Short Sales – Start to FinishPresented by Vince Scarano
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• Negotiations and research• Sit and wait, finally explained• Getting a loan• Home inspections and warranties• Getting a clean title
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 Impact
- 10,000 20,000 30,000 40,000 50,000 70,000 60,000Jan-02Apr-02Jul-02Oct-02Jan-03Apr-03Jul-03Oct-03Jan-04Apr-04Jul-04Oct-04Jan-05Apr-05Jul-05Oct-05Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08 Number of Active ListingsApr-08Jul-08Oct-08Jan-09Apr-09Jul-09Oct-09Jan-10Apr-10Jul-10Oct-10Jan-11 # of Active Listings - Cromford ReportApr-11Jul-11
Number of Active Listings50,00045,00040,00035,00030,00025,00020,00015,00010,000 5,000 - Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11
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 date
Picking Your Team• Qualifying Your Realtor • Experience, education, designations • What does it mean to you?• Qualifying Your Lender • Rates are just the beginning • New lender pay compensation• Partner Lenders • A hidden value
Searching for Short Sales• Active, AWC and Pending • What do they really mean?• Accurate and reliable websites• AWC, Pending and Sold stats• Pre-foreclosure lists • What are they?
% of Homes Sold, Expired, Cancelled100%90%80%70%60% Expired50% Cancelled Sold40%30%20%10% 0% Short Sales Traditional Lender Owned
Home Sale in Queen Creek % of Total Sales by Listing Type120% Traditional Lender Owned Short Sale100%80%60% 43%40% 34% 23%20% Source: ARMLS Single Family Homes 0%
Avg $/sqft for 3 Bedroom Homes$120 By Listing Type Traditional Lender Owned Short Sale$100 $80 $60 $40 $20 Source: ARMLS $- 41,533 Homes Sampled
Negotiations and Research• Purpose: Looking for a reason…• The 40 Questions to Ask • Listing agent • Sellers • Banks • You’re agent• Contract need to know• Photos (documentation)• Meet the Sellers• 90 day non-refundable earnest
Negotiation Strategies - SS• What’s the true price? • Pull the comps • New listing • Old listing• What does it mean? • Pre-approved short sale • Approved once upon a time• Meet the sellers• Be realistic• % of Listings that don’t sell: 60%
100% 105% 75% 80% 85% 90% 70% 95%Jan-09Feb-09Mar-09Apr-09May-09Jun-09 Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10 By Listing Type Jul-10 Final Sale to List %Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11 Short Sale TraditionalJun-11 Lender Owned Jul-11Aug-11
Moving Forward…• Writing the Offer • Tips, tricks, pointers • Low and Low Method• Youre 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?
Sit and Wait, Finally Explained!• The short sale approval process (chart)• Parties involved (chart)• Types of liens• Getting updates • Frequency and quality• Approval Notice
Short Sale Parties Short Sale Bank #1 Title Customer Short Sale Litigation Care Center Department Escrow Officer BPO Mortgage Appraiser Insurer Escrow Assistant Mortgage Negotiator Investor #1Sellers Bank #2 Mortgage Investor #2 Customer Short Sale Attorney Litigation Care Center Department Closing Buyers Department BPO Mortgage Home Buyer’s Appraiser Insurer Appraiser Inspectors Lender Mortgage Negotiator Investor #1 Underwriter Mortgage Investor Investor #2 Guidelines Closing Department
Getting a Loan• #1 Question • Credit inquires and FICO scores• Pre-qualification vs pre-approval• Changing underwriting guidelines• When to lock your interest rate • Short sales• Loan Options • Conventional, FHA, Rehab, Homepath
Interest Rates Past 18 months 30 Yr Fixed Source: Freddie Mac5.50% Interest Rate5.00%4.50% 4.27%4.00%3.50%3.00%
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 system defects
Home Inspections• Most common concerns • Plumbing • AC • Maintenance • Termites • Fresh Paint
Home Warranties• What is a home warranty?• What is covered?• What is excluded from coverage?• Benefits of a home warranty
Home Warranties• Managing the risk of unexpected repairs• As-is, what can be covered?• Pre-existing conditions • Known • Unknown• Home inspections and warranty coverage
Title and Closing• Getting a clean title • Last minute liens • Title insurance• Mortgage Electronic Registration System• Recording Process• Keys!