Short Sale Myths

Given the current state of the real estate market in many areas in greater Sacramento, there are many short sale listings. I myself have a handful of short sale listings currently, and as such I find myself educating buyers and sellers a lot lately about the process. Many people seem to think they know what short sales are...I find that about 2/3 of people I speak with really have no clue what a short sale is.

For those of you who are not familiar with this terminology, a short sale is the sale of a house for less than the amount that is owed to the bank/mortgage company. Occasionally, homeowners find themselves in positions in which they must to sell their home, but the reality is that their property is worth less than what they owe the bank...perhaps they did a "cash-out" refinance?...perhaps they bought at the peak of the market with 100% Financing? Many banks 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 costly foreclosure, and the owner is able to pay off the loan for less than what he owes.

I hear all kinds of crazy misperceptions about short sales. I have put together a short list of myths about short sales:

1) "The seller must stop making payments on their loan." Not necessarily. I have negotiated short sales where the seller has not missed any payments, and were not in default.
2) "The seller is in foreclosure." Not necessarily. It is possible to have missed payments and not be in full-blown foreclosure.
3) "Buyers will not want to make offers on short sale property." Not true. Occasionally buyer's agents are reluctant to represent offers on short sale property. Often times, listing agents will take on short sale listings when in reality they have no knowledge base or skill set to successfully negotiate the lower payoff. A shrewd buyer's agent will call the listing agent and make sure they are competent to complete the process, and then submit an offer.
4) "Financial hardship is the only reason a lender will accept a lower payoff." Not true. There are many potential reasons a lender will allow a lower payoff. One such example is that the seller must relocate for some reason, such as to care for a sick relative, or due to employment requirements.
5) "A short sale where there is a first mortgage and a second mortgage will not be approved." Not true. While this scenario requires diligent negotiation, many 2nd mortgage holders will accept as little as $1,000.00 in lieu of a full payoff.
6) "A short sale means that the escrow period will be short." Generally no. Depending on how much negotiation can be completed in advance, a typical timeline for lender approval can be 2 weeks - 2 months. Once the lender approves the lower payoff, escrow is opened and the transaction timelines proceed from that date.
7) "Short sales are a bargain!" Banks do not give property away. They base approval on recent sales comparables, and actually retain the services of a local agent to perform a BPO (aka, Broker Price Opinion). While I do believe it is possible to get a lender approval for a property a few percent under its market value, purchasing at "wholesale" is just not reality.
8) "The seller of the property can make money from the short sale." Not true. The lender will REQUIRE that the seller nets $0 from the sale.

These are just some of the common questions I get from both buyers and sellers regarding short sales. In reality, most people (buyers, sellers, and even some real estate industry professionals) do not have a clear understanding of what they are and how they work. I have successfully negotiated short sales for seller clients. If you are facing the reality that you have to sell your home, and you owe more than its current market value, I may be able to assist you. I welcome your call at 916-342-1372 so we can discuss your options.

New Listing - 124 Clearwater Court, Roseville 95678

124 Clearwater Court is beautifully appointed home in a great Roseville location! Built in 1996, this 3 bed, 2 bath home is loaded with upgrades and wonderful features. It is 1,736 square feet, on a big .187ac lot (per assessor), has vaulted ceilings, a huge living room with a wood-burning fireplace, separate family room and dining area, a wall of windows that lets in loads of natural light, covered backyard patio, newer carpet throughout, great kitchen center island, hallway bath has tub/shower combo and dual sinks, master suite has lots of closet space, big bathroom with dual sinks and a separate tub and shower, ceiling fans throughout, and more! Short sale subject to lender approval. For more photos and a virtual tour, visit http://www.124clearwatercourt.com/. Call Erin Attardi at 916-342-1372 to arrange a showing.

http://www.erinattardi.com/ • http://erin.golyon.com/

Is this a short sale scam?

One of my clients called me today to inquire about a new listing that just popped up on the market in Carmichael. When I pulled up the data on MLS, I was a bit alarmed at what I found.

In the "Agent Only" remarks section, there was a note that read "Closing is subject to seller obtaining title." Huh? There was an attachment to the listing that then explained that the "seller" is a for-profit corporation that the actual owner has given a power of attorney to sell the house. It is listed as a short sale and subject to the bank's approval of the owner's short sale to the seller...the seller then is selling for a profit via a simultaneous escrow. The house is listed by a small, Sacramento area independent brokerage that I have never heard of.

My thought is that this sort of transaction walks a very fine line - both legally and ethically. There was legislation passed several years ago called "The Home Equity Sales Act" that protects distressed sellers. Click here to read about the Home Equity Sales Act.

All I can say is that I will not touch a transaction like with with a 10-foot pole! Luckily my client thought that was a good idea too.

New Listing - 3924 Linus Way, Carmichael 95608

3924 Linus Way in Carmichael (95608) is offered at $259,000. This 3 bedroom, 2 bath, 1,466 sf home is the perfect blank canvas awaiting your personal decor! You will love the open layout, vaulted ceilings, large kitchen, spacious bedrooms, 2-car garage, huge .24ac lot (per assessor), and more! Close proximity to award winning schools, shopping, ARC, parks and freeways. NOT bank owned, and NOT a short sale! Virtual tour will be coming soon. For a private showing, contact Erin Attardi at 916-342-1372 or erin@erinattardi.com.

FHA LOAN LIMITS INCREASE!!

The FHA loan limits for Sacramento County have increased. The maximum limit was $362,790, and it was increased yesterday to $580,000. FHA loans are excellent tools for first-time home buyers, especially since the down payments are 2.85% of the sales price. Years ago, sellers used to balk at a buyer obtaining an FHA loan because sellers were worried that an FHA appraiser would require tons of repairs. That is no longer the case. Restrictions have relaxed, and FHA loans are faster to process. FHA loans are also popular with home buyers because FICO scores are not weighed as heavily as other factors.

Listings Parade!

Ok...so over the next week I will be posting four new listings. Couple of details if any of you are interested:

-$259k - 3bd/2ba, 1,466sf home in a nice part of Carmichael 95608
-$319k - 4bd/2ba, 1,736sf home in Roseville 95678
-$145k - 2bd/1ba, 990sf home in Oak Park 95817
-$TBD - 3bd/1.5ba, 1,190sf condo off La Riviera 95826

There are also a few other properties coming over the next month...keep your eyes open.

The Nick & Erin Show

Yes the rumors are true...my husband and I have a radio show every Monday night at 8pm. The easiest way to tune is is via this link here. We talk about local events, news, and the like - and yes Real Estate is definitely a topic that comes up...Anyone who wants to call in during one of our live shows (occasionally the station will re-broadcast past shows), the studio line is 916-456-5199.

Consumer Real Estate Forums

I read them pretty often. Sometimes I am just plain surprised by the total animosity that some people feel toward real estate professionals. True, there are bad apples on every tree, but there are some really awful generalizations made on some of these forums. I don't wish to repeat them for those who are wondering.

Most times, if I dare to chime in on those forums with my opinion (hoping perhaps to just give a little professional insight from someone who works in the trenches of real estate), I get bashed by angry readers. I recently commented on one forum though, where I was quite surprised to not get bashed, and was actually thanked for sharing my thoughts.

People are entitled to their opinions, both positive and negative. Not all agents are scum! There are some who are unpleasant to deal with, unprofessional, and rude...and if you happen to deal with any of them directly - I am sorry and please do not think that is representative of all agents. Trust me, I prefer not to deal with those types of agents too.

Also, not all agents are "Realtors." Realtors are members of the National Association of Realtors, and we adhere to a code of ethics among other things. The term Realtor among consumers is often a misnomer for all agents...

Anyway, I suppose the point of this post is basically to say that not all agents are created equal. My apologies to all those who happen to find a bad apple.