Tips

How To Compose A Short Sale Package

by Lisa Udy on October 22, 2010

In our previous post we talked a little bit about short selling a second or investment property.  We also discussed, that in order to qualify for a short sale, you would have to document some sort of hardship, and the tax consequences of a short sale. In this post I wanted to go into greater detail on the short sale package you and your real estate agent will need to submit to your lender.

Short Sale PackageThe Short Sale Package

Hardship Letter – A hardship letter gives you the chance to explain your situation in your own words to the bank. You should communicate three key points in your letter. They are:

  • I’m Sorry
  • Your Circumstances (Job loss, Medical issues, Divorce, etc.)
  • You Have Tried Everything And Foreclosure Is Your Only Other Option

Keep your hardship letter clear and to the point. It only needs to be approximately a page long, and should be hand written in legible writing.

Authorization To Release Information Form – This form gives your negotiator, whether it’s a Realtor or attorney, the authorization they need to gather information for you. However, a power of attorney may be needed depending on the route your negotiator prefers. A power of attorney allows your Realtor and/or attorney the ability to force the lender to “work in good faith,” giving them more power to negotiate for you.

Supporting Financial Information: Assets, Liabilities, Monthly Expenses, Pay Stubs, W-2′s, Employment History, Bank Statements, and Credit Card Reports.

- Assets

  • Real Estate (Any real property you own, not just the home you are selling.)
  • Stocks, Bonds, Mutual Funds, 401k (Any type of investment in money market accounts.)
  • Bank Accounts (Accounts and at least 2 months of bank statements.)

- Liabilities

  • Real Estate Loans (All loans associated with any real property you own.)
  • Personal Loans (Car loans etc.)
  • Credit Card Debt
  • IRS Liens (Back taxes of any sort.)
  • Judgments (Overdue bills with a judgement against you.)
  • Lawsuits

Short Sale Information Packet- Monthly Expenses

  • Monthly Credit Card Bills
  • Utility Bills
  • Car Payments
  • Insurance Payments
  • Food And Clothing
  • Medical Bills
  • Child Support
  • Tuition
  • Any Other Monthly Expense

- Employment Information

  • 2 Most Recent Pay Stubs (Possibly more depending on lender requirements.)
  • W-2′s/Tax Returns (Last 2 years of documentation, possibly more.)
  • Employment Record (Years worked, laid off, loss of job, current employer.)

Comparative Market Analysis – When submitting your short sale package to the bank, your Realtor should include their market analysis to justify your listing price and the accepted offer on your property.

Marketing History – Your Realtor should provide a complete marketing history to the lender. Including showings, feedback from agents, and all advertising. You need to show the lender that you and your agent are doing everything possible to get the best price on your home.

Accepted Offer – You and your agent submit this package to the bank only when you have an accepted offer you’re comfortable with. Although final approval is provided by the bank, you still get to choose the best offer.

As you can see, a short sale is a complicated process. You need the expertise of a qualified short sale agent to ensure you get an approval. Our team has years of experience and we have a 95% approval rate. If you need short sale help, please contact us immediately to get started.

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Tips For Buying Your First Home: A First Time Home Buyers Guide

by Lisa Udy on September 30, 2010

Realtor Holding A BinderI have written many articles on real estate, going into extreme details about complicated real estate deals. I have tried to inform my readers about the most surprising twists and turns of the real estate process.

Today, this article is about the basics. If you have never bought a home, it’s best to start at the very beginning, and this article should give you some great information to get started.

Hire A Buyer’s Agent

Realtor with help wanted sign.I would highly recommend using a real estate agent for your first deal. I would also recommend specifically hiring a buyer’s agent. A buyer’s agent is required by law to work as a fiduciary to you, the buyer. They work for you. They have your best interest in mind.

No Upfront Costs – You don’t have to put any money upfront when you hire a buyer’s agent. When you purchase a home listed with a real estate agent, the commission is already added into the purchase price. The seller is responsible for the commission to both a buyers agent and their sellers agent.

Get A Referral – Talk to family members and friends about the experiences they’ve had with Realtors they’ve used in the past. Interview agents they recommend and hire the one you feel the most comfortable with.

Listing Alerts – Ask your agent to sign you up for listing alerts. A listing alert is automatically sent to your email through the agents website or sent directly through the multiple listing service (MLS). Listing alerts can be set to the specifications of your choice. If you need 3 beds and 3 baths, you can set your alert to show you only homes with those attributes.

Agent Advantages – Real estate agents have many advantages. We often know of new listings before they hit the market.  You can waste the agents gas and not your own when touring homes. Agents can preview homes for you. Agents know if listings are overpriced. Agents have market data. Plus many more.

Don’t forget to check out our post on real estate agent interview questions.

Woman Holding Piggy BankTalk To A Lender

Unless you have cash to purchase a home, you will need to obtain a mortgage. Many people get excited about buying a home, only to find out after they find the perfect house, they can’t get approved for what they thought they could. It is recommended to get a pre-approval before you go house hunting for this reason.

Get Pre-Qualified – Also, if you write an offer on a home, and you haven’t at least been pre-qualified, you could lose out to a competing offer. Home sellers today are very adamant about home buyers providing proof they can obtain financing before they will commit to a contract.

Prove Your Serious - Once under contract, a seller will have to remove their listing from the MLS. They won’t be willing to do that unless you are serious about purchasing their home. Talking to a lender, providing proof of your ability to purchase, and submitting an offer with that proof, tells a seller you are ready to go.

Ask For A Referral – Just as all real estate agents aren’t the same, all lenders are not the same either. Talk to your agent about lenders they recommend. I would also suggest you look for a lender with in house underwriting, as it makes the deal go more quickly, and there is less chance of something getting lost in the shuffle.

Check out our post on Utah home loan programs.

Find A House

Have A House!When looking at homes, I would recommend scheduling no more than 7 appointments at a time. After viewing 7 homes, your head starts to spin, and it makes it difficult to distinguish properties.

Research Online – If you have access to the internet, you can find many websites to preview homes on. If you are in the Cache County area, you can view all Logan real estate listings by visiting that link.

Attend Open Houses – Open houses are a great way to get started looking at homes, especially if you haven’t found an agent yet. You can pop from one house to the next talking to a different agent at each one. If you find an agent you click with, ask them if they would like to work with you.

Check out our post on how to pick the perfect house.

Write An Offer

First Time Home Buyer Writing An OfferIf you find a home you feel is right, don’t be afraid to write an offer. Be sure to run the numbers, and don’t offer to much to start out with. Talk to your agent about comparable properties, and determine if the home is priced right.

Comparable Sales - When writing an offer, the great thing a Realtor can do for you is give you information on the market. Your agent should complete a comparable market analysis of the property to give you a starting point with your offer.

Check out our post on writing an offer.

Buying a home is a serious financial decision and can be extremely frightening. As a first time home buyer, remember that the roller coaster of emotions is normal. I always recommend to my first time buyers, before submitting an offer, take a day to think it over. Talk to friends and family, run the numbers, and don’t do it if you aren’t 100% in. If you feel it’s the right time to buy a home, have some fun, and enjoy your new place. Good luck!

You read through this whole post? Great! Want more information Super! Check out our:

Complete Guide To The Home Buying Process

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Why Short Sales Fail And How To Avoid Short Sale Denial

by Lisa Udy on September 24, 2010

Failed Short Sale!!Short sales are complicated, time consuming, and stressful to all parties involved. Depending on the bank you’re dealing with, it could take up to a year for a final approval on a short sale.

The fact that it takes so long makes it that much more difficult to find a buyer who is willing to wait months before they know if they can even buy the home.

In 2009, it was believed that only 20% of short sales were approved and finalized. That stat tells you, getting a short sale approved is not easy for anyone, let alone someone who is inexperienced. Plain and simple, many short sales fail to be finalized, and here are the common reasons why.

Why Short Sales Fail And How You Can Avoid Short Sale Denial

Incomplete Short Sale DocumentsIncomplete Or Fraudulent Short Sale Package – A short sale package is submitted to the lender when you receive an offer and accept it. The short sale package must be complete with everything the bank requires.

If it is not complete, it could delay the process. Many of the lenders out there won’t even call and tell you what’s missing. They will set the package aside and it will be handled later when they have the time, which will end up delaying the process, and you could end up in foreclosure because of it.

All information in your short sale package better be true or you can kiss your short sale approval goodbye. One example would be to lie about your financial situation. Hiding money in different accounts, pulling out cash to hide it from the bank, or giving money to relatives to hold onto during the short sale could end up costing you big time. Banks do not have to approve your short sale. If they find out you’re not telling the whole truth, you will be denied.

Short Sale Package Not Submitted Properly – All lenders are different and they each have their own protocols when dealing with short sales. Your agent must submit the package exactly how your lender requires it.

If they want it faxed, it better be faxed. If they want it scanned and emailed, it better be emailed. If they want 10 copies, they better get 10 copies! How a short sale package is submitted isn’t you or your agents decision. It’s the lenders, and it better be followed to the T!

A young woman sitting in a cafe opening her empty purseOffer Too Low – It is the job of your agent and you to secure the best possible offer on your property when submitting it to the bank. Each lender has their own formula for accepting offers, but one thing they all agree on is getting the most money possible.

It is the job of your short sale agent to give you an accurate analysis of the market and the value of your property. It is their job to counsel you to counter any offer to establish the best price and terms possible prior to accepting it.

Buyer Not Financially Strong Enough – Lenders want to see contracts that have a strong chance of closing. A pre-qualified buyer is not as strong as a pre-approved buyer. It is your agents duty to follow up with the buyers lender, or even better, you may want to have a lender you trust qualify the buyer as well.

If it’s a cash buyer, you will need proof of funds and proof of the ability of the buyer to access those funds in the time needed to close.  Any contingency in the contract could end up costing you the deal. It is best to remove as many contingencies during contract negotiations as possible before submitting to the bank.

Short Sale Buyer Backing OutBuyer Backs Out – This is probably the number one reason short sales fail. Buyers get tired of waiting, or they find a better house and back out of the deal.

This can be avoided by asking for a substantial earnest money deposit prior to acceptance of the contract. If the buyer has more skin in the game with say a $5,000 earnest money check, they will be more reluctant to give that up.

Your agent should counsel the buyers agent, or the buyer themselves, on how long short sales typically take to close. Keeping the lines of communication open on a weekly basis between your listing agent and the buyers agent can help keep the deal together. Buyers tend to stick around longer, at least in my experience, if they know what’s going on at all times.

Inaccurate Market Analysis/Appraisal/BPO – If  the BPO (Broker Price Opinion) was inaccurate, it could delay the closing. Lenders request BPO’s on short sales that are completed by third parties, whether it’s another real estate agent or an appraiser. Inaccuracies could give the lender a distorted view of what fair market value of the property is, this could influence the lender’s approval.

It’s important for your short sale agent to to ask the negotiator how the BPO compares to their market analysis. If your agent believes there are discrepancies with the BPO, it’s important for them to prove their point of view. Adding photos, better comparable properties, and any other information to support their claims.

Short Sale Clown!Incompetent Short Sale Agent – To avoid having your short sale denied, it’s extremely important to hire a Realtor that knows what they’re doing. Inexperienced and incompetent short sale agents should be avoided with one of the most important financial decisions you will ever make.

Some sellers end up facing foreclosure due to the lack of effort from their agent, and it’s a terrible situation for all parties involved.  Research real estate agents thoroughly before hiring them. Do not use a friend because they are your friend. You could end up going into foreclosure do to the lack of experience of a new short sale agent.

Don’t Let Your Short Sale Fail! Educate Yourself And Choose An Experienced Short Sale Agent!

When short sales fail, it’s the homeowner left holding the bag. Most likely, the homeowner will go into foreclosure, which is the last thing anybody wants.

Foreclosures devalue neighboring properties, cost banks tens of thousands of dollars, but most of all; a failed short sale will ruin your credit for 7-10 years, will cause you to lose your home, and will severely limit your access to credit for many years to come.

Please research short sale agents, put together a full and accurate short sale package, and follow all lender protocols when trying to short sale your home. If you do everything you can to avoid these common mistakes, you have a great chance for a short sale approval!

Related Articles:

Short Sale Investors Committing Fraud?

Common Short Sale Questions Answered

The Short Sale Process – Approval Time Frame – Withdrawal Period – Writing A Short Sale Offer

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The Real Costs Of Selling A Home

by Lisa Udy on September 16, 2010

Costs Of Selling A HomeThere are many fees and extra costs associated with selling a property. The last thing you want going to the closing table is unknown costs popping up at the last minute.

Any decent Realtor will give you a net sheet sometime prior to closing, but I also recommend you become familiar with these costs make sure you aren’t getting the short end of the stick.

The Cost Of Selling A House

Sales Commission – This is going to be your biggest cost associated with selling a home. Realtor commissions can be up to seven or eight percent of the sales price, although it’s more common at six percent. If you’re selling a $300,000 home, that could be anywhere from $15,000 to $24,000!!! Of course, these numbers are all negotiable with your agent.

Hopefully, when you signed your listing agreement with your agent, you worked out a commission agreement you were comfortable with. A good agent will do a net sheet at the listing appointment to show you how much you need to get out of your home to pay for this expense. I always do a net sheet at listing appointments so my sellers know exactly what they are paying.

Property Taxes – No matter when you sell your home, you will have to pay the property taxes up to the day you transfer title. The title company will pro-rate the taxes, and you will have to pay what you accrued before you sell. If you have already paid your taxes, be sure to let your agent know, and bring some sort of proof to closing so you don’t get double charged.

Closing Costs – Many sellers today are paying for buyers’ closing costs in order to get a deal done. If you agreed to a closing cost allowance, be sure to deduct that from the sell of your home. Closing costs usually end up being around two to seven percent of the purchase price on the home. Talk to your escrow officer about these costs before heading to closing.

Transfer Fees – Real estate transfer taxes are state and local taxes that are assessed on real property when ownership of the property is transferred between parties. Many also refer to these taxes as the Death Tax. Also, you need to be aware of the Capitol gains tax, which can be deferred as long as you you use a 1031 exchange form. Learn more about transfer fees here.

Document Fees – There are a lot of documents that need to be printed and dug up when selling a home. Title companies will charge you a doc fee as well as a notary fee for their services. I would recommend calling around to a few title companies to get a competitive price.

Required Repairs – No matter how new your home is, there can always be repairs that are required by the lender or the buyer before they will buy your home. These repairs could be very minimal or very large depending on how well you maintain your property.

Before you head to the closing table, you should be able to get a net sheet from your Realtor or title company. All fees will be on the settlement statement and will be explained to you at the closing table by your escrow officer.

If you see anything that wasn’t explained to you upfront, be sure to bring it to everyones attention. In this case, your agent or the title company, whoever was responsible for the fee, may have to eat it themselves if you were unaware.

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How Home Sellers Should Price Their House To Sell In 2010

September 13, 2010

When selling a home, pricing your property is crucial, and the psychology that goes into determining a price can leave your insides churning. Should you start out high and see if you can get top dollar? Should you start low knowing the competition out there is tough? If you just drop your price later, how many [...]

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Can You Still Make Money Flipping Real Estate?

September 10, 2010

This is a tough question to answer. Investors have made money flipping real estate during any market, but with today’s swollen inventory levels, it’s becoming a whole lot harder. The answer to the question, can you still make money flipping real estate is yes, but there’s a catch. The home has to be perfect in [...]

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Cheap And Easy Tips To Make Your Utah Home Greener

September 2, 2010

Who isn’t searching for ways to save money today? I know I am. So, I did a little research on how to make my Utah home greener to save some greenbacks. Here’s some things I found that you can try too: 1. Install more energy efficient lighting. This is probably the easiest way to go [...]

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Lower Down Payments To Boost Housing Recovery?

September 1, 2010

I recently read an article on CNBC where the author talked about Bill Gross’s recommendation to lower the down payment requirements for people to purchase homes. He states that in order for housing to play a role in the recovery, it’s paramount to ease the up-front cash requirements. This article brings many questions to mind, [...]

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Stop Making Payments During A Short Sale?

August 30, 2010

I was asked by one of my clients who is thinking about doing a short sale if they should just stop making their payments. This is a very difficult question to answer for anyone, and I can’t answer this question as a real estate agent. This question should be asked when talking to your bank, [...]

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Struggling Home Sellers Should Consider Lease Options

August 27, 2010

Before I get into why you might want to consider a lease option, let me give you a little background on market statistics. The other day, the National Association of Realtors (NAR) released a troubling statistic. In July, home sales across the nation dipped 27% year over year from July 2009. This was due to many buyers [...]

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