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Posts Tagged ‘foreclosure’

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Short Selling May Not Resolve Your Problems

January 13th, 2010 by Matthew C. Keegan | 4 Comments | Filed in Home Selling, Money Management

Consumers seeking to save their homes from foreclosure and the resultant long term hit to their credit ratings will sometimes put their homes on the market and accept a price for less than what they owe on their mortgage. If the lender agrees to this deal, then the original homeowner can get out from underneath his mortgage and be free of further obligation.

Well, not so fast.

housing crisisTheoretically, a short sell (short sale) should be final, a transaction whereby the lender forgives the loan deficiency, choosing to swallow a comparatively small loss up front, rather then a sizable loss that would probably be incurred had the house passed through foreclosure.

According to The Wall Street Journal (A Short Sale May Not Mean You’re Home Free), that theory isn’t always meeting reality. Sometimes lenders will go after the first homeowner in a bid to recoup some or all of the deficiency.

For example, let’s say you are behind on your mortgage and just a month or two away from foreclosure. You owe $295,000 on your home, but it is worth a bit more even though you have owned it for several years. A crummy real estate market is pushed down home values, yet you believe that you could get close to that amount for your home and pay off your mortgage.

Well, the tough market proves two things: buyers are tough too and are looking for bargains. You listed it for $320,000, but the best offer received was just $280,000 which you accepted pending your lender’s approval which you need in order to be released from your obligation. You see, when you seek to sell for less than what you owe in effect you are putting your lender in a position to take it or leave it. If this lender believes that your short sell is the best deal, then they may reluctantly accept the deal.

This is where things can get complicated.

Whenever performing any real estate transaction, you want to have a lawyer representing your interests. A real estate attorney will ensure that your short sell is up to snuff and includes one important provision: that the bank will not go after you for the deficiency.

If that provision is not in place, then guess what? Your lender can go after you for the loan deficiency, costing you thousands of dollars. And you thought that it was too expensive to get a lawyer!

Oh, by the way, if you think that short selling your home means you can automatically turn around and buy a new home within the coming months or year, think again. On future credit applications you will be required to state whether you have been involved in a short sale which is sometimes also called a deed in lieu of foreclosure.

Lying about it can cause serious legal problems for you. Telling the truth will keep you from getting a home loan. Regardless, a short sale is a serious matter, one that should be done as a last resort.

In fact, some lenders say that there is no credit advantage in a short sale versus a foreclosure, which means that your credit will likely reflect that information. (see MSN Money: Use a short sale to escape foreclosure)


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Double Dip Recession Possible If Housing Slide Persists

November 20th, 2009 by Matthew C. Keegan | 3 Comments | Filed in News

Here’s an unpleasant thought: as the nation gradually pulls away from the worst recession in more than a generation, consumer confidence begins to wane and job creation evaporates. That scenario is entirely possible given the current state of the housing market which remains a huge drain on the economy.

Housing Starts

According to published reports including yesterday’s headline article in The Wall Street Journal, new home housing starts plunged by 10.6% in October. Bad weather across most of the nation has been blamed as has worries that the $8000 federal tax credit for new home buyers would not be extended. Subsequently, the weather has improved and the tax credit has been extended and the program expanded to include other buyers.

foreclosureThe US economy probably pulled out of its most recent recession sometime in the third quarter of this year. As we close in to the end of the fourth quarter and end of 2009, there are nagging fears among many that unemployment has yet to hit its peak rate, most recently touching 10.2% in October. Moreover, though consumer spending is up and the Gross Domestic Product (GDP) is on the positive side, many people are sensing that the economy has yet to find solid footing.

Shadow Inventory

The overall housing market has an immense, somewhat hidden drag working against it. Namely, concerns persist that foreclosures will once again become a huge issue in the coming months and years as the number of homes being foreclosed on rise.

This past September, analysts with Amherst Securities Group LP said that they expect that once favorable seasonal housing market disappears until next spring, a “shadow inventory” of seven million homes to be foreclosed will emerge. Right now, 1.9 million homeowners are at least 120 days or more overdue on their mortgage payments, a point where lenders usually have begun foreclosure proceedings.

Side Effects

As the most recent recession proved, too many foreclosures mean that overall housing prices are suppressed. When people aren’t buying homes, then foreclosed property is abandoned or sold for rock bottom prices. Property tax revenues drop as new owners petition and win rate reductions; with less money in coffers towns need to slash services and lay off workers. Moreover, with fewer new home buyers in the market, home improvement stores and related businesses have fewer customers coming in their stores, resulting in more of their employees losing jobs.

A vicious circle, right? Yes, and not one that can be easily broken. And, with Congress considering adding about one trillion dollars more to the national debt via a costly health car reform package, additional debt will do nothing to help strengthen the economy.

No wonder why President Obama fears a double digit recession.

Adv. — For help establishing a web presence or to expand your current online business, please contact Krayton M Davis of nBuy Associates for assistance:

T: 804.527.1103
E: kdavis@nbuy.com
W: www.nBuy.com


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Buying Foreclosed? Consider This First!

May 29th, 2009 by Matthew C. Keegan | 1 Comment | Filed in Home Buying, Home Financing

Not many people are calling the bottom of the housing market yet, realizing that in some markets further declines in home values may still be happening. But, for the person who is ready to buy and is looking for a very good deal, foreclosed property can be an excellent way to help them become a homeowner this year.

Consider The Risks

foreclosureNaturally, buying a foreclosed home can be risky. You want to make sure that the home hasn’t been trashed and that the price you pay for the home minuses out whatever repairs must still be done. What a horror it would be to buy a home and find out later that tens of thousands of dollars in repairs still need to be completed in order to make your home habitable.

But, there is another downside to buying foreclosed property, one that every buyer should consider – is your local market, particularly the neighborhood, flooded with foreclosed properties? If so, your home’s value may take years to recover as the oversupply of foreclosed homes (which are already undervalued) can take a long time to finally sell.

Riding Out A Depressed Market

Of course, if you plan on staying in your home for many years, then you can probably ride out a depressed market. Just keep in mind that a neighborhood with an abundant number of foreclosures could be experiencing other problems, such as an overall deterioration. Get acquainted with where you want to live by driving up and down nearby streets to look for signs of blight. Check with the local police precinct to find out what crime rates are in that area. And, if you see a neighbor ask them for their honest assessment of the neighborhood.

So how much should you bid on that foreclosed home? Well, the first thing you’ll need to do is find out what its current value is. That can be hard to determine in a sinking market, but real estate comparables (comps) as well as checking home values on a site like Zillow.com can reveal that information. Once you determine what the value is, be prepared to knock as much as twenty percent off of the value of the home when submitting your bid to the bank who holds the property.

Banks Aren’t In The R/E Management Business

Banks aren’t in the business of managing real estate and may entertain your offer even if it is considered to be a “low ball” bid. In any case, your initial bid is a good starting point to give you some room to up your price, but not by too much otherwise you defeat the purpose of buying foreclosed which is to save you some money.

One more point: check online sites such as Trulia.com and RealtyTrac.com to keep up with home sales in a particular area. The latter is particularly good at pinpointing foreclosures, giving you a good idea if there are too many foreclosures in one neighborhood or not.

Adv. – If you are a first time homeowner, don’t forget that the federal government is giving to you an $8000 buying credit good through November 30, 2009. For more information about buying a home, finding a mortgage or refinancing, please visit SayLending.com.


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What You Should Know About PreForeclosures

March 13th, 2009 by Matthew C. Keegan | 6 Comments | Filed in Consumer Tips, Home Financing, Home Selling

For the homeowner who is behind on house payments, the threat of foreclosure looms large especially as months pass without a payment. foreclosureIn some markets owners may fall behind by two or three months before foreclosure action is taken, while in other markets — particularly those with a high percentage of foreclosures — it could take many more months to occur.

Regardless, if you have fallen behind on payments, then your home loan lender has every right to take back your home.

Notice of Default & a Grace Period

Once legal action has been initiated by the lender, both parties enter a pre-foreclosure period. This means that the days from when the Notice of Default has been received up to the court date, a state-mandated grace period kicks in. Also known as a “default cure” period, this timeframe is designed to give homeowners a remedy before foreclosure sets in.

In most cases, few homeowners will have the means to sufficiently satisfy the legal complaint against them, specifically come up with all of the funds owed to the lender which would prevent foreclosure.

Four Resolutions To A Pre-Foreclosure

Once pre-foreclosure has been started it must be ended in one of four ways:

  • The homeowner reestablishes the loan by paying off the default amount during the grace period set by state law. This grace period is also known as pre-foreclosure or “default cure.”
  • The homeowner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan, thereby avoiding having a foreclosure included in his credit report.
  • A third party comes to terms to purchase the property at a public auction at the end of the pre-foreclosure period.
  • The lender takes ownership of the property, usually with the intention of selling it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).

Most homeowners go through a drawn out warning period before they lose their home. Usually, several notices have already been sent by the lender reminding borrowers that funds are due, including phone calls, email messages, perhaps a visit to the home seeking collection.

During the default cure period which averages thirty days in most states, homeowners can still attempt to raise the funds needed to satisfy the lender’s complaint or entertain offers from interested buyers.

Investors make a habit of learning which homes are in pre-foreclosure and will contact owners if interested. Homeowners are urged to retain legal counsel before agreeing to any sale which may also require the approval of the lender especially if their debt isn’t satisfied with the sale.


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