Feeds:
Posts
Comments

Posts Tagged ‘pre foreclosure’

I have blogged previously that lizards who are smart enough to move survive and those that sit still are quickly eaten by any colonies. Both sitting still and moving are survival mechanisms, but depending on the circumstances one can kill you and the other can save your life. In a New York short sale, curling up in a ball might work fine for an armadillo to survive, but it doesn’t help a homeowner avoid a foreclosure. I have often stated that proactive sellers, who help themselves, have far better results. It’s just that simple.

Yesterday, I met with one of my agents and a client who had bought a home with her about 4 years ago. We have known for months that they were having difficulties, and for some reason they delayed meeting with us. In fairness, they were trying to refinance and then for a loan modification, but when that failed they went to an outfit that promised to solve all their problems for a fee. The money for the fee disappeared, but their problems did not.

Continue blog posting  here.

J. Philip Faranda is Westchester & the Hudson Valleys’s Premier Short Sale REALTOR. He has listed and sold successful short sales in Westchester, Rockland, Putnam, Dutchess, and Orange County, as well as the boroughs of New York City. Find out more at www.NYShortSaleTeam.com

Advertisements

Read Full Post »

This short sale closed at the end of this past year. The clients were divorced, and the home they had built while married was incomplete and upside down. The house was listed this past summer.

Divorce cases are in and of themselves difficult. I have to give both clients credit in their dealings with me- they kept it to the transaction. It still was more difficult than with a happily married client, and there were the dicey moments one might expect, but in context we did well in spite of the circumstances.

There were numerous offers on the property, but getting consensus on which one to submit to the lender complicated matters. No offer separated from the pack- price was an issue with one (rather crucial in a short sale), another was an acquaintance of the husband, which the ex wife was reticent to accept, and we were unsure of how to go forward for a time.

Not long after, what appeared to be a tie-breaking offer came in. Price, terms and details did give it a distinct advantage, that is, until the incomplete state of the home came into play. Without a final certificate of occupancy, they reduced the offer by $20,000. A decision had to be made, and with time running short the acquaintances were chosen.

It took another 90 days to get approved. Unfortunately, the buyers then asked for an extension! Given the rigid guideline of the approval we could only grant one brief extension. When another was requested, we had to deny it. We began to get concerned that the buyers might no longer qualify, but the file was cleared to close the day after their extension was denied. They might have been jockeying for a better loan; it might have been a stroke of luck. Because the closing was scheduled in haste for a morning I was already booked, I was unable to be present for the closing.

I later found out that the buyer voiced a complaint about me at the closing. I have never dealt with this person (just his agent), nor was I the source of any of the difficulty on our side. The combination of a short sale and divorce would make any transaction difficult, and perhaps the buyer transferred his frustration to me. I have no way of knowing. I do know that the seller’s attorney advised him that he was mistaken and that I was a good guy. You know you are living right when an attorney sticks out their neck for you and you don’t get a bill!

J. Philip Faranda is Westchester & the Hudson Valleys’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

Unless otherwise indicated, all data in this post is from the Westchester-Putnam Multiple Listing Service.

There are 3,454 single family homes actively for sale in Westchester County. Of those, 148 are disclosing either a short sale or foreclosure proceeding in process. This is about 4.3% of the available single family home inventory.

The actual number is probably far higher than that. That is because on many homes the listing agent has not disclosed, either knowingly or unknowingly, that the house is upside down or delinquent. Also, there are hundreds of overpriced listings which would be short sales if the price were lowered to market value. In other words, there are lots of $450,000 homes listed for $550,000 because the mortgage balance is $500,000.  Continue reading here

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

A recent posting from an Ohio broker highlights how real estate differs from place to place. In it, she says that she advises her clients to not sign a contract with a buyer if the house is a short sale prior to getting the bank’s approval. While I won’t quarrel with what works for someone else in another market, I disagree.

That may work in Ohio, but it is ill-advised in New York. I do most of my short sales in Westchester, Rockland, Putnam, Dutchess, Nassau, Suffolk, Queens, Orange and Fairfield (CT) Counties. It is the same in each place- when the buyer makes an offer, it is submitted to the lender with the seller’s hardship package and a contract that is conditioned on the approval of the short sale. The contract is prepared by the seller’s attorney. If the short sale is approved, we have a deal. If it is not approved, my seller is not obligated to sell and incurs no financial obligation to the buyer. Most of the time we continue to negotiate with the lender anyway, but the contract protects both parties.

For the buyer, the contract ensures that they will not lose the house to another buyer after enduring the long process of short sale approval.

For the seller, whom I represent far more often, the contract ensures that the buyer will not simply walk away without penalty or recourse after that same lengthy process. If I list a short sale, my job is to protect my seller. Handshake deals do not protect the seller, only contracts and deposits protect them. This does not “imprison” the buyer. It is virtually the same sort of contingency as their own financing, which is in almost every real estate contract, and no seller objects to such contingencies.

Moreover, the lenders require a valid contract of sale before they approve a short sale. With no contract, the offer is hypothetical. Hypotheticals don’t help my clients whose goal is to avoid foreclosure.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

BPO stands for “broker price opinion.” It is a part of the short sale process that the lender uses to evaluate the merit of a short sale application. Simply put, the lender uses a BPO to ensure that the proposed sales price is aligned with market conditions. Some Westchester County Short sales, for example, are 20% less than the house’s value from 3 or 4 years ago. A home that was purchased in 2005 for $500,000 may only be worth $400,000 currently. Just to be certain, the lender sends out a 3rd party to verify this.

The BPO report looks very similar to an appraisal. There is a description of the subject property, and usually at least 4 recent comparable sales. If the offer on your home is $380,000 and the comparable sales are $410,000, $395,000, 375,000 and $355,000, then the lender will know that the value is legitimate. If all the comparable sales are over $425,000 and there is no compensating factor, such as deferred maintenance or needed repairs, the bank may deny the application. As much as the BPO report resembles an appraisal, it is not an appraisal, which is more expensive and produced by a licensed appraiser.

Often the lender will forego a BPO and do a full-blown appraisal. The theory here is that the appraiser will be more accurate. This is a sound theory, but one pitfall I have personally experienced is that lenders have a bizarre habit of contracting appraisers from a different marketplace who turn in robotic, formulaic reports based solely on price per square foot and not local market conditions. We have had short sales denied because the home has over appraised, causing more work and, in one case, a foreclosure. After it was repossessed, the home ended up selling for $100,000 less than what the lender claimed to be market value. That lender is no longer in business.

As prices continue to shrink, overpriced BPOs and appraisals are becoming less common. The BPO usually comes after the rest of the process is complete, so in those cases a decision from the lender on the short sale ought not be far off. Some lenders do them earlier, but as the marker changes I see that less and less.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

This transaction came several years ago, before the market decline was fully accepted by home sellers. The client was a single mother who, because of a heart condition, missed a great deal of work and fell behind on her home loan. By the time I had met her, she was finished with another agent who failed to sell her home. She was skeptical of agents because of this, and felt that it was not her home’s price that was an issue, but how it was marketed. However, by the time we competed the CMA, she was clear that she owed more than the house would bring from the market.

Being the mother of two teenagers, my client was both scared and proactive. She was under terrible stress, which isn’t good for someone with a heart condition, but she was a fighter. She engaged with the bank as few sellers I have seen before or since. She hung on their every word. Anything they requested was faxed and followed up upon. She kept me on my toes. The buyer actually found the house through her craigslist posting. It never fails to impress me how much better things turn out for my clients who help themselves.

It was a tough process, but the short sale was approved. My clients’s attorney, well, let’s just say I wish he had half the initiative of the lady he represented. He did a sloppy job, and as a result of title issues he failed to detect, I walked away from the closing with about 75% of my commission going to cure a defecit. Niether the buyer nor the seller attorney seemed to feel at all badly about this draconian loss I had to eat. I never recommended the scoundrel again.

Regardless, my seller got out from under the house she could no longer afford, and she got her fresh start. Her attorney promised to refer me a client in exchange for my severe loss, but he never kept his promise. Just as well; I don’t want to hear from him. My client calls me from time to time, and she is rapidly approaching the point where she can buy again if she chooses. All in all, a tougher deal on me than my seller. That’s baseball.

 

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

The question that pops up for people who can no longer pay their mortgage is how much money they’ll have to come up with in order to get out from under their mortgage through a short sale. It is like the old catch-22 I’ve often heard where the client tells me that they want to seek bankruptcy protection but they don’t have the money to pay the attorney (of course, the answer to that is that the good attorneys I know will not charge for a preliminary consultation).  It is an understandable conundrum, and I’ll do some math illustrations here.

First, in a typical sale, the seller has numerous expenses, but the big one are the real estate commission, New York State transfer tax ($4 per thousand), Attorney fee, and the big one-the mortgage payoff (typically the biggest check drawn at closings).

On a $500,000 house with a $400,000 mortgage balance, assuming a 6% commission (all commissions are negotiable of course) and a $1500 attorney fee, the seller is liable for the following:

  • Commission: $30,000
  • NYS Transfer tax: $2000
  • Mortgage payoff: $400,000
  • Attorney: $1500
  • Total: $433,500

If you have the equity, all expenses come from the proceeds and you don’t give it another thought. Let’s look at a short sale scenario where the balance and market value are both $450,000:

  • Commission: $27,000
  • NYS Transfer tax: $1800
  • Mortgage payoff: $450,000
  • Attorney: $1500
  • Total: $480,300 shortage of $30,300

In a short sale, the bank absorbs the loss and discharges (settles/forgives) the loan debt, with no post-closing obligation, even if there are back  taxes and back payments. The reason is hardship. Lenders recognize that sellers do not have magic wands to wave and make the market values any higher, and that in selling the house the debtor is making a good faith effort to pay their debt. If you have hardship (which is typically why the house needs to be sold to start with), you should have a successful short sale. If you have  $100,000 in the bank, you don’t qualify for a short sale. I should also add that my clients do typically pay a small attorney fee to defray the attorney expense for the workout, but in short sale situations where the lender refuses and returns mortgage payments, it becomes a relatively negligible matter.

This is the same structure in my short sales in Rockland County, the Bronx, Putnam, and Dutchess.  Some municipalities such as Yonkers have a higher transfer tax. Of course, the broker or agent you choose matters as much as the surgeon you choose for an operation. You need a specialist or the results could be fatal. The lesson here is that homeowners experiencing hardship ought not put off acting because they don’t have money. You really don’t need any to get informed, get started, and get your life moving again. And the best part is that once the short sale is completed, the slate is clean. That day is the first day of the rest of your life.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

Read Full Post »

Older Posts »