Loudoun Foreclosures

Buyers/Sellers: What Does Few Foreclosure/Bank-Owned Properties on the Market Mean To You?

2009-09-26T19:42:04Z

The other day, I talked about how few foreclosure/bank-owned properties there are on the market in Loudoun County and Northern Virginia (click here if you missed the post). But what does having only a very few foreclosure/bank-owned properties on the market really mean for Loudoun/Northern Virginia home buyers and sellers?

Buyers

If you would like to settle quickly, your only options are traditional resales and foreclosure/bank-owned properties. Either can typically settle within 3 to 6 weeks (less if cash offer) of when the contract is accepted and ratified
Since there are so few foreclosure/bank-owned properties, the overwhelming majority of properties you’ll see will be traditional resales
Traditional resales are typically in better condition and require less work than foreclosure/bank-owned properties, but you’ll pay more for them up-front in the purchase price
If you have the time (3 to 6+ months) and patience and want to spend less money up front, but don’t mind doing some work to the property, then you may want to consider a short-sale
If you’re trying to take advantage of the first-time home buyer tax credit, you’re looking at only foreclosure/bank-owned properties and traditional resale (click here for more information on what I mean by that)

Sellers

If you are a home owner selling your home as a traditional resale (not a short-sale), you’re in a great position
When there were a lot of foreclosure/bank-owned properties on the market, buyers who needed to settle quickly could choose from a foreclosure/bank-owned property or a traditional resale. Now…their options are pretty much limited to traditional resales, which is good for you

CLICK HERE TO SEARCH FOR LOUDOUN FORECLOSURE/BANK-OWNED PROPERTIES

Anyone Seen Where All the Loudoun Foreclosure/Bank-Owned Properties Have Gone?

2009-09-26T19:25:30Z

Two years ago, you couldn’t walk out your front door in Loudoun/Northern Virginia and not see a foreclosure/bank-owned property for sale. But something interesting has been going on for the past 12 months…the number of foreclosure/bank-owned properties on the market has been quickly dwindling.

As of today, there are only 60 active foreclosure/bank-owned properties on the market in Loudoun. That’s a total of only 6 percent of the total existing home inventory on the market in Loudoun County. This is a far cry from what we were seeing in 2007, 2008 and even the beginning of 2009.

How is this possible despite record foreclosure filings throughout the US?

One possible reason is that the bans are holding on to their inventories on purpose. Releasing them all at once would sink the market and the value of all properties (including the ones the bank are holding to) would fall. This means that the overall worth of the properties the banks are holding on to would fall - not something banks or their shareholders want to see.

Another reason may be that the government is buying up these “troubled assets” so that they don’t get released on the market and sink it. Just look at the millions the government is spending buying up Mortgage Backed Securities (MBS).

Will we see a flood of foreclosure/bank-owned properties hit the Loudoun market in the near future?

I’d say “not any time soon” for a variety of reasons including political ones. But I don’t have a crystal ball so don’t take what I say to the bank.

Either way, the majority of homes on the market in Loudoun and Northern Virignia in general are short-sales and traditional resales. Practically speaking, this means that buyers who need to settle within 30 to 90 days have pretty much only traditional resales to choose from (blog post on this coming next week).

CLICK HERE TO SEARCH FOR LOUDOUN FORECLOSURE/BANK-OWNED PROPERTIES

Short-Sale Approved! Now What?

2009-08-19T22:07:05Z

Congratulations! You’ve waited patiently for a response on your short-sale offer from the bank(s) and you just got word that it’s been approved - half the battle has been won!

So now what?

To best understand what happens next, let’s quickly go over a part of the short-sale process…

The majority of what needs to be done (loan processing, appraisal, title work, termite, etc) can’t be done until the bank(s) has approved the short-sale - in writing. The reason for waiting until then is that all of those things cost money and no one wants to spend the money and resources before knowing for sure that the short-sale will be approved.

And as far as timing, you typically only have 2 to 4 weeks from when the short-sale has been approved to get all these things done because that’s how long the typical short-sale approval from the bank(s) is good for. If you run past the deadline, you have to ask for an extension and/or a new approval. While this is more than possible, it’s a hurdle best avoided if possible.

Is it tough to get all those things doe and settle within that time frame?

Two weeks is cutting it close, but four weeks is not a problem with the right lender on your side.

Now back to answering the question, “So now what?”…

Here are some things you can expect as a buyer once the short-sale approval comes in:

Schedule the settlement date and closing time based on the short-sale approval deadline(s) and when the lender can have the loan done and ready for funding
Provide your lender with updated pay stubs, bank statements, financial statements, etc.
The lender will now order an appraisal on your behalf
If you haven’t already done so, you should set up a home inspection (click here for more about home inspections on “as is” properties)
Order the termite inspection (sometimes it’s the seller’s responsibility and sometimes it’s yours)
The settlement/title company will now order the title search, title work, survey, etc.
If you’re renting, now is the time to put in your notice to the landlord/management company
Obtain home owner’s insurance on the new property
Contact the moving company if you’re using one (or call your friends/family and start bribing them with favors now)
Put in for time off from work for the final walk-through and settlement (these can only take place during normal business hours Monday through Friday)
About 2 weeks out, but not less than 1 week out from settlement date, transfer the utilities into your name

See..not too bad at all! Short-sales are a “stop and go” process. But, as many short-sale sellers and buyers will tell you, it’s well worth it! The seller ends up avoiding foreclosure and an even bigger ding to their credit while the buyer gets a great deal on a new home.

***CLICK HERE TO SEE ALL ACTIVE SHORT SALES IN LOUDOUN COUNTY***

Short-Sales Wear the Crown in Loudoun County

2009-08-07T00:19:05Z

This time last year, foreclosure/bank-owned properties were King by making up the largest percentage of distressed properties on the market. Today, it’s the opposite.

Short-sale properties now wear the crown out-numbering foreclosure/bank-owned properties for sale almost 4 to 1 and accounting for almost 20 percent of the total homes for sale in Loudoun County.

This dramatic shift is due to the foreclosure moratoriums that were in place at the end of last year and the beginning of this year (which seem to be voluntarily continued) along with banks becoming more open to negotiating short-sales (whether on their own free will or government coercion).

What does this mean for Loudoun home buyers and sellers?

For sellers, it means that, if you’re thinking about selling your home “short”, now is the time to do it. Banks are more open to negotiating with home owners and buyers are receptive to buying a short-sale. In addition, the U.S. Government is offering to pay the second trust in a short-sale up to $1000 to get the deal done.

You should also make sure that the Listing Agent you hire has successfully completed numerous short-sale transactions within the past 6 to 12 months (anything further back than 6 to 12 months doesn’t count because the rules today are much different than they were more than 12 months ago let alone in the history of real estate).

For buyers, it means that the majority of the “great deals” are short-sales. This means that you have to shift your thinking and “life plans” from moving in 30 to 45 days to moving in 4 to 7 months from now. This is because short-sales have a much longer turn around time and a smaller chance of success (unlike ordering a Whopper from Burger King).

The typical bank-owned property takes a few days to 1 week to get a response on while a short-sale typically takes 3 to 4 months (sometimes 6+ months). And even when you do get a response, it could be a counter-offer from the bank(s) or even worse, a plain old, “No - we’re not accepting a short-sale” and you’re S.O.L.

As a buyer, you should know what you’re getting yourself into with short-sales and have a Buyer’s Agent working for you that knows the ins and outs of the short-sale transaction. This will maximize your chance for successfully purchasing a great deal and actually getting to the settlement table.

If you’re a seller thinking about doing a short-sale, but aren’t sure what a short-sale is all about or where to start, pick up the phone or email me and I’ll be glad to help answer any questions or concerns you may have.

If you’re a buyer thinking about buying a short-sale in the Loudoun/Northern Virginia area, email or call me so we can chat about your specific needs and see how I can be of help.

CLICK HERE FOR A LIST OF ALL ACTIVE SHORT SALES FOR SALE IN LOUDOUN COUNTY

Local Government and Banks Discuss Short-Sales, Foreclosures and Loan Modifications

2009-07-28T18:47:10Z

The Dulles Area Association of REALTORS® hosted a symposium yesterday with banks and REALTORS® to foster a greater understanding of the mortgage options for troubled homeowners and challenges arising from complicated real property transactions such as short sales. The event was held at George Washington University’s Ashburn campus and featured Congressman Frank Wolf and “top dogs” from HUD, the FHA, Bank of America and the Virginia Mortgage Lenders Association.

I wasn’t sure what to expect of the event because I was afraid politics and “prepared speeches” would get in the way of actually getting things accomplished (or at least discussed openly and honestly). There was a discussion/Q&A session at the end, but not much commenting came from the “top dogs”. And as far as the “advice” given, none of it was anything many of us didn’t already know.

It seems the people near the top of these organizations/companies are out of touch with what’s really going on in real life. Or maybe they do know, but don’t want to admit it or do anything about it.

For example, one agent commented how bank negotiators never return phone calls nor emails regarding the status of a short-sale in process. The response was, “Be patient. We get 180,000 phone calls per day and we don’t have the manpower to support the volume.”

So you want people to sit around for up to 6 months before you bother to get back to them? That’s your advice?! Gee, thanks. I feel much better now

How about this…You received TARP money (aka millions of tax payer dollars) plus you’re saving thousands of dollars by working out a short-sale rather than going the foreclosure route - so hire more (competent) people!

Another example (which I have been fortunate enough NOT to experience) is that the short-sale and foreclosure departments at the same bank don’t communicate with each other. Banks have been known to foreclose on a property in the middle of a short-sale negotiation (with the same bank). It’s 2009 - there are land lines, cell phones, email, IM, text, Twitter, Skype, etc. There is no excuse for such a lack of communication between two departments within the same company.

They defended the new HVCC appraisal guidelines quite a bit even though every agent and most sellers, buyers and those trying to refinance since May 1 have a horror story (or five) to share thanks to the HVCC.

And not too much new was talked about working out a loan modification. Things such as term length increases were number one on the list of possibilities with lowering the interest rate close behind. Either way, you have to prove to the bank that you can’t afford your current (or soon to be adjusted) monthly payment due to some form of hardship.

The point is…there are lots of issues and new problems arising from foreclosures, short-sales and the new appraisal process and not much is being done about it. As a consumer, make sure you’re properly educated and be prepared for hurdles along the way. And if you’re selling your house “short” or buying a foreclosure or short-sale property, make sure you have an experienced agent who knows what they’re doing when it comes to these types of transactions (I may know of one).

Related Articles

A Seller’s Guide to the Short-Sale Process

10 Questions To Ask Before Writing an Offer on a Short-Sale

10 Things to Look Out For With Bank-Owned Property Contracts

Do You Qualify for a Loan Modification?

Second Trusts Are Holding Up, Killing Short-Sales

2009-07-11T18:08:49Z

Imagine this… The first trust (bank who the first/primary mortgage is with) approves their short-sale within 45 to 60 days, but the second trust takes 4, 5, even 6+ months to respond. And when they do, the response is, “Sorry, but we didn’t approve the short-sale” or “Sure, but we want $XX thousand cash from the seller due at settlement.”

And picture this… The first trust finally approved their short-sale 4 months ago. But, since the second trust has not given a response on their short-sale after a total of 6 months, the first trust says “enough waiting around” and forecloses. The contract then becomes void and, after 6 months of waiting around, the buyers are back to square one looking for a place to buy and live.

Pretty crappy, huh?

Unfortunately, these are real life examples happening here often and everywhere. And it’s killing short-sale transactions and frustrating home buyers and sellers everywhere.

The chances of the you actually getting to the settlement table and buying the house are much smaller when there is more than one trust or bank involved as compared to only one trust being involved. And the time it takes to get a response can double (or triple in some cases) when there are two trusts involved.

What’s the solution?

There isn’t one at the moment. But, you can protect yourself and manage your expectations by knowing what you could be getting yourself into. Part of doing that is making sure you ask the right questions including, “How many trusts/creditors are involved in the short-sale?” - before you write an offer on the property. You’ll avoid a lot of disappointment and frustration down the road.

On a related note, the Obama administration is attempting to address this issue by agreeing to share the cost of the loss with second trust/lien holders (aka banks/creditors). We’ll see if that pans out and what effect it will have…

Happy July 4th!

2009-07-03T19:28:51Z

Hope everyone has a great July 4th weekend!

-Danilo

Negative Equity, Not Sub-Prime to Blame; New 125% Refi LTV

2009-07-03T19:28:23Z

Two interesting discussions are going on right now over at VAR buzz (Disclosure: I wrote one of the posts). The first is about the Home Affordable Refinance Program (HARP) increasing their loan-to-value (LTV) limits from 105 to 125 percent. The second is about how it’s negative equity loans, not subprimes or “liar loans” that are to blame for the foreclosure crisis.

HARP’s new 125% LTV ceiling

Regarding HARP’s new LTV ceiling… Some think that HARP is a horrible solution and that the new LTV ceiling will leave homeowners “stuck” in their home. I disagree and here’s why:

If homeowners were allowed to borrow more than what they currently owned, HARP would be horrible solution because it puts people further into debt. But HARP does not allow people to borrow 125% of their home value unless they owe that much already. It is a refinance – not a new purchase nor “cash out.”

“Upside-down” homeowners are already “stuck” in their home whether they refinance or stay in their current mortgage. Their property will still be worth $X, they will still owe $Y on their mortgage and their LTV will still be at 125% whether they refinance through HARP or not.

As Sweth (one of the commenters on the post) said, this is not the Home Affordable Modification program - that’s a different program - nor a neg am loan. This is simply a way to refinance the same amount you currently owe into a fixed rate mortgage at a potentially lower interest rate.

Negative equity loans, not subprimes to blame

The other post is about how it’s negative equity loans, not sub-primes or “liar loans” that are to blame for the foreclosure crisis.

I can see where the author is coming from. Homeowners that took “zero down” or even “103 percent financing” (aka negative equity loans) had no financial stake in the property from the start. Many bought a house with less than $100 out of their own pocket. Heck, some even got money back! If you have no stake in something, you’re much more willing to let it go especially when you’re looking at a 10, 20, 40+ percent “loss” if you sell it.

And as property values fell, people were continuously counting how much money there were “losing” - the more they “lost”, the more willing they were to just walk away and be foreclosed on. If property values didn’t fall as much or were increasing, people would think twice before being foreclosed on because the may “make money on their home.” Primarily only those who were truly facing financial hardship would be foreclosed on because they wouldn’t be able to pay the mortgage regardless.

But this may very well be a, “Which came first, the chicken or the egg?” type of discussion.

What do you think?

10 Things To Look Out For With Bank-Owned Property Contracts

2009-06-19T11:18:42Z

I had the opportunity to attend an excellent “REO Contracts” (aka “contracts on bank-owned properties”) class yesterday presented by Keith Barrett, Esq of Champion Title in Leesburg, Virginia. The class went over some of the main pitfalls of REO contracts and what to look out for as a Buyer’s Agent or as a buyer of a bank-owned property.

Though the REO contracts class was for real estate agents/brokers, everything covered in the class directly affects buyers of bank-owned properties. That’s why I wanted to share the key points of the presentation with you, the home buyer.

DISCLAIMER: Nothing within this post is intended as legal advice or comprehensive answers to all questions, nuances, etc. that may come up in particular transactions. Consult an attorney for guidance. The following points were derived from the material given to attendees as part of yesterday’s REO contracts presentation.

Practical Considerations of REO Contracts

The buyer is generally getting the benefit of their bargain up front in the price - not in the ease or speed of the transaction
The seller is a corporate entity, which is both positive and negative. You don’t have to deal with an emotional seller that has unrealistic expectations about property value, etc. On the other hand, sometimes big corporate sellers “do what they want.” These banks are selling properties all over the U.S. making it difficult to conform to local custom and practice
Approximately half of all REO transactions do not close on time. Have a plan B should settlement be delayed (e.g. don’t schedule contractors to come out to the property the day after settlement, don’t settle on a Friday especially not before a long holiday weekend, etc)
Some bank sellers take the position that if the REO addendum is silent on an issue addressed in the original offer, that is a conflict and the REO addendum controls/prevails (e.g. appliances, home warranty, seller closing cost credit, etc). If something that you “agreed upon” in the original offer/contract is not listed/addressed in the REO addendum, the bank seller may argue that it’s not part of the contract
Even though the property is sold “as is”, there may be room for negotiation on a case by case basis
HOA Disclosure package - by law, the bank seller should provide this
Residential Property Disclosure Statement - by law, the bank seller is exempt from providing this
Make sure you change the locks immediately after you take possession of the property
Consider a longer rate lock period on financing from your lender - about 50 percent of REO transactions do not close on time
The latest revision to CRESPA (Consumer Real Estate Settlement Protection Act) states that the buyer’s right to choose a settlement agent/title company can not be varied or waived by any agreement - including an REO addendum (effective July 1, 2009)

Once again, this is not intended as legal advice. Every bank’s addendum and every transaction is different. I’ve even seen different versions of an REO addendum from the same bank.

Point is…be smart, read the entire addendum and know how the addendum affects the transaction and you as the buyer (even if that means consulting a real estate lawyer). But also know that bank sellers “do what they want” so even though it may seem “wrong” or “unfair”, there may be little, if any chance of getting the bank to change the language in the addendum.

And if you have any specific legal questions regarding REO contracts or real estate law in general, don’t hesitate to email or call (703.443.1010) Keith Barret, Esq directly - he’s knowledgeable, experienced and tells it like it is (though I have no idea what his hourly rate is as a real estate lawyer).

Related Articles

Do You Know What the Bank Addendum REALLY Says?

A Seller’s Guide to the Short-Sale Process

2009-06-11T03:55:17Z

Some of you may be wondering how you can go about selling your home the “short-sale” route, but aren’t sure how it works. Well, here’s what I call a “Seller’s Guide to the Short Sale Process”…

First and foremost, let’s define “short-sale” as it relates to real estate today:

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold

If you’re not sure whether you’ll be “short” if you sell the house, hire an appraiser or ask a Realtor to do a CMA for you and deduct the balance of your mortgage(s), any line of credit(s), other lien(s) and cost of sale from the estimated market value of your property. Once you’ve done that, you’ll have a good idea of whether you’re “short” (assuming the appraisal or CMA are accurate).

Let’s assume that you’re “short” and want to move forward with a short-sale. What are the next steps.

Well, fellow Virginia Realtors and bloggers Sarah Stelmok and Jeremy Hart beat me to the punch by about 24 hours with their posts on short-sales. So, with their permission, I’m going to cite their explanation about the process to save some time.

If you are a Seller considering a Short Sale in your property, you will need to gather the following information:

All lien holders names and contact information

All loan numbers

A Third Party Authorization Form - this will allow the bank to discuss your short sale with your REALTOR. It needs to be agent and loan # specific and have an indefinite end date Some banks have their own form; others will accept any form you prepare. You need to get this to the bank as soon as you hire a REALTOR.

Listing Agreement - this should include a CMA of the property to justify your list price

2008 and 2009 W-2s - or the tax forms that you filed if you do not get W-2s.

A Profit/ Loss Worksheet for 2009

Last 2 Month’s Bank Statements

Proof of Disability or Unemployment or Job Transfer (if applicable)

Hardship Letter - this explains why you want to short sale and why the bank should allow you to short sale

Once you have all of these items, the next steps are…

1. List the property for sale– Some banks want the property listed for the amount that is owed first, and they will be willing to drop to a more realistic price after a period of time. The listing agent will need to back up their list price with a good CMA! Remember, a BPO will be called out as soon as they receive a contract.

2. Receive and ratify a contract – needs to be ratified by the seller and buyer. Some banks want one contract at a time; others want to see them as they come in. Another reason to contact the bank ASAP.

3. Send Contract to Bank - get confirmation from the loss mitigation offer at the bank and preferably written proof of receipt

4. You will also need to send – all of the paperwork including the hardship letter you gathered/prepared prior to listing your property for sale (see earlier part of this post). The bank may ask for other items not listed here. They may also send you additional forms and paperwork for you and/or your agent to sign.

5. Be persistent, but patient - Make sure you ask how long it will take for a contract to work its way through the system. You want to hear it will take 30-45 days, but they may tell you that it will take just that long for them to even look at the file as is the case with CitiMortgage. You also want to ask about the likelihood the loan will be sold. They like to sell the loans right before they give you approval, and you’ll have to start the process all over if they do.

6. Stay as current as possible - Make sure you don’t get more than 2 months behind. Some banks will allow you to get up to 9 months behind, but they are harder to negotiate and keep off the auction block. If you don’t know what their policy is, ask.

These steps will need to be done for each bank that is involved and each bank has their own process. Some banks that are in 2nd position (2nd trust/mortgage) will only start processing their short-sale after they’ve received written short-sale approval from the 1st trust. This means that the overall short-sale approval process may take twice as long with two trusts/mortgages.

If you are considering pursuing the Short Sale route to sell your home, it is important that you consult an attorney that is familiar with the process. It is also important that you use a REALTOR who is trained in the short-sale process and has experience in Short Sales.

So I hope that this helps you out (thanks again Sarah and Jeremy). If you’re in a situation where you’re about to fall behind on your mortgage and/or are considering a Short Sale, contact me to chat about it and see what options you have.

Related Articles

Short Sale (real estate) - Wikipedia

Percentage of Short-Sales Being Approved Increasing

10 Questions To Ask Before Writing an Offer on a Short-Sale

Loudoun Foreclosures

Buyers/Sellers: What Does Few Foreclosure/Bank-Owned Properties on the Market Mean To You?

Anyone Seen Where All the Loudoun Foreclosure/Bank-Owned Properties Have Gone?

Short-Sale Approved! Now What?

Short-Sales Wear the Crown in Loudoun County

***CLICK HERE FOR A LIST OF ALL ACTIVE SHORT SALES FOR SALE IN LOUDOUN COUNTY***

Local Government and Banks Discuss Short-Sales, Foreclosures and Loan Modifications

Second Trusts Are Holding Up, Killing Short-Sales

Happy July 4th!

Hope everyone has a great July 4th weekend!

-Danilo

Negative Equity, Not Sub-Prime to Blame; New 125% Refi LTV

10 Things To Look Out For With Bank-Owned Property Contracts

A Seller’s Guide to the Short-Sale Process

CLICK HERE FOR A LIST OF ALL ACTIVE SHORT SALES FOR SALE IN LOUDOUN COUNTY