What About Short Sales?

Whether I am representing a home buyer or seller, I always strive to create a win-win situation for everyone involved. When it comes to short sales, patience and perseverance are job one. With today's challenging and increasingly complex housing market, Realtor's, including me, are handling an ever increasing amount of short sales.

Do you know someone who is facing a short sale?

I just listed another short sale yesterday. It's a "fixer-upper" with a ton of potential in the 30008 zip code of Marietta.

To stay current on real estate trends, I am forever participating in continuing education. Many of these classes are focused on the skill sets necessary to consummate a short sale. I am proud to say that my experience with short sales, foreclosures, REO and HUD properties has enabled me to earn a national designation in this specialty field too. Education coupled with daily practical on-the-job experience has proved to be invaluable.

Believe it or not Short Sales can be a win-win situation for both the Buyers and the Sellers. Short Sales can also cause many complications if not properly understood and executed. Since there is no provision in the mortgage agreement for a short sale, the primary lien holder -- the mortgage servicer -- must approve the homeowners request for one. Any additional parties with liens against the property such as a 2nd mortgage holder, must also approve the request before a short sale can commence. While each short sale scenario is unique and includes seemingly endless variables, the primary benefit to the homeowner is simple -- a short sale lets them avoid foreclosure on their credit record at a time when a good credit history is critical for financial and personal reasons.

Homeowners rarely enter into this process on their own -- instead they rely on Realtor's, attorney's or other professionals to communicate directly with the mortgage servicer. Since each servicer has their own guidelines and requirements, they play the lead role in ultimately approving or declining the terms of a short sale.

Despite obstacles that can arise, one of the keys to short sale success is the turnaround time it takes to process each short sale request. Earlier this year I represented a 1st time home buyer couple who wanted to close by June 30th so they could get their 1st time home buyer tax credit. We made an offer on the property in early March. Through many days, weeks and months, we hoped that the mortgage servicer would approve the offer and ultimately the sale in time to be eligible for the tax credit. Luckily it happened successfully. My buyers are happy home-owners today. It shouldn't go without saying that the mortgage servicer basically took us up to the 11th hour before we knew for sure that the transaction would be approved. Patience and perseverance paid off.

Most buyers and sellers can't wait indefinitely for an answer from the bank. As a result, often times, it is not the first potential buyer who comes along and makes an officer who purchases the property. When buyers wait weeks without any feedback from the bank, they move on to other properties.

Ultimately the goal is always to create a win-win situation. Ideally the seller moves on without enduring a foreclosure and in affect saving their credit; the Buyer gets a home that he might not otherwise be able to afford or at a reduced price; and the bank saves tons of money since they didn't have to start foreclosure proceedings on the Seller.

Foreclosures and short sales ARE NOT for everyone! your Realtor knows your individual situation. Ask your Realtor if a foreclosure or short sale is is right for you.

Sara Hibbard is a Realtor in the Atlanta metro area. Sara is available to answer your many questions or assist you whether you are planning to purchase a home or sell your current one. Please call Sara anytime at 770-399-8108. Sara Hibbard is glad Georgia Real Estate is on your Mind!

Buyers Must Be Cautious When Purchasing REO Property

I get calls everyday from prospective home buyers who tell me they want a "great deal". I often ask them to describe a "great deal". The answers to that question are varied. Because, a "great deal" means different things to different people, many buyers have unrealistic expectations of obtaining a "great deal" and based on their answers, in spite of a repressed market will probably never make a purchase.

Often, prospective buyers believe that their answer to a "great deal" is to find a foreclosure, short sale, HUD or REO (Real Estate Owned By A Bank) property. For some buyers this is a great opportunity, however, for many buyers this route to home ownership is very challenging and in the end may not be the "great deal" they anticipated. When looking for foreclosure and short sale properties it is important that you have a good Realtor working for you who is experienced with dealing with the foreclosure banks. You need a Realtor who will look out for your best interests.

Bargain-hunting Buyers looking to find a great deal in this market often go after foreclosure property. They find a home that fits their needs, and together with their real estate agent they produce and submit the offer for the home. The offer is then reviewed by the Seller, and if the Seller selects the offer, CONGRATULATIONS! – but don't get too excited, the offer is Acknowledged but not officially Accepted.

In order for the offer to be Officially Accepted, the Buyer needs to agree to a few Addenda. These Addenda can be scary, as they just about give the Seller all the rights and leave the buyer with none. Unfortunately, often times Buyers must agree to this Addenda before the Seller will proceed with the sale of the property. It is under their terms, and Buyers need to understand that the Addenda can CONTROL the entire agreement. It is always BUYER BEWARE when dealing with foreclosures and short sale transactions.

These addenda are very comprehensive, and can be overwhelming as they are filled with unfamiliar terms. Moreover, this Addenda may appear to be a whole new Purchase Agreement in itself which specifies terms & conditions set forth in the purchase transaction. This is because the Addendas purpose is to protect the Seller, therefore, it overrides almost all of the language in the original Georgia Association of Realtors (GAR) form offer that was originally submitted.

Executing these instruments while obligatory, should not be taken lightly. As a Buyer it is extremely imperative that these documents are carefully read and fully understood before moving forward with the purchase. All things considered, with the correct professionals in place to help you through the process, the purchase can still be a bargain for the savvy buyer!

Sara Hibbard is a licensed Realtor in the state of Georgia. One of her many specialties is working with foreclosure, short sale, HUD and REO properties. Sara holds the REOS certification. Sara can be reached anytime to discuss your many questions regarding the real estate market in general or specifics regarding the buying / selling process. Call Sara at 770-399-8108 TODAY!

Will A Short Sale Save Your Credit?

There is unfortunately a ton of miss information floating around on the Internet as well as other news sources regarding short sales and foreclosures.

This past week 4 different people actually told me that if they file for a short sale their problems will vanish.

As you would expect, as a real estate professional, I spend a lot of time and money attending various industry seminars, taking continuing education courses and learning about all things real estate. The reason for this is that the industry is changing -- literally changing with the wind. My goal is to stay as current as possible. To do that I also am a subscriber to many industry related newsletters and magazines. This allows me to stay current and up to date on various trends and issues facing the real estate industry and my clients. One newsletter I receive on a daily basis is RIS MEDIA. After the week I have just had, today's top story is timely and so I share it with you here.

Please feel free to call me anytime with your many questions regarding short sales, foreclosures or whatever might be on your mind relating to the Atlanta metro real estate market in general or specifics regarding the buying / selling / relocation process. I look forward to assisting you and your family when the time is right for you folks. Call me anytime at 770-399-8108. Have a wonderful weekend!

RISMEDIA, June 11, 2010— (MCT)—Stuck in a house you can’t afford or can’t sell for more than you owe on it? Beware the Web, where you’ll see plenty of claims that short sales will save your credit, simple as that. But there’s nothing simple about deciding whether to sell your house in a foreclosure or in a short sale, which means you sell the property for less than you owe the bank. And in most cases, going through either process will wreck your credit score.

“Both short sales and foreclosures are considered negative by the score, because our data shows us it’s very predictive of future credit risk,” Tom Quinn, Minneapolis-based Fair Isaac Corp.’s vice president of FICO scores, said. “The claim that doing a short sale is not going to hurt your score is false. It’s inaccurate.”

Credit scores, which are designed to assess how likely it is that consumers will uphold their side of the bargain, look at the severity (are we talking bankruptcy or a late car payment?), frequency (have you skipped a payment once, or have you missed a bunch?), and recency (did you miss a payment last month or last year?) of items on your credit report.

In both short sales and foreclosures, “you made a lender eat a big number,” said Alex Stenback, a mortgage banker with Residential Mortgage Group in Wayzata, Minn.

That’s not to say that there aren’t some instances where short sales are better. If a borrower is current at the point of a short sale, for instance, then the consumer’s credit score won’t sink as far as it would have if he hadn’t made a mortgage payment for six months. Still, Fair Isaac says that the benefit from not having prior delinquencies on file pales when compared with the hit a score takes from a short sale.

Dan Williams, program director for LSS Financial Counseling Service, says this widespread notion that short sales are better for credit is a big problem because it deters some people from going into foreclosure when that would be the best option for them.

In Minnesota, homeowners can stay in their houses for six months after the foreclosure sheriff’s sale. Factor in the fact that many banks don’t start foreclosure proceedings right after the third missed payment, and families can potentially stay in a house for more than a year rent-free, hopefully saving that money to help them get back on their feet. This could amount to thousands of dollars.

Housing counselors say that most clients have credit scores in the basement already. “If you’ve got a poor credit score and are doing a short sale to preserve your credit, it’s ridiculous,” Williams said. And it’s happening every day.”

If you’re having mortgage trouble, seek help right away from a housing counselor or an attorney. Realtors are the go-to professionals to learn about the local housing market and what it takes to sell your home. But they aren’t credit experts, and I’d get a second opinion if anyone is telling you that a short sale will save your score. And don’t pay someone a lot of money if they promise to quickly rehab your credit score after foreclosure. Credit scores are forgiving—over time.

Both FICO and its credit scoring competitor VantageScore have released estimates for what happens to consumers’ credit scores when they make mortgage missteps. In the VantageScore study, a homeowner with an otherwise clean record who then has a short sale sees their credit score drop between 120 and 130 points (on a scale of 501-990) compared with between 130 and 140 points if the same homeowner ends up in foreclosure.

For a homeowner whose credit report is rife with late payments on everything from credit cards to car loans, a short sale would ding them between 15 to 25 points compared with 10 and 20 points for a foreclosure. Customers with rotten scores will see smaller point drops than someone whose score is good, because the score already has taken into account the lower-scoring customer’s risky behavior and adjusted the score downward.

FICO’s example found short sales and foreclosures will set you back between 140 and 160 points if your credit score is a respectable 780 (on a scale of 300 to 850), or between 85 and 105 points if your credit is 680.

Even if you do your homework, you ultimately can’t control how your housing woes are reported to the credit bureaus. For example, mortgage servicers may report your situation to the credit bureaus using different codes that could be interpreted more or less favorably by FICO, Quinn said.

What if your circumstances change and you’re able to save your home from a foreclosure? “Once you’ve got a foreclosure starting to track on your credit file, you’re taking a major hit,” even if you ultimately save your house, said Sarah Davies, a VantageScore senior vice president.

Credit scores play such a central role in consumer’s lives. Yet it’s so hard to understand them that people can end up making disastrous choices based on myths that are taken as fact. It’s certainly not a catchall solution, but Congress should at least grant consumers free access to their credit scores, an idea which is currently being floated at the capitol.