Are you wondering what type of sale, a foreclosure vs. short sale, will give you the best return on investment?

It is often tough to decide which one will give you a better ROI but knowing the details about each type of sale, will help in making your buying decision. In most cases, both properties will usually be distressed and there are usually additional steps you will have to take as the buyer when buying a distressed home.

• The definitions of foreclosure vs. short sale: With a short sale, the homeowner receives permission from the lender to sell the home for less than what is owed on the mortgage. This is a pardon from the banks because the homeowner can no longer afford the mortgage payments but they want to avoid foreclosure. A foreclosure is a property that is now owned by the bank. The previous owners did not pay their mortgage and after falling delinquent, instead of requesting a short sale, were forced to vacate the property.
• There is a big difference in the time it takes for a foreclosure vs. short sale. Don’t be deceived by the name, “short sale” as they usually take much longer than a foreclosure. A lender has 30 days to respond to a short sale offer and up to 60 days to approve or reject the offer. After the 60 days, you must wait for closing. Just because the short sale deal is set, doesn’t mean the home will not be foreclosed. If the short sale deal takes too long, the lender may be forced to foreclose regardless of your short-sale deal. With a foreclosure you can hear back within a few days if your offer was accepted. If you are in a rush, a foreclosure is a faster route.
• In a foreclosure vs. short sale, a foreclosed home will be empty since the lender has evicted the previous owners or they have abandoned their home. Short sale properties still have the homeowners living inside. In most cases, the short sale homes are better maintained than foreclosed homes since the homeowners are still living in them. There is the chance that an angry distressed homeowner could cause deliberate damage to the home upon moving out.
• When negotiating a foreclosure vs. short sale, you usually have more negotiating power with a foreclosure. Short sales usually have limited room for negotiating, depending on how much the homeowner’s mortgage is for and what the bank is willing to work with.
• Foreclosures usually require more repairs to be made that short sale homes. In a foreclosure vs. short sale situation, make sure to inspect the home thoroughly and make sure you are aware of any major repairs needed to make the home livable. If you are buying a foreclosure, never spend more than 5 to 10 percent of your purchase price for renovations. If you do, you might be getting as good of a deal as you think.

Have you recently bought a foreclosure or short sale home? Please let us know your thoughts on the buying process. Looking to purchase? Please call The Lawhead Team at 760-518-8700.

The Lawhead Team has been staying up to date with the upcoming fiscal cliff and would like to share with our readers how it pertains to the housing recovery, particularly the mortgage forgiveness debt relief act.

Impact of the Fiscal Cliff, by Juliette Montoya-Cesena with WJ Bradley Mortgage Capital.

The fiscal cliff, the popular term for the upcoming tax increases and spending cuts if legislators fail to intervene, is weighing on the minds of most Americans. Caught up in the midst of the fiscal cliff debate are pieces of real estate legislation that housing experts say could significantly impact the housing recovery.

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

The Mortgage Forgiveness Debt Relief Act is set to expire on Dec. 31, 2012. The law, enacted in 2007, temporarily amended the federal tax code to enable taxpayers to omit income debt reduction or cancellation on their primary residence. Debt reduction through restructuring of a mortgage, for example, refinancing and debt forgiveness through a foreclosure generally qualify under the law.
 
Why the Expiration Matters

An estimated 11 million homeowners are underwater. Any homeowners who participate in a short sale that closes after Jan. 1, 2013, will be subject to taxation on the amount of debt forgiven if the law is not extended.
 
In addition, the $25 billion settlement states reached with five top mortgage lenders over the so-called robo-signing scandal urges lenders to forgive billions in mortgage debt next year and in the future. The expiration of the tax relief act could deter Americans from taking part in the settlement, according to attorneys general of the participating states.
 
Housing experts argue that the expiration of the mortgage forgiveness debt relief act law would cause significant financial pain for a large group of homeowners who are already under duress.
 
The Mortgage Interest Deduction

As legislators propose ways to reduce the deficit and avert the fiscal cliff, legislators are proposing reducing the mortgage interest deduction.
 
The mortgage interest deduction lets homeowners reduce their annual taxable income by the amount of interest paid on their mortgage. The deduction is the largest of its type in the tax code, accounting for an estimated $90 billion in reduced income tax revenue.
 
The housing industry is fighting changes to the policy, arguing it would hurt the housing recovery, and therefore the economic recovery.
 
“This is the last thing Congress should be considering when what we’re trying to do is stabilize the economy,” Jerry Howard, head of the National Association of Home Builders, told The Hill.

Do you have further questions about the Fiscal Cliff and the Mortgage Forgiveness Debt Relief Act? Please call or email us, The Lawhead Team, Because Two Lawheads Are Better Than One^TM.

If you are looking to buy a home in the near future, there is a good chance a lot of the properties you look at will be short sales.  The Lawhead Team would like to share some helpful short sale tips for prospective buyers.

A short sale is an attempt by the current owner to sell a home instead of the bank taking it back to partially save their credit and lift the burden of the huge mortgage debt they were paying.  Unfortunately, with a short sale the entire process relies on the hope that the bank will take a loss, approve the sale and eliminate the costly process of foreclosing, clearing and reselling a home.

This article, “Making an Offer on a short sale? What You Need to Know” is from Realtor Magazine.

You’re a good candidate for a short sale purchase if:

• You’re very patient. Even after you come to agreement with the seller to buy a short sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.
• Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
• You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you’re serious about purchasing a short sale property, it’s important for you to have expert assistance. Here are some people you want to work with:

• Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who’s knowledgeable about the short sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.
• A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they’ve represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)
• Title officer. It’s a good idea to have a title officer do an initial title search on a short sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it’s much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short sale properties include:

• Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
• Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
• No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.

If you are in the market for a new home, please call The Lawhead Team for all your Real Estate needs. Article can be found at: http://realtormag.realtor.org/sales-and-marketing/handouts-for-customers/for-buyers/making-offer-short-sale-what-you-need-know

As a guest writer for The Lawhead Team’s blog, I’d like to share my experience in dealing with my condo in North San Diego County and its recent short sale.

I had originally purchased my newly renovated condo in 2005, at a young age of 23.  My oh my was I proud of myself I had made such a big step in purchasing my own home at a young age.  What I didn’t realize was that it was right at the height of the market with my condo listed at a pricey $300,000.  However, I had the means to pay the mortgage, pay the down payment and live “happily ever after”.

It wasn’t always easy, scrounging up the money to pay the mortgage every month, not to mention the high HOA costs and all the other countless expenses that come with owning a home. But I did it and I wasn’t going to let that baby go.  It wasn’t until early last year, around February of 2012, I contemplated moving and needed to figure out what in the world I was going to do with my condo.  In my building of 8 units, I was one of the only two left of the original owners who had bought in 2005.  I contemplated renting out my condo however I would still be stuck with a $500 negative every month.  While my fiance and I were shopping for homes to buy, having an additional negative of $500 did not seem feasible.

On top of the negative, I was saddened to see the value of my home had dropped tremendously.  Of course, every one’s value had dropped but it seemed there was no recovering from this loss…in my lifetime anyway.  The original listing price of my prized possession in 2005, at a whopping $300,000, was now valued below $100,000!  While I wanted to hold on to my baby for as long as I could, maybe because of the pride of ownership, maybe because I’m stubborn, who knows, I knew it was time to let her go.

My previous neighbor had done a short sale on  his condo and was already repairing his credit.  It killed me to do it but in the long run I look back and am thankful I decided to go ahead with a short sale on my condo.  Fortunately my credit score was in the 800’s when I chose to short sale so I am hoping it doesn’t take long to repair my credit. A time span of 2-3 years is the average credit recovery time after a short sale.

The reason for my writing this is to let other homeowners who are upside down on their homes know that there is hope.  Don’t let your home go to foreclosure.  Taking advantage of a short sale is one of the best decisions I made.  Though it was a very bittersweet decision, I do not feel tied down anymore and my husband and I had the opportunity to buy a beautiful home for 2/3 the original cost of my condo.

Please contact The Lawhead Team if you are considering doing a short sale on your home.  They will be a true asset to you and your family.

Written by Vanessa Dakan.

Just yesterday we received a letter from the California Association of Realtors (C.A.R.) announcing new Fannie Mae and Freddie Mac Short Sale Guidelines.  See below:

Over the course of the past year and a half, C.A.R. has been working vigorously to address your concerns related to short sale transactions.  As a direct result of our efforts, we have made significant improvements through discussions with legislators, housing regulators, and lenders.

C.A.R. has long advocated for a streamlined, standardized short sale process, and I’m happy to inform you of changes announced today by the Federal Housing Finance Agency (FHFA) that will align guidelines for Fannie Mae and Freddie Mac short sales and allow lenders and servicers to quickly and more easily qualify borrowers for a short sale. 

Here are some specific changes that are effective Nov. 1, 2012:

• Eliminates current Fannie Mae and Freddie Mac short sale programs and creates a single standard short sale process for both entities (Fannie and Freddie HAFA programs will expire at the end of the year).
• Enables servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales without waiting for an approval from Fannie Mae or Freddie Mac
• Offers special treatment for military personnel with Permanent Change of Station (PCS) orders.
• Standardizes and clarifies foreclosure suspensions on a property with an approved short sale.
• May pay borrowers up to $3,000 in relocation assistance.
• Fannie Mae and Freddie Mac will offer up to $6,000 to subordinate lien holders to expedite a short sale.

Additionally, FHFA clarified that a borrower experiencing a hardship must wait at least two years before becoming eligible for a Fannie Mae or Freddie Mac loan.

These changes follow FHFA’s announcement in June that established strict timelines for servicers to respond to short sales within 30 days of receipt of a short sale offer, provide weekly status updates to the borrower, and communicate a final decision to the borrower within 60 days of receipt of the offer.

For details of Fannie Mae’s new short sale guidelines.
For details of Freddie Mac’s new short sale guidelines.

If you have faced foreclosure in the past, looking into buying a new home might be a bit trickier than for others.  The Lawhead Team would like to share some helpful tips to buying a home after you have faced foreclosure.

Many of us have experienced some form of financial hardship over the last few years such as losing our job, taking a pay cut, or a decline in the value of our investment and retirement portfolios. Many more people than some of us realize have also experienced extreme financial hardships because we have been forced to lose our homes, resulting in a foreclosure.

Losing your home can be devastating both personally and financially, but what’s important is that we do what we have to do to clean up our past and then we move into our future with hopes of making it better. One of the biggest questions that people ask when they lose their home is how long they have to wait to apply for another mortgage loan after declaring bankruptcy, foreclosing on a previous home, or having a short sale on your home.

What you need to know before you apply for a mortgage loan – There can be a lot of confusion surrounding when you can apply for a mortgage loan after a bankruptcy, foreclosure or a short sale.

Applying for a mortgage loan and being approved for a mortgage loan are two different things.  Just because you are able to apply for a mortgage loan doesn’t necessarily mean that you will automatically be approved.  Being approved for a mortgage loan depends on many factors such as your personal income, the amount of your savings, as well as your ability to repay the new mortgage loan. You have to take the necessary steps towards improving your personal finances, and being informed on the process of applying for a new mortgage loan after a bankruptcy, short sale, or foreclosure is a great first step.

Applying for a Mortgage Loan After a Bankruptcy – If you filed a Chapter 7 Bankruptcy you will have to wait 4 years from the discharge date if you are applying for a conventional mortgage or for a mortgage with Fannie Mae. However if you have filed several Chapter 7 Bankruptcies in the past 7 years you will have to wait at least 5 years to apply for a new mortgage loan.  If you file a Chapter 7 Bankruptcy and you are applying for a mortgage loan with FHA you must wait at least 2 years from the discharge date.

If you Foreclosed on your previous home you will have to wait 5 years before applying for a new conventional mortgage loan.  You will have to wait for 7 years before applying for a new mortgage loan with Fannie Mae and 3 years from the completion date of your foreclosure if you are applying for a new mortgage loan through FHA.

If you have to wait five years after financial hardships before you can apply for another mortgage loan then you have five years to get your finances in order.

Of course if you have any home buying questions what so ever, it is important to call The Lawhead Team.  They can find the answer for you or direct you in the best way suited for your situation.

Military homeowners benefit from new short sale guidelines.

There are some new guidelines being put in place for short sales and one of the beneficial ones has to do with military homeowners.

Check out the article from DS News about the new guideline for military homeowners to make short sales an easier process to sell their homes without having to first go into default.

New Guideline Will Make Short Sales Easier for Military Homeowners

Under a new guideline, military members with Fannie Mae or Freddie Mac loans will now have an easier time with short sales.

Federal Housing Finance Agency (FHFA) Acting Director Edward J. DeMarco announced in a release Thursday that military homeowners who receive Permanent Change of Station (PCS) orders can sell their homes via short sale without having to go into default first.

“It is in everyone’s interest for the men and women serving in our armed forces to focus on the important job they are doing defending our country, rather than worry about the maintenance and leasing of a property in another jurisdiction,” said DeMarco in a release. “These Fannie Mae and Freddie Mac policy changes, in combination with related guidance last fall, should now provide military homeowners with access to the immediate and automatic full range of foreclosure alternatives.”

Interesting article we came across from The North County Times about the possibility for more foreclosures to be released in the near future.

Analysts say foreclosures could rise sharply in coming months as government and lenders tighten the screws on borrowers who can’t make payments.

While the number of homeowners defaulting on their loans declined over the last 18 months in North San Diego and Southwest Riverside counties, an uptick in August could be the first sign of rough waters ahead.

Disclosures last week that some major lenders had suspended foreclosures could delay, but not prevent, a wave of property seizures as lenders review their procedures. If foreclosure rates jump as predicted, the increased supply of lower-cost homes could push down overall prices in the area. Such a dip could endanger the fragile economic recovery.

Government-controlled lenders, which own or guarantee 50 percent of all U.S. home loans, have made changes to some rules, and have sent out pointed reminders to lenders that shorten the leash on homeowners unwilling or unable to pay their mortgages. Already, some housing counselors and economists have seen signs of the new hard-line approach.

“Distressed sales are going to increase to record levels next year,” said Wayne Yamano, an economist with John Burns Real Estate Consulting in Irvine. “What’s really interesting is it’s coming from top down. Fannie (Mae) and Freddie (Mac) are starting to issue a lot more foreclosure starts, and banks typically take their lead.”

The two government-controlled lenders, Fannie Mae and Freddie Mac, have been part of a major effort for the last few years to stem the tide of foreclosures nationally.

After foreclosures skyrocketed in 2007 and 2008, state and federal agencies imposed a moratorium in the fall of 2008. But that only delayed the problem, as the foreclosure rate in North County and Southwest County rebounded to levels almost as high in spring 2009, according to an analysis of data from ForeclosureRadar, a real estate data firm.

In April 2009, the U.S. Department of the Treasury launched a series of programs that paid lenders and borrowers incentives for modifying loans or finding other ways to help borrowers who owed more in loans than their homes were worth —- a condition that became so severe in Riverside and San Bernardino counties that the total value of residential property in 2009 and 2010 was less than the total amount of loans secured by the property, according to data firm CoreLogic.

The federal loan programs allowed more than 1 million homeowners to get into trial modification programs, in which they made reduced mortgage payments while lenders assessed borrowers’ ability to pay.

Rates fall, distress lingers

The programs, combined with a 30 percent rebound in North County home prices and 10 percent in Southwest Riverside County, helped lower foreclosure rates in the region over the last year and a half by 81 percent in Southwest County and 83 percent in North County.

But underlying distress remained: In June, 15.9 percent of Riverside County borrowers and 8.6 percent of San Diego county borrowers were 90 days or more behind on their mortgages, according to CoreLogic.

In August, lenders ratcheted up the pressure on homeowners.

Ali Tarzi, director of Housing Works, a government-licensed counseling agency in San Diego, said lenders have begun warning borrowers of imminent default after 60 days of missed payments, instead of the 90 days they’d waited before.

Tarzi also has noticed that applications for modifications are being rejected more often.

“More decline letters go out, and the reasons are trivial,” he said.

And lenders in August sent more default notices, which initiate the foreclosure process, to 6.5 per 1,000 Southwest Riverside homeowners, up 77 percent from July, and 2.35 defaults per 1,000 North County homeowners, up 36 percent from July, though both figures were well below their 2009 peaks.

Once those default notices go out, borrowers can try to have their loans modified, or they can try to sell their property for less than is owed, called a short sale, or they can allow a foreclosure to occur.

But recent changes in lender and government policy could limit those options and push more homeowners into short sales and foreclosures. In June, Treasury changed the loan modification rules so that lenders have to tell borrowers whether they’ll get a modification before the trial starts, which could reduce the number of trials.

In July, Ed DeMarco, acting director of the Federal Housing Finance Administration, which regulated Fannie Mae and Freddie Mac, told lenders in widely reported remarks, “If you have an abandoned property or a borrower not willing to discuss or work with anything, then get going.”

Fannie says ‘hurry’

On Aug. 31, the government-controlled lender Fannie Mae released a statement ostensibly to announce that lenders working in four states would be allowed less time to complete a foreclosure after a borrower went into default.

But the announcement came with a complete timetable for all states —- in California, a lender has 120 days after sending a notice of default to make a foreclosure final —- and a section saying that Fannie Mae would be monitoring foreclosures, and it could impose fees for delays.

“The remainder of what was in that announcement was restating and reminding of existing policy and the importance of adhering to it,” said Janice Smith, a Fannie Mae spokeswoman.

Although the policy had existed, the announcement was interpreted by many real estate agents, economists and lenders as a new set of deadlines for completing foreclosures or short sales.

As a result, some lenders and loan servicers, who administer mortgages for investors who own them, tightened their own policies. When it comes to loans it owns, Wells Fargo & Co., which took over Wachovia in 2008, will allow foreclosures to be delayed once, and only if a short sale will be complete within 30 days of the scheduled foreclosure sale, said Mary Berg, a Wells Fargo spokeswoman. But some of the investors of loans Wells Fargo services won’t allow any delays at all, Berg said.

Policy changes from these investors and by Fannie Mae and Freddie Mac motivated the new policy, Berg said.

Gary Kishner, a spokesman for J.P. Morgan Chase & Co., said he was not aware of any similar policy changes, and Richard Simon, a spokesman for the nation’s largest loan servicer, Bank of America, declined to comment.

2011 foreclosure peak seen

After analyzing the housing landscape, Yamano and his boss, John Burns, released a report on Monday predicting that distressed sales, which include short sales and sales of foreclosed properties, would peak in 2011, and represent 40 percent of all sales nationally.

That’s up from 29 percent in 2009 and 18 percent in 2008. In a typical market, 7 percent of sales are distressed, the report said.

However, a jump in foreclosures could be delayed after Bank of America, GMAC Mortgage and Chase all suspended foreclosures in 23 states last week due to failures to properly review paperwork. California was not one of the states, but California Attorney General Jerry Brown sent letters to GMAC and Chase asking them to prove that they are complying with consumer protection laws or halt foreclosures in the state, said Jim Finefrock, a spokesman for the attorney general.

Burns didn’t think the reviews would do more than push the wave of foreclosures back a couple of months.

“All they’re doing is they’re making sure they have their paperwork in order,” Burns said.

Another housing economist, Chris Thornberg, agreed.

“You want to play stupid games on technicalities, fine,” he said. “But the reason these people are being foreclosed on is they haven’t been paying their mortgage.”

Burns’ report predicted that the distressed sales will push down housing prices 8 to 11 percent nationally, and the downward pressure could be greater in places such as San Diego and Riverside where foreclosures are likely to be more concentrated.

Michael Lea, director of the Corky McMillin Institute for Real Estate at San Diego State University, said the economy is braced for a modest decline in housing, but a high foreclosure rate could cause problems.

“If you tried to do an accelerated program and push distressed houses through the market, it could lead in parts of the country to a double dip,” he said, or a second recession.

From North County Times: http://www.nctimes.com/article_c4f05dc2-6d01-5a33-9081-ed803ee04a1c.html

With Short Sales making up a large majority of the real estate market, home buyers are forced to consider purchasing a short sale property.

While buying a short sale may not be the most pleasant real estate transaction, it is still doable and The Lawhead Team would like to provide some tips to making sure you are fully prepared to start your short sale buying process.

A short sale is an attempt by the current owner to sell a home instead of the bank taking it back to partially save their credit and lift the burden of the huge mortgage debt they were paying.  Unfortunately, with a short sale the entire process relies on the hope that the bank will take a loss, approve the sale and eliminate the costly process of foreclosing, clearing and reselling a home.

The potential buyer should keep these tips in mind:

• It is better to have a loan owned by one bank than two: If the seller has loans owned by two different banks it is a lot more difficult to approve the short sale. This is something the agent or the buyer cannot control; it simply depends on the willingness of the bank or banks involved. Buyers should know that when the seller only has loan(s) with one bank the short sale often becomes more buyer-friendly. 
• The bank doesn’t set the price, they agent and seller do: The agent and seller often create a very low asking price in order to attract buyers. The bank is normally unaware of the asking price; however, the bank has the final say in what an acceptable offer will be. Since the bank has the power to ultimately accept or deny offers, their lack of price awareness often leads to the process taking longer than anticipated. The bottom line is that the buyer needs to remain positive and patient throughout the entire process, sometimes even for months.
• Lowball offers are rarely given the time of day: Remember that the bank is typically unaware of the pricing during a short sale. When lowball offers stream into the bank they are often scoffed at and rejected, giving the prospected buyers little or no feedback. Surprisingly, it may also take painstakingly long to hear back even on good offers due to the high volume of transactions lenders are inundated with these days.
• Price should be based on comparables in the area: The agent must be sure to check recent home sales in the area to give buyers a better idea of the properties that are selling. This will give the agent and the seller appropriate grounds for an asking price that will be more likely to be approved by the bank. Checking comparables will also give the buyer a better knowledge of what price homes in the neighborhood are selling for and ultimately make them a more informed homebuyer.
• Don’t get attached to the one short sale you’ve put an offer on: Despite their name, short sales are normally not “short”. It can sometimes be a very long process. Don’t get your hopes up for just one property, keep your options open and continue to actively look at multiple properties. Buyers must remain optimistic, the right property will come along. It is usually a good idea to have multiple offers out at the same time just in case the one you want falls through.
• If you are looking for a faster deal, put an offer in on an “approved” short sale: It is important to remember that short sales are not always timely; however, making an offer on an “approved short sale” can be a quicker process. An “approved short sale” has a price that has already been given the green light by the bank. This could be due to the fact that another interested buyer made an offer that was approved, but didn’t end up buying the property. These types of short sales are some of the most highly desirable.
• The bank ultimately has all the power: The bank has all the power in approving short sales. The bank can pick the most appealing buyer, which may mean different things to different banks. Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment. Many buyers want to know if they will get a deeper discount for an all cash offer. This is very hard to predict and one will never really know until they make an offer. As long as the buyer is surrounded by a good team we would advise them to do just that.
• Buyer is responsible for any repairs: If there are improvements that need to be made on a home, even if they are necessary to get a loan, it is often unlikely that they will be done. Typically there is some sort of credit issued and the buyer must take the responsibility of fixing anything that is broken.
• Once the approval is made by the banks, you must close on or before the closing date: During a short sale there is no leniency with the closing escrow date as there often is in a traditional sale. During a short sale, exceptions are rarely made and the buyer must close on time. Because of this, it is important to take care of all loan paperwork immediately after opening escrow. We’d advise buyers to be extra prepared and try to have the loan finalized a few days in advance of the closing date. If there is going to be an issue that will prevent closing on time, a request for an extension will need to be made immediately. If the request is made early enough, many banks will grant an extension but don’t just assume it will happen.

Short sales can be a great opportunity to find your new home at a competitive price. A short sale could also be a major headache that lasts for months. It is important to have a good understanding of the factors that lead to a successful short sale to make it an enjoyable and profitable experience. Remember to contact The Lawhead Team for all your Real Estate questions and needs.

As a buyer looking at purchasing a new home, putting an offer on a short sale may not always sound appealing. Usually, it is due to the fact that short sales are usually are longer buying process than a standard sale or bank owned home sale.

If you are currently in the market, you have probably noticed that short sales seem to make up the majority of homes on the market.  Fortunately, new timelines for short sales will be in effect starting June.  We recently came across this article and thought it would be helpful information for our readers.

Fannie Mae and Freddie Mac to Streamline Short Sales to Help Borrowers and Communities

New Timelines Take Effect in June

April 17, 2012

Washington, DC – The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to develop enhanced and aligned strategies for facilitating short sales, deeds-in-lieu and deeds-for-lease in order to help more homeowners avoid foreclosure. The effort will come in stages with the first taking place this June. The new, aligned timelines include the requirement that mortgage servicers review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer.

“FHFA and the Enterprises are committed to enhancing the short sales and deeds-in-lieu process as additional tools to prevent foreclosure, keep homes occupied and help maintain stable communities,” said FHFA Acting Director Edward J. DeMarco. “These timeline and borrower communication announcements set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”

With the alignment, servicers will be required to do the following:

• review and respond to requests for short sales within 30 calendar days from receipt of a short sale offer and a complete borrower response package;
• provide weekly status updates to the borrower if the short sale offer is still under review after 30 calendar days;
• make and communicate final decisions to the borrower within 60 calendar days of receipt of the offer and complete borrower response package

By the end of 2012, Fannie Mae and Freddie Mac will announce additional enhancements addressing borrower eligibility and evaluation, documentation simplification, property valuation, fraud mitigation, payments to subordinate lien holders, and mortgage insurance.

Source: http://www.fhfa.gov/webfiles/23887/Short%20Sales%20release%20041712.pdf