Does Your Agent Understand Short Sales?

In most situations, a well-planned short sale of a home has a lot of advantages over foreclosures. Indeed, a close look at the Phoenix MLS shows that there are still plenty of short sales among all Phoenix Homes for Sale. However, a short sale is not to be taken lightly — preparation and experience is essential! Among the important questions to consider when pursuing a short sale is the big question: Does my Realtor understand short sales?

To help you evaluate how prepared your Realtor is for handling a short sale, have a discussion with him or her about the short sale process, and be sure to ask lots of questions. If you don’t hear the answers or the knowledge and familiarity that you’re looking for, be prepared to keep looking for a Realtor that’s equipped to help you.

  1. Who is the service company and what do they do in the process? In general, the service company of the mortgage is the name on the mortgage statement you receive every month. Bank of America, Chase and Wells Fargo are common service companies. In most cases, the service companies are only in charge of processing the file and have very little to do in the decision-making process and negotiation of the sale itself.
  2. Who is the investor? Fannie Mae, Freddie Mack and Ginne Mae tend to be the investors of the majority of loans. Large service companies such as Bank of America, Chase and Wells Fargo may also be an investor on a mortgage. The investor is usually the decision- maker on each loan and has specific guidelines to follow in negotiating a short sale. Experience in negotiating with different investor guidelines is essential experience for a Realtor to have in order to have a successful close of escrow
  3. Who is the MI Company? Not all loans have MI (mortgage insurance), but some do. In the event that there is MI on a loan, you be certain that the MI Company is going to negotiate with you (the seller) before allowing a close of escrow. The MI Company is generally covering the loss in the short sale and paying out the investor for the loss on the mortgage, So, the goal of the MI Company is to reduce the lost payout as much as possible.
  4. How will each be negotiating with me? This is a great question for an agent. Negotiating with service companies, investors and MI Companies is not like negotiating a normal purchase contract. The process is bureaucratic, paperwork-intensive, and detailed. Experience really pays here and a good Realtor will know how to get it done and cost you very little at closing. However, a lack of experience and less-than-thorough paperwork by your agent could result in you writing a large check at closing, or worse, a foreclosure.
  5. What are the potential tax consequences? In every short sale, there are potential tax consequences that a seller must deal with. Asking your CPA or tax advisor about your particular situation and possible consequences is a very important part of planning for your future. A Realtor should have some general knowledge of the potential consequences as well as a good reference for you to get further help, but should also encourage you to discuss with your CPA or tax advisor.
  6. What are the potential liabilities after closing? Most loans are written as “non-recourse”, meaning that the lender will not be able to pursue you in the future for a loss incurred. However, some loans are recourse loans in which the financial institution may choose to pursue legal and collection avenues for the loss. When working with a recourse loan, there may be future liability and it is wise to consult an attorney about the situation.

Our Phoenix AZ Realtors have the short sale knowledge and experience to help you succeed – contact us at www.ThompsonGroupAZ.com or 480-776-5214.

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Phoenix Market Mid-Year Update: Summer Is Hot for Sellers

The Phoenix Real Estate market continues to maintain low housing inventory levels and above average appreciation for property owners. For buyers,  Phoenix Arizona Homes continue to be difficult to find and rising values are pinching purchasing budgets. At the same time home owners are enjoying nice appreciation on their homes. Here are few quick mid-year facts on the market:

  • Overall Home Supply  –  At the end of June, the total number of Phoenix Homes for Sale for the entire MLS was 19,029. Year over year, this is a reduction in housing inventory of 270 units. The number of sold listings for the entire month of June 2013 was 9,310. Based on the June sales, the inventory of active listings represents a 1.7-month supply. With such a limited supply of homes available to buyers, sellers should continue to be able to ask for higher sales prices on their Phoenix homes.
  • Local ZIP code of 85224 – The Chandler ZIP code of 85224 shows at the end of June there was a total number of 70 active real estate listings, with the total number of sold listings coming in at 80. In other words:  there’s less than a month supply for this popular Chandler ZIP code.
  • City of Chandler  –  If you are looking for a “starter” home in Chandler, inventory remains low. For the entire city of Chandler, the number of active listings for single family homes between 1,200 and 1,500 square feet is 41. The number of sold listings in June came in at 70. THAT means there is less than a one-month supply of homes.
  • Phoenix Home Sales  – Year-to-date, the Phoenix MLS recorded sales of 47,901 homes  –  or an average of 7,983 homes per month. That puts the Phoenix market on pace to sell over 95,000 homes for 2013.

Do you need to consider a short sale to unload a burden of debt? Or are you looking to maximize your selling price? Here at the Thompson Group, our goal is to show you the BEST options for your situation. Give us a call at 480-776-5214 or find us at www.ThompsonGroupAZ.com .

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Important Questions to Ask Before Starting the Short Sale of Your Home

Many time homeowners need to sell a home, but the homeowner cannot sell the home for enough to pay off the mortgage. One way of solving this problem – and avoiding foreclosure – is to sell your home in a “short sale.” With a short sale, you sell your home for whatever the current market will bear, and your lender agrees to accept the proceeds of that sale and release the lien on the home.

A short sale is not to be taken lightly. Before you pursue a short sale of your home, you should consider these important questions:

  1. Do I have a Qualifying Hardship? Lenders generally will accept a short sale when the mortgage holder has a bona-fide inability to meet their current mortgage obligation, or a “qualifying financial hardship.” There are a number of reasons why a homeowner may face financial hardships — job loss, divorce, and medical bills are just a few. Although a hardship is not required to pursue a short sale, a hardship will allow the short sale a greater chance of success.
  2. Who are the lending institutions for my loans, and how do they handle short sales? Every lending institution has a different set of guidelines and policies to process short sales. Some work quickly and some work slowly. Knowing how your institution works is an important part of being successful. Most Realtors that process short sales should be able to guide you as to how your lender operates.
  3. Does my Realtor understand how to work short sales with my lending institutions? Short sales are a relatively new type of sale that many independent Real Estate Agents are unprepared to manage. If your agent is part-time, new to the process, or has not closed many transactions of this type, be concerned. The bank you are about to negotiate the short sale with is likely processing thousands of these transactions and is fully prepared to get the best deal it can. Make sure you have a Realtor that is fully prepared as well.
  4. What are my tax consequences? When should I talk to a CPA? In every short sale, there are potential tax consequences that a seller must manage. Asking your CPA or tax advisor about your situation and possible consequences is a very important part of planning for your future.
  5. Are my loans “recourse” or “non-recourse” loans? Could I be held liable for the loans later? Most loans are written as “non-recourse,” meaning that the lender will not be able to pursue you in the future for a loss incurred. However, some loans are recourse loans in which the financial institution may choose to pursue legal and collection avenues for the loss. Even this aspect can be negotiated – after all, the lender does not want your house back, and stands to lose thousands if there ends up being a foreclosure instead of a short sale. Make sure your Realtor is prepared to help you negotiate if you are in the “recourse” category.

In many situations, a well-planned short sale of a home has significant advantages over a foreclosure. If you are facing financial hardship, if your home is worth less than what you owe on it, if you are unable to pay the bills, if you need to sell due to relocation of a job, then pick up the phone and give us a call – we can help.

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The Seller’s Market Continues!

In case you have not been paying attention, the Phoenix Real Estate market continues to maintain low housing inventory levels and above average appreciation. For over a year now, Phoenix Arizona Homes are hard to find for buyers. At the same time home owners are enjoying nice appreciation on their homes. Here are few numbers to gauge the market:

  • Overall Home Supply – At the end of March, the total number of Phoenix Homes for Sale for the entire Phoenix MLS was 16,268. Year over year, this is about a 1% increase in housing inventory.  The number of sold listings for the entire month of March is 9,621. Based on the March sales, the inventory of active listings represents a 1.7 month supply. With inventory of homes well under 20,000, the Phoenix market should continue to see appreciation of Phoenix homes.
  • Local ZIP code of 85224 HOT! The Chandler ZIP code of 85224 shows that in March there were a total number of 48 active real estate listings, with the total number of sold listings coming in at 71. In other words:  there’s less than a month supply for this popular Chandler ZIP code.
  • City of Chandler EVEN HOTTER! If you are looking for a “starter” home in Chandler, inventory is low. For the entire city of Chandler, the number of active listings for single family homes between 1,200 and 1,500 square feet is 26. The number of sold listings in March came in at 83. THAT means there is less than a one month supply of homes.
  • Phoenix Home Sales –Year to date, the Phoenix MLS recorded sales of 22,102 homes – or an average of 7,367 homes per month. That’s a stellar start for 2013 for Phoenix AZ Realtors and this data shows buyer demand is continuing to be robust.

Do you need to consider a short sale to unload a burden of debt? Or are you looking to maximize your selling price? Here at the Thompson Group, our goal is to show you the BEST options for your situation. Give us a call at 480-776-5214 or find us at www.ThompsonGroupAZ.com .

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Freddie Mac Not Pursuing Deficiency in Short Sales

In their Feb 15th, 2012 Bulletin to their servicers, Freddie Mac stated that in the event of a successful short sale closing where all parties have acted in good faith they will accept the proceeds of the sale and will not pursue the borrowers for the deficiency (entire amount owed on the original mortgage note). Furthermore they have instructed all servicers to release the lien and mark the mortgage note as “Satisfied”.

This is good news for those sellers who have Freddie Mac as the investor on their loan and who need to do a short sale.  Most servicers are acknowledging the regulation change with adding deficiency language to their approval letters. Of the major lenders Aurora is the only one we have come across who is thus far refusing to add the proper deficiency language. (Shame on you, Aurora)

To see the Freddie Mac Servicer Bulletin please go to: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1205.pdf

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Reasons for Pursuing a Short Sale

Homeowners who purchased Phoenix Arizona Homes between 2002 and 2009 may owe more than their home is worth. Homeowners who refinanced or took out a home equity line of credit are in the same situation. Reports estimate that half of all homeowners in the Valley owe more than their home is worth.

Many of these homeowners want to move, but feel trapped and helpless about their situation due to the Phoenix Real Estate market. For some, their property no longer meets their current needs. Others simply can’t afford to stay in their home due to financial hardship. And for many others, the truth is finally setting in. It simply doesn’t make sound financial sense to stay in their home.

No matter the reason, all of these homeowners have the same question: What is the best way to move forward with their lives? For most homeowners facing one or more of these challenges, a short sale is the best solution.

A short sale is when your lender(s) allows you to sell your home for less than the unpaid mortgage(s). Here are the top reasons why doing a short sale in 2012 is likely your best alternative:

  • It’s easier than ever. Banks are now embracing short sales. Why? Because they now realize that short sales save them money when compared with the expenses involved in completing foreclosures. The process is more streamlined and less stressful than ever.
  • There is absolutely NO cost to you. Your lender pays for all closing costs and commissions for Phoenix AZ Realtors. You may even get additional cash at closing. A recent trend is that some homeowners are getting cash to complete the sale.
  • You can stay in the home until the sale is complete and make no mortgage payments unless you choose to make them. Many Phoenix Homes for Sale advertised through the local MLS have homeowners that choose to remain in the home until completion of the sale.
  • Arizona is an Anti-Deficiency state. In Arizona your lender is unable to pursue you for a deficiency judgment, if you used the borrowed money to purchase or make improvements to a home. That means that your lender cannot sue you for the difference between your mortgage and the sales price of your home. Situations do vary, so consult an attorney about your specific situation.
  • Your debt forgiveness is NOT taxable. Prior to 2008, any mortgage debt forgiven by a bank was taxed as normal income. If you had a $300,000 mortgage and short sold your home for $200,000, then you would owe taxes on the $100,000 shortage that was forgiven by your lender. The Mortgage Forgiveness Debt Relief Act that went into effect in 2008 essentially eliminates this problem.
  • The Mortgage Forgiveness Debt Relief Act is expiring soon. At the end of 2012 this Act expires meaning that any debt forgiveness as in the previous example is taxable income.
  • A short sale is better on your credit score than foreclosure or bankruptcy. You can purchase a new home sooner than with a foreclosure. You will be eligible, under Fannie Mae guidelines, to buy another Phoenix MLS home in 2 years instead of 5 to 7 years. You are also in a much better position to secure lower rates on all types of loans in the future. Additionally, some employers look at a foreclosure as a sign that you are not dependable. As more employers rely on credit reports for hiring practices, it is best to do all you can to avoid a foreclosure.
  • Best of all, you can move on with your life. Get rid of stress. Being upside down on your mortgage is incredibly stressful. A short sale can help you get through the process in a shorter period of time while reducing the emotional and mental stress involved.

Do you owe more than your home is worth? You are not alone. For a private consultation, please contact us at   www.ThompsonGroupAZ.com or (480) 776-5214.

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Arizona’s Market Heats Up for Sellers

On a recent listing which was a short sale transaction, the buyer activity was truly amazing.  The list price started in the high $140’s and got bid up to the high $150’s.  The listing was on the market for 6 days and received 40 showings from Phoenix Arizona Realtors and over 10 offers.  If this seller where not underwater on the mortgage, the home may have sold for $10,000 more.

As of today, the number of active Phoenix Homes for Sale in the Phoenix MLS has dropped to 15,231.  With this low amount of inventory valley wide for Phoenix Arizona homes, prices in the Phoenix Real Estate Market should see increases in value until more inventory returns to the market.

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Do I Have Enough Equity to Sell My Home?

A seller that purchased a home in the last year came to us about selling their home due to being relocated out of state. This Arizona seller asked us, “Do I have enough equity in my home to sell now and not lose money?”  Unfortunately, with the current market conditions in the Phoenix Real Estate market – and this seller’s short time of making mortgage payments – the seller is looking at a loss of $20,000 to $30,000.

In most areas of the country and when selling Phoenix Arizona Homes, the costs of selling a home run between 6% and 7% of the sales price. For example, a home sold for $250,000 would actually net a seller $232,500 after 7% in real estate fees, meaning the cost of sale is $17,500. In order for a seller to break even after expenses of the sale, the seller needs one of two scenarios to break even.  The seller must own the home long enough to make enough mortgage payments to cover the expenses or the seller must be in a real estate market where enough appreciation occurred to cover the expenses.

If the home owner’s financing is a 30-year mortgage at 5.5%, then after five years a home owner has made enough mortgage payments to sell the home. According to www.amortization-calc.com, a seller will have $18,491 in home equity after five years or only owe $231,509 on the home.

If a seller is in an appreciating market where annual appreciation is 3%, then a home owner will gain enough appreciated value in three years to sell. In our case, with a $250,000 purchase, the three-year appreciation will bring the house value to over $273,000, allowing for $23,000 in costs to cover the sale.

Unfortunately, appreciation is a rare occurrence in the Phoenix MLS since 2005.  If cases arise where the homeowner can no longer continue to make mortgage payments a short sale is a good option to consider.  Many Phoenix AZ Realtors are now capable at processing such transactions and many Phoenix Homes for Sale are closed as short sales.  More information can be found at www.MyAZHouse.com on short sales.

Are you considering a sell of your home soon?  Here at the Thompson Group our goal is to equip our sellers with knowledgeable and professional promotion of their home.  Would you like to learn more, or do you need Market Analysis of the value of your home?  Contact us at www.ThompsonGroupAZ.com or 480-776-5214.

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Does Your Realtor Understand Short Sales?

In most situations, well-planned short sales of Phoenix Arizona Homes have significant advantages over foreclosures. Indeed, a close look at the Phoenix MLS shows a relatively high percentage of short sales among all Phoenix Homes for Sale. However, a short sale is not to be taken lightly – preparation and experience is essential. Among the important questions to consider when pursuing a short sale is the big question: Does my Realtor understand short sales?

To help you evaluate how well prepared your Realtor is for handling your short sale, have a discussion with him or her about the short-sale process, and be sure to ask the questions below. If you don’t hear the answers or the knowledge and familiarity you’re looking for, be prepared to keep looking for a Realtor that’s equipped to help you.

  1. Who is the service company and what do they do in the process? In general, the service company of the mortgage is the name on the mortgage statement you receive every month. Bank of America, Chase and Wells Fargo are common service companies. In most cases, the service companies are only in charge of processing the file and have very little to do in the decision-making process and negotiation of the sale itself.
  2. Who is the investor? Fannie Mae, Freddie Mac and Ginne Mae tend to be the investors of the majority of loans. Large service companies such as Bank of America, Chase and Wells Fargo may also be an investor on a mortgage. The investor is usually the decision-maker on each loan and has specific guidelines to follow in negotiating a short sale. Experience in negotiating with different investor guidelines is essential experience for a Realtor to have in order to have a successful close of escrow.
  3. Who is the MI company? Not all loans have MI (mortgage insurance), but some do. In the event that there is MI on a loan, you be certain that the MI company is going to negotiate with you (the seller) before allowing a close of escrow. The MI company is generally covering the loss in the short sale and paying out the investor for the loss on the mortgage, so the goal of the MI company is to reduce the lost payout as much as possible.
  4. How will each be negotiating with me? This is a great question for an agent. Negotiating with service companies, investors and MI companies is not like negotiating a normal purchase contract. The process is bureaucratic, paperwork-intensive, and detailed. Experience really pays here and a good Realtor will know how to get it done and cost you very little at closing. However, a lack of experience and less-than-thorough paperwork by your agent could result in you writing a large check at closing, or worse, a foreclosure.
  5. What are the potential tax consequences? In every short sale, there are potential tax consequences that a seller must deal with. Asking your CPA or tax advisor about your particular situation and possible consequences is a very important part of planning for your future. A Realtor should have some general knowledge of the potential consequences as well as a good reference for you to get further help, but should also encourage you to discuss with your CPA or tax advisor.
  6. What are the potential liabilities after closing? Most loans are written as “non-recourse”, meaning that the lender will not be able to pursue you in the future for a loss incurred. However, some loans are recourse loans in which the financial institution may choose to pursue legal and collection avenues for the loss. When working with a recourse loan, there is always future potential liability where you should consult an attorney about the situation and again, a competent Realtor experienced with short sales in the Phoenix Real Estate market will encourage you to discuss the situation with your attorney.

Remember – a short sale is truly a “double-edged sword.” On one hand it can usually offer significant advantages over foreclosure, but on the other hand it requires specific knowledge and expertise to successfully complete. Our Phoenix AZ Realtors have the short sale knowledge and experience to help you succeed – give us a call today!

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The Short Sale – What is the Verdict?

Not long ago it seemed no one knew of a short sale. Now, it seems that of every ten Phoenix Arizona Homes I show to buyers at least five are listed as “Short Sale.” Simply defined, a short sale means that the seller is “short” enough money to pay off the mortgage by selling the home. Therefore, the homeowner must negotiate with the lender to determine a lesser amount allowable to pay off the mortgage at close of escrow.

The list of downsides for the Short Sale are numerous: tons and tons of bank bureaucracy to work through, super-long escrows lasting three times as long as a normal escrow, waiting for bank negotiators for days on end, real estate agents who may not know how to operate in the banking world. Last but not least – the seller’s bank is always able to say no.

On the other hand, the bank industry is dramatically improving processes required to complete short sales in a timely manner. Large national banks such as Bank of America, Chase, Seterus, Wells Fargo and CITI – which received black eyes in the past for poor performance – are now able make decisions in less than 90 days if provided the proper paperwork. Even smaller regional banks such as MetLife, Green Tree, Desert Schools, Provident Funding, and American Home Mortgage Servicing are also showing improvement. With Fannie Mae and Freddie Mac – the two largest holders of mortgages – continuing to implement short sale support, short sales of Phoenix Real Estate continue to improve on closing ratios.

With that silver lining in mind, remember that a short sale is not a foreclosure! Completing a short sale is an option to unload piles of mortgage debt. A well-planned short sale should include legal, tax and credit planning. With the correct planning, a homeowner may be able to qualify for a new home in as little as two years. And as a rule, banks are approving 90% of short sales of sellers with viable financial hardships.

And, don’t forget that the Home Affordable Foreclosure Alternatives is paying homeowners for completed short sales. Do you qualify? Contact us today at 480-776-5214 or www.ThompsonGroupAZ.com and one of our Phoenix AZ Realtors with extensive Phoenix MLS experience in the short selling of Phoenix Homes for Sale can help you find out.

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