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The number of U.S. home short salessurpassed foreclosure deals for the first time as banks became more agreeable to selling houses for less than the amount owed on their mortgages, according to Lender Processing Services Inc. (LPS)

short sales accounted for 23.9 percent of home purchases in January, the most recent month available, compared with 19.7 percent for sales of foreclosed homes, data compiled by the Jacksonville, Florida-based company show. A year earlier, 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

 

Mark Elias/Bloomberg

April 17 (Bloomberg) -- U.S. housing starts in March dropped 5.8 percent to a 654,000 annual rate, less than the lowest estimate of economists surveyed by Bloomberg News and the least since October, Commerce Department figures showed today in Washington. Michael McKee and Betty Liu report on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

“It’s a fairly recent phenomenon that short sales have been increasing,” Jonathon Weiner, a vice president in the applied analytics division of Lender Processing Services, said in a telephone interview. “Short sales should be the dominant way of disposing of assets” in distress, he said.

Lenders are catching up to short sales after being slow to provide the staffing and incentives necessary to complete the deals, Weiner said. The transactions typically fetch a higher price for banks than sales of homes that have gone through foreclosure. In January, foreclosed homes sold for an average of 29 percent less than comparable non-distressed properties, compared with a 23 percent discount for short sales, according to Lender Processing Services. The gap has narrowed as short sales become more common, Weiner said.

The growing percentage of short sales, which don’t require going through the drawn-out foreclosure process, is a sign that the U.S. is making progress in working through its inventory of distressed properties, Weiner said. The increase in short sales also may help values find a floor quicker.

“Our baseline scenario is that home prices will hit a bottom at the end of this year,” he said.

Cash Incentives

Banks including Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM)last year began giving cash inducements as high as $35,000 to selected homeowners who agreed to a short sale as a way of speeding up the process.

Bank of America Corp. paid $19.9 million in the first two months of this year for 22,534 homeowners to relocate after short sales and deeds in lieu of foreclosure, when borrowers agree to return the property deed in exchange for debt forgiveness, the Charlotte, North Carolina-based company said March 16. Its short sales rose 31 percent in January and February from a year earlier.

Banks have struggled to reduce losses from delinquent mortgages. Almost 4.4 percent of homes with loans had received a notice of foreclosure sale at the end of 2011, the 11th consecutive quarter the rate has been higher than 4 percent, according to the Mortgage Bankers Association.

Falling foreclosures

Foreclosure filings, including notices of defaults and bank repossessions, fell 16 percent in the first quarter from a year earlier after lenders under legal scrutiny slowed actions against delinquent homeowners, RealtyTrac Inc. reported April 12.

Lender Processing Services, a 2008 spinoff from title-insurance company Fidelity National Financial Inc. (FNF), counts short sales by tallying mortgage and property transfer documents filed with county recorders, Weiner said.

Other reports haven’t shown the same magnitude of short-sale growth. The National Association of Realtors reported that 13 percent of transactions were short sales and 22 percent were foreclosures in January. In February, short sales increased to 14 percent and foreclosure-related transactions declined to 20 percent, the group said March 21.

Showing an ‘Uptick’

The Realtors collect their data from transactions on the Multiple Listing Service, a database of homes on the market, and a survey of about 3,000 members, said Walter Molony, a spokesman for the association.

“The February data is showing a bit of an uptick,” he said in an e-mail from Washington. “We’re hearing the process is going a bit more smoothly now, so that comes as no surprise.”

The U.S. Department of Housing and Urban Development reported a preliminary 19,600 short sales in January, compared with the Lender Processing Services tally of 48,721. An April 6 HUD report showed that the number of short sales rose 4.3 percent from a year earlier as the number of real estate owned, or REO, sales -- another name for foreclosure sales -- fell 39 percent.

Before agreeing to accept a loss on a short sale, lenders usually require homeowners to show evidence of hardship, such as inability to afford their mortgage payments or the need to relocate for a job, said Weiner of Lender Processing Services.

California, Arizona

short sales outnumbered foreclosures in states with some of the largest shares of homes facing foreclosure, such as Arizona, California, Florida, Nevada and New Jersey, Lender Processing Services reported.

In New Jersey, short sales have exceeded REO deals every month since June 2010. In January, short sales accounted for more than 15 percent of the 3,033 New Jersey homes sold, compared with 3.9 percent for foreclosures. It took 966 days for banks to repossess a home in New Jersey, second only to New York, according to RealtyTrac. Both states require judicial hearings for foreclosure approval.

In New York, where it takes 1,056 days to repossess a home, 7.9 percent of purchases in January were short sales while 2.3 percent involved bank-owned properties.

“In general, markets where larger incentives are provided usually have extended foreclosure timelines, such as Florida,”Tom Goyda, a spokesman for Wells Fargo, said in an e-mail from Ellisville, Missouri. Wells Fargo, which doesn’t disclose its short-sale totals, offers homeowners as much as $20,000 to relocate, he said.

For more information about short sales Visit Us  The Short Sale Toolbox

Short Sale Listing Agents...If you can't answer these basic questions, refer your client to an Agent who can. 

Home Owners...Hire a Real Estate Professional who has experience with short sales...you might only have one chance to get it right.  All real estate agents do not handle short sales.   We do...if you need assistance with your Short Sale Contact Us Here

By Bernice Ross, Monday, April 16, 2012.

Inman News®

How well are you representing your clients? Today's column has nine questions that at least one investor has found cannot be answered by 95 percent of the agents in his market. Are you part of the 5 percent who can answer these?

I recently interviewed Barry Cunningham who has a successful investment business purchasing and selling short sales. Cunningham is not a licensee and typically uses an Agent in his transactions. What he has experienced is nothing less than shocking. Here are the questions that most of the agents in Cunningham's market are unable to answer:

1. Is the property still available?
There are four answers to this question. The property could be actively listed, sold, pended or expired. When Cunningham asks this question, many of the agents can't give him a simple answer. If the Agent doesn't say that the property has sold, Cunningham responds by saying, "So we still have time to put in an offer." At this point, many agents start hemming and hawing. Again, the property is either available or it's not.

2. How many mortgages are there on the property?
While the sellers aren't always forthcoming about this issue, there are numerous ways to check this either through the public records, the title company, or by ordering a preliminary title report. If you don't know the number and the amount of the mortgages on the property, how do you plan on closing the transaction when the seller owes more than what the buyer is offering? Determining this upfront not only protects the principals in the transaction, but it can literally save you months of work. 

3. Are there any liens or judgments?
sellers may be embarrassed to tell you that they haven't paid their homeowner dues or that there is an IRS tax lien against them. Again, it's important to see the number and the type of liens on the property.

For example, IRS tax liens are extraordinarily difficult to close in a short time period. City and state liens are often easier to resolve provided there is enough cash in the deal to pay them off. The question is: Do you want to list or sell a property that will require this level of work?

4. Are there any municipal or city fines on the property?
While municipal and city fines are often wiped out when there is a foreclosure, in Florida, for example, this is not the case. The fines transfer to the new owner of the property.

Cunningham cited one example where there was a $1,000-a-day fine (which can be for something such as a swimming pool infested with mosquitoes). The listing Agent provided comparable sales information to the bank that owned the property. The comps were based upon other properties in the area that did not have this issue. Clearly, the fine greatly diminished what the property was worth. Furthermore, once the information was revealed to the listing agent, in most states that agent has an affirmative duty to disclose that information, not only to the bank selling the property, but to any future buyers as well.

5. Are the improvements permitted?
Your listing says that there is a new roof or kitchen. Where are the permits? Depending where you are in the country, some areas are relatively lax when it comes to obtaining permits. In places like Los Angeles, however, you have to pull a permit just to replace a dishwasher or a water heater.

In fact, there was a case in West L.A. where an owner did a major remodel on a $1 million home that included adding a substantial amount of square footage. The seller didn't pull permits. The city demanded that the improvements be removed.

Again, when you take a listing and the sellers say they have done work to the house, determine the nature of the work and whether a permit is required. If a permit is required and the sellers didn't obtain one, it's probably smart to pass on the listing, as you could be buying a lawsuit.

6. Who paid what taxes?
If there have been improvements and the sellers didn't pull permits, their upgrades will probably cause their property to be reassessed for property tax purposes. This means that the sellers may owe additional property taxes, even after the property has closed.

In terms of your obligation on a short sale or other distressed property sale, you need to know whether the homeowner paid the taxes or the bank did. If the bank paid the taxes, this means the payoff will be higher and it also must be disclosed on the HUD statement.

7. Where is that sewer hookup anyway?
Cunningham had a situation where a bank was taking back a property. When the city installed a sewer, the sellers never paid the sewer hookup fee. Instead, they were pulling water out of a pond. The bank didn't believe it until Cunningham shot a video showing this was the case.

8. The comparables are all at $72,000, $70,000 and $75,000, so why are you listed at $95,000?
There's only one answer to this question: The listing Agent wasn't strong enough to persuade the seller to list the property at market value.

9. Did you tell the seller about the offer we submitted?
This is probably the most frustrating issue for competent agents and serious buyers. For whatever reason, some listing agents do not submit the offers to their sellers, or worse yet, don't even call back the Agent who has the offer.

Because Cunningham is not licensed, he often sends his offers directly to the owners. The comments he hears are, "I haven't seen my Agent in a month!" or "You mean I can sell my house on a short sale and avoid going through foreclosure?"

In Cunningham's area, there are about 1,600 sales per month. There are 27,000 agents. It's clear there's not enough business for all of them and that most simply don't have the experience to navigate the difficult waters in today's market.

If you aren't able to answer the basic questions outlined in this column, then there is no better time than now to start asking the questions you need to provide your clients with the best possible representation. If you are unable or unwilling to address these issues, refer the client to an Agent who will get the job done. It's much better to earn a referral fee than to get zero when the transaction doesn't close. 

Contact Us Today -   Short Sale Listing Agent

We have often advised buyers to look at the COST of purchasing a house more than the PRICE of the home. Obviously, price is part of the cost equation. The other piece, assuming you are not an all cash buyer, is the mortgage rate. The mortgage rate to finance a purchase can have a dramatic impact on the overall cost. Recently, there are more people talking about the possibility that mortgage rates could begin to increase.

HSH.com studies trends in mortgage rates. They explain:

“A better economic climate almost always brings higher rates, and a lessening of the troubles in Europe from massive central bank assistance adds to the movement of money from safe havens to more risky assets, driving rates upward."

Dan Green of The Daily Market Reports recently stated.

“The Fed sees growth coming faster than originally expected. There’s suddenly less chance that the Federal Reserve will intervene to help keep mortgage rates low. Absent Fed intervention, mortgage rates are apt to rise and Wall Street is now betting that the Fed has bowed out. With no stimulus, mortgage rates rise.

Lawrence Yun, chief economist for the National Association of Realtors, recently wrote:

“mortgage rates will be starting to rise. From the 3.9 to 4.0 percent average rate in the past five months on a 30-year fixed mortgage, the new rates will soon be in the range of 4.3 to 4.6 percent”

Yun explains his logic here..

We do not attempt to predict future interest rates. We leave that up to the experts in the field. However, we want our readers to understand the potential impact on the cost of purchasing a home if they do rise. Here is a simple table that shows, even if the PRICE of a home softens, the COST of a home could increase.

Bottom Line

Many purchasers think they should wait until they are sure that prices have hit bottom. Deciding whether or not to wait should be determined by where the COST of a home is headed.

If you or someone you know are considering Buying a Home we can help.  

Visit The Teri Pacitto Group and see how we can help

This article caught my attention as I am seeing this happening in Thousand Oaks, Westlake Village areas.   How can we get the attention of banks to let them know specifics?   They are loosing a lot of money in the short sale transaction.

In 'flopping,' a home is purchased by insiders at a steep discount, then immediately sold for a big profit.

By Melinda Fulmer of MSN Real Estate

Real-estate Agent Lynne Wright thought she had found the perfect home for her clients. The quiet house on a cul-de-sac in one of the most prestigious gated communities in Bakersfield, Calif., was offered in a short sale for $40,000 less than similar homes on the market.

Wright and the couple moved quickly and made an offer higher than the asking price, but were outmaneuvered by a husband-and-wife real-estate team in Wright's brokerage office who wanted to buy it for their own use. She didn't think much of it, until she saw that the property sold for $40,000 less than the $342,000 her clients had offered.

When she asked the listing Agent why, she was told to "leave it alone."

Wright says she is still not sure if the servicer or owner of the property ever saw her clients' much higher offer. All she knows is that two agents picked up a luxury property for $80,000 less than market value, the banks took a big loss and the listing Agent got both sides of the commission, representing his colleagues.

"It's just robbery," she says. "And I don't know how to stop the robbery."

Apparently the nation's mortgage servicers don't, either. Suspicious real-estate transactions have surged in the past two years, analysts say, along with the number of short sales, in which a house is sold for less than the amount of its remaining mortgage.

short sales are supposed to be "arms length" transactions without any relationship or collusion among the parties, all of whom must sign affidavits to that effect. But the parties often are connected.

Many times, this fraud is committed through limited-liability companies to make it hard for servicers to see who is buying the property, says Robert Hagberg, associate director of mortgage-fraud investigations for Freddie Mac.

In some cases, this type of mortgage fraud involves buyers scooping up distressed properties for a portion of their value, either for themselves or to give back to a friend or relative.

The rest involve "flopping," where an investor – with the help of an Agent or middleman – persuades the bank to agree to a much steeper discount than it should, and immediately resells the property to another buyer for a significant profit without having made any improvements. The FBI says it has found numerous instances in which organized-crime groups were involved in short-sale fraud.

According to a recent study by CoreLogic, short sales that were resold the same day averaged a 34% gain (or $54,947) between sale prices.

One in every 52 short-sale transactions in the first half of last year appeared to be one of these "suspicious" resales, CoreLogic said. This year, it expects lenders, servicers and investors to incur more than $375 million in unnecessary losses from these shady deals, as the number of short sales surges an additional 25%.

"Short-sale fraud and other servicing-related fraud is definitely the fraud du jour and our greatest area of focus at the moment," Hagberg says. In 2011, more than 50% of Freddie Mac's investigations were related to short sales.

Who are the perpetrators?
For the most part, these deals involve insiders, from the underwater borrowers themselves to investors, listing agents, brokers providing valuations and so-called "facilitators," or middlemen negotiating with the banks and buyers trying to flip the properties.

Banks, with a huge backlog of distressed properties, are under pressure to do a lot of transactions and to do them as quickly as possible, says Ann Fulmer (no relation to the reporter), vice president of industry relations for Interthinx, a company that helps lenders reduce their fraud risk.

Knowing this, these insiders are able to work the system and push through bogus valuations to set the price of the sale or fend off higher offers.

Fulmer has seen listing agents involved in these scams post properties in multiple-listing services in the wrong city to avoid competition. Some post pictures of a completely different, junk-filled property. Or they stipulate that only people from the real-estate office will take offers on the property, so they can control the transaction.

In Wright's case, which was reported to the state but has not been prosecuted, real-estate agents controlled every aspect of the deal. An Agent in her office was the distressed borrower; the listing Agent who represented the property and buyer sat just desks away, as did the real-estate team who eventually wound up with their own luxury property for a song.

"The thing that really bothered me was the lack of ethics," Wright says. "Sure I can find my clients another house; what I couldn't explain to them very well was how (something like this) can happen."

Gary Crabtree, an appraiser in the area, said he got calls from several agents whose offers were rebuffed for the rock-bottom inside bid.

"It set an all-time low for that neighborhood," he says.

If you or someone you know is in jeopardy of loosing their home Contact us The Short Sale Toolbox

Some big banks are offering struggling homeowners incentives -- sometimes $30,000 or more -- to sell their homes for less than they owe.

This post comes from Marilyn Lewis of MSN Money.

Banks appear to be waking up and making efforts to rid themselves of troubled mortgages. And what's good for banks is also suddenly looking good for homeowners.

Banks are encouraging delinquent homeowners to sell their homes for less than they owe, letting them walk away from the debt. What's more, in some cases banks are offering delinquent homeowners cash -- typically $15,000 to $35,000 -- to do a short sale. It's not clear how widespread the practice is.

Banks are nudging potential sellers by preapproving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, Bill Fricke, a senior credit officer for Moody's Investors Service in New York, tells Bloomberg.

Riverhead, N.Y., real-estate Agent Kris Pilles said that in his work approaching delinquent homeowners to sell on behalf of banks, mortgage servicers and hedge funds, he saw a homeowner offered $92,500. In exchange, owners are expected to keep up the homes and yards while the properties are for sale.

Foreclosure is a big expense for banks. Consumers have long wondered why banks shun alternatives like short sales or forgiving a portion of the mortgage debt. Now, some banks -- in some cities for some homeowners -- appear to be coming around.

Bloomberg explains:

Losses for lenders are about 15% lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody's. The (short sale) deals accounted for 33% of financially distressed transactions in November, up from 24% a year earlier, said CoreLogic Inc., a Santa Ana, Calif.-based real-estate information company.

These cash payouts aren't common. Not yet, anyway. They may be just a tactic in isolated situations where banks believe they have few other options to extract a borrower from a home.

Still, the tales make compelling reading. Bloomberg tells of Karen Farley, 65, who was a year behind on her mortgage payments when her bank let her -- no, urged her to -- sell her home in San Marcos, Calif., for $592,000, about $200,000 less than her debt on the property.

"You could sell your home, owe nothing more on your mortgage and get $30,000," JPMorgan Chase wrote Farley in an Aug. 17 letter quoted by Bloomberg.

In addition to the $30,000 from Chase, Farley was also in line for a $3,000 federal incentive. Certified HAFA Specialist, the federal Home Affordable Foreclosure Alternatives program, pays a "borrower relocation incentive payment" of $3,000 to qualifying homeowners in a short sale.

Banks offering cash

Several banks are using cash incentives.

CNNMoney tells of Angelique Pierce, Rancho Cordova, Calif., whom Chase mortgage offered $25,000 to sell her home:

After Pierce became disabled a few years ago and had to stop working . . . she fell behind on payments on both her first and second mortgages, valued at $250,000 and $50,000, respectively.

Now, she's trying to sell her three-bedroom ranch for just $95,000 -- almost half of the $179,000 she paid for the place in late 2002.

Pierce found a buyer, but the holder of a second lien on the home wanted a share of the bank's incentive, CNN says. Chase "balked" and the sale fell through.

Bloomberg spoke with 12 real-estate agents in Arizona, Florida, New York, California and Washington and learned that JPMorgan Chase "generally" pays incentives of $10,000 to $35,000 at settlement for short sales.

Also:

• Bank of America ran a pilot program in Florida last autumn, according to CNNMoney. It paid $10,000 to $20,000 to certain homeowners to sell their homes. B of A may revive and expand the program.
• Wells Fargo offers homeowners $10,000 to $20,000 for short sales or deeds in lieu (in which the bank takes the home's title.) But the incentives are only in some states.
• Citigroup offers qualified borrowers about $3,000, a spokesman told CNNMoney. "Investor programs have different guidelines for relocation incentives, which we honor," the representative said by email.

As nice as a five-figure pile of cash sounds, it's not always the best strategy for a homeowner.

Explains Jeff Gelles in his Inquiring Consumer column in The Philadelphia Inquirer: "Homeowners who want to stay in their homes and can afford payments would be much better off with direct principal write-downs, of course, rather than the after-the-fact variety entailed in a short sale."

Switch in tactics

Banks aren't discussing their motives. But it's fun to speculate about why they're suddenly pulling out their checkbooks:

• A relatively quick short sale can help 

After all, as Bloomberg News points out (quoting RealtyTrac): "The U.S. housing market must digest more than 14 million distressed properties -- 1.5 million homes in the foreclosure process, 3.5 million with delinquent mortgages and at least 10 million 'underwater' properties, whose owners owe more than the homes are worth -- before the foreclosure crisis will subside."

Teri Pacitto says "I have recently had clients receive up to to $30,000 for Short Selling their homes".  Homeowners need to open their mail from their lenders as this is where the offers come from.  I have talked to many homeowners who are in distress who have a stack of unopened mail and are surprised to find that they have had offers of several thousand dollars sitting in their unopened mail.  

If you or someone you know is in jeopardy of loosing their home, Contact us to see what your options are.   Teri Pacitto, CDPE is experienced in all aspects of short sales and can help.  The Short Sale Toolbox

By Polyana da Costa of Bankrate.com  

short sales have become the only way out for some sellers who owe more on their mortgage than their home is worth. For struggling borrowers, it's a chance to avoid foreclosure.

While helpful, short sales can be stressful and time-consuming, and they may lead to harsh consequences if not done properly.

Many sellers think the biggest challenge in a short sale is persuading the lender to allow the property to sell for less than the mortgage balance. That's only the first step.

Here are five tips you must know when short selling your home.

Choose an Agent experienced in short sales

If you needed heart surgery, would you put your life in the hands of a surgeon whose first surgery would be on you? Probably not.

The same applies to your financial life. Hire a real-estate Agent who is experienced in short sales, says Daniel Gomez, an Agent and board member at Neighborhood Housing Services of the Inland Empire in San Bernardino, Calif.

Many agents claim to be short-sale specialists in their ads. But some have closed only a handful of short-sale deals, Gomez says. Many have taken short-sale courses and are certified in selling distressed properties. That's not enough; certifications help, but nothing counts more than experience, Gomez says.

"Interview agents, ask how many short sales they've closed and ask to talk to some of their clients," he says.

A short sale is a time-consuming transaction and can take months to close. You want an Agent who will stay on top of the game until the deal is closed.

Understand potential consequences

Underwater sellers are so anxious to get rid of their mortgage payments that they often don't think about what comes after the sale. Then, months or even years later, they receive a collection letter for the difference between what the house sold for and what they owed on the mortgage.

Laws vary by state, but many states allow lenders to go after that balance once a short sale or foreclosure is completed. That's why it's crucial for borrowers to understand whether the lender agrees to waive the deficiency, or the balance left on the loan after the sale, says Howard Ullman, an attorney at Family Counseling Law Firm in Deerfield Beach, Fla.

"This needs to be discussed verbally and represented in documents," he says. "It shouldn't come as a surprise."

One way to avoid a deficiency judgment is to do the short sale through the Home Affordable Foreclosure Alternatives program. Lenders who approve short sales through this federal program must release the borrower from a potential deficiency judgment.

Lenders are not obligated to approve Certified HAFA Specialist short sales, however. They may choose to do the short sale based on their own rules and guidelines that loan investors set. In that case, it's up to the lender to decide whether it will pursue the deficiency against the borrower.

You can negotiate your way out of deficiency

When negotiating a short sale, many lenders don't offer to release you of liability on the remaining loan balance— at least not for free. But you can ask to negotiate a waiver.

"I've never had a lender refuse to negotiate a settlement" to waive the borrower from deficiency, says Patty Da Silva, owner of Green Realty Properties in Davie, Fla., and a real-estate Agent certified in distressed-property assets.

Some lenders may ask you to sign a promissory note for at least a small portion of the balance, usually cents on the dollar, or they may ask for a lump sum. sellers often are outraged when they receive this settlement offer, Da Silva says.

"The sellers sometimes forget they actually borrowed that money," she says. In many cases, it is usually worth paying upfront to avoid future headaches.

"There is a price attached to the waiver of deficiency, but most of them are very tiny," she says.

Talk to a lawyer

Real-estate agents who are experienced in short sales can coordinate the transaction with the bank and tell you what to expect in the process. But remember: They are not lawyers.

"Most of the people who do short sales are doing it through the Realtors or people who claim to be short-sales specialists," Ullman says. "But there are many issues that borrowers need to discuss that cannot be discussed with a short-sale specialist."

Those issues range from potential tax implications to protecting other assets the borrower may own if the lender tries to collect the loan balance later.

If you don't understand the contract you are signing or the potential consequences of a short sale, consult a lawyer.

Keep up with HOA payments

If you are thinking about short selling your home, don't stop paying your homeowners-association dues. The fees can snowball and kill the sale, even if the buyer is willing to pay for the delinquent dues at closing.

"In short sales, there are a few problems that money cannot fix," Da Silva says. In a regular sale or even with foreclosures, the seller or the bank pays any past dues owed to the HOA at closing so the buyer gets clear title of the property. But in a short sale, the seller's lender wants to get every penny out of the transaction, Da Silva says.

She says it is so crucial for the seller to stay current on HOA and condo dues that she refuses to represent a seller who won't keep up with payments.

"Plus, you want to make sure the association is able to maintain the common areas so your house is salable," she says. "A short-sale property needs to be maintained. The power needs to be on; the grass needs to be cut. You don't want your home to look like a foreclosure."

Teri Pacitto, Broker is experienced in handling short sales.  If you or someone you know needs help, please Contact us.  The Short Sale Toolbox

The forecast for the rest of 2012 shows mild increases building up to a stronger 1.2 percent by year end, according to the Home Data Index™ (HDI) Market Report, recently released by Clear Capital®, with data through March 2012. The HDI Market Report uses a broad array of public and proprietary data sources providing the most timely and relevant analysis available. Methodology details are on page eight of this report.

Report highlights shows that national home values dropped slightly in the rolling quarter-over-quarter analysis. Additionally, tegions posted mild quarterly gains, except the struggling Midwest, which continued its downward slide.

“With the exception of the Midwest, positive growth in rolling quarter-over-quarter prices is an encouraging sign that markets are rebounding from the winter slow down earlier than usual,” says Dr. Alex Villacorta, Director of Research and Analytics at Clear Capital. “Even with the relatively modest declines seen over the last few months, markets have continued to show signs of bottoming out. The projections we made at the beginning of the year are playing out and we expect to see the nation gain just over 1 percent through the year’s end.

“We are continuing to see, overall short term home value strength against the rising REO saturation.” Villacorta adds. “This is an indication of market stability, and bodes well for the continued growth we’re expecting over the rest of the year.”

Quarter-Over-Quarter Results: Is No News Good News?

At the national level, home prices fell a modest-0.2 percent over the quarter. The West, South and Northeast posted gains of less than 1 percent, but the Midwest lost a significant -2.4 percent. REO saturation, which traditionally pushes down prices, continued to climb in all regions.

The nation held fast over the most recent quarter, and for the fifth time in six months, saw price changes of less than 1 percent. While the US lost -0.2 percent quarter-over-quarter, this decline is milder than last month’s decline of -0.6 percent. This positive trend may be attributed to the beginning of spring after a very mild winter, resulting in the start of an early buying season.

In looking at the quarter-over-quarter performance through March, the typically weak Western region squeezed out a minor 0.1 percent gain in prices over the quarter, which is a healthy improvement of over last month’s losses of -0.4 percent, and shows long awaited upward momentum in the region that posted losses over the past five months. The embattled Midwest region, hit hard over the past three months, continued sliding this month losing -2.4 percent, and was the only region to post losses in the quarter or mark any quarterly price movement more than 2 percent. This result shows how the stability seen by the rest of the nation has yet to embrace the region.

The stable Northeast held true to form and turned in a modest 0.3 percent increase in prices, which was a 0.4 percentage point improvement over the quarterly loss of -0.1 percent posted last month.

The South turned in the strongest short term gains across the nation, with prices climbing up by 0.6 percent, due in part to impressive results in Florida, Texas, and Virginia, all of which are well represented in the best performing MSAs listed later in the report. This gain was a healthy 0.8 percentage point improvement over the loss of -0.2 percent posted last month.

Year-over-Year Prices: Nation and Regions Catching Up to Short Term Gains

The year-over-year analysis found the nation lost -1.4 percent over the period, which is slightly better than February’s year-over-year results of -1.9 percent, indicating a positive trend in yearly numbers.

The yearly numbers across all regions show more significant losses than the quarter-over-quarter numbers, which indicates the nation has possibly hit the bottom of a pricing “valley,” with long term prices starting to reflecting the short term strength. This effect could be in play as all of the regions’ yearly numbers, while still weak, are better than February’s results. The consistent theme for the yearly numbers is that all regions are showing losses, with Northeast posting a small gain. This is similar to the condition seen over the past six months.

Interesting Trends in REO Saturation

For the second month in a row there have been increases in REO saturation for the nation and the regions, helping to confirm speculation the Attorneys General settlement has empowered the affected servicers to become more aggressive in moving their REO backlog onto the housing market.

In March, the national REO rate went up 1.2 points since last month and 1.8 points over the past quarter to hit 27 percent, pointing to an acceleration of REO sales. The Midwest contributed the most to the increase, jumping 3.8 points over the quarter to 34.3 percent, with the other regions all seeing softer increases.

Of particular interest this month is how these changes in REO saturation are affecting prices. In the past, there has been a consistent inverse relationship between changes in REO saturation and prices, but not this month.

While the nation and all regions saw increases in REO saturation over the most recent quarter, changes in prices over the same period were positive for the West, Northeast, and South, describing an unexpected direct relationship. The US and Midwest’s changes in prices over the same period were downward, describing the expected inverse relationship.

The geographies with direct relationships show a pricing resilience to REO saturation that has not been seen in previous HDI analysis. It could be powered by improvement in the jobs numbers recently, rapidly increasing investor activity in certain regions, and the general increase in consumer confidence.

Forecast for Remainder of 2012

The forecast models predict the nation’s prices to increase modestly over the next three months and increase to 1.2 percent growth by the end of the year. This shows the valley shape with current prices at the bottom and an upward trend from now (March) through December of 2012.

The strongest of the regions throughout much of 2011, the Northeast, is expected to gain a modest 0.3 percent over the next three months, but pick up momentum and grow prices by 1.3 percent to wrap up the year. The South is expected to perform the strongest in the short term, growing 0.5 percent over the next three months, and end the year with 1.6 percent growth, exceeding the national forecast by 0.4 percentage points.

The forecast shows the Western Region could be turning a corner. The three month numbers show the region gaining 0.2 percent, and pushing that to a positive 1 percent to end the year. The Midwest is expected to drop -0.6 percent over the next three months, but move into positive territory with a 0.7 percent gain by December.

By Clear Capital 

Short sale success does not stop at educating the seller as to their loss of mitigation options and then successfully negotiating with the seller’s bank to accept a short payoff. Today’s complex real estate market warrants more. Having negotiated over 1000 successful short sales, we have found one aspect of the short sale process that needs serious attention: Educating the buyer regarding the proper short sale procedures.

Educating the buyer and setting the correct expectations is imperative to a successful short sale transaction. Nothing is more discouraging than successfully negotiating a short sale only to have the buyers walk from or not be able to close the transaction. The following are some precautionary and educational items to consider which would avoid such buyer fallout.

Patience is a Virtue

Not every buyer is a short sale buyer. However, one important characteristic a short sale buyer must have is patience. Setting the proper expectations regarding the time frame of a short sale plays a key role in bringing the short sale to the closing table. If a buyer is not willing to stay in the transaction for at least 90 days, they are not a short sale buyer. Of course we cannot speak for every circumstance. But, in most cases, the short sale process takes 60-90 days to complete. For their patience, the buyer will likely earn instant equity. The average short sale, according to the Realty Trac report dated 5/21/11, sells for 79 percent of market value. To that end, a buyer will earn “patience equity” (a term coined by Steve Harney).

Work with a Lender that Understands the Short Sale Process

The pre-approval process should be the same whether the buyer is being pre- approved to buy a short sale or pre-approved to buy a non-distressed property. This seems like simple advice doesn’t it? However, from our vast experience negotiating short sales, we have found that 35% of successfully negotiated short sales do not reach the closing table because the buyers financing falls through. We must educate buyers to work with the proper lender who will not only walk them through the mortgage process, but also understands the short sale process. Too many mortgage applications start at the time of short sale approval. Some short sale approvals expire in 10- 15 days from date of issue. In many cases, that is not enough time for a lender to underwrite the file, order title, order appraisal and fund the loan.

A proper pre-approved short sale buyer would be one who is brought through a complete underwriting analysis prior to the short sale offer. This includes full income analysis, full asset analysis and full credit analysis. The ideal lender is one who completes the underwriting procedure and has a credit decision pending clear title and appraisal. The lender should also help in keeping the buyer engaged throughout the process. In a lengthy short sale negotiation, the lender should be proactive in keeping the loan file up to date with recent paystubs, asset documentation etc. This will ensure the transaction closes on time and without extensions.

Complete Inspections Prior to the Short Sale Approval

This is a confrontational subject but each buyer should be educated to understand that in most cases any major deficiency regarding the condition of the property will not be cured prior to closing. However, in many instances, if the deficiencies are known prior to the start of the short sale negotiation, the short selling bank will be more willing to except a sale price that is discounted deeper to the current market value. It is a challenging task to go back to the bank and ask for a lower sales price when a home inspection that was done after short sale approval showed major deficiencies.

In addition to the home inspection, the lender appraisal can be done prior to the short sale approval. In most circumstances where the short selling bank’s broker price opinion shows a property value that is much higher than the buyer offer, the lender appraisal can be used to negotiate the value.

We should educate buyers as to the pros and cons of completing the inspections prior to short sale approval. We understand there is a monetary commitment that would have to be made. Having said that, having the inspections done can save allot of aggravation to the seller and buyer later in the process.

In closing, the above are just a few items to consider when educating the buyer regarding the proper short sale procedures. If we remember to keep the buyer engaged and walk them through the process every step of the way, we will ensure the buyer earns their “patience equity” and the short sale transaction closes.

by Christopher Reale, Director of Short Sale Operations at Lepizzera and Laprocina Title and Escrow Services

For information about short sales in Thousand Oaks, Westlake Village, Agoura Hills, Newbury Park, Moorpark and Simi Valley go to  The Short Sale Toolbox   

A short sale, in most instances, is a complex transaction. However, there are two very simplistic characteristics that every qualified short sale possesses:

1. The house must be valued at less than the homeowner owes on their mortgage debt obligation. In other words, the home must be “underwater”.
2. The homeowner must have a qualified hardship.

It is the second characteristic that we would like to touch upon in this blog post.

One question that we answer frequently is “My house is underwater. Is this an acceptable hardship?” Unfortunately, the answer is always “No.”

The simple fact that a homeowners mortgage obligation is in excess of their house value is not an acceptable hardship. A Short Selling bank will entertain a short sale when and only when there is a hardship that will, now or in the future, affect the borrower’s ability to pay their mortgage.

The following is a list of acceptable hardships that may be used when submitting a short sale package:

• mortgage Rate Adjustments
• Loss of Employment or Reduction in Wages
• Business Failure
• Medical Hardship
• Death in the Family
• Divorce/Separation
• Military Service
• Overwhelming Debt Obligations
• Job Relocation

As always, should you have questions as to the acceptability of a hardship scenario, you should seek advice from an expert that has been trained in the short sale field.   By Christopher Reale, KCM Blog

If you or someone you know needs help with a Short Sale - Go to   The Short Sale Toolbox