The Short Sale: An Under-Utilized Method to Avoid Foreclosure

The Short Sale: An Under-Utilized Method to Avoid Foreclosure

We have an epidemic of foreclosures in America. Las Vegas, Nevada has been leading the pack in this grim statistic for over two years. I was at a real estate conference in Las Vegas last week and one of the panelists who consults on a committee working with the government made a comment which stunned me, 80%-85% of homes that are foreclosed across the nation were never listed on their local MLS (Multiple Listing Service) as a short sale prior to being foreclosed.

Many sellers who are stuck underwater usually end up feeling powerless after fighting within the system, and eventually give up. Sellers need to know that there are still options open to them that involve little or no cost which may save them from a foreclosure or even bankruptcy. Your REALTOR assumes the burden of dealing with your bank on your behalf, but the results can offer a buyer a much quicker return to normalcy.

A short sale is when a homeowner sells a property for less than is owed on the current mortgage. Permission must be obtained from the seller’s lien holders to do so, but if successful, foreclose is avoided. The process is complex, but the results are far more favorable to a seller than foreclosure. Under short sale, the debt is usually settled in contrast to a foreclosure where the bank gets the home back, but the issue of the debt is not settled and the bank may have strong recourse available to them to pursue the unpaid debt depending on State law. You will have to consult with an attorney on these issues.

People who know they have to alter their loans to maintain their ownership engage in an activity known as a “workout” of their loan. Most major workout options consist of the following:

1. Repayment of past due payments
2. Forbearance (temporary suspension of payments)
3. Loan modification
4. Short sale
5. Deed-in-Lieu of foreclosure. Investment homes are not eligible. Borrowers voluntarily give the property back to the bank. This is however, still a foreclosure.

With over 4 million foreclosure filings expected in 2010, alternatives to foreclosures are being encouraged by the Federal Government. In a market like Las Vegas, where plummeting property values have excluded many homes owners from curative programs such as Hope For Home Owners, the short sale is a viable option for many homeowners who know they cannot maintain the mortgage.

Sellers, go seek counseling on all the potential options up front. You want to move from one option to the next rather than try only one, stop to learn the next, and on an on. The problem with this strategy is you will run out of time to really mount a successful short sale effort. Don’t wait until two weeks before your home is due to be foreclosed and then try to take a stab at a short sale.

Going back to the original statistic that over three quarters of people who lose their home did not try to sell it demonstrates that the public is unaware or at the least uninformed that they can work with their bank to sell it, rather than have the bank simply come and take it!

Please contact Sena and Associates at 702.376.0088  for a free consultation on short sales and whether it may be a good option for you.

After much speculation within the industry, news out of Washington D.C. this week confirmed that Senate is moving forward on extending the $8,000 first time home buyer tax credit. The Senate still has to approve the measure; however, it appears to have bi-partisan support amongst Republicans and Democrats. Read More

Unfortunately, the misconceptions many sellers in Las Vegas may have about this question often prevents them from pursuing one of the best options to a foreclosure—the short sale. They just assume that they won’t be able to pay any closing costs, have the money to cover buyer requested repairs and mostly believe they cannot afford a REALTOR.

In reality, if the seller’s bank approves a short sale, they will allow for the majority of these costs to be taken right out of the sales proceeds, including the REALTOR’s commission! In some cases, the seller may never have to contribute any money at all.

Now that being said, there is no guarantee that a seller will never have to contribute something to the closing. If you’re interviewing prospective real estate agents to list your property, and they tell you this, run! No REALTOR can make such a guarantee. You don’t even have an offer yet; you don’t have an appraisal; the bank has not evaluated the seller’s financial profile; and lastly, you certainly don’t yet have an offer from the seller’s bank with the terms of the short sale they are willing to accept.

Example:

Seller has a home on the market as a short sale for $200,000. The bank usually allow for many of these costs to come directly out of the $200,000.

• Escrow and Title fees
• Title Insurance
• REALTOR Commissions
• Taxes (both property and transfer taxes)
• Home Owner Association fees
• Legal Fees (if applicable)

I always try to minimize any potential costs my sellers will have to incur, and present in a straightforward manner, exactly what the benefits and negatives of the seller covering a certain cost, so that the seller can make an informed decision.

In the current Las Vegas real estate market, we are literally trying to settle hundreds of thousands of dollars of debt per property, so in some cases, the sellers may have to contribute something and should not automatically expect that they will not have to contribute in some fashion. When you look at what is often asked from sellers as compared to how much debt is being settled, the amounts are often staggeringly meager.

Earnest money deposit (EMD) is the amount of money the seller has REQUESTED as a deposit to agree to sell you their house. Consider it a sign of good faith that you, the buyer, will go through with the purchase once you initiate the offer. Remember, by agreeing to your offer the seller has severely limited their ability to market their house for sale during the time you requested to close the transaction.

The EMD REQUESTED is always listed on the Multiple Listing Sheet (ask your realtor to see it). I capitalized requested to highlight the fact that EMD amounts are not set in stone. Almost everything is negotiable in this transaction and EMD is no exception. Offering to small an EMD can paint you as an insincere buyer. It also may cause you to lose the purchase to a competing offer with a higher EMD. Conversely, I always advise my clients not to offer any more of an EMD then is requested from the seller. Why risk a penny more of your money then you have to? If you ever have to default (breach the contract without an acceptable reason) you could lose your EMD.

Always make sure you have the money in the bank before you submit a check with your offer. The EMD will be turned over to the title company (usually within one day of acceptance of your offer) and they will cash it shortly thereafter. They place the money in a trust account until it comes time to close the transaction or until it is requested by either the buyer/seller.  An interesting side note, even veterans (doing a dollar down VA loan) have to put down an EMD. The same rules mentioned above apply to veterans as well (though they have slightly greater protections in regards to potentially losing their EMD).

The down payment is the amount of money the LENDER requires that the buyer put into the purchase of the property. For example, on an FHA backed mortgage the lender requires that the buyer put down 3.5% of the purchase price. In return, the lender agrees to finance 96.5% of the purchase price for the buyer. The seller DOES NOT dictate what  the down payment requirement is.

If the EMD is more then the required down payment, then the extra money can be used for other things. It can be used to pay for closing costs (including buying down the interest rate) or it can be partially refunded at close of escrow. Another important difference between EMD and down payment is the time in which the two types of funds most be committed. EMD most be submitted with the offer and down payment is usually required at close of escrow (at the end of the transaction).

Always check with your local professionals as laws and procedures vary from state to state. My name is Greg Hoffman. I have lived in Las Vegas for 19 years and I have been a Realtor here for 10 years.

Some of the easier banks to work with on a Las Vegas short sale: Aurora, Nationstar, Wells Fargo, GMAC, Wilshire, HSBC, OCWEN, Specialized Loan Servicing

If you have mortgages with one of the above institutions and believe that you may qualify to do a short sale of your Las Vegas Home; then help may be easier than you think. The number one threat to successfully selling your home via a short sale (assuming you have a legitimate hardship and need to sell for less than you owe your bank) is the name of the bank on your mortgage statement.

I’ve found the above institutions understand the value of approving a short sale in an upside-down market such as Las Vegas is currently experiencing. The alternative is foreclosure, period. Foreclosed homes usually net less for the banks, so not approving the short sale is simply illogical. Lenders can get the homes off their books without ever having to take possession of the home—less liability, lower exposure to loss.

Banks that can make a decision on approving a short sale inside of 6 weeks will give those sellers a far better chance to complete a short sale as the end buyer will not get impatient and bail on the deal.

Sellers who can no longer make their mortgage or who will soon arrive at that point, give us a call to see if your lending institution has a reputation for really working with borrowers.  We can be reached at 702.376.0088 or you can complete the form to the right.  You can also read our most Frequently Asked Short Sale Questions.

Buying a short sale in Las Vegas is becoming a much more attractive option for home buyers as our currently inventory has been slashed in recent months. Of the 11,760 homes for sale right now in the Las Vegas valley, only 2,575 are bank owned foreclosures. As a buyer, if you factor in homes that will not be in your price range, reside in areas that do not interest you, as well as the condition of the home not being to your liking, that 2500 figure quickly gets whittled down. Of those few homes that may draw your attention, we are frequently seeing multiple offer situations and your chances of being the winning bidder are further reduced! Buyers get worn down with this process. Imagine having to go out and look at 25 homes a week in the heat of Las Vegas, put in offers on the couple you actually like, only to get shot down. This process can continue for weeks.

As an alternative, buyers have begun to turn to homes being offered on short sale terms. There are advantages to buying short sales vs bank owned.

1. You get to lock up your home under contract right away. A good agent, proficient in short sales, will know how to get that seller to commit to you as a buyer. Remember, sellers can still forward additional offers to the bank even if you have a contract, so having a strong agent, who can keep the seller committed to you is essential.
2. The real estate industry has becoming more adept at processing short sales in this market saturated with distressed sellers. Short sales have always existed, but never has the industry been forced to deal with the volume of foreclosures and short sales. Although not perfect, it is easier than a year ago, and getting better.
3. You often get to see how the home is being treated. With many short sales, they are often occupied, giving you insight into how they home is being maintained, something not available when you are making offers on vacant foreclosures. Also, the landscaping can also be saved, since all utilities are on at the property. Foreclosures usually take at least a couple of months to bring to market, and by that time the hot temperatures may mean you will have to schedule a trip to the local nursery once you move in to replace your burned out landscaping.
4. Sellers are usually very cooperative. They rarely fight you on seller contributions for closing costs, because they don’t care. They are not getting any money from the proceeds of the sale anyway. They are very appreciative of you as the buyer, because you (and your money!) are their ticket out of an impossible situation.

Most of the information out there about short sales is all negative; the pitfalls, drawbacks, etc., and very little about the upside. That is the purpose of this article, to show the benefits. To understand more about the short sales, continue to read through our blog as many topics regarding short sales here in the Las Vegas valley are covered. For immediate assistance, please give us a call at 702-376-0088.

I have been corresponding with a potential Las Vegas Property Management client for a few weeks now.  The initial contact I received was an email asking about our services, fees and an idea of how much his property would rent.  As soon as I received the email, I began to do some research on the condo located in Henderson, Nevada but I couldn’t find the unit number he provided, it didn’t exist.  I sent an email back to him and within a few minutes he sent me the correct unit number as he had the numbers mixed up.  I did my research and sent him an email with details about our services, fees and rental rates.

A short time later he responded and asked if I would be able to meet with him while he was in town working on the unit.  So of course I agreed.  Well today was the day I met with him and his wife.  During the appointment, they asked me several questions pertaining to renting their condo, my experience and why I would be the right Las Vegas Property Manager for the job.  As the appointment drew to a close, I asked them if they had a chance to interview any other Property Managers and his reply was a bit shocking.

He advised that out of all the Property Managers in Las Vegas that he emailed, I was the only one that caught the Unit Number mistake in his email.  It wasn’t like they could have a done a search based on his name and received the correct Unit Number because at the time he was in the process of buying the condo and it was still in the name of the Lender.   So how were the other Property Managers able to provide rental rates without knowing if the unit was a 1 or 2 bedroom unit?  He never provided that information, all he provided was the address.  Makes you wonder how some people are even business!

Many homeowners who purchased their Las Vegas Home between 2004 and 2007 are most likely upside down, unless they put a substantial amount down of at least 40%.  With home values dropping from a high of $315K in June 2006 to today’s average price of $140K can make selling your home very difficult and most likely will require you to sell it as a short sale.  Unfortunately, just because you want to sell your home does not mean the Bank/Lender is going to agree to take a loss without some type of hardship such as job relocation, job loss, divorce or death.  So depending on your financial situation, renting your home for the next 3-5 years could be an option to selling.

Giving the state of the economy, the Las Vegas Rental Market is doing well.  Many former homeowners are now becoming renters as they have lossed their home to foreclosure or sold it as a short sale.  For those that lost their home due to foreclosure will be unable to purchase a home for 5 years, making them an ideal long term renter.  Knowing that there is still a market for rentals, the next step is determining what your home could rent for based on what other homes have rented for in the area.  The rental price could be the determining factor on whether you can afford to rent your home out or if the negative cash flow is going to force you to sell your home.  The last thing you want to do is rent your home out knowing full well you are going to let it go in foreclosure as this is very unethical and could cause a hardship for the tenants when they are forced to vacate the property.

If you are in a position that is forcing you to sell or rent your Las Vegas Home, it is important to contact the right real estate agent.  Chances are, if you are going to sell your home, you will need a real estate agent that specializes in short sales and remember there could be legal and tax implications.  If you are going to rent your home, I would recommend having a Las Vegas Property Management Company handle the management of your property.

If you have any questions about the short sale process, feel free to contact Paul Rowe at 702.376.0088.  If you are thinking about renting your Las Vegas Home and are in need of Property Management Services, feel free to contact Tony Sena at 702.376.7379.

Las Vegas Real Estate sales of single-family homes, condos and town homes hit a record of 4,702 in June, beating the previous record of 4,414 set in June 2004 according to the information released by the Greater Las Vegas Association of Realtors.  The main reason for the increase in home sales is the average sales price of $140,000 which is considerably less than the average sales price of $242,000 in June 2004.  The drastic drop in home prices has made it affordable for first time home buyers once again and lucrative for real estate investors.

Majority of the Las Vegas Properties that sold in June were single family bank owned homes and short sales.  Condo and town homes also saw an increase in sales compared to June 2008.  This can also be attributed to the drop in the average sales price which is bringing real estate investors to the Las Vegas Real Estate Market. Many real estate investors are buying condos with cash and then placing them on the market for rent with a Las Vegas Property Management Company.

Now that Banks and Lenders have lifted the moratorium, we should see a rise in bank owned homes hitting the market over the next 5 to 7 months.  This should fuel homes sales even more as many real estate agents are receiving multiple offers on their bank owned home and even short sale listings.  The bad news is the increase in bank owned homes for sale could drive down the average sales price even further as Banks and Lenders price the properties below market value for a quick sale.  Either way, don’t expect Las Vegas Home prices to increase any time soon.

We are a team of professionals that can assist you in all aspects of real estate in Las Vegas, from condos to multi-million dollar estates.  We pride ourselves on providing top-tier service for all our clients, but we do recognize that there is a big difference between residential homes and luxury real estate.  It is not just another property, it is a home that defines a lifestyle.

Las Vegas Luxury Homes and Estates require considerable time as well as a specially designed marketing program in order to attract the right buyers. We have the resources to attract those qualified buyers and match them with your prestigious home.

Any Las Vegas Real Estate Agent would be privileged to list and sell a multi-million dollar property, however; not every agent has the experience combined with the techniques to do so successfully.  We offer a customized marketing plan designed to get your luxury home sold in less time and with less stress.

We start by focusing on your customized marketing plan.  This involves defining and describing your property accurately and creatively, professionally photographing your home, setting up a virtual tour, and maximizing your homes internet exposure.  We specifically target buyers searching for luxury real estate by ranking our website on all the top search engines.  In turn, your luxury home will be one of the most viewed world-wide.  It is essential that luxury homes and estates are clearly defined. Marketing a home as distinctive as yours requires uncommon knowledge and creativity. High-end Las Vegas Homes and Estates are unique because of their quality, historic significance or eminent location.

We have the resources to generate the greatest number of prospective buyers for your Las Vegas Luxury Home.  We use a wide variety of methods to market your home; display advertising in national and international editions, placements in premier home magazines, customized press releases, and direct mail are only a few of these techniques. We continually prove that we can market homes to the maximum number of qualified buyers worldwide, as well as handle every inquiry with discretion, efficiency and sophistication.  Our website provides potential buyers access to virtual tours, expanded listing information, and a property search. Considering that over 80% of all buyers search the internet for available properties, a top ranked website like ours is always beneficial.

We are dedicated to helping you sell your Las Vegas Luxury Home and providing you with the type of service you deserve.   We appreciate the opportunity for an interview, so please contact us when you are ready.  We have the experience, knowledge, and ability to properly market your luxury home.

For a confidential interview, please contact Tony Sena at (702) 376-7379 or complete the contact form to the right.

Finding the right Las Vegas Property Manager could mean the difference in your property being rented and maintained or sitting vacant and costing you money.  Even though most property management companies in Las Vegas offer the same services, not all companies follow through with their services.  I get several calls a week from real estate investors stating their property managers aren’t providing monthly accounting statements, rent money isn’t arriving on time or at all and there is no communication.  This is why our clients have access to their account via a link to our property management software, we automatically deposit all rent monies by the 10th of the month and we always keep our clients updated on the status of their property.

Another key aspect in property management is properly screening tenants.  Unfortunately, most property managers never even meet the tenant until they are signing the lease or picking up the keys.  They choose the tenants based on the information they receive on the credit reports, criminal background check, employment check, rental history and reference checks.  An area that is commonly over looked in the screening process by property managers is interviewing potential tenants.  Sitting down for 15-20 minutes can tell you alot about someone and is just another factor in screening a potential tenant.  Being a former City of Henderson Police Officer, I have years of experience interviewing subjects and I rely on my experience when I sit down and interview potential tenants.  I feel my experience makes me the ideal Property Manager to find the best tenant for your investment property.

So if you just purchased an investment property in Las Vegas and need a Property Manager or looking to replace your current Property Manager, give us a call at 702.376.7379 and I will be happy to go over our services.  We are available 7 days a week for all your Property Management needs.

Recently, I was very pleasantly surprised to receive a call from Countrywide (now known as Bank of America since the acquisition) regarding one of my Las Vegas Short Sale files. Usually, the communications goes in one direction, with me doing all the calling. The bank negotiator needed some updated information on the file, namely, a 2008 tax return and an updated worksheet detailing the monthly financial obligations of the sellers.  The negotiator gave me a deadline of 6 days to get her the information.

I left a voicemail and emailed my sellers about the information the bank needed and if they could fax it to me as soon as possible. It so happens that my sellers have moved out of State, so communication is anything but immediate. Knowing this might be a problem, I emailed the negotiator that I would do my best to get the info but we might need a couple more days to get them everything as a weekend was going to fall within the 6 day period.  As a show of good faith, I emailed all the information I had on hand to the bank and explained I was working on the balance.

On the following Monday, my assistant received an email from the negotiator stating she was missing some items. It was obvious that she did not read my previous email, so we fired off another message stating we were working on getting the info and would need a couple of more days. We also sought clarification of one item in particular, and asked her to explain it, and of course, help gain a delay in the deadline.

The next day, we get an email stating she cancelled the file and we would now have to start all over. Luckily, I complained to a supervisor that is was ridiculous to cancel the file when we were actively working to get the requested info. Sure, that negotiator gets a file off her desk, but now it goes on to someone else’s, only this time, a lot of work which was previously done will have to be needlessly repeated.

I could rant all day about this bank and person (the negotiator) who should have employed some common sense when evaluating a deadline, but this simply illustrates the challenges Las Vegas short sale agents have to overcome on a daily basis. I will not let this setback stop me, but it is a very stark reminder that we cannot get these deals closed without the cooperation of our sellers. The banks make us wait around for weeks and than out of the blue we have gather time sensitive information. Failure to do say may have significant consequences. As this situation demonstrated, sellers must stay in contact with us at all times and be ready to produce information as needed.