All About Purchasing A Short-Sale Property

Tags: Foreclosure, Home Equity, Home Purchase, Mortgage, Sector - Real Estate Rental and Leasing, Short Selling

When shopping for a home, you may notice that certain listings are labeled as short sales, short pays or pre-foreclosures. All of these terms mean the same thing: the seller is upside-down on his or her mortgage and is attempting to negotiate a deal with the lender in the hope of avoiding foreclosure .

In this type of sale, the bank (lender) agrees to accept less than the amount owed on the mortgage. The transaction benefits the bank by allowing it to avoid repossessing the home in foreclosure, which is expensive and time-consuming, and it benefits the seller by allowing him or her to avoid the negative credit ramifications of foreclosure (and the bankruptcy that sometimes accompanies it). (For more on foreclosures, see Foreclosure Investing Not A Get-Rich-Quick Venture and Foreclosure Opens Windows For Investors

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If you're interested in buying a property that's listed as a short sale, here's what you need to know.

How It Works
Unlike in a foreclosure, the bank does not own the property in a short sale. However, because the bank must approve the sale (because it is the lender, not the seller, who will be taking a loss on the property) it will seem like the buyer is purchasing the property from the bank. Short sale transactions, however, can be much more time-consuming and patience-testing than foreclosure transactions. (Keep reading about this in Short Sell Your Home To Avoid Foreclosure.)
In some ways, buying a short-sale property is just like a traditional purchase. However, there are a couple of ways in which the purchase agreement you and your agent draw up are different. The contract will specify that the terms are subject to the mortgage lender's approval. In a normal transaction, the only party who would need to approve the sale is the seller.

The contract should also state that the property is being purchased "as-is". While it is acceptable to include language in the contract that allows you to back out of the deal if an inspection reveals considerable problems, in general, you should not expect the bank to lower the price to account for repairs if any problems are revealed. The bank is also unlikely to make any repairs, and the seller, being strapped for cash, is probably even less likely to help out. Given the situation, you'll likely also need to have enough money for closing costs. (Keep reading about the closing process in Understanding The Escrow Process.)
A Waiting Game
If you make an offer on a short sale property, be prepared to wait. Banks are notorious for taking as long as several months to respond to short sale offers. Some experts recommend that you give the lender a deadline to reduce the wait time. It's hard to say whether this strategy will really spur the bank to action, but it may be worth it from your perspective if you can't handle the stress of waiting months for a response. However, if the bank hasn't actually approved the short sale yet at the time of your offer, implementing a deadline will be useless as it may take several months just for the seller to reach a short sale agreement with the lender. And even if such an agreement is struck, there is no guarantee that the short sale will go through.

Weighing the Pros and Cons
Experts disagree on whether short sales are a good deal for buyers. Some say that short sales are priced below market values , creating the opportunity for buyers to get a great deal or for first-time homebuyers to get into a home when they otherwise might not be able to afford one.

Others say that banks have no interest in selling properties below market value and will do a comparable market analysis before setting or accepting a price for a short sale. Further, the listing price of a short sale may be an amount the seller's agent thinks the bank might accept - rather than the amount the bank has actually agreed to accept. The bank might find the price too low, or the seller might list the property below market with the intention of generating a bidding war. In some states, the seller will be obligated to pay the bank back the difference between the mortgage amount and the sale price of the home, so it's in the seller's best interest to get as much money as possible for the home even though he or she will see no cash from the sale.

Better Living Conditions
One advantage to both the bank and the seller is that unlike a bank-owned property, a short sale property is less likely to be trashed or ransacked. The owner will still be living in the home and while the property may be suffering from deferred maintenance because of the seller's financial situation, the seller is not likely to destroy the place when he or she still lives in it. By contrast, homeowners who lose their properties to foreclosure often take out their frustration on the house as a way of getting back at the bank. If the property is damaged, the bank won't be able to get as much money when it resells the home.

Along the same lines, because short sale properties are still occupied, they won't have suffered at the hands of unscrupulous people who have chosen to squat in or vandalize the property. Vandalism can be a common problem with foreclosure properties, especially in lower-income neighborhoods.

Want to turn $1k to $10k?

Don't assume the property is a great deal just because it is a short sale, though. Do your own comparable market analysis. The bank is facing a losing transaction, so it will want to minimize its losses and sell the property as close to fair market value as possible. If you can buy a similarly priced property directly from the seller, do it. It will be easier than dealing with a short sale. Also, if you make it to escrow, don't skip a thorough home inspection.

Precautions and Pitfalls
As you've probably gathered by now, short sale transactions are fraught with pitfalls and don't have many compensating advantages. If you still want to proceed in an attempt to snag a bargain or simply because the property that's perfect for you happens to be listed as a short sale, here are some precautions you should take and situations to be wary of.

Experience
Make sure your agent is experienced with short sales. Because of the complexity of this type of transaction, you don't want to work with someone who is unfamiliar with the process. Also, make sure your agent is willing to work with you on a short sale. Some agents won't want to get involved due to bad past experiences or the poor reputation of short sales. Not only are short sales more work for agents, they sometimes offer less of a commission. The bank may not be willing to pay the listing agent the usual 5-6% commission because it is already taking a loss, and because the buyer's agent gets a percentage of that percentage, he or she will see even less money.

In addition, try to find out if the listing agent is experienced with short sales. Although the bank is ultimately in control, a listing agent who knows the ropes may be able to facilitate or expedite the transaction.

Keep the Search Going
Given how long it will probably take the bank to reply to your offer, you should probably keep looking at other houses while you wait for a response, and you should probably proceed with the purchase of another property if you find an easier buy. Have your agent write the short sale purchase agreement in such a way that you'll retain this flexibility. And if you're buying on a deadline, don't even bother with a short sale.

Haggling Over Prices
Be prepared to raise your offering price. For the seller to increase the odds of the bank going through with the short sale, he or she may try to convince you to up your purchase price. Ultimately, though, the seller has no real authority to approve the selling price. The bank may also counteroffer as it tries to cut its losses.

What's worse, the bank may continue to collect offers even if you make it to escrow. Most people would consider this unethical because the potential purchaser is likely to have shelled out a few thousand dollars on inspections, title searches and the like, at this point. Getting dropped from the deal so late in the game is a huge waste of time and money for the buyer, not to mention enormously frustrating. For all of these reasons, the listing price of a short sale must be taken with a healthy dose of skepticism.

On the other hand, the bank might not counteroffer. They might just reject your offer outright, especially if you've written a significantly lower priced offer. Or, in the worst case scenario, they might not reply at all. Ever.

Seller Must Be in Official Default
Make sure the short sale is already lender approved. If the seller has not actually gone into default yet, the bank may not be interested in doing a short sale. The bank may also not be interested in a short sale if it thinks it can get more money by going into foreclosure.

Short sales are already difficult because of the involvement of the original lender. If there are two lenders, you double the difficulties of completing the transaction. It takes a considerable amount of time and convincing to get a bank to agree to a short sale, so if it hasn't agreed already, don't waste your time. Many homes are listed as a short sale by the listing agent, but there is no guarantee that the transaction will ever be completed as such.

Bottom Line
Potential buyers of short-sale properties should proceed with a hefty dose of caution and a pound of patience. Even with a thorough understanding of the process, the best agent in the world and a willingness to wait, the bank will not always cooperate. However, short sales can be a good deal for some buyers and will occasionally close successfully.

How to Buy a Short Sale Home

What happened to the days when a homeowner who just wanted to sell his home found a willing buyer and, after several negotiations, the home sold? The real estate market’s tumble into the ashes flooded the market with “distressed properties” – a sweet euphemism for homes that the owners could no longer afford.


While the short sale transaction has been around as long as mortgages have, the sheer volume of them during the most recent recession familiarized the average American with the concept. Caught unaware, both lenders and real estate professionals scrambled to find their places in the process, with many becoming overnight experts. Several myths became firmly rooted in our consciousness and scams and cons abounded.
Sellers typically agree to short sell a house as a way to avoid foreclosure. This is because they’ve bought into the myth that a foreclosure is worse on their credit than a short sale. In reality, the Fair Isaac Corporation treats a short sale and a foreclosure the same when determining your FICO® score.
Buyers, on the other hand, have been inundated with news stories about deeply discounted prices for short sale properties – so much so that some buyers insist on being shown short sales instead of traditionally listed properties.
Lenders love short sales. The homes tend to sell for more than foreclosed homes, and the borrower remains in the home, caring for it, showing it to potential buyers, hiring the real estate agent and, basically, doing the lender’s job.
Real estate agents love short sales because they have a better shot at getting the listing than they do if a house is bank-owned. Is it any wonder then, that the myth of a short sale being better for both buyer and seller is so pervasive?
If you’ve decided you absolutely must pursue a short sale home, let’s take a look at the basics of buying a short sale.

Buying a Short Sale: Take it One Step at a Time

Step One – The Short Sale Real Estate Agent

The first step to take is to find a knowledgeable real estate agent. Yes, it may be a bit of a challenge, but short sales are quite different than standard purchases, and you need someone experienced and well-versed in the short sale process. Let the newbie agent find someone else to practice on. To find this super agent, ask friends, colleagues and neighbors who they recommend. Look at short sale homes currently on the market and pay close attention to any agent names that pop up repeatedly.

Step Two – Financing

Next, put the agent to work finding you a short sale property according to the criteria you have determined works best for you. While he’s doing that, concentrate on getting a loan. Visit lenders to find the best rates and terms. Although short sales are notoriously slow, once your offer is approved by the seller’s lender the pace may pick up, and you want to be ready to close when it does.

Step Three – Determine Market Value

Never assume that just because a house is listed as a short sale, it’s bargain-priced. When you find a house that you are interested in, have your agent compile a comparative market analysis (CMA) to determine its market value. Often, its value doesn’t match the asking price, so a CMA gives you a basis from which to determine how much to offer on the house.

Step Four – The Safety Net

Ensure that your agent includes language in the offer that allows you an out under certain circumstances. Some of these include finding another home or a home inspection that turns up needed and costly repairs. Lenders typically won’t negotiate the price because of considerable problems with the house. It’s imperative you are able to walk away from the deal when faced with huge problems with the home.

Step Five – Continue Your Short Sale Search

Keep looking at houses. There is absolutely no guarantee that the lender will accept your offer or that the sale will conclude successfully. If you find another home that you like, that is easier to purchase, you may want to walk away from the short sale.
It seems as if everyone involved with the short sale, from the homeowner to the listing broker to the lender, wants you to believe that the short sale is the very best bargain opportunity of a homebuyer’s lifetime. The reality may be quite different, depending on region. In Las Vegas, for instance, the prices of short sale houses average $2,500 more than the median price of other homes on the market. Foreclosures are the bargain in Sin City. The lesson here? Don’t buy into the media’s hype. Do your homework and pay close attention to research pertinent to your specific region.
Short sales do offer the chance to purchase a home at a discount, but buyers should proceed with caution. It’s a long process, full of pitfalls. Going into it with a savvy agent, and your eyes wide open, puts you a step ahead of the game.

Tagged as: bargain, foreclosure, home buying, home prices, home values, real estate, short sale

How to Take Advantage of the Recovering Real Estate Market

How to Take Advantage of the Recovering Real Estate Market

Conclusion:

1.    If you are looking to buy a primary home or switch to another house, now might be a good time.

2.    If you are looking to invest in real estate market, now the good time begins.

3.    With the right mix of resources and experiences, flipping property might be a good way to cash in on this rising market.

Here are some thoughts behind the conclusion.

 There's been a lot of talk of economic recovery and more specifically the recovery of the housing market. But what does this all mean to you? Should I buy a house now? Should I start to invest in the market?

So now what does that mean?

It's a mixed bag. There's good news to that comparison. But there's also some less than favorable news.

The good news is that the economy and the housing market are in an upwards trend. That indicates growth and if history is any indicator, that real estate could once again be a good investment, instead of an underwater one.

Now for the not-so-exciting news -- the last real estate depression took over seven years to cure. So again, if history is any indicator, we're looking at many years until real estate becomes a fruitful investment again.

In any event, if you're thinking of making money from real estate, there are many ways to do it, aside from passive investment.

Passive investment is essentially owning a property (or several) and waiting for values to rise.

These days, while prices are climbing, a passive real estate investment won't yield fast money. And what's worse is that loss from the passive investment business won't be deductible on your federal tax return.

Now, how about a more active role in real estate investment? Becoming a landlord is one way to allow your real estate to work for you. And active property management constitutes a tax deductible activity.

Finally, with the housing market picking up, it's a good time to buy a house for your personal residence, as opposed to investment property. You're likely to get good prices without the risk of losing large amounts in equity.

I will write more about how to flip a property in future blogs.

7 Money-saving shopping Advices

-By Jason Niu

We all buy things, we all shop around. Shopping becomes an important part of life. Do you know your shopping habit? Sometimes I think it’s like dieting habits, with the right diet habit, you will remain or lose weight; with the right shopping habit, you will save money and improve your financial situation. The following 10 advices will make you a smart shopper; in some cases it will save you big money and improve your financial situation.

1.       Only buy what you really need, not what you want.

When you go to a nice shopping place, you probably want everything. But ask yourself, do we really need it? Where do we place it? How long can it be used for? I can give you a real example: I bought a fore-closure property near the ocean once. The owner couldn’t keep up with the mortgage. The mortgage plus tax was at $900-1200$ range. When I got into the house, I saw a house full of “Staff” on the floor and in cabinet. What staff? Clothes, gifts, decorations, kitchenware and toys…They are everywhere. Some of them are not even used or opened! Especially clothing, they filled up 12 inches on the floor everywhere in two rooms. It took me four 30-yard dumpster to take them all out. I also heard they go out to eat a lot, rarely cooking at home. They have lots of time to move their belongings, but they still left a lot behind, that might mean they don’t really need them.

2.      Have a shopping list before you go, and don’t buy too many items outside of your list.

Thinking about what you need to buy before going shopping, make a list will help you keep expense down.  You know, things are nice in Costco. It looks like we can use everything and eat all the food. I used to be a big eye shopper myself. When I go to Costco, I had a list of 8 things, but I always end up buying more, sometimes 8 things more. That list got doubled! So now, I only allow myself to go over 2 more items for the weekly trip. Otherwise, before you realize, you would have two types of chips, 3 types of crackers, 4 types of fruits, and 5 type of frozen food in your house. Sounds familiar?

3.      Don’t go shopping when you are in bad mood

When we are in bad mood, we tend to go shopping and buy more. Shopping and spend money does make us feel better for a little while, but that’s it. Shopping won’t buy you long term happiness. At last you probably need to pay the credit card charges back and maybe costly interest.

4.      Don’t go shopping food when you are really hungry.

We probably all have the same experience. I buy a lot more food when hungry.

A few times, I went hungry grocery shopping, the shopping cart was full of food and we still had left over vegetables, fruits, milk and such in a week. That receipt nearly doubled our average weekly grocery budget.

5.       Tell kids “No, that is not on the list this time”

You know how kids go: nearly everything is attractive to them. Thanks to the good-looking packages and brands, kids want to buy them every time. Fruit snack, M&M, all kinds of candy, ice cream, gold fish crackers, gum… I can only name a few. What do you respond when they ask? How about simply “No.” or “Not today”, or “We have that at home”, or maybe: “No, that is not on the list this time”. I feel embarrassed when turning down on kids requests, but hey, it’s my money, my life, I control it. People don’t really care and they might understand it all

6.      Shop around and shop online more

With the internet technology and online shopping trends up, nearly everything is online.

I always shop online except for food and clothing. Amazon.com is a good place to start; they usually have good return policy and good customer services. I buy cameras, gifts, toys, laptop, external usb hard drive, SD cards, gardening suppliers and books on it all the time.  There is free shipping on order over $25 on some of the products. Neweggs.com is another place you can get some price from for computer related staff. You can use google.com to search for the product first and see compare them to get an idea on different pricing. One thing I can tell you, it can be a big difference. Once a friend bought a power surge protector at Best buy for over $35, it’s only $15 on Amazon. I will list out some good place I use to buy staff in later blog articles. This will also save you time and gas expense.

7.       Shop at the right place

For everyday staff that I can’t buy online, we usually go to Wal-Mart, Target. For groceries, we go to Chinese supermarket or food center. The price is usually cheaper if not much cheaper there than Stop and Shop or A&P. Find if there is a Chinese, India or Korean super market nearby, check it out yourself. You might save big on your grocery spending every week. I won’t be surprised if you find 20-40% of savings.

More tips to come in my blog at http://waytobetterlife.blogspot.com/

iphone 5: 20 most-wanted features and iphone5 rumors

iPhone 5: 20 most-wanted features

by David Carnoy

 (Credit: designedbyitem.com)

Updated April 12, 2011

I originally posted this column the day after the iPhone 4 launched, which is why you see a lot of comments dating back to June of last year. At the time, I apologized for talking about the next-generation iPhone within hours of the 4's release, but I knew that a lot of iPhone 3 and 3GS owners (like me) were planning on skipping the iPhone 4 and were already looking ahead.

Back in January, we got the iPhone 4 from Verizon. Except for some small design changes, including some tweaks to the antenna design, it really wasn't different from the AT&T version and wasn't considered an incremental upgrade or iPhone 4.5.

Now the iPhone 5 rumors are flying fast and furious, with June, the typical launch window for next-generation iPhones, quickly approaching. Will the iPhone 5 have a completely new design or just be a slightly modified version of the iPhone 4 with enhanced parts and various tweaks? Will the launch be delayed until fall, as several reports are now suggesting? Will there be a smaller, lower-cost iPhone?

All is unknown. But that hasn't stopped me from updating this list of most-wanted features with information gleaned from the arrival of the iPad 2, as well as other new products and services.

As a reminder, the 20 items in the list are ordered from least to most important in a reverse countdown. I've also included what I think are the odds of Apple actually implementing each request. As always, feel free to agree or disagree with me and make your own suggestions (and to post your own ordered wish list). Perhaps Apple's listening.

iPhone 5 rumours: what you need to know

Updated: New iPhone 5 release date, specs, features and more

By Gary Marshall

iPhone 5 rumours are picking up pace

 iPhone 5 (or the iPhone 5G, as some are calling it) rumours are flying thick and fast already.

Will the 5th generation iPhone deliver ultra-fast mobile internet? What other specs will it feature?

Let's raid the iPhone 5 rumour fridge to find the tomatoes of truth amid the stinky stilton of baseless speculation.

iPhone 5 release date

The Apple Worldwide Developers' Conference 2011 date has been announced as 6 June 2011, so it's possible we'll see the iPhone 5 break cover there. However, Jim Dalrymple at The Loop says that this year's WWDC will be about software, not hardware, with Apple focussing on iOS and Mac OS.

This fits with Apple's established rhythm of iPhone releases, with new models appearing in late June or early July each year. So it's a safe bet that the iPhone 5 release date (UK and US) will also be late June or early July.

The usual July release date was mentioned by Engadget's source too in January 2011 - meaning the standard release cycle looks set to continue.

A new report from China later stated that Q3 (which still includes July) is now the earliest we will see the iPhone 5, after the disaster in Japan pushed back supply of key components.

On 20 April 2011, it emerged that the iPhone 5 release date may now be September 2011 rather than June/July. This date was cited by three sources who spoke to Reuters.

Our colleagues on T3.com have rounded up the latest rumours in the iPhone 5 video below.

iPhone 5 form factor

The Wall Street Journal reported that: "Apple is also developing a new iPhone model, said people briefed on the phone. One person familiar said the fifth-generation iPhone would be a different form factor than those that are currently available… it was unclear how soon that version would be available to Verizon or other carriers."

This has since been backed up by reports from Engadget we reported on 17 January 2011, which state the design will be a 'total rethink'.

Of course, since the iPhone 3G was followed by the 3GS it's possible the new iPhone won't be a total refresh and we'll see an iPhone 4S (or iPhone 4GS) before an iPhone 5.

However, reports from China have backed up the larger-screened, metal chassis-sporting iPhone 5 rumours, so the redesign still seems firmly on the cards.

On 22 March 2011, China Times also reported that the iPhone 5 will feature a 4-inch display.

A rumour we covered on 7 March 2011 suggests that the new iPhone will do away with the glass back and opt instead for a metal back which will act as a new iPhone antenna.

And an Apple patent that we reported on on 7 April 2011 suggests that we could see the bezel put to good use on the new iPhone. The patent describes how visual indicators and touch-sensitive buttons could be incorporated to the space around the iPhone screen.

A cheaper, smaller iPhone 5 - an iPhone nano

A prototype version of a smaller iPhone is said to exist, built to ward off competition from cheap Android handsets.

Rumours around an iPhone nano picked up again on 13 February when the Wall Street Journal claimed that the so-called 'iPhone nano' exists and may even be on sale later this year.

Those iPhone nano rumours may hold little truth, though. As we reported on 18 February, the New York Times cites an anonymous source who says there will be no smaller iPhone from Apple. "The size of the device would not vary," says the source.

A white iPhone 5

The Economic Daily News is reporting that white iPhone 5 glass is being shipped, with a supplier called Wintek being the sole touch panel vendor for the white iPhone.

iPhone 5 specs

According to the Chinese Economic Daily News (via AppleInsider), with the exception of Qualcomm chipsets - which would replace the current Infineon chipsets in the iPhone 4 - Apple's sticking with the same suppliers for the 2011 iPhone 5G components.

We'd expect the basics of the iPhone 5 specs to get a bump - more memory, faster processor, and more storage.

The specs? A new antenna, 1.2GHz processor (possibly dual-core) and a larger screen: 3.7" instead of 3.5". The iPhone 5 may also be made from a new kind of alloy, or maybe meat.

In other rumours which surfaced on 15 February 2011, Digitimes is reporting on information supposedly leaked from component suppliers that claim the iPhone 5 will feature a larger, 4-inch screen. Digitimes quotes the source as saying that Apple is expanding the screen size "to support the tablet PC market as the vendor only has a 9.7-inch iPad in the market."

We're also hearing word of a multi-core design, in keeping with the rest of the mobile world, as Apple looks to improve both battery life and performance.

The iPhone 5 will also get a massive graphical boost as it moves to a dual-core GPU - this could herald true 1080p output from the new device, according to our news story on 18 January.

UPDATE: On 10 March 2011 it emerged that the A5 chip, found in the new iPad 2, looks to be headed to the iPhone 5, bringing enhanced functionality and dual-core power.

iPhone 5 digital wallet

There's been some speculation that Apple might include Near Field Communication (NFC) technology in the iPhone 5G, turning it into a kind of credit/debit card. However, as Techeye.net notes, "Apple has looked into NFC before" so this might not be imminent.

However, with the tech being inside the Google Nexus S, the time for NFC may finally be here.

UPDATE: On 24 February 2011, we reported that an Apple patent has revealed an e-wallet icon on the iPhone homescreen. This adds credence to the rumour that iPhone 5 will feature NFC.

However, on 14 March 2011, reports in The Independent cited sources from 'several of the largest mobile operators in the UK', who said that Apple told them not to expect NFC in the iPhone 5. So perhaps we'll have to wait for iPhone 6 for that.

But who to believe? On 22 March 2011 China Times reported that the new iPhone will include an NFC chip.

LTE support

At least one analyst thinks the iPhone 5 will support LTE, super-fast mobile broadband, in the US. That would make the iPhone 5G a 4G phone, which won't be confusing at all. LTE is certainly coming - AT&T plans to roll out its LTE service in 2011 - but an LTE iPhone has been rumoured for a while. USA Today floated the idea of an LTE iPhone on Verizon last year.

iPhone 5 camera

Speaking at a live Wall Street Journal event, Sony's Sir Howard Stringer was talking about the company's camera image sensor facility in Sendai, a town that was recently ravaged by the recent Japanese earthquake and tsunami.

According to 9to5Mac, he said something along the lines of, "Our best sensor technology is built in one of the [tsunami] affected factories. Those go to Apple for their iPhones… or iPads. Isn't that something? They buy our best sensors from us."

iPhone 5 price

If the iPhone 5 is an evolutionary step like the move from the iPhone 3G to the iPhone 3GS then we'd expect the price to stay more or less the same, although in the UK higher VAT rates may well mean a higher price tag.

iPhone 5 pictures

A spurious photo of an iPhone 5 front case has been unearthed by a Chinese reseller, suggesting that the next Apple handset will feature an edge-to-edge display. We're not convinced it's a genuine Apple part, though.

On 17 March 2011, we reported on another supposed set of leaked iPhone 5 cases, this time looking remarkably similarly to iPhone 4 cases.

What do you want to see in the next iPhone? Hit the comments and share your thoughts.

Read more: http://www.techradar.com/news/phone-and-communications/mobile-phones/iphone-5-rumours-what-you-need-to-know-721534#ixzz1KZ4Wfbm5