About 40% of the short sales we work on, as a brokerage, are tenant occupied properties. The obvious question I get from our clients in these situations is:

“How do I keep my tenant happy during the short sale process?”

The goal is to keep the tenant in the property paying every month on time. Even if my clients are not making payments (most do not) they still own the property and have the right to collect rent during the short sale process. There are numerous strategies we suggest our clients use to keep their tenants happy during the short sale. Here are a few:

• Offer a few hundred dollars off rent in return for their cooperation in showing the property to buyers.

• We only show the property with 24 hour notice to the tenant.  Respect Their Privacy.

• If they have a year lease we can attempt to keep them in the property by selling to an investor.  Investor buyers love property that comes with a good tenant.  Everyone’s happy.

• If we cannot find an investor buyer, we can offer the tenant a months rent free or other monetary incentives to break the lease so the agree to move out upon close of the short sale.  Everything is IN WRITING.

• Always put ourselves in their shoes and treat them as we would want to be treated in this situation.  We need their cooperation to sell the home effectively.

As long as these principals are followed when approaching the tenant about the short sale, most tenants will be understanding and willing to help… especially if they are saving a few hundred dollars a month.  Don’t let a tenant or long term lease get in the way of short selling a home that is a bad investment and underwater asset.  Contact me for questions and to go over your specific situation so we can plan a strategy to get a short sale done the right way.

Short Sales are widely seen as complicated and difficult transactions that take forever and often times end in failure. This is not true and is a common misconception. As long as the Real Estate Company you hire is experienced and understands the system a short sale should be a simple process that you can set timelines and expectations for. We’ve done over 450 short sales to date and I’ve been able to break down the short sale process into 3 simple phases. I’ve also created a Video that outlines each phase and goes through the estimated timeline for each.

3 Simple Phases to the Short Sale Process and Timeline are as follows:

•  Phase 1: Marketing and Listing Period (30-45 days)

• I consider this the most important phase of the process because this is where we choose our buyer to work with.  It’s crucial to choose a buyer that is willing to commit to the deal and wait the necessary time to hear back on the approval of their short sale offer.

• Phase 2: Package Submittal and Bank Negotiation (60-70 days)

• Once we have an offer from our perfect buyer we submit the offer into the short sale lender along with the full short sale package.  See my video detailing the common items required for a short sale package.  During this phase the lender(s) review and process the documents and also order an appraisal on the property.  If the appraisal comes within a certain percentage of our offer they will stamp an approval on the short sale.

• Phase 3: Escrow (30-45 days)

• Once we have short sale approval from the lender(s) we can open up escrow.  During the escrow period we help the seller prepare disclosures for the buyer, along with additional paperwork needed.  This is also where the buyer gets their appraisal and home inspection done on the property.  Depending on the buyers financing (Cash, Conventional, FHA, VA) the escrow process can take anywhere from 30-45 days.

If you add those timelines up we get 4-5 months from start to finish.  Sometimes short sales can take 6-8 months or more.  Lots of things can happen to extend these timelines however much of it depends on the type of home, short sale lenders involved, and the borrower situation.  Contact me to discuss your specific situation and I can bring you through an estimated timeline  for how the short sale process will work for you.

After over 450 short sales completed in San Diego County, I’m trying to determine some of the most common questions I get from prospective clients.  One of the biggest questions and concerns I get from prospective clients is:

“What type of documents will my bank require in order to process a short sale”

In order to help answer this I created a short 5 minute video detailing the 8 most common documents needed by lenders to process a short sale.  I also go into more detail about each document and the most common questions/concerns regarding each.  They are the following:

1. Hardship Letter

2. Bank Statements – Two most recent

3. Pay Stubs – Two most recent

4. Tax Returns

5. Financial Statement

6. 3rd Party Authorization

7. Listing Agreement

8. HAFA Documents

Watch the entire short sale video here.  It’s important to understand that depending on who the lender is in the short sale, different or additional documents might be needed.  Every short sale is different, and here in San Diego we get to see a lot of different lenders out there.  Contact me and I can go through the list of documents your specific lender will require in order to process a short sale.

What is the biggest benefit of a short sale?

After a survey of my short sale clients from 2011 (62 Clients) we found that the biggest perceived benefit of a short sale was the ability to stay in their home longer while not making payments.  Saving money, it seems, tops the list of short sellers according to the results.  Salvaging Credit Rating was a close 2nd, since a short sale is much better on credit than a foreclosure… and can put a short seller in position to purchase again within 2 years.  Here is the list of short sale benefits in order of importance:

1. Stay in home longer (while not making payments)

2. Salvage Credit (Avoid Foreclosure)

3. Get out from ‘under water’ debt without having to pay back bank

4. $3,000 HAFA Incentive

5. Peace of mind and moving on

Obviously people do short sales for different reasons, thus they have different perceived benefits.  Regardless, a short sale is almost always the best route in comparison to a foreclosure.  Contact me for a free consultation on your situation and see if a short sale is right for you.

Hey everyone, one of the biggest questions I get from clients is “how
long will it take before I can purchase again after a short sale?”.
The answer to this has been evolving over the past 5 years and will
continue to evolve over the next 5 years.  Right now, today, there are
two main options to obtain financing.

How to Purchase a property after a Short Sale

• FHA Financing:

FHA financing has remained extremely popular among buyers especially
because it may only require a 3.5% down payment as opposed to 10-25%
for a conventional loan.  FHA loans are for buyers purchasing an owner
occupied property and the rates are extremely competitive.  FHA
requires a borrower who has completed a short sale to wait 3 years
before they can be considered for financing.  The guidelines are
strict and are not as flexible for buyers obtaining conventional
financing… however the small downpayment more than makes up for the
upfront hassle.

• Conventional Financing (Non FHA loans)

Most conventional (non-FHA) loans available from mainstream lenders
are insured by Fannie Mae and Freddie Mac.  Both of these institutions
require a minimum 2 year waiting period for buyers who have completed
a short sale.  The big caveat here is that they also require a minimum
down payment of 20% to be considered after the 2 year mark.  Buyers
can choose to wait an additional 2 years if they wish to only put 10%
down.  By that time, however, you would already qualify for FHA
financing (3 years minimum) so it would be wise to consider that
financing route instead.

• FHA / Extenuating Circumstances

FHA guidlelines do allow for an exception to the 3 year waiting period
for short sellers.  If a borrower can plead and make a case for
‘extenuating circumstances’ they can avoid the waiting period all
together.  Extenuating hardships might include illness, temporary
medical issues, job transfer, or natural disaster affecting the
property.  It is solely up to the lender to approve or deny the
extenuating circumstance and whether it would qualify as legitimate.
Hardships such as job loss, adjustment of an interest rate, or
underwater property do not qualify.  We have worked with borrowers who
we have helped short sale in the past who have already gotten approved
for this type of program… so it IS happening.

If you are getting closer to these 2-3 year timelines and curious
whether you can qualify feel free to call me to discuss your situation
and I can help get you in touch with the right people to find out
more.  In the meantime, pay your bills on time, every time, and make
sure all your other financial matters are handled so there are no
surprises when your waiting period is up.

I hope this is helpful, let me know if I can be of service to you,
your friends, or family when it comes to short selling or buying.

The Federal Open Market Committee adjourns from a scheduled 2-day meeting today, its first of 8 scheduled meetings this year.

The FOMC is a designated, rotating, 12-person committee within the Federal Reserve, led by Federal Reserve Chairman Ben Bernanke. Members of the FOMC sub-committee are the voting members of the Federal Reserve; the ones that ultimately determine U.S. monetary policy.

The most well-known Federal Reserve monetary policy tool is the central bank’s Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other for a period of one night. 

The Fed Funds Rate can only be changed by FOMC vote.

For home buyers and would-be refinancing households in San Diego , it’s important to recognize that the Fed Funds Rate is an interest rate separate and distinct from “mortgage rates”. Mortgage rates are not voted upon by the Federal Reserve. Rather, mortgage rates are based on the price of mortgage-backed bonds, a security bought and sold among investors.

Historically, there is little correlation between the Fed Funds Rates and 30-year fixed rate mortgage rates throughout CA. Going back 20 years, the benchmark rates have been separated by as much as 5.29% and have been as near as 0.52%. 

The spread has even gone negative, most recently in 1979 and 1981 — a period marked by high inflation.

Today, the separation between the Fed Funds Rate and the average, 30-year fixed rate mortgage rate is roughly 3.60%. Beginning at 12:30 PM ET, however, that spread is expected to change. The FOMC will make its statement to the press at that time, and will release its quarterly forecast to the markets.

As Wall Street reacts to the Fed’s press release and projections, mortgage rates will move.

Investors expect the Fed to vote the Fed Funds Rate unchanged from its current range near 0.000 percent, but are unsure of how the Fed will characterize the U.S. economy. If the Fed speaks optimistically on the economy, stock markets should rise and mortgage bonds should fall, driving mortgage rates higher.

Conversely, if the Fed shows concern for future economic growth, mortgage rates should drop. Either way, today figures to be volatile one for mortgage markets. 

When mortgage markets get volatile, the safe play as a rate shopper is to lock your mortgage rate immediately. There too much risk in floating.

The housing market finished 2011 with strength, and is carrying measurable momentum into 2012. 

According to data from the National Association of REALTORS®, on a seasonally-adjusted, annualized basis, December’s Existing Home Sales climbed by 120,00 units overall from the month prior on its way to an 11-month high.

An “existing home” is a home that’s been previously occupied; that cannot be considered new construction.

After 4.61 million existing homes were sold in December, there are now just 2.38 million homes for sale nationwide. The last time the national home supply was this sparse was March 2005.

At today’s sales pace, the complete, national home inventory would be exhausted in 6.2 months — the fastest pace since before the recession. A 6.0-month supply is believed to represent a market in balance. 

The December Existing Home Sales report contained noteworthy foreclosure and short sale statistics, too :

• Foreclosures sold at an average discount of 22% to market value
• Short sales sold at an average discount of 13% to market value
• Together, foreclosures and short sales accounted for 32% of all home sales

Clearly, “distressed homes” remain a large part of the U.S. housing market.

Furthermore, in its report, the real estate trade group also noted that one-third of homes under contract to sell nationwide succumbed to contract failure last month. That’s up from 9% one year ago.

Contract failure occurs for a multitude of reasons, most notably homes appraising for less than the purchase price; the buyer’s failure to achieve a mortgage approval; and, insurmountable home inspection issues. December’s high failure rate underscores the importance of getting pre-approved as a buyer, and of buying homes in “good condition”.

For today’s home buyer in San Diego , December’s Existing Home Sales figures may be construed as a “buy signal”. Home supplies are dropping and buyer demand is rising. This is the basic recipe for higher home prices ahead.

If your 2012 plans call for buying a home, consider that home values throughout CA are expected to rise as the year progresses. The best values of the year may be the ones secured this winter.