What to Expect in a Short Pay Situation and why it takes so long.

1. This is a very complex transaction compared to the traditional real estate transaction. Please do not use your previous experience in buying or selling real estate as a reference point for this transaction; the two have nothing in common. We list you home and when an offer is presented we contact the lender to start the submissions of the following.

2. How a transaction starts is how a transaction ends. That is, if the necessary documentation is slow to come in, the process will be slow to begin. Every lender requires typically the same documentation and the offer will not reviewed or begin until ALL the necessary documentation is delivered. Once we have all the required documents  we put the Status of your listing in our Pismo Coast MLS as: “Contingent SSale”

3. We collect and review then package  to sent to the lender along with offer:
A. Two Years’ tax returns along with 2 months bank statements from all accounts.

B. A letter from the seller requesting a short pay-off

C. A letter of hardship from the seller (in their own wording) why a discount is necessary

D. Signed authorization giving permission for the realtor to discuss issues with the lender

4. Timeframes and what to expect:

1- Initial marketing and packaging to the lender. There’s more to it than what one might think. We will be accumulating approximately 100 pages plus of documentation to send to the lender, and this process is very complicated. There is 90% preparation only 10% negotiation. Are experience in job packaging the home and seller, ahs proven to expedite the entire process.

2 – Wait for confirmation that the lender to receive our package.

3 – For the lender to acquire their necessary documentation to make a decision, i.e., appraisal, preliminary title, escrow net sheets and all your documentation,
etc., this process can take the lender as long as 3 -4 weeks or longer, but we have had a response within 3 days, as well. This process is out of our control. A lot of it depends on the lenders work load at the time of our request.

4 -  Now that the lender has all the necessary documentation, they will reply of acceptance,  or declined.
Of course sometimes they requests more information, however, do not panic.

5 - The clock is ticking. With a property where the foreclosure process has begun, every day is valuable. We cannot afford to deny access or miss valuable exposure time. We must have a lock box and continued access all the way through the transaction. If the buyers have a problem obtaining their loan, we need to have a back-up.
However, we cannot afford to get emotional right now, so we requests patience throughout as we update weekly on status of the Short Sale proccess.

See this article:
With interest rates at record lows and the stock market looking too perilous for small investors, many people are putting money in an asset they understand — real estate.

One of the best places to invest is in foreclosures and bargain residential real estate.

The current market conditions make it a perfect time for a small investor to purchase one or more foreclosure properties for their private residence, rental or resale. During economic downturns, more upscale homes go into foreclosure, so the notion that foreclosure homes are only available in crime-ridden areas is inaccurate. Beachfront and homes in affluent areas are part of the mix of foreclosed properties available.

But anyone considering buying a foreclosed home should forget about paying pennies on the dollar.

“You can buy foreclosures for as cheap as 30% or 40% below market, but most foreclosures sell for 5% below market,” said John T. Reed, editor of Real Estate Investor’s Monthly, a newsletter based in Alamo, Calif.

Yet the savings may be twofold if the property is purchased from the lender who holds the mortgage that’s in default. That lender may be willing to waive some closing costs, maybe even offer a break on the interest rate or the down payment.

MSN 08/01/2010 By Bankrate.com

http://www.raymondrealestateteam.com/Nipomo.htm

SHORT SALE HOMES
“Short Sale” is when more money is owed on property than the suggested listed price.

Approximately one in five homeowners is “underwater” – meaning they owe more on their mortgage than their home is currently worth. For borrowers in default or at risk of defaulting, selling their house for less than is owed, often termed a short sale, may be the only option. However, short sale offers must be accepted by the bank that owns the mortgage, and can take as long as a few months before an offer is accepted.
Be persistent during ordeal of short sale.

MAKING SENSE OF SHORT SALES
Some home buyers are submitting unrealistically low offers on bank-owned properties, hoping to purchase a home at a bargain price. Low offers often use valuable time and resources that could be dedicated toward more favorable offers more likely to garner bank approval. It is vital that home buyers work closely with their REALTORS® to submit appropriate offers, especially when dealing with a short sale property.

Theoretically, short sales should be a win-win for the bank and the homeowner. Although the bank does not receive the full payment on the mortgage, it also does not incur the costs of foreclosure and/or eviction, if necessary. Many homeowners also prefer short sales because it does less damage to their credit score than a foreclosure. However, many real estate experts say that the majority of banks are reluctant to approve short sales, and often let properties go into foreclosure, even when there are reasonable offers on the property. In addition to considering the price, most lenders also take into consideration whether the homeowner can demonstrate financial hardship. If the homeowner is capable of making payments, many lenders will try to work out a loan modification, rather than a short sale.

Short sales often are more time intensive than traditional transactions and often require additional paperwork. Due to the large number of short sale offers, many take as long as a few months to receive approval. If information or required forms are missing or incomplete, the bank may set the offer aside, which could delay the process and cause the property to go into foreclosure. To expedite the process, it is important that sellers work closely with their REALTOR® to provide all of the necessary paperwork.

REO, FORECLOSURE, BANK OWNED TERMS
You will hear people saying “REO” in one form or another including “REO’s” and “REO Properties” among a few others. REO simply means Real Estate Owned. In the real estate investment industry when you see the words REO in an advertisement it is generally assumed the subject property is a foreclosed property or property that has otherwise come into the possession of the bank or lender.
Where it gets confusing to some is that REO does not only mean real estate owned by a bank or lender they have accepted in lieu of foreclosure or have foreclosed upon but the term also indicates any property held by an individual including their primary residence.

When a loan originator is accepting an application from a prospective borrower there is actually a section for the listing of real estate owned. When that part of the application is encountered the loan originator may use the abbreviation REO instead of saying the words “real estate owned”. This is the time where all properties are listed whether or not there is a registered mortgage attached to them.

 The Definition of “FORECLOSURE” Properties or “BANK OWNED”
Legal process by which a lender cancels (forecloses) a borrower’s right of redemption of the mortgaged property through a court order (called foreclosure order).
The court sets a date up to which the borrower can redeem the property by paying off the entire loan balance (including foreclosing expenses).
Thereafter, the lender is free to sell the property and, upon the sale, applies the sale proceeds first to the due amount and pays the remainder (if any) to the borrower. The borrower remains liable for the due amount if the property remains unsold, and for the shortfall if the sale proceeds are insufficient to pay off the entire debt. The lender is generally under an obligation to sell the property at or near its fair market value (FMV).

For a list of Short Sale and REO homes: www.RaymondandAssociates.com

This article is the last information from California Association of Realtors about California’s home sales:

By Nick Timiraos

How many homeowners have been sitting on the sidelines during the housing downturn, waiting for massive price plunges to pass?

The prospect of home-price stabilization is raising that question in some of the nation’s housing markets, say real-estate agents, who report an uptick in listings from “sidelined” sellers testing the waters.

Over the past year, there’s been plenty of speculation about if and when banks will begin to list more foreclosed homes for sale. But these sidelined sellers represent another potential source of “shadow” inventory.

“The number of people coming back on the market as sellers is moving up,” says Pat Lashinsky, chief executive of real-estate brokerage ZipRealty, Inc. At the same time, “buyers are looking, but they’re not buying,” he says. The inventories of unsold homes increased in June, according to the National Association of Realtors, to 8.9 months of supply at the current sales rate, up from 8.3 in May.

In a survey by real estate website Zillow.com earlier this year, some 7% of homeowners surveyed said they were “very likely” to put their home on the market over the next year if they saw signs of improvement in their housing market. That would translate to more than 5 million homes.

“What’s going to happen to the household that wanted to move three years ago and didn’t want to sell into a declining market?” says Michael Fratantoni, an economist at the Mortgage Bankers Association. “There’s a lot of those folks out there, and once we start getting a couple months of good news, there’s going to be a flood of listings from these people.”

Real-estate agents in Southern California say that’s happening already.  “We have had unabated growth in our listing inventory. Usually it ends towards February. This year inventory kept increasing. It was uninterrupted growth,” says Steven Thomas, president of Altera Real Estate, a brokerage in Orange County, Calif.

Surprisingly, he says, the share of home-sellers with equity in their homes has grown over the past year, to 63% in May, from 52% one year ago.

That’s a problem, agents add, because many of these sidelined sellers continue to cling to unrealistic views about how much their homes are worth. It’s bound to become an issue in all neighborhoods as more mid-to-high end homes go into foreclosure or attempt a short sale, setting prices at a lower level.

“At any sign of good news, if [sellers] are going to try to liquidate their house, that’s going to prevent supply from going very low.  It creates a choppy bottom,” says Stan Humphries, chief economist at Zillow.

Karen Wiese decided to hold off on selling the six-bedroom home in suburban Sacramento, Calif., that her husband built five years ago after prices first softened. The home wasn’t getting any offers at the $1.1 million asking price, so she and her husband, a homebuilder, took it off the market and decided to live there for two years. They figured the market would recover quickly.

Last week, she put the home on the market for $639,000. “We don’t even know if we’ll get a looker,” says Ms. Wiese, 59, who is building a smaller home on an adjacent lot. She wants to downsize because her husband died last year and she sees no reason to live in such a larger home any more.

Ms. Wiese has lots of equity in the home, which means she’s able to be flexible on price. Many sellers don’t have that luxury and are reluctant to cut their price because then they’ll have to consider a short sale, where the home sellers for less than the amount owed. Short sales can be tough to pull off and can have the same effect on a borrower’s credit score as a foreclosure.