Archive for November, 2010
During the past couple of months I have been monitoring and answering Real Estate Question posted on Trulia and Zillow. I think people ask some good questions and are seeking clarity about local Real Estate Markets and want expert advise from realtors.
I am going to share some of their questions and print my answer to them:
“Short Sale vs Foreclosure: Can we actually owe the bank money in a Foreclosure? Can someone tell me how a foreclosure can demand money from us, and how we can avoid this in either a short sale or a foreclosure?”
What you seem to be eluding to is a “deficiency judgement” after a short sale or foreclosure. The deficiency amount is the difference between the amount owed on your mortgage and the amount the lender receives in a short sale. The lender can require you to sign a “note” for the remaining balance. This “note” is unsecurred.
A 1099 is something different. A 1099 is often sent to the seller after closing and is also on the deficiency amount owned to the lender. You would have to report the deficiency amount as part of you income for tax purposes.
When doing short sales we always try to get the lender to forgive the seller on their debt. I have yet to come across a situation where they required the seller to sign a note. If that does happen the lender can guarnish wages to collect the defiency amount but then you have the right to file for bancruptcy as a way to protect you from ever having to pay this deficiency.
“Foreclosure and retirement. We have 2 homes. A primary home in Chicago with no equity and losing value and a short term rental in Florida.”
Why have you not considered a short sale for both your primary residence and your investment property. You would be better off doing a short sale than let them both go into foreclosure.
Short sales can be done for both primary and investment properties. If a short sale is not accepted then try to negotiate a Deed-in-lieu of foreclosure for both properties.
You should consult with an attorney and tax consultant to protect you against any and all future claims against you since you are looking to retire in the next couple of years.
“Some foreclosures seem quite hight in price for what the house has are banks willing to negotiate price or closing fees?”
When banks finally put the property on the market as an REO it has been through an internal evaluation process with a Broker Price Opinion (BPO) done by a Realtor or an Appraisal from a certified appraiser.
Often the investor of the loan is the person who agrees to a certain “Net” dollar amount they want at closing and often these BPO’s are manipulated to reach that “Net” dollar amount and thus the reason why so many REO’s tend to be listed high.
But remember buyers set the price by writing offers on properties. If nobody writes an offer prices will come down.
REO’s want offers and often prices are reduced every 30 days if no offers are received.
My only advise is do not over pay for something and not every deal is a good deal.
LET THE BUYER BE WARE.. STILL HOLDS TRUE IN TODAY’s MARKET..
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November 19th, 2010 categories: For Buyers
The information below comes from the MLS and Relaist’s data.
Sales Statistics for Cook County IL
|Property Type||Month/Year||Total Sales||Median Price|
There are currently 3,243 fewer homes sold in 2010 when compared to 2009. This represents a decline in total homes sold by 17%. The Median Price of a home in 2009 was $205,000 and in 2010 it is $193,000. This Median Sale price reflects a decline in home values of 6%.
There are currently 3,433 fewer condo sales sold in 2010 when compared to 2009. This represents a total decline in total condo sales of 27%. The Median Price of a condo in 2009 was $220,000 and in 2010 it is $198,000. This Median Sale price reflects a decline in condo values of 10%.
It is interesting to note that Median Sale price of Condos is higher than Single Family Homes.
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What is an FHA Approved Short Sale? Well I am about to explain it to you by example. The picture below is one of my listings and it has already a Pre-Approved Short Sale by FHA. What are the benefits to a buyer looking in today’s real estate market? 1. Pre-Approved Short Sales mean no more waiting for the Bank to respond. It is ready to close as soon as the buyer is ready then a closing can be scheduled. 2. FHA has already had the property Appraised by an FHA appraiser. No guess work on what it’s worth. 3. FHA has pre-determined Net to closing they want to receive at Closing. 4 FHA will assist buyers with some closing costs as long as the Net amount is within the amount approved by FHA. What are the Qualifications and Benifits to a Seller? 1. Sellers must have an FHA mortgage and have a hardship. 2. Sellers will be given 120 days to list and sell their home and another 60 days to close after receiving an offer. 3. FHA will convert any home not sold within the above time frame to an automatic DEED-IN LIEU. 4. Sellers will receive assistance from FHA to move out the home. Most incentives are around $750.00 on the HUD-1. Any homeowner who has a FHA mortgage should consider an FHA Short Sale.
5701 Sheridan Unit 16- R Road Chicago, Il
WOW… WHAT A GREAT PRICE FHA APPROVED SHORT SALE!!!
List Price: $93,000
1 bedroom/ 1 bath unit with additional room which could be used as a den/office or bedroom. Convenient location. Near Lake, Lake Shore Drive (LSD) and Beach. Deeded Parking, Full Amenity Building with Doorman, Laundry Room.
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Four years into the housing crisis, myths about foreclosure still litter the minds of even the smartest of real estate consumers. When it comes to matters as high stakes as your home, confusion can cost you thousands – or even your home. Whether you’re a buyer looking at foreclosures, a homeowner struggling to keep your home or a seller concerned making sure your home can compete with the foreclosed homes on your block, these foreclosure myths are prime for the busting, with no further ado.
Myth #1: Foreclosure happens fast. With unemployment and underemployment still affecting nearly 1 in every 4 Americans, no one is immune from fears that a pink slip might quickly turn into a foreclosure notice. According to NeighborWorks America, nearly 60 percent of families seeking foreclosure counseling cited a lost job or cut wages as the reason they were facing foreclosure.
While the Obama Administration’s Home Affordable Programs haven’t been nearly as effective as predicted in actually preventing foreclosures, they have had the effect of extending the foreclosure process for many families. Even though the legal process of foreclosure can happen in as few as 6 months in most states, it is currently taking much longer for the average foreclosure to get to completion. Recently, JP Morgan Chase revealed that their average borrower who loses a home to foreclosure has not made any payments in 14 months nationwide; 22 months in FLorida and 26 months in New York.
To be sure, some see this as a good, others view it as unnecessarily dragging out the overall market’s recovery. Many insiders will point out that these delays in foreclosure may be calculated to save the banks the costs of owning and maintaining foreclosed homes, not to help homeowners. In any event, the fact that foreclosure does not happen nearly as fast, in many cases, as expected does give families who are temporarily down on their luck some extra time to try to get back on their feet and save their homes.
Myth #2: Buyers can’t get clear title or title insurance on foreclosed homes. When the foreclosure robo-signing scandal first hit, there was widespread concern that buyers would not be able to get clear title on foreclosed homes, because the former foreclosed owners might be able to come get their homes back when the improprieties in the bank’s foreclosure documentation processes came fully to light. At the same time, several of the country’s largest title insurance companies publicly balked at issuing policies on bank-owned homes until the issue was resolved. At this point, the banks claim they have revamped their processes, and all banks have stated that they have found not a single borrower whose home was repossessed without them having missed the requisite number of mortgage payments. Nevertheless, a number of governmental investigations are still in progress.
The fact is, buyers of bank-owned properties in nearly every jurisdiction are protected from later title attacks by foreclosed homeowners by the bona fide purchaser rule, under which courts would prefer to simply award cash damages to be paid by the culpable bank to a wrongfully foreclosed-on homeowner, rather than reversing the sale or ownership to the new, innocent buyer. Additionally, the title insurers have now changed their tune and restarted issuing insurance policies on bank-owned homes which protect buyers’ interests, after working with the banks for them to take responsibility in the event a former homeowner prevails in a wrongful foreclosure suit.
While there are still many intricacies of title to be resolved for foreclosure buyers who purchase homes at trustee sales and auctions, or for cash buyers who often went without title insurance in the past, on the average, Trulia-listed, bank-owned property purchased with an average mortgage and title insurance, the chances a buyer’s title will later be successfully challenged by the foreclosed homeowner on the basis of robo-signing? Exceedingly slim.
Myth #3: Buyers should wait for the shadow inventory to be released. Many a buyer, discouraged with the homes they see on the the form in their price range, has decided to sit still and wait for the banks to release for sale what is called their “shadow inventory” – rumored to be anywhere from 4 to nearly 6 million homes that have already been foreclosed, but not listed for sale, or will be foreclosed in the near future. The fact is, to the extent that the banks have acknowledged the existence of a pool of homes they own but are not selling, they have expressed that their reasoning for holding the homes off the market is to avoid flooding the market and driving home values down any further. For that reason, buyers should not expect to see a massive influx of these shadow homes onto the market anytime soon – if ever.
The banks’ current modus operandi is that as they sell a home, the replace it with another home in that market – if they sell 50 homes in a town that month, they’ll put another 50 on the next. So, don’t hold your breath waiting for a fabulous new flood of homes. Instead, set up a Trulia alert to notify you when homes that fit your search criteria come on the market, and be ready to call your agent and go visit any and every one that looks like it might be a good fit.
Myth #4: If you’re looking for a deal, you’re looking for a foreclosure. Despite what they may say, no buyer’s heart’s fondest desire is to buy a foreclosure. But almost every buyer dreams of buying a great home – and getting a great deal on it. Many people think that to get a great value on their home on today’s market, it means they must buy a foreclosure. As a result, the value and other advantages of buying an individually-owned home on today’s market are frequently overlooked. Individual sellers with homes on the market right now are generally quite motivated, and understand that their homes are competing with discounted short sales and foreclosed homes. Many of these sellers are slashing prices in an effort to get them sold – the most recent Trulia Price Reduction Report revealed that 27 percent of homes on the market across the country have had at least one price reduction. Now that’s what I call a sale!
Further, individual owners are often much more negotiable on a wide range of contract terms than a bank which owns a foreclosed home. You can work with non-bank owners on things like repairs, closing dates, choice of escrow provider, closing costs and even included personal property much more flexibly than you can when the bank is on the other side of the bargaining table. On top of that, many individually-owned homes are in pristine, move-in condition; that is much rarer with foreclosures. So, don’t underestimate the value of the deal you might be able to get on a non-foreclosed home. Just get clear on what you can afford and look at all the homes that are available in that price range, without discriminating against non-foreclosures.
Myth #5: Having a foreclosure on your credit history means it’ll take years and years before you can buy again. One of the most Frequently Asked Questions in the Trulia Voices Community by homeowners who are facing or have just lost a home through foreclosure is how long it will take before they’ll be able to buy again. Until recently, the standard wisdom was that 5 years, minimum, would have to have elapsed between the foreclosure and the new home purchase. Now, though, borrowers can obtain an FHA loan with the low, 3.5 minimum down payment requirement as soon as 3 years following a foreclosure. To do so, though, all your other ducks must be in a row.
Post-foreclosure buyers need a credit score of 620-640 to qualify for an FHA loan; higher for a non-FHA loan – given that the foreclosure itself usually dings anywhere from 100-150 points off the credit score (not necessarily counting a full year or more of pre-foreclosure missed payments), former homeowners who want to buy again need to ensure they have no other late payments or credit dings after they lose thier home. You must have clean credit with no derogatory marks like late credit card payments following the foreclosure, and you may also be required to document 12 to 24 months straight of on-time rent payments after the foreclosure.
Further, the bank may impose a lower debt-to-income ratio on post-foreclosure borrowers than on borrowers who have not had a foreclosure, in an effort to keep your mortgage payments low, keep you from overextending yourself and boost the chances you’ll be a successful homeowner over the long-term this time around. The bank will also need to see 2 years of continuous employment history in the same field, and documentation that you meet other loan qualification requirements.
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