Short Sales in Texas

Prevent Foreclosure

There are many Texas homeowners looking to desperately prevent foreclosure of their home. There aren’t many options that people can take to prevent foreclosure, but doing a short sale may save a home from being foreclosed. The first thing homeowners should do to prevent foreclosure through a short sale is to look for a Dallas Short Sale Realtors or investor and get them to put a bid on their home. The bid, of course, will be a lot lower than what the house is worth or what it owes, but this is not a problem. Once the homeowners get their offer, they need to contact their lender’s short sale mortgage department and inform them of the offer. The bank will either approve or disapprove the offer, but if they do, the owner can sell the house to the agent and prevent foreclosure of their home. With the current economic problems, having good credit is indispensable and even though doing a short sale might put a dent on a credit report it’s a hundred times better than not being able to prevent foreclosure. There are many investors buying short sale homes all over the nation. Homeowners have a good chance of finding someone who is willing to bid on their home and help them to prevent foreclosure on their home.  

FHA 90 Day Rule

For those of you who have not heard, the FHA has suspended the 90-day anti-flipping rule for 1 year, effective February 1, 2010. So for at least the next dozen months, FHA buyers can obtain loans on properties that have been recently purchased by investors.

This is great news for investors trying to flip properties to FHA Buyers! For the next year at least, you wont’ have to sit on your laurels waiting for 90 days on title before you can even GO TO CONTRACT with a buyer.

• Here’s the first article I read about it: “HOUSING: Feds suspend anti-flipping rule”

• And here’s the actual PDF from HUD that makes it official and takes you through the grueling details…if you like that sort of thing.

So with this, maybe the FHA just got a little less sucky.  For now.  And just a little.

Apparently there are a few details to be aware of, such as if the resale is 20% higher than the investor’s purchase, you’ll have to pony up some proof to an independent appraiser that renovations and repairs justify the higher price. But that’s just good standard practice to have handy as a flipper these days anyway.

What is a Deficiency Judgment?

A deficiency judgment is a judgment lien against a debtor, defendant or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. This option may or may not be available to the lender, depending on whether they have made a recourse or non recourse loan.

The fuller, statutory definition as defined by New York is: "the whole residue, or so much thereof as the court may determine to be just and equitable, of the debt remaining unsatisfied, after a sale of the mortgaged property and the application of the proceeds, pursuant to the directions contained in such judgment, the amount thereof to be determined by the court as herein provided.

The plaintiff's attorney (in other words, the bank's lawyer) must make a motion to receive such a deficiency judgment. Otherwise, the amount gained from the sale shall be deemed the full amount owed, and the plaintiff has no right to collect the additional debt. However, if the parties (mortgagor and mortgagee) have already agreed in their mortgage or promissory note, then the debtor could be liable for the full amount.

A debtor who has a deficiency judgment should see an attorney for possible remedies, including bankruptcy, an exemption from creditors,an appeal, or a motion. As with all legal research sources on-line, Internet users should take caution before applying such advice to your own case, and perhaps should consult an attorney.

Example: Upon Default by the Mortgagor a lender Forecloses on the mortgage. The unpaid balance of the loan is $102,000. The property is sold at public Auction and brings $80,000. The lender then seeks a deficiency judgment against the mortgagor to recover the $22,000 shortage, plus foreclosure expenses.

The good news is many lenders do not pursue deficiency judgments because someone that has lost a house to foreclosure is a poor candidate to collections on a deficiency judgment.

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Short Sale with CitiMortgage

Okay, here is a test run.  I just listed a new short sale in Rowlett, Texas.  There is only one lienholder, and it is CitiMortgage.  I just called them and spoke with a processor.  She actually gave me her email address so she can process it for me directly.  WOW!  She said that it will take about two days to input all the info.  She will then order the BPO, and that will take about one week.  Once the BPO is received, the short sale package will be presented to the negotiator, and they should have it for about 30 days before making a decision.

I asked if I could go ahead and submit all the paperwork (excluding a contract), and she said that I could, and she would get things going (to include the BPO).

Today is Wednesday, March 21st...I will submit the package to her now, and let you know how things progress.  So far, I am extremely impressed!

Getting in the Texas Short Sale Mortgage Market

Due to the current real estate crisis, the Texas real estate market has been flooded with short sale  homes. These short sale homes can be had by smart investors for a very low prices. In fact, many real estate investors are looking to purchase short sale homes as long term investments. They buy houses for extremely low prices, sit on them for while and then make a killing when it’s time to sell them. Even if they were to hold these short sale mortgage homes for a long time, these properties promise to be a very profitable investment. The return on investment that a short sale mortgage home possess is unparalleled by anything else out there. However, investors need to be very knowledgeable about the whole process, since a lot of the short deals end up failing. There are many real estate short sale courses that can train people on the correct way to deal with lenders so that their short deal is approved by them. If you are thinking of getting into the short sale mortgage home market, make sure to do it quickly, because these homes are being bought in high numbers every day.

Texas Foreclosures and Texas Short Sales Go Hand-in-Hand

Did you know that Texas foreclosures and Texas short sales actually go hand in hand, tied at the hip so to speak. This is because amid the current crisis of the real estate market and the home loans crisis—which is putting many lenders out of business all together—foreclosures and short sales are actually a marriage of sorts. One that offers struggling home owners with a second chance at clearing their loans to the bank and starting over once again on the long pathways to financial freedom.

Foreclosures and short sales are seemingly one and the same theses days as many homeowners about to lose their homes make a last minute deal with the banks that in turn allow them to sell their homes for less than they currently owe. This makes the home a lucrative investment for investors and new home seekers, who will hop on the deal in a heartbeat and save the homeowner from a foreclosure. So to say that foreclosures and short sales are not a dynamic lending duo of the modern day mortgage crisis would be a vast understatement.

New Short Sale Rules Affect Dallas Buyers

New short sale rules are impacting homebuyers as well as sellers and lenders.

Recently, the federal government instituted the Home Affordable Foreclosure Alternatives Program, or HAFA, which is intended to streamline the short sale process, at least for transactions in which the home sellers have mortgages owned or guaranteed by Fannie Mae or Freddie Mac.

"Buyers of short sales have had to wait months and months and still not always have their offer approved for a short sale," says Lisa Matykiewicz, a Realtor and Certified Distressed Property Expert in Gilbert, Ariz. "Now there will be defined parameters as to what the lenders will accept and a timeline for when the contract needs to be approved or denied."

While most HAFA rules affect only the home sellers and their lender, a few of the streamlined rules impact buyers. They include:

• Buyers must present documentation of funds or a preapproval letter from a lender with their offer for a short sale; sellers need to present this to their lender within three days of receiving the offer.

• Lenders must approve or deny the offer for the home within 10 business days of receiving the offer.

• Settlement must take place within a reasonable period of time after the offer is made, but the lender cannot require a closing earlier than 45 days from the date of the sales contract unless the home seller agrees.

• Buyers cannot sell the property again for 90 days. This is meant to prevent investors from "flipping" homes by purchasing at a low price and selling at a quickly inflated price.

• Short sale transactions through HAFA must take place at "arm's length," meaning the home sellers cannot sell the property to a relative or anyone else with whom they have a closer personal or business relationship.

Matykiewicz anticipates fewer foreclosures in 2010 and more short sales due to the streamlined short sales rules.

"I think more short sales will be available in 2010 than in 2009 because everyone is cooperating to avoid adding more foreclosures to the market, from the government to the lenders to the homeowners," says Matt Martin, CEO of Matt Martin Real Estate Management in Vienna, Va.

Better bet?

Homebuyers may find that short sales are not necessarily opportunities for bargain hunting.

"In reality, short sale properties are priced at what the market will bear because the bank wants to recoup as much as possible of the loan value," says David Liniger, Re/Max International chairman and co-founder.

Still, shoppers may find a short sale a better bet than buying a foreclosure, he says.

"Short sales are usually in much better condition than a foreclosure because they have an actively involved seller who is living in the property," Liniger says. "Most people would prefer to buy a home in good condition at a reasonable price as opposed to a property in bad condition which will require considerable time and money to make livable."

Not all short sales fall under the HAFA program. Homeowners with loans owned by lenders other than Fannie Mae or Freddie Mac will need to negotiate short sales on an individual basis.

"One problem that will continue even with the streamlined short sale process is that homebuyers do not know where the homeowner stands in terms of approval for the short sale," says Martin. "Some real estate agents go ahead and list a home as a short sale even before the lender has approved one."

If, on the other hand, the home sellers have been preapproved by HAFA for a short sale, "the process should work better," Martin says.

How to Find Texas Short Sales

Every MLS system is different, so short sale listings aren't always evident. There seems to be a movement toward identifying short sale listings because of commission disputes. When real estage agents fight over money, systems are often immediately put in place to keep disputes from happening.

What is a Short Sale?

Short sales occur when property values drop or inflated appraisals were obtained, making the property worth less than the amount of its mortgage. This means when a seller enters into a purchase contract to sell for an amount that is less than the home's present mortgage balance, if the seller isn't bringing in money to close, the lender must approve the short sale. That's because the lender is taking a loss.

Generally, short sales are not bargains for a buyer. It doesn't mean the buyer is purchasing the property under market, and it can take a long time to close, if it closes at all, among a host of other reasons. Not all lenders will approve a short sale, and many short sale prices that are advertised are not real prices. They are guesses at what it takes to sell the home.

Short Sale Commission Disputes

The problem arises when an agent takes a listing on a home that is not yet in default, meaning the seller is still making payments to the lender. During the listing agreement term, if a Notice of Default is filed, this could change the terms of the listing. It now becomes a short sale listing, subject to commission negotiation by the lender.

In the Dallas MLS (NTREIS), our rules state that agent comments -- those that the public cannot see -- must contain verbiage that specifically spells out the sale is subject to lender approval and the commission will be divided 50/50 between the agents.

Most lenders discount the commission, paying less than a seller would pay. One listing agent did not include this verbiage. While in escrow, the buyer's agent insisted that his brokerage was entitled to the fee originally listed in MLS. The listing agent ended up giving a big chunk of his commission to the buyer's agent.

Finding Short Sale Listings

Most short sales are listed by real estate agents. You will find these listings on local web sites and in MLS feeds. Some lenders have complained about advertising that identifies the home as a short sale, because the lenders feel it puts them at a disadvantage when it comes to home pricing. They are right. A buyer generally offers less when it's advertised as a short sale.

If you have access to search terms, first look where the term short sale appears. It might be under "status modifier" or it might be contained in the marketing comments. Choose that field as your search term.

Read the listing carefully. Agents slip in words that identify the listing as a short sale. Look for the following terms:

• Subject to bank approval.

• Preforeclosure

• Notice of Default

• Give the bank time to respond.

• Preapproved by bank.

• Headed for auction

Above all, hire an agent who is well versed in handling short sales and can advise you of the procedures. If you have legal questions, please ask a lawyer for advice and guidance

Prevent Foreclosure with a Short Sale Transaction

For the legions of homeowners facing foreclosure proceedings, the prospect of selling their home with a short sale can only be a source of hope. A real estate short sale is not an ideal solution to one's mortgage problems, to be sure, but it can prevent foreclosure and allow a homeowner to get out of an expensive mortgage without ruining one's personal credit. However, if you are doing a short sale transaction with your home, you need to be very detail-oriented and precise. Be sure that you attend to all of the myriad details that need to be addressed when doing a short sale transaction. Although more and more banks are willing to do short sales in the current real estate climate, you must make sure that you don't make any mistakes that would prevent the sale from taking place smoothly and efficiently. Be sure that you have filled out the short sale paperwork packet completely. If the packet is incomplete, it could simply be disgarded by the lender. Lenders are faced with hundreds of these packets each day, and the incomplete or incorrectly completed ones will not be given a high priority. If you want your packet to be considered promptly, be sure that it is correct and complete.

Buying a Texas Short Sale Requires Patience and Capital

There is absolutely no doubt that you can make a killing in Texas foreclosures and Texas short sales right now. However, even if you have good credit and sufficient capital, you still need to have the patience and maturity to hang on to your purchases so that you can eventually realize a profit from buying up short and home foreclosure properties. So many Americans are putting their homes on the market as foreclosures and short sales that there is a real bonanza available in terms of residential properties. As the real estate market tanks, many, many people are putting their homes on the market as short sale properties. This presents real opportunities to investors interested in buying a short sale, but it also puts a surplus of properties on the market, which has the effect of driving prices down. This is a problem if you want to buy a short sale mortgage and then turn it over for a profit. However, if you have patience, you can turn a profit in the next three years or so. You've got to be patient to make money in the current turbult short sale market.