With all the recent craziness going on in the local market it’s no wonder people are paying so much attention to real estate. One local Boston real estate agent and foreclosure specialist, was kind enough to contribute a market valuation analysis on current market conditions.

“With the recent popularity of the Short Sale in the Boston real estate market it’s no wonder property values can quickly become like the wild wild west. The illogical market goes something like this…A distressed homeowner short sales a property because the mortgage is worth more than the house.

Home buyers aren’t stupid though and realize that banks will settle for 80% of the FMV (Fair Market Value). This is because on many Boston area homes it costs banks at least 20% of the FMV to foreclose on a property (i.e. lawyer fees, upkeep fees, auction fees, etc…).

So, now we have a plethora of short short sales driving market prices down. If the neighborhood comps are selling for 80% short than regular home sales have to adjust in order to stay competitive. This is not even to mention that often times bank appraisers are not familiar with the local neighborhood and are basing assessments on the discounted short sales that recently sold. So, now there is this vicious cycle that will only stop if all the short homes are taken out of the equation.

So, if this is the case why hasn’t the Boston real estate market taken a much steeper decline? There are number of answers to this question. First off, many homeowners are unaware that there exists alternatives to foreclosure. Secondly, many government programs like ‘Hope for Homeowners’ and loan modification programs only offer a false sense of hope. These programs rarely work out favorable for the homeowner.

The Boston area loan modification process is still very backed up with lenders. Some lending departments are handling loan modifications, auto modifications, and credit payoffs all within the same department. Depending on the bank, short sale departments are separate from the modification department allowing processing to be more successful.

Wait a second, why would the government initiate programs that are not in the best interest of distressed homeowners? Simple, election year is always right around the corner! When this “Great Recession” is finally over you can bet your very last dollar that politicians are going to be bragging about how many homes were saved by their legislation initiatives.

It doesn’t matter if a homeowner that SHOULD short sale their home is actually in a worse situation now that they used a Government program to modify. What matters is that 1 more home is saved from foreclosure. So, at all the cocktail parties during re-election year when people ask this politician about their fiscal reform during the last 5 years he/she can say they saved ‘X’ number of homes from foreclosure.

With the recent FHA legislation that eliminates the 90 day wait period on selling a short sale to an FHA buyer this opens a whole new market to investors. Perhaps, this is the legislative system already making adjustments for their failed loan modification programs.

Of course the 90 day rule places strict limits on the transactions, “All transactions must be arms-length, meaning that there must not appear to be any impropriety taking place between buyer and seller. This requirement also indicates that any prior flipping activity on the home in the previous 12 months may be a red flag to the lender.”

Actually, this rule is nothing new to short sales as many lenders have been and continue to require transactions to be contingent upon signed arms-length agreement contracts.”

If short selling a home in this economy wasn’t bad enough, the added burden of a HOA fee can complicate things even more. The HOA fee is often overlooked when considering a short sale.

If this fee isn’t taken into consideration at the start of the process things can get very sticky and unravel days before closing. In order to make sure the status of the HOA fee will not harm the short sale process the association should be contacted. Think of the HOA as a ‘third lien’ on the property.

After talking with many different Home Owner Associations the process of how they handle short sales varies. For example, one complication that can arise days before the close of escrow is that delinquent HOA fees can be sold to collection agencies. Some HOAs only manage, service, regulate and process payments.

When it comes to delinquent fees policies substantially vary. Some HOAs have taken it upon themselves to create in-house delinquent fee collection departments. In this case, negotiating with them will be significantly easier then an outside agency.

Why? This is because outside agencies are often located across the united states. Most of these agencies handle more then just delinquent HOA fees. The departments are often very busy and slow to respond to payoff requests. The payoff request might need to go through several levels of management before a decision is made.

Things can get even more complicated if the account is referred to one of these agencies and then the home owner charges the account off. Not only will this slow the whole process, but might actually cause the charge off to be reported to credit reporting agencies.

Even when the HOA collection department is handled in-house complications can arise. These agencies are businesses looking to make money. They understand that if the short sale is not approved by them it could kill the deal.

Thus, they have a certain degree of clout when negotiating a short sale. Think of this like a ‘two-edge sword’, HOA approval is necessary, but if the home goes into foreclosure they might get absolutely nothing. They really want to cooperate with the distressed home sale, but have figured out that no matter if the short sale gets approved or not, they can still get money.

They do this, by requiring the home owner to pay a certain portion of the delinquent fees before responding to short sale requests. Again, this is because if the short sale doesn’t get approved and goes into foreclosure the HOA would get nothing. HOA fees are notoriously overlooked when considering the whole scheme of the short sale. If the HOA doesn’t sign off on the payoff then money will have to come from someone (i.e. buyer, seller, 1st lien holder, 2nd lien holder, etc…). In this respect they are very much like home mortgage.

Of course, the HOAs are not just ‘mortgage hungry money grubbers’ they understand that if the HOA fee is not being paid, then the HOA is loosing money. For this reason they want to get someone who can pay the fee into the property quickly. Because the delinquent fees are often minimal seeking a deficiency judgement after the sell is often not profitable. Before starting a short sale it’s a good idea to get details on the HOAs policies.

Do they transfer the delinquent fees to an outside agency? Is there an amount required to get a short sale demand request answered? Can the home owner stay current or prevent transfer if a portion of the fee is paid every month? Can the buyer ‘pre-pay’ the fee during the escrow period. What are the HOAs pay off policy? Is it a percentage of the sales price or amount charged off? Will the debt be forgiven or will the HOA seek a deficiency judgement.

1. Are you experienced with Short Sales? In today’s Quincy real estate market it’s essential that your real estate agent be well versed in the short sale/pay market. Since Obama’s administration has implemented so many programs that promote foreclosure avoidence the local Quincy real estate market can definitely expect more short sales in 2010.

A short sale (or short pay off) is when a home owner sells a home for less than what they currently owe their mortgage company. Often times home owners in financial trouble facing a foreclosure on their Quincy Home will request that their mortgage company take a fair market value sale in exchange for payment in full on any outstanding liens. Banks are willing to do this because foreclosing on a home can often cost an upwards of 20% of the FMV (fair market value).

In allowing the short sale lenders don’t have to pay for expensive foreclosure lawyer fees, home upkeep, and other costs associated with foreclosing on someone’s Quincy Property.

2. What do you suggest about rate locking a loan for my Quincy Home?

Although, your lender should be the one to answer this question, if the agent doesn’t know than move on. Mortgage rate locks are one of the most basic aspects of a real estate deal. A Quincy real estate agent should be able to tell you exactly how long you should request for your lock.

A Mortgage rate lock is when you literally ‘lock in’ to a certain mortgage percentage rate. For example, say Countrywide home loans is offering you a rate lock at 6% for 45 days. This means if interest rates change by +/- a % point your rate stays at 6% as long as you close your property’s contract by the 45 day limit. Asking your Quincy real estate agent this is essential because they are the ones who are very familiar with the local Real Estate market. Your agent should know if homes are closing in 30 days or if because of all the Quincy foreclosures and short sales property contracts are taking 45 days or longer.

3. Are you familiar with local area asset managers?

Since within the last 2 years (before the Obama administration) there has been so many foreclosures bank asset managers are working overtime. Banks will often liquidate hundreds and hundreds of Quincy homes to try and lighten up their financial portfolio which is heavy burdened with Quincy REOs (foreclosures). Knowing who the local popular asset managers are means that you as a home buyer will have an advantage to all those homes being liquidated.

4. Will you use the Internet to market my home?

Now-a-days the Internet is the go to place for Real Estate. There is perhaps no other industry that has changed so much with the advent of the technological age than the real estate industry. If your agent doesn’t have a dedicated plan on how to use the Internet to market your home you should be concerned. In real estate often times home selling comes down to numbers. For example, if you can get 50 people to view your open house, isn’t that better than 25?

Likewise, if you can get over 150 people to inquire about your home online isn’t that better than just 25 at an open house?

If your Quincy real estate agent says they are just going to post your home on craigslist or their own website and leaves it at that, fire them!! Unless they can tell you that they generate a significant amount of web traffic to your listing than craigslist and an agent’s website don’t go far enough in today’s market. Inquire about the web 2.0 community and how it can help sell your home.

Remember in real estate sometimes it’s all about the numbers game. Ask how much traffic their site gets. An increase in web traffic often times means more inquiries about your home.

5. Do you have buyers waiting in line to buy homes?

Any good agent will be able to show you that they have a whole stack of buyers/investors that are waiting to buy property. With so many technological avenues for buyer lead generation their is no excuse for your agent to not have willing investors on hand.

“LoopNet is a leading commercial real estate information services provider offering a suite of products and services tailored to the national and local needs of the commercial investments industry. LoopNet operates the largest and most heavily trafficked commercial real estate listing service online with over 3 million registered members and 890,000 average monthly unique visitors. LoopNet.com contains more than $495 billion billion of properties available for sale and 6.1 billion square feet of properties available for lease.

Listings available on LoopNet include all commercial real estate property categories like commercial office space for lease and for sale, hotels and motels, multifamily apartments, retail space and land for sale. LoopNet is also your resource for commercial real estate market research. LoopNet attracts the largest community of commercial real estate brokers, appraisers and other professionals to its rich resource of commercial real estate news and property listings.

LoopNet’s market-leading LoopLink product powers the web sites of more than 1,000 commercial real estate organizations and seamlessly integrates their web sites with commercial properties from LoopNet’s listing service at www.LoopNet.com.”

After the Quincy Cove tested the new search platform it really is much easier to locate Quincy commercial real estate spaces. The great thing about LoopNet is that it allows you to create localized loops (commercial real estate searches). The developers were successful in developing a software platform that filters out bogus ads.

Superfluous commercial real estate ads is the major problem Craigslist.com is facing. Although, Craigslist does have it’s place in the classified search industry, LoopNet deliveries true authenticity. This is something that Craigslist developers are just not able to capture. Not only does LoopNet allow for localized searches on their own web platform, but integration into your own domain is readily available.

Initiating a short sale can be an experience with a whole host of emotions. Every bank’s short sale process is a bit different. And of course there are likely hundreds of Quincy homes for sale that are already on the market making it that much more difficult.

Total time frames can significantly vary, even from what the bank is telling you. However, below is, as of today, a little bit of insight that Quincy home owners facing foreclosure will find usefull.

From my experience Bank of America takes the longest to process short sale documents, with the possible exception of Bank of the West and Washington Mutual/Chase. Bank of America processors are still seeing a 7-15 business day time frame for document imaging.

Until the short sale documents are imaged the property will be displayed just as a past due account. You may receive several phone calls from the collections department during the short sale process.

My personal interactions with Bank of America have led me to believe that the collections departments are not always 100% current on all short sale information. Unlike some of the other banks, as of today BOFA does not require you to call to initiate the short sale process.

In order to start the short sale process they just require a valid 3rd party authorization, short sale package, and purchase agreement to be on file.

If a representative does contact you, as the homeowner, it is always best to report this interaction to the representative that is handling the short sale for you. This individual is usually your real estate agent or loan negotiator.

From speaking with hundreds of short sale processors there seems to be a general consensus that Realtors who check short sale status on a daily basis are slowing the whole system down.

For example, after speaking with one specific senior level negotiator he explained that 6 hours every day is spent giving ‘no-movement’ status updates to Real Estate agents. Apparently, if everyone just stayed quiet and listened the process would actually be miles per hour quicker (like hundreds of).

One thing, as of today, that is informative is the fact that according to Bank of America short sale policy once a ‘Phase I’ negotiator is assigned the short sale file, they have 7-15 days to respond before the file can be escalated to a supervisor. Now, solely based on ‘rumors’ I’ve heard that some Realtors huff and puff to the processors about the file not being processed fast enough in this phase.

Unfortunately, according to Bank Of America processors this only prolongs the file. What happens is the impatient agent usually tries to get the file reassigned. Unfortunately, every time a ‘escalation or reassignment’ is requested this starts the 7-15 processing response time over again.

Now, there is an appropriate time for escalations (i.e. after 15 days), but anything before that with Bank of America could just prolong the whole processes.

While attempting to short sell your Brookline home you may have questions regarding what criteria the banks will use to approve or deny your short sale.

For example, if you are a married couple and you purchased a property in your name alone before the marriage, will you have to disclose your significant other’s income while attempting to short sale the property?

Like many of these short sale issues each bank has different standards so answers to this question will vary significantly. The more strict banks will likely require you to disclose spousal income no matter what.

Other Quincy banks that have relaxed standards may only require the purchaser to supply their own personal income sources.

The living arrangement and tax filing status has a role in determining to disclose or not to disclose too. For example, a couple that files jointly will likely have to account for their partner’s income when attempting a short sale.

Remember that the banks really only want to do a short sale when absolutely necessary.

If they know that a couple is filing jointly and are both sharing the burden of servicing the loan (regardless of who’s name is actually on the deed) then this could very well be a determining factor for approval.

It’s best to be as honest as possible during this process, because the potential for backlash could be severe.

If the housing market was ‘suppose’ to have bottomed out in April, 2009 than why is the market still very unstable?

This is an excellent question and a likely suspect is what industry experts call the ‘Short Sale’.

“Economics tells us that if inventory goes down, prices will go up. This is not the case in Quincy. Housing prices continue to stay par or below to previous month’s averages.

This is because the short sale has now reared it’s full doubled edged character. Yes, short sales liquidate housing inventory, but they just may be a downer for the local market. Quincy agents have been pricing the short sale below market value in order to attract buyers. Since to a lender there is a calculated value on the profitability of doing a short sale; Quincy homes are often selling for 80% of their true market value.”

Short sales maybe a great opportunity for distressed home owners, but for Quincy home owners that want stability and home price appreciation they are horrible. It all has to do with cost analysis. If a foreclosure (i.e. including attorney fees, maintenance fees, processing fees, etc…) is more costly than a short sale the banks will want to settle.

On average foreclosing on a property costs the lender approximently 80-85% of the home’s fair market value. Quincy Real Estate agents understand this so they keep pricing properties at 80-85% of fair market value. This way they can kill two birds with one stone so to speak.

They will attract buyers that will stick through the short sale process (no easy task considering short sales do take some time to get approved) and they will sell the property quickly.

If Quincy homes continue to be priced at 80-85% of fair market value month after month appraisals begin to drop. Appraisals are all based upon the price of a comparable (like property in the neighborhood that just sold). When the only comparable properties that an appraiser can analize are short sales that have been selling for 80-85% of market value current Quincy homes for sale develop low values.

Banks conduct appraisals too!! This is one of the major criteria they use for determining the suitability of a particular property for a short sale. It all becomes a downward spiral that will not stop until pre-foreclosure inventory is liquidated.

When exactly that inventory will be depleted is a question that is still up in the air. A general consensus in the Quincy Real Estate market suggests that inventory will start to normalize sometime next year (possibly April, 2010). Still, lenders are becoming more effective with the short sale processes. Some Quincy short sale properties are closing within a month.

“You are in talks with a prospective buyer regarding the matter of selling your house, the deal is almost struck, and suddenly, your prospect expresses his desire to get your house inspected by a home inspector.

The name is just a bolt from the blue. Now the sellers generally want to avoid these disguised investigators because their eyes literally scan your house to verify that it is really perfect for sale. Since the buyers have the right to hire home inspectors, you don’t have much choice with this. If your looking for the number 1 Quincy home selling piece of advice it would be get your home ready for inspection.

Therefore, it is always advisable that you hire a home investigator yourself and implement his professional advise and groom your house beforehand. You may say that it is a kind of insurance policy you may adopt by paying a certain fee to your own consultant so that minor shortcomings do not cost you a profitable sale.

Well, home inspectors are up there with Sherlock Holmes when it comes to checking out the house. They will check every corner of you house from the roof top to chimneys, they will touch, feel and find anything that may cause any future problems.

When you hire a home inspector always listen to him carefully and ”’pay attention”’ to his advice that they tell you to fix and try to fix them right away. It is lot more better spending lot of money for the repairing the house than to be ”’caught”’ trying to sell your less prefect house.

Even if you have hired a home inspector of your own, your buyer can bring in his own consultant. And, legally whatever the buyer’s inspector asks you to repair, should be fixed. However, the costs are probably paid by the buyer.

However, you should be prepared when the home inspector approaches you. There is every possibility of a negative home inspection. You may have to replace a few items and even lose your potential sale.

Most often buyers do not deal with sellers who attempt to sell homes that need a lot of repair work to be done. It’s always better if a seller hires his own home inspector to ensure that the home is up to the mark before its sale in the market.”

Washington Mutual gets the weeks award for being the most difficult bank to attempt a short sale with. I had one client who was attempting a short sale in Quincy, MA and it took 5 hours just to have the foreclosure date postponed. Even for a short sale expert like myself, that still is a long time. Wamu has been so terrible with short sales lately because they are going thru huge informational structural changes.

Remember a few months back when all your favorite Wamu branches suddenly posted Chase banners? Well, apparently the process, with regards to short sales, is not going very smoothly.

The problem is that hundreds and thousands of computer files are being transferred back forth between Wamu and Chase. Until, the new database is functional you can expect delays with Wamu’s short sale department.

Loans that originated with Chase seem to be handled properly, but even second liens that were taken over by Wamu are clogging the system down.

The contrast becomes even more apparent when considering that several of the other big chain banks have vastly improved their short sale processes. Just the other day I was working with a Bank of America short sale and the approval came after only 3 weeks.

A lot of the strategy depends on getting connected with the right person in the right department. Some bank processors are motivated to work and others are not. The challenge becomes spotting the unmotivated individuals and getting the file processed thru quickly.

I was surprised that the Wamu/Chase transfer is taking so long. Chase is typically very organized with their structural systems. Wamu is expecting the issues to be resolved within the next few months. So, what does that mean for current clients?

It means that if your attempting a short sale and your loan originated with Wamu you better have your real estate agent triple check the status (often!).

The lack of organization in the mainframe does not just make it harder to get connected to the right person, it cripples inter department communication.

I called about 4 times trying to get a short sale foreclosure postponed and each time was told the date had been extended. However, when I called back and spoke to the bank again they said the ‘postponement’ was not recorded in their systems.

I finally got thru to a main short sale negotiator who exuberantly promised that the date had been postponed. If Wamu is letting short sales slip thru their fingers hundreds of home owners could be unnecessarily foreclosed upon.

Credit Cards photo by flickr user eliazar

A short sale is, “The sale of a property by a financially distressed borrower for less than the outstanding mortgage balance due where the proceeds from the sale will be used to repay the lender. The lender then accepts the less-than-full repayment of the mortgage (and the borrower is released from the mortgage obligation) in order to avoid what would amount to larger losses for the lender if it were to foreclose on the mortgage. ”

The phrase your house is ‘upside down’ means that you have more debt on the property then what it’s worth. For example, if the property is worth $400,000 and there is a $700,000 loan on the property the house is considered upside down.

Any distressed Quincy home owner will say that owing more a property then it’s actually worth really does feel like living in a house that’s upside down. Perhaps, this is the true origin of the phrase.

It’s unfortunate, that some Quincy home owners decide to simple walk away from a property that becomes upside down. The stress of the whole ordeal is often so great; that to keep sane the only logical option at the time is to walk away. This does not have to be the case! A professional Quincy real estate agent’s job is to calm the storms of emotions that come along with a foreclosure.

The realty of the situation is that their are alternatives that are much brighter then the bleak decision to allow the property into foreclosure. Comparing the effects of both foreclosure and ‘short selling’ the decision will be less diffecult to make. Often times, the effects of a foreclosure on credit will last 5-7 years. This means when you go to apply for a new home loan in the future the loan agent will likely deny the application.

Short selling the property will shorten that time period to about 2 years. Lenders see that the distressed home owner is taking initiative for their actions. This shows a genuine concern and commitment to servicing perspective future loans.