Short Sales - Long Process

Many of us in real estate joke that the phrase "Short Sale" is an oxymoron because short sales are anything but short. Of course, that's not what a short sale is.

A short sale is when the mortgage holder agrees to take less than is owed on the mortgage to satisfy the loan. In otherwords, if you owe $100,000 on your mortgage, but can only sell for $80,000 and your mortgage lender agrees to take that as payment in full, you are selling "short."

The most common question I get is why do short sales take so long. Its a complicated process to explain. When you get an offer for less than you owe on the property, the offer is sent to your lender or lenders if you have more than one mortgage, so they can decide whether to accept that amount or not. After an offer is submitted to the lender, the lender then has to assign it to a negotiator, or someone who will manage the process. This first step can take up to 90 days depending on who the lender is and the workload of each negotiator.

After a negotiator is assigned, they review the offer as well as all the financial documentation submitted by the homeowner or seller. They look to see if the seller has a true financial hardship and if the offer is reasonable for the property, geographic area and what is going on in the market there. If the negotiator needs more information about prices of similar properties in the area, they will order a BPO or Broker's Price Opinion which is basically a real estate agent's opinion of what the property compares at in terms of market value.

Now armed with this information, they will review the offer. Some negotiators must submit all this accumulated documentation to their superior or even a committee for review and a decision. Sometimes, they must even submit all this to the original or current investor who holds the mortgage for a decision on whether to accept, counter or reject the offer. You can see how this can bog down the entire process.

Finally, after getting the okay or responses from everyone they need to get approvals from, the offer is accepted, countered or rejected. This process can take up to 6 months, sometimes longer. Many of us are often surprised that the lender does not foreclose, but often it is entered into the system and taken out of or away from the foreclosure department while the short sale is negotiated.

It doesn't always take a long time. As lenders have had to deal with more and more short sales, some have developed a much more efficient system to deal with them, giving guidelines to the negotiators on what a reasonable offer would look like, terms, what they as the lender would be willing to pay for in costs for the buyer, etc. This can cut down significantly on the amount of time it takes to get a response from the lender(s) for a short sale.

Many buyers get tired of waiting for the response. In our market in Las Vegas, this time lag could cause a property to drop more in value making the offer made less than attractive. For example, I was involved in one short sale that between the time the offer was verbally accepted by the lender and receipt of the written acceptance by the lender, the property had dropped $30,000 in value lower than the verbally accepted offer. Of course, the buyer was not interested in paying $30,000 more for the property than it was now worth, so the buyer refused the counter. On the other hand, because a short sale property had already been assigned a negotiator, I completed a cash deal on a short sale in 8 days from offer to closing.

In the Las Vegas market, as I'm sure in other markets as well, there is a little less competition on short sale properties. The process deters many buyers as well as real estate agents who don't want to deal with the phone calls, documentation, and more.

If you are considering offering on a short sale property, do a little bit of homework. Talk to your agent about the process to decide how knowledgable they are on the subject. Find out if a negotiator has been assigned or if you're starting at the beginning of the process. Great deals still abound on short sale properties, but make sure you understand the process and how it may or may not affect your offer by the time it gets accepted.

If you'd like more info about the short sale process or short sale properties in Las Vegas and the surrounding area, I can be reached at LasVegasExpert@yahoo.com.

Henderson working on New Heritage Park Center

I have recently moved back to Henderson. I love that it's close to all the activity of the Las Vegas Strip yet far enough away to truly be the suburbs.

The part of Henderson I live in is a rural preservation area. We have no streetlights, neighbors have horses, all of the lots are big and all the houses are custom. Of course, the downside is some of the homes are much older and they reflect it. But the tradeoff is worth it to me. We have quail and bunnies hopping around the yard, its very quiet other than the birds chirping, and having only lived in my house a little over a month, I have already met my neighbors.

I was thrilled to see that the City of Henderson is building a brand new Heritage Park Center which will offer an indoor aquatic center which will be open to the public as well as be used by Clark County School District swim teams. There will also be a therapeutic warm pool. This facility will also offer a new Senior Community Center, offering lots of amenities and services including activity center, billiards, computer room, crafts, television room, card and dining rooms, and a library. Bus service will also be available.

If Henderson sounds like a good option for you, don't hesitate to call or email me to help you find a new home in this great community.

Heather Peck
Rosen & Company West
702-595-7380
LasVegasExpert@yahoo.com
www.HeatherSellsVegas.com

Las Vegas - Ghost Town?

I was on the phone the other day with another investor living in a different market. He told me he heard that Las Vegas was becoming a Ghost Town. The market was so bad here, people were leaving Las Vegas in droves.

I had to chuckle. Although, yes, we have the distinction of being the worst or almost the worst real estate market in the country with the highest number of foreclosures, we have another new honor. We are also in the top ten of undervalued market, with our market being considered up to 40% undervalued. Read about it here: http://money.cnn.com/2009/06/04/real_estate/home_affordability_soaring/index.htm.

Of course, this article doesn't mention, or maybe they don't know, that 50% of the properties currently listed for sale are under contract, and another 10-15% are juggling multiple offers. When typically pulling properties off the MLS to show a client, you would just search for what's available, choose the ones to show and go. Today, because of this market being very competitive, you need to call the listing agent or their team and see how many offers are on it. In fact, its not uncommon to hear there are 4 offers, 10 offers, 25 offers or more, or even that they are no longer accepting offers because they're countering all the ones they currently have.

So yes, we have a lot of foreclosures, but first time buyers and smart investors are snapping them up as fast as they get listed. If you've been sitting on the fence waiting to get a deal, I wouldn't sit there too long.

Loan Modifications - Real or Fraud

Loan modification options are being offered everywhere. "Let us help you save your home from foreclosure." "We can lower your payment." Are these options real or a scam?

Loan modifications do exist, and yes they are real. However, caution should always be taken before you sign up with a company to do your loan modification. Don't automatically assume that because they say their process is backed by an attorney that their program is any more legitimate.

First, what is a loan modification? A loan modification is when your mortgage lender agrees to adjust your mortgage payment. That adjustment may be temporary or permanent. They may change the terms of your mortgage from adjustable to a fixed rate. They may lower the payment for 1-5 years, or permanently. They may suspend or allow you to stop making payments for a few months but put that amount on the back end of your loan, meaning you pay the same but you'll just pay on your mortgage longer. It all depends on your lender and what type of loan you have. It also depends on what caused you to require a loan modification, how long your financial situation will take to correct itself, and when or if it will improve.

Many people pay loan modification companies out to desperation in order to stop their foreclosure and save their home. Often they pay $1,500 to over $7,000, and then later discover that not only did the loan modification not get approved, the company may not have done anything to stop their foreclosure at all. I'm not saying that every company offering loan modifications is a fraud, but you first need to know if you're even eligible.

As painful and as scary it might be, call your lender. Make sure you get to the department that will actually be able to help you with your loan modification. Don't tell the receptionist who answers the phone, they don't know anything, can't help you and don't care. Make sure you speak to the Loan Modification department. Yes, there usually is one. If they won't help you or tell you you're not eligible, ask them why. This is the information you need to make a decision whether to seek outside help or not.

If you really can't face speaking with your mortgage lender, my next suggestion is call a local real estate agent who specializes in short sales. If they understand this market and understand what makes a successful short sale, they should be able to either explain whether a loan modification will be a good option for you as well as explain all your other options including short sales, foreclosure, deed-in-lieu, etc. If they don't know these things or can't explain them, call another agent. This is an avenue I recommend to everyone because its FREE advice. Loan modification companies have the goal of getting your money whether or not you're a good candidate, and even if they say they'll refund your money, wouldn't you rather not spend it before you find out they can't help you?

If your financial setback is temporary, this may be a great option for you. However, if you have no equity in the property, or your income will not improve in the near future, you're probably better doing a short sale on your property.

If you'd like more information on loan modifications and short sales, don't hesitate to call or email me.

Heather Peck
Rosen & Company West
702-595-7380
LasVegasExpert@yahoo.com
www.HeatherSellsVegas.com

Working With Investors - Do Your Homework!

As a real estate agent, I'm sure you've had lots of wanna be investors come out of the woodwork who want to take advantage of this great opportunity in purchasing and reselling REO and short sale properties. They tell you they have funding, provide you with a proof of funds letter, and have you start making offers. However, when its time to close, they don't follow through and the deal falls apart. WHAT HAPPENED?

The key is in understanding what kind of financing or proof of funds they actually have. I've discovered some investors only have transactional financing, meaning they only have funds to close the property and intend to resell the next day to another buyer. Although that's fine, if its legal in your state, and the title company is willing to perform a double close transaction (some are and some aren't), make sure you know the facts on the other end of the deal ..... in other words, know your investor's exit strategy. Does the investor intend to buy and hold, resell immediately, or rehab then flip, etc. Knowing this ahead of time is very important.

I'm not saying don't work with investors -- this is a great time to work with investor buyers. Investors are currently buying a majority of the properties in Las Vegas right now, absorbing a lot of short sale and bank owned properties for amazing prices. However, it is a must to understand your investors exit strategy in order to manage the first, and maybe subsequent transactions, getting you multiple commissions.

If they plan to hold the property for at least 90 days to resell to an FHA/VA buyer, make sure your investor has that type of financing in place so you don't get surprised when the deal doesn't close. In otherword

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s, do your homework on your investor/buyer. It will save you a lot of time, effort and commissions, not to mention wear and tear on your reputation working with other agents in your community.

Now get out there and make some money!