Archive for the 'Pre Foreclosures' Category

Notice Of Defaults In Sacramento Are Backing Up, But Still Being Postponed

Foreclosure Notices In Sacramento Continue At Alrming Rates

Foreclosure Notices In Sacramento Continue At Alarming Rates

Foreclosure Sales, or Trustee Sales in Sacramento, the actual Trustee action or   Sacramento county trustee sale at 720 9TH ST  downtown Sacramento, held nearly every business day are still being postponed at record rates, but so are Notices of default Filings in Sacramento County.

ho long can they continue to file the default, file the notice of sale and then just postpone? Well, if they postpone for over a year, they will have to re-file the Notice of Default, as I understand

“Despite a tsunami of mortgage delinquencies we continue to see no signs of a foreclosure wave” says Sean O’Toole, Founder and CEO of ForeclosureRadar.com. “Lenders and government intervention continue to delay foreclosures despite their continued failure to find a long term solution to unsustainable negative equity.”

See Foreclosureradar’s Foreclosure Report at Wereheretohelp.org

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Sacramento Foreclosures At Trustee Sale Still Slow

How long can this go on?

Loan Modification

I hear through the grapevine that over 90% of the Sacramento County Trustee sales are still being postponed at courthouse steps.

But it looks as if they haven’t scheduled that many?

The entire Government, Industry and powers that be are pushing hard to get homeowners to contact their banks/servicers and get a loan modification started, yet only 4% of the trial loan modifications become permanent.

This must have a lot to do with the fact that most loan modificatrions are only for 5 years, they fix the payment problem (reductions in payment have been about $500 Ave) for a while, but there is typically no reduction in principle.  The payment terms are typically changed to a 40 or 45 year loan, with 2 or 3% interest for five years and then reverting to todays rate. So, why do that? I see many homeowners are instead just throwing in the towel even if they can now afford the payment. 

Can’t blame them. 

The negative equity problem must be addressed.

Statewide, according to Default Research Inc.

California, the country’s most populous state, saw Notice of Default and Notice of Trustee Sale recordings drop by an average of 16.8 percent in 2009, and Los Angeles County, the country’s largest county, saw foreclosures decrease by 16.5 percent. The hardest hit cities with foreclosures in the state were Los Angeles (20,256), Sacramento (13,495) and San Diego (10,745).

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Foreclosure Timelines

Understanding Foreclosure

Foreclosure– how do you mean that?

Understanding Foreclosure Timelines

Understanding Foreclosure Timelines

Foreclosure: a process and an event…

Most of the time, Foreclosure means one of a couple of things; a process, as in “my Brother is in foreclosure”, or it can be an actual event: “that 4600 square foot home went for $243,000 at the foreclore sale the other day…”

You see, foreclosure as a process means the three steps a bank or investor goes through to take a  home or piece of property back;

The legal Foreclosure Time-Lines in California:

After you are 60 days past due on your mortgage payment, (or 90 days since your last payment), the bank can file a notice of default:

Then, 90 days after that, the Notice of Trustee Sale can be filed. No earlier than 20 days later, the Trustee Sale can be held-

So;

60 days late = Notice of default

90 days = Notice of Trustee Sale

21 days= Trustee sale

The fastest your bank can take a home back in California is 171 days late on payments or 211 days since the last payment.  Most banks and servicers are being very slow to file the initial Notice of Default- almost all wait over six months.  The Notice of Trustee Sale may take up to a year after the Notice of Default is filed.  Even after the Notice of Trustee Sale is filed, the banks/sevicers are now re-scheduling over 3/4 of the Trustee Sales, many for an additional 30, 60,or 90 days initially and then rescheduling again if they have made contact with the homeowner and there is any hope of a loan modification or short sale.  They don’t want any more foreclosures unless it is clear there is no  foreclosure solution. The writing is on the wall: Less foreclosures and more short sales for 2010 and beyond!

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HAMP LOAN MODIFICATION SUCCESS RATE

Loan Modification Report for December–

How many homeowners have found a long term solution through HAMP?  The numbers show catastrophic failure!

At worst 4.5% at best 13%…

I have been keeping track of the two most important numbers in the Obama Administrations HAMP Progress report that comes out every month… The number of Trial modifications folks have entered into the program, and the number of permanent modifications, or folks that have been through the three month program and then qualified for and approved their final modification offer from the bank-

According to the charts: through November: (November’s numbers included)

Number of Active Trial Modifications
697,026


Number of Permanent Modifications
31,382

So only 4.5% of these loan modification starts have actually gone on th become a long term fix for families–

Now I’m sure this percentage will increase– Almost half of the 697,000 homeowners were added in September and October, so their numbers might start showing up as permanent modifications in January and February, but what about the 250,000 that were added before September, does this really mean that at best case only 13% of people will be able to find a long term solution through a loan modification?

Foreclosures and short sales will be the only solution for the other 87%?

I’ll keep you posted and revisit this on the 10th of January, when the December numbers come out…


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Sacramento Trustee Sale Report… More Postponements

December Sacramento Trustee Sale Report 

November California Notice of Default and Notice of Trustee Sale Numbers…

 Notice Of Defaults vs. Trustee Sales Nov 09

 

Graph of California Notice of Defaults/Trustee Sales

Courtesy dr.housingbubble.com

Sacramento Trustee Sales Continue to be Re-Scheduled on nearly 90% of trustee sales at 720 9TH ST  downtown Sacramento most days. Imperfect foreclosure, and/or new policies under the HAMP/TARP guidelines are usually blamed.

The whole state of California has been experiencing this too, lately, even though Fannie Mae said on Dec. 15th that they were not going to re-schedule or postpone any more Trustee Sales.

According to Sean O’tooles blog on ForeclosureRadar (www.foreclosureradar.com), the only website that tracks every California foreclosure and provides daily auction updates, issued its monthly California Foreclosure Report for for November 2009. Despite apparent headline month-over-month declines in foreclosure activity, the real story requires looking at changes in the average daily activity. November had only 18 days on which filings could be recorded or trustee sales held because of fewer days in the month, Veterans Day and the Thanksgiving Holiday, while October had 22 recording days, and 21 trustee sale days. After adjusting for this difference in days we find little month-over-month change in the statistics, with the exception of Notices of Trustee Sale which declined 13.4 percent, Cancellations which rose 40.0 percent and Sales to 3rd Parties which rose 8.0 percent on a daily average basis.

“We’ve been waiting to see some impact from the Home Affordable Modification Program,” says Sean O’Toole, Founder and CEO of ForeclosureRadar.com. “The 40 percent increase in cancellations this month is likely just the beginning of what we expect will be a wave of cancellations under this program”.

Foreclosure Filings

Notice of Default

Prior Month Prior Year
-18.98% 35.41%

Notice of Trustee Sale

Prior Month Prior Year
29.14% -4.03%

It is important to recognize that the decline in Foreclosure Filings is primarily due to a difference in the number of days documents can be recorded month-over-month and not fewer filings each day. With just 18 recording days in November versus 22 in October, average daily filings of Notices of Default only declined 1 percent, while Notices of Trustee Sale declined 13.4 percent from the prior month.

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Sacramento Short Sale Buying Tips: Qualifying the Short Sale

Buying a Sacramento short sale will definitely become easier and easier in the next several months and the process will continue to evolve, change, and morph into a more traditional transaction for years to come.

 

Buying A Short Sale

Contact a Certified Short Sale Agent about buying a short sale.

However; your Buyers Agent- if they are at all experienced with with todays market- will know that there are some short sales will never close!Secondary Mortgages (any Junior Liens) that have been added after the purchase or have been refinanced (any non purchase money loans) are full recourse in California– the first will go away with the house– no matter what; if it goes to foreclosure, closes as a short sale, whatever… but non-purchase money seconds may stay intact and become non-secured debt… just like credit card debt.Short Sale qualifying is just asking questions; the right questions will allow yor agent to find shortsales that have a high chance of being approved: Your Short Sale Specialist will find out things like:1) The Kind of loans involved; recourse or non-recourse.2) If recourse; the sellers (think homeowners) financial situation, hardship status and/or their willingness/ability to make a contribution, sign a note, or otherwise pay off any secondary note holders demand (which may be full recourse).3) Which banks are involved and their policies regarding first liens, secondary liens, recourse debt, hardship rules etc.4) Know the market, the absolute market value of the home– (banks don’t like to leave money on the table) what the Broker’s Price Opinion, or Appraised value of the home will be and the amount of money the first will be short; and the policies of each bank involved–If you don’t know these things gong in, you will find them out during the process, usually weeks or months into the short sale processContact a Certified Short Sale Agent about buying a short sale right here.  Many, many times, the short sale you have fallen in love with and cannot live without may very well become an REO.There is also the chance that your short sale will, at the eleventh hour, not be approved because the banks or servicers suddenly want to include language stating the seller agrees that the lender has the right to pursue a deficiency judgment or the balance unpaid on the promissory note… Many homeowners, when they realize this problem is not going away, file bankruptcy– again, at the eleventh hour- after you and your family have been waiting months for the home of your dreams.Make sure your Buyer’s agent is also a Sacramento short sale listing agent and a Sacramento Short Sale Specialist and works with a team that specializes in these complicated and ever-changing transactions!Short sale negotiating is definitely a moving target– it is nearly a full-time job just to stay on top of educated of all the different banks, servicers, secondary investors rules of procedure and the institutional/political policy changes.Some short sales will never close! Find out why!By the way…here’s where I remind everyone that I am NOT a lawyer, and that if you have any questions or concerns about your legal situation– get an attorney! I have several great Real Estate Law, Mortgage Law, Contract Law and Bankruptcy Law specialists that I can refer you to!

Contact a Certified Short Sale Agent about buying a short sale.

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Some Short Sales are just ‘UNCLOSEABLE’…

 

 

The Sacramento Short Sale “Mirage”

Buyers pursue short sales to get a good deal. So when you see a price listed for a home that you think is too low for the neighborhood, before you jump, ask your agent to call the listing agent to find out if the home has already got offers and may be going Contingent. Also find out about how many banks, which banks, if the loans were purchase money  also, if there is a second, is it an original loan or  was it added later or refinanced. Are there full recourse loans involved? Will there be Seller Contributions? These questions and whether the home is owner occupied, if it is a second home, the owners financial situation… these all have an impact on whether or not the deal has a chance to be approved.
 
 
Click here for your free short sale guide and glossary.
 
 
Deficincy judgemnt
 
 “…May pursue a deficiency judgement for the difference…”
 
 
If the listing agent doesn’t have quick answers and a logical plan  when ask “what is your plan for getting short sale approval?”- This Short Sale may be a “mirage”- some are uncloseable… you might just walk away.
Find a better situation.
Because you might want to think twice about making an offer on a pre-foreclosure, short sale home. It’s not as simple as you may believe, some will never close and very few can close in 60 days or less.

Many of my Sacramento short sale home buyers have waited 4 to 6 months to close on a short sale, sometimes longer.

What is a Short Sale?

A short sale means the seller’s lender is accepting a discounted payoff to release an existing mortgage. Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it.Be aware that the seller need not be in default — to have stopped making mortgage payments — before a lender will consider a short sale. A lender may consider a short sale if the seller is current but the value has fallen. The seller may have over-encumbered, owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it.

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SHORT SALE DEFINITION

Foreclosure Solutions Report

Stop Foreclosure With A Short Sale

Straight out of Wikipedia:

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

 Click Here For Sacramento Short Sale News

Stop Foreclosure with a Short Sale

Process

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is “doing the other a favor;” a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than foreclosure or continued non-payment would entail. Borrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal or Broker Price Opinion (abbreviated BPO or BOV).

Lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from the 2009 foreclosure crisis, they are now more willing to accept short sales than ever before. This presents an opportunity for “under-water” borrowers who owe more on their mortgage than their property is worth and are having trouble selling to avoid foreclosure as a result.

Additional parties

Multiple levels of approvals and conditions are very common with short sales. Junior lien-holders – such as second mortgages, HELOC lenders, and HOA (special assessment liens) – may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax – as opposed to real property taxes, which have priority even when unrecorded) and mechanic’s lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender’s loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized type of real estate transaction. Unsurprisingly, short sale deals have a high failure rate and often do not close in time to prevent foreclosure when they are not handled by a knowledgeable and experienced professional. 

The best sources of knowledge and expertise in short sales are short sale negotiators, loss mitigation specialists, and real estate lawyers who specialize in short sale.

 Consent

Short sales are different from foreclosures in that a foreclosure is forced by a lender, whereas both lender and borrower consent to a short sale. However, this consent may change at any time, and negotiations may be ongoing between the lender and borrower even while the short sale is on the market. The borrower may decide to remain and refinance their house, or become obstinate and force foreclosure. The bank may renege as well if they decide to stick with the current borrower, or if they disapprove of the sale price. Any short sale contract includes a contingency where the bank must approve the sale.

Changing consent can present a perilous situation for potential buyers. It can waste considerable time and money for a prospective buyer who anticipated a sale. Typically, deposits with the bank will be refunded but money for paid inspections or other services cannot be.

There are several defenses against this. If the seller has moved out of a property, that is a clue that they have no intention of staying or negotiating further with the bank. “Bank Approved Short Sales” are advertised by real estate advertisements, indicating that a real estate broker has verified the selling bank’s position. This still does not guarantee acceptance, and it often does not take junior lien-holders into account, but it is better than situations where the bank holding the mortgage has only been lightly involved in the borrower’s decision.

 Credit implications

Short sales are a type of settlement, and they adversely affect a person’s credit report, though the negative impact is typically less than a foreclosure. Like all entries except for bankruptcy, short sales remain on a credit report for seven years. Depending upon other credit information, it is typically possible to obtain another mortgage 1-3 years after a short sale.

While lenders sometimes forgive the remaining loan balance, other lien-holders likely will not. Further, it is common for a lender to omit updating mortgage balances zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.

 Business

Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense or is economically not feasible to retain an asset, businesses default on their loans (called bonds). It is not uncommon for business bonds to trade on the after-market for a small fraction of their face value in realization of the likelihood of these future defaults.

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Stop Foreclosure With Government Shortsale Guidelines

NEW GOVERNMENT SHORT SALE GUIDELINES:

Loan Mod Fails? Stop Foreclosure with Short Sale/Deed-in-Lieu!

Foreclosure Alternatives for Borrowers Eligible for MHA but Unable to Sustain a Modification

Government

Making Home Affordable

On Feb.18th 2009 the Obama Administration announced the Making Home Affordable (MHA) Program, a comprehensive plan to stabilize the US housing market and offer assistance to up to 7 to 9 million homeowners by reducing mortgage payments to affordable levels and preventing avoidable foreclosures. They are betting on the fact that most homeowners will stick around in a home that is upsidedeown, as long as they can afford it.(low enough monthly payment). Then, two weeks later on March 4th

, they (the Administration) published details of a program that authorized servicers to begin modifications and refinancings under the plan immediately. On April 28th, the Administration announced additional details related to the Second Lien Program and strengthening Hope for Homeowners. Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.

 

 The rest of this post is directly from a press release way back on May 14th, 2009. It shows that they have been pushing for short sales as a foreclosure most of this past year!

 

Today we are providing a program update, including additional details on Foreclosure Alternatives and Home Price Decline Protection Incentives. Foreclosure Alternatives will help to prevent costly foreclosures by providing incentives for servicers and borrowers to pursue short sales and deeds-in-lieu of foreclosure in cases where a borrower is eligible for a MHA modification but unable to complete the modification process. This program will assist homeowners who cannot afford to stay in their homes by helping them to avoid foreclosure and relocate to a home they can afford. Building on insights developed by the FDIC, Home Price Decline Protection Incentives will provide additional payments based on recent home price declines, and therefore will incentivize additional modifications in areas where home prices have been falling. By increasing MHA modifications and the use of alternatives to foreclosure, we will reduce the negative impact of foreclosure, minimizing damaging costs for financial institutions, borrowers and communities.

Home Price Decline Protection Incentives and Foreclosure Alternatives, together with the other comprehensive elements of the Making Home Affordable program, will help to stabilize property values for homeowners in neighborhoods hardest hit by foreclosures. Based on estimates of the relationship between foreclosures and home prices, the Home Affordable Modification program could help to bolster home values for the average homeowner by as much as $6,000.

Foreclosure Alternatives and Home Price Decline Protection Incentives

1. Foreclosure Alternatives for Borrowers Eligible for MHA

Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives o

Incentives for servicers to pursue alternatives to foreclosures o

Borrower incentives to cover relocation expenses to homes that are affordable o

Streamlined process combining short sales and deed-in-lieu transactions

2. Home Price Decline Protection Incentives to Protect Against Falling Home Prices

Incentives to support modifications in markets hardest hit by falling home prices

o Provides incentives for modifications by providing payments based on recent declines in home prices to reduce the risk of loss to lenders from modifications compared to alternatives that could result in the loss of homeownership ?

  • Foreclosure Alternatives for Borrowers Eligible for MHA but Unable to Sustain a Modification: For eligible borrowers unable to retain their homes through a Home Affordable Modification, MHA will provide incentives to borrowers, servicers and investors to encourage short sales and deeds-in-lieu. Both allow families and servicers to avoid the costly foreclosure process, and to minimize the negative impact of foreclosures on borrowers, financial institutions and communities.

Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives

When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the servicer may consider a short sale, and if that is unsuccessful, a deed-in-lieu (DIL).

Both a short sale and a DIL provide an opportunity for borrowers and servicers to avoid the foreclosure process. In a short sale, a servicer allows the borrower to sell the property at its current value, even if the sale nets less than the total amount owed on the mortgage. Approval of a short sale requires the borrower to list and actively market the home at its fair value. The sale must be an arms length market transaction with all proceeds (after selling costs) applied to the discounted mortgage payoff. If the borrower actively markets the property but is unable to sell it within the agreed upon time period, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer – provided the title is free and clear.

Short sales and DILs are complex transactions involving careful coordination and close cooperation among a number of parties — servicers, appraisers, borrowers, purchasers, real estate brokers, title agencies and often mortgage insurance companies and junior lien holders. A short sale or DIL usually provides a better outcome for borrowers, investors and communities. However, due to the complexity of and time required for completion of these transactions, servicers historically have often opted to pursue foreclosure instead, even where a short sale or DIL would have provided a substantially better outcome for borrowers, investors and communities.

The MHA Foreclosure Alternatives Program simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. To compliment a standardized approach, Treasury provides incentives to borrowers, servicers and investors to pursue short sales and DILs.

How The Home Affordable Short Sale/DIL Program Works:

  • Borrower Eligibility. Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification. Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor’s recovery through foreclosure Incentive Payments.

?

Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.

  • ??? Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.
  • ??????Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.

    1. Standardized Documentation: The program will publish streamlined and standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter. These documents will outline specific marketing terms, describe the rights and responsibilities of all parties and establish clear timeframes for performance. Creating one standard set of documents that the industry can use is expected to minimize the complexity of these transactions and significantly increase use of the short sale option.
    2. Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions. The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.
    3. Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.
    4. Selling Commissions and Fees: Reasonable and customary real estate commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement. The Servicer will agree not to negotiate a lower sales commission after an offer has been received.
    • Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.
    • Property Eligibility: Any junior liens, mortgages or other debts against the property must be cleared for the property to be sold as a short sale or deeded to the servicer. The servicer can proceed with a short sale or deed-in-lieu if there is a reasonable belief that all liens on the property can be cleared.
    • Program Expiration: Eligible borrowers will be accepted until December 31, 2012. Program payments will be made upon successful completion of a short sale or DIL.
    • ?
    • Deed-in-Lieu: At the servicer’s option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.
    • Home Price Decline Protection Incentives to Protect Against Falling Home Prices: This initiative provides lenders additional incentives for modifications where home price declines have been most severe and lenders fear these declines may persist. These incentives will encourage servicers to undertake more modifications by assuring that incremental investor losses will be partially offset.

        To encourage the modification of more mortgages and enable more families to keep their homes, the Administration, building on insights pioneered by Chairman Bair and the FDIC, has developed an innovative payment that provides compensation based on recent home price declines, structured as a simple cash payment on every eligible loan. Home Price Decline Protection (HPDP) incentives are designed to address investor concerns that recent home price declines may persist. Together the incentive payments on all modified homes will help cover the incremental collateral loss on those modifications that do not succeed. HPDP payments will be linked to the rate of recent home price decline in a local housing market, as well as the average cost of a home in that market.

    • Increases Number of Loans that Are Modified: Making Home Affordable will make payments totaling up to $10 billion to to encourage lenders, servicers and investors to modify rather than foreclose by addressing concerns that home price declines will persist in the future. This should increase the number of modifications completed under the MHA program in markets hardest hit by falling home prices.

      How The Program Works:

    • Payments will be based on the total number of modified loans that successfully complete the modification trial period and remain in the modification program.
    • Each successful modification will be eligible for a HPDP incentive, up to a cap for HPDP incentives of $10 billion.
    • If the trial modification remains successful, 1/24th of the HPDP incentive will accrue to the lender/investor each month for up to 24 months. HPDP incentive payments will be made at the end of the first and second year of the modification.
    • Calculation of HPDP Incentives: HPDP incentive amounts will be calculated based on a formula incorporating:
    • Declines in average local market home prices over recent quarters prior to the quarter in which the loan was modified based on housing price indices; and
    • The average price of a home in each particular market, since the potential loss due to a given rate of home price decline will be larger in higher cost areas

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9 Must Know Tips on buying Sacramento Short Sales or Sacramento Foreclosure

 

Weekly Sacramento Short Sale Foreclosure Report

Beautiful Natomas Home

Many Sacramento home buyers want to hit the jackpot and buy that Sacramento REO foreclosed home, or a Sacramento Short Sale, many of which are often under-priced by the bank or seller. When asset managers (working for banks to unload their foreclosed homes)  or a distressed homeowner price  REOs or short sales under the market, multiple offers are usually the response . This means as a buyer vying for a Sacramento Home, you could be up against stiff competition for that bank-owned home, short sale or foreclosure.

Especially now that the Sacramento Real Estate Market is short of  inventory and it’s hard to find a home that interests you,  it’s not unusual for some REO (bank owned homes) or Sacramento short sale homes in  to receive 15 or 20 offers or more. Sometimes the bank or homeowner will only respond to two or three offers by asking the selected buyers’ agents to resubmit for their buyer what is called their “Highest and Best” offer.  Sometimes the bank or homeowner simply accepts the best offer at inception. Sacramento foreclosures that enter the market as bank owned or REO, or short sales and are priced under the market or below comparable sales are usually gone in days.

If you’re wondering how you can make your offer shine above all the rest and be the winning offer, For either Short Sales or Bank Owned Foreclosures here are a few tips to help you select the right price and terms:

1) Learn the Property History

If it is an REO: ask your buyer’s agent to find out the bank’s purchase price on the Trustee’s Deed or Sheriff’s Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.

Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.

If it is a Short-sale, have your Buyer’s agent ask the listing agent what the mortgages are- how many banks, which banks and what the balances of those loans are. It is important to see how much is currently mortgaged on the home. This information can also be deemed from tax records, is usually pretty easy to figure: If the home was purchased in 2004 for $400,000 and mortgaged for $320,000, there is probably still well over $300,000 owed.

 

2) Study the Situation

If it is a Bank Owned Sacramento Foreclosure: How long has the bank owned the property? How long was  it been in the “pre-list”  stage?  Were the past owners evicted? Was it vacant when the bank took over? Are their outstanding utility bills and HOA liens or Code Enforcement fines that may need to be dealt with at the eleventh hour of escrow? Ask your buyers agent to contact the listing agent if possible, many Sacramento REO listing agents are notorious about being “untouchable” or hard to contact- be persistent. Most Sacramento bank-owned agents have staff that will answer your questions.  Know about the property before you write an offer.

If it is a Sacramento Short Sale, find out about Recourse on the Second Mortgage,  if there is one. Were all loans “purchase money loans?” Make sure your buyer’s agent knows what this is and what the ramifications could be.  Be sure you are working with an agent who is a hort Sale Specialist and a Short Sale Listing Agent.  When most Sacramento Short sales will be multiple  offer competitive situations, you only want to write offers on short-sales that have a decent chance of being successful.

 3) Study Comparable Sales

Here in our market, Sacramento shortsales and Sacramento bank owned foreclosures make up to 85% of the market in the last six months or more…  so that means that every home in a radius search of the Bank Owned Property you are interested in may also be bank owned or short sales. In many cases, the list price has little bearing on the value of the home. The market value will always prevail-  If you are up against competing offers, many times other buyers will offer more than list price, they will do their homework to see what they belie market price to be and coffer that price.

  • Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO or short sale  is worth. Try to use only those homes that most closely match regarding square footage, number of bedrooms, baths, amenities and condition.
  • Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Sometimes a Sacramento Short Sale Listing Agent will share that information and some will not.
  • Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.

4) Review Listing Agent’s REO and Short Sales  Solds History

Most Sacramento REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Some agents will do Elusively Short Sales, some will do a combination.  Since most Sacramento REO  and  Sacramento Short Sale agent will deal in volume, they typically apply the same pricing principles to all their foreclosure listings.

  • Ask your buyer’s agent to look up the listing agent in MLS.
  • Run a search using that listing agent’s name to find the last three to six months of that agent’s listings.
  • Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.

5) Ask Listing Agent About Number of Offers

 If there are no offers on the Sacramento Foreclosure REO or Sacramento short sale home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.

If there are multiple offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. Short sale sellers don’t really care and the bank that is being shorted sees no benefit in a cash offer- it’s going to get cash at the close of escrow whether the buyer gets a loan or not, and a homeowner is probably going to counter for a longer escrow time, so a cash offer is really no benefit. 

If you are obtaining financing for a bank owned, then you may need to increase the price on your offer to be considered.

5) Submit Preapproval Letter

You do not want a prequal letter. You want a preapproval letter. Get preapproved from a  lender in advance. both Bank owned transactions and short sale transactions require the buyer to be fully approved.

Moreover, if it is a bank owned, get pre approved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don’t trust other lender pre approvals but trust their own departments.

6) Don’t Ask for Repairs / Inspections up from

Make a squeaky clean offer…

On an REO or Bank Owned, sometimes banks will pay for repairs, but usually will not agree to do so at the offer stage.  Besides, remember, you are probably in multiple offer competition here in the Sacramento bank owned foreclosure market. If there are problems found during a home inspection, renegotiate after your offer has been accepted.

On a Short Sale it is very hard to negotiate repairs any time after the initial offer has been approved by the bank- if you absolutely love the house you may want to have your inspections done outside of the contract offer, getting your offer accepted and then approved by the bank is the most critical and hardest part of the process.  You may want to do your own inspections just for your information, but don’t ask the bank to pay for anything other than a pest report, if that (remember you may be in competition for the best offer). It will cost some up front money but will keep the deal clean. 

 

7) Shorten the Inspection Period

If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.

8) Offer to Split Fees

On REO’s some banks will not pay transfer taxes, for example. If the you as a buyer offer to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow and title fees– remember, this is just business .

On short sales, the most important thing to remember is that it is all about net to the bank- how much money are they going to net from your offer- do whatever has to be done to get your offer accepted by the seller and then approved by the bank.

Many banks negotiate discount fees for title insurance. If the bank will pay for the owner’s policy, the ALTA policy might cost a bit more. But it’s still a good idea to let the bank choose title if you want your offer accepted.

9) Consider the Appraisal Consequences

If you offer over list price on a Sacramento Foreclosure Bank Owned or Sacramento Short Sale, bear in mind that the appraisal will need to substantiate that price, if you are going to obtain financing for your foreclosure purchase. If you find yourself dealing with a low appraisal, you have options; so don’t despair. Remember, the new appraised value will be disclosed to the next buyer and. Most times the bank (either as the seller or the montage lender/investor of a short sale) will agree to sell at the appraised value.

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