Hello, and thank you for taking the time to read this information!
Why is the market changing and how long is this going to last?
We in Southern California have witnessed a peak in the real estate market during the summer of 2005. Since then, most areas have seen a supply of property increase, demand decline, and prices fall. As prices fall, equity is wiped out, and homeowners who need to sell or refinance (due to loan adjustment or income change) are unable to do so successfully. Those who cannot borrow or bring cash to the table eventually go to foreclosure.
Foreclosed properties add to the already swollen inventory of homes, forcing conventional sellers and lenders into fierce competition against each other. Lenders always drop prices fast and hard, because they absolutely MUST sell their properties. This is due to federal regulations that require them to foreclose on defaulted loans. Then, when they own too many foreclosed properties, they are penalized by government requirements to hold higher reserves, thereby decreasing the amount of money they can loan out. This is why they become so aggressive when trying to sell.
This scenario will continue to play out until adjustable and sub-prime loans leave the scene, and the built-up inventory becomes cheap enough to be re-sold. According to the various statistical data currently available, the market will bottom-out around 2010-2011.
How much is my property worth?
Most owners today tend to think that their property is worth more than it actually is. For a free and immediate “market value” you may want to go to www.zillow.com and enter your address and zip code. The prices on Zillow are on average about 5-10% higher than actual market value due to the “market lag” effect, and sometimes they can be quite off because of property specifics. Nevertheless, it gives you an approximation of current price and general trends. If you have purchased or refinanced your property within the past three years, it is very likely you may owe more than the property could sell for in today’s market.
What can I do if I owe more than my property is worth?
In the wake of erroneous market forecasts from various Realtor associations and other “economy experts”, many homeowners have decided to just “hold on”, expecting a positive change in the market that would provide a solution to their problems. Many also have chosen to borrow money from friends or family to make payments, or tried to refinance. Unfortunately, due to recent loan underwriting changes and market decline, they can no longer do so. There are options available, but sadly, the solution for most who can no longer afford their home is foreclosure.
What is a Foreclosure?
The foreclosure process begins typically after the borrower misses three or more payments. At that time the bank files a notice of default, and, after another 90 days, files a notice of trustee sale, subsequently attempting to sell the property 21 days later at a foreclosure auction. At the auction, the property may be purchased by an all cash/cashiers check only buyer. Obviously, since there is usually no equity in these properties, there are usually no takers. So, in 99% of all cases, the property reverts back to the foreclosing lender as an REO – “real estate owned” property.
The foreclosure process can take 6-8 months from the first missed payment, and, of course, severely damages the owner’s credit. If the loans had not been previously refinanced, then they are wiped out, and the banks cannot collect the difference between the loan balance and the proceeds from the sale. If the loans have been refinanced, or a HELOC (home equity line of credit) has been used for anything other than purchase money, the lender will be able to pursue collection on the money they lost in the sale. A foreclosure is a lose-lose scenario for everyone.
What is a Short Sale?
A transaction that is a “short pay” or a “short sale” simply means that the property is sold for less than the seller owes. The sale will be subject to lenders approval, and the property is typically either in foreclosure or eventually will be, since the seller cannot afford the payments, cannot refinance (due to decline in value and/or missed payments), and cannot sell for what is owed.
Benefits of a Short Sale:
A successful short sale is a win-win-win for everyone: the bank, the buyer, & the seller
- The bank gets out of the non-performing loan and does not have to take back another property as an REO.
- The buyer gets a good property at a slightly below market price.
- The seller gets a letter from bank releasing the lien and giving a full satisfaction of debt (therefore, the bank cannot later come after the seller for their loss), and without having a foreclosure on the seller’s record.
Does my property/situation qualify?
There is no guarantee the bank will approve any sale. However, the banks are receptive to deals that make financial sense to them, so it is critically important to know exactly what to do and how to present the case to them.
We have created a highly effective team of people (including experienced negotiators and former loss-mitigation managers) that know precisely what to do, how to do it, and how to assure success from start to finish.
In order to see if your situation qualifies for our team to work with, you will need to have a brief discussion with me, where we will review different scenarios specific to your case. There are way too many variables in this process to have a generic, one-size-fits-all qualification. There are also many misconceptions about this process; for example, despite what you may have heard, you do not have to be in default or pre-foreclosure to have a short sale work!
Everyday we work to help homeowners in tough situations and they confess how they heard a realtor, a friend, or some “expert” say that the market will turn around soon, so just “hang on!” The truth is, all honest statistics point to a continued market decline until 2010-2011, so waiting longer simply means you’ll be competing against more REO’s and negative equity sellers.
Other sellers say they found a website, or heard from a neighbor that the best thing to do is to just let it go to foreclosure, or to have an investor make an offer on the property to take it to the bank. Taking advice from those who do not understand the implications of a foreclosure, or working with anyone who is not an expert in short sales, will most likely cost you valuable time, and possibly force you to lose your home, ruin your credit, and be stuck with a bill for the lender’s losses.
Since this is a very complex and individually-variable topic, any further discussions regarding timelines, credit damage scenarios, mortgage relief, debt collection, and tax implications will require further action on your part.
You owe it to yourself to find out if this will work for you. Many of our clients thought they could not qualify or benefit from our help, but they did!
Again, you have three options to explore this further:
- Send an email to info@SDSSE.com requesting an evaluation and the best way to contact you
- Call me directly at 858-254-6741 to leave a message with the best time and phone number to reach you
- Click here to fill out a short inquiry form, and we will get back to you right away
There is no obligation, and you have nothing to lose.