From A Sad Foreclosure To A Happy Home

Hi Everyone,
   Hope you had a nice long weekend if you had yesterday off, and a belated tip-of-the-cap to Dr. Martin Luther King for the peaceful way that he traveled to bring equal rights to African-Americans, and to bring peace amongst the different races of people on our little planet.

   Back in late summer, I wrote a post titled, "Feds Finally Keen on Rent to Own Housing", where we discussed a possible Government program aimed at selling bundles of foreclosed homes owned by Fannie Mae (FNMA) and Freddie Mac (FMCC), to real estate investors, with the properties converted into rentals. The key point here is that these homes will be sold in bulk vs. individually.

   Fast Forward a few months, and the Government is hoping to "launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties", in a story by Tami Luhby for CNN Money. Just last week, Federal Reserve Chairman Ben Bernanke cited the program as a possible way to help us get through the housing crisis, and per the article by Luhby, titled, "Turning foreclosures into rentals", Bernanke said that "Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery".

   After dropping mortgage rates down to historic lows, the Fed started thinking "outside of the box", and needed to find creative ways to solve the crisis. Perhaps after a prolonged stall in foreclosure procedures, the Fed sees the wave of foreclosures coming in their crystal ball, and as Luhby writes, there are close to 2 million homes in the late stages of delinquency, according to Lender Processing Services. These foreclosed properties can destroy home prices since they "often sell below market value", says Luhby.

   By converting these homes to rentals, the neighbors are happy, the Fed is happy, and things can start looking better for everyone. What are your thoughts?

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Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #MLK #MartinLutherKing #AfricanAmerican #RenttoOwn #FannieMae #FNMA #FreddieMac #FMCC #realestateinvestors #FederalReserve #foreclosedproperties #homeprices

Short Sales - What Do You Need to Know?

Hi All,


   Happy Wednesday to you. In keeping with our promise to tackle every topic you threw at us a few weeks back in that now "famous" Blog Post, today we are going to discuss some tips and strategies when pursuing Short Sales.

   A conversation about Short Sales would be incomplete without looking at it from two viewpoints: that of the Buyer (Broker or Investor), and that of the Seller (The Homeowner), and we have spoken with a few experts in the field who will discuss both viewpoints.

   First, we will examine things from the vantage point of the homeowner (the Seller). Geena Becker, of Geena & Company/William Raveis Real Estate & Home Services reminds us that the credit score is bruised on a short sale vs a foreclosure - "whereas foreclosure your credit score is driven down 200 points and banks will loan money to a bankruptcy victim before they loan to a foreclosed victim.". Becker also states that the banks pay for the attorney, realtor commissions, and back taxes, but will, "not pay any liens on the property. Those liens have to be negotiated OFF before the approval."

   In addition, Allan S. Glass, President of ASG Real Estate Inc. adds that, "The bank is settling a bad debt. Anything and everything they can extract from you regarding financial information will be used to that end, there are no casual off the record conversations with the banks while they are collecting your debt". Glass warns that you need to make sure you are working with an expert in the field of short sales, and that, "not every agent/broker is created equal and there is a learned skill to negotiating a debt settlement."

   Glass also provides additional pointers, such as to never pay any fee under any circumstance up front ! ("Professional agents will not charge until they are successful in completing your short sale or modification"). Further, he says that you should never sign over title to an investor who will then negotiate with the banks, as you do not need to sign over title to your home to be helped with a short sale. Finally, Glass reminds us that investors who help you with short sales are attempting to buy your home for a discount in order to make a profit, and that, "Not that anything is wrong with that when reasonable, however make sure you ask what happens if they cannot negotiate a purchase price low enough for them to invest."

   From the Buyers point of view (broker or investor), Becker provides some important pointers:
   1. You Will be buying "as is"
   2. You may be subject to more than one banks approval
   3. The Buyer won't know if the seller's loan was an FNMA (takes longer).
   4. If seller has it in their contract to make it subject to not receiving a deficiency judgment tied with short sale appraisal - there is a 50/50 shot of getting that wish.

   Further, she says that she will, "always find out if the mortgage they are late on was their mortgage that they first had when they bought the house. If so, nationally the bank CAN NOT go after the sellers with a deficiency note or promissory note on the difference. With the bank knowing it can come into play in a short sale negotiation since they know they can't come after the seller or borrower for the deficiency. If they have re-fi'd meaning it was not the "original" mortgage they will not have that slam dunk protection."

   Glass also provides some pointers in reminding us that, "the banks are motivated by values. They will do a short sale if they make more money by doing so compared to completing the foreclosure process", and that, "the bank and the seller are NOT working together to get the highest price from the buyer." Glass tells us that the best strategy is, "for the seller and buyer to work as a team to deliver the best value to the bank.". He warns that you must, "understand the numbers (as a broker or investor) and have a strong understanding of market value. Compare what the bank will net as a short sale vs. foreclosure / REO sale".

   As for timing, Glass says that it is key to, "follow up, follow up, follow up. If you are not following up the bank is not working on your file!", and Becker suggests that you make sure the buyer is very clear that this will not be a normal closing time frame, and that the buyer has to be able to, "wait without having to move in." and tells us, "I have had a lot of short sales last year especially where the buyers walk 1/2 way through my negotiating process and I have to start all over again. The buyer's agent must get it through to their clients that they can not be in a hurry. Good deals come to those who wait..."

   This is good sound advice from some seasoned Short Sales Professionals. Do you have any additional tips to share with our readers? We welcome your comments below.

Have a Great Day, and Happy Rent-to-Owning !