Bank of America Short-Sale Process Revamped, Improved

Bank of America made some changes to its short-sale procedures which are supposed to shorten decision times on short-sale offers to 20 days, down from 45 days or longer.

Bank of America’s short-sale management platform, Equator, was revamped and now enables short-sale negotiators to conduct tasks like document collection, valuations and underwriting simultaneously. In addition, when buyers walk/back out of their contract, agents will have 5 days instead of 14 days to submit a backup offer.

As part of the change in their short-sale approval process, Bank of America is requiring a new third-party authorization form for short sales initiated as of April 14, 2012. In addition, there are now 5 specific documents which are required to process short sales initiated with an offer. Once these five specific documents have been submitted, Bank of America should have a decision made on the short-sale in 20 days.

If you’re a homeowner thinking of doing a short-sale or a buyer considering purchasing a short-sale, I’d be happy to give you the details and chat more about the short-sale process - click here to contact me.

Decrease in Loudoun County Short-Sale, Foreclosure/Bank-Owned Properties For Sale

The number of Loudoun County short-sale and foreclosure/bank-owned properties for sale has decreased significantly over the past few years. This is an important fact because it speaks to the health of the overall real estate market in Loudoun County. As you may know, the less the number and percentage of short-sale and foreclosure/bank-owned properties for sale, the better the real estate market typically is in general.

So here are the numbers…

• The number of new short-sales listings in Loudoun County went down by 42% from 2009 to 2011
• The number of foreclosure/bank-owned properties in Loudoun County went down by 53% during the same time.

And here it is broken down by year…

2009

• Short-sales made up 19.2% of all properties listed for sale in Loudoun County
• Foreclosure/bank-owned properties made up 9.6% of all properties listed for sale in Loudoun County

2010

• Short-sales made up 14.6% of all properties listed for sale in Loudoun County
• Foreclosure/bank-owned properties made up 6.3% off all properties listed for sale in Loudoun County

2011

• Short-sales made up 11.1% of all properties listed for sale in Loudoun County
• Foreclosure/bank-owned properties made up 4.5% of all properties listed for sale in Loudoun County

These are refreshing numbers to see after the chaos of a market we’ve had in the latter part of the last decade. These numbers and trends along with other local real estate market statistics and “street reports” backs-up the sentiment that the worst is behind us and that the local market has and is continuing to improve.

Free Capital Home Show Tickets!

Want to go to the Capital Home Show this week? Is money tight? Don’t worry…I gotcha covered! I have tickets to the Capital Home Show which I am giving away for free to clients and LoudounScene.com and LoudounForeclosures.com readers.

“Nothing in life is free!”, you say? You’re right. Here’s what I ask in return…

1) I have a limited supply of tickets and they’re first-come, first-serve so if I don’t have any more left when you contact me, please don’t be angry with me

2) When contacting me, you have to give me your real name, home address, working phone number and actual email and have to be OK with hearing from me once in a while regarding what’s going on with the local real estate market

If you’re still interested, click here to contact me for your free Capital Home Show tickets. And don’t forget to put in your home address so I can either mail them to you or drop them off at your front door (I will drop them off to you as long as you live in Northern VA and not somewhere like Richmond).

How To Buy a Foreclosure in Loudoun County/Northern Virginia

Lots of people ask me, “How do I buy a foreclosure in Loudoun County/Northern Virginia?” There are two ways - one is definitely more popular than the other these days.

Here are the two ways a consumer can buy a foreclosure in Loudoun County/Northern Virginia…

1. At the local court house steps during the foreclosure auction. (Yes, there is an actual auctioneer speaking a million miles a minute in that typical auctioneer slang)
2. On the open market (including local MLS) once the property is marketed by a listing broker of the bank’s choice.

Let’s look at the first method of buying a foreclosure in Loudoun County/Northern Virginia…

The auction method is tricky and can by filled with pitfalls. Once of the pitfalls is that you have limited access to the property before the auction so you may not get a good idea of what the house looks like or the full scope of work needed to fix it up. There are also many special requirements and nuances to an auction which are different than buying a traditional resale listed through a listing agent/broker on the MLS. Another issue is that there is a “Buyer’s Premium” of 10 - 15 percent of the sales price which you must pay on top of the winning bid price. So your $300K purchase just turned into a $345K purchase.

Even if you get past these issues, there’s one more… The “reserve” price is usually the amount due on the mortgage which is typically higher than the market value of the property. This makes the reserve amount (plus the Buyer’s Premium) an absurd amount of money for the property. The price issue is one of the main reasons why this method is used so rarely these days.

Now let’s look at the second method of buying a foreclosure in Loudoun County/Northern Virginia…

In the current market, this method is used 99% of the time because banks end up taking the property back at auction and then using a listing broker to sell the property on the open market and MLS. This  method is also less tricky - as long as you have your own Buyer’s Agent who has a lot of experience working with foreclosures/bank-owned properties and who is looking out for your interests (unlike the listing agent who is looking out for the bank). The transaction is similar to buying a traditional resale in many ways which makes for a smoother transaction than buying at auction. But it’s different in other ways such as “as is” conditions/clauses, bank addenda, etc. This is why you need a Buyer’s Agent who knows what they’re doing with foreclosures/bank-owned properties.

In addition, there is no “Buyer’s Premium”, you get to see the house before submitting an offer, you get to do a home inspection, etc.

Are you intimidated with the prospect of buying a foreclosure in Loudoun County/Northern Virginia?

Don’t be. If you go in educated and with someone in your corner, you’ll find it’s not as crazy of a process as you think. And there’s more good news…Though buying a foreclosure involves much more than buying a traditional resale, it’s a lot less hassle than buying a short-sale.

This post is the quick answer to the question. If you would like to know more or would like to find a foreclosure in Loudoun County or elsewhere in Northern Virginia, click here to contact me.

Short-Sales Get Tougher, Banks More Willing to Foreclose

Short-sales are getting tougher for sellers and buyers and banks are more willing to foreclose now than before. Compared to just 6 months ago, banks are putting greater demands on short-sale sellers and buyers and are becoming less hesitant to foreclose if sellers (and buyers) don’t agree to their terms. This practice is hurting sellers experiencing true hardship and honest buyers who just want to buy a place to call home.

Banks are putting greater demands on short-sale sellers. Here are some examples…

• Bank’s guidelines for “hardship” are becoming more stringent (and unreasonable in some cases).
• Banks are demanding more money out of the sellers’ pocket at closing - money the seller does not have.
• Banks are less willing to forgive the remaining debt especially in states such as Virginia.
• If there are multiple loans and banks involved in the short-sale, the individual banks are becoming less willing to work with each other (i.e. the first trust bank is not willing to give the second trust bank any money like they used to).
• Second and third trust banks are requiring more money (they used to be happy with $3K) and are less willing to forgive the remaining debt

By putting these demands on the sellers, buyers are being forced to pick up some of the burden for the seller or walk away from the deal and start their house hunt over from scratch. And if the buyer walks away and the seller doesn’t almost immediately get another buyer that will agree to the terms, the seller runs out of time and the bank forecloses.

In addition, banks are becoming more willing to foreclose rather than work out a short-sale deal. A well informed and reliable little birdie told me that at least one big bank (first initial “B”) is moving toward a policy of foreclosing rather than accepting short-sales. Considering my latest short-sale dealings with this and other banks, I agree.

Maybe this has to do with the banks being tired of those who are “strategically defaulting”. Maybe it has to do with the banks being bailed out and knowing no matter what they do, they’re too big to fail. Maybe it has to do with them thinking the market has stabilized so they’re holding on to inventory until prices go up and the home is worth more then than it is today. Maybe it has to do with plain old greed and arrogance. Regardless of why, it is what it is.

Banks foreclosing rather than accepting short-sales is not only hurting sellers, it’s hurting buyers. Imagine being a buyer who patiently waited 3, 4 even 6 or more months for a final response from the seller’s bank only to hear, “The bank is foreclosing. Sorry it didn’t work out.” That’s time and money wasted that you can’t get back.

If you want to  best position yourself for success, do your homework, be prepared and put yourself in good hands (a good lawyer, accountant, real estate agent, etc). And have a Plan B because there is no guarantee that the short-sale will be approved at the terms you (the seller) want.

This is true if you’re a buyer as well. Make sure you know what short-sales are all about and that you’re at the mercy of the seller and bank agreeing to terms. Your Buyer’s Agent should do as much prying as is legally possible to find out the seller’s short-sale situation and circumstances surrounding it. This will give you a better idea of the chances of the short-sale being approved and whether you should move forward with placing an offer on the property or move on to something else.

This short-sale market has been “interesting” to say the least. And it’s about to get even more interesting.

Short Sales 20% of Loudoun County Homes For Sale

Short-sales make up 20 percent of Loudoun County homes for sale. As in, for every five “For Sale” signs you see, one of them is a short-sale.

What does that mean in regards to the Loudoun County housing market?

First, let’s go back to August 2009… In a post entitled, “Short-Sales Wear the Crown in Loudoun County”, I ran the numbers and the percentage of short-sales to total homes for sale in Loudoun County was the same - 20%.

Based on a comparison of August 2009 and today, it means things are not getting worse. But they’re not getting better either.

It also means that buyers should know exactly what they’re getting themselves into when buying  a home in the area and have a real estate agent that is experienced in short-sales and can walk them through every step of the process.

When will see a decline in short-sales and a return to a “normal” market?

Once the general economy stabilizes and prices go up. Many people are underwater on their homes and can’t afford to come to the settlement table with a check for $20K, $50K or even $200K+. This means that their options are to 1) stay in the home until prices appreciate and/or they have the money to cover the loss, 2) let the property go into foreclosure or 3) try to negotiate a short-sale with the bank(s).

For more information about short-sales, check out the “Short-Sales and Distressed Properties” section of Loudoun Foreclosures or click here to contact me with your specific question.

New Government Short-Sale Guidelines (HAFA) - Don’t Believe the Hype

The Treasury Department released a 43-page document in November 2009 that outlines a proposal for streamlining short-sales across the banking industry. It’s supposed to go into effect April 5, 2010.  This document is being talked about as if it were the answer to all of America’s short-sale problems. The National Association of REALTORS(R) has been celebrating since the announcement and REALTORS(R) all over are being trained that this document will solve all of our problems and that the banks will be so much more pleasant to deal with.

Well, that sounds all nice and dandy…but is it more hype than help?

Rather than me breaking down and analyzing the document and its true effect on short-sales and the real estate market, I’m going to point you over to a series of excellent blog posts on this topic that have already been written by a fellow REALTOR(R) and friend of mine.

As Sarah Stelmok puts it so eloquently,

REALTORS(R) all over are being trained that this document will be the savior of the real estate market and that the banks are going to start playing nice, and rainbows and kittens will fall from the sky, and we will all reap riches from the bounty of this document.  I hate to be a Debbie-Downer, but when’s the last time our government proposed guidelines that were actually effective when it came to the banking industry.  Ahhhh, that’s right, after the S&L scandals. Didn’t that take years to recover from?  Well, it will take years to recover from predatory lending and a pretty little 43-page document can not fix 7 years of bad lending decisions.

So, let’s dissect the document so that a layman can understand what it says…

Sarah’s three-part series on this topic is excellent and funny and you should definitely take the time to check it out whether you’re a home owner considering a short-sale or a REALTOR(R) (if you’re a home owner considering a short-sale, click here to contact me so we can discuss your specific situation and options).

1. Part One - Proposed Short-Sale Guidelines (HAFA)
2. Part Two - Proposed Short-Sale Guidelines (HAFA)
3. Part Three - Proposed Short-Sale Guidelines (HAFA)

If you would like more information about the proposed guidelines or are thinking about doing a short-sale yourself and are located in Northern Virginia, click here to email me or call me on my cell - 703.582.6900. If you’re located in the Fredericksburg, VA area, click here to contact Sarah Stelmok, REALTOR(R), Coldwell Banker Elite.

P.S. If you can name the most popular person in the group pictured in the photo at the top of this post and the year the song came out, you get a prize!

How Long Do Short-Sales Take?

A very common question people ask me is, “How long does a short-sale take?” There is no exact answer to that question because short-sales are not a perfect science. Short-sales are like a trip to Vegas - you may come back with more money than you left with or you may come back broke, but you won’t know till the end of the trip. You won’t know when you will get the response from the bank(s) until the day you actually get one.

Average Time

The average - and I stress average time to hear back from a bank(s) on a short-sale - is 3 months. I don’t suggest using any amount of time in planning when you’ll hear back on from the bank(s), but if you really must, 3 months would be your best bet.

Fastest

The fastest response on a short-sale I’ve ever seen is 4 weeks. Unless “you’re in” a loan officer or loss mitigation officer at the bank you’re dealing with that can “fast track’ the short-sale (contact me offline for more info on this), don’t bank on this (pun intended).

Longest

There are short-sales still sitting waiting on a response from the bank(s) that went under contract over a year ago. Yup - a year ago. You REALLY have to love the house you’re buying and have all the time in the world to wait around this long.

Don’t forget settlement preparation time

Don’t forget about the time needed from short-sale approval to settlement date. Once the short-sale has been approved (not before) the buyer’s loan officer can tart finalizing the loan approval and everything that goes along with it (appraisal, title work, underwriting, etc). This takes at least 2 weeks, but more like 30 days.

To recap…the average time from ratifying a contract to settlement date is 4 months (3 months plus 30 days). The shortest is 2 months (4 weeks plus 30 days). The longest is over a year.

If you have would like more information or have specific questions regarding short-sales as a buyer or seller, click here to email me or call me at 703.582.6900.

FHA 90-Day “Anti-Flipping” Rule Waived - Yes and No

Many of you have gotten excited about the FHA “waiving” their 90-day “Anti-Flipping” rule beginning February 1, 2010. But hold on a second because that’s not what really happened.

In case you don’t know, the FHA “Anti-Flipping”  rule prevents you - the ready, willing, able and honest home buyer - from buying a perfectly good and renovated home that was last bought within the last 90 days (bank-owned properties do not fall into this category). It has also prevented investors who have bought, renovated and flipped a property within the last 90 days  from being able to sell it to home buyers that are using FHA financing.

Sounds a lot like a “lose-lose” situation, doesn’t it? That’s because it is.

Well, the FHA has realized that it’s hurting home buyers and has made some changes to their “Anti-Flipping” rule. No - they have not canceled, repealed, gotten rid of or any such permanent thing when it comes to the rule. They have simply made some temporary small changes to the rule which allow for a small window of breathing room. But it’s ain’t much of a window.

Here are the highlights of the changes to the FHA “Anti-Flipping” rule…

The exception to the FHA 90-day “Anti-Flipping” rule is only for properties that do not have a 12 month history of flipping. The properties must have all the renovation and rehab closely documented. And the increase in sales price must be less than 20 in order for the property to qualify. If the sales price is 20 percent or more, a full home inspection and 2nd appraisal must be conducted.

And here’s the kicker…

Banks and financial institutions must adopt this exception before you, the home buyer or investor, can take advantage of it. So far, I have yet to hear of any bank or financial institution adopting it. And even if they do, they may add their own extra rules to the exception on top of the FHA’s so who knows what the final “exception” to the rule will be - if there’s one at all.

Sorry to burst your bubble folks, but better you know the real truth now rather than finding it out the hard way later.

If you have specific questions or concerns as a home buyer or investor, email or call me - 703.582.6900.

You can also read the HUD announcement and get further details regarding the changes by checking out the document below (click here if you don’t see the HUD press release regarding changes to the FHA 90-day “Anti-Flipping” rule below)…

Changes to FHA 90-day Anti-Flipping Rule 2010 -

How Short-Sales Affect Your Credit and Other Ramifications

A question on many people’s minds that are considering a short-sale is, “How will a short-sale affect my credit and what are some of the other ramifications?” There is no one right answer because every short-sale negotiation is different, every seller’s situation is different and every bank is different.

Sarah Stelmok, a Realtor in the Fredericksburg, VA area and an expert in short-sales did a great job summing it up in one of her latest blog posts…

How will the short sale affect my credit score? – This is a tricky question. I’ve seen some credit scores hit as little as 90 points. I’ve seen others hit a couple of hundred points. It will really depend on how the bank will report the short sale to credit agencies and how delinquent you already are on your mortgage payments. An agent experienced agent will know that this is a case-by-case answer and won’t make any guarantees or promises.

Besides my credit score going down, what are some other ramifications of a short sale? – Many banks are now trying to mitigate their losses by having the defaulting party sign a promissory note. Each promissory note is different, there are no standards. Your agent may be able to help you negotiate your way out of signing a promissory note. It will depend on your situation. We’re not quite sure how lenders will look at credit histories with short sales on them. Some people may be able to obtain a home mortgage in as little as a year; others will have to wait much longer than that. There could also be tax penalties for short selling your home.Your agent should recommend a good real estate attorney to you, as well as an accountant to go over all the pitfalls of short sales.

Though this may give you a general idea of what Sarah and I have seen personally, remember that Sarah, myself and all other Realtors are only Realtors - you should contact a real estate lawyer, accountant, bank employee and/or the credit bureaus for guidance in this matter. And every person’s situation is different so just because someone else got “XYZ deal” doesn’t mean you will and vice versa.

If you have questions regarding short-sales, whether as a seller or buyer, contact me at any time (click here for contact information).

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