You've found the home of your dreams, but it's a short sale. What are your risks? I've listed them below for you. Don't freak out though. Some (or even most) of these may not apply to your transaction. On the other hand, they may. Try to do as much diligence as you can to find out how serious the seller and his bank really are.
1) The seller's lender is slow to process the transaction. Wait, let me rephrase that. The seller's lender is sloooooooooow to process the transaction. This happens a LOT. Do not expect a quick turnaround time. If you need to move quick, a short sale is probably not the way to go.
2) The seller is not diligent in following up with his lender. The seller's lender will want a lot of paperwork -- the seller's whole financial history, and sometimes even more. Whoever is negotiating with the bank needs to follow up with the bank constantly. Additionally, when the bank wants something from the seller, the seller has to get it to them quick. I can't tell you the number of times that I've had a file stall because I called my client for signatures or some other paperwork that the bank requested, and my client did not provide it in a timely manner.
3) The seller doesn't really want to sell. This is unfortunate, but it happens. Some sellers are only using a short sale as a stall tactic to stay in the home as long as possible without making a mortgage payment. Oftentimes, their real estate agent and/or their attorney is not even aware of this.
4) The seller may be using the short sale as a method to commit fraud. Some sellers really don't want to move, and they find creative ways to avoid having to leave -- such as having a friend or relative purchase the home at a low price through a short sale. This is fraud. Unfortunately you, a true "third party", may never have a shot because the seller already knows which offer he is sending to the bank.
5) The seller is uncooperative. You may want to measure for blinds, or measure for furniture. The seller, on the other hand, probably still occupies your dream home and may not want to let you in. Homes going through a short sale are often owner-occupied, and the owners a) are not usually paying their mortgage, and b) don't have a lot to lose if the short sale falls through.
Despite all of this, many short sales are a success. I'm not trying to deter you from short sales, but I think you, as a buyer, should have reasonable expectations and be aware of the pitfalls!
Thursday, May 31, 2012
Thursday, May 24, 2012
April 2012 Housing Market Roundup
Overall, April was a good month for Illinois home sales. Based on data from the Multiple Listing Service (MLS), 9,961 homes sold statewide in April. This a 15.7% increase from April 2011. The median sales price was $135,000, an increase of $5,000 from March 2012.
The U.S. Census Bureau defines the nine-county Chicago Primary Metropolitan Statistical Area (the CPMSA) to include the following counties: Cook, Lake, DuPage, McHenry, Will, Kane, Kendall, DeKalb, and Grundy. In those counties, 6,814 homes were sold in April 2012. That's nearly a 20% increase from last April. However, the median sales price went down to $160,000, which is a 1.5% decrease from last April. That's not to say everyone of the counties in the CPMSA saw a price drop. From April 2011, sales prices in DuPage, Kane and Kendall Counties increased around 10%.
Sales prices in Chicago also increased close to 10% when compared to April of 2011. Moreover, 1,750 home sales were reported in Chicago in April 2012, a whopping 20% increase over April 2011.
Moreover, sales where MLS services were not utilized (such as for sale by owner homes) are not even included in these numbers. There's a possibility that the numbers would look even better if private sales figures were available.
So April looked good overall when compared to last year. Here's looking to more increases this summer!
The U.S. Census Bureau defines the nine-county Chicago Primary Metropolitan Statistical Area (the CPMSA) to include the following counties: Cook, Lake, DuPage, McHenry, Will, Kane, Kendall, DeKalb, and Grundy. In those counties, 6,814 homes were sold in April 2012. That's nearly a 20% increase from last April. However, the median sales price went down to $160,000, which is a 1.5% decrease from last April. That's not to say everyone of the counties in the CPMSA saw a price drop. From April 2011, sales prices in DuPage, Kane and Kendall Counties increased around 10%.
Sales prices in Chicago also increased close to 10% when compared to April of 2011. Moreover, 1,750 home sales were reported in Chicago in April 2012, a whopping 20% increase over April 2011.
Moreover, sales where MLS services were not utilized (such as for sale by owner homes) are not even included in these numbers. There's a possibility that the numbers would look even better if private sales figures were available.
So April looked good overall when compared to last year. Here's looking to more increases this summer!
Thursday, May 10, 2012
How are Short Sales Faring?
Despite all the short sales that seem to sit around forever while lenders ignore them, short sales are faring surprisingly well overall when compared to the last few years. Are lenders finally figuring out it makes more sense to sell a property short than to foreclose it, worry about it, deal with it, and end up selling it for less than they would have gotten in a short sale situation? Possibly.
According to Realty Trac, short sales outnumbered foreclosure sales nationally for the first time in January 2012. 23.9% of homes sold in January were short sales. Only 19.7% of sales in the same month were foreclosed homes. Overall, short sales increased 33% in the last year.
The greatest increase in short sales was in the western part of the country, with California leading the pack. In fact, nearly 30% of homes sold in California in January 2012 were short sales. Over 27% of homes sold in Nevada in January were short sales, and over a fifth of homes sold in Arizona and Colorado were short sales.
In the Midwest, Michigan, Wisconsin and Indiana had short sales in excess of 10%. In the south, in Georgia short sales exceeded 20% of sales in January. In Florida, short sales exceeded 13% of sales closed in January.
Psychologically, a short sale can be a lot easier to digest for a distressed homeowner than a foreclosure. With any luck, banks will come around to short sales more and more!
According to Realty Trac, short sales outnumbered foreclosure sales nationally for the first time in January 2012. 23.9% of homes sold in January were short sales. Only 19.7% of sales in the same month were foreclosed homes. Overall, short sales increased 33% in the last year.
The greatest increase in short sales was in the western part of the country, with California leading the pack. In fact, nearly 30% of homes sold in California in January 2012 were short sales. Over 27% of homes sold in Nevada in January were short sales, and over a fifth of homes sold in Arizona and Colorado were short sales.
In the Midwest, Michigan, Wisconsin and Indiana had short sales in excess of 10%. In the south, in Georgia short sales exceeded 20% of sales in January. In Florida, short sales exceeded 13% of sales closed in January.
Psychologically, a short sale can be a lot easier to digest for a distressed homeowner than a foreclosure. With any luck, banks will come around to short sales more and more!
Thursday, May 3, 2012
Should I buy a foreclosure or a short sale?
You have no idea how many people ask me this question. And of course, there is no right answer. The reality is, no one is forcing you to buy either a foreclosure or a short sale. There are houses on the market that are neither foreclosures nor short sales. One of those just might be the right home for you.
But regardless, many people have it in their heads that in order to get a great deal, the property must be foreclosed or selling short. If you have absolutely decided that you must buy a foreclosure or a short sale, that brings us back to the title of this post. Which should you buy?
While there's no right answer, foreclosures are typically much faster to process. They are often cheaper than short sales, and while you can't expect much help or any information from the bank, if you need to close quickly, it's safer to stick to a foreclosed property.
On the other hand, if you have time to wait, and the home of your dreams happens to be a short sale, go ahead and place an offer. With any luck, the short sale home you're buying may be a "pre-approved short sale"; this means that the lender has issued a bottom line number to the seller, and if the offer is at least that amount, the short sale can be processed fairly quickly. Most homes, however, are not pre-approved.
Another advantage of buying a short sale is that the home may not be vacant, and therefore less prone to damage or vandalism. Foreclosed homes are usually vacant, and if they are damaged (i.e. water or storm damage), often no one knows for a while.
Banks are supposedly streamlining their short sale processes, and sure, they've sped up a little, but I haven't seen results yet. Last month, the Federal Housing Finance Agency stated that the short sale process will change for Fannie Mae and Freddie Mac-backed properties starting in June. Among other changes, the mortgage servicers will only have 30 days to respond to an offer. If they don't respond in 30 days, they have to provide an update every week. And after 60 days, they must give a final decision, no matter what.
Most banks, however, still seem to be acting on their own whims. Most files languish and sellers and buyers get frustrated. Many times buyers back out of the contract to pursue other options. And of course, at the end of the day, not every short sale gets approved.
If you find a foreclosed home you love, go for it. If you find a short sale you love, go for that. Just keep in mind the pros and cons of each, and hopefully you make the right choice!
But regardless, many people have it in their heads that in order to get a great deal, the property must be foreclosed or selling short. If you have absolutely decided that you must buy a foreclosure or a short sale, that brings us back to the title of this post. Which should you buy?
While there's no right answer, foreclosures are typically much faster to process. They are often cheaper than short sales, and while you can't expect much help or any information from the bank, if you need to close quickly, it's safer to stick to a foreclosed property.
On the other hand, if you have time to wait, and the home of your dreams happens to be a short sale, go ahead and place an offer. With any luck, the short sale home you're buying may be a "pre-approved short sale"; this means that the lender has issued a bottom line number to the seller, and if the offer is at least that amount, the short sale can be processed fairly quickly. Most homes, however, are not pre-approved.
Another advantage of buying a short sale is that the home may not be vacant, and therefore less prone to damage or vandalism. Foreclosed homes are usually vacant, and if they are damaged (i.e. water or storm damage), often no one knows for a while.
Banks are supposedly streamlining their short sale processes, and sure, they've sped up a little, but I haven't seen results yet. Last month, the Federal Housing Finance Agency stated that the short sale process will change for Fannie Mae and Freddie Mac-backed properties starting in June. Among other changes, the mortgage servicers will only have 30 days to respond to an offer. If they don't respond in 30 days, they have to provide an update every week. And after 60 days, they must give a final decision, no matter what.
Most banks, however, still seem to be acting on their own whims. Most files languish and sellers and buyers get frustrated. Many times buyers back out of the contract to pursue other options. And of course, at the end of the day, not every short sale gets approved.
If you find a foreclosed home you love, go for it. If you find a short sale you love, go for that. Just keep in mind the pros and cons of each, and hopefully you make the right choice!
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