Mark Cohen, Broker : Lenders

What Buyers Should Know About Short Sales.

Mark Cohen, Broker — Sat, 01 Aug 2009 14:59:00 GMT

Short Sale Transaction Information Form

1. A Short Sale is a transaction in which the Seller is attempting to sell the property for less than the amount of the balance owed on the mortgage to the Lender.

The Seller won't make any money from the sale of the property. The Seller's credit history and score will be adversely affected by a short sale.

The Seller must be behind in the mortgage payments, show the Lender that he/she is in a hardship position and can no longer make payments, and that there is no income or assets available to pay the loan.
The Lender has to decide whether to lose money now from the short sale or lose money later from a foreclosure.

2. The offer price is lower than the mortgage balance so the Lender must agree to take a loss equal to the mortgage balance minus the offer price and Seller's closing costs. Therefore, the Seller must first obtain agreement from the Lender that the Lender will agree to consider a short sale.
Unless the Seller has already obtained this agreement with the Lender to do a short sale, the Lender won't even look at a contract between the Buyer and Seller. Therefore, the Buyer should make sure that the short sale itself has the Lender's approval before investing time and effort in making an offer.

3. When the Buyer's offer is accepted by the Seller it becomes a legally binding contract. The Seller then submits the contract to the Lender for approval.
Lenders can take anywhere from 3 weeks to 4 months to reply to a contract. Usually it takes several months. The length of time for a reply is dependent on the workload at the Lender, how well they are trained and equipped for short sale transactions, their overall financial condition, and the local real estate market.

Even after several months, the Buyer's contract may be rejected or a counteroffer made by the Lender. At that point negotiations might be necessary among the Buyer, Seller, and Lender to obtain an acceptable contract.

If the contract is rejected or no approval can be negotiated, usually the property will be foreclosed on soon.

4. Because short sale transaction processing almost always takes a long time, the Buyer must have no expectation of obtaining fast responses or replies or decisions. Short sales are not for Buyer's who want or need a quick purchase.

4. Note that the contract is actually between the Buyer and the Seller. The Lender is only approving or disapproving it because they are the entity that will take the loss.

Short Sale Odds.

Mark Cohen, Broker — Sat, 01 Aug 2009 14:55:00 GMT

5. Short Sale Odds.

            Why do only a small percentage of short sales close?

            Everyone involved is:

Short on Money.

Short on Time.

Short on Patience.

Short on Knowledge.

Short on Experience.

Short on Paperwork.

Long on Odds that it will close.

When Will Homes Start Selling Quickly Again?

Mark Cohen, Broker — Tue, 13 May 2008 14:59:00 GMT

During the heated market of the last several years homes sold very quickly. Today in May 2008, my area has at least a 10-11 month inventory of homes. Almost every day for the last 7 months about 3 times more homes have been listed for sale than closed (sold). Today was no different. Far more homes came on the market than closed or went pending.

It makes me wonder - WHY are so many people trying to sell their homes at the same time? Don't they know the news? Don't they know anything about or have even rudimentary knowledge about SUPPLY and DEMAND.

However, the daily statistic that I believe holds the key to why this market is slow is the Back on the Market list. On most days the number of homes that were returned to the market from the Pending or Under Contract category outnumbered the ones closed (sold). Why are so many deals falling through? Could it be because FINANCING has become so hard to get?

YES. The banks that were over exposed to the subprime risk or perceive they have too much risk, have stopped making loans. Their offices are open. Their loan agents are at their desks. Their processors and underwriters are on duty. BUT, somehow, no matter how much documentation, paperwork, proofs, tax returns, W-2's, 1099's, statements, verifications of deposit, etc. are provided, there is always one more thing they need. Of course the contract expires before the loan is approved.

By not lending very much money, even to excellent credit risks, the banks are building up reserves to balance out projected losses and writeoffs. But, how can they earn income without lending? A bank's income comes from the difference between money in and money out. They borrow from depositors at a low rate of interest and lend to borrowers at a higher rate of interest. When they need some extra they borrow from the Federal Reserve (which creates money out of thin air by accounting entries, but that's another whole story). By not lending they will grow reserves at the expense of income.

There are plenty of buyers in the market. There are plenty of underpriced and fairly priced homes. There just aren't enough serious lenders at the moment. Homes will start selling again as soon as financing is readily available for buyers who have down payment money and good to excellent credit.

This a a good time for "Private Lenders" to enter the single-family home financing market.