Tuesday, June 29, 2010

Buying or Selling a Short Sale


Short Sales

Short sales are becoming even more common due to the huge increase in the number of foreclosures which are having an effect on home values across the nation. Due to the current subprime and anticipation of the more ARM resets, many people are considering short sales but are not clear on the short sale process and how it can be used to avoid foreclosure. A Short sale is basically a process which allows the borrower to sell the home for less than what is owed on the mortgage loan and allows the seller to avoid having their credit score hit with a foreclosure penalty. Although, there is still a penalty given for short sales, the time to buy a home is shortened with a short sale versus a foreclosure home. A foreclosure can stay on your credit report for up to 10 years while a short sale can range 3 to 5 years. Depending on when you plan to get short sale completed, the IRS may consider your debt forgiveness as taxable income.

The Short Sale Process for Sellers:

1. Contact the lender to discuss the chance of a short sale of the mortgaged property and determine the lender’s process for completing a short sale, successfully.
2. The borrower is to send a lender of hardship to the lender. The letter is to include all financial difficulties, in which the lender can research to validate the seller’s financial situation. Additional documents are to be included with the letter, including bank statements, investment accounts, paystubs and other financial records.
3. A lender will review the settlement package and consider forgiving the remaining loan balance and all expenses (property taxes, etc.), real estate commissions and other expenses associated when closing.
4. A BPO will be ordered by the mortgage lender to determine a Broker Priced Opinion (BPO) to examine the prices of the home in the market by looking at comparables.
5. The lender then will review the purchase agreement and determine if the real estate commission is acceptable.

Short sales can be quite lengthly and need a good real estate agent, a lender willing to work with you on the loan and a buyer.

Success Rate? Success rate can range from 6% to 50% depending on the lender holding the loan, how many loans are on the house and the Realtor’s experience. There are many factors involved in making a successful short sale. The Realtor has be prepared and present to the bank all the required documents to prove to the bank that the owner can no longer afford the house and also prove the home is worth less than the surrounding market.

Tips:

* Be ready for anything. A short sale can be finalized with the bank in 2 weeks or take as long as 5 months.
* If time is an issue. Stay away from short sales, they are unpredictable.
* Be aware that the owner is still living in the home and depending on their situation, they may take things from the home prior to closing. Make sure your realtor is on your side.
* Find out how many loan the borrower has on the home and how much they owe.
* Continue to take additional offers while the bank is reviewing an accepted offer to keep your options opened. The buyer may have an addendum that allows them to back out at any time.
* Consult an accountant, lawyer or real estate with your important decision in deciding on a short sale.

Short Sale Buyers

The Short Sale Process for Buyers:

1. Hire a Realtor to protect your best interests, especially when dealing with short sales.
2. Search for Short Sale Propeties
3. Make an offer on a short sale property and include a Short Sale Addendum which allows you to back out prior to and after a lender has sent written approval of the short sale. This way you can continue looking at homes if the short sale is taking too long or you can back out at any time if something better comes onto the the MLS.
4. Make escrow to start AFTER the lender has submitted written approval to your agent before getting your earnest money tied up in possibly many months into a limbo account.
5. Get an appraisal and home inspection AFTER the lender has approved your offer.

Tips:

* Many short sales fail because the mortgage company is unfamiliar with the local market. Don’t expect a quick answer as they research the comparable home sales.
* The lender may request the real estate agents reduce their commissions to minimize costs.
* The lender may demand the seller to sign a promissory note to pay back the short sale. If the seller refuses, it may sour the deal.
* The mortgage company does not want to own the property, that’s the last thing they want to do.
* Make sure to include an escape provision if the process takes longer than you want or a better property comes along.


The Metro Atlanta housing market continues to evolve and Georgia Down Payment Assistance Programs have as well. For years, Georgia Down Payment Assistance Programs were available only to the GA first time home buyer, persons who have not owned a home in the previous three years. In light of the recent housing crises, several programs are now available to Metro Atlanta move-up buyers who do not currently own a property and higher income households that may ease the acquisition process associated with home ownership and make it affordable to a wider consumer base.

These Georgia Down Payment Assistance Programs offer silent second mortgages, interest-free loans with no monthly payment requirement as long as the borrower owns and occupies the property as their primary residence and does not refinance the mortgages. The borrower and property eligibility and redemption periods, the length of time that the second mortgage must encumber the property before the loan is forgiven, vary by product, so call me today for more information on the right non- GA First Time Home Buyer product for you.

Georgia Dream Program

Branded Georgia Dream Recovery, this second mortgage offered by the State of Georgia offers a silent second mortgage of up to $7,500 on new or existing properties in 22 flood-ravaged counties (including 13 major counties in Metro Atlanta) priced up to $300K. The borrower must have a middle credit score of 660, may have liquid assets of no more than $20K or 20% of the purchase price at settlement, must attend a HUD-certified home buying class and must contribute at least $1,000 toward the transaction. Please see the Georgia Down Payment Assistance Recovery Flyer for more details and then call me with questions.

City of Atlanta Opportunity Down Payment Assistance

Borrowers buying within the City of Atlanta may be eligible for a second mortgage of up to ten percent of the purchase price on properties priced at up to $252,890 with a redemption period of ten years. The borrower must have a sound credit history, must attend a HUD-approved home buying workshop and must contribute at least $1,500 toward the transaction. See the Atlanta Down Payment Assistance flyer for more information and then call me for more details.

City of Atlanta Beltline Affordable Housing Trust Fund

Properties located in the Beltline Tax Allocation District may be eligible for purchase by qualified borrowers using Beltline Funds of up to 20 percent of the sales price up to $252,890. There is a fifteen-year redemption period and the buyer must attend a homebuyer class. Call for a list of eligible properties today.

City of Atlanta Vine City

The Vine City/English Avenue Trust Fund is available to borrowers looking to buy properties located within the eligible city boundaries. The product offers down payment assistance of ten-percent up to a maximum dollar amount of $15,000. The borrower must contribute $1,500 toward the transaction and attend a HUD-certified and City of Atlanta-approved home buying class. For more information, please call today.

Neighborhood Stabilization Programs

Counties within the Atlanta Metro Area are offering down payment assistance of up to $25,500 through their Neighborhood Stabilization Programs (NSP). Some of the NSP programs are administered by the Georgia County that has purchased the properties, completely renovated them and placed them on the market while other municipalities are allowing the buyer the opportunity to find their own foreclosures. As an example, please see the Gwinnett County Down Payment Assitance NSP Flyer here. Contracts must be carefully written in accordance with program guidelines so please call today for more information.
Please note that other programs may be available within Metro Atlanta for move up buyers and higher income households.


Here’s a snapshot of some of the various active Georgia Down Payment Assistance Programs to help the GA first time home buyer determine which program will work for them. Funds are provided through a soft second mortgage (an interest and monthly payment-free mortgage) that is forgiven after a set period of ownership. Most programs are restricted to those whose incomes are at 80% of the average median for their household size while others are offered at 100% of the average median for the household size. See the flier to the left of the screen for details, restrictions and more.

* State of GA First Time Home Buyer Program – Branded Georgia Dream, the state offers soft second mortgages of up to $10,000 to be used to toward the down payment and closing costs on the purchase of single family homes, townhomes, condominiums and more. The borrower must be a Georgia First Time Home Buyer (has not owned a home in the past three years) and must use the first mortgage offered by the state.

* The Atlanta First Time Home Buyer Program – The Atlanta Development Authority offers down payment assistance programs to the Atlanta First Time Home Buyer who is looking to buy within Atlanta City Limits. Qualified borrowers may buy eligible properties using one of or combining a few programs:

o Opportunity Down Payment Assistance Program (ten percent of the purchase price up to $252,890),

o the Atlanta Affordable Homeownership Program ($10,000 toward the purchase price up to $252,890),

o Vine City/English Avenue Trust Fund Program (ten percent of the purchase price up to $15,000)

o Beltline Affordable Housing Trust Fund (Up to 20% of the purchase price up to $$252,890)

* Gwinnett Down Payment Assistance – Branded HOMEStretch, Gwinnett County offers the eligible Georgia First Time Buyer up to $7,500 toward the purchase of single family homes, town homes and condominiums built after 1977.

* Dekalb Down Payment Assistance – Dekalb County offers up to $8,000 in down Payment Assistance to be used toward the purchase of single family homes.

* Neighborhood Stabilization Programs (NSP) - Municipalities are buying foreclosed properties within their areas of greatest need (areas hit hardest by foreclosures), rehabbing them, returning them to the market and then offering soft-second mortgages of up to $22,500 to be used toward the down payment and closing costs. Both the state (temporarily) and some local municipalities allow NSP Funds to be used by borrowers who have identified foreclosed properties within those areas to be used toward down payment assistance. If you are NOT working with an agent, please call for a list of Gwinnett and Henry County NSP properties.

* HUD $100 Down Program – Granted, this is not a traditional down payment assistance program, but owner-occupant borrowers may be eligible to purchase a HUD-owned home for as little as $100 down. Up to one-thousand dollars in earnest money may be still be required, plus the inspection fee, and there may be instances when more than $100 will be required (i.e. multiple bids, etc.), but this program also provides a pathway to home ownership to those with little money for the down payment AND there are no income limits.

Other Georgia Down Payment Assistance Programs are available to the GA first time home buyer at various times throughout the year, but the funds do run out, so be sure to return to this blog frequently for updates. Again, if you are not working with an agent, please feel free to contact us with any questions tha you may have.

Thursday, June 24, 2010

Castleberry Point







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Tuesday, June 22, 2010

 

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