investing in short sales

Making Money On Shortsales

Short sales are not new. Lenders have been doing them for years. However, due to the increase in mortgage delinquency due to our current economic situation, the lenders are now inundated with request for short sales. Bank of America, Chase and Wells Fargo are lenders who have been very slow in their response to short sale request. Chase has indicated that they are still working on request made in June, 2009 and we are now closing in on November, 2009. The original timeframe of 60-90 days is now 90-180 days at minimum. The smaller lenders work more quickly.

Shortsale: What is it?

If you own real property and you owe more on your mortgage then the home would appraise for and you have a hardship, then you may be able to short sale your property. A short sale is when the lender is willing to accept less than the full amount you owe.

In order for your lender to consider this option the following must apply: Property must be listed with a realtor and must have a contract based on the comparables in the area the property is located. Owner must have a financial hardship. A financial hardship could occur from divorce, loss of job, pay cut, illness, accident. etc. Owner’s expenses exceed their income, this is considered a hardship. Expenses must be legitimate expenses. One cannot have a $500 dollar a month clothes shopping addiction. Real expenses including; electric, water, rent, insurance, car payments, gas, groceries, homeowner association dues, health insurance, etc.

Once a financial hardship has been established on behalf of the owner, These required documents that must be submitted to your lender: 1. Bank Statements – Last two months 2. Pay Stubs – Last two pay periods 3. Tax returns for 2008 and 2007 4. W’2s for 2008 and 2007 5. Financial Worksheet

The realtor will provide the following in order to submit to the lender: 1. Listing Agreement 2. Comparables ( active/pending/sold) 3. Listing History 4. Contract offer ( The accepted sales price, should be on or around the current market value) If the contract offer is not acceptable, then the agents should leave the short sale addendum un marked on #5, to allow additional offers to be submitted. But if the original offer submitted is sufficient, this clause should be eliminated.

The following will be provided by the Title company: 1. Title search 2. Preliminary Hud 3. Complete Lien search, including: Code Enforcement, Open Permit and Water balance search.

We highly recommend that a title search and lien search be completed on the property being sold in order to make sure that there are no judgments, liens other than the existing first or second mortgage. If a title search is not completed and a Preliminary HUD -1 Closing Statement is submitted to the lender, which does not reflect other items such as: Code Enforcement liens, Outstanding Water Balances, Open Permits, HOA Liens, Certified Judgments, delinquent real estate taxes, you can get your approval. However, once you have completed your title search and lien search and they show any of the items above, at that point you have to re-negotiate with the lender.

Important Items to consider regarding a short sale: Most lenders are not paying the entire amount owed fpr HOA assesments. They are comparing a short sale to a foreclosure in these cases. If a lender proceeds to the foreclosure sale, the lender is, under law, only required to pay a certain portion of the back assessments. This is the rule of thumb to go by, if the property is a condominium, the lender will pay up to 6 months in back assessments, if the property is a single family home, then the lender will pay up to 1 % of the original balance of their mortgage or 12 months of back assessments. Attorney fees are not considered, nor paid for by the lender. In most cases, the HOA will reduce the amount owed to them. However, some HOA’s are taking a stance that they will not accept what the lender is offering and they will kill the deal. Most lenders will only accept individual buyers. Most lenders do not allow; Corporations, LLC, LLP, Land Trust, Trust etc. The property must be purchased by an individual person(s). Not all companies who say they can negotiate a short sale are qualified to do so. Negotiating a short sale or even a loan modification requires a background and experience in mortgage, title and real estate. Most short sale negotiators who have a background in title insurance, mortgage, or even real estate have a better idea of the entire process and what is involved in all areas of the short sale transaction. Lenders do not have to approve a short sale, even if there is a hardship; however, most lenders are trying to accommodate the owner to some degree. Lenders will definitely deny owners short sale if they feel there is not a legitimate hardship. Second Mortgage Lenders are asking for 10% of the principal balance.

GETTING THE SHORT SALE APPROVAL LETTER FROM THE LENDER IS THE EASY PART. PUTTING ALL THE PIECES OF THE PUZZLE TOGETHER: PRICELESS!

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investing in short sales

Help Increase Value of Your house

A freshness of a brand new kitchen, whether it is renovated or build from scratch, is what makes a house a home .Everything revolves around kitchen, whether it is a noisy chatter of family, or the dumdum of getting a utensil –when one utensil falls when you plan to get another or those fun filled parties which always end up in kitchen. And if you have your dining area in kitchen then all those lovely family meals happen there. Really the kitchen forms the centre of any household and it is the heart of the whole house.

The financial importance of kitchen
Since kitchen is such an important part of the house, it is one of the first thing buyer look for when surveying their prospective new home. Everybody wants it to be perfect– to be functional yet be a joy to look at in the same time. So if you have a clean, beautiful, fresh new kitchen then is going to appeal to home buyers for sure. You will be able to verify this by the number of offers you will receive for your home. Therefore, putting the money on kitchen will reap you good returns. Most of the financial lenders agree that renovating the kitchen is the first thing to do when you are planning to sell the house. This is followed closely by renovating the bathrooms.

How much to spend while renovating the home?
Anybody who has a home will vouch for the fact that owning a home is a big investment. Even renovating the home requires lots of money .So you need to plan properly otherwise you can easily end up spending more on renovations than you actually planned for in the beginning. As you spend more, your asking price for the home also goes up. But because of its higher price most of the buyers will cut it off from their list. So to save you from this uncomfortable position, before doing any renovation you should have a fair idea of the monetary value of your area and your house. Even if you are planning to put a ‘For Sale’ board on your house in near future it is best to preserve your home as an investment for a future return.You never knows what the future holds.

Calculating investment and return
You need to get the valuation of your house done so that you know its exact worth. Then once you know its market value, you should see how much you own on the house and will it be possible to increase your mortgage so that even the renovations can come under it. Once you know that it can be done, you should check out if you will still be able to get its market value after selling the house.

Finally after all the calculations are done and you know exactly how much you can spend on renovation of your home ,you can start thinking about how much of this you can spend on getting that fantastic kitchen.

Learn more about real estate. Stop by Nancy Geils’s site where you can find out all about real estate and what it can do for you.