
- Low down payment (3%)
- No mortgage insurance or PMI
- No appraisal fees
- Easier qualification with imperfect credit
- Down payment can be funded from a gifts, grants, loans, bond money
- Flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
- Primary residences, second homes, & investment properties qualify
Act now for low prices and favorable mortgage terms. To take advantage of the HomePath program, contact your lender or mortgage broker for more information. To see foreclosures and short sales, contact Team Bohannon at Coldwell Banker.
Pitfalls of Buying a Short Sale
Wow – that is a great price! What is a “short sale”? Short sales are a large part of the Tampa Bay real estate market. Locally, short sales comprise over one third of all sales, but they often result in massive frustration and canceled transactions. While we have helped many people buy homes at fantastic prices via short sales, the process neither quick nor painless.
Short sales are still owned by the homeowner, but they require a bank’s approval to sell the home for less than the mortgage balance. The average short sale contract takes 4-6 months to close if they are approved without changes. The uncertainty surrounding if or when a contract will be approved takes a toll on many families, as lives are put on hold without much info along the way. The extended closing period may also cause you to miss out on today’s low interest rates. As Certified Distressed Property Experts (CDPEs), and based on our experience in the field, we have compiled a list of issues that could derail a sale:
Seller Modifies Loan
The seller might end up modifying or re-financing their loan, causing the lender to decline the sale.
The White Knight
We have seen family members offer gifts or last minute loans to help loved ones avoid foreclosure.
Running Out of Time
Once a homeowner starts missing payments, the clock is ticking for the foreclosure process. The home may be foreclosed before a short sale is completed. By Florida statute, a foreclosure can happen in 180 days, but in practice the process is taking much longer. Having an short sale offer in to the bank is not guarantee that a foreclosure will be postponed.
Rejection of Hardship
Banks are not in the business of rescuing Tampa area homeowners who are disappointed that their home has declined in value. To qualify for a short sale, a homeowner must demonstrate a true hardship, financial insolvency and a shortfall of income. The short sale is likely to be rejected if the homeowner has other funds, other properties, or money left over at the end of the month.
Rejection of Price
The asking price for a home is set by the owner and the Realtor, not the bank. There is no guarantee that a bank will agree to the asking price, let alone anything less. There is a financial incentive for banks to approve short sales, but they are not giving these homes away – especially since the homeowner is on the hook for the loan(s). If your offer is way below fair market value, chances are it will be rejected and you will have wasted months.
Inaccurate Valuations
A bank might reject the offer based upon an inaccurate valuation. After receiving a short sale contract, banks will want to determine the value of a home. Rather than pay an appraiser $400 for a formal home valuation with true comparable sales, banks hire a outside Realtors to determine market value. Known as a BPO (Broker Price Opinion), these valuations can be inaccurate. They are often completed by inexperienced Realtors for prices ranging from $20 to $50. Many BPOs are done without visiting or entering the home, and the Realtor might not even live in the same market area or have a lockbox key.
Loan Sold Midstream
We have seen loan(s) sold to another lender during the short sale process. As banks often sells large numbers of loans at once, the loan may be sold to a collection company or another bank that might not accept a short sale. We have had this happen with megabanks such as Wells Fargo, SunTrust and others in the midst of consider a short sale.
Conflicting Demands from Multiple Lenders
If the seller has more than one mortgage, then both lenders must agree to the short sale. In order to clear all the liens and complete a sale, the first mortgage holder offers a settlement with the second mortgage holder. The first mortgage holder and the second might disagree on how much the second should receive. We had a case where the policy of the first mortgage holder (who happened to be Fannie Mae) stated that they would only pay a certain amount to the 2nd mortgage holder, and the national policy of the 2nd mortgage holder required a higher amount..so the buyer wasted 5 months of waiting.
The HELOC Payback
If the homeowner has a Home Equity Line of Credit (HELOC), they may be in for a rude surprise. Megabanks are not allowing people to walk away from HELOCs. Many banks are requiring homeowners to sign promissory notes to repay 85% of the HELOC before approving a short sale. Since homeowners are often expecting a “get out of jail free card”, many are not able, prepared or willing to agree to these terms and the sale could be canceled after many months of waiting.
Deficiency Judgment
The bank might agree to the short sale, but the homeowner might not agree to the bank’s terms for the sale. Even if a lender approves a short sale, they might require the sellers to sign a promissory note to repay the deficient amount of the loan. These terms might not be acceptable to a financially desperate homeowner, who could cancel the sale. Rather than accept a deficiency judgment and be obligated to pay back the shortfall, a home owner might decide to take their chances in bankruptcy or foreclosure.
After Bank Approval
The lender reserves the right to cancel the sale at any moment up until closing. We have had short sales approved only to see the loan sold or the sale canceled a few days before closing. Sometimes one department within a bank might not know what another department is doing. As financial pressures mount on banks, we have seen sales canceled at the last moment based upon the financial considerations of the bank (for example: banks may not want to recognize the loss within a certain quarter, or they may not want to write down the value of their holdings while being audited).
There are many other pitfalls to consider. If you are comfortable with the uncertainties of the short sale process, contact a Certified Distressed Property Expert (CDPE) at Team Bohannon today for more info.
Tampa / Hillsborough County School Assignment Look-up
With new schools opening and school boundaries changing, what school will you child attend next year?
Click the link below to find out which schools are assigned to your home address:
http://apps.sdhc.k12.fl.us/locator/
The Hillsborough County School District (SDHC) in Tampa, Florida is the nation’s 8th largest school district. The SDHC’s School Locator is also an invaluable tool for those looking to purchase a new home. To speak with someone at Hillsborough County School District’s Pupil Assignment office, call 813-272-4090 or 813-272-4093. To speak with a Realtor about homes, contact Team Bohannon at 813-979-4963.
