Friday, February 25, 2011

Why Short Sales Do Not Close

Short Sales can and are good deals for both the buyer and the seller. The buyer gets a home at a fair deal and the seller is not subjected to a foreclosure on their credit. So, if the situation is one that is a win for both the buyer and the seller then why do so many short sales not close?

The answer is simple...Communicaton and expectation. In my dealings with short sales I have found two keys to getting the short sale offer accepted and the buyer to wait to get that final approval. The first and most simpliest answer is communication. There is nothing worse than not knowing. I rather have an answer that says do not know or have no updates to day for you rather than have nothing communicated to me. I learned early on that if you want your short sale to close you need to be proactive in communicating to the buyer's agent the status of the short sale. It does not have to be daily but at least once a week you should give some kind of communication that they can relay onto their buyer. Without that, buyers tend to waiver and are not sure if the process is moving along as it should. The listing agent can be one of the best at negotiating short sales but if they fail to communicate to the buyer's agent; they are setting themselves up for a cancelled offer.

for example,if you have an offer on a house that is a short sale; weeks go by and maybe months and you have no feedback form the listing agent as to where the offer stands or where the bank is in the process you will begin to think they do not know what they are doing. Or, you may think they are not going to accept your offer. Either way; you begin to look at other properties and maybe place an offer on a different house and rescind your offer on that one. A lot of that anxiety and frustration can be allievated with proper communication between the listing agent and the buyer's agent. A good rule of thumb is at least once a weeek to give an update or at most every two weeks depending on where you are at with the bank in the negotiation process.

The other main reason so many short sales do not end up closing is the expectations of the buyer. They are not properly briefed upfront that the process can take some time. The quickest I have seen a short sale go from start to finish is 30 days to approval. Generally it takes anywhere from 45 days and longer depending on the bank. Some banks have a great system in place that moves the process along rather quickly. Others do not. So, knwoing what bank you are dealing with and the average time frame that bank takes in processing a short sale can and will make the differnce in whether the house will close....

By telling someone you are very good at it but not relaying the bank's average time will do nothing but frustrate the buyer and the buyer's agent. In the end that frustration will lead the buyer to walk away and go to another house.

If you are selling a short sale or buying one make sure the lines of communication between the realtors is open and that the expectations of the buyer are realistic and you will both have a smooth closing that is beneficial to both of you.

Dave diCecco
Realtor/Broker
www.davedicecco.com

Thursday, February 24, 2011

How To Price A Short Sale To Sell And Close

I read an article today that said over 35% of all sales reported in 2010 as a retail sale were either a short sale or a foreclosure. So, how do you keep your home from falling into the second category? Selling a short sale is not as easy as everyone wants to think they are. It takes a lot of work on the Real Estate agents part to make the situation work and the seller to ensure that the necessary paperwork is there when they need it. After viewing quite a few short sales and negotiating my fair share of them on both the listing end and the buying end I have come up with my top reasons homes do not sell through a short sale and how to get a home sold through a short sale.

The biggest reason is PRICE. Pricing of the house correctly from the start is vital. If your Realtor is inisisting on pricing yoru home substantially below market value to start out with you have the wrong Realtor. There is an old adage that if it is to good to be true it probably is. Well that is no more true than in a short sale price. If the comparable homes in a neighborhood in the same condition are selling for $150,000 and you price your home at $99,900 certain things are going to happen. You are going to get a lot of traffic and most likely a few offers on the house. Then you are going to go through the process with the bank and put together a financial package to only find out the bank will not accept a penny less than $135,000 for the house. This will do nothing by upset the buyer. Which will lead the buyer to walk away. Now, you have lost valuable market time, and have to raise the price again to an acceptable number from the bank.

This will have multiple effects on the marketing of your home. First, it will show in the Charlotte Listing Service as a price increase. People are a little shy when in this economy they see prices going up and not down. Second, all the places your Realtor has the home advertised now show the home going up. So, people looking online will not even call or look at your house becase they feel you just increased the price. Eventhough, this price may be less than market value for the neighborhood and a good value it is perception....and you only get one chance to make a good first impression.

My recommendation and what I have done (I have closed over 90% of my short sale listings), is to price the home at fair market value based on the condition of the home. Keep a log of the price and the activity it gets. Every 30 days adjust the price down slightly until you hit a number that has increased the showings and interest in the home. At that point I realize I have hit what I call the wall. A point where the value of the house and the price are ata happy median for buyers. Then provide this type of evindence to a bank has a large impact on justification of your pricing to them. They do not want the house anymore than you want to lose it to foreclosure. And the value of the house is ultimately determined by what soemone will pay for it.

A fair deal to the buyer and the bank will get your home sold in a quicker time frame and benefit you the seller, buyer and bank......

Dave diCecco
Realtor/Broker
www.davedicecco.com

Wednesday, February 23, 2011

What Does Approved Short Sale Mean?

Today short sales of homes have become more common as people are trying to sell ther homes before losing them to the bank via foreclosure. As daunting the process is, there is a madness to the process they have. Unfortunately, not all banks work on the same guidelines and time lines. Some banks have responses within 30 days of submitting an offer and others take six months or longer. So what if you are lookng at a house that is advertised as a short sale. You read in the comments that it is an approved short sale. What does that really mean.

The perception is that if it is says the house is short sale approved; then the price is an acceptable price to the bank. However; this may not be true. In order for a homeowner to short sale a home they need to prove that they have a legitimate hardship. The hardship can be loss of job, divorce, underemployed, medical, etc... The listing agent submits to the bank a copy of the listing agreement, hardship letter and finacial affidavit showing income and expenses. If everything falls in line the bank will accept a short sale on the house. Thus, the home is short sale approved.

Now, there is no way to know what the final number the bank is willing to accept on the house until an offer is presented to them. Prior to that it is just specualtive. So, unless the lisitng agent had an offer on the house and the bank countered that offer with another price, and the listing agent changed the sale price to reflect that change you do not know what the dollar amount the bank will accept is. Sounds confusing. However; it boils down to the bank letting someone know what their bottom line on the house is today and advertising it as such.

That number is subject to change as well. Depending on when they approved the original deal they may request another BPO (Broker Price Opinion). That value can change the acceptable price the bank accepts up or down. I have witnessed it happen both ways before. The approval a bank gives is for a specific deal and buyer. If that buyer backs out of the deal for any reason the bank is not obligated to sell the house to someone else at that price. There are variables that can change the bottom line dollar amount for the bank. Type of finanicng, when you want to close, proerty taxes, home owners association fees etc....

So, depending on the situation an approved short sale may not mean you can close in 30 days or sooner. It could mean that the bank is willing to accept a short sale or it could mean they have an agreed upon price. The best advice I can give someone is to have your Realtor call the listing agent and ask them what they mean by approved short sale. Because to different people it means different things.

Dave diCecco
Realtor/Broker
www.davedicecco.com

Monday, February 21, 2011

Due Diligence Fee On Foreclosed Homes In North Carolina

Recently North Carolina changed the offer to purchase contract on Real Estate transactons. A lot of the contingencies that were present before were removed in favor of one Due Diligence period. During this time you have the right to inspect a home, get it appraised, and secure your financing. If at the end of this period you wish; you were able to walk away form the house no questions asked. All you lost was your Due Diligence fee. But, what if you are purchasing a bank owned home (foreclosure)? How does that apply to those transctions?

The banks are not in the market to collect Due Diligence fees and have far to many homes for which to manage nationally to keep up with each one and the dates they are due to decide. All the banks on a foreclosure have their own addendums in addition to the offer to purchase contract. So what do you do? How do you present an offer to the bank with a Due diligence fee pre printed on the contract?

I have recently negotaited a few of these transactions. Besides the ones I have done; talking wth other Real Estate agents the consensus is you do not charge one. All of the bank addendums you receive once you have agreed upon a sale price give you a ten day opportunity to have home inspections done on the home. If your Realtor has provided you with the comparables for the neighborhood then you should have no concern about the appraisal process. The only variable left is the loan approval.

The loan approval is a difficult one to handle. Though I have seen more mortgage brokers getting the standard stipulations up front when they pre-qualify a client. This allows them to start the process and when a home is selected it exepdiates the time for them to send it to underwriting for approval. In rare cases where the financing does not work out after the 10 day inspecton period; I have seen the banks refund the earnest deposit. The banks are not out to keep anyone's hard earned money; if through no fault of your own the financing falls through they will refund you your earnest money.

So, despite there being a Due Diligence fee now in North Carolina. there is NO regulation as to how much you have to charge or offer. Thus the banks have elected to forgo this fee and collect earnest money deposit with a 10 day opt out clause.

Dave diCecco
Realtor/Broker
www.davedicecco.com