Some Quick Tips About Short Sales

If you are reading this then you probably already have heard the term "short sale" and are interested in knowing what to expect selling a house short of what is owed or what to expect when putting an offer on a home listed as a short sale. For those of you who do not know what a short sale is I will give a brief definition. A short sale is when a home, not owned by the bank or lien holder, is sold for less than what is currently owed on the home. The home does not have to be in the foreclosure process for it to be a short sale although many times it is. So lets get to some tips of what to expect.

Tips for the seller!
Because you are selling the home for less that what is owed you will need to prove to the bank you cannot afford to keep the home. You will have to prove this much like when you bought the home. Banks typically ask for 1 months pay stubs, 2 months bank statements, 2 years tax return, a letter of hardship, and you will need an authorization letter stating your real estate agent can act in your behalf when it comes to dealing with the bank. Having all this together at the beginning of the process will help your Real Estate Agent save you time and it shows your motivation, typically resulting in better service.

Many people have a hard time writing the authorization letter because they do not know what the bank wants to hear. In my experience and conversation with other Agents it seems banks want to know what has changed in your life to make the home no longer affordable. This may be change or loss of employment, the interest rate change on an adjustable rate mortgage, having to move to another state or area of your state (moving down the street typically will not work), or any change which can logically justify the bank taking a loss.

This next tip is huge! Make sure your Agent prices your home at current market value to begin with. This will save you a ton of time! Many agents like to start the home pricing at what is owed and slowly work down to market value. By the time it reaches market valley your house has been on the market 180 days and most agents will think there is something wrong with your home and will not show it. If the home is priced at current market value in the beginning you are more likely to sell your home and not have it foreclosed on.

Have your Agent reduce the price every 2 weeks, if you need to have it sold ASAP then have the price reduced weekly. Once you receive an offer stop reducing the price and many times you will receive more than one offer. By the time you receive an offer you home may be below market value which is okay. When your Agent presents the offer to the bank make sure the Agent includes a letter explaining what price the house started at and each price drop. This will help the bank see the house would not sell at a higher price and will give you a better chance of the bank accepting the offer.

Once an offer makes it to the bank expect the process to seem like it has stopped. This is usually the banks fault. Some banks take up to 6 months to approve a short sale. Your agent should be make contact with the bank twice a week and each time they call they will spend about an hour on hold just waiting to talk with someone so please be patient with with your agent during this process. They want the home to sell just as much, if not more, than you do.

Once the house sell what happens to the loss? I'm sure this is a question you are asking. The bank will send you a W-2 with the loss amount for you to claim on your taxes. President Bush signed a debt forgiveness act allowing you to write off this amount IF its your primary residence and the money was spent on the home. A second mortgage used to pay bills typically will not fall under this and that is something to talk with an accountant about. Your accountant will have a much better understanding of the taxes and how/what to write off.

This brings me to my next tip, make sure every offer is accompanied with a Short Sale Addendum. This give either party the right to walk from the transaction at anytime. In the event you can afford the home again, before the bank has given written acceptance of the offer, you can back out without defaulting on the contract. If staying in the home becomes an options via a loan modification or any other means take advantage of it! It will save your almighty credit score!

What to expect at the time of closing. All you will be doing is signing papers. You will come to closing paying nothing and you will leave closing having received no money. You will not be paying your agent a penny, the bank will be the one paying your agent. So just show up, sign the papers and turn the keys over to your agent. Closing is that simple for a short sale. Closing is the only simple part of a short sale.

And my last tip for the seller is be patient. This is going to be a long process so be prepared and expect there to be some speed bumps but if you have chosen a Real Estate Agent committed to you and with enough free time to complete the process it will happen as fast as possible.

Tips for the buyer!
I have fewer tips for the home buyer but there are still a few things you should know ahead of time.

Make sure you have MAJOR flexibility in your moving date. The home could close anywhere from 60 days to 6 months so make sure you have flexibility.

NEVER submit an offer without a Short Sale Addendum. Tthe process can take so long you will need to have the freedom to submit multiple offer and/or walk from your offer for any reason. Having this freedom when submitting an offer on a short sale is extremely important.

Get the extended title policy offered from the title company, this will prevent any lien holder from coming after you once you own the home. This is good advice for ANY home buyer. This protection is VERY cheap and should always be purchased especially with a short sale.

My last bit of advice is to get a home inspection. This is smart for all home buyers. It's important to understand what you are moving into and to know what is wrong with the home prior to moving into it. A good inspector will find most everything wrong with the home and give you more information to make the best decisions possible for you and your family.

I guess the over all advice for the home buyer is to be smart and protect yourself. Take a necessary precautions to protect yourself, your family, and your new purchase!

I hope this helps both buyers and sellers on what to expect and how to handle a short sale. The road to closing can be long but worth it and these tips should make it a smoother road to head down.

Life is great!
Lee Taylor

Is The Ada County Real Estate Market Any Better Off This year?

I believe this is the question everyone wants answered with hard numbers. So... Lets proceed with removing my opinion and letting the number speak for themselves.

So here they are:

April 2008

Active Listings . . . . . . . . . . . . 4931

Homes Sold . . . . . . . . . . . . . . .449

Months of Inventory . . . . . . .11 Months

Median Price . . . . . . . . . . . . . $208,000

Average Price . . . . . . . . . . . . $243,224

Average Days on Market . . .72 Days

Jan 2009

Active Listings . . . . . . . . . . . . 3764

Homes Sold . . . . . . . . . . . . . . .232

Months of Inventory . . . . . . .16 Months

Median Price . . . . . . . . . . . . . $183,000

Average Price . . . . . . . . . . . . $210,928

Average Days on Market . . .94 Days

April 2009

Active Listings . . . . . . . . . . . . 3896

Homes Sold . . . . . . . . . . . . . . .419

Months of Inventory . . . . . . .9 Months

Median Price . . . . . . . . . . . . . $170,000

Average Price . . . . . . . . . . . . $200,135

Average Days on Market . . .94 Days

So what does all this mean??? I guess I will have to give my opinion here. It means prices are still falling, not as fast, but still falling. The market is closer to being stable this year than last and if you are thinking about buying then you better hurry and take advantage this market. For those of you still reading I will explain what I mean.

The most important statistic stated above is the months of inventory. Why? The months of inventory tells us if no more houses were put up for sale it would take that many months to sell all the currently inventory of active listings. The months of inventory tells us if we are in a buyers market, sellers market, or a neutral market. An inventory of 4 or less months means we are in a sellers market, sellers are in the drivers seat. 4 to 5 months of inventory is a neutral market, meaning the buyer and the seller are on a level playing field. Anything over 5 months means the buyers are in the drivers seat and usually paying less than asking prices.

In just a few short months here in Ada County we have gone from a 16 months inventory to a 9 month inventory. The closer we get to 5 months the fewer good deals are on the table for buyers and more you can expect to pay for homes. Recently I have seen many homes around and under $200,000 receive multiple offers so do not sleep on this market, take advantage of historical low interest rates and home prices if you can. Consider yourself warned the market is shifting!

It's All About Curb Appeal

We have all heard the saying, "You never get a second change to make a first impression." This is true with buyer when they come to view your home. Your curb appeal will set the tone for the showing. Imagine the excitement of potential home buyer as they ride along with their Agent to see your home. All the while your home is being talked up about how beautiful it is and how well it will work for their family. The excitement at times can to such a high it causes some to cry! In contrast imagine the drop of the buyers heart when they pull up to see broken down cars in the driveway, bikes and toys littered across the front lawn, and poorly maintained landscaping. This disappointment is rarely overcome by the beauty of the interior of your home. At times the buyers will outright refuse to even look inside the home. To avoid this let me give you a few simple tips that can be done in a hour each weekend and a few minutes before each showing.

1. After receiving a call to have your home shown walk across the street and look at your home. Imagine yourself as the buyer and see what they will see. Many times you will notice sometime peeking over the fence that needs to be quickly moved or toys hiding in your bushes.

2. Move all of you cars out the garage and off your driveway to around the corner from your home before each showing. Buyers want to be able to picture their cars in garage and on the driveway not yours. Help the buyer feel like they are pulling up to their home when they come to see your house. Buyers need to make an emotional connection with your home from the moment they pull up.

3. This is the easiest and most simple of all but the most forgotten! Open all the blinds in the front of your home and remove EVERYTHING from the window sills.

4. Take a hour each weekend to mow your lawn, pull the weeds, and rake the planter beds.. Buyers like to see the pretty lines in your lawn from your lawnmower and freshly maintained planter beds. Buyers will feel the entire house has been well maintained. The condition of your landscaping in the eyes of a buyer is the same as the structural condition of your home.

Follow these simple steps and buyers will will enter your home with a smile on their face and ready to see what the interior has to offer. Remember the outside MUST be cared for or the buyer will not care to see the inside.