Friday, December 11, 2009

Not A Headline I'd Write... But....

"If You Don't Buy A House Now You're Stupid, Or Broke"
is the headline from a story found in Business Week, written by Marc Roth.

As MY headline explains, it's not a headline I'd write... (yet) BUT... Listen Up:

In the early 90s I bought a house for $150K,  my mortgage payment was $1250  month.

The week of Thanksgiving (2009) I sold a house for $300K, and the buyers mortgage payment is $1265 a month.

Both include the cost of escrows (your taxes and insurance).  The main difference is interest rates.  A 30 year fixed mortgage when I bought was 8.5% (with 2 points).  The 2009 buyer paid no points and got an interest rate well below 5%. 

The resulting question:

Is he really paying more for his house NOW than I did for my house THEN?


If you've been on the fence about buying, you need to seriously consider this example, and others like it.  I know, some people don't have job security, are fighting bad credit, or have other personal circumstances that make buying impossible, improbable or risky.  But, if you are not one of those people, you better get off that fence before those pickets go right up your..... well, near where guys keep their wallets if you know what I mean... The point is, you may not ever be able to get off that fence. 

(That fence doesn't look too comfortable to me!)


And, remember, I've been TRYING to tell you this, my friends. (ew, that sounded a bit "McCain-ish didn't it.  He lost, maybe I should take note). 

But seriously, I post this blog where everyone can see it, but I also post it for my FRIENDS. It's the same advice, whether I've met you or you are my own flesh and blood.  So, please, pay attention.  Please try to listen. 

See these prior posts:



If you've heard enough and think you're ready, give me a call.  I will help you analyze your situation to see if buying is a good idea for you right now.



For other questions, feel free to contact me anytime:
Vicky Chrisner
Ofc: 702-669-3142

Monday, December 7, 2009

Buying After A Short Sale

Have you fallen victim to the real estate market?  Many have.

You bought (or did a cash out refi) at the height of the market.  You watched your personal wealth plummet as the housing values in the neighborhood took a dive.  And, then, "life" happened - you lost your job, were transferred, got married, divorced or some other event occurred that required you to move.... but sell?  How?  You were upside down.  After considering all other alternatives, you chose between bad and worse and avoided a foreclosure by completing a short sale. Congratulations. 

Now what?  Many lenders require you to wait 2 - 3 years before are permitted to buy again.  It's almost like being "sentenced" as a punishment for your sins.  If only you could take advantage of this incredible buyers market..... well, you can.

I have a lender with a "short sale plus" program.  They recognize that most homeowners who complete a short sale were victims of the same circumstances we're all dealing with - and then "one more thing" happened and was the "final straw".  They couldn't wait out the market, they had to get out of the mortgage. 

Is this you?  If you have just 3.5% as a down payment, you, too, may be eligible to buy TODAY, even if it's been only a few months.  This is not a scam, it's a new program.  Rates are currently BELOW 5% for these loans on a 30 year fixed interest rate.  Interested?  Contact me directly.

Ofc: 703-669-3142
Cell: 703-728-5766


Notes:
*  This is NOT for people who've had a foreclosure - short sales only.
*  People with foreclosures are not generally eligible for loans for 3 years after the foreclosure date.
*  Veterans can do a VA loan 2 years after a foreclosure.

For continuing updates on changes in the real estate market, stay tuned to www.TheRealEstateWhisperer.blogspot.com

For information on Living in Loudoun County, check out

To order a Market Snapshot (showing sales in YOUR neighborhood),

To search for homes for sale, go to

Saturday, November 28, 2009

Automated Valuation System

What is an Automated Valuation System? It is a process whereby computers, using proprietary algorithms (aka “secret formulas”) provide an estimate of value of your property.

The first ones used were by localities, and this is where many of your assessed values were derived.

Then, public web sites started offering them. Perhaps you’ve heard of a “Zestimate”?

Now, even banks are getting in on the action. If you apply for a short sale or a refinance, the bank is likely to, as part of their process, go to their secret, proprietary database and do their own estimate of your property.

Is this good or bad? And, how accurate are they? WELL, sometimes they are right on the nose. Sometimes they are WAY off. Where I live, in Loudoun County, the assessment values are supposed to be within a 10% margin of error. TEN PERCENT? Well, if you need to sell, and you could only get 90% of what you were expecting, would you be satisfied with that? Probably not. If your home's estimated value was $1,000,000; but the "real" value was $900,000... would you be happy paying taxes on an extra $100,000? Again, probably not.

A friend of mine has been relocated and asked me recently what I thought the value of her home would be if she decided to sell. I told her right at about $600,000… perhaps just a bit over that. That was not what she wanted to hear, but she knows and trusts me. Maintaining 3 homes (she also has an investment property) is rather expensive, so she decided to refinance. Her appraisal came in at $605,000.

The estimates were very close... and therefore, likely, very accurate....as accurate as you are going to get before you have a buyer. The appraiser and I are both actively engaged in the real estate market, we have access to some of the most accurate and current data available, and we’ve both seen the house with our own eyes, driven the neighborhood, maybe even seem some of the comps in person.

Her “Zestimate” is $629,000. Her county assessment is roughly $568,000. Those were both created by automated value systems. Why such a difference? Who knows, since the formulas are “secret”. But, really, BOTH are within that "allowable margin of error" that many atuomated valuaton systems usually allow

A little something to remember:  The public web sites that offer FREE real estate tools and advice are not being operated as a public service, they are designed to draw web site traffic and then sell advertising space to people like REALTORs. Would you ever click “get a professional estimate” if the web site told you that your house was worth half of what you expected or wanted? No. So, to sell advertising space they have an incentive to err on the high side. You like what you see, you request a consultation. The web site can then accurately report that they provided a “good lead” to the agent – someone who wants to sell. If the agent does or does not get the listing, well, that has to do with whether the agent can “sell” YOU. If you are someone that shoots the messenger, you will probably hire any agent that gives you the highest estimate of value.

On the other hand, the tax assessor needs to provide an estimate upon which to base your real estate taxes.  They really want a fair estimate, since they are part of the equation that “balances” the local budget.  However, their system is not perfect, can be based on inaccurate facts about your home or others, and is a "snapshot" valuation provided at a particular point in time.  In Loudoun, they are reassessed each year, as of January 1.  So, how relevant is this estimation in November?  If the market has been stable, and it was a good estimation to start with, it may still be reasonable.  But, markets are fluid and change rapidly. And, as I pointed out, the estimation may not have been accurate to begin with - and their "target" for accurate is within a 10% margin of error.

So, who to believe? I guess it depends, are you betting your prosperity on it? A full time professional that is competent, confident and trustworthy is going to be your best resource. But, do some homework of your own.

I recommend that rather than ask a computer what your home is worth, ask a computer what the sales prices have been for the homes that recently sold in your neighborhood. The more recent the sale, the better. Look for commonalities. We all know that every home is unique, as is every buyer, seller and transaction. So don’t look for what’s different; look for the things that are the same. Those with the most things in common will give you a fairly good idea of what your home might sell for. CLICK HERE to be routed to a web site where you can get this information for the Washington DC area (DC, most of MD, Northern VA and the panhandle of WV).

Then, give me a call. If I don’t service your area (I work the Dulles area – most of Fairfax & Loudoun Counties), I have contacts throughout the DC region and I’d be happy to match you up with an agent you can trust.

For more information, consider these web sites:
INFORMATION ON NEIGHBORHOOD SALES: http://www.20175homesales.com/

Or reach out to me directly for more information:
Ofc: 703-669-3142
Cell: 703-738-7432

Thursday, November 26, 2009

I am Thankful For ....

I wanted to write and post a blog today on why I am thankful for my business… and, true to my nature, my first draft was very comprehensive and too wordy, so I trashed it, looking for a simpler thought to share…. and then I recalled this….



One day last year my daughter and I were driving down the road, and she started talking about the parent of one of her friends. It prompted me to ask “Rachael, do you know what mommy’s job is?” She nodded. “What?” I asked.


“You sell houses, help people and make new friends.”


(Long pause and big smile.)


Yep, it’s exactly what I do…. And I love it… I am so grateful that I somehow have managed to make a living selling houses, helping people and making new friends. What a lucky lady I am!


I am thankful for my clients, my associates, and my friends and family that support me personally and professionally every day. I would be nothing without you all.







Have a wonderful Thanksgiving
and
May God Continue To Bless You!

Wednesday, November 4, 2009

To Sell Now or Wait

Like many, you’ve probably been thinking about moving up to a larger home or downsizing, or perhaps even relocating. But, the market has meant declining house values, and you’re concerned that if you don’t get enough for your home, you’ll not be able to afford what you really want in your NEXT home.

Did I hit the nail on the head for you? You’re not alone. It’s always easiest to focus on the scary, negative thoughts – fear is a powerful emotion, in fact, THE most powerful emotion we have as humans. But, as humans, we have the ability to overcome illogical fear if we’re willing to. Let me point out some things you may not know, or may not have put together.

SUPPLY AND DEMAND: Because of a decrease in supply for much of this year, home values in some areas have started to rebound slightly, and are making the sales process (when you price “right”) easy for sellers. But, that won’t last forever… banks are holding a plethora of homes in inventory (either they’ve stalled the foreclosure process or they haven’t released foreclosed homes for sale, for a variety of reasons). We expect inventory to pick up after the first of the year – if that happens, it puts downward pressure on prices for YOUR home. And, if you’re trying to wait out the storm, you could be there a long while.

COMPARE THE SUBMARKETS: If your current home's value is less than $500K in Loudoun or $750K in Fairfax County, it's likely that supply is low, and demand for your home is high. 

However, at higher price points in the same area, that's not the case.  So, if you are "trading up" you may benefit from a seller's market when you sell and a buyer's market where you buy. 

If you're relocating, you'll soon realize that our Washington DC submarket is quite different from other areas of the country.  Many areas have massively depressed home prices allowing you to scoop up amazing deals.  While buyers markets are found in many areas, some of the best opportunities include Detroit, Michigan, most of Florida, the Las Vegas area and far more.

So, whether you're moving up or relocating, you have a very good chance of benefitting from seller market conditions when you sell, and buyer market conditions when you buy.  Can it really get better than that?

INTEREST RATES: Let’s face it, Americans buy with loans… therefore, the interest rate for loans impacts you as both a seller and a buyer. Right now, the fed’s rate is 0% and it can not go any lower. To artificially DEFLATE interest rates and spur more home buying activity, the fed has been buying mortgage backed securities. This has resulted in a “typical” 6% interest rate being reduced to an average hovering around 5%.

What does this mean in dollars? Well, for every 1% increase in interest rate, if you want to keep your payment identically the same, the price of the home must be 10% less. So, buyers that can pay $500K for your home today with a 5% interest rate, will only be able to pay $450K for it at a 6% interest rate. I bet you’d like to keep that $50K in your pocket, wouldn’t you?

And, this won’t last forever either. In fact, the fed has announced it will be phasing these purchases out and no longer plans to buy these mortgage backed securities after the first quarter of next year. That means if you are thinking of putting your house on the market in the spring, that could be a very poor decision.

EXPANDED TAX CREDIT: You’ve heard of the “First time home buyer tax credit” of up to $8,000? Well, that is coming to an end November 30th. BUT, it's being extended!  And, it gets better… the new version of this program is not just for first time home buyers any more! If you are a first time home buyer you can still get up to $8000.  Or, if you’ve owned a home for 5 of the last 8 years, this NEW credit’s for you, too! Plus, the income limits are being increased…. Allowing people with higher incomes ($125K for one person, $225K for a married couple) to take advantage of the maximum credit. If this passes, it will expire APRIL 30th.

This affects you as a buyer and as a seller. You may be eligible as a buyer; but even if not, your buyer may be eligible, and certainly many buyers in the market will be eligible, spurring activity and urgency to buy before April 30th of next year.


** As an aside, please know that the National REALTOR Association worked hard to make this happen.  Your national, state and local REALTOR associations are always looking out for you, property owner rights, and small business owners, as well as for our economy overall.  This bill is only one example of the fruits of our labor.

***
Still not convinced? Call me for a personal consultation. I will be glad to help you sort through this, and other economic news, as well as to discuss your family’s specific situation and help you strategize to make the most of what’s available to you.

www.VickyChrisner.com


Ofc: 703-669-3142


VChrisner@KW.com

Tuesday, November 3, 2009

Update: Why This Is Still A Buyers Market

With the $8000 tax credit almost gone, why is this STILL a good time to buy?


PRICES (More House For Less)

Some submarkets have “hit bottom”. In the Washington DC metro area, the industry professionals and economic experts believe that pricing for the lower half of the market (generally, under $500,000 in Loudoun; under $750,000 in Fairfax County) are as low as they are going to go, and many are predicting prices will start to increase, and in fact, in some areas, we’ve already seen that.

INTEREST RATES (Low Rates = Affordability)

The Fed’s rate is 0%, which is as low as it can go. To artificially deflate interest rates, the federal government has been purchasing mortgage backed securities. They intend to phase this out by the end of the first quarter of 2010.

This effectively means that interest rates are artificially low right now – hovering around 5%. After the first quarter of next year, interest rates are expected to increase to an average of 6%. For every 1% increase in interest rates, to keep your payment the same, you must purchase a home that has a price that is 10% less. In other words, if today you can comfortably buy a home that is $500,000; by next spring you may only be able to afford a home that is $450,000. That makes a substantial difference in the amenities of the home you can buy.

TAX CREDIT – Extended and Expanded

Last, but certainly not least, the tax credit dubbed the “first time home buyer credit” is being extended, and expanded.... and it's not just for first time home buyers anymore!

First time home buyers can still get a maximum of $8,000 in tax credits. However, many more will find advantages as eligibility is expanded to anyone who has owned a home for 5 of the last 8 years, and income limits are increased.  To take advantage of this new program, you must be under contract by April 30th and will have until July to actual settle on the property.

Read highlights of this bill:                                                                                                  
http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf

No one expects further extension or expansion beyond that point.... so take advantage of the gift while you can!

***

Still not convinced? Let’s talk. Let me show you what homeownership in the long run can do for your personal wealth, the continued affordability of your housing expenses and the quality of life for you and your family.


Vicky Chrisner


www.VickyChrisner.com


703-669-3142

Monday, October 19, 2009

A Short Sale, Anything But Short


The first time I heard a buyer say they thought a short sale was someone who needed to sell quickly (in other words, they thought the sale would happen in a short period of time), I giggled a little. When I thought about it, I could totally understand the thought pattern. The reality is nearly the opposite....a short sale can be anything but short!
The term actually refers to the current owners needing to sell and being "short" the funds it will take to pay off the lender. So, the current owners need to negotiate with their lender an alternate repayment plan or forgiveness of the remaining debt. In today's market, banks are doing anything to avoid foreclosures, so we are seeing more and more short sales approved; very often with full debt forgiveness to the sellers.
This is truly a win for the sellers. Sure, their credit takes a hit. But, their bank accounts and immediate financial future is far better off than if they were to go through a foreclosure. And, it is expected that many of these sellers will be eligible for purchasing again in the not so distant future.
Buyers, on the other hand, need to be willing to stay the course, and hope for the best. There are opportunities and risks.  Be sure you understand them.
Because in many segments of the marketplace today, most of the available inventory is short sales, I am going to try to break down this very complex process so you're better equipped to consider buying or selling in this kind of a transaction.

Stay tuned to http://www.therealestatewhisperer.blogspot.com/ in the coming days.
UPDATE: Read "The Long and Short of a Short Sale: Part 1 , Part 2 ,  Part 3 , Part 4 and Part 5" by clicking on the light pink links.
* * *
Post written by Vicky Chrisner; Keller Williams Realty
Questions and comments can be posted here, or for more privacy, please feel free to email me: VChrisner@KW.com

Monday, October 5, 2009

Demystifying Credit Scores - Updated 11/29

Recently, I had the opportunity to participate in a conference call with Dave Wheeler from Credit Plus. Credit Plus is a credit scoring company that supplies information to mortgage lenders. In other words, Dave is "the man" (or one of them) that creates, interprets and manipulates the credit scoring model.

During our conference call, he demystified many things for me, that I would like to pass along to you... it was a lot of information, so I have broken up these topics into a series of mini-posts for your easy reference.

Part 4:  So What? - UPDATED 11/29

These posts answer 90% of all the questions I get about credit scores.  Hopefully, they will help you understand how your creditors are viewing your credit.  Please keep in mind in the last 18 months, the credit scoring model has changed THREE TIMES.  So, this is an ever evolving industry.  However, the basic principles have remained constant for some time now. 


November 29, 2009:  The chart shown is copied from an article on Creditcards.com by Jeremy Simon, based on NEW information just revealed from FICO.  FICO will be releasing even more information which will be available on their web site this weekend. 
If you're thinking of buying, I encourage you to start looking into your credit, but also to contact a mortgage lender who can further assist you.  Credit reports are not the only thing that lenders consider, so beware.  Do not spend every dollar you have to pay down existing debt... sometimes you'd be better off having some cash on hand.  Let them help you look at the big picture.  I actually suggest you start thinking about financing as much as 6 months to a year before you plan to buy.  For a referral to a trusted lender, contact me today!

Sunday, October 4, 2009

Demystifying Credit Scores: Pt 5 Rebuilding Your Credit

This is the last of our series on Demystifying Credit Scores.
Please be sure and read through the other posts, too. 

==========

So, your credit score needs a little work?  Okay.  Here are some tips on improving your credit score.

  1. Start by knowing what your credit score is.  Go to http://www.myfico.com/ and checking your scores.  You can no longer get your Experian score, but you can get those from TransUnion and Equifax.  These are your base lines.  For mortgages, it will be hard to get a loan if your score is less than 620, and quite honestly, you want it to be over 700 ideally.  If it's over 800, you're done!  Congratulations it probably can not get any higher, so don't sweat it.
  2. Next review full copies of your credit report from each of the agencies. (Experian, TransUnion and Equifax).  You can get a free copy from many sites, including http://www.annualcreditreport.com/ and http://www.freecreditreport.com/.
  3. Challenge every negative piece of information on any of these reports.... even if it is accurate.
  4. Wait for responses.  Do your best to argue why any derogatory information should be removed.
  5. Once you've gotten the reports corrected, look at what your most negative things are, like public records and collections.  When were they?  Most negative things fall off your credit report in seven years.  Let's say that 6 years and 9 months ago a collection was placed on your account for $500.  If you want to buy a house next year and are doing this credit repair process in preparation, the WORST thing you can do at this point is to pay it without an outside agreement.  Why?  Well, the reporting period is 7 years from the last date of recorded activity.  If you pay it now, it stays on your credit report for another 7 years starting now.... if you leave it alone, it disappears from your report in six more months.
  6. Remember that, outside of public records and collections, it is your most recent activity that is most heavily weighted.  Make sure you are paying as agreed on every active account.  No exceptions.
  7. Pay down your balances as best you can.  Part of your credit score is calculated by the balance of all of your accounts compared to the credit limits you have.  If you have $10,000 of credit, but are only using $2,000 of it, that is rated favorably, as it is indicative of someone who has responsible spending habits.
  8. It is best to have a mix of types of accounts - Revolving credit (credit cards), and Installment loans (like student loans and car loans). 
  9. If you are having trouble getting a credit card, get a secured credit card - put $500 in a bank and get a $500 credit card.  Use it (otherwise it won't be rated) and then pay it off, regularly.  In time, you will be able to have a credit increase and get unsecured credit lines.  But, from a credit rating standpoint, secured accounts are rated exactly the same as unsecured accounts.
  10. After taking these actions, check your credit score again in six months.  Then, send me an email and let me know how much your credit score improved!

Congratulations on caring enough to start putting yourself back on the right track toward a healthy credit rating.  Remember, no matter what happened to ruin your credit, you can recover.  Time heals all wounds, including credit score wounds.

Demystifying Credit Scores: Pt 4 So What?

This is the 4th in a series of 5 mini posts on Demystifying Credit Scores.

Please be sure and read through the other posts, too.

==============


In this final post of the series, I want to address the major question, "So What?"

When it comes to credit scores should we really care? 

Well, yes and no.  I use my (divorced) parents as a great example:

For nearly 20 years, my dad didn't have a bank account or a credit card or a car loan.  He bought a home with owner financing (because he had bad credit after the divorce).  He had no credit file at all.  But dear old dad usually had lots and lots of cash; and that's how he paid for everything.   He needed a new truck?  He bought in a stack of bills.  When there was an emergency, he pulled cash from his mattress (or whereever).

My mother, on the other hand, lived paycheck to paycheck.  The money in her bank account barely covered the bills expected to come in over the next 2 weeks.    But, she had great credit.  So, when she ran into challenges and her expenses were increased unexpectedly, she relied on credit to get her through - and it's always worked for her.

You see, the answer to the question "So What?" is "It Depends."  Will you need your credit anytime soon?  Are you planning ot buy a new car?  Rent an apartment?  Buy a house?  If so, then yes, it matters what your credit rating is.

Many will tell you if you have a couple of credit cards, a good car and a place to live, then if you do have to allow something detrimental (like a foreclosure or short sale) to happen to your credit report, it's not that big of a deal.  But, remember once you've defaulted on something, it's like lying to your parents, you have to regain trust.  You do that by rebuilding your credit.

The COST of a lower credit rating:

The actual cost varies, as does the actual point change.  But, according to an article published on November 29th on CreditCards.com, the following are examples of the actual dollars you could lose by having a lower credit rating:

If you had a 780 credit score, and paid 30 days late just once, on a 5 year $20K car loan, your interest rate could increase 3%, costing you $26 more a month.  If a debt settlement was reported (this is where a creditor agrees to take less than is owed to them in order to close the account and recoup some of what is owed to them), a $200,000 30 year mortgage rate would increase so that the loan cost you $109 more a month.




If your credit score was 680 before your 30 day late payment, the increase in your cost would be $41 per month; and a $200K 30 year mortgage would cost you $95 more per month.  After a debt settlement, you could no longer qualify for a credit card.

You see, these credit scores (specifically, the FICO score) is powerful.  I urge you to care about  your credit, but for you to balance the needs for credit with the needs for cash.  You can only live on credit OR cash for so long.  At some point, both run out...when you run out of one, you want to make sure you have the other.  It's best to have a mix.

If you've recently been in a situation where you let your credit rating fall, tune into my next post with tips on improving your credit score.

Demystifying Credit Scores: Pt 3 How Foreclosures and Short Sales Affect Your Score

This is the third of a series of fiv mini posts on Demystifying Credit Scores.

Please be sure and read through the other posts, too.

============


Short sales are slightly less damaging than a foreclosure to your credit score.... for about the first 12 months after its occurrence. 

  • If you are paying as agreed up to the short sale, for that duration of time, the loan is rated PAID AS AGREED, which is good.


  • It is possible, sometimes, to stay current on your mortgage and to complete a short sale. 


  • Once either the short sale or foreclosure is completed, both accounts are reported the same: PAID DEROGATORY, and therefore will affect your score the same from a numerical standpoint.  Dave used the analogy that it doesn't matter really whether you ran off the cliff or walked off the cliff, the point is you still went over the cliff.


  • After the short sale or foreclosure, the major difference in how it will affect your score relates to the balance that shows as unpaid (since balances for outstanding credit are a big part of the scoring model).  Short sales, as forgiven debt, will sometimes be reported with a zero balance. But, balances are only considered for 12 months.  So, one year after either a short sale or a foreclosure, the rating and numerical impact are the same.  Refer again to the jumping over the cliff analogy.

    Foreclosures can also become public records (this varies state to state).  From that standpoint, foreclosures can take a dramatically worse toll on your credit report than a short sale - as public records are weighted very heavily.  Here is where it can REALLY matter.
  • Accoring to a November 29, 2009 article by Jeremy Simon published on CreditCards.com, FICO has just revealed examples of point score drops for certain credit events, as follows:
    If your previous credit score was 680: A Foreclosure would drop your score 85 to 105 points.  A Bankruptsy would drop your score 130 to 150 points. If your previous credit score was 780:       The Foreclosure's impact would be a 140 to 160 point decline. The Bankruptsy's impact would be a 220 to 240 point reduction. For examples of how this could actually COST YOU MONEY, see the post "So What".
Please note here that we are referring to CREDIT SCORES!  When it comes to buying a house after a short sale or foreclosure,  it is up to the lender as to how to underwrite these things.  Chances are that a short sale will be considered more favorably than a foreclosure during a loan application process. 

It's hard to know where the future of credit scoring or loan applications will go as we move past this part of our history.  But we can rely on past experiences and common sense to help us know what to expect.

Prior to this period in our history, we've been through other periods where people had many foreclosures or people did deed in lieu of foreclosure transactions with their bank.  I experienced many lenders who said, even if the person would otherwise qualify for a 100% loan, if they had a foreclosure EVER they could not receive 100% financing on a property. 

In fact, my dad was business partners with someone who had a previous foreclosure on his record.  The business partner had a very good credit score at the time, and had a current mortgage for a principal residence that had nearly 20 years of being in good standing.  But, after a couple of times of being told by lenders the partnership was better off not including him on loan applications, they just stopped doing it - and so my dad became fully responsible for all the business debt.

This type of underwriting attitude is likely to continue into the future, even as this period gets further and further behind us.

Saturday, October 3, 2009

Demystifying Credit Scores: Pt 2 How Inquiries Affect Your Credit Score

This is the second post in a series of five mini posts of our series on Demystifying Credit Scores.
Please be sure and read through the other posts, too.


===========

Continuing our series of posts on "Demystifying Credit Scores", this posts explains how credit inquiries affect your credit score.

There is a lot of misinformation floating around regarding how inquiries affect your credit report, and I finally feel like I have a reliable answer!!

There are two kinds of inquiries: Soft and Hard

Soft inquiries are done by insurance purposes, current creditors, and employers. These do not have a negative impact on your credit rating.

Hard inquiries are inquiries run whenever you’ve applied to borrow money from a creditor (credit cards, personal loans, mortgages, car loans, student loans, etc.). When you have a “hard” inquiry, it immediately deducts points from your credit score for each "unique" inquiry. Generally, the point loss is somewhere between 3 and 7 points, and you don’t get those points back for one year.

However, if you have multiple inquiries from a similar type of creditor – like mortgage loan inquiries from multiple companies, the scoring models do allow you to “shop around” without further deducting points. Experian allows you 14 days, TransUnion and Equifax permit 45 days.

Demystifying Credit Scores: Pt 1 All Credit Scores Are Not Created Equal

This is the first mini post in a series of five mini posts in our series on Demystifying Credit Scores.

Please be sure and read through the other posts, too.

================
The credit scores you buy on sites like AnnualCreditReport.com are NOT your FICO scores!!

They are typically your "Vantage Scores". Vantage Scores are rated on a scale of 501-990.

FICO scores are done based on the Fair Isaac scoring model, and are a range of 330-850. You can purchase these scores at http://www.myfico.com/  Most Creditors, including mortgage lenders, are basing their lending decisions on your FICO Score. 

Sites like AnnualCreditReport.com ARE a good source for pulling and reviewing the detail of your credit report.  You SHOULD review your credit report periodically to check for errors. 

Since most creditors do report to all three reporting bureaus, I actually pull a report from one of the three reporting bureaus every four months.  I often find errors, and when I do, I write letters to all three of the credit bureaus to advise them.

As a matter of practice, it is suggested that you challenge ANY negative information on your credit report, even if it is accurate.  Many times, the creditors or their collection companies will be so overwhelmed they will fail to respond within the time frame allowed and the bureau will remove the negative information from your file.

Friday, October 2, 2009

Home Prices Will NOT Return to 2005 Levels

"Home prices will NEVER return to the levels of 2005.  NEVER," said Roger Arnold, a well respected Global macro-economist, during a recent conference call with several Keller Williams Agents in the Northern Virginia area.  Of course, he meant that comment in the context of relative value when you consider affordability indexes (median home price compared to median area income), inflation, etc.

He is not discouraging buying a home today, just "calling it like he sees it" for existing homeowners, himself included (and me, too).  At this point, the artificial home price inflation peaking in 2005 or the beginning of 2006, has pretty much come and gone.  Even in areas where there is still fallout to come, prices are relatively low, and homeownership offers many advantages, financial and otherwise.

Locally, in the Washington DC metropolitan area, we're somewhat insulated from the national economic climate, but we don't go unaffected. 

Since 2006 and 2007, area homeowners thought they would "wait out the storm" by renting their homes for a year or two, rather than selling them, when life forced a move.  It's not that they couldn't sell, just that they wouldn't, because they wanted to get back that 2005 value... and they wanted it very, very much....enough that they couldn't hear what they didn't want to.

Sadly, the next couple of years saw continual price decline.  It caused additional fallout, with even more homeowners letting go of those "second homes" to foreclosure when they realized they simply didn't have the reserves to withstand the storm.  They had drained their savings, and run up credit lines.  Even if their homes were rented, being a landlord turned out to be a much harder job than they thought...and it wasn't making them any money.  The flooding of the housing market with so much similar inventory all at once caused home sales to slow to a crawl, and in some areas to a complete halt.

At this point, our inventory was mostly post foreclosed, bank owned homes (REOs)....and a few traditional sellers who had their homes on the market for about $100,000 above the neighboring REO.  The traditional sellers were being laughed at by buyers, and REALTORs were shaking their heads.  Some agents would even shy away from taking traditional listings entirely.  The REO homes had previously been owned as rental homes by investors; or starter homes by people who had already moved into their next "move up" home without selling their first house; or by people who never should have been buyers in the first place.  Essentially, our market was flooded with an inventory of homes at similar price points, and all in direct competition with one another.  So many choices, and nothing was selling. 

In 2008, desperate to move some houses, banks began holding public, well marketed, auctions.  What they, and the rest of the world, discovered was that prices weren't low enough.  But, when they were, buyers would come out of the wood work.  So, in 2008, even when many thought prices may had already "flattened", Loudoun homes saw a sudden and dramatic 10% price drop in a matter of a few months; and the buying frenzy began. 

Since then, we've seen continual competition for well priced homesREALTORS began to be able to predict market values again since there was some stabilization... at least within that segment of the market.  Perhaps because we could set expectations properly, the same people who did not want to sell their homes in 2006 and 2007 (because they didn't want to give up value) were now ready to sell

Wait!  What was that?  You got it.  A homeowner unwilling to sell in 2007 at $300,000 because they were going to wait until they could sell it for $400,000 again were suddenly willing to sell at $225,000 in 2009?  Yes.  The sellers trying to time the market lost, big time.  In fact, some where now under water, but were willing to face the fact that they could no longer hold on, and started talking about options to foreclosure (i.e. short sales).

With 2009, we've seen more traditional (non-distress, non-bank owned, non-short sale) sales re-emerging in the marketplace, which is what buyers really want.. but inventory remains low.  So, premiums are being placed on these homes, and fierce competition ensues.  Prices are going back up, for all types of sales, but most especially for well cared for homes which are not short sales.  In 2009, we've regained most of the value we lost in 2008. 

But now the greed is re-emerging and it is scaring me.  Sellers, seeing that prices have started to regain value in 2009 are saying that they have new faith that prices will continue to go up, and they seem to think by next year, or the year after, they will be back up to 2005 prices.  No, it's not likely.   I don't think so, and neither does Roger Arnold, or any other REALTOR or economist that I know.

My message here:  Please, don't try to time the market.  If life is suggesting to you it is time to move up, move out, or move on... do it. Sell for what it's worth and make the best of it.  I am talking here, mostly, about principal residences... and telling you that if you didn't mean to be a landlord, you shouldn't be.  And, you need to seriously calculate the cost of a vacant home before you allow it to stay that way.

Besides, if you are moving out of that "starter" home as a move up buyer, or to relocate, then you are likely going to get the best end of both markets - seller's market conditions when selling, buyer's market conditions when buying.  What more could you ask for?  You would not have gotten that benefit in 2005. 

Looking at value rather than prices, it may very well be prudent for you to consider making your move now, while interest rates are lower and buyers have buying power, while inventory is low and buyers have little choice and are paying premiums and competiting not just on price but on terms.

Remember, most homeowners who thought, in 2007, thought their 2005 values would have returned by now.  It hasn't, and it's cost them money - a lot of money - over the past two years.  They have seen their dreams shattered and finances ruined by trying to time the market.  Don't make the same mistake

Here's an example of someone who's in denial over market conditions - it's a bit humorous, but after reading this blog and watching the video, look in the mirror.  You're not doing the same thing, are you?
http://therealestatewhisperer.blogspot.com/2009/08/in-economies-like-ours-its-hard-to-know.html


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My advice here is NOT one size fits all. 
For a personal consultation in the Northern Virginia/Dulles area, please contact me at:

703-669-3142

for more news from the front lines of real estate!

Thursday, September 10, 2009

I Need Your Help. My Home Was Foreclosed On....I Have 5 Days...

It happened, again. 
This morning I got a message from a friend - our daughters go to school together.  The message said "I need your help.  My home was foreclosed on... and I have 5 days to find a new place to live..."
Oh, how I wish I'd known.  It seems they were working through a loan modificiation company thinking all would be well... and, all the while, the home was being sold on the courthouse steps.  WHY, WHY, didn't they call me?  Maybe I could have done something?  Maybe I could have given them a bit more control over the situation, at least.
So, I will work with them and do what I can to help place them elsewhere, but honestly I probably could have done better for them.  I would have liked to have tried.
Then, I think, "Why WOULD they call me?".  Let's be honest, they may have considered it embarrassing.  They didn't want to sell, so why would they call a REALTOR?  Well, here's why.  They know me.  They can trust me.  I have industry contacts.  I could have given them resources.  I could have at least saved them the money they paid to the loan modification company.
 
Please, please, friends... if you or someone you know is struggling with your house payments... PLEASE call me.  At least give me a chance to try to help you. 
Here are some posts I've done on similar things.... I am doing what I can to get the word out, especially to you... I am here to help, please let me try....

Thursday, September 3, 2009

The Long and Short of a Short Sale, Part 4

Continuing our posts on short sales, this post discusses the most common clauses in the contract, and how you, as a buyer or seller, should attempt to negotiate the clauses.  (Please keep in mind you need an attorney or a real estate agent, or both, to advise you personally.  I am talking here in very general terms.)

All real estate contracts have contingencies in them on both sides.  A contingency is the "if" in these statements:
I will sell you this house IF ______________.
I will buy your house IF ________________.
Contingencies can be for anything you can dream up.  However, most residential contract contingencies fall into a handful of categories.
Sellers Contingencies:
To protect the seller, the primary contingencies revolve around money and the settlement date.  The seller says "I will sell you the house IF you give me $___________ by__________(date)".  If the buyers don't bring the money to closing, or don't show up, the sellers can terminate the contract without penalty  (although there may be a penalty to the buyers). 

In a short sale situation, sellers should also have a contingency for "Third Party Approval" - meaning they need to get approval from their lender(s) to be able to sell the property, since the proceeds will not cover the mortgage.  If the sellers can not obtain the approval, then they can terminate the contract without penalty.
Buyers Contigencies:
To protect the buyer, contingencies almost always include: (a) financing (if they can't get a loan, they can't buy the house); (b) appraisal (if an appraiser doesn't certify that they are paying market value-or less-for the property, then they won't buy the property); (c) the dates, particularly the date of settlement; and finally (c) that the buyer needs to be getting the deed to the property, free and clear, with all rights and enjoyments of ownership (in Virginia, this is called a General Warranty Deed).  In addition, we often see buyers ask for a contingency to do a home inspection and/or environmental testing on the property; and, if the property falls in an area that has a Property Owners Association, then Virginia provides the right to buyers to receive and review a package full of information about the restrictions and fees associated with that POA.  In a short sale situation, we may also see language built into a contract that allows the buyers to terminate the contract because the "short sale approval" hasn't been received within a certain time frame. 


To improve chances of a short sale, sellers want a contract that has no buyer contingencies. 
To provide the maximum protection and lowest risks, buyers want maximum contingencies.

If I am representing a seller:

  • PRICE: I want a contract price that represents at least full market value; and in general, I want the highest price possible to entice the bank to approve the sale, and also because in some cases, sellers are being asked to pay the deficit between the mortgage payoff and the proceeds of the sale.  The higher the proceeds of the sale, the less my client would be liable for.


  • FINANCING: I will attempt to obtain a cash contract, with no inspection or appraisal contingencies for the buyer.  If that is not possible, I will want a full loan commitment, with the only contingencies being seller contingencies.


  • DEPOSIT: I want a high earnest money deposit, and I want it to be deposited into the escrow account as in a normal contract.


  • SHORT SALE APPROVAL: I want the longest possible timeframe to get the short sale approved.


  • PROPERTY OWNER DOCUMENTS: Since this contingency can not be waived by the buyers, I want any POA documents delivered to the buyer early on, with an addendum that they will pay the cost to replace them if they terminate the contract and do not return them.

If I am representing a buyer:

  • PRICE: I want a contract price that reflects no more than the market value in "as is" property condition...preferrably with a financial  benefit to my client because they are having to deal with the uncertainties and frustrations of a short sale.  (Generally, if the bank orders a BPO/Appraisal of their own, and the contract price is within 10% of the fair market value, then they will accept it; of course, I hope my buyer will be paying at least 10% less than fair market value).


  • DEADLINES: I want a full home inspection and financing and appraisal contingencies, and I don't want my buyer paying any of those "hard costs" (out of pocket) until we've gotten the approval from the seller's lender (which is the thing that takes the longest in this process).


  • DEPOSIT: I want the "consideration" for the contract to be in the form of a Note Payable, rather than actual funds, until the seller's bank has approved the sale.  This is because EVEN if my buyer defaults, their money is still in their own pocket - and the seller will have to sue them to get the deposit.  Most sellers in this situation will not take court action to obtain cash from a buyer that didn't buy the house.  However, if my buyer DOES NOT default, but has made a hard money deposit into an escrow account, and the buyer choses to exercise a right of walking away from the contract under one of the contingencies, then my buyer may have to fight the seller - perhaps even in court - to get their money back.


  • SHORT SALE APPROVAL: I want a short timeframe to get the short sale approved, in an effort to increase the speed of each action on the other side of the transaction.


  • OUT CLAUSE: I want an addendum that says my buyer can serve a UNILATERAL notice to the seller that he is terminating the contract FOR ANY REASON, up until the time that the short sale approval is received.  This is so that my buyer can continue looking for other homes while he waits for the approval on this short sale.  That way, if it is not approved, the buyer didn't miss out on anything (interest rates, pricing, market supply) while he waited.  (Please note this is not part of any standard addendum in our region... and many agents will wrongfully tell you it is implied.  Again, your agent matters. Read what you sign - regardless of what your agent says, the written agreement dictates the enforceable terms.)

In this post, I sound a bit like a 2 year old, I want what I want....and I do put up a good fight if it seems reasonable.  However, in the game of real estate it is not about getting all of what you want, it is about getting enough of what you want and all of what you need; and about balancing the needs and wants of the primary parties. 

Balancing the two sides is where an experienced agent with good negotiation skills comes into play.  But, sometimes you simply don't know how good your agent is until it is too late.   So, in my next post, I will share examples of things I have seen, failures and successes.  These examples will help you know how to balance your interests.

I invite you to read the earlier posts in this series.  Start with this post:  A Short Sale, Anything But Short.  Then, stay tuned to The Real Estate Whisperer for important real estate news from the front lines...Get your news AS the market is changing!

***

It probably goes without saying, but, if you are thinking of buying or selling in Northern Virginia, I hope you'll call ME first to see if I can assist you. Also, no matter where you are in the country, feel free to contact me. While I can not give real estate advice outside of Virginia, I can connect you with a proven professional in your area. I belong to many networks, including REO and short sale expert networks, and we have members throughout the country.


I can be reached at:
703-669-3142

Sunday, August 30, 2009

The Long and Short of a Short Sale, Part 3

Continuing our posts on short sales, this post focuses on how different situations can impact your chances of success with a short sale.  Below, I've outlined highlights of the ingredients which improve your chances of having a successful short sale.

A true hardship

If you had a true hardship which is impacting your ability to pay for your mortgage, and you provide evidence to back that up, banks have a strong reason to consider your request for a short sale.  

Banking is big business and they are under a lot of scrutiny right now; policy (i.e. politics), and the perception thereof = credibility to their share holders and financial backers; and consequently impacts their bottom line.  In other words, banks look better when they are helping people with a true sob story, a true hardship that any of us can imagine happening in our lives or the lives of others we know.  So, yes, in some ways, banks are being judgemental about your situation.  Don't let your pride get in the way when writing your hardship letter. Tell them why you need their help.  They are more likely to give it to you.

You have no other reasonable alternatives

In your hardship letter, you should spell out what alternatives you have considered (and ruled out) and what still exist, and, do it with strength.  It increases incentives to the bank for considering your request.  For example, if they can show (and you remind them) that you attempted to get a loan modification but didn't qualify, then they know you've TRIED to find alternatives.  If you've depleated savings and credit lines (and you demonstrate that), they realize you've TRIED to handle the problem on your own, but were unsuccessful.  If you're considering bankruptsy, they realize you consider yourself destitute with few options. 

Your letter should always state that you are looking for the best alternative for all involved, and you believe that is the short sale.  A foreclosure is not good for you or the lender.

For some banks, if you continue to pay your mortgage payment, they will believe that some how, some way, you will continue to stay current; and therefore, they may not consider your request, or it may be prioritized very low in the stack of requests.  Banks, too, go through a state of denial.
In all cases, expect your financial records to be required (in detail).  They will do their own calculations to determine if you CAN continue to pay. It's your job to show them you can not.  You are not asking for a small favor here; so don't expect it to be easy. 

Lower numbers of approval layers = Higher chances of success

For every bank/lender involved, another approval is required.  The more approvals required, the more the complicated and time consuming the process gets; and consequently, each approval required reduces the chance of success.  If any ONE party denies the request, the short sale will not go through.

If you have only one lender and one loan, the process is fairly easy.    If you have multiple loans with one bank, it's also a reasonable transaction to try to accomplish. 

If there are two different lenders on two different loans, you must get approvals from both; and it gets tricky.  For example, let's say you own a house worth $250,000 today, but you bought it in 2005 for $375,000 with what we called an 80/20 split - meaning you had one loan for 80% of the value ($300,000), and another loan for 20% of the value ($75,000).  Again, if both loans are through the same bank, it's not too hard; but if there are two banks, they will argue over how the proceeds get split.
 
In a foreclosure, the primary lien holder (the one with the $300K loan) would get the full proceeds of the sale - approximately $225K after closing costs; which translates to something like $215K after having to incur the costs for foreclosing, too.  (There are HUGE variables depending on banks and states here, so please understand this is only an approximate example.) The secondary lien holder will get nothing. 
 
In a short sale, the only reason a second lender would even consider approving a short sale is for a reward of some sort.  Fairly commonly, we see that the second lender will accept $5K as full payoff for the $75K loan.  Remember that it costs them money to process the sale, and so they are really not getting much at all for this.  That means they take their time approving (or not) the sale. 
 
The other thing is that the primary lender - the one that would get $215K of the $300K you owe them (of the $600K they thought they were going to get if you paid it over 30 years) - is being forced to face a painful situation, and they do NOT want to share another $5K with the second bank.  But, they might....after all, do they have a better alternative?
 
As you can easily see, however, the higher the number is that the second bank requires, the less likely the first bank is to agree to split to split the proceeds.  At some point, it makes more financial sense for the primary lender to allow the property to go through foreclosure.
 
If you add 3 or more loans with different lenders to the equation, everything can very easily can fall apart.
 
Most consumers have no idea that very often, they are paying (for example) Countrywide (now Bank of America) every month but another lender or institution is actually the mortgage holder, and BofA only services the loan (handles collections, escrows, paperwork and customer service).  When there is a servicer and investor, you must work through the servicer but the investor must approve the short sale.  While this generally does not deter chances of approval (it depends on who the investor is), it will often increase the length of time required to process a short sale.  The longer it takes, the more challenging it can be to keep buyers on the other end.  At some point, their patience may wear out.  No buyer, no sale.
 
If you have some kind of mortgage insurance on your loan, the insurance policy can impact your ability to get a short sale approved.  If the bank is not taking "enough" of a hit on the short sale, it may not qualify to collect on the insurance; and it may be better for them to foreclose on the property so they get foreclosure proceeds plus the insurance payout.  We're seeing this affect less short sales, but it can be a "behind the scenes" factor.  Part of the reason it is not impacting us too much today is that we were rarely doing FHA or VA loans or even those with private mortgage insurance in 2004-2006; at least in the Washington DC market. And, those homeowners are the ones that are being most impacted by the recent decline in home values.  When combined with a personal hardship, these homeowners make up the majority of the short sale candidates in our market.

Timing

Some parts of "timing" you don't choose.  You don't know the lenders internal climate, and what their current business policy is for dealing with short sales - and this changes often based on market and political influences; and it can impact your sale.

What you CAN choose is when to ask for professional help.  Get your real estate agent involved before you have missed a payment.  This gives your agent the most amount of time to help you examine your options and then to start the process moving along if short sale is the best strategy.

Make sure that once the ball starts rolling, everything happens as quickly as possibly.  Have your financial package ready, so that once you have a ratified contract, you can submit the package to the bank immediately without delay.
Also, in cases where there are multiple lenders, make sure you submit packages to all of them at the same time, or the earliest time at which you can deliver a complete package.  Do not get approval from one lender first, and then submit for approval from the second lender.  Your multiple banks can work concurrently on processing their packages.
Your agent(s):  The "Professional Negotiator"

Some people immediately reach out to a "professional" negotiator.  Many of these negotiators are asking for very high (non-refundable) fees upfront, and additional success fees.  I am not a fan of these companies, although some are reasonable and work WITH your real estate agent to assist you. 

I see these companies as extensions of the real estate agent.  Instead of hiring additional administrative assistants to handle all the paperwork, emails and phone calls, the agent is choosing to hire an outside company with specialized experience in the area of short sales.  However, some agents are hiring these companies because they are intimidated by the process of negotiating with your bank.  Any real estate agent afraid of negotiating is not an agent I would want to hire. 

So, if a third party company is involved, do your research and make sure you understand their role and your agent's role.  Usually, these companies require some fee upfront - if you have a complicated case, then a fee may be reasonable (not thousands of dollars).  Any success fees, since they are working as an extension of the listing agent, should be incurred by that agent, and guarranteed by the owner (my opinion). 

NOTE:  Some states are not allowing agents to negotiate short sales on behalf of their clients; they are requiring attorneys and/or third party negotiators.  In these cases, it makes sense that the agents would pass along those fees to the clients.

Your agent(s):  The Real Estate Agent

To me, the most critical decision an owner makes during this process is what real estate agent to hire.  Your agent will be guiding you through the process from start to finish.  You want to make sure your agent knows how.  Do they understand the process?  Do they have good communication skills (written and spoken mastery of the English language)?  Good follow up skills?  Do you know what the process is and who will be doing what for you? 
Remember, your agent must negotiate with the bank, facilitate a lot of financial paperwork exchange, market and advertise your property for sale, negotiate on your behalf with the showing agents and their clients; and coordinate the transaction all the way through to the closing.  It's a TOUGH job; hire carefully.

The right marketing and good price negotiation

You will need to demonstrate the marketing plan used to procure an offer.  Walking across the street to the neighbor's house and asking what they are willing to pay for the house is not going to suffice.  You must show that you listed the home, usually with a real estate agent who placed it in the multiple listing service (not all areas have these, believe it or not).  You must show that you did all the typical stuff - internet advertising, signage, etc. and that you attempted to make the availability of the home known to the widest possible audience in an attempt to procure the best offer possible.
You must also demonstrate why you used the asking price you did - with comps and market data... not because just about anyone will buy just about anything if it is cheap enough.  You can not ask $100K for your $250K house and then expect the bank to accept an offer at that price. 
In a continuing declining market (by the way, this is no longer the case in our area), you might have run comps that supported a $240K-260K price point, so you listed it at $235K to try to get a quick offer.  After 2 weeks, you dropped the price to $225K, still nothing.  Now, you're 30 days into this and there have been no new sales in your market place in that 30 days and no body seems that interested.  You get an offer of $175K. 

Well, here's what I'd do - I'd drop the asking price to $175K and wait a few days - maybe a week, to see if I can get that offer from anyone else.  Hopefully, you'll get an offer at $200K, maybe $215K, and then you can ratify and send it to the bank.  If not, I'd ratify the $175K offer and submit it.  You can then show that you TRIED to get a better offer or multiple offers at that point, and you couldn't.  It demonstrates that the price is not below, or at least not far below true market value.

The right buyer

Selecting a buyer who understands the short sale process is important.  If the buyer MUST move within 60 days, and you haven't started the process with your bank, that is not going to work. 
Selecting a well qualified buyer is critical.  Make sure that the buyer has the funds available to close, and that they are in an FDIC insured account (not the stock market).  Make sure the pre-approval letter is from a well respected loan officer and from lender (not a mortgage broker) and is current.  If the process takes several months, your agent should be checking in with the lender to make sure the loan program remains available and that the buyer (to the best of his/her knowledge) is still qualified.

The right offer

If you're in a fairly active market, your agent should market your price agressively, but not ridiculously, in order to obtain a quick offer - hopefully many.  The lesser contingencies the better. The buyer will want some protection in the contract - it is only reasonable.  But, as the seller, negotiate as much as you can in your favor.  Make sure the buyer understands - even if they do a home inspection - the property is being sold as is, and the homeowner will make no repairs (after all, this is a financial crisis, and the buyer is getting a great deal).

If you are "approvable" based on the bank criteria, the price is the make or break it point of the short sale contract.  While everyone knows that short sales, from a buyers perspective, SHOULD be good deals, it can not be much below what the bank's appraisers show is fair market value for the home.  If you sent in an offer of $100K on your $250K home, the banks generally won't accept it.  Remember, most are taking public bail out funds, and almost all have public share holders or atleast multiple financial backers.  Even if they WANT to, they can not take ridiculous offers... their financial backers would walk, the public would scream.  It simply isn't possible.  (Keep in mind here that I am not referencing a list price, but market value.)

When it falls apart

With so many variables, often sales fall apart on the buyer's side.  Maybe the buyer can't wait any longer, or their financial situation changed, or you simply picked the wrong offer because the buyers agent can't manage her clients' expectations, or maybe the bank counters with a higher price and the buyer chooses not to accept it.  Whatever the reasons, buyers often walk.  But, the first contract is critical because it starts the ball rolling with the lender.  If your contract falls apart, I discourage you from telling the bank this information, because they will stop their process.  Just get a new contract; and try to collect the earnest money for your clients.

Maybe you had back up contracts, or maybe just other offers - call them back.  Maybe they are still interested?

If you've gotten bank approval when the contract falls apart, getting the second offer should be easier - once you put the house back on the market, and you can show potential buyers the terms that the bank agreed to, it means most of the waiting is over.  If you replace the contract quickly enough, perhaps you won't even need to get reapproval (depends on how the approval was issued by the lender).  Even if you are required to get re-approval, try hard to match the terms and conditions and make the contract as strong as possible.  From a buyer standpoint, putting an offer on an "approved" short sale takes much of the guessing and waiting out of the process, and makes your home a very attractive alternative.
BOTTOM LINE:  By working with a qualified professional who understands the various nuances involved in these types of sales, your chances of success are dramatically increased.  I've done my best to outline for you the major considerations.  I hope you will use these to interview agents.  Make sure they can expand on these items, and explain which are mostly likely to impact you.

STAY TUNED FOR MY NEXT POST WHICH WILL OUTLINE THE VARIOUS TERMS OF CONTRACTS AND CONSIDERATIONS ON BOTH SIDES OF THE TRANSACTION.

***

Of course, if you own a home in Northern Virginia, I hope you'll call ME first to see if I can assist you.  Also, no matter where you are in the country, feel free to contact me.  While I can not give real estate advise outside of Virginia, I can connect you with a proven professional in your area.  I belong to many networks, including REO and short sale expert networks, and we have members throughout the country.
I can be reached at:
703-669-3142
 
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