More on the Intertwined Sticky Tricky Cobweb Net called Short Sales

There’s no doubt about it, short sales are going to be around for a while.  But they’re not for the newbie nor for those with a short fuse.  Buyers and sellers both need to take a deep breath, cross more “t’s” and dot more “i’s” than you ever thought possible and remember, “it aint over ‘till the fat lady sings.”  And in some cases, that fat lady could be singing and knocking on the door some six years after the short sale closes.

Yep. Nothing’s easy with a short sale and nothing is short either!

Real estate attorney and short sale guru Scott Drucker gave some great insight and advice the other day about short sales that buyers, sellers and the real estate agents on both sides of the transaction should note. 

Before I go on further, you’ll need to note:  I’m not an attorney and make no claims to be one.  If you’re looking for an expert, seek one out and get legal expertise.

Many know that Arizona is an anti-deficiency state.  Not many know what that means and/or what they need to know or do to ensure the lender isn’t knocking on the borrower’s door some six years later wanting to collect the amount owed.  Some agents are telling their sellers incorrect information about a deficiency release and the law suits are ramping up.

Here’s a few notes – just the tip of the iceberg, mind you – you and your agent must consider:

Before the property closes, the seller will want to obtain a written deficiency waiver.  Ah, you may say that sounds simple.  Trust me, it’s not.  More often than not, the waiver the seller gets may not be adequate.  The language in it may be unclear and not sufficient enough to prevent the bank coming back looking to collect the amount owed.  If you were a seller on a short sale, pull out the deficiency waiver and read it.  Better yet, have an attorney read it and give their opinion. 

I’ve seen short sale homes under contract for 2, 3, 4 or even 6 months or longer.  If we’re lucky, the buyer will hang in there because they love the home.  The unfortunate part is that a seller may have to cancel the transaction just before it is scheduled to close because the language from the lender does not adequately release the seller of the debt.  That leaves the buyer with nothing. No home, countless months and emotions that have been wasted and they’re back to square one. And, the seller loses the home to foreclosure and gets a hit on the credit.

Scott often talks about the 3 magical words he looks for in a deficiency waiver: release, waive and deficiency (or “full satisfaction of the mortgage debt”).  And, the release needs to apply to both the lien and to the debt.

If you’ve been down this road, you likely have a 1099C.  Just because you were issued a 1099C, that does not release you of the deficiency.

My advice to you, a potential seller considering a short sale: Get legal advice from an expert like the folks at Mack Drucker & Watson.  They offer a couple of different programs – affordable programs that will keep you back side covered.  From a consultation and document review from start to finish to a full service negotiator on your behalf.

Photo credits: Cobweb from Flickr courtesy of Jonathan Camp. Debt photo from Flickr courtesy of alancleaver_2000.

Facing a Short Sale or Foreclosure: “When can I buy again?”

Notices of foreclosure posted on the doors to Phoenix area homes are not an uncommon sight.  In recent months, reports indicate upwards of 40% of the properties being sold are the result of short sales or foreclosures.  With the recent rough economic times, a number of people are finding themselves in situations beyond their control. They may have gone through a foreclosure, short sale, or bankruptcy and are asking the question, “When can I buy again?”

Steven Johnson, Senior Loan Consultant at Flex Mortgage, LLC in Tempe put together a great chart that provides some valuable information and may help answer that question.  Of course, no two situations are the same, so don’t take it as gospel, but it gives some generalized scenarios that may be helpful.

When Can I Buy Again?

Occurrence	Fannie Mae	FHA	VA	USDA Rural	Jumbo*
Foreclosure	7 yrs from Trust Deed Date	3 yrs from Trust Deed Date	2 yrs from Trust Deed Date	3 Yrs from Trust Deed Date	7 yrs from Trust Deed Date
Short Sale	2 yrs w/ Max 80% LTV 4 yrs w/ Max 90% LTV 7 yrs – Max LTV	3 yrs from completion Date *Per FHA ML 09-52, FHA financing can be obtained in less than 3 yrs under certain circumstances*	No specific information on this yet. Assume Foreclosure rule of 2 yrs	3 yrs from Completion Date	7 yrs from Completion Date
Chapter 7 Bankruptcy	4 yrs from Discharge Date	2 yrs from Discharge Date	2 yrs from Discharge Date	3 yrs from Discharge Date	7 yrs from Discharge Date
Chapter 13 Bankruptcy	4 years from Discharge Date	1 yr of the payout must elapse & payment performance must be satisfactory. Buyer must receive permission from the court to enter into a Mortgage	1 yr of the payout must elapse & payment performance must be satisfactory. Buyer must receive permission from the court to enter into a Mortgage	3 yrs from the discharge Date	7 yrs from the Discharge Date

If you have questions regarding the above, feel free to contact Steven at (480) 222-2122 or via e-mail at sjohnson@flexmtg.net, or consult with a licensed loan consultant.

Photo courtesy of Flickr by Casey Serin.

Phoenix Feeding Frenzy.

For the last couple of days, after getting the requisite coffee brewing first thing in the morning,  I’ve logged into my email to uncover a plethora of contracts.  Yup, purchase contracts for a listing of mine in Laveen.  After the first 48 hours of the home being on the market, I have received five offers.  Two more expected in this afternoon.

Let me tell you a bit about the home: Built in 2006, this Ryland home is 1,802 square feet with 3 bedrooms, 2 baths, open great room plan near

51^st Avenue

and Baseline.  My seller purchased the home from the builder for $220,000 and added some nice upgrades.  Custom draperies mounted from the ceilings, designer paint and fixtures, even synthetic grass in the back yard.  It shows better than any model.

We all know what the market has been doing since its peak in 2006 and my seller has decided to short sell the property.  Based on the most recent sales in the neighborhood, it’s priced below the current loan amount of $126,000 and it’s being offer for $79,900.

At that price, it’s a feeding frenzy. 

The Phoenix area real estate market is seeing fewer listings in the MLS, pricing has stabilized and actually moving upwards in some parts of the valley.  Demand is increasing, especially from the investor sector and days on the market are dropping.  As of this morning, there were 21,826 active listings in the system.  That’s about half of what we were seeing a year or so ago.  The latest statistics show that the majority of activity is in the $200K and under range – homes less than $100,000 are not likely to stick around very long at all.

The offers my client has been getting range from fair to pretty attractive and we’ve reached back out to the interested parties asking for their "best and final" offer with the hopes my seller can select one to then send on to his lender for final approval.  The winning bid is likely to be above asking price, compliments of an inevitable bidding war.  That’s when the real rubber hits the road. 

From there, we’ll face challenges.  The challenge of getting bank acceptance.  The challenge of holding on to the buyer and getting an answer sometime in his lifetime.  The challenge of an appraisal coming in at or above the accepted sales price.  Picking the "right" offer means more than just terms, price and conditions - it's the unwritten "gut feeling" of the buyer being able to hang on through what is bound to be a very long, stressful period where the agents are on the phone constantly with the seller's lender trying to get an answer. 

The fact of the matter is that there is a very strong possibility that the buyer with the winning bid may not be the final buyer of the home.  I've seen countless times the buyer giving up and movng on after playing the waiting game with the seller's lender.  Weeks are likely to drag into months.  Months and months undoubetly will pass before the lender rubber stamps his approval.  Urgh.  

Welcome to the new “normal” of the real estate industry.  It’s a different world out there.

Short Sales maybe be getting Shorter

There may be good news just around the corner regarding short sales - They've been anything but short in terms of time, but new legislation aims to speed that process.

Realtors® have longe cringed when representing buyers and sellers in short sales.  Short sales have been known to take a long time - and in some cases, a very long time.  I've seen them go one for 6 months and the buyer still doesn't know if he will get the home.  That makes it tough, especially if the buyer wants to live in the home - perhaps has a family and needs a place to call home. 

Often times, a home being sold as a short sale will end up loosing the buyer because the lender won't make a decision.  The buyer ends up moving on to another property because they can't wait any longer.

And, imagine the headache - and heartache - that the seller experiences.  Thanks to the efforts of the National Association of Realtors, new legislation has just been introduced that would speed the decision process up to 45 days - The legislation, "Prompt Decision for Qualification for Short Sale Act of 2011," is great news for buyers, sellers and Realtors® alike!

Photo from Flickr courtesy of Dave Stokes.





Phoenix Area Market Trends through Feb. 2011

Phoenix 1955 from So. Mountain.  

The lastest market stats are out reporting real estate sales activity through February, 2011.  Matt Canady at First American Title put this worksheet together:

Bank owned and short sales continue to be the trend - the ARMLS STAT report makes this trend loud and clear:

 

Taken from AZ Regional MLS Feb. 2011 STAT report

Photo of 1955 Phoenix from Flickr courtesy of jczart.




Foreclosure….Now What?

Is there life after?

That’s been a question that has been asked of me a lot lately.  People are often inquiring about what a short-sale – or worse – foreclosure does to their ability to buy a home again.  My answer is always, the same – consult an attorney!

In this challenging market, where homeowners are struggling to make their payments on a home that may not be valued at what the currently owe, the decision on what to do is a tough one.  No two scenarios are the same.

If a short-sale or foreclosure is the best option for you, then what?  How does one unbury themselves and get back on track?

I had the pleasure of working with Dean Wegner at WJ Bradley on a transaction a year or so ago – a great lender, with a dynamite staff that went above and beyond to get the job done. One of the smoothest transactions in a long time, too!  That being said, Dean has just published a “must read” book that is creating quite a buzz:  Life After Foreclosure.

Here’s a very real-life guide with practical strategies you can implement to get back on track.  It discusses legal, emotional and even psychological issues that need to be dealt with so you can swim to shore.  I encourage you to check it out – Life After Foreclosure is available at most bookstores and online.

©2011 Tom Weiskopf, PLLC. Tom Weiskopf, PLLC is an AZ licensed real estate agent with John Hall & Associates serving the Phoenix area. For more information, Tom can be reached at (602) 953-4000 or via e-mail at phxareahomes@gmail.com.

2011: The Year of Change

Change.  We either hate it or embrace it.  One thing is certain - we'll always have it.

How fortunate I am to hang my license at John Hall & Associates.  Each year, my brokerage hosts an annual meeting – an event that the attendees actually look forward to attending.  The event gives the state of the state, the newest and the latest, where the industry has been and what to look forward to in the year ahead. 

The special guests and speakers read like a who’s who of the industry.  Judy Lowe, Commissioner, Arizona Department of Real Estate; Richard "Rick" Mack, Phoenix-based real estate attorney, Michelle Lind, General Counsel, Arizona Association of REALTORS, and John Hall’s own Jim Sexton and Marge Lindsay got the prime billing.  But there was so much more:  Key leaders from the Phoenix board, Scottsdale Area Association of Realtors, AAR, SEVRAR also joined us.  I can honestly say, all brokerages are NOT created equal.  To have such talent and wisdom all congregated together to share their insights and expertise was truly inspiring.  I am proud to hang my license with John Hall & Associates and work with such a talented and dedicated group of professionals where access to the industries greatest minds is always available and they're eager to assist.

Frankly, most of us are delighted to kiss 2010 goodbye.  We welcome 2011 with open arms but all need to embrace change. 

Change.  And how!  I’d say.  And for most – we’re talking more than just a new zodiac sign.

It’s a different time today than it was when I started in this crazy, exciting, fun and rewarding business.  How we did business 5 years ago – or even 2 for the matter – is no longer the case.  Short sales and REO’s have gone for less than 5% of the transactions several years ago to well over 80%.  If your agent hasn’t done or isn’t willing to do a short sale, chances are he or she should find another profession.  Short sales and REO’s are going to stick around awhile – Brace yourself, understand the facts and be prepared.

The number of licensees has dropped significantly the last couple of years.  And, still many of the “active” ones aren’t in it full time or involved with the direct buying and/or selling process.  Make sure your agent is devoted 100% of the time to real estate.  It’s the only way an agent can stay on top of things and give his or her very best fiduciary to the clients they serve.  If there not willing to do that, they should pack their bags.

Another change just around the corner is a new Arizona Purchase Contract.  At our meeting, the new proposed changes were unveiled – mainly dealing with the financing section.  Changes this past year with the lending institutions necessitate contract revisions.  AAR anticipates Executive Committee approval this week with the new changes going into effect February 28, 2011.  A word to the wise:  Make sure your agent knows how these changes will affect the buyer and the seller.  Significant money is on the table that could now be forfeited.

Technology is another roller coaster ride we all need to embrace.  Blackberry’s still hold the market but are quickly being challenged by the Android and other “smart” devices.  FLEXMLS, our computerized MLS system rolls out a new change nearly every week.  We’ve now got QR codes, digital video, new apps, digital signatures and oh-so-much-more that are allowing consumers greater access to more information on a daily basis.  Sellers should quiz their agent on how they are maximizing technology to get their property sold.

It’s going to be an exciting year – see ya later, 2010.  You’re outta here.  Change is here and we’re ready! Let 2011 bring renewed hope and optimism to us all. 

©2011 Tom Weiskopf, PLLC.  Tom Weiskopf, PLLC is an AZ licensed real estate agent with John Hall & Associates serving the Phoenix area. For more information, Tom can be reached at (602) 953-4000 or via e-mail at phxareahomes@gmail.com

Before you make the offer…

Tips for Evaluating the Lender Owned Property

So often when I’m out with buyers, we are looking at a number of homes and they tend to run together.  Some are short sales, some are “normal” where there is a traditional seller and some are bank owned properties.  All are in various states of repair and we tend to look quickly at the details as we concentrate on the floor plan, the kitchen area, the views, amount of storage, etc. 

Sometimes, we miss a few things. Or, underestimate what it might take to make it work.

As a recent buyer myself, I had narrowed my list of possible homes down to a few.  I had a tough decision to make.  The short list included one property that was being sold by family members after the original owner had passed away – more of a traditional sale.  Another was bank owned.

The traditional sale was smaller, but very well appointed. Although somewhat dated with brass fixtures and those bleached kitchen cabinets that give off a pink cast, it was built in 1996 and was very well maintained.  The expensive items had been updated with granite in the kitchen and the baths.  The flooring was acceptable but nothing to write home about.

The bank owned home was built in 1986 and was being billed as a complete remodel.  It was WOW from the moment the Porsche [by now you know I'm kidding] pulled up to the curb.  Offered at about the same price as the traditional sale home, it had great curb appeal with its adobe brick walls and tiled roof.  It was spectacular on the inside, too.  It was quite spacious with more rooms than the other home, honed travertine floors everywhere and a dramatic stacked stone fireplace.  Cherry looking cabinetry in all the baths, brushed nickel faucets and hinges.  It had an enormous lot with desert landscaping and a pool.  The home looked like perhaps an investor had bought it to remodel, and then turn around to flip it. Not uncommon. As I ventured into each new room, I kept thinking to my self, “This is it. This is perfect”. 

Put the emotion aside for a bit; peel back the blinders for just a moment.  With pen and paper in hand, I followed the tips below to help make my decision:

• 
  
  Look under all sinks.  Check for signs of leakage; evidence of repairs (or lack of repairs); age of fixtures; type of piping.  Polybutylene is a big concern. 
• 
  
  Look at and around all toilets.  Can they be cleaned or are they so stained they will need replacement? Any visible water staining at the floor?
• 
  
  Jiggle the shower fixtures – turn them on if there is water to the home.  What kind of life do they have left?  Often times, a plumber will have to tear out the tiling to make any repair.  Consider those costs.
• 
  
  Carefully look at the ceiling, especially the edges where it meets the wall, in every room, including the garage. Look for signs of staining which could indicate water leaks from the roof.  Does the ceiling texture need correcting? Was all the popcorn properly removed, or are there still remnants at vents and in the corners?
• 
  
  Mentally calculate the cost to ready the home so it can be inhabited.  Are there faucets, appliances, light fixtures, towel rods? 
• 
  
  In the kitchen, open every cabinet and drawer.  What condition are the cabinet boxes in? Is there evidence they have been repaired?  Are the shelves adjustable to accommodate varying heights of bottles and other tall items? Is there a pantry for storage? [I was out with buyers recently who fell in love with a property – it was stunning in every way and very well done, with a remarkable kitchen.  Guess what?  It was missing a pantry.  The buyers did not even notice this flaw as they were overtaken by the other features.  This critical piece was the deal breaker on that home].
• 
  
  Consider all flooring.  Does it need replacing?  Is there cracking in the grout? Is the carpet in need of cleaning, re-stretching or more? 
• 
  
  Evaluate all windows and doors.  Are they single pane or dual pane?  Do they need replacing now? Will they in the future?
• 
  
  On the exterior, evaluate the fascia and wood trim.  Pay careful attention to the landscaping.  Is it in need of trimming? Does the grade slope away from the home or towards it? 
• 
  
  If there is a pool, is it empty? If so, it will likely need to be resurfaced as the sun and heat will (not may) crack the surface.  Does the pool equipment appear in good condition?

None of the items above should be deal breakers – merely, be cognizant of the cost to make it yours.  Write down all the items discovered and put a price to each one individually.  Add them up.

These costs should be considered before you make an offer.  When it’s all said and done, does the price plus the costs of repairs still represent a good value – or at least is acceptable to you?  And, you will still get the home inspection done to fully understand what you are getting involved with. 

                                                   

In the end, the traditional sale needed nothing to be able to be lived in.  It would definitely need the rose colored paint in the bedroom corrected very soon though.  That was about it though. In time, the bleached cabinets could be refinished as the quality of the wood and the condition of the boxes was excellent.  My mental calculations on the bank owned home totaled somewhere around $50,000.  Money I would need to spend immediately just to be able to move in. 

We all know there are pro’s and con’s to every home.  I went with the traditional sale because it suited my pocket book and lifestyle at the moment.   Is it perfect? No way.  Does it meet my needs? Absolutely.  Watch for details on the house warming party – but when you arrive, don’t look too close at the pink walls.

©2010 Tom Weiskopf, PLLC.  Tom Weiskopf, PLLC is an AZ licensed real estate agent with John Hall & Associates serving the Phoenix area. For more information, Tom can be reached at (602) 953-4000 or via e-mail at phxareahomes@gmail.com.