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What is a Short Sale?

Jason Painter — Tue, 14 Oct 2008 16:43:08 -0700

It seems nearly every day I am asked by my website users to explain what a short sale is to them. The question is so common that I decided to just write a page about it on my website so I dont have to keep telling the same story as it may.

Short sales are new to many people and seem to be a creation of a sharply declining housing market. A short sale is when a seller attempts to sell their property at a price that is insufficient to cover their mortgage and related selling expenses. The idea is that a seller can avoid foreclosure by finding a buyer for the bank. The bank may decide that rather than foreclosing on a client they may just grant a short sale. You might wonder why a bank would do this?

The banks position: The bank realizes that the homeowner is in trouble and is not going to be able to continue making payments. The bank can choose to foreclose on the seller for nonpayment. In order to foreclose, costly legal proceedings and time must be accounted for. It is estimated that an average foreclosure in the US costs a bank from 40-50k dollars. The bank may decide that allowing a short sale is the lesser of two evils; a way for the bank to cut its losses and go on.

The sellers Position: The seller will want to perform a short sale to hopefully keep their credit from being hurt by the hit of a foreclosure. Short sales are generally forgiven and the client does not have to pay the shortage back in many instances. The credit repercussions are generally much less harsh than a full foreclosure. Recent tax rules signed into law stipulate that the perceived “profit” from the short sale not be taxed. The tax break is for primary residences only.

So do I want to buy a short sale?

Think very carefully before embarking on a short sale hunt. Be very aware that these types of transactions are neither fast nor easy. Many times banks will stall for months before countering an offer on a short sale. Many times a short sale may be listed for sale and the bank may not have been made aware of it, and definitely not approved it. I find that short sales generally take at least 90 days to close, sometime much longer. Many times they will never close and are instead foreclosed on.

Keep in mind that when you see a short sale on the market it will normally have a very attractive price. Short sales are priced low for a reason. People know the hassles of short sales and generally stay away from them. Knowing this, the listing agent and seller price the home at a sometimes unbelievable low price. This low price has not been approved by the bank, and instead usually a “teaser price” in order to garner multiple offers. The bank will wait a period of time and will usually start countering the offers at market prices. Keep in mind that the banks are fully aware of market price and are not in the habit of giving properties away. Even if you offer the full asking price, or even above it, there is no guarantee that the bank will accept the offer.

Some short sales are better than others:

In my experience there are several tell-tale signs that a short sale is going to work or if it isnt.

Is the seller qualified to perform a short sale? Only a person facing some type of financial pressure is allowed to pursue a short sale. Usually a loss of work, sickness or some other issue is warranted. Banks will not allow you to short sale just because you invested in a property that lost value and now you want out. They look for genuine hardship to consider working with the seller at all.
Has the listing agent contacted the bank and obtained a short sale package? The bank will let it be known quite early if they are willing to proceed with a short sale. Ask to see proof that the bank is willing to facilitate such a sale before entering into a listing agreement.
How much is owed against the property? If a property has a serious delinquency between selling price and the priced owed, the bank may choose to foreclose. They may feel that they may have better luck selling the home as a REO or real estate owned property.
How many mortgages are on the property? Find out if there is just one or multiple mortgages. A property with one mortgage will have a much better chance at closing than multiple mortgages.
If there are two mortgages, are they from the same bank? In my experience, if there is a first and second mortgage on a property and they are both from the same company; you have a better chance of closing the short sale. If there is a primary mortgage by bank “A” and a secondary mortgage by bank “B”, bank “B” will be hard to convince that a short sale is beneficial to them. The second mortgage always gets paid last, and many times that means they may get nothing at all.

With all the caveats of short sales, there seem to be some people that are more suited as buyers of them than others. If you have plenty of patience and no timeline on purchasing a home, short sales may be an avenue for you. If you need a home within the next few months and like to know exactly what is going on with your offer at all times, you may want to look elsewhere. If you would like to learn more about Florida short sales, just give us a call at 941-740-8000.

PROGRAM Realty Goes Hollywood!

Jason Painter — Sun, 10 Jun 2007 15:59:44 -0700

There are some exciting things happening around the office at PROGRAM Realty. This week Jason and Amanda Painter were approached by the producers of a television show for Home and Garden Television (HGTV) called “House Hunters.” The show follows buyers and their real estate agents while going through the process of buying a home.

The show works like this. It starts off by filming the buyers in their current home. The show then shows the meeting with the Realtors and the viewing of three perspective homes. The buyer chooses a home to purchase, then is followed up with after the closing has taken place and the new owners have moved in.

The shows that Amanda and Jason were picked for is for Gulf Front homes and Million Dollar homes. If you are currently in the market for either of these types of homes in the Southwest Florida area and feel comfortable with being in front of a camera, then give us a call. If the producers like what they see you could be on the next addition of House Hunters!

PROGRAM Realty is your go to source for Englewood Florida Real Estate , Boca Grande Real Estate , and Manasota Key Real Estate . To Contact Jason and Amanda about this opportunity, just click here!

Sneaky Fees on your Closing Statement!

Jason Painter — Sat, 07 Apr 2007 09:04:56 -0700

I have experienced a few surprises at the closing table recently and I thought I might blog about it here on this website. It seems that a new trend in real estate is hidden fees at closing.

Usually for a new home here in Englewood, Florida there is a commission of 6-7% that is generally split evenly between the buying agent and the selling agent. This commission is evidently just not enough for some real estate companies as they have decided to charge their customers an extra $250 to $400 “Documentation Fee” or “Transaction Fee.” This fee will show up whether you are buying or selling with these agencies, and if you use that same agent to both buy and sell your property, you can get hit with the fee twice!

When asked to explain this new fee, your agent will normally tell you it is for preparation and storage of your closing documents. If this is the case, what is the rest of the commission for? On an average 250k dollar home the commission before splits can be as high as $17,500.00. Is this not enough money to prepare and store your documents? You would think that surely they could pay their document storage fee out of this commission. How much does it cost to store a folder of paper nowadays?

Dont blame the individual agents though…well not too much at least. The only mistake the agents are making is working for a company with policies like this. In my experience if the buyer or seller refuses to pay the “documentation fee,” the broker will take it out of the poor agents commission.

I urge everyone to ask their agent up front what their fees will be so that we can get this nasty trend stopped before it gains too much of a foothold. PROGRAM Realty never has and never will charge any of these ridiculous fees to our buyers or sellers! Our only fees come from the percentage commission that is pre agreed upon when the listing is made and is paid only by the seller in a transaction.

Jason Painter's State Of The Market, Spring 2007

Jason Painter — Wed, 31 Jan 2007 17:05:20 -0800

As I sit here writing this article, it is late January and we are in surprising cold snap. This cold snap is a change from what so far has been a very mild winter. The eastern half of the nation in particular has experienced a very warm winter, possibly one of the warmest on record. What does this have to do with real estate you may ask? Well, quite a bit actually…read on!

Usually in January when its freezing up north, people flock to Southwest Florida to escape the cold and dreary weather. This year has been a little different, although the weather up north is not up to par with what Floridians experience, its still not as bad as it normally is. This has translated in some folks not feeling the need to visit Florida this year. Since the weather isnt horrible, “just tough it out till spring” is what are on many peoples minds.

This has created for the first time in years a period when Florida might experience a year over year decline in winter visitors. This decline in winter visitors have brought with it a decline in the usual boom in real estate sales that normally occurs this time of year.

As usual with my State of the Market addresses, I will examine the factors affecting property values in the area; both good and bad.

The market for Florida real estate has been somewhat flat since my last article in the summer. The flatness is a welcome change from the dramatic decline from the Spring of 2006. The market would still be considered quite soft.

Some of my personal beliefs for the soft market for Port Charlotte Real Estate, Englewood Real Estate, and Manasota Key Real Estate amongst other areas in Florida are listed below.

Small time investors have left. The flippers have flopped and left town on their last dime. Most people that are buying properties now are folks that actually intend to live in them, yes crazy I know.

Buyers and sellers are in a standoff. It is almost like a duel and buyers are hoping that the sellers flinch first. The sellers have been battered to the point where they seem to be saying, “If I cant get X amount of dollars I will just hold it until the market comes back.” Buyers, on the other hand, have the attitude that they wont buy anything unless it is severely undervalued to protect themselves in case the market dips farther.

Some folks get caught in the crossfire. Unfortunately, some folks are finding themselves in a financial crunch and MUST sell in order to get out alive. The unfortunate part is many of these people bought in at the high point of the market and face large losses.

The amount of property for sale is staggering. As with any free market society the laws of supply and demand reign supreme. There are 6448 homes listed in the Punta Gorda-Port Charlotte-North Port association of Realtors MLS at the time of this writing. At some point sellers and buyers must meet. Will it be higher, lower, or at current levels is the question.

But alas, everything is not all gloom and doom, let looks at the positive factors that have to be considered in the Southwest Florida market.

The baby boomers are coming, yes they are…believe it! I get contacted by them every single day. They are not in a hurry, are savvy buyers, and are looking for deals.

Long term interest rates are at historical lows. Time has really never been better for financing a new home.

Florida is a great place to live, sometimes we forget it but have you looked around? Wow! Florida will always be a THE destination on the east coast.

If you look around at the truly successful big investors, they are still here. These people know that there are ups and downs in investments and these variations mean nothing in the long term. They dont have their properties for sale. The big investors are picking up new properties every single day at bargain prices.

In closing, yes the market is slow. Prices for things like vacant lots are 60-70% off their highs. I suggest getting into a duel of your own and picking up a gorgeous property at a terrific price before it is too late! If you are selling, I suggest you reconsider if possible. If you absolutely have to sell your property I suggest you find a top Realtor with access to the northern market. Have this Realtor list your property at a true market value and get it sold. Keep in mind that if you overprice the property it will not sell, simple as that. Best of luck to all in 2007!