Phoenix short sales class 6.21.12 final

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Phoenix short sales class 6.21.12 final

  1. 1. Short Sales – Start to Finish Presented by: Marcus Fleming and Justin ToenjesSlide 1 of 49
  2. 2. Introductions ● Redfin ► Website Search ► Changing the game for the home buyers ► Transparency ● Marcus Fleming ● Justin Toenjes ● Class Survey, feedback and ideas needed!!Slide 2 of 49
  3. 3. Introductions ● Your Turn ► Name ► How long have you been looking for a home? ► Have you been under contract on a short sale? ► What would you like to get from this class?Slide 3 of 49
  4. 4. The Life of a Short Sale ● How to grow a short sale ● Getting a short sale listed ● Picking your team ● Searching for short sales ● Market statistics ● Researching the home ● Determining the value ● Sit and wait, finally explained ● Getting a loan ● Home inspections and warranties ● Getting a clean titleSlide 4 of 49
  5. 5. How to Grow a Short Sale ● Supply vs. Demand ● 80/20 Loans ● HELOCS (disappearing money) ► Recourse in a Non-recourse state ● Market crash ► 50% drop in home values ● Making the decision to short sale ► Loan modifications ► Bankruptcy ► Credit ImpactSlide 5 of 49
  6. 6. - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Jun-03 Sep-03Slide 6 of 49 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Single Family Dwellings Sep-08 Dec-08 Mar-09 Number of Active Listings Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 # of Active Listings Jun-11 Sep-11 Dec-11 Mar-12 Jun-12
  7. 7. Getting a Short Sale Listed ● Seller’s mindset ► Home maintenance ► HOA dues ● Bank’s attitude ● Listing agent’s struggle ● Pricing strategies ► Some things are too good to be true ● Approval Notice complications ● Trustee’s sale dateSlide 7 of 49
  8. 8. Shifting Gears Starting your search for a short saleSlide 8 of 49
  9. 9. Picking Your Team ● It all starts with trust ● Qualifying Your Realtor ► Experience, education, designations ► Full time vs part-time ► What does it mean to you? ● Qualifying Your Lender ► When to choose a loan officer ► Rates are just the beginning ► New lender pay compensation ● Partner Lenders ► A hidden valueSlide 9 of 49
  10. 10. Searching for Short Sales ● Active, AWC and Pending ► What do they really mean? ● Does the website identify homes with the AWC status ● How often is the website truly updated? ● Example ► 740 Short Sales Available ► 10,000+ Short Sales Under Contract ► Zillow shows all 10,740 as being available for sale ► Redfin tells you what homes are under contract and which ones you can put an offer on.Slide 10 of 49
  11. 11. Market Statistics understand today’s market not the media’s marketSlide 11 of 49
  12. 12. Number of Active Listings Single Family Dwellings50,000 50,000 # of Active Listings # of Active Listings 45,00045,000 Selection of  40,00040,000 Homes 35,00035,000 30,00030,000 25,00025,000 Competition 20,00020,000 15,00015,000 10,00010,000 5,000 5,000 -- Slide 12 of 49
  13. 13. Homes for Sale by Listing Type Short Sales 10% Traditional LenderSales Short 14% 21% Owned 10% Last Year This Traditional Lender 80% Owned 65%Slide 13 of 49
  14. 14. Avg $/sqft for 3 Bedroom Homes By Listing Type$120 $100  $80  $60  $40  $20  Traditional Lender Owned Short Sale $‐ Slide 14 of 49
  15. 15. Inventory – Single Family Homes Sold Pending Active Pending Solds Inventory Inventory REO 787 1,053 929 0.85 1.13 Traditional 6,284 4,679 3,610 1.74 1.30 Not all these homes will sell Short Sales 740 10,337 2,050 0.37 5.21Slide 15 of 49
  16. 16. Research… its time well spentSlide 16 of 49
  17. 17. Research ● Purpose: Looking for a reason… ► 3-5 months is a long time ● The 40 questions to ask ► Listing agent ► Sellers ► Banks ► Your agent ● What does it mean? ► Pre-approved short sale ► Approved once upon a time ● Meet the sellersSlide 17 of 49
  18. 18. Determining ValueSlide 18 of 49
  19. 19. Zestimate ● What is a Zestimate? ► Automated Valuation Model (AVM)Slide 19 of 49
  20. 20. Zestimate vs. Appraisal ● What the Zestimate is not “The Zestimate is not an appraisal and you won’t be able to use it in place of an appraisal…” “Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home. Remember, the Zestimate is a starting point and does not consider all the market intricacies that can determine the actual price a house will sell for, such as entertaining offers, negotiating, closing costs, timing, etc.”Slide 20 of 49
  21. 21. Zestimate vs. Appraisal ● Accuracy ► 50% of the time the Zestimate is within 13.7% of the selling price ► The remaining 50% of the time, the Zestimate is off by more than 13.7% ● Most homes in today’s market sell for 5-10% of the originally listed price. ● Once homes do receive an offer they rarely come down more than 5% from the final list price. ● So why bother starting with the Zestimate?Slide 21 of 49
  22. 22. Determining Value ● What are comps? ● Criteria for pulling comps ► 10% living sqft +/- ► 20% lot sqft +/- ► Neighborhood or ½ mile radius ► Active, AWC, Pending, Sold (past 3 months) ► Dwelling type ► 3-5 good compsSlide 22 of 49
  23. 23. Determining Value ● Key factors to keep in mind ► Distressed sales ► Unique value adds (extreme modern remodel) ► Major value detractors (backs to major road) ► Days on market ► Final negotiation %Slide 23 of 49
  24. 24. Determining Value ● Boils down to $/sqft ► Overly simplistic, but very effective ► Keep in mind the key factors ► Use the $/sqft as a range ● At the end of the day, a home’s value is what a buyer is willing to pay and nothing more.Slide 24 of 49
  25. 25. Possible ScenariosSlide 25 of 49
  26. 26. Possible Scenarios ● Home is over priced ► Risk over paying ► Possible appraisal issues ● Home is under priced ► Risk rejection by bank ► Risk undervaluing the home ● Bidding wars ► Is the home over priced or under priced? ● Owner damages the home ► Take lots of photos (before and after)Slide 26 of 49
  27. 27. Tenants ● AZ Law protects tenants ● Investors don’t want to lose their tenant ● Owner might create fictitious lease ● How to protect yourself ► Documentation ► Contract exitsSlide 27 of 49
  28. 28. Writing the offerSlide 28 of 49
  29. 29. Writing the Offer ● What to look for ● Common Verbiage ► Previously approved short sale ► Pre-approved short sale ► Short sale approval required ► 90 Day non-refundable earnest deposit ● Determine the value ● Tenants? ● Appraisals ● Negotiations ● Tips, tricks, pointersSlide 29 of 49
  30. 30. You’re Under Contract… ● Now What? ► Sit and wait… and wait… and wait… ► Do an early home inspection ► Revisit the home, occasionally ● Approval Process ► What’s involved? ► Approval letters and transferability ● What If… ► House gets trashed ► Critical items are missing to qualify for the loan ► What leverage do you have?Slide 30 of 49
  31. 31. Sit and Wait, Finally Explained! ● The short sale approval process (chart) ● Parties involved (chart) ● Types of liens ► 1st ► 2nd ► HELOC ► HOA ► Mechanic’s ● Getting updates ► Frequency and quality ● Approval noticeSlide 31 of 49
  32. 32. Short Sale Approval ProcessSlide 32 of 49
  33. 33. Traditional Transaction Traditional Sale Title Home Seller Escrow Officer Seller’s Agent Escrow Assistant Home Buyer Home Appraiser Loan Officer Buyer’s Agent Inspectors UnderwriterSlide 33 of 49
  34. 34. Short Sale Parties – 2 Banks Short Sale Bank #1 Title Customer Short Sale Litigation Care Center Department Home Escrow Seller Officer BPO Mortgage Appraiser Insurer Seller’s Escrow Agent Assistant Mortgage Negotiator Investor #1 Home Bank #2 Buyer Mortgage Investor #2 Customer Care Short Sale Litigation Center Department Closing Loan Buyer’s Home Department Officer Agent Inspectors BPO Mortgage Appraiser Insurer Underwriter Mortgage Negotiator Investor #1 Appraiser Mortgage Investor #2 Closing DepartmentSlide 34 of 49
  35. 35. Short Sale Parties – 3 Banks and HOA Short Sale Home Seller Bank #1 Bank #3 Title Seller’s Customer Short Sale Customer Short Sale Litigation Litigation Agent Care Center Department Care Center Department Escrow Officer BPO Twitter Mortgage Mortgage Appraiser BPO Insurer Insurer Escrow Appraiser Assistant Mortgage Negotiator Mortgage Investor #1 Investor #1 Negotiator Home Buyer Mortgage Mortgage Investor #2 Investor #2 Mechanics Bank #2 Lien/HOA Closing Buyer’s Home Closing Department Loan Officer Department Agent Inspectors Customer Short Sale Litigation Care Center Department Underwriter Mortgage BPO Insurer Collections Department Appraiser Mortgage Appraiser Investor #1 Negotiator Lawyers Mortgage Investor #2 Customer Closing Service DepartmentSlide 35 of 49
  36. 36. MortgagesSlide 36 of 49
  37. 37. Lending: Go Local! Go Personal! ● When to start working with a loan officer ● Reasons to go with a local lender ● Interview your loan officer ► Office hours ► Team structure ● Establish a relationship ● Learn all your loan options ● Learn what you need to do to make it a smooth process ● Get fully pre-approved immediately ● Desktop underwriting or early underwritten approval (optional) ● Have a PQF created and on handSlide 37 of 49
  38. 38. Getting Pre-Approved A pre-approval letter is a letter from a bank or a lender estimating how much theyll lend you… we need a PQF! ● Establishes what you can afford & makes offer process go faster ● Good for 90 days, depending on lender ● Ask for a few different amounts ● Similar, yet different from pre-qualification Information needed: ● W-2, two pay-stubs, tax returns, bank statementsSlide 38 of 49
  39. 39. Mortgage FAQ ● FAQs ► Do credit inquires hurt FICO scores? ► MyFICO.com scores vs a Lender’s FICO scores ► How to compare rates ► When should I lock my interest rate (short sales) ● Need to Know ► Changing underwriting guidelines ► How much information will I need to provide?Slide 39 of 49
  40. 40. 10% 12% 14% 16% 18% 20% 0% 2% 4% 6% 8% Apr‐71 Mar‐72 Feb‐73 Jan‐74Slide 40 of 49 Dec‐74 Nov‐75 Oct‐76 Sep‐77 Aug‐78 Jul‐79 Jun‐80 May‐81 Apr‐82 Mar‐83 18.45% Feb‐84 Jan‐85 Dec‐85 Nov‐86 Oct‐87 Sep‐88 Aug‐89 Jul‐90 Jun‐91 May‐92 Apr‐93 Mar‐94 Feb‐95 Jan‐96 Dec‐96 30 Yr Fixed Source: Freddie Mac Nov‐97 Oct‐98 Sep‐99 Aug‐00 Jul‐01 Jun‐02 Interest Rates 1971 ‐ Today May‐03 Apr‐04 Mar‐05 Feb‐06 Jan‐07 Dec‐07 Nov‐08 Oct‐09 Interest Rate Sep‐10 Aug‐11 3.80%
  41. 41. Where Are Rates Headed? Interest Rates Past 12 months4.80%4.60% Interest Rates4.40%4.20%4.00%3.80%3.60%3.40%3.20%3.00% May‐11 Jun‐11 Jul‐11 Aug‐11 Sep‐11 Oct‐11 Nov‐11 Dec‐11 Jan‐12 Feb‐12 Mar‐12 Apr‐12 May‐12Slide 41 of 49
  42. 42. Home Inspections and WarrantiesSlide 42 of 49
  43. 43. Home Inspections ● What to look for yourself ● Missing components ► Big ticket items (AC, cabinets, appliances) ► Deliberate damage & safety (electrical) ● Severe neglect ● What an inspector won’t find and won’t test ► Hidden defects ► Untested systemsSlide 43 of 49
  44. 44. Home Inspections ● Most common concerns ► AC ► Roof ► Termites ► Scorpions ► Water damage ► Deferred maintenanceSlide 44 of 49
  45. 45. Home Warranties ● What is a home warranty? ● What is covered? ● What is excluded from coverage? ● Benefits of a home warranty ● Pre-existing conditions ► Known ► Unknown ● Home inspections and warranty coverageSlide 45 of 49
  46. 46. Title and Closing ● Getting a clean title ► Last minute liens ► Title insurance ● Signing appointment (loan docs) ● Recording process ● Keys!Slide 46 of 49
  47. 47. Quick Recap ● How to grow a short sale ● Getting a short sale listed ● Picking your team ● Searching for short sales ● Market statistics ● Researching the home ● Determining the value ● Sit and wait, finally explained ● Getting a loan ● Home inspections and warranties ● Getting a clean titleSlide 47 of 49
  48. 48. Upcoming Classes ● New round table idea ► 5-6 people, more interactive ● What else would you like to learn about? ● Would smaller classes be more or less attractive?Slide 48 of 49
  49. 49. Thank you for joining us!Slide 49 of 49

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