Across the country, many people are buying second homes in America today. Although a sizable number of vacation home buyers plan to retire in those homes someday, another segment hopes their second home will do double duty--as a vacation getaway and an investment property. If you fit into the latter category, here are five areas of the country where you might want to begin your search.
* There are trade-offs to buying a second home in an area that's going to become one of THE hot places of the future, because you won't be the only one looking in that area, and it's going to grow quickly, bringing in more and more people. However, if those factors don't deter you, here are a few tips on how to look for a vacation property that will also prove to be a good investment over the long haul.
* Of course, a beautiful setting and decent weather are first and foremost, but the property must also meet a number of other criteria, as well. You'll want to begin your search in smaller towns that are still within a two or three-hour drive from a growing urban area with a large airport.
* There should be plenty of recreational opportunities. And that means things to do other than just shopping. Depending upon your personal taste, that typically means near a ski area, a beach, or in the mountains.
* It's also nice to have some cultural amenities nearby, since you won't always be in the mood to do strenuous physical activities. So make sure there are both stage and movie theatres, and it’s also advantageous to have art galleries and museums within easy reach.
* Take a look around and see if there’s commercial development going on in the area. Long-time residents may complain about how much the area is changing, but seeing new motels, malls, and other business investments moving into town is a good indicator that you're not the only one who thinks this section of the country is going to continue to grow.
With some diligent searching and a keen eye for what's going on in the area, you can find properties that will provide the best of both worlds. A wonderful getaway in a delightful vacation area AND a great investment that will continue to increase significantly in value while you make use of it.
Copyright © 2006 Jeanette J. Fisher
Jeanette Fisher offers free real estate investing information, free ebook, The Truth about Making Money Flipping Houses and teleseminars. http://doghousetodollhouse.com
Article Source: http://EzineArticles.com/?expert=Jeanette_Joy_Fisher
Saturday, March 22, 2008
Tuesday, March 18, 2008
The Benefits of Using A Realtor To Help You Buy Your Home
Is it possible to go out and buy a home on your own without the assistance of a professional realtor? Sure. But it’s not a good idea. Using a realtor to help in buying your home will make the entire process easier and will help to make sure that you get the best deal on your own and that all of the legal issues involved in home buying are taken care. Still not convinced? Just take a look at some of the basic benefits of using a realtor to help you buy your home:
· A realtor can significantly narrow down the home buying process by helping you to determine exactly what your needs and desires are for the new home.
· A realtor is more capable than you are of negotiating on the price of the home.
· Home buyers rarely pay out-of-pocket fees for the help of a realtor. Therefore you’re getting professional advice and a better deal on your new home without any costs.
· If you are going to be purchasing a new home in a city that you are unfamiliar with or in a neighborhood that you don’t know a lot about, a realtor can provide you with important information about neighborhood demographics and things like schools in the area.
· Realtors are able to access the right people for making a good value assessment of your home so that you know if you’re paying a fair price.
· Realtors have access to online listings of homes that you yourself may not have ready access to, making it possible for the realtor to find a home for you to buy that you wouldn’t have found on your own.
· There are a lot of details to buying a home and you probably aren’t familiar with them, especially if this is your first time as a home buyer. The realtor can help you through every step of the process so that you understand what is going on and don’t get cheated anywhere along the way.
· You’ll know that the I’s have been dotted and the T’s have been crossed so legal concerns about the home buying transaction won’t have to worry you.
· Your realtor will remain calm even when you aren’t. Many good home deals have gotten bungled because of the heat of emotions that can rise up during this important purchase. Realtors help make sure that these emotions stay in their office and don’t cause problems with your buying deal.
The benefits to using a realtor are obvious. And what it really boils down to is that buying a home is not something that you’re trained to do, so it makes sense to work with a professional who is trained. While there are certainly many areas of life that can be quickly learned and approached with the do-it-yourself mentality, home buying isn’t one of them. There are just too many legal details involved and too much (like your money and your home) at stake. When it comes down to it, the choice about using a realtor is up to you. But since there’s little to no cost and a whole lot of benefits, it is definitely the smart thing to do.
Eric Bramlett is the Broker and co-owner of One Source Realty in Austin Texas. He has seen considerable success in real estate, and looks forward to many more years in the business. Eric currently invests, renovates, and develops real estate in the Greater Austin Texas Market. He spends his time working with select clients, helps his new agents get started in their real estate careers, helps his experienced agents progress their careers to the next level, & when he has time…he takes his dogs to the lake. Visit Eric’s Austin Texas Real Estate Guide & visit his Austin Texas Real Estate company’s website. Downtown Austin Condos & Lofts
· A realtor can significantly narrow down the home buying process by helping you to determine exactly what your needs and desires are for the new home.
· A realtor is more capable than you are of negotiating on the price of the home.
· Home buyers rarely pay out-of-pocket fees for the help of a realtor. Therefore you’re getting professional advice and a better deal on your new home without any costs.
· If you are going to be purchasing a new home in a city that you are unfamiliar with or in a neighborhood that you don’t know a lot about, a realtor can provide you with important information about neighborhood demographics and things like schools in the area.
· Realtors are able to access the right people for making a good value assessment of your home so that you know if you’re paying a fair price.
· Realtors have access to online listings of homes that you yourself may not have ready access to, making it possible for the realtor to find a home for you to buy that you wouldn’t have found on your own.
· There are a lot of details to buying a home and you probably aren’t familiar with them, especially if this is your first time as a home buyer. The realtor can help you through every step of the process so that you understand what is going on and don’t get cheated anywhere along the way.
· You’ll know that the I’s have been dotted and the T’s have been crossed so legal concerns about the home buying transaction won’t have to worry you.
· Your realtor will remain calm even when you aren’t. Many good home deals have gotten bungled because of the heat of emotions that can rise up during this important purchase. Realtors help make sure that these emotions stay in their office and don’t cause problems with your buying deal.
The benefits to using a realtor are obvious. And what it really boils down to is that buying a home is not something that you’re trained to do, so it makes sense to work with a professional who is trained. While there are certainly many areas of life that can be quickly learned and approached with the do-it-yourself mentality, home buying isn’t one of them. There are just too many legal details involved and too much (like your money and your home) at stake. When it comes down to it, the choice about using a realtor is up to you. But since there’s little to no cost and a whole lot of benefits, it is definitely the smart thing to do.
Eric Bramlett is the Broker and co-owner of One Source Realty in Austin Texas. He has seen considerable success in real estate, and looks forward to many more years in the business. Eric currently invests, renovates, and develops real estate in the Greater Austin Texas Market. He spends his time working with select clients, helps his new agents get started in their real estate careers, helps his experienced agents progress their careers to the next level, & when he has time…he takes his dogs to the lake. Visit Eric’s Austin Texas Real Estate Guide & visit his Austin Texas Real Estate company’s website. Downtown Austin Condos & Lofts
Sunday, March 16, 2008
Short Sale 101 - The Ultimate Definition
This article will attempt to address the following:
1. Define a short sale
2. Talk about the different ways it can come about and be structured
3. Talk about how it’s different that foreclosure or bankruptcy
4. Talk about the implications for the seller
5. Talk about the implications for the buyer
6. Address investor related questions on capitalizing on short sales (which you will soon find based on the definition is not really what you investors are looking for)
7. If your question is not answered in the article, see the Short Sale FAQ.
Definition:
A short sale is an “arrangement” between the current owner of a home and the bank that lent them the money to buy their home to accept an offer for less than the total amount owed to pay off the home. The “deficiency” is the difference between the amount owed and what the bank collects at the short sale.
Although, the “arrangement” can take many different forms, there is no other definition of a short sale. I say this because many realtors and some investors simply throw the term around as if it meant “a sale under market value.” No. A bank owned (foreclosed) house is not a short sale. A seller deciding to lower their price and take less profit is not a short sale. An old lady that owns her home free and clear, selling a $150k home for $75k, IS NOT A SHORT SALE. For it to be a Short Sale, someone must be getting “shorted.” Either the seller, or the bank. I will explain how both of those happen in more detail presently.
Free Foreclosure List
Another important definition of a short sale is how it differs from foreclosure. In foreclosure, the homeowner falls way behind on their payments and the bank repossesses the house and sells it. In almost all cases, THE BANK PURSUES THE HOMEOWNER FOR THE DEFICIENCY!!! No one seems to know or believe this, but just ask someone who has gone through foreclosure, they will tell you the only way out of this was to file bankruptcy.
How It Can Happen - The Arrangement
Most short sales arise when a seller owes more on their house than they can sell it for (upside down). The owner of the home then attempts to make an arrangement with their lender to sell the house for less than is owed.
The term “arrangement” was used in the definition and is intentionally broad because the arrangement depends on the bank that holds the loan. Though there are general practices, every bank does it differently. This article will give you the most common arrangements, but if you take part in a short sale, it’s crucial you assume nothing until you have the bank’s policies in writing.
There are some overriding principles:
1. There is no such thing as a free lunch. This is not some dream come true alternative to foreclosure where the money you owe magically disappears. The deficiency will be accounted for. The deficiency can be 100% loaned to the seller in the form of a promissory note, which they then must repay. If any portion of the deficiency is “written off” meaning that the bank eats it, you can be sure that they will report it as 1099 income to the seller or even as a judgment which will show on your credit for 10 years (not 7 years, 10 years).
2. It is a cumbersome process. If you are entering into a short sale as a buyer or seller, don’t expect it to go as quickly as any other sale. There’s a lot of “back and forth”.
3. The employees of the lender that are negotiating the sale ARE NOT there for the benefit of the seller. Their only goal is to collect as much money possible for the lender and they will use whatever means necessary. You can be sure they will misrepresent their own policies and flat out LIE to the seller in order to intimidate and scare them into paying more money. If you think I’m exaggerating, the joke will be on you.
For instance, I was once told by a lender negotiating a short sale that, as a policy, they don’t “write off” any of the deficiency and that the seller would have to have a promissory note for $40,000. This lender also told the seller that their hands were tied and this decision came directly from the investor who provides the money for the lender. The lender also said there is absolutely no negotiation on the amount owed, either pay the deficiency, or they will foreclose. The lender made the promissory note very manageable (20 years 0%) so that the seller would be more enticed to just roll over.
But the seller called the lenders bluff. The seller then provided a letter from an attorney stating they would qualify for a bankruptcy, thus rendering the lender incapable of collecting anything. That same day, the lender called the seller saying they would reduce the promissory note and write off $30,000 of the debt! It would have to be reported as 1099 income, but it would not have to be paid. Amazing change of policy! Then the seller saw what was happening and just said, “no thanks, we don’t want to owe you anything, we’ll just go ahead with the bankruptcy.” Two days later the seller received a written offer that the lender would completely forgive the debt and simply report it as 1099 income! Wow!
The moral of the story is that the lenders will LIE to obtain their money. Many of the managers of the collections departments are paid on COMMISSION on how much they collect. Just imagine if that seller had rolled over on the first offer! That employee would have been responsible for keeping $40,000 of his company’s money with one five minute phone call!
One other important thing to remember is that if the lender gets the property back (i.e. short sale doesn’t go through), they have to put it up for auction. This creates the risk that additional money will be lost if the house doesn’t sell for what it’s worth. In the case of the example, the short sale offer was for $550,000, and the amount owed was $590,000. The seller faxed in evidence to the lender that most similar houses in the area were now selling for $480,000. So this enabled the seller to make the argument that it was a much more prudent risk to write off $40,000 instead of running the risk of losing $110,000. This enabled the seller’s representative to intimidate the employee of the lender asking him “did he really want to be responsible for losing his company $110k, when he had the option, right now, to settle for 40k?”
If it seems like I know a lot about “this example” it would be because I was the mortgage broker for the people making the offer and seller of the property happened to be my wife.
The Details of the Arrangement
Different banks have different policies. The best case scenario is to get a bank that actually “writes off” the deficiency. All that happens here is that the seller has some minor derogatory credit reporting, but doesn’t actually owe the bank any more money. This credit reporting can consist of anything from “creditor settled for less than the amount due” all the way to “foreclosed.”
As the example noted, many banks will do a promissory note for the deficiency.
Some banks are stupid enough to require that the deficiency be paid at closing. Think about it. This does no good because it’s the same thing as the seller selling their house without doing a short sale and simply bringing cash to the table. If a bank tells as seller they need to bring cash to the table in a short sale, they are either idiotic, or more likely LYING.
In cases where the money is “written off” it’s important to understand that the lenders will never actually “write something off.” In most states (I don’t know the law in every state), the lender has the ability to show any deficiency as 1099 income for the seller. All this really means is that the seller has to pay taxes on that income. Depending on one’s situation, it could mean that people that are dependent on some form of aid because of “low income” will have some explaining to do come tax time.
Another way that the deficiency can be written off is in the form of a judgment. This will often occur in conjunction with the 1099 reporting. It might say something on the seller’s credit report such as “judgment filed against John Doe in the amount of $xx,xxx by ABC lender.” This will appear in the “public record” section of the seller’s credit report for 10 years (7 years is only for late payments, 10 years for public record info, don’t argue, trust me). It can either show up as satisfied or unsatisfied. Satisfied is obviously better because it means that the worst thing that can happen is that the lender will report 1099 income.
Unsatisfied could be a problem, because it means that a court has found in favor of the lender to collect the deficiency from you. Now they still might simply do the 1099 thing, or they might try to collect it from you. They can keep trying to collect it from you until they get it. They can garnish your wages. Your only hope then is that you qualify for a chapter 7 bankruptcy.
This brings up an important note. NEVER EVER ASSUME THAT A DEBT THAT YOU OWE A LENDER IS GONE UNLESS YOU HAVE THE DETAILS OF THE RELEASE OF THAT DEBT IN WRITING. For instance, someone who had done a short sale had a first and a second loan. The bank agreed to the short sale, which ended up being enough to pay off the first loan, but not the second. The seller had assumed that because the bank agreed to the short sale that they wouldn’t have to worry about the deficiency from the second mortgage. Now they are surprised that they are being pursued for the deficiency. REMEMBER, the lender(s) will always want ALL their money accounted for somehow. NEVER assume something is written off unless you have a formal, signed, written, unconditional release of lien and/or judgment from the lender specifically stating that no further action to collect this debt will be taken.
How did we get to this place in the first point?
A short sale can come about for many different reasons. In my wife’s case, she was the owner of the house and had been making payments. We bought an investment property and put it solely in her name to protect our family in the event that the market took a turn for the worse. It did. We owed 590k, but the best offer we had after 6 months was 550k. The short sale prevented her from having to file bankruptcy, and there was no derogatory credit reporting because there were no late payments made.
Despite popular belief, YOU DO NOT HAVE TO BE BEHIND ON YOUR MORTGAGE TO REQUEST A SHORT SALE. You just have to demonstrate that your house can’t be sold for what you owe.
In other cases, short sales happen when a seller can’t afford to make their payments and is nearing foreclosure or bankruptcy. It makes life much more complicated if you are living in the house in question. The bank’s ability to scare you is much greater in that case. In this case, a short sale is only slightly better than the alternatives. You will still lose your house, and your credit is still destroyed just because you’ve made 4-5 late payments on your mortgage.
Despite popular belief, A BANKTUPCY, FORECLOSURE, OR REPOSSESSION DO NOT HURT YOUR CREDIT AS MUCH AS THE MULTITUDE OF LATE PAYMENTS THAT OFTEN LEAD UP TO THEM!!!!! I just cannot stress this enough. People think that a bankruptcy damages their credit beyond repair in and of its own accord. I’ve had many clients file bankruptcy with 750 scores and no late payments only to have their score drop to 680. It’s the clients with 20+ late payments that are having their credit hurt.
A final note on how the short sale can come about… Most banks will not agree to a short sale in writing until you have a formal offer. You can simply call your bank and ask them if you could do a short sale at a certain price and they might say “sure, no problem, we’d be happy to facilitate that offer.” BEWARE. That doesn’t mean a thing. Before your short sale is APPROVED, you’ll have to submit an application, hardship letter, financial statements, tax returns, pay stubs, the purchase agreement from the buyer, a HUD statement from the pending transaction, payoff letters from all lenders involved, and several other things depending on the lender.
Once this huge packet of information is submitted to the lender, you will most likely hear back in 1-4 weeks on the TERMS of their “approval.” Be warned their approval will most likely be thinly disguised attempt to collect their debt and will almost never be the “write off” you were hoping for.
Investors
If you’re an investor, by now, I hope I’ve scared you off. Short sales are not some magic way for you to find properties under market value. They are a tool for sellers that owe too much on their homes to sell them at market value.
What you are looking for (or should be if you’re not) are sellers that owe far far less on their homes than what they’re worth. Sellers who don’t care how much they earn because they’re either desperate or have so many houses they don’t care.
Still if you see a house you want, there is one way that a short sale could come into play. Say there’s a distressed property that you’d pay 100k for that you know would be worth 180k if it was fixed up a bit. The seller doesn’t have the money to do it and the house is either vacant or they want out of their situation. In this case, if the seller happens to owe 130k (around there), and you will only pay 100k, AND the seller hasn’t had any viable offers because of the level of distress on the property, then a short might be just what the doctor ordered.
Don’t be unethical and take advantage of people. You’re only going for short sales if the person WANTS to sell their house and no one else but you will buy it because you’re not afraid to rehab a house that’s smells bad and is falling apart.
Conclusion
Again, a short sale is not a magic cure. It’s also not some mystical solution that only an elite few know about. If you’re curious about selling your house as a short sale, you should contact your lender and get information in writing. It’s usually not easy, and hardly ever will truly “win.” But in some cases, it can leave you much better off than the alternative of foreclosure and bankruptcy. If you’re an investor, there are much better ways to obtain undervalued homes.
Visit www.RealEstateInvestorsLife.comfor more valuable investor resources
By: Real Estate Investor
Article Directory: http://www.articledashboard.com
Rick Sarouk is an 18 year veteran real estate investor and certified Appraiser He specializes in foreclosure and Preforclosure real estate investing.Visit www.RealEstateInvestorsLife.com
1. Define a short sale
2. Talk about the different ways it can come about and be structured
3. Talk about how it’s different that foreclosure or bankruptcy
4. Talk about the implications for the seller
5. Talk about the implications for the buyer
6. Address investor related questions on capitalizing on short sales (which you will soon find based on the definition is not really what you investors are looking for)
7. If your question is not answered in the article, see the Short Sale FAQ.
Definition:
A short sale is an “arrangement” between the current owner of a home and the bank that lent them the money to buy their home to accept an offer for less than the total amount owed to pay off the home. The “deficiency” is the difference between the amount owed and what the bank collects at the short sale.
Although, the “arrangement” can take many different forms, there is no other definition of a short sale. I say this because many realtors and some investors simply throw the term around as if it meant “a sale under market value.” No. A bank owned (foreclosed) house is not a short sale. A seller deciding to lower their price and take less profit is not a short sale. An old lady that owns her home free and clear, selling a $150k home for $75k, IS NOT A SHORT SALE. For it to be a Short Sale, someone must be getting “shorted.” Either the seller, or the bank. I will explain how both of those happen in more detail presently.
Free Foreclosure List
Another important definition of a short sale is how it differs from foreclosure. In foreclosure, the homeowner falls way behind on their payments and the bank repossesses the house and sells it. In almost all cases, THE BANK PURSUES THE HOMEOWNER FOR THE DEFICIENCY!!! No one seems to know or believe this, but just ask someone who has gone through foreclosure, they will tell you the only way out of this was to file bankruptcy.
How It Can Happen - The Arrangement
Most short sales arise when a seller owes more on their house than they can sell it for (upside down). The owner of the home then attempts to make an arrangement with their lender to sell the house for less than is owed.
The term “arrangement” was used in the definition and is intentionally broad because the arrangement depends on the bank that holds the loan. Though there are general practices, every bank does it differently. This article will give you the most common arrangements, but if you take part in a short sale, it’s crucial you assume nothing until you have the bank’s policies in writing.
There are some overriding principles:
1. There is no such thing as a free lunch. This is not some dream come true alternative to foreclosure where the money you owe magically disappears. The deficiency will be accounted for. The deficiency can be 100% loaned to the seller in the form of a promissory note, which they then must repay. If any portion of the deficiency is “written off” meaning that the bank eats it, you can be sure that they will report it as 1099 income to the seller or even as a judgment which will show on your credit for 10 years (not 7 years, 10 years).
2. It is a cumbersome process. If you are entering into a short sale as a buyer or seller, don’t expect it to go as quickly as any other sale. There’s a lot of “back and forth”.
3. The employees of the lender that are negotiating the sale ARE NOT there for the benefit of the seller. Their only goal is to collect as much money possible for the lender and they will use whatever means necessary. You can be sure they will misrepresent their own policies and flat out LIE to the seller in order to intimidate and scare them into paying more money. If you think I’m exaggerating, the joke will be on you.
For instance, I was once told by a lender negotiating a short sale that, as a policy, they don’t “write off” any of the deficiency and that the seller would have to have a promissory note for $40,000. This lender also told the seller that their hands were tied and this decision came directly from the investor who provides the money for the lender. The lender also said there is absolutely no negotiation on the amount owed, either pay the deficiency, or they will foreclose. The lender made the promissory note very manageable (20 years 0%) so that the seller would be more enticed to just roll over.
But the seller called the lenders bluff. The seller then provided a letter from an attorney stating they would qualify for a bankruptcy, thus rendering the lender incapable of collecting anything. That same day, the lender called the seller saying they would reduce the promissory note and write off $30,000 of the debt! It would have to be reported as 1099 income, but it would not have to be paid. Amazing change of policy! Then the seller saw what was happening and just said, “no thanks, we don’t want to owe you anything, we’ll just go ahead with the bankruptcy.” Two days later the seller received a written offer that the lender would completely forgive the debt and simply report it as 1099 income! Wow!
The moral of the story is that the lenders will LIE to obtain their money. Many of the managers of the collections departments are paid on COMMISSION on how much they collect. Just imagine if that seller had rolled over on the first offer! That employee would have been responsible for keeping $40,000 of his company’s money with one five minute phone call!
One other important thing to remember is that if the lender gets the property back (i.e. short sale doesn’t go through), they have to put it up for auction. This creates the risk that additional money will be lost if the house doesn’t sell for what it’s worth. In the case of the example, the short sale offer was for $550,000, and the amount owed was $590,000. The seller faxed in evidence to the lender that most similar houses in the area were now selling for $480,000. So this enabled the seller to make the argument that it was a much more prudent risk to write off $40,000 instead of running the risk of losing $110,000. This enabled the seller’s representative to intimidate the employee of the lender asking him “did he really want to be responsible for losing his company $110k, when he had the option, right now, to settle for 40k?”
If it seems like I know a lot about “this example” it would be because I was the mortgage broker for the people making the offer and seller of the property happened to be my wife.
The Details of the Arrangement
Different banks have different policies. The best case scenario is to get a bank that actually “writes off” the deficiency. All that happens here is that the seller has some minor derogatory credit reporting, but doesn’t actually owe the bank any more money. This credit reporting can consist of anything from “creditor settled for less than the amount due” all the way to “foreclosed.”
As the example noted, many banks will do a promissory note for the deficiency.
Some banks are stupid enough to require that the deficiency be paid at closing. Think about it. This does no good because it’s the same thing as the seller selling their house without doing a short sale and simply bringing cash to the table. If a bank tells as seller they need to bring cash to the table in a short sale, they are either idiotic, or more likely LYING.
In cases where the money is “written off” it’s important to understand that the lenders will never actually “write something off.” In most states (I don’t know the law in every state), the lender has the ability to show any deficiency as 1099 income for the seller. All this really means is that the seller has to pay taxes on that income. Depending on one’s situation, it could mean that people that are dependent on some form of aid because of “low income” will have some explaining to do come tax time.
Another way that the deficiency can be written off is in the form of a judgment. This will often occur in conjunction with the 1099 reporting. It might say something on the seller’s credit report such as “judgment filed against John Doe in the amount of $xx,xxx by ABC lender.” This will appear in the “public record” section of the seller’s credit report for 10 years (7 years is only for late payments, 10 years for public record info, don’t argue, trust me). It can either show up as satisfied or unsatisfied. Satisfied is obviously better because it means that the worst thing that can happen is that the lender will report 1099 income.
Unsatisfied could be a problem, because it means that a court has found in favor of the lender to collect the deficiency from you. Now they still might simply do the 1099 thing, or they might try to collect it from you. They can keep trying to collect it from you until they get it. They can garnish your wages. Your only hope then is that you qualify for a chapter 7 bankruptcy.
This brings up an important note. NEVER EVER ASSUME THAT A DEBT THAT YOU OWE A LENDER IS GONE UNLESS YOU HAVE THE DETAILS OF THE RELEASE OF THAT DEBT IN WRITING. For instance, someone who had done a short sale had a first and a second loan. The bank agreed to the short sale, which ended up being enough to pay off the first loan, but not the second. The seller had assumed that because the bank agreed to the short sale that they wouldn’t have to worry about the deficiency from the second mortgage. Now they are surprised that they are being pursued for the deficiency. REMEMBER, the lender(s) will always want ALL their money accounted for somehow. NEVER assume something is written off unless you have a formal, signed, written, unconditional release of lien and/or judgment from the lender specifically stating that no further action to collect this debt will be taken.
How did we get to this place in the first point?
A short sale can come about for many different reasons. In my wife’s case, she was the owner of the house and had been making payments. We bought an investment property and put it solely in her name to protect our family in the event that the market took a turn for the worse. It did. We owed 590k, but the best offer we had after 6 months was 550k. The short sale prevented her from having to file bankruptcy, and there was no derogatory credit reporting because there were no late payments made.
Despite popular belief, YOU DO NOT HAVE TO BE BEHIND ON YOUR MORTGAGE TO REQUEST A SHORT SALE. You just have to demonstrate that your house can’t be sold for what you owe.
In other cases, short sales happen when a seller can’t afford to make their payments and is nearing foreclosure or bankruptcy. It makes life much more complicated if you are living in the house in question. The bank’s ability to scare you is much greater in that case. In this case, a short sale is only slightly better than the alternatives. You will still lose your house, and your credit is still destroyed just because you’ve made 4-5 late payments on your mortgage.
Despite popular belief, A BANKTUPCY, FORECLOSURE, OR REPOSSESSION DO NOT HURT YOUR CREDIT AS MUCH AS THE MULTITUDE OF LATE PAYMENTS THAT OFTEN LEAD UP TO THEM!!!!! I just cannot stress this enough. People think that a bankruptcy damages their credit beyond repair in and of its own accord. I’ve had many clients file bankruptcy with 750 scores and no late payments only to have their score drop to 680. It’s the clients with 20+ late payments that are having their credit hurt.
A final note on how the short sale can come about… Most banks will not agree to a short sale in writing until you have a formal offer. You can simply call your bank and ask them if you could do a short sale at a certain price and they might say “sure, no problem, we’d be happy to facilitate that offer.” BEWARE. That doesn’t mean a thing. Before your short sale is APPROVED, you’ll have to submit an application, hardship letter, financial statements, tax returns, pay stubs, the purchase agreement from the buyer, a HUD statement from the pending transaction, payoff letters from all lenders involved, and several other things depending on the lender.
Once this huge packet of information is submitted to the lender, you will most likely hear back in 1-4 weeks on the TERMS of their “approval.” Be warned their approval will most likely be thinly disguised attempt to collect their debt and will almost never be the “write off” you were hoping for.
Investors
If you’re an investor, by now, I hope I’ve scared you off. Short sales are not some magic way for you to find properties under market value. They are a tool for sellers that owe too much on their homes to sell them at market value.
What you are looking for (or should be if you’re not) are sellers that owe far far less on their homes than what they’re worth. Sellers who don’t care how much they earn because they’re either desperate or have so many houses they don’t care.
Still if you see a house you want, there is one way that a short sale could come into play. Say there’s a distressed property that you’d pay 100k for that you know would be worth 180k if it was fixed up a bit. The seller doesn’t have the money to do it and the house is either vacant or they want out of their situation. In this case, if the seller happens to owe 130k (around there), and you will only pay 100k, AND the seller hasn’t had any viable offers because of the level of distress on the property, then a short might be just what the doctor ordered.
Don’t be unethical and take advantage of people. You’re only going for short sales if the person WANTS to sell their house and no one else but you will buy it because you’re not afraid to rehab a house that’s smells bad and is falling apart.
Conclusion
Again, a short sale is not a magic cure. It’s also not some mystical solution that only an elite few know about. If you’re curious about selling your house as a short sale, you should contact your lender and get information in writing. It’s usually not easy, and hardly ever will truly “win.” But in some cases, it can leave you much better off than the alternative of foreclosure and bankruptcy. If you’re an investor, there are much better ways to obtain undervalued homes.
Visit www.RealEstateInvestorsLife.comfor more valuable investor resources
By: Real Estate Investor
Article Directory: http://www.articledashboard.com
Rick Sarouk is an 18 year veteran real estate investor and certified Appraiser He specializes in foreclosure and Preforclosure real estate investing.Visit www.RealEstateInvestorsLife.com
Friday, March 14, 2008
Time To Buy And Hold?
Real estate investing can be seen as a complex issue, but that is only because there are so many choices. When you invest, you have a virtually unlimited array of ways to make money. But that entails being able to make choices. You have to decide how much you will learn about each aspect of real estate, whom to add to your team, where to seek properties, whether a particular property is a good one for you—and on and on.
One question you will find yourself faced with is what to do with a property once you have purchased it. You may not be the type of investor who wants to buy a property and hold on to it for a long time. You may not want to deal with property managers and tenants or to see to the upkeep of a piece of real estate. If these things don't appeal to you in the slightest, your other option is flipping.
Flipping a property is simply the practice of selling it as soon as you buy it, often at the same closing. At the very latest, flippers tend to begin the selling process the day of the sale. Some even begin before they own the property, which is very risky business. However one goes about doing it, flipping always entails a mad rush to the auction block because an empty property is always a liability.
However, when you hold a property, you have the opportunity to raise that property's value. If you get a really good deal, the amount you have paid for it will probably be a drop in the bucket compared to what you stand to make from it. And when you do decide to sell it, you will be able to do so at your leisure and get more than you would have by flipping.
This holds true especially if you property is a multi-family dwelling such as an apartment high rise. If it is a good property in a good location, and you take care of it, chances are that occupancy is going to stay up. With a property like that, your earnings tend to increase exponentially. With good management, that is almost guaranteed.
Speaking of management, you will need to decide whether you will do that yourself or hire a management company to do that for you. If you own a particularly large piece, or if you own many pieces, you will have to hire a manager. Ken McElroy, author of “The ABCs of Real Estate Investing,” strongly suggests that you hire a real estate management company so that your talents and your time will be put to better use elsewhere.
Those are the sorts of things you will have to consider if you hold a property.
Ultimately, however, whether you flip a property or hold it depends on what you would rather spend your time doing. Perhaps you thrive on the fast-pace workday that flipping entails. Maybe the adrenaline rush feels like an adventure to you. In that case, you should learn the proper way to flip properties (i.e., wait until you actually own a property to sell it and don't approach buyers at the very closing where you acquired a property).
However, if the idea of nurturing a property appeals to you, then buying and holding is the way to go. Depending on your talents, you personally may be able to make more money working one way as opposed to another. It's totally up to you.
About The Author: Alex Anderson Has a Website for Minnesota Real Estate and Assists Buyers To Purchase Investment Property in Minnesota As Well As National Investors Looking to Buy Investment Property.
One question you will find yourself faced with is what to do with a property once you have purchased it. You may not be the type of investor who wants to buy a property and hold on to it for a long time. You may not want to deal with property managers and tenants or to see to the upkeep of a piece of real estate. If these things don't appeal to you in the slightest, your other option is flipping.
Flipping a property is simply the practice of selling it as soon as you buy it, often at the same closing. At the very latest, flippers tend to begin the selling process the day of the sale. Some even begin before they own the property, which is very risky business. However one goes about doing it, flipping always entails a mad rush to the auction block because an empty property is always a liability.
However, when you hold a property, you have the opportunity to raise that property's value. If you get a really good deal, the amount you have paid for it will probably be a drop in the bucket compared to what you stand to make from it. And when you do decide to sell it, you will be able to do so at your leisure and get more than you would have by flipping.
This holds true especially if you property is a multi-family dwelling such as an apartment high rise. If it is a good property in a good location, and you take care of it, chances are that occupancy is going to stay up. With a property like that, your earnings tend to increase exponentially. With good management, that is almost guaranteed.
Speaking of management, you will need to decide whether you will do that yourself or hire a management company to do that for you. If you own a particularly large piece, or if you own many pieces, you will have to hire a manager. Ken McElroy, author of “The ABCs of Real Estate Investing,” strongly suggests that you hire a real estate management company so that your talents and your time will be put to better use elsewhere.
Those are the sorts of things you will have to consider if you hold a property.
Ultimately, however, whether you flip a property or hold it depends on what you would rather spend your time doing. Perhaps you thrive on the fast-pace workday that flipping entails. Maybe the adrenaline rush feels like an adventure to you. In that case, you should learn the proper way to flip properties (i.e., wait until you actually own a property to sell it and don't approach buyers at the very closing where you acquired a property).
However, if the idea of nurturing a property appeals to you, then buying and holding is the way to go. Depending on your talents, you personally may be able to make more money working one way as opposed to another. It's totally up to you.
About The Author: Alex Anderson Has a Website for Minnesota Real Estate and Assists Buyers To Purchase Investment Property in Minnesota As Well As National Investors Looking to Buy Investment Property.
Thursday, March 13, 2008
Using Short Sales To Buy Property With Little Or No Equity
You know that it’s possible to buy a house that has little or no equity in it for less than is owed on the mortgage! Yes, it’s possible. Let’s say that you, as a property investor come across this homeowner who is behind in their mortgage with the bank. On the current real estate market the defaulted property is worth $100,000, but the homeowner is actually in debt for $115,000. It is possible for you to get that homeowner’s house for just $70,000.
This seems impossible, but a little known practice called, “Short Sales” in defaulted note buying allows you to purchase property that is over financed and has little or no equity in it! This is basically when you work with the bank to renegotiate the selling price of the house and the bank writes off the remainder of the mortgage.
Getting Started with the Short Sale When you work with this homeowner, you will become the homeowner’s advocate or intermediary with the bank. So the first thing you’ll need to do is get an “Authorization to Release Information”, and fax it to the bank so that you can negotiate with the bank. This basically means that the homeowner is giving the bank permission to speak with you concerning their mortgage.
When you contact the bank you’ll want to explain to the bank the reasons why they should be willing to let go of the house for less than it is valued and for less than is owed on the mortgage. This involves putting together a little package with information that the bank may request from you and extra information that you include on the condition of the house.
For example; the house may need a new roof. There could be all kinds of deferred maintenance and it needs all kinds of repairs. You could even point out that the housing market is declining in the area or point out that there are loads of other houses on the same street that haven’t sold. Basically, you present your case to the bank explaining the reasons that they should let the property go cheap. Be sure to include digital photos of the damage to the property or the decline.
Using the Short Sales technique it is possible for you to work with the bank to reduce the selling price of that defaulted property. You are able to purchase it from the homeowner for a reduced price and the homeowner can get out from under this mortgage without it being on their credit.
All you need to do is approach the banks professionally, put together a good case for reducing the price (such as needed repairs to the property) and for good measure include some digital photos of damage or neglect on and around the property.
This seems impossible, but a little known practice called, “Short Sales” in defaulted note buying allows you to purchase property that is over financed and has little or no equity in it! This is basically when you work with the bank to renegotiate the selling price of the house and the bank writes off the remainder of the mortgage.
Getting Started with the Short Sale When you work with this homeowner, you will become the homeowner’s advocate or intermediary with the bank. So the first thing you’ll need to do is get an “Authorization to Release Information”, and fax it to the bank so that you can negotiate with the bank. This basically means that the homeowner is giving the bank permission to speak with you concerning their mortgage.
When you contact the bank you’ll want to explain to the bank the reasons why they should be willing to let go of the house for less than it is valued and for less than is owed on the mortgage. This involves putting together a little package with information that the bank may request from you and extra information that you include on the condition of the house.
For example; the house may need a new roof. There could be all kinds of deferred maintenance and it needs all kinds of repairs. You could even point out that the housing market is declining in the area or point out that there are loads of other houses on the same street that haven’t sold. Basically, you present your case to the bank explaining the reasons that they should let the property go cheap. Be sure to include digital photos of the damage to the property or the decline.
Using the Short Sales technique it is possible for you to work with the bank to reduce the selling price of that defaulted property. You are able to purchase it from the homeowner for a reduced price and the homeowner can get out from under this mortgage without it being on their credit.
All you need to do is approach the banks professionally, put together a good case for reducing the price (such as needed repairs to the property) and for good measure include some digital photos of damage or neglect on and around the property.
Article Directory: http://www.articledashboard.com
Monday, March 10, 2008
5 Top Foreclosure Techniques
Financing options for foreclosure investors are not in short supply. On the contrary, there are a variety of options - both traditional and more creative - for foreclosure investors to choose from. There are many people who would like to try their hand at foreclosure real estate investing, but feel held back by their lack of financing. They wrongly assume that having the cash outright or taking out a large mortgage are their only options available to them. In this article, we will explore the top 5 foreclosure financing options - that touch both creative and traditional approaches.
1. Make payments on the sellers mortgage in order to get it current and out of the pre-foreclosure phase. You can then have the loan transferred into your name and take over future payments. To go this route, you have to contact the home owner before the property goes into foreclosure and is sold at auction.
2. If you have an investment that you can borrow against, such as a life insurance policy or a retirement fund, it is a great way to get a large sum of money without taking out a traditional bank loan, dipping into your savings, or risking a high-value asset such as your home.
3. If a large loan is out of your reach due to credit problems, you may still be able to get approved for several smaller loans. If you take them all out within days of each other, you can secure them all before they start to hit your credit report and affect your eligibility for other loans. Plus, paying all of these loans off will help your overall credit situation immensely.
4. If you own a home, you can use the equity you have in it to secure funds through a home equity loan. Since you are using your home to guarantee the loan, you will have an easier time with the approval process, than you might if you tried to take out an unsecured personal loan.
5. Lastly, if you can't secure financing on your own, then it may be a good idea to find a partner who has the assets, credit, or cash to help you finance your properties. You will have to split your profits, but you will still be making your share of money off of each deal.
Although these are great options to choose from, they are not the only ones available to you. There are many other financing options out there to explore and the more time you take to explore each of these options, the easier it will be to discover which financing options are best for your investment strategy. Choose the right financing options and you could make a killing in the foreclosure real estate market.
About the Author:
John Krajewski is a 33-year old real estate investor who has spent several years building a successful REI portfolio. After facing and conquering the common REI trials and tribulations that most new investors deal with, John has poured his wealth of valuable information into one amazing e-book: Secrets to Foreclosure Profits. This powerful e-book teaches real estate investors of any level how to profitably invest in foreclosure properties using the insider secrets and little-known tips discovered by John during his direct experience with foreclosure REI. Besides real estate investing, John also enjoys snowboarding, mountain biking, networking with other investors, and spending time with his family. Learn more about John's e-book Secrets to Foreclosure Profits at http://www.4closuresecrets.com
Article Source: http://EzineArticles.com/?expert=John_Krajewski
1. Make payments on the sellers mortgage in order to get it current and out of the pre-foreclosure phase. You can then have the loan transferred into your name and take over future payments. To go this route, you have to contact the home owner before the property goes into foreclosure and is sold at auction.
2. If you have an investment that you can borrow against, such as a life insurance policy or a retirement fund, it is a great way to get a large sum of money without taking out a traditional bank loan, dipping into your savings, or risking a high-value asset such as your home.
3. If a large loan is out of your reach due to credit problems, you may still be able to get approved for several smaller loans. If you take them all out within days of each other, you can secure them all before they start to hit your credit report and affect your eligibility for other loans. Plus, paying all of these loans off will help your overall credit situation immensely.
4. If you own a home, you can use the equity you have in it to secure funds through a home equity loan. Since you are using your home to guarantee the loan, you will have an easier time with the approval process, than you might if you tried to take out an unsecured personal loan.
5. Lastly, if you can't secure financing on your own, then it may be a good idea to find a partner who has the assets, credit, or cash to help you finance your properties. You will have to split your profits, but you will still be making your share of money off of each deal.
Although these are great options to choose from, they are not the only ones available to you. There are many other financing options out there to explore and the more time you take to explore each of these options, the easier it will be to discover which financing options are best for your investment strategy. Choose the right financing options and you could make a killing in the foreclosure real estate market.
About the Author:
John Krajewski is a 33-year old real estate investor who has spent several years building a successful REI portfolio. After facing and conquering the common REI trials and tribulations that most new investors deal with, John has poured his wealth of valuable information into one amazing e-book: Secrets to Foreclosure Profits. This powerful e-book teaches real estate investors of any level how to profitably invest in foreclosure properties using the insider secrets and little-known tips discovered by John during his direct experience with foreclosure REI. Besides real estate investing, John also enjoys snowboarding, mountain biking, networking with other investors, and spending time with his family. Learn more about John's e-book Secrets to Foreclosure Profits at http://www.4closuresecrets.com
Article Source: http://EzineArticles.com/?expert=John_Krajewski
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