Short Sales 101 – Part 1
Short Sales 101, Part 1
What is a short sale? A short sale is transaction in which the seller is attempting to sell their property for less than they owe the lien holder or lien holders. In almost all cases something has happened that prevents the homeowner from being able to continue to make their mortgage payments.
The difficult part of this process is getting the lien holder or lien holders to accept the short pay. Short sale properties are available everywhere and offer the potential of being a GREAT BUY. However, they usually take a long time to complete and, because many lien holders can not or will not accept a short pay, many attempts at a short sales fail. Also, many buyers give up in frustration and move on to another property because they get tired of waiting for lien holder’s approval.
Do I qualify for a Short Sale? Qualifications for a short sale include any or all of the following:
- Financial Hardship – an acceptable reason (as determined by the lien holder) causing the homeowner to have trouble affording their mortgage payment. Some acceptable reasons include; death in the family, serious injury impacting a wage earner’s income, loss of job, major reduction in income… to name just a few.
- Monthly Income Shortfall – You have more month than money.
- Insolvency
In all cased the homeowner must document the reason they can not make their payments. Tax returns, pay checks, bank statements, investment account statements, documentation from employers are part of the paperwork required.
The fact that the value of your home has declined and your mortgage payment is too high given the current market value is not an acceptable reason.
More on Short sales will be posted soon.
Call (916) 337-0658 if you want to discuss your particular situation. Each one is different.
Flora in El Dorado Hills, CA
The Lotus blossom is one of the most ephemeral of all flowers. The Lotus plant blossoms once a year if you are lucky. More competent gardners may get better results. When the blossom opens it only lasts for two or three days at best. This is a photo that I took in my courtyard in El Dorado Hills at about 3:00 PM on a day in August. It did not blossom again the next day.
BORROWER’S BACKGROUNDS MORE THOROUGHLY INVESTIGATED
BORROWER’S BACKGROUNDS MORE THOROUGHLY INVESTIGATED
Caveat emptor (Let the buyer beware!) Big brother gets a more powerful microscope!
Mortgage lenders will soon have tools to vet prospective borrowers to a degree never before available. Information provided in past rental applications, evictions and missed child support payments are a few examples of personal credit history information that will soon be available.
In the past, lenders would pull credit reports on prospective borrowers and review FICO (Fair Isaac Company) scores–a statistical prediction of a prospective borrower’s likelihood of default on a loan based on their credit history. The FICO score formula is a closely guarded secret, however, it includes borrower’s payment history, credit utilization, the length of time credit accounts are kept open, the types of credit accounts used and the number of recent searches through a borrower’s credit records.
The three credit repositories apply their respective data to each borrower and usually come up with different FICO scores. Scores range from 300 to 850 and lenders usually use the middle of the three scores.
Until now, the data available on borrowers was somewhat limited. Corelogic, a large information aggregator, was charged with developing new credit risk scores using data that has not been available to lenders in the past. Corelogic will serve as a “supplemental credit repository”, augmenting data provided by the three traditional repositories, TransUnion, Equifax and Experian.
Some of the “supplemental data” will include property ownership, mortgage obligation, property legal files, tax payment status, rental applications, evictions, credit inquiries, charge-offs, consumer-specific bankruptcies, liens, judgments and child support obligations.
The “supplemental data” is designed to weed out higher risk borrowers and help lower risk borrowers obtain credit. The jury is out with respect to how well it will work and how much damage it may do to potential borrowers.
It has not yet been decided if the new data will be included in the initial FICO score or if it will be presented as a separate number. Naturally, Corelogic will charge lenders for this data and lenders will pass that cost on to borrowers. There is no indication how much the Corelogic report will add to the cost of obtaining a loan.
Borrowers are likely to find it easier and less expensive to apply for a loan before the new Corelogic reports become available.
Select this link to view the full Inman news story:
http://lowes.inman.com/newsletter/2011/10/12/news/156410
BANKS APPROVING MORE SHORT SALES!
BANKS APPROVING MORE SHORT SALES!
A short sale is a borrower/owner’s attempt to sell their home for less than they owe to their lender(s). Once they get an offer, they submit it to the lender(s), asking for approval. In California, if approval is given, the lender forgives the borrower for their debt commitment.
For example, a borrower/owner purchased a home for $300,000 several years ago, taking out a loan for $270,000 to complete the purchase. If, and only if, he has a financial hardship that the lender(s) will accept, he can put his home on the market for the current market value, say $ 150,000. Once he receives an offer for the $ 150,000, he will submit it to his lender(s) for approval. If the lender(s) approve the short sale, the borrower/owner is of the hook for the unpaid balance of the $ 270,000 loan.
Additionally, the impact of an approved short sale on that borrower’s credit is far less damaging than a foreclosure would be. Borrowers who go through an approved short sale can usually qualify for a loan to buy another property in two years. Therefore, a short sale is a better option than most others are for borrowers who are having trouble making their mortgage payments. Of course, their financial hardship is the key.
Short sales have been a major segment of housing market activity for several years. In the early stages of the recent down turn, lenders were reluctant to approve many short sale requests. Lenders were not prepared for the volume of requests and were quickly buried with paperwork. They have been adding staff and implementing procedures to handle the volume, but not quickly enough.
Lenders are well aware of the fact that approving short sales for borrowers with legitimate hardships is far less costly to the lender than going through a foreclosure. As they get their house in order, we were bound to see an increase in short sale approvals.
We are pleased to report that all indications are that lenders are turning the corner and now approving more short sales. Select this link and read the entire Bloomberg article:
If you, or someone you know, are having difficulty making your mortgage payments and need assistance, feel free to contact us. There is no charge to the distressed homeowner for our services. We are short sale specialists.
BANK OWNED (REO) HOME SALES DATA FOR EL DORADO HILLS, CA –OCTOBER 2010
El Dorado Hills, CA REO (BANK OWNED) SALES DATA FOR October 2010
This is a continuation of our three year long monthly report on Bank Owned (REO) home sales data for El Dorado Hills, CA. This report covers Bank Owned homes sold in October 2010.
There were 13 Bank Owned homes sold in October, up from 5 in September. That September number was the smallest number of REO homes sold in one month since we have been reporting this data.
REO inventory in El Dorado Hills spiked to a 6.4 month supply in September and dropped back into the normal range wit a 2.2 month supply in October.
The inventory for all available homes dropped from a 5.5 month supply last month to a 4.7 month supply in October. A six month supply is considered a neutral market.
The average days-on-market decreased from 45 days last month to 38 days in October. None of the REO homes that sold this month had been on the market for over 100 days and four of the REO homes sold were on the market two weeks or less.
The 13 REO homes that sold represent only 24% of all homes sold in El Dorado Hills in October, within the normal 
range.
The cost per square foot of REO homes in October was $ 134, down from $ 142 the previous month. The cost per square foot of all El Dorado Hills Homes sold in October dropped four dollars, to $ 159.
The difference between the cost per square foot of REO properties and the cost per square foot of all properties sold indicates that REO homes represented a 15% savings for REO buyers in October, a little better than in September.
The overall sales price for REO homes was 98.8% of the final asking price, and 92.7% of the original asking price. And 47% of the buyers paid more than the asking price for REO homes in October.
The actual, measurable savings is the difference in cost per square foot between REO homes sold and the cost per square foot of all home sold: in July, $ 25 per square foot. That is a $ 60,000 savings on a 2500 square foot home, A much larger difference than normal.
If you have any questions about the data provided on Bank Owned Homes sold in El Dorado Hills, feel free to give us a call at (916) 337-0658. If you need assistance in finding the best bank owned deal we are the El Dorado Hills Realtor you should contact.
The data follows:
