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What follows are some of the most common delays that crop up during the short sale process, with a little advice on what agents can do to avoid them:

Title Problems

Real estate agents should make sure that a title exam is done at the start of the process in order to identify all persons named on mortgages and deeds, and to determine all lien holders on the property. This can save heaps of trouble later on should any issues crop up.

Lack of Communication

Specifically, we’re talking about lenders here. Misunderstandings and lost or incomplete documents can cause big delays in the process. Be sure to follow up at least twice a week with the mortgage service in order to keep on top of things.

Delayed Starts

The short sale process doesn’t even begin until a contract to purchase has been agreed upon and signed. However, lenders won’t even look at the contract until the seller has been approved for the short sale and the market value of the home has been determined, so make sure these are out the way first.

Package Incomplete

One of the biggest causes of delays is down to agents submitting incomplete packages, and so agents should take extra care to ensure that all documents are completed accurately and submitted without errors. In addition, all financial information about the homeowner and seller needs to be kept current, and should be forwarded to the lender every 30 days.

Failing to Build a Rapport

Agents should aim to develop a rapport with their contact at the lender as a way of building up trust and mutual respect – very important in what can be an extremely stressful process. Such a simple step can make things go much more smoothly should problems arise.

© Andy Dean – Fotolia.com

Lenders are verifying home values with automated systems, broker price opinions (BPOs) and in some cases, appraisals. In short, they are ensuring that offers accepted reflect current comparable properties. Despite what lenders publicly say, there is little motivation to complete a short sale; foreclosure is not a bad option for them or one they shy away from.

Key points for buyers interested in short sales to remember:

• Most agents price short sales to generate offers, it is likely and often a virtual certainty that there will be multiple offers and that the accepted offer will be at or above list. Going in 20% lower is likely a waste of time.
• Lenders look at the net amount of an offer. A full price offer with 5% in closing costs is not a full price offer. Look at the net, lenders will.
• Keep the offer clean and simple. Cash is king and so is simplicity, focus on the net amount and demonstrate the ability to close quickly. The fewer stipulations and the shorter the time frames the better.
• Homes are almost always transferring “as is”, repairs are almost never completed.
• Don’t be surprised if the lender counters. Most short sales are not “binding” until approved; in GA it’s fairly common for lenders to counter an offer that’s been under review for weeks or months. Right or wrong, this typically happens as a result of their research on market value. In many cases, it’s wise to challenge poorly prepared BPOs and an experienced agent can often successfully appeal them.
• Don’t be surprised if the process drags on and on. As noted, lenders are mostly ambivalent about short sales; foreclosure is not a bad thing for them. As many former owners and many buyers will note, dealing with the bureaucracy can lead to aggravation, stress and ulcers. The most important thing for a particular seller and buyer is merely one of hundreds for a lender, and they treat it as such.
• Don’t be surprised if the deal falls apart. A short sale has many variables that are completely outside of the buyer’s control. Of all involved, the buyer has the smallest and least influential role after contract acceptance. Often, buyers grow weary of the process and terminate realizing that the ends do not justify the means.

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At least that’s the way it is for now. And until something changes, you can push forward with this information to garner more listings and be of service to your marketplace.

With just a bit over a two months left before the scheduled expiration, you might consider urging homeowners to do their short sale immediately, so they can get a deal closed before year’s end. However, be aware that deals not approved and closed by Jan 1 may be subject to taxation.

If I were a home owner considering a short sale, that might make me pause.

Considering that last March a bill was introduced in the U.S. House of Representatives to extend the Mortgage Debt Relief Act through the end of 2015, people may want to sit tight until they’re sure. I suspect we’ll see fewer new short sales come on the market in November and December just for that reason.

As a real estate consultant, you are positioned to discuss this with homeowners. If they’re in an NOD status and must sell or go to foreclosure, they might be more motivated to risk short sale, even with just barely 60 days left until the deadline. On the other hand, they may simply decide it’s time to go to foreclosure rather than be faced with a sizable tax bill. They’re really caught in the middle and need help.

You can help them weigh the options, and possibly generate listings for yourself. Here’s one idea for some last-minute short sale marketing:

Hit the Road for Listings

Nothing sells like urgency. You can use the pending expiration of the Act to get the attention of homeowners who are in NOD status or who need to move for other reasons. And one of my favorite approaches to getting their attention is to hit the road. Do a hard-core door-knocking real estate marketing campaign for the next two weeks.

When you do talk to homeowners who’ve been hit by the crisis and are under water, be sure to let them know that last March a bill was introduced in the U.S. House of Representatives to extend the Mortgage Debt Relief Act through the end of 2015. The new bill, titled “Homeowners Tax Fairness Act” requires congressional approval, which has not been given yet, but all the pundits believe it will.

Short Sale Marketing Package

Here’s how you can use the current expiration to introduce yourself to homeowners and provide information that can do them real good, whether they list or not.

1. Put together a short sale marketing package

Include:

• A cover letter introducing yourself and your real estate credentials, preferably with referrals. Make sure to include a crystal clear call to action.
• A short book or series of blog posts that offer short sale FAQ’s for homeowners. Make it simple.
• Alternatives to short sales ideas…be a consultant. Talk about renting the home, putting it into a vacation rental pool, doing a lease option, or other possibilities.
• Positives about short selling, such as the availability of relocation funds. (If they have a Bank of America first loan, and they activate their short sale before it is offer-generated, they could be entitled to up to $30,000.)
• Information about buying again fairly quickly (or even before selling if they can rent their home for enough to make up the mortgage payment) and take advantage of low rates and lower prices. A better start.

2. Put the marketing package into a Fed Ex or Post Office overnight envelop

This will ensure the package gets opened if you have to leave it at the door. When handing it to the homeowner in person, remove it from the overnight envelop and hand your real estate company folder to them.

3. Go knock on the door of the homeowners currently with NOD (notice of default) status

Knocking rather than calling on real estate leads may take a bit more guts, but you’ll have vastly better results with the personal touch. You can also door-knock in general, without needing NOD status. The NOD status simply improves your odds.

4. Use a simple script

Say something like: “Hi, I’m __ with ___. Are you Mr.____? I’m on a list that notifies me when someone in my market area has been issued a Notice of Default by their lender. My job is to let you know that you have options, depending on your situation. For instance, with the Mortgage Forgiveness Debt Relief Act set to expire in December, getting a short sale started immediately may be your last chance to escape the tax consequences of a short sale. Do you have a few minutes to talk about this now or would you like to set an appointment for sometime in the next few days to go over your options and get your questions answered?”

Make sure you rehearse your speech until it’s natural.

5. If there’s no answer, leave the overnight package by the front door. It’ll get opened

By providing useful information, you’re offering help to homeowners who might otherwise not realize they have options. By engaging in a discussion with them, you can better understand their constraints and help them think of solutions to their real estate dilemma. You can be their sounding board.

At the very least, you’ll be out there talking real estate to homeowners…and isn’t that the best way to get listings? If the new Act is passed by congress, you can return to those homeowners who weren’t ready to take action yet.

Be consistent. Be bold. Be smart. Linda Schneider is a real estate business coach for smart real estate agents who want to be more powerful in their business. Drop by RealEstateBusinessCoaching.com for more about selling skills and real estate marketing ideas to take your business to the next level.

Image by owenwbrown/Flickr

So in today’s real estate marketing post on RealtyBizNews.com, I give to you 5 creative blog topics that can allow you to interlink some of the local home listings in your market:

1)      Find 5 home listings in your area that house an in-home bar. Whether it’s a cozy bar space in the basement or a separate bar off the kitchen, compile a list of these homes and link each to the specific property listing on website. In honor of the upcoming weekend, post the blog on a Friday and of course share it on all your social media accounts. This in-house bar topic is fun and may actually get readers to keep coming back to see what else you’ll write about in the coming days and weeks!

2)      Do a price comparison blog. Find 2 property listings with the same list price and similar features (bedrooms, bathrooms, square footage, etc). Do a simple write-up of each home listing and ask your audience which home they prefer. This encourages interaction between your readers and it’s something that will hopefully get some comments posted.

3)      Like it or not, short sales are still a big part of today’s real estate market. So pick out a certain area or neighborhood, and talk about all the short sales available in that specific community. Title this blog “Short Sales Available in [Neighborhood Name]” and hopefully it won’t be long before you begin to rank for this long-tail keyword.

4)      Everybody loves an updated kitchen when searching for real estate for sale. So give home buyers what they want. Pick out several home listings with a fabulous kitchen and talk about what makes each kitchen so special. Include photos for each kitchen space and, as always, link each home with the property listing on your website.

5)      Curb appeal is also something people love to see in a home they may be considering. So do a “Landscape of the Day” series and pick out a home to write about with an attractive, manicured lawn that looks impressive. Of course, this type of real estate blog works best in the summer for most markets, but if you happen to live in Florida or Southern California, this idea works year-round.

Joe Heath is a graduate of Indiana University and also holds a Graduate Certificate in Real Estate Development from Drexel University. After working in market research and authoring published Market Snapshots for Hanley Wood Market Intelligence, Joe now works as a Web Marketing Specialist and is a managing partner at  Real Estate Web Creation, LLC.

© Andy Dean – Fotolia.com

A short sale simply means “selling short of what is owed on the note”. When a bank agrees to short sell a home they are agreeing to accept less than what is owed on the loan balance.

Short sales used to be very rare. Prior to the housing market crash, they were almost unheard of. But in the past two years, banks have really stepped up approvals of short sales to help move the backlog of foreclosed homes.

This is currently a very popular buying strategy for real estate investors, because fundamentally, the large inventory of foreclosed homes combined with a very high percentage of delinquent home owners in danger of foreclosure has forced the banks to sell more homes this way.

For investors looking for cash flow or cash profit on a resale, a short sale is currently the only way to add real equity to a property that is worth less than is owed on the mortgage. In short, investors and savvy buyers can use short sales to create equity where there is none. But relative to other strategies like holding rentals for income, the window of opportunity is relatively short. And once the mortgage forgiveness debt relief act expires at the end of 2012, this strategy could see drastic reductions in home owner participation.

From the point of view of the banks and home owners, short sales are currently a hot selling strategy, because of the ability to create equity. A bank that is willing to approve short sales can move a lot of properties at present, even though housing sales are still near the record lows. With home prices barely edging upward in most cities, short sales are a necessary strategy for sellers at this point in time.

According to Realty Trac, about 34% of all home sales in 2012 have been short sales. This is an unprecedented number that will not last more than a few more months if the market continues to pick up. And the expiration of the tax exemption is looming large. Given the long time frames involved in getting short sales approved by the bank(s) involved, sellers are quickly running out of time.

However, barring any big recovery in housing, short sales will continue at higher than normal levels until the market sees a true increase in end-user, owner occupant buyers. Investors are buying lots of homes and driving up the sales numbers and price statistics somewhat, but they are not end users. An end user tenant or buyer is still needed to get the housing market back on a stable growth track. That won’t happen until job growth really takes hold.

Buyers need reliable proof of funds to close short sales successfully. Yes it is possible to “flip” short sales at a profit if you are an experienced investor. Since you are dealing directly with banks and lenders, you’ll be expected to be able to prove that you have access to funds to close the deal as part of the approval process.

As noted above, market fundamentals such as unemployment and high foreclosure rates are supporting the high percentages of short sales activity. But short sales are not really impacted so much by property fundamentals such as location and condition. At present we have a rare set of market fundamentals in play that have combined to make short sales one of the hottest buying and selling strategies around, at least for the time being.
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Donna S. Robinson is a real estate market analyst, investor, author and speaker located in Atlanta, GA. Follow her on twitter at donnaconsults and read her blog on her website at www.realtybizconsulting.com

I have a real estate investor client who buys, fixes and resells single family homes.  He has been regularly buying twenty to thirty foreclosure auctions every month for the past two years.  However, over the past three months he has averaged closer to ten properties every month and has been continuously outbid on many desirable properties.  He also has had to pay more for the properties he has bought. It’s forced him to look at other avenues for buying and reselling distressed homes.

The reason is the buy and hold investor is not concerned with making a quick profit on a property so he is willing to pay closer to current market values for these properties.  His goal is to buy the property at a price he can rent it out for and develop a positive cash flow.  With rental prices continuing to rise across the county this allows these investors to pay more for properties and still maintain a solid rate of return.  Their goal is to generate cash slowly and are betting on an overall real estate market recovery over the next three to five years.  When that occurs they will be able to sell these assets at a significant gain and cash out then.

The same is happening in the short sale market.  The combination of lenders demanding more money for their inventory combined with investors willing to pay more for that same inventory has caused the profit margins for fix and flip investors who have made their living over the past several years buying and reselling short sales to significantly decreasbe, almost to the point of actually costing the investor more than the property is worth after repaired value.

There is also no shortage of real estate guru’s who have switched their course materials available to new investors from fix and flip to fix and hold.

Recently BiggerPockets.com,  one of the larger real estate investor sites and forums on the web, held a REI Summit in Denver Colorado.  Sponsors from Phoenix to Indianapolis to Atlanta were there offering turn-key investment properties for sale with excellent returns. Also, the New York Times published an article this month about large investors buying homes by the thousands and renting them out because the returns are higher than treasury securities or stock dividends.

So what does all this mean to the fix and flip investor?  The short answer is much more work and networking to find deals.  Direct mail marketing, phone calls, email campaigns and even door knocking on For Sale By Owner homes are going to come back in fashion.  The problem is many investors are new to the fix and flip market and have been spoiled by the easy access to properties.  They don’t have the experience in buying and selling when a market is moving up or peaking so these techniques seem like way too much work in their eyes.

In order to survive, investors are going to need to get out of their comfort zones and start using some of the older tried and true methods of finding deals.  You may also need to start investing in properties that are selling at a different price point than they’ve been using or possibly even look at other markets where the fix and hold investors are not as abundant.

Daniel Doran is a 20+ year veteran in the real estate industry. He is a previous owner of a law firm, mortgage and title company. Daniel has also written several books on mortgage modification, short sales and real estate investing. He currently specializes in Commercial Finance and Real Estate Development and is a graduate of Manhattanville College and Brooklyn Law School. You can contact Dan at Buildings By Owner.

© Andy Dean – Fotolia.com

In an effort to speed up the current pace of short sale transactions, this bill, which is supported by the National Association of Realtors, will give subordinate lien holders only 45 days to reply to short sale requests.

Sponsored by U.S. Rep. Jerry McNerney (D-Calif.) the bill was submitted to Congress on July 19th in hopes that the passage of this legislation will lead towards stabilizing the market.

“As the leading advocate for homeownership, Realtors® know that issues and delays with secondary lien holder remain an obstacle to streamlining the short sale process, NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami said. Short sale negotiations are much more difficult for borrowers who have multiple servicers involved and ongoing delays continue to severely limit the number of homeowners who are approved for short sales, forcing many homeowners into foreclosure.”

The bill would require primary lenders to notify secondary lienholders of a short sale request, and would place a deadline for a response from individuals and institutions in secondary lien status to both the primary lender and the homeowner.

Veissi explained the problem. “Second mortgage lien holders frequently hold up and cancel the short sale transaction while trying to collect the largest possible payout in exchange for releasing the homeowner’s lien, even though the secondary lien holder often gets nothing if the home ends up going into foreclosure. While efforts have been made to improve primary lien holders’ response times, issues still abound with second and subsequent lien holders, and this legislation is a step in the right direction.”

Creating a systematic process to deal with short sale approvals can benefit both the seller and prospective buyers in that the price averages will more accurately reflect the marketplace since a shadow inventory would be slim or in some cases, perhaps, non-existent.

Have a nightmare story about a short sale you’ve dealt with? Please, share your thoughts!

Zillow's new Negative Equity Map

Viewing the national map, it’s obvious that the areas with the highest concentrations of negative equity are California, Florida, Georgia, Nevada, Arizona and southern Michigan, to name a few “hot spots”. While Michigan’s problems are more related to long term employment issues, The other crisis states are in the “sunbelt” and had the vast majority of the home building activity during the housing boom years.

Those states with little to no negative equity include South Dakota, Kansas, New Mexico and Idaho. These states saw little of the over-building and “irrational exuberance” of the housing boom.

What we really have here is a tale of two housing markets. But what is more unusual is the fact that these two housing markets exist side by side. For example, in Georgia, now the number 3 state for foreclosure activity in the nation, it’s the northwest sector of the state that is primarily impacted by negative equity. Paulding county, Georgia, a western suburb of Atlanta, shows that about 71% of it’s homeowners owe more than their homes are currently worth. This is among the worst in the nation. But Macintosh county, on the Georgia coast, shows only 4% of owners with negative equity, among the lowest in the nation, for a state on the “top ten” foreclosure list.

In Clark county, Nevada, the location of Las Vegas, a whopping 71% of home owners are under-water. In southern California, the interior counties such as Kern and San Bernardino are at 60% and 58% respectively. But heading to the coastal counties, LA County is at “only” 38%, and on up the coast, in Marin county, only 19% of homes are in a negative equity position.

The real lesson here is that the housing crisis is very much a local crisis, since some states have no major issues with negative equity, while other states will need years to recover the home values that existed prior to the crash.

It’s also interesting to note that many of the counties experiencing major problems with falling prices and negative equity are those located near large metropolitan areas. Buyers who are in the market for a home should use the Zillow Negative Equity Map and/or local data provided by their real estate agent to make sure that they understand the market conditions in the county in which they are shopping for a home.

Negative equity counties can yield some great deals for buyers, but buying “low” in those counties is essential because you can’t expect any significant appreciation any time soon.

You may also notice that even in “crisis” states, coastal counties near the ocean have much lower percentages of negative equity than those counties located farther inland, in the interior of the state.

Even in the midst of the largest housing crisis in the history of the United States, there are still many areas enjoying stable or even slightly increasing prices, while many other areas struggle to retain value or continue to lose value. At the end of the day, it all harkens back to the classic real estate mantra…the three most important factors in real estate are “location, location and location”.

When it comes to today’s housing market, this has never been more true. All real estate buyers are investors, simply because virtually no one ever buys a home with the intention of losing money. Regardless of what the over all market headlines are, the key to successful buying for personal use or investment is to be aware of what is happening with the local housing market in your specific area.
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Donna S. Robinson is a 16 year veteran of the real estate industry. She is a real estate market analyst who specializes in coaching and consulting services for real estate investors. Her website is www.RealtyBizConsulting.com

© iQoncept - Fotolia.com

So then, how do you know which path to take? A short sale may seem to be the best course of action, however, choosing whether or not to sell your home, even in the best of times, can be a difficult decision to make.

Lori Ballen, CEO of Ballen Group International, a Las Vegas based team of real estate professionals, discusses the launch of a new online tool geared towards helping homeowners make this choice.

“Millions of Americans hold a firm belief that their home is an investment,” said Lori Ballen, “but those investments haven’t had positive returns in the past few years.”

The tool starts with the premise that your home is an investment. The “short or stay calculator” will give homeowners an idea of when their home could become profitable again. In other words, after using the tool they will know approximately how long they might remain underwater in their homes.

If you knew that hanging on just 3 or 4 more years would mean that your investment will start to grow again, would that change your mind on selling?

The tool is easy to use and will fit each person’s individual scenario. “We’ve simplified this decision calculator to show you the financial facts about your specific situation,” noted Ballen.

The calculator will provide important information about your home’s current value, and will use a number of possible market conditions to show you when your home could become an asset again.

Ballen continued, “We know short selling a home can be a difficult decision. Hopefully, this short sale decision calculator can help families make the decision that is right for them.”

There is no cost for the calculator. It is available at http://www.NevadaShortSaleServices.com

Image courtesy of FreeDigitalPhotos.net

Experts say that the new, streamlined short sales process should give housing markets a boost. One of the biggest flaws with short sales is the time it takes to get a final decision from the lender, with numerous buyers deciding to pull out of the deal rather than endure months of uncertainty.

The new guidelines come at a time where short sales have picked up a lot of steam, with many lenders deciding that they are now more preferable to a foreclosure, as there is less paperwork to get through and the costs often amount to less. In some parts of the US, short sales are actually more common than foreclosures. According to March data from CoreLogic, short sales represent just over 14% of all home sales in the country.

Michael McHugh, of the Empire State Mortgage Bankers Association, told the New York Times that faster short sales would do much to speed up a recovery in those states which use the judicial foreclosure process. Foreclosure cases in some states, such as New York for example, can take over a year before they make it to court.

With short sales set to be over and done within just two months, it’s thought that many defaulting homeowners will now view them as a much better option

“We should see a significant improvement in turnaround,” said McHugh in regard to those states that employ a judicial foreclosure process.