Treasury Department unveils new rules about ’short sales’

Lisa Bennett, REALTOR

Submitted by Lisa Bennett, REALTOR®, Atlanta Fine Homes Sotheby’s International Realty

The change would help financially strapped homeowners

December 02, 2009, The Associated Press

The Treasury Department unveiled sweeping rules this week to help financially troubled homeowners who need to sell but can’t get a price high enough to pay off their mortgages. Homeowners will even get $1,500 to help cover their moving costs.

The plan is designed to help homeowners who don’t have the income or debt levels to qualify for a loan modification under the Obama administration’s $75 billion Making Home Affordable program. The plan establishes timelines, a standard process and documents, and cash incentives for participation.

“There’s always efficiency with uniformity,” said Vicki Vidal, associate vice president of government affairs at the Mortgage Bankers Association.

Short sales, as these deals are known, reduce the damage to the borrowers’ credit record and save the lenders the cost of foreclosure. Short sales also help neighboring property values because the sales price is usually higher than what the house would fetch in a foreclosure auction.

About one in 10 home sales this year was a short sale, or an estimated 500,000 sales, according to the National Association of Realtors.

To qualify under the new guidelines:

• The property must be the homeowner’s principal residence.
• The homeowner is delinquent on the mortgage or default looks likely.
• The loan was made before Jan. 1 this year and is less than $729,750
• The borrowers’ total monthly mortgage payment exceeds 31 percent of their before-tax income.

For more information on this topic, or for the entire article, please contact Lisa Bennett at 678.531.2996 or lisabennett@atlantafinehomes.com.

Foreclosures Can Offer Deals, but Buyer Beware

Bill Rawlings, REALTOR®

Submitted by Bill Rawlings, REALTOR®, Atlanta Fine Homes Sotheby’s International Realty.  

By TARA SIEGEL BERNARD,  Published: December 4, 2009 on the New York Times.com. 

So you’re looking to buy a new home, and you think a foreclosed house may be the best deal. You’ve probably noticed, then, that many of the big banks’ Web sites are beginning to look a bit like real estate brokerages, showcasing the many properties that they’ve repossessed.

Michelle and Mark Gordon, with their daughter, Taylor, bought a short-sale house. Jamie Rector for The New York Times

These houses often sell for about 15 to 20 percent less than comparable homes in the same neighborhood, according to the National Association of Realtors. And while the banks have been careful not to flood the market with all their properties at once, there are hundreds of thousands of listings now, and half a million more expected in the coming year.

Despite the seemingly high inventory, though, anyone considering buying a distressed property should heed the classic warning: Caveat emptor, or let the buyer beware.

Closing a deal in a desirable neighborhood can be hard to do. Many aspiring homeowners have lost out to all-cash bidders. Buyers also need to search more aggressively than usual, which means figuring out which brokers have the best foreclosure listings, religiously checking for new ones and visiting the properties shortly thereafter.Buyers also need to ensure that the home is truly a good deal and not a money pit — most of these homes are sold as is.

Please click here to see the rest of the story on the New York Times regarding tips for buying a foreclosure or short sale.  

Why do banks do short sales?

Lisa Bennett, REALTOR

Banks will accept short sales when the payments are late and homeowners can prove that they can no longer afford the property, some banks require the foreclosure notice to be severed while others require just a few payments to be late. No specific number of payments must be delinquent; even one payment is enough at times for most homeowners, selling for less than what they owe may not be the most preferable solution to the foreclosure.

A short sale is however, much better than going through the entire foreclosure process, through the courts and sheriff sales, and can have a positive impact on the former owner’s credit once the sale is completed.

Instead of a full foreclosure showing on the credit history, the mortgage will be reflected as having been paid off and closed but with a settlement accepted for less than the total amount, which in turn looks better to future creditors rather than a foreclosure.

A misconception that most homeowners make is when the bank forecloses they no longer owe for the debit. The bank may be able to sue the borrowers and seek a deficiency judgement against the former homeowners.

Why bankers should be willing to do short sales. 

When a bank has too many loans in default, their lending power is weak. Every defaulting loan is like a black mark on their credit report. The bank becomes a high risk for investors, and their ability to make money decreases.

One thing to remember the banks are in the loaning money business. When the banks see a loan is in default, they are happy to try to get the  non-preforming loan off their books. The only way for them to remove the loan is to consider a short sale and take less than what is actually owed.

When a bank actually has to foreclose on a homeowner according to Larry B. Litton Jr. , President and Chief Executive of Litton Loan Servicing in Houston, state on MSNBC, banks lose an average of 40 percent of the values of a loan in foreclosures and also has to pay the taxes and other expenses on the property. Litton states “The larger the loss of values and the grater the likely loss will be, the more flexible we are.”

For homeowners if you find yourself facing foreclosure you should definitely be proactive and consider a short sale.

Sitting back and thinking your house will never sell in this market is wrong. There are investors out there looking to buy properties at a discounted amount. Your home needs to be properly marketed as a short sale from someone who has the experience in dealing with the banks.

Lenders are relying on REALTORS® for their creative and innovative way to market and sell the property. Lenders look for industry reputation, experience and commitment to confidentiality. They want REALTORS® who have working knowledge on the short sale process.

I have participated in many transactions that are short sales or foreclosure situations.  I would love to help you if you are considering this route.  Please contact me for a confidential consultation.  

Lisa Bennett

Atlanta Fine Homes Sotheby’s International Realty

678.531.2996
404.835.9600
lisabennett@atlantafinehomes.com