Topic: Foreclosures & Short Sales

Where To Find New River Valley Real Estate For Sale

So you’ve decided to buy a house – where do you get information on all of the real estate that’s for sale?

Years ago – back when people still walked uphill to school, both ways, you looked in the paper. Earlier this week I was listening to a podcast with Barbara Corcoran and she shared how, when she started renting apartments in NYC, you advertised in the New York Times because that’s where everyone looked for real estate. The real estate section of the NYT was at times thicker than most sections of the paper!

Times have changed, and so have the methods of finding real estate. You’ve got sites like NestRealty.com, Realtor.com, Zillow, and hundreds (thousands?) of others. And how many times have you found a great home on a site, emailed your agent, and found out that the house you wanted isn’t actually for sale any longer? (By the way, did you know that Nest Realty syndicates to more than 150 national and regional locations?) While everyone has a different website they like and trust, I’m always going to recommend that if you see a home for sale on one site, cross-reference it on NestRealty.com. Our search option connects direct to the Multiple Listing Service, so you know if it shows for sale on NestRealty.com it’s available and ready for you to take a look.

Looking for foreclosures? We’ve got that too – just hit up www.NewRiverValleyForeclosures.com, and there you’ll find every foreclosure listed for sale!

Happy searching!

National Bank of Blacksburg Building Auctioned Off

If you’ve been around Blacksburg for any length of time, you’ve almost certainly noticed the old National Bank of Blacksburg building – on the corner of N. Main and Roanoke Street – standing proudly but looking rather weathered and beaten up. The building was an earlier home to the National Bank of Blacksburg, and in recent years had been passed around from owner to owner while sitting vacant and, quite honestly, falling apart.

The story is muddled, of course, but here’s a synopsis.

Earlier this month, it was finally auctioned off (along with two adjacent storefronts), and the highest bidder at the auction – Steve Hill – is a real estate developer well-known to folks in and around Blacksburg.

Going Once, Going Twice, Sold to the man with the pants on!

Going Once, Going Twice, Sold to the man with the pants on!

From a professional standpoint, I was interested in the auction because of the location of the building. It is a centerpiece of the downtown core, and has sat vacant for FAR too long. And I wasn’t alone – there were probably 100 other folks there, most of watching and afraid to move in fear of bidding for a property we couldn’t buy!

From a personal standpoint, I was even more interested because I was the agent who had the building the property listed in 2005, and I had watched it for nearly 10 years continue to fall into disarray. I knew what had been planned for the building and it was sad to see it not come to fruition, but I was excited about the possibilities for the future, as well.

I tried livetweeting the auction, which was interesting – head down, thumbs furiously typing, I wasn’t real sure who was bidding what, but I tried to capture most of it.

In my opinion, Steve is a great person to head a redevelopment project like this. I know that lots of folks what all sorts of things for a site like this, but none of us know what will actually come to pass. From my interactions with him, however, I know that Steve knows and loves Blacksburg, and I have every confidence he’ll do something really nice with that spot.

Congratulations, Steve – there’s a whole Town watching!

A side note – the caption on the photo above is something my grandfather would say. He was an auctioneer – and also a rodeo clown, businessman, and quite honestly probably just a hustler – but he used to say “Going once, going twice – sold to the man with the pants on!” I had no idea what it meant – still don’t – but as a small boy I thought it was funny. So the caption is homage to Rabbit.

An Easy Way to Search for Foreclosures in the New River Valley

 

It seems like we get a lot of questions lately from home buyers, or folks just calling in asking about a particular listing, but the one question I bet gets asked more than half the time is “is this house a foreclosure?

Now there’s an easy way to find out – NRVLiving.com/Foreclosures

The list is tied to the Multiple Listing Service for the New River Valley Association of Realtors, and brings in anything listed as “lender-owned” or “bank-owned”.  It’s as comprehensive as we can make it, but depends on accurate data entry when the property is listed.

Feel free to poke around and see what catches your eye.  If I can help, you know how to find me.

If you want to search traditional resales throughout the New River Valley, you can do that at NRVLiving.com/Search.

Will A Cash Offer Get A Better Deal On A Foreclosure?

I read a question, posted online, recently, where a buyer said that they were looking at making a cash offer on a bank-owned foreclosure. Specifically, they were wondering whether a bank would take a cash offer for less than the listed price.  For the purposes of this post, let’s assume that they mean “will the bank take far less than the asking price if I’m paying in cash?

The answer is that the bank might … or they might not.  I’ve seen competing situations where sellers have taken less money for cash offers, and I’ve seen other situations where an offer with a financing contingency eventually won because other terms made it more attractive.  So the short answer is no one knows.  The long answer is that if you’re making a cash offer on a foreclosure (also considered an REO (Real Estate Owned) or bank property), consider:

  • your source of funds – every bank will require proof that the money, the cash, is available to you.  This could be as simple as a letter from your bank stating that you have a line of credit of $X available to you, or it could be as complicated as notarized copies of the fund accounts from which the money will be pulled.  Every REO is different, and so you – and your agent – will need to know that information before submitting an offer.
  • inspections – most banks will not allow repairs to be made as a result of inspections, but do not let this stop you from doing a home inspection!  As a buyer, you have a right to do the inspections you need to do in order to be satisfied with the purchase, but since the bank has never lived in the house (and if they’re being foreclosed on their own property you probably don’t want to be doing business with them anyway!), they can’t/won’t disclose potential problems and make sufficient repairs.  You’re still entitled to the inspection, if you so choose, but the bank isn’t required to make repairs, so factor that in to the equation when making your offer.  In order to be successful, the intent and timeframe of any such inspections should be clear and reasonably swift.
  • the closing date – your closing date is also important, obviously, because it tells the bank how long they’ll need to “carry” the home and any related expenses.  Most cash offers can close quickly, even in two weeks or less, but be sure to leave yourself enough time to allow everything (deed transfer, document preparation, etc.) to happen.

Does cash get you in the game?  Absolutely.  But it’s not the only thing you’ll need to be successful.

How To Buy A Short Sale

Last week I talked about having a short sale right down the street from an upcoming listing.  It’s not the greatest deal in the world, to have a house just steps away that’s being sold for less than what is owed on it, but it is what it is.  My sellers are realistic, they’ve got a house that’ll be priced right and will show great, and we’ll continue on.

One of the emails I received over the weekend asked, “Is buying a short sale something you recommend?“.  Kristina, if you’re ready for an interesting experience, then yes, buying a short sale here in the New River Valley is something I recommend.  Three things:

  1. Hard work is required. The bank has agreed to let the borrower – in this case, the homeowner – sell the house for less than it’s worth.  In all likelihood, you’re not going to get the belle of the ball.  The house is likely going to be in some state of disrepair (I’m not suggesting all homeowners who sell short do this, just suggesting that sometimes you’ll need a little more than elbow grease), and since the borrower has already shown they have no money to make the payments, they’re not likely to make any repairs, either.
  2. Losing the deal will happen.  When your offer goes to the bank for approval, it could very well be one of several offers on the same property.  And the bank will continue to accept offers until it makes a decision.  Don’t be surprised if, while waiting for a response from the bank, you learn that you’ve lost out to another offer.  Your agent should help you write as tight an offer as possible, but when push comes to shove the banks only care about the bottom dollar.  You WILL lose a short sale from time to time … the key is to lose as few as possible.
  3. Hope you’re not in a hurry. I thought about writing this point first, but saving it for last seemed more appropriate since we’re not in a hurry.  And I hope you aren’t, either, because buying a short sale will take time.  There’s no sitting down at the kitchen table and presenting an offer when it comes to a short sale – the offer is agreed upon the seller and THEN it’s submitted to an overworked “specialist” who reviews and approves everything.  Since this specialist is working on who knows how many hundreds of other files at the same time, it could sit for quite a while.  If you don’t have the time to wait, don’t – and if you do, I hope you’re patient.  Honey can cure a lot of troubles, but it’s not guaranteed when dealing with a short sale.

I’m sure I’m not the first to repeat this to their clients, but I constantly remind my clients that one of the greatest strengths of a good agent is their ability to be an unemotional facilitator in the transaction.  When it comes to short sales, both the homeowner selling the home, and the buyer trying to buy the home, need to ratchet up their ability to be unemotional, as well.  It’ll take time, and it might be ugly at times, but if you’ve got the patience you can buy a short sale.

Updated 2/2/10 2:10pm – Danilo Bogdanovic just posted a good addition to this post, entitled “How Long Do Short Sales Take?“.  If anyone would know it’d be an agent in the 51st state, Northern Virginia.

What Exactly Is A Short Sale?

Next week, I’ll be listing a house in Christiansburg.  That’s the good news.  The bad news is that just a few doors down, there’s a short sale.

I wanted my clients to see the floor plan of this particular house because it’s a little different than many of the others on the street, and so we took a little walk to look around.  As we were in the house, I mentioned that the property was a short sale, and asked if they knew what that meant.  Blank stares.

Not much has been posted on this blog about short sales because, well truthfully, we just haven’t seen too many of them.  There was this post, “What Is A Short Sale, Really?“, but that’s really about it.  I sense that short sales will become more prevalent here in the New River Valley though, as our real estate trends tend to be a bit behind many of the larger metropolitan areas – here’s to hoping I’m wrong, but if that’s the case than it’s likely we’ll see a rise of them in the next year or so.  But back to the story …

A short sale is simply when a homeowner owes more to the lender than their home is worth.  It’s an unfortunate scenario, but one that is pretty common in a lot of areas.  The impact of a short sale to a homeowners’ credit is often less of a hit than that of a foreclosure, but nevertheless it’s a tough pill to swallow.  And the impact on surrounding properties can also be tough to deal with, as well, as homes sold “short” will often drag down comparable home values.  A short sale isn’t always a lender’s first preference, but when it comes to choosing to foreclose – and then having to put a foreclosed property on the market – versus getting some kind of value for the property, I suspect most lenders will choose to at least explore a short sale with the borrower.

But a short sale isn’t for everyone.  As the borrower, you’ll need to prove to the lender that you can’t afford to continue making payments – this is done through what’s called a hardship letter, and in this letter you’ll need to explain – with verification – exactly why the payments are not being made.  Once the lender has agreed to allow the home to be sold short, the house can be put under contract … but it doesn’t get any easier.  There are any number of moving targets that need to be met, and as a homeowner you should know that not every short sale that goes under contract successfully makes it to the closing table.

The long and short of a short sale is this – it can be done, but it’s not easy, and it’s not foolproof.  At some point, because the bank is the one making the final decision on whether to accept less than what is owed, the decision-making is taken out of your hands; if you’re not comfortable with the uncertainty of that, a short sale may not be right for you.  And an agent who knows their way around a short sale is a must.

If you think you might need to address the possibility of a short sale with your lender, contact me and let’s talk.  There may be other ways of handling it, but even if there aren’t, we can get you through it.

Updated 2/2/10 2:10pm – Danilo Bogdanovic just posted a good addition to this post, entitled “How Long Do Short Sales Take?“.  If anyone would know it’d be an agent in the 51st state, Northern Virginia.

Danilo’s Got A Question For You

Well, 10 questions, actually.

Last week I wrote that I didn’t know much about short sales, but that I knew who to call to find the answer.  At the same time as I was writing that post, Danilo Bogdanovic of LoudounForeclosures.com (there’s an upbeat site address, huh?) wrote a post entitled “10 Questions To Ask Before Writing An Offer on a Short-Sale“.  I’ve read it three times already, and I keep going back to it so I thought I’d repost it again.

Look, most buyers aren’t going to have the time or the patience to wait for a short sale or a foreclosure to go through.  Nevertheless, I think it’s important to know that if you’re going to pursue one of these homes, there are very specific ways you need to do things in order to make sure you’re protected.  In short, D (it’s easier to say D than Danilo, don’t you think?) suggests:

  1. Have you received any other offers that you are waiting to hear back on from the bank?
  2. How many trusts are involved that will be “short”?
  3. How many total banks/creditors are involved in the short-sale and which banks/creditors are they?
  4. Have you requested and received the short-sale package from the bank(s) including the hardship letter?
  5. Have you sent the package and confirmed receipt?
  6. Has the asking price been approved by the bank(s)/creditor(s)?
  7. Who is negotiating the short-sale with the bank(s)/creditor(s) – you, a negotiator, a ivc lawyer, the title company or….?
  8. Has the seller/borrower completely stopped making payments on their loan(s)?
  9. Is the seller willing to hold a note with the bank for the difference? (much better for their credit score)?
  10. How many short-sales have you (the listing agent) closed within the past 12 months?

And that’s just the tip of the iceberg.  Thanks to D, and Sarah, for their lessons on short sales and foreclosures.  If you’re a buyer – or a seller – who’s headed down this road, let’s talk … I’ve got some experts who’ll be glad to help.

What Is A Short Sale, Really?

I was asked recently about short sales, and while I could give the quick and dirty explanation, that was about the extent of my expertise.  The quick and dirty?

A short sale occurs when the lender agrees to let the borrower sell the house for less money than what is owed on the loan.

I’ve only been a part of one short sale transaction, and so my experience with them is limited.  And, thankfully, we haven’t seen many of them in the Blacksburg-Christiansburg area. Yet despite my lack of experience with them, I knew just who to call … my friend, Sarah Stelmok.  Sarah is an associate broker in Fredericksburg, VA, and knows a LOT about the short sale and foreclosure process.  Seriously.  And if she doesn’t know what she’s talking about, then she ought to be an actress because she has me fooled.  So I sent her an email and within minutes had a response from her, which she has generously allowed me to repost.  If you’re a homeowner and facing foreclosure, consider a short sale and the following steps in order to minimize the damage.  Each bank is a little different, so your agent should be in touch with the bank immediately in order to begin assembling the necessary steps.

1.  Third Party Authorization – this letter will give the real estate agent permission to talk to the bank and the bank to talk to the real estate agent.  It needs to be agent and loan # specific and have an indefinite end date.  Some banks have their own forms they want you to use.  This is another good reason to contact the bank ASAP.
2.  List Property – 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.
3.  Get Contract – needs to be ratified by 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.
4.  Send Contract to Bank
5.  You will also need to send – two years of W2s, the most current profit/loss form, listing agreement, a preliminary HUD-1 specific to the contract that you are sending, last 2 bank statements, and a hardship letter.  They may also ask for proof of disability or being laid off, if applicable, and/or proof of other assets.  Some banks ask for a little more info, but they will let you know when you call.
6.  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.  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.
7.  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.

These steps will need to be done for each bank that is involved and each bank has their own process.

From the things I hear from colleagues who work in other areas of Virginia, the short sale and foreclosure process is an ever-changing experience, and I’m learning as much as I can about it.  My thanks to Sarah for sharing this, you can find out more about short sales on her blog, SarahiouslySpeaking.com.  And if you’re in danger of falling behind on your mortgage, email me and let’s see what can be done about it.

I may not have the answer, but rest assured I’ll know who to call!

Updated 6/10/09 4:38pm – Interesting bit of timing, and completely unplanned, but Danilo Bogdanovic of LoudounScene.com wrote “10 Questions To Ask Before Writing An Offer On A Short Sale“.  It is a really informative post, I highly recommend it.

Loan Modifications Perpetuate The Problem, and Don’t Use The Benefit Of Experience

Inman News posted information last week a new plan whose focus was to streamline the loan modification process.

I’m admittedly behind on this post, and it’s been rehashed across the web.  Essentially, if (1) you’re at least 90 days delinquent on a home that is your primary residence and on which you owe at least 90% of the home’s value AND (2) either Fannie, Freddie or one of their participating loan companies must own theRed Leaf loan, then under the loan modification program you can restructure your loan to as much as 38 percent of your gross income.

Forgoing the in-depth analysis and critique from economists and Harvard-types for a moment, I have a problem
with this.  I’m struggling with the issue of personal responsibility, and Government subsidy of these loans doesn’t resolve the problem.  The problem is poor decision-making on the part of consumers and lending institutions and the real estate industry.  I’m not sure modification or “streamlining” resolves the issue of personal responsibility, and on the flip side I don’t know that allowing millions of loans to default and further crippling the housing and financial sector makes a lot of sense either.  I have no answer for this, but struggling with the issue.

Bloodhound writes (emphasis mine):

The streamlined process looks only at income, not assets. If you refinanced your home to buy a Mercedes or own another home, you won’t be expected to sell them to pay your mortgage.

 

Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their income again.

 

This is a once-in-a-lifetime opportunity,” Schiff says. “People are going to feel like complete morons if they don’t participate. The people getting punished are the ones who never made an irresponsible decision to buy a house they couldn’t afford.

The government is offering loan servicers $800 for every homeowner they get into the plan.

 

Schiff predicts that loan agents “will be cold-calling people trying to get them into it. Just like they encouraged people to overstate their income to get a bigger loan in the first place, now they will encourage them to understate their income to qualify for a smaller loan.

I can see Schiff’s point.  Desperate lenders will have an incentive to push people into what appears to be an even worse problem.

As I said, I’ll leave the bulk of the analysis to economists and people who have a better grasp of the larger picture.  I know that locally, Blacksburg and Christiansburg lenders haven’t gone crazy with out of control loan terms, unlike the ones from lendup.com.  Rates are low, borrowers are bringing money to the closing table and deals are getting done.  Mark Weddle says it’s “Back To Basics” and he’s right … you can still buy and sell in today’s market.

It was eery watching this video, reposted on Jim Duncan’s blog, this morning.  Take the 10 minutes to watch what Peter Schiff has to say, and then tell me you didn’t raise your eyebrows in surprise at how history has played out these last several months.

No … the photo has nothing to do with the post.  I took the photo, and I liked it.  That’s all.

Look A Little More Closely

Look CloselyOn Saturday's NRVLiving Real Estate Show (which, coincidentally, we don't have an electronic 
copy of – argh), we spent a good bit of time discussing HR 3221 – the Housing and Economic Recovery Act of 2008.  This bill was introduced in July 30 2007, tweaked and massaged and – as evidenced by its 694 pages and 237 Amendments – added to several times until it was signed into law exactly one year later by President Bush on July 30 2008.

So what it is it?  According to the House Committee on Financial Services, the bill is designed to respond to the housing crisis and prevent a repeat of problems.  A good idea, yes, but look a little closer … when you dig into it, there are some highlights that every American should be aware of, regardless of whether you're a homeowner or not.  Some of the key points include:

  • Conforming loan limits have been raised to $625000.  recently, the conforming loan lmit – those loans that would be eligible for purchase by either Freddie Mac or Fannie Mae – was capped at $417000 previously.  In high-priced areas, as loans have been harder to come by, fewer homeowners have been able to qualify for these loans … I'm sure the hope is that this will stimulate this section of the market.
  • The one that most folks have likely heard of is the FHA Foreclosure Rescue.  Under this section, the Federal Housing Administration will take on as much as $300 billion in new mortgages.  Lenders will be able to write down qualified mortgages to as much as 85% of the appraised value, and then the borrower can then refinance into an FHA-backed, 30-year fixed mortgage at 90% of the appraised value.  There's a catch, of course – borrowers will have to share 50% of all future appreciation with the Federal Housing Administration.
  • The First-Time Homebuyer Tax Credit will apply to homes purchased on, or after, April 9 2008 and before July 1 2009.  If you're a first-time buyer though, don't get too excited.  It's not really a credit, but an interest-free loan for $7500 that you'll be required to pay back.  If you own the home for 15 years, you'll pay it back during that time period, at $500 per year.  If you own the home for LESS THAN 15 years, and there's enough gain at the time you sell, you'll pay the remainder back at that time.  You have to qualify, of course – single home buyers must make less than $75000, and married couples less than $150000.  When the median salary is much less than that in the New River Valley, I'd think a lot of first-time buyers would want to take advantage of this.

  • This next one is important, though, and one about which I expect a lot of people are going to be surprised.  It used to be that when you sold a home, if it had been your primary place of residence for two of the last five years, any money you made on the sale of that home was yours to keep, tax free.  $100000 profit?   Yours to keep, thank you very much!  Under HR 3221, however, the Capital Gains Exclusion Rule comes into play, and hits American homeowners right in the wallet.  It works based on a formula (congrulations, elected officials, for making it SIMPLE):
    Profit from sale * (# of days home was primary residence / # of days you owned the home)
  • So, say you bought a Blacksburg home for $300000 on January 15 2004, you lived in it for four years, and moved out January 15 2008.  On January 15 2009, you sold it for $500000, making your capital gains $200000.  Under the old system, you'd have $200000 in your pocket, tax free.  Now, with the Capital Gains Exclusion Rule, it looks like this:

          200000 * (1460 / 1825) = $200000 * .80 = $160000

$160000 of your profit will be exempt from capital gains, but there's $40000 left over the federal – and state – government would like a piece of.  The federal capital gains rate is 15%, while the VA rate is 5.75%, so 20.75% – or $8300 – of that money you'll never see.

Good idea?  Bad idea?  According to GovTrack.us, the cost per American is $4 between 2008-2012.  It seems to me that, while things like first-time buyer credits and lender write-offs might help stabilize and boost buyer confidence in some areas, things like the Capital Gains Exclusion Rule are just going to piss people off.  And, at $8300 as in the example above, cost far more than just $4.

You can find the whole text herePhoto credit.

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