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Home-Buying 101: Short Sales explained
Friday, August 1, 2008
Searching the MLS for a home in the Anatolia area lately? If so, you've probably noticed a large number of homes listed as short sales (they may be referred to as active short sale or short sale contingency or even just "AS" or "ASC")—and they're often some of the lowest priced homes in any given neighborhood. Here are some of the most common questions I get:
Q. What is a short sale?
A. The term "short sale" is used to refer to a property being sold for which the seller owes more than it will sell for in the current market. This is more common in neighborhoods that have seen significant price declines since the peak of the market in 2005, but any seller can end up in a short sale situation if they've borrowed more money against the home than it's currently worth (such as when a home owner has borrowed money and "overimproved" a home for the neighborhood it's in).
Q. How do short sales work?
A. Short sales work like this: a seller has a financial hardship (death of a spouse, loss of a job, job transfer, hospitalization, or sudden change in monthly mortgage payment) and needs to sell a home. Because they owe more than the home is worth, the seller is requesting that the bank(s) that they have a mortgage through accept less than they're owed. Most banks won't even entertain the notion of a short sale if there aren't any buyers ready to purchase the home for the current market price so, as part of the process, the seller puts the home on the market and begins accepting offers. The seller will typically accept the best offer and submit it to the bank for approval.
Q. Are these deals too good to be true?
A. The short answer is: Yes, in many cases these deals are too good to be true. Many home sellers who are in a short sale situation are selling because they're falling behind on payments or are in preforeclosure. For this reason, they're feeling a lot of time pressure to get the home sold before a bank forecloses, so they price the home lower than anything else in a neighborhood to just try to get offers to submit to the bank(s). This leads to multiple offers but doesn't guarantee that the bank will accept whatever sales price the seller accepts. The seller doesn't usually care what the home sells for because he or she won't be making any money on the sale.
Q. Do banks really go for this?
A. Sometimes. No bank is ever eager to accept less than they're owed because they're losing money in the process, and banks aren't in the business of losing money. Of course in many cases the alternative is foreclosing on a home, and that can be a lengthy, expensive process that results in the bank owning a property—and banks are often even less eager to own the home so may be willing to negotiate if they see that it's in their best interest.
But there are some big challenges when buying a short sale. For instance, unlike a foreclosure where the bank owns the property free and clear and can sell it for whatever price they want, in a short sale situation there may be other parties with a financial interest in the property. If a seller has experienced a financial hardship, there may be unpaid taxes, utilities, or contractors who've done work and are seeking payment—and any of these can result in liens against the property. In a short sale, the seller MUST prove to the bank that there is a financial hardship that requires the home be sold and all parties must agree to accept little or no payment and sign off on the sale of the property. Add to this the fact that there may be a second mortgage that will likely be completely wiped out and it becomes challenging getting everyone with a financial interest to authorize the sale. This is often a grueling, months-long process that can ultimately be for nothing if one or more parties deny the short sale request, and this is a major reason why a lot of homes that are listed as short sales eventually come off the market and reappear later as bank-owned REO properties.
Q. What do the terms active short sale and short sale contingent etc. mean?
A. An active short sale is just another way of saying that the home is active on the market as a short sale. A home listed as short sale contingent means that the seller has accepted an offer and submitted it to the bank. Until the bank responds (and this can take months), the listing agent is obligated to continue to market the home as "for sale". Once the bank has accepted an offer, then the property will be marked as "pending" and the normal escrow period begins.
Q. I've called several times about a home that's for sale online and the agent keeps telling me it's already sold. Why is it still showing up online?
A. In the Sacramento area, if a property is being sold as a short sale, until the bank accepts one of the offers that has been submitted the listing agent is required (by the rules of the local MLS) to identify it as short sale cont and it will continue to appear online on searches because the home isn't yet technically in escrow. While this may seem confusing, your Anatolia REALTOR® can help you figure out the status of properties you're interested in.
To summarize, when you see a property for sale that's listed as a short sale this means you should expect a much longer than average escrow period (so don't plan on buying a short sale if you're on a tight timeline), a counter offer on price from the bank (even if the seller has accepted your price), and the possibility that the bank will reject the short sale entirely. If you can find a great home that's either a traditional sale or a foreclosure (also called an REO), consider going with these options first. Good luck and happy house-hunting!
More questions about short sales or other homes? Give us a call at (916) 444-7577 today!
Labels: Anatolia, Antelope, Arden, Carmichael, Citrus Heights, Curtis Park, Del Paso Heights, Downtown, East Sac, El Dorado Hills, Elk Grove, Fair Oaks, Gold River, Granite Bay, Greenhaven, Home-Buying 101, Laguna, Land Park, Lincoln, Meadowview, Midtown, Natomas Park, North Highlands, North Natomas, North Sac, Oak Park, Old Sac, Orangevale, Pocket, Rancho Cordova, Regency Park, Rio Linda, River Park, Rocklin, Rosemont, Roseville, Sacramento, South Land Park, South Natomas, South Sac, Southport, Tahoe Park, UCD Med Center, West Sac, Woodlake, Woodland
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posted by Rob McQuade @ 1:50 PM,
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I want you to use this website...
Monday, July 21, 2008
...even if you don't use my services!
I've designed these websites to be useful and usable—and I really want you to find the information (or property) you're looking for. To that end, I'd love to hear what you think. I'm constantly adding and updating the website, including new relevant info and resources. Even if I haven't blogged in a few days, I'm usually adding a new feature here and there (thanks for the feedback on the ZIP Code search tool at the left of each page, Margaret!)... But is it the type of info you want? And what else would be helpful?
Please let me know what you think. I'm listening and working to build the best, most easy-to-use Sacramento area real estate website I can. Judging by the great phonecalls and emails I'm getting it's working. But I'm not here to rest on my laurels!
Fifteen seconds of (real estate) fame
A few weeks ago I was fortunate enough to meet with the fine folks at Trulia (a real estate industry website used by a lot of consumers to find properties for sale—though it's not nearly as good as my websites! ;-D)to shoot a video with Brett Crosby at Google Analytics for other real estate industry professionals. It probably won't be of interest to you (it's a bit nerdy, I confess I'm a "real estate nerd"), but you can check out the video below. It was even picked up by ActiveRain (another industry website that many consumers use)
Oh, and if you decide you'd like some help with your Sacramento real estate needs, my team and I are absolutely here to serve you—just ask! -Rob McQuade -- (916) 444-7577.
Labels: Anatolia, Antelope, Arden, Carmichael, Central, Citrus Heights, Curtis Park, Del Paso Heights, Downtown, East Sac, El Dorado Hills, Elk Grove, Fair Oaks, Gold River, Granite Bay, Greenhaven, Laguna, Land Park, Meadowview, Midtown, Natomas Park, North Natomas, North Sac, Oak Park, Old Sac, Orangevale, Rancho Cordova, Regency Park, River Park, Rosemont, Roseville, Sacramento, South Land Park, South Natomas, South Sac, Southport, Tahoe Park, UCD Med Center, West Sac, Woodlake
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posted by Rob McQuade @ 7:17 PM,
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"Buy and Bail" is Mortgage Fraud
Wednesday, June 18, 2008
A Sacramento homeowner was recently quoted in the Wall Street Journal talking about her plans to purchase a "second home" and then let her current home—purchased in November 2006 for much more than similar homes are currently selling for—fall into foreclosure.
"I can find the same exact house as what I live in right now for half the price."But this practice, referred to in the mortgage market as "buy and bail", is considered by many in the real estate industry to be mortgage fraud. Fannie Mae, established in 1938 as a government agency but now a privately-held lending institution that provides financing to most of the nation's largest home mortgage lenders, is tightening regulations to prevent these abuses of the system. Individual lending institutions are reviewing their own lending practices and underwriting requirements and are watching for borrowers that are at risk of engaging in buy-and-bail.
Legitimate borrowers planning to take advantage of the current sluggishness in the real estate market to buy a second home or move-up property can expect tighter loan standards and will likely need to produce additional evidence.
Thinking about renting out your current home and moving up to something better? Here's what your lender will probably request from you:
- Supporting evidence to back up the claim that the current home will be rented out, including a signed lease agreement;
- Proof of income to support principal, interest, taxes, and insurance on both the current residence and the new property being purchased;
Labels: Anatolia, Antelope, Arden, Auburn, Carmichael, Citrus Heights, condos, Del Paso Heights, El Dorado Hills, Elk Grove, Fair Oaks, Galt, Gold River, Granite Bay, Lincoln, Meadowview, Modesto, Natomas Park, North Highlands, North Natomas, North Sac, Oak Park, Old Sac, Orangevale, Rancho Cordova, Regency Park, Rio Linda, Rocklin, Rosemont, Roseville, Sacramento, South Natomas, South Sac, Southport, Stockton, Tahoe Park, UCD Med Center, West Sac, Woodland
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posted by Rob McQuade @ 3:04 PM,
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What you need to know before buying a Anatolia foreclosure
Thursday, June 5, 2008
For the last three years we've been talking about a "changing real estate market"®and the Anatolia real estate market keeps on changing.
Six months ago I began urging friends, family, and clients on the fence to scrape together their down-payment dollars for either their first home purchase or to begin investing in real estate. I'll admit even I wasn't expecting us to be where we are now: in the past few weeks agents on my team have been competing with five, nine, 17, and even 42 other offers on some properties... Is it 2004 all over again?
So why is this happening?
There are two explanations, really:
First, after three years of doom-and-gloom media headlines locally and nationally, many who've been waiting for "the bottom" are realizing that prices are great (and in a lot of areas have returned to pre-2003 levels) and that even if values dip a little bit more they're still buying at a great time. Financing that was challenging in late 2007 has become a bit more available and old school financing (think FHA and VA loans) are back in full force and are great options. Sure, lending requirements are stricter than in 2004 and 2005... But not everyone who qualified for mortgage financing back then was really ready for ownership.
Second, the banks are doing funny things. Whether because they've been beaten down or they're simply not sure how to price their foreclosed properties, many are pricing those properties so far below the market that buyers swarm.
And this second issue has become a problem.
Over the past couple years I've had to educate clients that pricing a home competitively is especially important in the current market. In some cases the only way to get a home sold is to be the very best price in the neighborhood. But when a bank prices a home artificially low it hurts neighboring property values and, worse, gives many buyers false hope that they can afford to buy in a certain neighborhood. I don't blame the listing agents because their own hands are tied by the banks' pricing "procedures".
I'm seeing homes come on the market for $175,000 or $200,000 in certain neighborhoods and they're instantly getting a dozen offers or more. Because of the competitive nature of things, buyers are being forced to offer above list price and that home listed for $175,000 actually sells for $195,000. Or $205,000. Or, in extreme instances, $230,000. If a home is in reasonable condition, a decent location, and is priced near market then it's probably going to sell quickly. And this is in stark contrast to what many buyers have been lead to believe in the recent past about always offering below list price on bank-owned homes.
Is it really fair for a buyer in the $175,000 price range to have a $200,000+ property dangled in front of them and jerked away? And how long will this go on? Banks aren't typically turning on a dime right now—it's something more akin to turning a battleship. As property inventory fluctuates and new batches of REOs come on the market, it becomes clear that we'll probably be dealing with this issue for most of 2008. We can probably expect another wave of fresh foreclosures later this year and that inventory needs to be consumed by the market before we'll see things normalize.
For now, I recommend buyers become attuned to what's happening in the neighborhoods in which they're considering purchasing. If average homes in the area are typically selling at $250,000 and a comparable property comes on the market at $200,000, expect a lot of competition. This isn't to say that there aren't deals to be had—but some of the best deals are in the overlooked properties that need a little extra TLC or cosmetic work.
If you can handle a little painting and minor repair then I encourage you to look at the ugliest home in your favorite neighborhood. ;-)
Labels: Anatolia, Antelope, Arden, Carmichael, Citrus Heights, Del Paso Heights, Elk Grove, Greenhaven, Laguna, Meadowview, Natomas Park, North Natomas, North Sac, Rancho Cordova, Regency Park, Rosemont, South Land Park, South Natomas, South Sac, Southport, Tahoe Park, West Sac
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posted by Rob McQuade @ 3:28 PM,
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New! Search homes and condos quickly by ZIP Code
Saturday, May 31, 2008
Now you can quickly and easily search by ZIP Code with just a click! It's easier than ever to pull up homes and condos in your preferred ZIP Code by simply clicking the » By ZIP Code NEW! link under Quick Property Searches from the menu at the left. You can scroll through the list of available ZIP Codes in Sacramento, Placer, Yolo, and El Dorado Counties to bring up a convenient list of the first 200 homes and condos for each ZIP. And, as always, you can get news listings matching ALL your search criteria sent to your email inbox daily by clicking on the link under Resources for Buyers.
Labels: Anatolia, Antelope, Arden, Auburn, Carmichael, Citrus Heights, Curtis Park, Davis, Del Paso Heights, Downtown, East Sac, El Dorado Hills, Elk Grove, Elmhurst, Fair Oaks, Galt, Gold River, Granite Bay, Greenhaven, Laguna, Land Park, Lincoln, Meadowview, Midtown, Natomas Park, North Highlands, North Natomas, North Sac, Oak Park, Old Sac, Orangevale, Pocket, Regency Park, Rio Linda, River Park, Rocklin, Rosemont, Roseville, Sacramento, South Land Park, South Natomas, South Sac, Southport, Tahoe Park, UCD Med Center, West Sac, Woodlake, Woodland
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posted by Rob McQuade @ 10:42 PM,
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NEW! Anatolia foreclosures available online
Sunday, April 20, 2008
This is a quick update: I just added a new link to Anatolia foreclosures, now you can view bank-owned and REO properties in Anatolia and other areas, including Antelope, Arden, Carmichael, Citrus Heights, Curtis Park, Davis, Del Paso Heights, Downtown Sacramento, East Sacramento, El Dorado Hills, Elk Grove, Fair Oaks, Gold River, Granite Bay, Greenhaven, Laguna, Land Park, Lincoln, Meadowview, Midtown Sacramento, North Natomas, North Sacramento, Oak Park, Orangevale, Rancho Cordova, Rio Linda, River Park, Rocklin, Rosemont, Roseville, Sacramento, South Land Park, South Natomas, South Sacramento, Tahoe Park, the UCD Med Center, the Pocket, West Sacramento, Woodlake, and even Woodland.
Foreclosures (also called REOs or bank-owned properties) represent some of the best deals in the local real estate market. Still not sure how to buy a foreclosure property? You can and review a glossary of terms, plus request additional info and get new foreclosure listings as they become available.
Labels: Anatolia, Antelope, Arden, Auburn, Carmichael, Central, Citrus Heights, Curtis Park, Davis, Del Paso Heights, Downtown, East Sac, El Dorado Hills, Elk Grove, Fair Oaks, Galt, Gold River, Granite Bay, Greenhaven, Laguna, Land Park, Lincoln, Lodi, Meadowview, Midtown, Modesto, Natomas Park, North Highlands, North Natomas, North Sac, Oak Park, Orangevale, Pocket, Rancho Cordova, Regency Park, Rio Linda, River Park, Rocklin, Rosemont, Roseville, Sacramento, South Land Park, South Natomas, South Sac, Southport, Stockton, Tahoe Park, UCD Med Center, West Sac, Woodland
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posted by Rob McQuade @ 9:52 AM,
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Understanding your credit
Thursday, April 17, 2008
I'm fortunate enough to host a great weekly real estate forum (the largest of its kinda in the area) that I created in early 2007. While it's only open to real estate professionals, a lot of the info that comes out of that group benefits my clients. This week we had Mark Wolff and Jay Broderick with the law firm Wolff & Wolff join us to talk about credit information and how consumers can protect themselves.
Here's a scary fact that Jay shared with us: a recent study showed that one in four consumers had errors on one or more credit reports so severe that it could cause them to be unable to obtain housing or employment. Additionally, 79% of credit reports had at least minor errors or inaccuracies.
Do you know what's on your credit reports?
The first key is to understand that not one but three major credit reporting agencies are monitoring our individual credit behavior. This includes payment habits, credit balances, loan types, and new credit inquiries (initiated by the consumer or by outside creditors for the purpose of evaluating creditworthiness). Creditors and individuals such as prospective employers that you grant permission potentially have access to information about how much and what types of credit you have, whether or not you're paying on time, what percentage of your available credit is used, your rent/mortgage payment history, and more—and they're using this information to determine not only if you should get that new platinum credit card but also whether or not you should have a home loan, what interest rate you'll get on that loan (remember that when you're considering buying a home in the Anatolia area), whether or not you should be allowed to rent, or even if you should be hired for a job.
Knowing what's on your credit report is critical.
The three major credit reporting agencies—TransUnion, Equifax, and Experian—are required to provide for FREE one copy of your credit report per year to you the consumer. The two easiest ways to access these reports are
- By phone. You can call toll free in the U.S. (877) 322-8228 to request a printed copy of your credit report from one or more of the agencies be mailed to you.
- By secure website. You can access information quickly and easily online (after verifying your identity) at http://www.annualcreditreport.com (Please note that the information provided online is not produced in the same format as a printed credit report, you may wish to order by phone for the most detailed information)
If you're having a hard time understanding what's on your credit report, a creditor or agency is unwilling to make a correction, or you need more assistance, I recommend you contact Jay Broderick with Wolff & Wolff for a consultation (there is a $50 consultation fee for a review of your reports and to determine a course of action). The number is (916) 714-5050 or you can email Jay at jaybroderick@wolffandwolff.com
Labels: Anatolia, Antelope, Arden, Auburn, Carmichael, Citrus Heights, credit, Elk Grove, Galt, Gold River, Land Park, Lodi, Modesto, Natomas Park, North Highlands, North Natomas, Old Sac, Rancho Cordova, Regency Park, Roseville, Sacramento, Southport, Stockton, West Sac
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posted by Rob McQuade @ 10:42 AM,
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Choosing a REALTOR® in the Anatolia area
Saturday, April 5, 2008
When choosing a REALTOR® to help you buy or sell a home or other property in the area, there's good news: you have options. With membership within the Sacramento Association of REALTORS® at more than 7,000 real estate professionals* (though this includes lenders, title and escrow professionals, and other affiliates), you the consumer have more options than ever when it comes to selecting a real estate agent. So how do you choose?
I. Select a knowledgeable professional who understands your needs
Looking for a Anatolia homes? You probably don't want a real estate agent whose focus is on vacant agricultural land. Ask questions. How well does he know the area? How familiar is he with current market conditions in the area? With the type of property you're looking for? I'm a fourth generation Sacramentan and host the largest weekly forum of its kind for real estate professionals within the greater Sacramento area.
II. Buyers: Choose an Accredited Buyer Representative (ABR)
If you're a buyer, one way to make sure you're receiving expert representation is to select an Accredited Buyer Representative or ABR. ABRs are professionals who've been certified by the Real Estate Buyers Advisory Council (REBAC) through advanced education and training and have met the council's criteria—and this is the only buyer representation credential recognized by the NATIONAL ASSOCIATION of REALTORS®. There are only 34 ABR designees** in Sacramento County despite association membership numbering more than 7,000. I'm proud to be an Accredited Buyer Representative and have been since 2006.
III. Sellers: Choose a REALTOR® with a comprehensive marketing plan
In an ever-changing real estate market, it's not enough to put a sign in the ground and post a listing on the MLS. Make sure your real estate agent has a comprehensive marketing plan that's tailored to your property. Ask for details about that marketing plan? What does your REALTOR® have to offer that will help your property stand out in a crowded marketplace? I offer my sellers the unparalleled access to the right buyers through the largest local network of neighborhood- and property-specific real estate websites: and I'm the only agent who can offer this.
This includes regional sites such as ForSaleinSacramento.com, ForSaleinRoseville.com, ForSaleinElkGrove.com, ForSaleinWestSac.com, and ForSaleinCitrusHeights.com; smaller neighborhood-specific sites such as ForSaleinDowntown.com, ForSaleinMidtown.com, ForSaleinEastSac.com, ForSaleinLandPark.com, and ForSaleinArden.com; property-specific sites including SacramentoCondoLiving.com, MidtownLoftLiving.com, and SacramentoGreenProperties.com; and even project-specific sites like SutterBrownstones.com,
RiverfrontPlazaCondos.com, 1600H.com, and 800JSt.com. And this is just a sample of my own personal websites and doesn't include the video, viral marketing, mailings, or network of independent resources I use to market listings!
IV. Talk to people you trust and ask for referrals
"Rob was great. He was very patient in dealing with questions and quirks."
-Marlis R. (home buyer in Elk Grove)
"Thanks for doing such a great job. You guys are awesome!! I appreciate being kept informed..."
-Reiko M. (condo seller Downtown)
"Dear Mr. McMartin, I want you to know how much I appreciate Rob McQuade. He is an excellent Realtor and also a good person. He was aware of every detail along the way, he took the initiative to keep in close contact so I would stay informed. He was so competent and knowledgeable. I don't know how he managed to be so professional while also being understanding and patient. His judgment and advice on pricing the house, improvements needed to sell quickly and fairly was impeccable. I could not have had a better REALTOR® and I was so pleased with not only the end result, but the entire process. Thank you."
-Jeanne N. (home seller in East Sac/McKinley)
* According to the Sacramento Association of REALTORS® as of April 2008.
** According to the Real Estate Buyers Advisory Council (REBAC) website as of April 2008.
Labels: Anatolia, Arden, Curtis Park, Downtown, East Sac, Galt, Land Park, Lodi,