Short Sales- What It Means For Buyers

A short sale happens when the lender settles for less than what’s owed to avoid foreclosure.  I’ve heard the average foreclosure costs the lender over $40k, often making a compromise worthwhile for both sides.  Today, more than 300 homes are listed in the Boise Metro subject to short sale.   If you are shopping for a home or investment, it is very likely you’ll come across one.    

Don’t expect a fast closing.  It can be weeks to months after an offer is accepted by the seller, depending on how far into the process the seller is.   The seller must initiate the process by claiming hardship with their lender and submit financial statements as to their ability to pay.  The lender must determine the current value, weigh the costs against foreclosing, and get approval from the investor if the loan has been securitized.  During all this, the home may be in foreclosure.  In my experience, lenders are willing to delay the foreclosure sale if the seller has a viable offer.

Look for pre-approved short sales.  If the lender has pre-approved the asking price, you may be delayed only a few days, which also makes the window for competing offers much smaller.   If not pre-approved, then the seller’s acceptance subject to lender approval means almost nothing.  Even if your offer is accepted by the seller in first position, the seller can keep taking back-up offers until the lender makes a decision, playing all buyers against each other in a bidding war of sorts. 

It’s a good idea to reserve the right to withdraw your offer at no penalty prior to lender approval, in case you find a better deal or can’t wait any longer.  After weeks or months the lender can also reject or counter any offer.  I have a client who outlasted and outbid all competing offers, waited 3 months for lender approval only to have the lender ask for $3k more.

If the price sounds too good to be true- it might not be.  With the larger numbers of troubled borrowers, slow sales and pressure on lenders to avoid foreclosure, I’m seeing larger discounts.  Discounts in the 10-20% range are certainly possible under current market conditions.

Dan Rowe ABR GRI CRS, Broker/Owner of Dan Rowe Realty, Boise Idaho www.repomandan.com 

Since 1991, specializing in Buyer Representation & Repos; pre-foreclosures, foreclosures, foreclosed homes, HUD Homes, VA Homes, Bank-owned homes, Bank REOs in Boise, Meridian, Eagle, Star, Kuna, Nampa, Caldwell & Middleton Idaho.

Foreclosure Does Not Mean For Sale

Everyone is using the word “foreclosure” to attract you.  Just search for Boise foreclosures, and you’ll see thousands of websites.  What surprises me is how few are Realtors or licensed agents.

There are many dot-coms selling membership for access to lists of “foreclosures”.    Once a default notice is published, the home shows up on websites everywhere as a foreclosure.  However, the majority of these homes will never be for sale. 

The Mortgage Insurance Companies of America recently reported that 67,967 loans with mortgage insurance fell 60 days behind in May, 2008.   Remarkably, 59.8% of those homeowners got back on track.  Therefore, roughly 60% of the foreclosures on many websites will be a waste of time.  

The remaining 40%  have months before the default sale and many options, including a repayment plan, modification of loan, partial claim on FHA, forbearance, refinance, re-instatement or bankruptcy (ask your attorney).  If all else fails, a short-sale is better for your credit than a foreclosure.  Since the average foreclosure costs lenders around $40k, many are willing to allow a work-out; liquidation short-sale.  

Now we’re down to maybe 5-10% of defaults making it to a foreclosure sale- your area may differ from Boise Idaho.  If you want to buy at the trustee sale at a local title company, you’ll need cash for the full amount and a willingness to buy on short notice with limited inspections and limited title guarantees.  And these sellers won’t pay for a buyer’s agent. 

Now let’s talk accuracy.  Many dot-com lists are based on public records and don’t reflect a pending offer or sale until the sale is recorded, which may be months too late.  Life is too short to work with a bad list of maybe for sale homes! 

Your local Realtor has access to the most accurate and useful information.  Today, there are 300+ homes listed by Realtors subject to short sale in the Boise area.  Also, nearly 190 foreclosed homes from HUD, VA and Banks, which come with no delays, less worries about clear title and the safety of inspection and financing contingencies.  And professional representation for you paid by the seller.

Dan Rowe ABR GRI CRS, Broker/Owner of Dan Rowe Realty, Boise Idaho www.repomandan.com 

Since 1991, representing buyers on Repos; pre-foreclosures, foreclosures, foreclosed homes and short sales in Boise, Meridian, Eagle, Star, Kuna, Nampa, Caldwell & Middleton Idaho.

The Web Replacing Realtors?

I started hearing it years ago:  The internet will replace Realtors.  Well, it hasn’t happened yet.  In fact, the internet has helped Realtors become even more relevant to the marketing of and searching for real estate.  My proof?  Today, over 80 percent of homebuyers start their search on the internet.  The number one place they search has “Realtor” in the name! 

Below are some examples of gimmicks and gadgets you’ll find on the internet that could be misleading and/or a waste of time, and should not replace professional guidance.

Mortgage Calculators-  you see them on every website.  They are handy for calculating principle and interest.  But what about property taxes, hazard insurance, mortgage insurance, association fees and flood insurance?  An experienced Realtor can accurately estimate these costs and save you time searching for homes you can not only qualify for, but afford to own.

Foreclosure Sites.  Ever look at local foreclosures on that site that rhymes with Wahoo?  There are hundreds because every home is repeated at least once.  Most on the list have only received a default notice and may never be available- either the default is cured or the home is sold on a short-sale prior to the default auction in many cases.   And that number to the right that looks like a price?  That’s what is owed to the foreclosing lender and means nothing, unless you are willing to bid more against the lender at the default sale, pay cash on the spot and receive less than a warranty deed.  Don’t waste time looking at homes you can’t buy- there’s plenty you can!  contact a local Realtor or visit their website for the most accurate and useful information.

Internet Home Valuations, the newest trend.  Huge margins of error and sometimes grossly innacurate.  If it were possible to accurately appraise homes with a computer program, lenders would be using it and hundreds of thousands of real estate appraisers would be unemployed.  This is just a gimmick to get you to their website so they can sell advertising.  There are plenty of Realtors in your area willing to provide a free market analysis of your home.  Or an appraisal will cost a few hundred.  If you are considering selling, you’ll be best served by an experienced Realtor making a visual inspection, who can take into account location, utility, condition, comparable sold & competing homes, and a huge number of other factors that no computer program could address.

Dan Rowe ABR CRS GRI, Broker/Owner of Dan Rowe Realty, Boise Idaho www.repomandan.com 

Since 1991, specializing in representing buyers and investors on homes in Boise, Meridian, Eagle Star, Kuna, Nampa, Caldwell & Middleton Idaho.

Repomans First Blog

Welcome to my Blog, my first ever, where I log my thoughts about anything real estate.  I may just have an axe or two to grind, wrongs to right, misconceptions to dispel and informative essays to share.  I do enjoy writing.  I see this as a great way to connect with the community and provide a service at the same time.  

My nick-name, Repoman, comes from my website www.repomandan.com, where I post & track all available Repos.  When I started it, there were over 250 Repos in Boise and surrounding areas.  I can’t believe how the name has paid off being easy to remember.

Writing from Boise Idaho, I’ve been in the residential real estate business in the Treasure Valley since 1991.  I started as an agent specializing in representing buyers on HUD, VA & Bank-owned foreclosures, when they were plentiful.  Most of my clients were home-buyers and fix & flip investors.   In the last 5 years, partly because the Repos and bargains had almost evaporated, I have transitioned to working mostly with investors buying rentals.  My base of past clients keeps me going with listings, referrals and the odd home purchase.  The Repos are starting to come back- almost 30 in the area now. 

I hold several professional Realtor designations: Accredited Buyer Representative, Graduate of the Realtor Institute and Member of the Council of Residentail Specialists with only one class to go for my certification.

I stayed with the same company for over 16 years, including serving as designated broker for 4 years while overseeing more than 500 transactions.  Then, in July, I turned 40 and  struck out on my own to start Dan Rowe Realty.   The name is not ego-driven, but tells everyone who knows me I’m on my own.  

I already have 2 agents working with me.  The first to join, Carleen Egbert, is a former investor client gone pro.  I did not enjoy losing her as a client, but she may still make me money as my agent.  The second to join, Gay Cornell, is an experienced agent that came over from the company I used to work for.  She likes my commission splits and attitude better. 

I’m not a heavy-hitting super top producer.  I have a life other than real estate, although sometimes I wonder.  I average more than 3 sales per month in my own practice.  When I’m not working from my home office or out in the field, I enjoy steelhead & salmon fishing, camping in our RV trailer, watching football, home improvement, playing guitar and spending time with my boys.  My wife, Kathy, home-schools our boys and we are living the dream of total freedom.  Thanks for your interest.