Short-Sales Wear the Crown in Loudoun County

This time last year, foreclosure/bank-owned properties were King by making up the largest percentage of distressed properties on the market. Today, it’s the opposite.

Short-sale properties now wear the crown out-numbering foreclosure/bank-owned properties for sale almost 4 to 1 and accounting for almost 20 percent of the total homes for sale in Loudoun County.

This dramatic shift is due to the foreclosure moratoriums that were in place at the end of last year and the beginning of this year (which seem to be voluntarily continued) along with banks becoming more open to negotiating short-sales (whether on their own free will or government coercion).

What does this mean for Loudoun home buyers and sellers?

For sellers, it means that, if you’re thinking about selling your home “short”, now is the time to do it. Banks are more open to negotiating with home owners and buyers are receptive to buying a short-sale. In addition, the U.S. Government is offering to pay the second trust in a short-sale up to $1000 to get the deal done.

You should also make sure that the Listing Agent you hire has successfully completed numerous short-sale transactions within the past 6 to 12 months (anything further back than 6 to 12 months doesn’t count because the rules today are much different than they were more than 12 months ago let alone in the history of real estate).

For buyers, it means that the majority of the “great deals” are short-sales. This means that you have to shift your thinking and “life plans” from moving in 30 to 45 days to moving in 4 to 7 months from now. This is because short-sales have a much longer turn around time and a smaller chance of success (unlike ordering a Whopper from Burger King).

The typical bank-owned property takes a few days to 1 week to get a response on while a short-sale typically takes 3 to 4 months (sometimes 6+ months). And even when you do get a response, it could be a counter-offer from the bank(s) or even worse, a plain old, “No - we’re not accepting a short-sale” and you’re S.O.L.

As a buyer, you should know what you’re getting yourself into with short-sales and have a Buyer’s Agent working for you that knows the ins and outs of the short-sale transaction. This will maximize your chance for successfully purchasing a great deal and actually getting to the settlement table.

If you’re a seller thinking about doing a short-sale, but aren’t sure what a short-sale is all about or where to start, pick up the phone or email me and I’ll be glad to help answer any questions or concerns you may have.

If you’re a buyer thinking about buying a short-sale in the Loudoun/Northern Virginia area, email or call me so we can chat about your specific needs and see how I can be of help.

***CLICK HERE FOR A LIST OF ALL ACTIVE SHORT SALES FOR SALE IN LOUDOUN COUNTY***

10 Things To Look Out For With Bank-Owned Property Contracts

I had the opportunity to attend an excellent  “REO Contracts” (aka “contracts on bank-owned properties”) class yesterday presented by Keith Barrett, Esq of Champion Title in Leesburg, Virginia. The class went over some of the main pitfalls of REO contracts and what to look out for as a Buyer’s Agent or as a buyer of a bank-owned property.

Though the REO contracts class was for real estate agents/brokers, everything covered in the class directly affects buyers of bank-owned properties. That’s why I wanted to share the key points of the presentation with you, the home buyer.

DISCLAIMER: Nothing within this post is intended as legal advice or comprehensive answers to all questions, nuances, etc. that may come up in particular transactions. Consult an attorney for guidance. The following points were derived from the material given to attendees as part of yesterday’s REO contracts presentation.

Practical Considerations of REO Contracts

1. The buyer is generally getting the benefit of their bargain up front in the price - not in the ease or speed of the transaction
2. The seller is a corporate entity, which is both positive and negative. You don’t have to deal with an emotional seller that has unrealistic expectations about property value, etc. On the other hand, sometimes big corporate sellers “do what they want.” These banks are selling properties all over the U.S. making it difficult to conform to local custom and practice
3. Approximately half of all REO transactions do not close on time. Have a plan B should settlement be delayed (e.g. don’t schedule contractors to come out to the property the day after settlement, don’t settle on a Friday especially not before a long holiday weekend, etc)
4. Some bank sellers take the position that if the REO addendum is silent on an issue addressed in the original offer, that is a conflict and the REO addendum controls/prevails (e.g. appliances, home warranty, seller closing cost credit, etc). If something that you “agreed upon” in the original offer/contract is not listed/addressed in the REO addendum, the bank seller may argue that it’s not part of the contract
5. Even though the property is sold “as is”, there may be room for negotiation on a case by case basis
6. HOA Disclosure package - by law, the bank seller should provide this
7. Residential Property Disclosure Statement - by law, the bank seller is exempt from providing this
8. Make sure you change the locks immediately after you take possession of the property
9. Consider a longer rate lock period on financing from your lender - about 50 percent of REO transactions do not close on time
10. The latest revision to CRESPA (Consumer Real Estate Settlement Protection Act) states that the buyer’s right to choose a settlement agent/title company can not be varied or waived by any agreement - including an REO addendum (effective July 1, 2009)

Once again, this is not intended as legal advice. Every bank’s addendum and every transaction is different. I’ve even seen different versions of an REO addendum from the same bank.

Point is…be smart, read the entire addendum and know how the addendum affects the transaction and you as the buyer (even if that means consulting a real estate lawyer). But also know that bank sellers “do what they want” so even though it may seem “wrong” or “unfair”, there may be little, if any chance of getting the bank to change the language in the addendum.

And if you have any specific legal questions regarding REO contracts or real estate law in general, don’t hesitate to email or call (703.443.1010) Keith Barret, Esq directly - he’s knowledgeable, experienced and tells it like it is (though I have no idea what his hourly rate is as a real estate lawyer).

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