There are most certainly
great deals to be had in
Southwest Florida! The key is going to be deciding how patient you want to be after finding that right property. Both Sellers and Buyers of "Short Sale" and "Foreclosure" properties need to exercise diligence and patience as well as locate professionals to assist them in expediting the process. Much to the surprise of many, banks are slow, seem disorganized and lack the expertise to properly handle the volume of requests that are coming in from throughout the nation. The article below details some of the problems to expect if you're dealing with one of these short sales or foreclosures.
Banks miss an easy housing fixLenders say they want to help troubled homeowners, but they are delaying deals that could save everyone - including the lenders themselves - a lot of time and money. By Les Christie, CNNMoney.com staff writer
Last Updated: May 28, 2008: 11:16 AM EDT
NEW YORK (CNNMoney.com) -- Banks say they want to help troubled homeowners, but they are delaying deals that could save everyone - including the lenders themselves - a lot of time and money.
Lenders are taking much longer than necessary to approve short sales, according to Duane LeGate, of House Buyers Network, a short sale specialist.
In a short sale, a homeowner who cannot keep up with their loan asks the lender to take a dollar amount less than what is owed on a home's mortgage, and forgive the remainder of the unpaid debt.
So if a borrower has a mortgage balance of $100,000 and finds a buyer who will pay $95,000 for the house, the lender agrees to accept that $95,000 and close out the loan.
"There was a much greater chance of success with these in the past," said LeGate
Ideally in a short sale, everyone wins. Borrowers avoid the ugly foreclosure process that destroys their credit, while lenders recoup more of their costs than they would by spending the time and money it takes to kick an owner out and resell the property.
Lenders typically lose about 19% of a mortgage's value in a short sale, according to Clayton Holdings, a Conn.-based, provider of loan analytics, while they lose an average of 40% on loans that go into foreclosure.
Coldwell Banker CEO Jim Gillespie agrees that short sales are taking too long to complete. And he speaks from firsthand experience; a short-sale offer he made on a house in Marin County, Calif. in late fall didn't win approval until April.
But most buyers can't, or won't, wait that long."That's been our biggest challenge - keeping the buyers interested long enough as we wait and wait for an answer," said Jeff Morrell, a Colorado Springs real estate agent who specializes in short sales.
Running out the clock
John Fitzmorris, a short-sale expediter in East Stroudsburg, Pa., was working with Robson and Laura Pereira, who were behind on their mortgage.
"She worked, but he had a construction business that went defunct," said Fitzmorris. "That put them in trouble."
Falling home prices in the area made a normal sale impossible; the couple was upside-down in their mortgage, owing more on the property than it was worth on the current market.
After they fell behind on their payments, Laura Pereira said, her bank, HSBC (HBC), sent her a letter asking her to call for help. "I called them four or five times and they never got back to me," she said. "We had three [short sale] offers on the house at the time." Later, the loan was sold to First American.
Fitzmorris, who has been doing short sales for more than 20 years, contacted First American (FAF, Fortune 500) about a short sale well before the foreclosure date.
But after three months, the bank still hadn't approved the short sale, and the Pereira's property went to sheriff's sale. (First American declined to comment on specific cases.)
"The offer we sent to the bank was $129,500," said Fitzmorris. "But another investor, TM Builders, bought the property at the sheriff's sale for $100,265."
In the end, the bank lost $60,000 on the loan, when it could have lost $30,000 by doing a short sale.
Ironically, TM Builders flipped the home to Fitzmorris's buyer for the $129,500 short-sale price, money the bank would have gotten had it acted more quickly.
"The sellers did what they could to mitigate the problem but the bank didn't respond, which hurt both the sellers - with an unnecessary foreclosure permanently impacting their credit - and the bank," said Fitzmorris.
Usual suspect
The difficulty in getting short sales approved stems from the same hurdles facing all the other foreclosure prevention efforts. The fact that the majority of mortgages are pooled and securitized makes it hard to get approval to change the terms of the mortgages.
"It has to do with who owns the loan," said LeGate. "If a mortgage is stuck in a pool somewhere, when something goes wrong, no one knows who the actual owner of the note is."
Additionally, the volume of troubled borrowers makes it hard for lenders to keep up. The housing crisis has put an enormous burden on mortgage servicers, the companies that manage loans for securities investors.
At many servicers, said LeGate, "There's no one really skilled at loss mitigation, and these guys have more work than they were prepared to do."
And with foreclosure filings breaking new records each month, there's no sign that this problem will ease any time soon.
Says Laura Pereira, "I feel the bank really let us down."
To make sure your real estate transaction is a smooth and successful one contact a professional that can walk you though the pitfalls as well as provide suggestions on how to expedite the process. A team of experts in the local market will boost your confidence and ease you thorough the process. Let me help you today!
To your Success,
Garren Grup at
www.BuyUpNaples.com
I have to wonder if many of our buyers are missing the best values by focusing on short sales and foreclosures. Everyone wants a deal and many want to offer .30 to .50 cents on the dollar based on the estimated appraisal. In our market this reflects somewhere between 15% to 40% of what the previous owner paid in 2004-2005. We have defined this period in our area as the "irrational period" when people bought anything they could get under contract. I have to ask myself if finding the best value may actually mean ignoring the foreclosures and searching for owners that have owned for a longer period of time(8-10 years) and just need to sell, based on the statistice below?
