short-sale

Selling a Home before the Bank Forecloses

As the closing date approached on one of my recent listings in Fairfax, VA, my clients who had moved due to a job-loss informed me that they had not made mortgage payments for the past few months. Now, when I am filling in my listing paperwork there is a section where I have to ask, “Are you current on your payments?”

The truthful answer last November was, “yes”.

But moving and renting a new place out of the area takes money, and it is easy to picture the financial strain on any family’s budget.

So, there we were approaching an early March settlement and the truth finally surfaced requiring me to recalculate the Seller’s net proceeds. Proceeds? Well, like many folks, this client was upside-down which means they owed more than the property was worth and they knew that they would have to bring cash to the table to sell the home.

But now it was “x” + 5 months of mortgage payments!

Home Sellers bring money to the table to close the sale

Are you thinking that they should have done a short sale? If you have read my posts on the subject you may know why I’m not a fan of pushing sellers into that mine-field of possible deficiency judgments. I do have to warn you of these things! Here is another opinion.

The new numbers were still do-able thanks to some help from their family, and we were headed to settlement as planned until… the buyer’s agent called to say there was a glitch in the sale of his client’s place. Yes, we understood it was contingent on that sale but things had looked firm until the 11th hour.

And, at that 11th hour we got the notice withdrawing from the contract. We were back at square-one now with a looming foreclosure situation.

But then, within a week, the same agent called back to say, “their financing has been approved and we are closing today, is your place still available because my client wants to buy it?”

Obviously the answer was yes! Are you still following this roller coaster?

The Homer Seller’s emotional roller coaster…

Since the old financing had expired and the buyer had to “re-lock” his rate, the new RESPA rules require a “cooling-off period” of seven days before a loan can be closed.

So there we were, on hold with everything teetering in the balance… and then the F-bomb dropped.

Phone rings: “This is Doug,” I said in my upbeat, breezy, yet professional way.

Client: “Hey, I just got a letter from my mortgage company’s law firm saying they are going to FORECLOSE if I don’t get my account up to date, paying $17k-something before April 1, 2010.”

Doug: “Wow, that’s right when you are gonna close. You are really going to need a Virginia real estate attorney to check this out, so why don’t you give John a call at …”

To make a long story short, the attorney advised him to pay the amount to catch up and then sell the place as planned at the end of March. My client took this advice and Fed-Ex’ed a certified check to the mortgage company’s law firm in Maryland.

“Received” they told him the next day and that they would notify his big city mortgage company he was “reinstated” and in good graces.

But, that law firm never sent the check to the big city mortgage company, and my client’s account continued to be flagged “FORECLOSURE”.

So, there we were on March 31st and all set to close, buyer was ready, seller was ready, but the existing mortgage company said “no” because the account was still flagged as a “FORECLOSURE”.

Folks, this is one example how everything can fall apart at the last minute. When you read about the government relaxing rules to make the process easier whether it be a short sale or a foreclosure, please keep in mind that these are unique, often complex situations where human error can cause the whole situation to go beyond the point of return.

If you are interested, I will write another post telling the story of how this situation ended. Anyone?

Related articles by Zemanta

• Scrubs Star Facing Foreclosure! (perezhilton.com)
• Foreclosures Hit Rich and Famous (online.wsj.com)

short-sale

Real Estate short sales may just start your headache

When people sell their home for less than they owe on their mortgage it is called a “short sale”.  And these can give short-sale-sellers the impression that the agreement to repay the amount borrowed has been satisfied, and that it is time to move-on like in a traditional sale.

You pay, you stay… if you don’t, you won’t

Some of my buyer clients have bought these “short sale homes” at below-market prices which was very good for them. Buyers kind of walk away with a really good deal… if they are patient and can wait months for a written response from the bank, which has to agree to the short sale.

I have heard “real estate experts” on WTOP radio or the “TODAY Show” giving pretty flip advice about trying for a short sale if you are upside-down  (industry jargon meaning: the mortgage is greater than market value). Okay, time for my observation that should be discussed with an attorney because it is a good possibility that the bank will come after the short-seller long after the sale closes.

You’re still on the hook!

You see, when the bank sends over the short sale approval letter to be signed by the buyers and the sellers, it spells out that the bank agrees to take “x amount” for the mortgage. And if there is a home equity or second mortgage, accept “x amount” for that too.  My buyer clients have been eager to sign-on because the letter always includes an expiration date for this “short-sale deal”.

But, short-sale-sellers need to read it carefully because it will also include a sentence that says that the seller is still responsible for the debt, like, for example, the bank will accept $1,000 instead of the $35,000 owed to get the house sold. I have seen home sellers sign whatever was put in front of them thinking that their problems have finally come to an end. Or have they?

The home seller’s risk is a deficiency judgment

I always thought this was odd, and my suspicions were confirmed recently when I read an article by real estate attorney Harvey S. Jacobs in The Washington Post, and it’s an article worth reading. He pointed out that banks can use “deficiency judgments” to aggressively get their money back… and these baby’s are good for 12 years! Take a look at this article

I have an excellent real estate lawyer in Northern Virginia to recommend to people considering a short sale because you need some legal advice before you decide to sell your home as a “short sale”.

Related articles by Zemanta

• Learn about Florida Short Sales, Deficiency Judgments and More: Free Legal Foreclosure Workshop March 3 Hosted by Roy Oppenheim (prweb.com)

short-sale

Home buyers need a plan, and be ready to pull the plug…

It has taken a couple of months, but you are now walking up the stairs and into your new home. It’s actually a little bigger than you thought and you can’t wait to paint the kitchen, replace the carpet, get the FiOS set up, and turn in the keys at the old place. Maybe even take a dip in the pool!

Nice story, but this is the type of mental image that I want my home buyer clients to have in their minds before we start looking for houses. Setting a goal is important and visualizing the ideal or “perfect scenario” makes it  seem a little less intimidating.

Home buying is a rough sport at any level:

• first-timers
• move-up
• retirement (move-out).

The primary complaint that I hear from today’s home buyers is… there is nothing to buy! Well, there are homes to buy depending on the region of the country you are in, and many of those homes may be short-sales (where the seller is asking the bank to forgive his loan for less than he owes) or foreclosed homes (a bank is the owner and seller). In either case, these homes may have issues like needing a lot of updating or fixing up, being sold strictly “as-is”, or the sale is a long-shot to ever get to settlement.

Even with the $8,000 first time home buyer credit, a home that needs all new appliances or carpeting isn’t that attractive. And a first time home buyer may understand why some homes went into foreclosure, like homes overlooking the Beltway or backing to an industrial area. And many people feel uneasy about buying anything for $400,000+ strictly “as-is” – yes, they ain’t fixin’ nuthin’.

Okay, these scenarios may have scared some of you away but for the person looking for a good home at a discount (from even 1 year ago) and a mortgage rate around 5% then this is the perfect opportunity. Yes, the affordability index is off the charts.

I tell clients to not get emotionally attached to any home until we have completed the home inspection. This is always a contingency included in my client’s offers because our contract specifically states that “the Purchaser may void the contract” after the inspection. It is make or break time… we have a contract, is it still worth it? If not, then we submit the notice to the Seller declaring the contract void and the home buyer is back looking for better options.

By having a clear picture of what you want the end to look like, making the decision to move on to another home will be much easier.

short-sale

3rd Street in Herndon, Virginia – bought!

This 4 bedroom, two car colonial wasn’t your typical short sale in Herndon, Virginia… it was much better!

Lots of space, finished lower level, big bedroom sizes. But it took a lot of work, time, patience, and a couple off-hand prayers. Took about 2 months (fast) but almost 30 days without any response to the offer! Bought in 2009.

My thoughts on the short sale process are further expressed here…

Next Page »