Top 10 Seller Short Sale Questions and Answers

Short sales are becoming more and more prevalent in our real estate market. For those of you that aren't sure what a short sale is, a short sale is the sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. Each short sale case is different and determined on a case by case basis by the seller's lender.

Below is an article by Tim and Julie Harris, founders of Harris Real Estate University, on the top ten seller short sale questions and answers.

Number 10
I can't make my house payments, but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score...is a short sale right for me?

Probably, not. In cases where the seller can pay back all or part of the negative equity (usually to the 2nd lien holder), it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.

Number 9
If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?

The mortgage insurance is not there for your protection, just the mortgage lender's.

Number 8
Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale?

No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.

Number 7
I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale?

The foreclosure process takes differing times depending on your state. In the Midwest a foreclosure can take over a year. In California it's taking six plus months. Generally speaking a well priced short sale being processed by an educated short sale listing agent will sell and close in less than 120 days.

Number 6
Will I still have to pay property taxes if I do a short sale?

Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender, it depends on their policies and the specific agreement you reach while negotiating the short sale.

Number 5
I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale?

The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.

Number 4
Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true?

It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.

Number 3
How does the Realtors commission get paid?

The bank will pay the commission along with all the other usual closing costs.

Number 2
Do I have to miss a payment to do a Short Sale?

No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment.

Number 1
I want to do a short sale and have a 2nd mortgage, does this make me ineligible?

No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

890 Lives Could Be Saved

According to the National Fire Protection Association, an estimated 890 lives could be saved each year if all homes had working smoke alarms. So, please take a moment to change the battery in your smoke detector.

Then we can all enjoy the summer.

All the Best,
Amit

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Most Cost Effective Improvement to Your Home

With today's declining real estate market, I often get asked by sellers the following question - What is the most cost effective improvement to their homes? Basically the least expensive thing to do to their homes to get the most in return from buyers. The greatest "bang for the buck" has always been to paint the home. It should be in a neutral color so it won't turn off any potential buyers. The link below is to a story that has many painting tips from the pros. It is definitely worth spending three to five minutes to read it.

Painting Tips Story

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

New Good Faith Estimate Form

When home buyers are comparison shopping different lenders (mortgage brokers, credit unions, banks, etc) for their mortgage, their potential lenders will give them something called a "good faith estimate" form. The idea behind the form, to help the buyers comparison shop different lenders with the terms of the financing, was very good, but in reality, the form was very difficult to understand. The US Department of Housing and Urban Development proposed a new borrower-friendly Good Faith Estimate. An article from Inman News (below) goes into further detail about it.

New Good Faith Estimate Form Article

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

South Florida Home Prices Fall Again

Below is a quick update on the South Florida real estate market in an article in the Miami Herald today. Please click on the link below to read the story.

South Florida Home Prices Fall Again

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

More Foreclosure Tips

Here are some more foreclosure tips that I saw in the Sun Sentinel. Please read their story below.

What to do if you're put on notice?

If a lender puts you on notice -
Homeowners have many options after a lender has filed a foreclosure notice. Foreclosure specialists advise:

*Don't ignore mail from your lender; stay in touch even after a foreclosure notice has been filed. Most lenders would rather work out options than foreclose on a home.

*Beware of foreclosure companies calling themselves "mortgage consultants" or "foreclosure services" promising to save your credit or pay the closing costs. Be wary of deals that take over ownership of your home.If you turn to a foreclosure rescue firm, be aware such companies do not need a state license to operate in Florida unless the business is selling or buying properties.

*Never transfer your property deed or title to a rescue firm. Never sign a contract under pressure and without legal advice. Do not pay your mortgage payments to someone other than your lender.

For more information
Contact the Department of Housing and Urban Development to request an approved housing counseling agency: 800-569-4287 or hud.gov.

For legal help, contact the National Association of Consumer Advocates at 202-452-1989 or go to naca.net; the Florida Bar floridabar.org.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

How Do I Save My Home?

How do I save my home? It seems like I get asked this question a million times now days. Unfortunately because of many different reasons - a change in the adjustable rate on your mortgage, the economy, loss of job, the depreciating real estate market, etc - people are losing their houses at record paces. In fact, I read a couple of weeks ago in our South Florida real estate market, that for every home sold, there are six foreclosures. Ok so enough of the bad news. What can someone do to save their home?

The US Department of Housing and Urban Development (HUD) has a website that tells homeowners what they can do to save their homes. Please click on the link below to read the information.

How Do I Save My Home?

All the Best,
Amit

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Is Your Landlord Paying His Mortgage?

Landlords have always asked potential tenants about their financial situation. But with today's changing real estate market in South Florida, tenants are advised to do the same with their potential landlords.

I read a really good article in the Miami Herald about this. Please click on the link below for the story.

Is Your Landlord Paying His Mortgage?

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

What Really Matters?

What really matters? That's something many people, including myself, lose focus on lots of times. A friend of mine the other day was kind enough to send me something that quickly put everything into perspective. Although I had seen it before, it was just as powerful as the first time I saw it. If you have a few minutes to spare, please click on the video below. I hope it has the same impact on you as it had on me.

What Really Matters? (video)

Thanks,
Amit

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

The Latest Foreclosure Statistics

I read an article today in the Miami Herald today that I thought you might be interested in. Please read it below.

Florida and California, states with significant investor speculation and overbuilding during the real estate boom, helped push the percentage of homes entering foreclosure nationwide to record highs, an industry group reported Thursday.

Together the two states had 21 percent of all outstanding loans but were responsible for 30 percent of new foreclosures in the three-month period ending Dec. 31, according to numbers released by the Mortgage Bankers Association.

In Florida, 10.69 percent of borrowers with first lien home loans were behind on payments or in foreclosure, compared to 7.86 percent nationwide, the report said.

The percentage of new foreclosures in the state rose to 5.19 percent from 3.52 percent in the previous quarter, driven by a large percentage of defaults among subprime borrowers who got loans despite shaky credit.

More than 17 percent of all subprime loans entered foreclosure in the fourth-quarter, compared to just 2.66 percent of prime loans.

MBA economist Doug Duncan said the state's foreclosure problems were the result of interest rates resetting on adjustable-rate loans coupled with falling home prices.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Are Foreclosures Good Deals?

Foreclosures. That's what we all here so much about now days. Being a Realtor, I get asked all the time to find foreclosures for home buyers. But how good a deal are foreclosures? The simple answer is, it depends. Because so many people in the past bought homes with zero downpayment or very little down payment, the amount of money owed on the majority of these foreclosed homes is significantly higher than what they are worth. Most banks aren't willing to lose hundreds of thousands of dollars to get rid of their inventory. Many of them simply can not afford to right now. There are times when some of them can, and those are the times when people get a good deal on a foreclosure.

With so many homes on the market that aren't foreclosures, there are just as many great deals within these group of homes for sale. There are still a huge number of people that have lived in their homes for many years. These homeowners still have a great deal of equity, and many of them are in position to offer an incredible deal to a potential buyer to make their home stand out from all the competition. So how does someone get the best deal in today's real estate market? The answer is the same as it has always been - speak to an experienced Realtor with knowledge in the area you are interested in.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Top 10 Reasons It's a Great Time to Buy Real Estate NOW!

Now days many people feel that it is a terrible time to purchase real estate. It is actually quite the opposite. Please read the article below by Paul Pastore that lists the top ten reasons why it's a great time to buy real estate today.

1. Selection, selection, selection. There are about 57,000 resale homes on the market in Maricopa county(Phoenix). Regardless of the price range a buyer desires, there are plenty of houses from which to choose. Just a few years ago the resale inventory dropped below 5,000 units. A buyer was forced to make compromises if they were going to locate the home of their dreams. There is a great selection of attached homes, condos, and townhouses. You can find large lots, small lots, and a lot that will accommodate your boat or RV. There are lots of options in this market.
   
   
2. No Bidding Wars. In 2005 we had one client that made an offer on ten homes. They lost the first nine to the 'feeding frenzy' that existed. Other buyers bid the properties up substantially from the original listing price. There were escalation clauses where buyers authorized their agents to outbid other offers by thousands of dollars. There is no competitive bidding in this buyer's market.
   
   
3. You can make an offer. A few years ago when you made an offer, the only question was how high above the list price could the buyer reach in hopes of being the best offer on the table. Today the sell price list vs. price ration is about 90%. A seller will not be insulted if you 'make them an offer they can't refuse'.
   
   
4. Patience is tolerated. In the hot seller's market that existed everything was rushed. Find a house before other buyers did. Hurry up and make the offer. Today a buyer can take their time. Look at several homes and think about your decision for a few hours.
   
   
5. Due diligence is welcomed. In this market a buyer is encouraged to obtain a home inspection, termite inspection, and appraisal. In 2005 many buyers waived these contingencies in order gain an advantage with multiple offers.
   
   
6. There are plenty of specs. In the not too distant past buyer had to 'play games' if they wanted a new home. There were lotteries and waiting lists in order to obtain new construction. Some buyers slept in their cars in order to get to the head of the lines. R.L. Brown estimates that builders have thousands of specs ready for immediate occupancy.
   
   
7. Repair requests are welcomed. After a buyer completes a home inspection, they are allowed to submit a repair request to the seller. In the past a seller might insist the home was sold 'as is'. Many times, there were back-up buyers waiting for a primary buyer to upset the seller whose home was increasing in value almost daily.
   
   
8. Few, if any investors. It is estimated that one third of all sales in 2005 were to investors. These non-owner occupied buyer caused the market to inflate and affordability to decline. Mortgage fraud became commonplace. It's a great time to buy without having to compete with hundreds of prospective landlords.
   
   
9. Location, location, location. Today's buyers can find homes closer to work. In the past buyers flocked to Maricopa and Queen Creek in order to find affordable homes. In this market, reasonably priced homes are within biking or walking distance to schools, rapid transit lines, and relatives.
   
   
10. Real Financing is available. The 'wink, wink' zero down, no doc, adjustable, sub-prime loans are gone. Fixed rates are back. FHA financing, first time homeowner bond programs, special loans for teachers, and police officers are back in business. It's a great time to buy real estate!
    

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Real Estate Market Update

The most accurate gauge of home values, in my opinion, is the S&P/Case-Shiller US National Home Price Index. The S&P/Case-Shiller Home Price Indices measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. These indices use the repeat sales pricing technique to measure housing markets. First developed by Karl Case and Robert Shiller, this methodology collects data on single-family home re-sales, capturing re-sold sale prices to form sale pairs. This index family consists of 20 regional indices and two composite indices as aggregates of the regions. The S&P/Case-Shiller Home Price Indices are calculated monthly and published with a two month lag. New index levels are released at 9am Eastern Standard Time on the last Tuesday of every month.

The study only does research on single family homes, NOT condos or townhouses. Below is a story from REUTERS news on today's report that was released. Keep in mind that when you are reading the report, there are still a tremendous amount of opportunities in South Florida's real estate market due to the exceptional prices and historically low interest rates.

Home prices accelerated to a record pace in the fourth quarter of 2007, with prices plunging 8.9 percent last year, according to a national home price index released on Tuesday. The quarterly drop in prices of existing single-family homes quickened to 5.4 percent in the final three months of last year from a 1.8 percent drop in the third quarter. Miami, remained the weakest market, reporting a double-digit annual decline of 17.5 percent, followed by Las Vegas and Phoenix at a 15.3 percent drop each. The three cities boasted of some of fastest rising home prices in 2006.

Charlotte, North Carolina, Portland, Oregon and Seattle were the only three metropolitan in the indexes where prices rose in 2007. Seattle, however, came in at only 0.5 percent, an almost flat growth rate.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

How does the Fed’s rate cut affect us?

Mortgages, home equity lines of credit, auto loans, credit card rates, certificates of deposit, and money market accounts can all be influenced by changes is short-term interest rates set by the Federal Reserve. But don’t count on getting a lower interest rate; first, read the fine print in whatever contract you are signing. The only interest rate that will automatically drop is the federal funds rate, which is what banks charge each other on overnight loans.

Consumers are often confused when it comes to the subject of the Federal Reserve and how it affects mortgage interest rates. News coverage of the Fed can actually cause the confusion.

The Fed affects short-term interest rate maturities, the Federal Funds Rate, and the Overnight Lending Rate. These factors have a direct impact on the Prime Rate. However, it is a mistake to conclude that changes made by the Fed will cause a similar movement in the interest rates. Mortgage interest rates fluctuate with the market for mortgage backed securities, which trade on a daily basis, but are not widely published. Money to purchase mortgage-backed securities comes from overseas investors as well as domestic investors, and the flow of huge sums of monies to and from these securities is subject to competition from the stock market and complex economic and political influences.

A key (but not infallible) indicator for the movement of mortgage interest rates is the 10 year Treasury bond yield. It is widely quoted, and if it is heading up, you should be prepared to face higher mortgage rates. It fluctuates constantly, just like mortgage rates.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

New Tax Portability Calculator

Hi everyone. I wanted to thank all of you that helped pass Amendment 1, the real estate tax portability amendment. If you are unfamiliar with the amendment, please read my previous two posts with some written examples as well as a brief video overview.

The amendment is far from solving all the issues we have with the huge real estate tax problem in Florida. The main thing though is that it is a start and definitely can save many many people thousands of dollars each year. To see how the new amendment affects you, please click on the link below.

New Tax Portability Calculator

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com