Short Sale Process Actually Becomes Shorter!

RealtyTraq, which measures real estate activity across the country, just released a very interesting article with the latest statistics on the time it takes banks to process a short sale, and which banks have the fastest response time. Not surprisingly, Freddie Mac, Fannie Mae and FHA had the shortest timelines from the beginning of the process to the final closing, posting an average of 193 days in January 2012, down from 248 days on average a year ago. View the complete article here

But the most interesting part of the article was the fact that Bank of America has announced that it's new policy is to provide a decision within 20 days of a short sale offer with a completed seller package. In Las Vegas, almost 60% of short sales are serviced by Bank of America, so this is GREAT news for Las Vegas homebuyers that can't wait five or six months to find out if they can actually buy the home of their dreams.

In fact, as a matter of course, many prospective owner occupants have been instructing their real estate agents to exclude short sales from their home search because they can't wait and/or don't want the typical hassles associated with a short sale even if they could get a better price on a short sale home. This means they are not even looking at half the market inventory they could possibly buy. And especially now, with Las Vegas real estate inventory levels so low and Las Vegas back to being a seller's market, this will give buyers more choices and potentially a better bang for their buck.

For sellers too, this means less hassle and stress waiting to see if their short sale will be approved and if they will be able to take advantage of the tax benefits on deficiencies currently in place until the end of 2012. Hopefully other banks will soon follow B of A's example and set a strict policy on response time.

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Beware Home Owners - Judicial Foreclosures Coming to Las Vegas!

Nevada has always been a non-judicial foreclosure state. If a borrower was past due, all the mortgage holder had to do was produce copies of the appropriate documents and file foreclosure notices, and within approximately 5 months the foreclosure sale took place at the county steps. There was no right of redemption for the borrower, and the new purchaser took possession immediately.

But in the wake of the robo signing scandals, the Nevada legislature passed a new amendment, AB 284, which included the requirement that an authorized representative of the current lien holder had to complete and sign an affidavit indicating they had “personal knowledge” of all previous transfers of interest in the note. Most notes are sold by the originating lender within weeks of the initial closing, and often they are sold several times during the life of the loan.

Since there is absolutely no way any authorized representative of the current lien holder would ever be able to affirm personal knowledge that each previous lien transfer was done correctly, no lien holder would ever be willing to sign the new affidavit. Because of this, foreclosure filings have almost ground to a complete halt in Nevada, active inventory on the real estate market has shrunk to less than a two month’s supply, and properties priced at less than $200k are receiving multiple offers in droves.

Past due borrowers, many of whom have been sitting comfortably in their homes for up to two years while not making any payments, celebrated the new amendment. No more new foreclosure filings meant they might be able to stay another couple of years “rent free,” right?

Well, that celebration is about to come to a screaming halt. Banks, sitting on large inventories of non-income producing assets, have started to “wise up,” and they are pursuing the judicial foreclosure process instead. A judicial foreclosure does not require signing off on the AB 284 affidavit.

This has serious ramifications for past due homeowners. A judicial foreclosure entails an actual lawsuit filed against the borrower. The filings include the entire amount of the past due note, all past due interest, and the lien holder’s attorney fees. In addition, the borrower will have to hire their own attorney to represent them in court.

Best case scenario: the borrower files bankruptcy to wipe out the debt, keeping in mind that any assets they have accrued will be used to reimburse the bankruptcy creditors. And they will still have to pay attorney fees for the both the court case and the bankruptcy out of pocket. And with both a foreclosure and a bankruptcy on their credit, it will be a long number of years before they will be able to qualify for home ownership again.

A much better alternative for the homeowner AND the bank is a short sale. Benefits for the borrower: in almost 99% of short sales any loan deficiencies are “forgiven” and in a few years the borrower can re-establish their credit and purchase another home. (In some cases owner occupants can even receive a credit from the short sale proceeds for moving expenses.) Benefits for the banks: a judicial foreclosure means the borrower has a one year right of redemption. So the banks would have to rent out and maintain the property for at least a year before putting it up for sale to recoup some of their losses. A short sale is less costly and gets the asset off their books much more quickly.

So, Las Vegas homeowners, unless the sheriff is already at the door changing the locks, call us immediately to find out about listing your home as a short sale. The banks WANT to accommodate short sales now. They will still make you jump through paperwork hoops to get an approval, but their ultimate goal is to make it happen. As long as you have a little bit of patience for the process, you will soon be able to put this house behind you and start fresh again.

Buy a Property for $50k - Rent it for $1k per Month?!

'Where in Canada can you buy a $50,000 property and rent it for $1,000 a month?' was the lead-in for an article on the Las Vegas real estate market in the Montreal Gazette this past Friday. The article implied that paying $50k for a property and being able to lease it out at $1k per month was easy in Las Vegas and other distressed US markets.

If so, I would sure like to know where these properties are. I can’t seem to find any listed in our local Las Vegas MLS system. I would be happy to buy at least 10 of them this week myself! Already our phones are ringing off the hook from Canadian buyers who saw the article and don’t believe us when we tell them it was all hype. They think we are “hiding” the listings from them! (I have yet to see a real estate agent that can afford to “hide” listings and stay in business.)

Where does the press come up with these statistics?? They seem to have little or no basis in fact. Another news article posted recently said that the Las Vegas real estate market was going to go down another 10% to 12%. Again, this was reported with no supporting documentation, just a gobbled gook of random statistics that had no bearing on what was reported. But because of articles like these, we have to spend a lot of time re-educating buyers on fact vs. fiction and what is actually possible.

Sure, we absolutely have low cost homes for sale in Vegas. But they are in neighborhoods where the purchase price reflects the potential rental income as well. (And Buyers, please check those Metro crime statistics before making a purchase.) True, many of the Las Vegas short sale properties are listed way below market just to get someone to put in an offer. But the banks always do their own appraisal before approving a short sale, and will usually counter with a price that is within 5% of the actual market value.

That is not to say that you can’t get a terrific return on Las Vegas investment properties. It is absolutely possible to buy a cute newer home for around $100k and get $1k or more per month rental income. This is actually a great time to buy, as the latest statistics are finally showing a small upward trend in Las Vegas sales prices (see Las Vegas real estate weekly trends) and inventory has come down to a five year low. Just between October 1st and November 1st single family home inventory went from 11,500 active listings down to 10,500 active listings. (For homes under $200k we are once again experiencing multiple offer situations because investors and second home buyers from all over the world are trying to take advantage of the low cost to own.)

Not to mention, prices have dropped substantially, 50% to 60%, from just a few years ago. With the strength of the Canadian dollar vs. the US dollar, it makes all the sense in the world for Canadians to finally buy that snowbird property in the States. And the Australian buyers are also taking advantage of the favorable foreign exchange rates to purchase second homes and investment property in Las Vegas.

But someone somewhere has got to finally hold the press accountable for what they print. They aren’t doing anyone any favors by not checking the facts first. The client that buys that $50k property and expects to get $1k per month in rent is going to be sadly disappointed. The client that didn’t buy because he/she read that property prices were going to decline further is going to be really upset when they come back six months later and find that the home he/she wanted is even more expensive.

Is B of A Finally "Getting It" on Short Sales?

Yes, it actually DOES look like Bank of America is finally getting their act together in the Las Vegas real estate market on short sales! We have seen a marked improvement in service and approval times over the past six months, and just recently B of A has rolled out two new changes to improve their image.

The first big change is their new Bank of America Cooperative Short Sale program, similar to the government's HAFA program (but hopefully much more effective!) B of A is now allowing sellers to apply for a pre-approved short sale prior to listing their home with a real estate agent and without a purchase contract. The seller must complete all the short sale documents including their hardship letter, and must submit all their current financials to the Bank. Once the bank reviews the seller's package, it is submitted to the investor holding the loan for final approval. If the seller is approved, they are given a guaranteed approved sales price AND they may also receive up to $2500 as a moving incentive, kind of a cash for keys.

Our first two attempts at this process have been resoundingly successful: both sellers were fully approved within three to four weeks of submitting their packages, and the prices were realistic. Both Las Vegas homes were placed on the market and both sold within a couple of weeks. One has already closed and the other is due to close next week.

This is a HUGE win for sellers, buyers, agents, lenders and title companies. As long as the sales contract follows the terms of the bank's approval, there is no more wondering for months on end if you even have a sale! Having guaranteed approvals on short sale will also reduce the number of homes for sale in Las Vegas in the near future. And it's smart on B of A's part, because a pre-approved short sale will garner a higher list price and improve their bottom line.

The second big change is that now Bank of America will allow back up offers to be submitted, so that if the first buyer walks or fails to qualify during the escrow, the second buyer's contract may be substituted without starting the approval process all over again. The listing agent can continue with the original transaction in Equator and still work with the same short sale specialist. This change will save several weeks of time by not having to repeat a number of the short sale process steps.

Since over half of Las Vegas short sales are being processed by Bank of America, this is GREAT news. Hopefully some of the other big banks will follow B of A's lead since the current government has already proven hopelessly inadequate for the task. Kudos to B of A for thinking outside of the box and keep it up.

Selling Your Home - Las Vegas Short Sale Tips

The collapse of the general economy has left the Las Vegas real estate market in a shambles. If, like many, your home is upside down and you need/want to sell it, you are going to need the approval of your existing mortgage lender(s) to take less than what is owed. This is what we call a short sale, or pre-foreclosure property. Short sales are complicated transactions, so you can’t just hire your sister’s best friend who works part time in real estate to handle it for you. (Well, you can, but you may not be happy with the outcome.)

Who actually makes the decision to approve a short sale? As the seller, you will not be allowed to take any money from a short sale transaction. So you, the seller, really don’t care what you sell your home for. Surprisingly enough, your lender, who is probably only servicing your loan, doesn’t care either. The servicing bank merely collects the appropriate documents and presents the entire file to the investor who is actually holding the note and is owed the money. Literally, you could have two identical homes with two identical cash offers being serviced by the same bank and yet one will get approved and the other will not. It is entirely up to the investor holding your note how much of a loss they are willing to take.

Why would you short sale your home? The main advantage to doing a short sale is that you will ask your existing lender(s) to release you from any deficiency judgments. In other words, they agree not to go after you for the difference between what you owe and what the home sells for. (After a Las Vegas foreclosure they automatically have that right. On a short sale, this is negotiable.) In addition, if you can keep your payments current during the short sale process, it may not ding your credit too badly. While you won’t be able to finance another Las Vegas home for 3 years under FHA guidelines or 4 years under conventional guidelines, you should be able to buy a car or obtain credit cards. A foreclosure could prevent securing any type of credit for a number of years.

What will you need to provide to your lender to get a short sale approved? Most lenders will require the following documentation in addition to a multitude of standard forms:

· hardship letter – you are telling the lender in detail why you can no longer make your payments. Loss of employment, reduction of income, job transfer, divorce, illness, etc. In some cases the investor holding the note may still be willing to do a short sale even if you can afford the payments, but that is on a case by case basis
· last two paycheck stubs
· last two bank statements from all accounts
· last two years of tax returns
· financial worksheet showing expenses

What is the best way to go about a short sale? First of all, you would want to contact your lender to see if you qualify under the HAMP program or Home Affordable Modification Program. If you qualify under program guidelines, your lender may agree to reduce your interest rate so that you can afford to stay in your home. If you still can’t stay in your home for one reason or another, you may then qualify for the HAFA program or Home Affordable Foreclosures Alternative. Under this program you may get pre-approved for a short sale based and you may also receive relocation assistance up to $3k upon the sale of your home. Definitely something worth checking out.

The next step, whether or not you are HAFA eligible, is to hire a Las Vegas real estate agent EXPERIENCED in listing short sales. Your home must be listed on the local MLS so that the investor has a chance to receive the highest possible price on the open market. You cannot sell your property to a family member or friend either with the idea of buying it back later. Part of the bank paperwork you will be required to sign at closing is an “arm’s length” disclosure stating that you have no relationship with the buyer who purchases your property. (Breach of that disclosure is federal fraud and subject to severe penalties.)

Should you hire an attorney to help negotiate a short sale? If you have been unable to obtain a preapproved short sale under the HAFA guidelines, this is an excellent idea as long as the attorney you hire does not charge you anything at all, and only collects a fee from the bank’s proceeds upon the successful completion of the short sale. Your real estate agent should be able to help you locate a firm that has been successful in negotiating short sales, and the attorney should be brought in at the beginning of the listing process. Often if the investor proves stubborn about approving a sales price or terms of the short sale, just an attorney’s letter can alter the outcome favorably. Again, the attorney takes their fee from the bank’s proceeds at no cost to the seller or buyer.

How much should you list your home for? You are trying to establish a reasonable value for your home in the marketplace, keeping in mind that it is a short sale transaction which is not popular with either buyers or buyer agents as it may take months for them to find out if they even have a deal. Your agent should look at recently sold comparable properties and price your home at the bottom end of that spectrum but taking into account comparable condition and amenities. Once your home has been listed for several weeks without an offer, you want to do regular price reductions (your agent can advise you on how much is reasonable) until you are able to generate an offer with a solid buyer.

What happens after I get an offer on my home? Your lender, the servicing bank, puts together a file containing the contract, your updated financial documents and all documentation that you have tried to obtain the best price possible. They order a BPO or Broker’s Price Opinion (basically an appraisal) to establish market value of the home. They present this file to the investor for approval, rejection or, in many cases, counter offer if the BPO comes in higher than the sales price. If there is a counter offer on the price, the buyer may decide to accept the counter subject to a second appraisal of the property by the buyer’s lender. If both the buyer and seller accept the initial terms of the short sale approval, the buyer’s due diligence period commences. The buyer’s Las Vegas mortgage lender will order their appraisal and the buyer will complete all inspections and review any HOA documents.

Quite often the buyer’s appraisal is lower than the bank’s appraisal, and then the buyer will ask for a reduction of the sales price to meet that appraisal. The investor can either agree or disagree. Once a final price is agreed upon by all parties, the transaction proceeds pretty much as normal.

Why do most short sales fail? Most Las Vegas short sales fail simply because of the time it takes to find out if they are approved. Even the most serious buyer can become fidgety after a month or two of waiting to hear something, anything. That is why it is crucial for your agent to give weekly updates to the buyer’s agent, even if there is nothing new to report. Just a steady stream of communication can keep a deal alive. The second most common reason short sales fail is the difference in appraisal values between the short sale bank and the buyer’s lender. Again, a strong listing agent can go a long way toward documenting reasons for a lower sales price, though again this is ultimately the decision of the investor and sometimes those decisions seem to make no sense at all! But it is quite common to see the same Las Vegas homes for sale go into escrow several times before a successful closing. There is nothing wrong with the property itself, just the process.

That is why it is vital that the seller, the buyer and the agents all remain calm and be willing to jump through many hoops to a successful close. Guaranteed, there will be many hoops! But the patient buyer can get a great deal and the seller can walk away with a clean slate, and that is what makes it all worthwhile.

Short Sales Don’t Have to Ruin Your Credit!

Like markets across the country, Las Vegas real estate has been hit hard by declining values and many homeowners are unable to sell their properties without coming out of pocket. Good news has arrived for those who have so far kept their payments current, but have been seriously considering filing for bankruptcy or letting their homes go into foreclosure. Some lenders are now allowing homeowners to go ahead and do a short sale without first falling behind on their payments.

A short sale or pre foreclosure occurs when a homeowner owes more on his property than it is currently worth and the creditor agrees to take less than the amount owed. First the homeowner has to show proof of true hardship which can be due to a variety of reasons: loss of employment or drastic cut in pay, loss of income from investments (stock market declines), illness, divorce, or death in the family. The homeowner has to write a hardship letter explaining in detail why they can no longer afford the payments on the property. They also have to provide tax returns, pay check stubs and current financials to support the hardship letter.

After the seller completes the short sale documentation, the property is put on the market. Once a bona fide buyer makes an offer that is accepted by the seller, the listing agent then submits the offer and the short sale package to the lender for approval. The bank will do their own estimate of value and decide whether to approve or possibly counter the original offer with what they are willing to accept.

Until recently the banks were not willing to look at a short sale package unless the property owner was already behind in their payments. The late payments and the short sale settlement meant the that property owner took a huge hit on their credit scores and were ineligible to buy another home for at least four years.

But with the glut of Las Vegas foreclosures on the market and the increasing costs of maintenance on foreclosure properties, the banks are becoming a bit more lenient toward Las Vegas short sales. Some are now willing to approve a short sale even if the homeowners have kept their payments current. Most of the time the homeowner remains living in the residence and taking care of it until the sale, meaning the properties are in better shape and sell for more than they would later after foreclosure. The credit report reads “negotiated settlement,” and the homeowner may only take a minor hit on their credit score. If their scores were high enough to begin with, they may even be able to buy other lesser priced Las Vegas homes almost immediately, or as soon as they can save up the down payment money.

So if you have been feeling that you need to get out from under a huge mortgage balance, but you hate the idea of damaging your credit, there may be hope! The inventory on Las Vegas homes for sale is down dramatically from what it was a year ago, so it may not be as hard as you think. Contact one of our short sale specialists today and let us help.