Definition of a Short Sale

Definition of a Short Sale:

A short sale is an “arrangement” between the owner of their home and the bank that lent them the money to buy their home to accept an offer for less than the total amount owed to pay off the home. The “deficiency” is the difference between the amount owed and what the bank collects at the short sale.

Although, the “arrangement” can take many different forms, there is no other definition of a short sale. I say this because many realtors and some investors simply throw the term around as if it meant “a sale under market value.” No. A bank owned (foreclosed) house is not a short sale. A seller deciding to lower their price and take less profit is not a short sale. An older lady who owns her home free and clear, sells her $150k home for $75k, is not a short sale. For it to be a Short Sale, someone must be getting “shorted.” Either the seller, or the bank.

 Another important definition of a short sale is how it differs from foreclosure. In foreclosure, the homeowner falls way behind on their payments and the bank repossesses the house and sells it. In almost all cases, the bank pursues the homeowner for the deficiency! This is not a widely known fact but ask someone who has gone through foreclosure, and they will tell you the only way out of this was to file for bankruptcy.     

How It Can Happen - The Arrangement

Most short sales arise when a seller owes more on their house than they can sell it for (upside down). The owner of the home then attempts to make an arrangement with their lender to sell the house for less than is owed.

The term “arrangement” was used in the definition and is intentionally broad because the arrangement depends on the bank that holds the loan. Though there are general practices, every bank does it differently. This article will give you the most common arrangements, but if you take part in a short sale, it’s crucial you assume nothing until you have the bank’s policies in writing.

There are some overriding principles to consider:

1. There is no such thing as a free lunch. This is not some dream alternative to foreclosure where the money you owe magically disappears. The deficiency will be accounted for. The deficiency can be 100% loaned to seller in the form of a promissory note, which they then must repay.

2. It is a cumbersome process. If you are entering into a short sale as a buyer or seller, don’t expect it to go as quickly as any other sale. There’s a lot of “back and forth”.

3. The employees of the lender that are negotiating the sale are not there for the benefit of the seller. Their only goal is to collect as much money for the lender and they will use whatever means necessary. You can be sure that they will most likely misrepresent their own policies and in a fair amount of cases flat out lie to the seller in order to intimidate and scare them into paying more money.

This is a good example: a lender negotiating a short sale that, as a policy, they don’t “write off” any of the deficiency and that the seller would have to have a promissory note for $40,000. This lender also told the seller that their hands were tied and this decision came directly from the investor who provides the money for the lender. The lender also said there is absolutely no negotiation on the amount owed, either pay the deficiency, or they will foreclose. The lender made the promissory note very manageable (20 years 0%) so that the seller would be more enticed to just roll over.

But the seller called the lenders bluff. The seller then provided a letter from an attorney stating they would qualify for a bankruptcy, thus rendering the lender incapable of collecting anything. That same day, the lender called the seller saying they would reduce the promissory note and write off $30,000 of the debt! It would have to be reported as 1099 income, but it would not have to be paid. Amazing change of policy! Then the seller saw what was happening and just said, “no thanks, we don’t want to owe you anything, we’ll just go ahead with the bankruptcy.” Two days later the seller received a written offer that the lender would completely forgive the debt and simply report it as 1099 income! Wow!

The moral of the story is that the lenders will sometimes use falsehoods to obtain their money. Many of the managers of the collections departments are paid a commission on the total amount of money they collect. Just imagine if that seller had rolled over on the first offer! That employee would have been responsible for keeping $40,000 of his company’s money with one five minute phone call!

One other important thing to remember is that if the lender gets the property back (i.e. short sale doesn’t go through), they have to put it up for auction. This creates the risk that additional money will be lost if the house doesn’t sell for what it’s worth.

The Details of the Arrangement

Different banks have different policies. The best case scenario is to get a bank that actually “writes off” the deficiency. All that happens here is that the seller has some minor derogatory credit reporting, but doesn’t actually owe the bank any more money. This credit reporting can consist of anything from “creditor settled for less than the amount due” all the way to “foreclosed.”

As the example noted, many banks will do a promissory note for the deficiency. 

How did we get to this place in the first point?

A short sale can come about for many different reasons. In some cases the owner of the house could have been making the monthly payments on time. Let’s say you owed 300k on the home, but the best offer you had after having the property on the market for 6 months was 250K. So, the moral of the story is that you do not have be behind on your payments to request a short sale. You just have to show that your home can’t be sold for what you owe.

In other cases, short sales happen when a seller can’t afford to make their payments and is nearing foreclosure or bankruptcy. It makes life much more complicated if you are living in the house in question. The bank’s ability to scare you is much greater in that case. In this case, a short sale is only slightly better than the alternatives. You will still lose your house, and your credit is still destroyed just because you’ve made 4-5 late payments on your mortgage.

People tend to think that a bankrupcty, foreclosure, or reposession will damange your credit rating more than the multitude of late payments that lead up to one of the above mentioned actions.

Conclusion

Again, a short sale is not a magic cure. It’s also not some mystical solution that only an elite few know about. If you’re curious about selling your house as a short sale, the first step is to contact a certified short sale/foreclosure agent. We will be able to give you choices and possibly an alternative to foreclosure and bankruptcy. If you’re an investor, there are much better ways to obtain undervalued homes.

Remember that this is a complex process and you should always seek the help of a professional when considering a short sale.

Stimulus bill stokes housing hopes

It has been justifiably argued that the new home purchase credits certainly will not help everyone and will actually compromise, even create a liability for others. The article below explores where you may stand in the big picture

r.rempfer

Stimulus bill stokes housing hopes

A substantial tax credit for homebuyers in the recently passed $838 billion stimulus bill may be just what is needed to turn around the real-estate industry. But will the credit survive the House?

By Nick Timiraos, The Wall Street Journal

A tax credit for home purchases is raising the hopes of the real-estate industry, which believes the credit could be just the stimulus needed to stabilize the housing market and get hesitant buyers to take the plunge.

A provision included in the Senate version of the recently passed stimulus bill would provide a tax credit for 10% of the purchase price of a home, up to a maximum $15,000. The measure would have to win backing from the House, which voted to repeal a provision that requires an existing $7,500 tax credit to be repaid over 15 years. That credit, which has income limits, applies only to first-time homebuyers, who last year accounted for about 40% of all buyers, according to the National Association of Realtors.

The idea behind the broader Senate plan is to lure fence-sitting potential homebuyers like John Westerdale, a 47-year-old information-technology worker who has been shopping for a home for a year but has been reluctant to finalize a deal because of falling home prices. Sunday, he planned to visit a four-bedroom home listed at more than $500,000 in Ringwood, N.J., and said that if the credit is included in the final package, he’ll speed up his plans to make his first home purchase. The tax break,
he says, could help offset the possibility of further declines in home values. “The problem is, if you buy a house you’ll have lost value in two months,” he says.

Economists say the credit could help buyers get over that worry. “This is triage,” says Mark Zandi, chief economist of Moody’s Economy.com. “We’re in a runaway elevator trying to put on the brakes … and this can help change the psychology in the marketplace.”

The National Association of Home Builders and the National Association of Realtors began aggressively promoting the tax credit last fall as part of a lobbying effort, which received a big boost when it was embraced by leading Senate Republicans last week. Congress last year approved the $7,500 credit for first-time buyers that had to be paid back over 15 years. But consumers weren’t excited about the plan, and housing executives say it didn’t spark many sales.

The current proposal has strong support from consumers. At real-estate firm Long & Foster Cos. in Chantilly, Va., Web-site traffic has increased fourfold over the past month and managers report a big uptick in interest from clients who want to go under contract if the tax credit is approved, says company President David Stevens. He sees the tax credit boosting sales among first-time and “move-up” buyers who have been sitting on the sidelines for years and could benefit from low home prices and interest rates.
Home repairs

Home repairs
A look at the differences between the House and the Senate tax credit provisions for homebuyers.

	House	Senate
Size of the credit	10% up to $7,500	10% up to $15,000
Who qualifies	First-time homebuyers	All buyers
How it works	The tax credit is refundable, which means that even buyers who don’t owe any federal income tax will receive a check. Modifies an existing tax credit to eliminate repayment provisions.	The tax credit is nonrefundable, which means that buyers can claim the credit only if they owe income taxes. Buyers can claim the credit on two years of tax returns.
Restrictions	Limited to singles who make $75,000 or less, and married couples who make $150,000 or less.	No income limits; primary residences only.
Price tag	$3 billion	$39 billion

Source: Joint Committee on Taxation

“Now is not the time to buy for everybody, but if you’re sitting on the sidelines expecting to wait longer to buy that perfect home … you have a layering of opportunity” if the tax credit passes, he says. Some economists say that without any effort to stimulate demand from buyers and eliminate a supply backlog, prices will continue to fall, triggering more defaults as more homeowners lose equity. That creates a self-reinforcing process, whereby banks that hold mortgage-related securities take more losses and tighten credit, slowing the economy.

Even some landlords, who could see their tenants leave to buy homes, support the approach to boost demand. “You need to get the housing market back on its feet because it’s dragging us all down,” says Richard Campo, chief executive of Camden Property Trust, a Houston-based apartment owner.
But the measure has its share of critics who say Washington shouldn’t be spending billions that largely benefit homeowners with equity in their homes, and upper-middle-income borrowers who have stable incomes and good credit. “The biggest beneficiary of this is whoever owns a home today at a price where they’re unwilling to sell,” says Thomas Lawler, an independent housing economist in Leesburg, Va. He and others say the real focus should be on stemming foreclosures, which are flooding the marketplace with price-destroying competition.

And because the Senate tax credit is nonrefundable, it wouldn’t benefit buyers who don’t owe any income tax or who have a low tax liability. About 38% of Americans owe nothing on their federal income taxes. “It’s basically a giveaway — an unnecessary windfall — to higher-income people,” says Sheila Crowley, president of the National Low-Income Housing Coalition.

Mounting job losses, rising credit-card defaults and tighter lending standards also could counter efforts to jump-start home sales. Jeff Jacobs says he is prepared to speed up his plans to move out of his Westerville, Ohio, condominium and into a larger home with his wife and 7-month-old daughter. But the 28-year-old urban planner isn’t sure he would be able to qualify for a loan after losing his job late last year, and he wonders if he could sell his three-bedroom condo. “If the credit comes along, maybe we could get some buyers in here,” he says.

7 Home Selling Blunders to Avoid this Spring

Remember the adage “enter emotion exit reason”? Here’s some sound advice if you’re serious about getting your home sold this season.

R. Rempfer

7 home-selling blunders to avoid this spring

Buyers continue to have the upper hand, which means you’ll have to play it smart. Your first move? Avoiding these common pitfalls.

By U.S. News & World Report

Amid falling home prices, near-record-low mortgage rates and even an $8,000 tax perk from Uncle Sam, prospective buyers have plenty of reasons to dive into the real-estate market.
But with the teetering economy and financial markets, real-estate experts don’t expect an aggressive bounce in sales this spring. “I don’t think (home) sales will really pick up until the job market has stabilized — and that won’t be this spring,” says Mark Zandi, chief economist at Moody’s Economy.com.

Despite some encouraging housing data, buyers will continue to have the upper hand in this home-selling season. But that doesn’t mean your house won’t sell; it just means you’ll have to make smarter moves to land a buyer. With the help of several experts, U.S. News & World Report compiled a list of seven home-selling moves to avoid this spring.

1. Thinking your home is the exception: It’s natural to be emotionally attached to your home, especially if you’ve lived there a long time. But allowing this affection to obscure the realities of today’s real-estate market is a serious mistake. If your local market is declining in value, you’ll need to price your home at a compelling level. That will require a painful decision: to price the property at or below comparable homes in the area, even if the price point is less than what you think your home is worth. “There are still sellers out there who think that their house is the exception,” says Judy Moore of Re/Max Landmark Realtors in Lexington, Mass. “They think that the other houses that are on the market are really overpriced, yet when you get to their house, they think that it should have a higher price because it is better.” Overpricing a home because of an emotional attachment only makes selling it that much more difficult.

2. Not scouting the competition: Another reason sellers might price a home too high is that they’re simply unaware of the dynamics of their real-estate market. To sell your home, it’s essential to have a firm grasp on the conditions in your area. Sellers should study the pricing trends and sales data in their local market. But the data tell only half of the story. To fully understand the market, sellers should get a first-hand look at the nearby homes that are also up for sale. “I would recommend my sellers go look at open houses so they see how [their homes] really compare,” says Ron Phipps, a broker with Phipps Realty in Warwick, R.I.

3. Not checking your agent’s references: An effective, experienced real-estate agent can be a big help in selling your home in today’s sluggish market. But finding such a broker may not be easy. “[Real-estate] agencies these days are pinching pennies, too,” says Joshua Dorkin, founder and chief executive of BiggerPockets.com, a real-estate networking and information site. “A lot of them think you can just put something on Craigslist and it [will] sell, and that’s not how it works anymore.” To ensure you’re doing business with a solid real-estate professional, contact some of his or her previous clients and ask about their experience.

4. Not prepping the property: Since buyers have many options these days, home sellers need to ensure that their property is in tip-top condition for showings. That means making any and all home repairs, ensuring that the indoor and outdoor portions of the property are immaculate, and removing clutter. “It is a very picky buyer right now, and they are ready to seize on any little thing that they see,” says Elizabeth Blakeslee of Coldwell Banker Residential Brokerage in Washington, D.C. “You want your house to look cared for.”

5. Being present during open houses: It’s important for the sellers to be away from the home during open houses, as their presence can be unnerving to would-be buyers. “Some sellers have the mistaken idea that they are the best people to sell their house, and that is absolutely not the case,” Blakeslee says. If a seller remains at home during an open house, she says, “buyers will have an uneasy feeling, and that is the feeling that they will take away from the house.”

6. Taking negotiations personally: The negotiation process can be tough on sellers, as buyers may demand concessions such as price reductions or help with closing costs. Although such requests might be irksome, it’s important that sellers consider them just another part of a business transaction. “It is not meant to be personal; the buyer is looking to buy as carefully as they can and pay as little as they can,” Phipps says. “It is not about you, it is about them.”

7. Sneering at offers: Even if you aren’t crazy about a buyer’s offer, don’t dismiss it out of hand. “You need to be willing to negotiate with anyone and everyone who puts in an offer, even if it is one of those low-ball offers,” Dorkin says. “Don’t ignore it, because those people might really want the property.”

This article was written by Luke Mullins of U.S. News & World Report.

Reno Aces Ballpark Opening Night

This stunning picture of the Reno Aces Stadium on Opening Night was taken by Keith Owens, for more of his work please visit: www.owensimaging.com

Reno Aces Stadium on Opening Night

On Friday, April 17, 2009, the Reno Aces played their first home game in Aces Stadium, to an over-capacity crowd of 9,167. They beat the Salt Lake Bees by a score of 11-1.

History of the Stadium

The drive to build a stadium in the Reno-Sparks area began in 2002, with Sierra Nevada Baseball’s purchase of land near the Sparks Marina. In 2003, Nevada state Legislature passed a Washoe county rental car tax surcharge to partially finance the new stadium. However, Sierra Nevada Baseball’s plans fell through when they were unable to secure the private financing portion of construction, as well as the cost to purchase and relocate a Triple-A team.

In 2007, SK Baseball stepped in and proposed a new stadium plan, redeveloping an eastern portion of downtown Reno. They entered into an agreement with the county in May 2007, secured financing, and bought the Tucson Sidewinders with the intent of moving them to Reno by the 2009 season.

Ground was broken on February 25, 2008, for what was tentatively called Sierra Nevada Stadium. It was later renamed Aces Ballpark once the Reno Aces were named. The stadium was constructed on an accelerated schedule, with only 1 year, 50 days between breaking ground and opening day.

Alpine Meadows Neighborhood Profile

Alpine Meadows real estate is prized for its serenity, its views and the mountain sites. Many owners ski from the mountain to their own Alpine Meadows property!

Alpine Meadows home designs range from classic mountain style to contemporary. Homes are found on the river’s edge at the base of the canyon, in forested settings, and on sunshine parcels with amazing views.
 
Condos are also available to purchase at the base and top of Alpine Meadows Road, and land is available for development even on the variable topography that is prevalent for the area.

North Lake Tahoe’s Alpine Meadows Ski Resort has been a long time favorite of Tahoe locals. With 2400 acres of skiable terrain and one of the longest seasons in Lake Tahoe it’s no wonder people of all abilities flock to this winter retreat. Along with Alpine Meadows, Lake Tahoe has over 20 ski areas to fit all types of skiers and snowboarders.

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