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.

Buyers/Sellers: What Does Few Foreclosure/Bank-Owned Properties on the Market Mean To You?

The other day, I talked about how few foreclosure/bank-owned properties there are on the market in Loudoun County and Northern Virginia (click here if you missed the post). But what does having only a very few foreclosure/bank-owned properties on the market really mean for Loudoun/Northern Virginia home buyers and sellers?

Buyers

• If you would like to settle quickly, your only options are traditional resales and foreclosure/bank-owned properties. Either can typically settle within 3 to 6 weeks (less if cash offer) of when the contract is accepted and ratified
• Since there are so few foreclosure/bank-owned properties, the overwhelming majority of properties you’ll see will be traditional resales
• Traditional resales are typically in better condition and require less work than foreclosure/bank-owned properties, but you’ll pay more for them up-front in the purchase price
• If you have the time (3 to 6+ months) and patience and want to spend less money up front, but don’t mind doing some work to the property, then you may want to consider a short-sale
• If you’re trying to take advantage of the first-time home buyer tax credit, you’re looking at only foreclosure/bank-owned properties and traditional resale (click here for more information on what I mean by that)

Sellers

• If you are a home owner selling your home as a traditional resale (not a short-sale), you’re in a great position
• When there were a lot of foreclosure/bank-owned properties on the market, buyers who needed to settle quickly could choose from a foreclosure/bank-owned property or a traditional resale. Now…their options are pretty much limited to traditional resales, which is good for you

CLICK HERE TO SEARCH FOR LOUDOUN FORECLOSURE/BANK-OWNED PROPERTIES

Anyone Seen Where All the Loudoun Foreclosure/Bank-Owned Properties Have Gone?

Two years ago, you couldn’t walk out your front door in Loudoun/Northern Virginia and not see a foreclosure/bank-owned property for sale. But something interesting has been going on for the past 12 months…the number of foreclosure/bank-owned properties on the market has been quickly dwindling.

As of today, there are only 60 active foreclosure/bank-owned properties on the market in Loudoun. That’s a total of only 6 percent of the total existing home inventory on the market in Loudoun County. This is a far cry from what we were seeing in 2007, 2008 and even the beginning of 2009.

How is this possible despite record foreclosure filings throughout the US?

One possible reason is that the bans are holding on to their inventories on purpose. Releasing them all at once would sink the market and the value of all properties (including the ones the bank are holding to) would fall. This means that the overall worth of the properties the banks are holding on to would fall - not something banks or their shareholders want to see.

Another reason may be that the government is buying up these “troubled assets” so that they don’t get released on the market and sink it. Just look at the millions the government is spending buying up Mortgage Backed Securities (MBS).

Will we see a flood of foreclosure/bank-owned properties hit the Loudoun market in the near future?

I’d say “not any time soon” for a variety of reasons including political ones. But I don’t have a crystal ball so don’t take what I say to the bank.

Either way, the majority of homes on the market in Loudoun and Northern Virignia in general are short-sales and traditional resales. Practically speaking, this means that buyers who need to settle within 30 to 90 days have pretty much only traditional resales to choose from (blog post on this coming next week).

CLICK HERE TO SEARCH FOR LOUDOUN FORECLOSURE/BANK-OWNED PROPERTIES

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).

Related Articles

Do You Know What the Bank Addendum REALLY Says?

A Seller’s Guide to the Short-Sale Process

Some of you may be wondering how you can go about selling your home the “short-sale” route, but aren’t sure how it works. Well, here’s what I call a “Seller’s Guide to the Short Sale Process”…

First and foremost, let’s define “short-sale” as it relates to real estate today:

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold

If you’re not sure whether you’ll be “short” if you sell the house, hire an appraiser or ask a Realtor to do a CMA for you and deduct the balance of your mortgage(s), any line of credit(s), other lien(s) and cost of sale from the estimated market value of your property. Once you’ve done that, you’ll have a good idea of whether you’re “short” (assuming the appraisal or CMA are accurate).

Let’s assume that you’re “short” and want to move forward with a short-sale. What are the next steps.

Well, fellow Virginia Realtors and bloggers Sarah Stelmok and Jeremy Hart beat me to the punch by about 24 hours with their posts on short-sales. So, with their permission,  I’m going to cite their explanation about the process to save some time.

If you are a Seller considering a Short Sale in your property, you will need to gather the following information:

• All lien holders names and contact information
• All loan numbers
  
• A Third Party Authorization Form - this will allow the bank to discuss your short sale with your REALTOR.  It needs to be agent and loan # specific and have an indefinite end date Some banks have their own form; others will accept any form you prepare.  You need to get this to the bank as soon as you hire a REALTOR.
• Listing Agreement - this should include a CMA of the property to justify your list price
• 2008 and 2009 W-2s - or the tax forms that you filed if you do not get W-2s.
• A Profit/ Loss Worksheet for 2009
• Last 2 Month’s Bank Statements
• Proof of Disability or Unemployment or Job Transfer (if applicable)
  
• Hardship Letter - this explains why you want to short sale and why the bank should allow you to short sale

Once you have all of these items, the next steps are…

1. List the property for sale– Some banks want the property listed for the amount that is owed first, and they will be willing to drop to a more realistic price after a period of time.  The listing agent will need to back up their list price with a good CMA!  Remember, a BPO will be called out as soon as they receive a contract.

2. Receive and ratify a contract – needs to be ratified by the seller and buyer.  Some banks want one contract at a time; others want to see them as they come in.  Another reason to contact the bank ASAP.

3.  Send Contract to Bank - get confirmation from the loss mitigation offer at the bank and preferably written proof of receipt

4.  You will also need to send – all of the paperwork including the hardship letter you gathered/prepared prior to listing your property for sale (see earlier part of this post). The bank may ask for other items not listed here. They may also send you additional forms and paperwork for you and/or your agent to sign.

5.  Be persistent, but patient - Make sure you ask how long it will take for a contract to work its way through the system.  You want to hear it will take 30-45 days, but they may tell you that it will take just that long for them to even look at the file as is the case with CitiMortgage.  You also want to ask about the likelihood the loan will be sold.  They like to sell the loans right before they give you approval, and you’ll have to start the process all over if they do.

6.  Stay as current as possible - Make sure you don’t get more than 2 months behind.  Some banks will allow you to get up to 9 months behind, but they are harder to negotiate and keep off the auction block. If you don’t know what their policy is, ask.

These steps will need to be done for each bank that is involved and each bank has their own process. Some banks that are in 2nd position (2nd trust/mortgage) will only start processing their short-sale after they’ve received written short-sale approval from the 1st trust. This means that the overall short-sale approval process may take twice as long with two trusts/mortgages.

If you are considering pursuing the Short Sale route to sell your home, it is important that you consult an attorney that is familiar with the process. It is also important that you use a REALTOR who is trained in the short-sale process and has experience in Short Sales.

So I hope that this helps you out (thanks again Sarah and Jeremy). If you’re in a situation where you’re about to fall behind on your mortgage and/or are considering a Short Sale, contact me to chat about it and see what options you have.

Related Articles

Short Sale (real estate) - Wikipedia

Percentage of Short-Sales Being Approved Increasing

10 Questions To Ask Before Writing an Offer on a Short-Sale

10 Questions To Ask Before Writing an Offer on a Short-Sale

It’s like the Wild West right now when it comes to short-sales in Loudoun County (and the entire Northern VA area). Some take 60 days to settle while others take 6 months (if they settle at all). Some are handled by agents, title companies and negotiators that know what they’re doing while others are not. The list goes on…

That’s why every buyer (and buyer’s agent) should ask the listing agent/broker (or seller if FSBO) the following 10 questions before they write an offer on a short-sale…

1. Have you received any other offers that you are waiting to hear back on from the bank?
2. How many trusts are involved that will be “short”?
3. How many total banks/creditors are involved in the short-sale and which banks/creditors are they?
4. Have you requested and received the short-sale package from the bank(s) including the hardship letter?
5. Have you sent the package and confirmed receipt?
6. Has the asking price been approved by the bank(s)/creditor(s)?
7. Who is negotiating the short-sale with the bank(s)/creditor(s) - you, a negotiator, a lawyer, the title company or….?
8. Has the seller/borrower completely stopped making payments on their loan(s)?
9. Is the seller willing to hold a note with the bank for the difference? (much better for their credit score)?
10. How many short-sales have you (the listing agent) closed within the past 12 months?

If the listing agent balks at answering these questions, it’s either because the seller does not wish to disclose the information and/or the listing agent may not know what they’re doing. Either way, if you don’t have the answers to all of these questions, you can’t make a very educated decision as to whether it’s worth writing an offer on the property or not.

Why? Here are just a few of the reasons…

• Different banks have different approval percentages and varying time frames for processing the short-sale. For example, if you have to move within the next 60 to 90 days, a short-sale being negotiated with CitiMortgage may not be something you want to pursue. If the short-sale is being negotiated with IndyMac, you will be talking to folks in a call center in another part of the world (literally) that care little about your short-sale (or IndyMac for that matter because IndyMac no longer exists)
• If the agent, title company and/or negotiator has not negotiated/closed many short-sales, they may not know what they’re doing which lowers the chance of the short-sale being approved and you being able to actually buy the property.
• If there is more than one trust, the total approval process time doubles because the second trust typically does not start their approval process until they have written approval from the first trust.

The 10 questions listed above are very similar to the 10 questions that Frank Llosa recommends asking before seeing a short-sale in one of his (excellent) posts. One question that Frank has on his list that I don’t have on mine is…

• How long do you estimate that the lender will take to provide an answer to an offer?

The reason why I don’t have it as one of my questions is because I’ve found that some agents just throw a date out there that they pulled out of thin air. For example, one agent told me the other day that she could have an approval and settle on the short-sale “within 45 days at the most” despite the short-sale being through Countrywide who is running way behind on short-sale approvals due to their recent merger with Bank of America which involved physically moving many offices, computers, files and employees.

Forty-five days? Riiiiiight… And I have a great deal on some ocean-front property in Arizona. No, really!

Rather than relying on what the listing agent tells you, your Buyer’s Agent should know and be keeping up with the nuances and latest news regarding each individual bank/lender’s short-sale approval process and how long it typically takes. This includes anything and everything that could affect the length of time it could take (such as the Countrywide/BoA example above).

Important: If a Buyer’s Agent tries to get you to blindly write an offer on a short-sale without asking these questions first or the listing agent is not willing to answer them, be wary and look at your other options.

On a related note…I will be writing a post on which banks are the fastest at approving short-sales, which are the slowest and which banks are the easiest to deal with from a sellers and buyers standpoint. Keep an eye out for that later this week.

Search for short-sales in Loudoun County

Next Page »