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Whether you are pro or con government intervention, the bottom line is that the recent moratoriums and loss mitigation programs are going to yield another 7 million or so homes for sale. Like a parallel universe, these properties are poised to enter the real estate market from the famed shadow inventory. But buyers of investment properties stand to take advantage of some incomparable foreclosure opportunities.
These shadow inventory properties are currently in foreclosure or are headed that way and are just not yet on the market. So while the government’s efforts to decrease foreclosures have backfired, the foreclosure purchase opportunities will be rampant for investors.
The National Association of Realtors has reported that there are currently 3.6 million homes that are unsold; we are now looking at twice the current inventory that will be available to investors and even to homebuyers looking for foreclosure opportunities.
In addition, since the governmental modification programs and refinance programs didn’t avail themselves to homeowners who were either too wealthy or owned too much on their homes; a very large percentage of the shadow inventory homes are luxury class. Many of these homeowners have given up and have vacated their homes.
These are the hot real estate investment opportunities: the chance to buy a high-end investment property by offering a home owner a short sale proposal. And while we need to reiterate that short sales have to be processed through experienced short sales Realtors, these are the veritable spoils of war that make for brilliant real estate investments.
There are certain circumstances that dictate short sale eligibility, but there are just as many circumstances that can cause short sales to fail.
For example, there are about (15) components that comprise an effective short sale package. Five of these documents include:
- The seller’s financial information
- The seller’s hardship letter
- The comparative market analysis (CMA) of the home
- The fully executed purchase contract (signed by both the buyer and the seller)
- Written proof of the buyer’s ability to purchase the property
Different lenders will dictate how they want all the information delivered, but just about all of them want a proposal cover letter or a “table of contents” page to facilitate their review of the file. Let’s face it…they can pretty much ask for whatever they want.
But with all the things that can go wrong with a short sale, one of the most common reasons short sales fail is due to an incomplete submittal package. If an incomplete package is delivered to the lender, many of them won’t stop to call and tell you what you need to do to rectify it; they’ll just set it aside. They may eventually get around to contacting you, but they are going to handle the ones that provided a complete short sale package first.
When time is of the essence and there is not a great deal a borrower can control, our advice is to control the things you can. So, follow the instructions of your short sale specialist to the letter, compile all the requested detail, and make sure everything is accurate and valid. It can be done; you just have to do it right.
Short sales and foreclosures have become the face of real estate. Property buyers are seeking deals and distressed homeowners are either walking away from their homes or trying to emerge from their situation as unscathed as possible.
The best way to avoid foreclosure is to pursue alternatives like a short sale or a loan modification. Don’t run from the obligation, but instead confront it head on with an experienced Realtor and your lender to determine the best approach.
Besides the obvious impact to the homeowner of losing the home itself, a post-foreclosure credit score will take a hit of at least 200 points and the homeowner’s credit history will reflect the foreclosure for seven years.
But the ripple effects continue. Both the neighborhood of the foreclosed home and the surrounding community are adversely impacted. Along with the equity, the value of those area homes declines and the likelihood of theft and vandalism increases.
Obviously there is lot at stake. A targeted approach with your lender, a licensed Realtor, and possibly a legal resource will potentially help your situation, maintain the integrity of your neighborhood, and eventually restore some balance to this market.
Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).
Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.
Here are a few reasons why:
On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.
Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.
There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.
If I can answer any questions you may have about how these changes could impact you, call me at 727-488-9747. We always enjoy helping our clients!
Search for all the Foreclosure properties in Tampa Bay.
Short sales are getting the most press these days as the antidote for foreclosure, but they do have a limited window of opportunity and entail very specific steps.
First of all, short sale eligibility requires proof of hardship; and hardship is determined by a set of defined circumstances that change the homeowner’s ability to remain current with their mortgage payments. The following situations would signify short sale candidacy:
- The failure of your business
- The loss of your job
- Divorce
- Death of your spouse
- A natural disaster
- Insurmountable medical costs
- Illness
Your Realtor will help you organize and present all the appropriate short sale paperwork to the lender, but time is a factor in accomplishing a successful short sale.
The process needs to be initiated in the pre-foreclosure phase which begins with the first mortgage payment default. The foreclosure timeline in your state starts the clock against how long you have to list the home, find the buyer, and get the sale approved by the lender.
Consult an experienced short sale realtor to assess your situation and hopefully get you out from under.
New rules from the U.S. Treasury could figure prominently in Central Florida’s housing market, where about one in every five existing-home purchases involves a short sale.
Key Points of the New Rules: Emerges between now and April; Only banks that owe the federal government TARP bailout funds must comply; New federal guidelines give lenders a 10-day limit in which to respond to sale offers; The Treasury rules, in addition to imposing a 10-day deadline for bank decisions, call for sellers to receive $1,500 moving allowances — and for the sellers to not have to repay any of the debt.
We are working closely with Bank of America in an effort to expedite any short sale they own or service.
I just explored this great opportunity if you are having a hardship and you live in your primary residence. If your 1st mortgage is backed by Fannie Mae or Freddi Mac, the FED has approved the HAMP program that will allow you to reduce your Principle & Interest to a more reasonable payment. In some cases it can reduce your payment $300-$350 in an average mortgage payment of $1500. This will allow you to save that money and pay down other bills that you may have so you can save your credit. A quick phone call and we can determine if you qualify for this type of option. Dave 727-488-9747
When making an offer on a short sale, your Realtor should establish a starting point and an ending point on a contract. You should never have a open ended contract EVER! If you only want to wait a certain amount of time or are not sure you want to commit to a longer timeframe, make your contract good for 60-90 days and so you can get out of it at any point for any reason. You can always extend the contract if you want! There can only be one purchaser of any property. A short sale is alway contingent on 3rd party approval…..the bank decides.
One or the other? If you go into Foreclosure you will most likely receive a Deficiency Judgement agains you. You don’t want this!!! Or maybe you do, I don’t know you! You should probably speak to an attorney on this matter. Banks have a 5yr. Statute of Limitations as to whether or not they send you a deficiency with in this timeframe. We have found that 20-30% of the lenders will release the deficiency at the time of the approval due to our “personal relationships” with lenders and they will state on the credit report “Paid in full as agreed”. Taking a Promissory Note from the bank at a reduced amount at 0% for 10yrs at $200/mo. is better for your credit than taking a deficiency at any point with in the next 5 years…..But you MUST pay that Note! If you are behind on your mortgage, get professional help. Your financial future depends on it!
If you are going into foreclosure and you live in your primary residence, don’t ever move out of the property! If “someone from the bank” calls you and states that there is a sale date scheduled for “next week” or the “end of the month”, speak to an attorney prior to doing anything. Chances are that these are scare tactics used and we don’t really know why. If you think about it…..if you are living in the property and are taking care of it to some degree, the Property/Asset condition is being sustained and will hold its value better than a property that is vacant, vandalized and deteriorating.
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