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Short Sales and REOs Account for 25 Percent of Home Sales in August

A recent study shows that short sales and REO’s accounted for 25% of home sales in August.  RealtyTrac released its August 2013 U.S. Residential & Foreclosure Sales Report, which shows that U.S. residential properties, including single family homes and condominiums and townhomes, sold at an estimated annualized pace of 5.6 million in August, up two percent from the 5.5 million pace in July and up 12 percent from the 5.0 million pace in August 2012.  It also stated that the median price of a distressed residential property, a property that is bank owned or in foreclosure in August was $116,000, up one percent from the previous month, but down three percent from a year ago. Median distressed prices have now declined on an annual basis for six consecutive months including August.

Daren Blomquist, vice president at RealtyTrac stated “This recovery in home prices and sale volume continues to be driven in large part by cash buyers and institutional investors, as evidenced by the increasing share of sales represented by those two categories in August.”

The study also showed that:

►Short sales accounted for 15 percent of all U.S. residential sales in August, up from 14 percent in July and eight percent in August 2012.

►Sales of bank-owned homes accounted for 10 percent of all U.S. residential sales in August, up from nine percent in July and nine percent in August 2012.

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HUD is Shooting Itself in the Foot In Light of Short Sale Policy

New HUD Rules For A Short Sale

There are new rules that took effect Oct. 1 that will prohibit brokers and agents from representing both buyers and sellers in FHA short sales, this will only make it harder for the government to get the most bang for its buck.  The Department of Housing and Urban Development issued a letter to mortgage servicers in July detailing an array of new anti-fraud requirements for short sales and deeds-in-lieu of foreclosure.

The letter included the use of a “deficit income test” to prove that a homeowner is experiencing a hardship that may qualify them for a short sale or deed-in-lieu of foreclosure. It also stated the documentation requirements for verifying the homeowners assets, income and expenses. To guarantee that short-sale transactions are conducted at “arm’s length,” HUD said “brokers and their agents may only represent the buyer or the seller, but not both parties.

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What You Need to Know About A Short Sale

If you were thinking about purchasing a short sale as an investment or your next home, you don’t have to be aprehensive of these types of purchases anymore as long as you start the buying process with your eyes wide open. One of the most important things you can do is to choose the right agent to represent you. There are several questions to ask your real estate agent when you are deciding  if purchasing a short sale home is the right fit for you. Some questions to ask your real estate agent may include:

  • How many mortgages does the home have?
  • Does it have a primary and home equity loan or a second mortgage?
  • Are there other liens on the property and are they being negotiated at the time?
  • Is the seller filing for bankruptcy? Or are they planning on filing for bankruptcy?
  • What type of bankruptcy are they filing and what phase are they currently in?
  • Who is the end investor behind the loan: it is FHA, Fannie, private funding, etc.
  • Who is negotiating the sale of the property and has any paperwork been submitted yet?

Another important part of the short sale purchasing process and is a required piece is the “Arms-Length Transaction”  form. This form states that the buyer and seller are unrelated parties.  It is important for buyers to keep in the back of their heads closing dates because when one buys a distressed property, the timeline should have some flexibility; they are not like a typical sale. Once you have decided to pursue a short sale you should also be informed and have an understanding or you responsibilities as the buyer. 9 times out of 10 you will required to obtain all town and municipal requirements including the certificate of occupancy. In addition to that, depending on the lender, you will NOT receive a credit or any repairs at closing.  The point of the short sale is to successfully complete the transaction in the best interest of all parties.

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HUD Announced Delay of the Preforeclosure Participation Requirement on Short Sales

Delay of The Dual Agency

The U.S. Department of Housing and Urban Development (HUD) has announced that they are delaying, until further notice, a portion of the preforeclosure participation requirement on FHA Short Sales.

Key preforeclosure participation requirement that is now delayed:

  • The FHA is delaying the prohibition on dual agency/brokerage      that was included in Mortgagee Letter 2013-23.  As revised by the      FHA’s new announcement, brokers and their agents may continue to represent      both the buyer and the seller in FHA short sale transactions, but the      existing arm’s-length requirements remain in effect.

New requirements that will continue to go into effect October 1, 2013:

  • New or different documentation requirements for verifying      assets, income, and expenses
  • Deficit Income Test (DIT) will be used to determine a      homeowner’s financial hardship
  • Possible elimination of the financial hardship/deficit income      preforeclosure sale requirement for:
  • service members who have received Permanent Change of Station (PCS) Orders, or
  • homeowners who are deemed eligible for a streamlined preforeclosure sale option
  • New validation requirements for appraisals
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Changes to Short Sale Requirements

Effective October 1, 2013 U.S. Department of Housing and Urban Development (HUD) has announced the following changes to their Federal Housing Administration (FHA) Short Sale requirements:

  • New or different documentation requirements for verifying assets, income, and expenses
  • Deficit Income Test (DIT) will be used to determine a homeowner’s financial hardship
  • Possible elimination of the financial hardship/deficit income preforeclosure sale requirement for:
    • service members who have received Permanent Change of Station (PCS) Orders, or
    • homeowners who are deemed eligible for a streamlined preforeclosure sale option
  • New validation requirements for appraisals
  • Different dual agency/brokerage requirement: to meet the new short sale purchase contract addendum requirements, brokers and their agents may represent either the buyer or  the seller, but not both parties


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What You Need to Know About Short Sales

Representing A Short Sale

If you’re going to start taking on short sales, it’s important and beneficial to completely understand the process, the lenders, their motives, procedures, and how to handle your seller to get them all the information you need to help them.

1. Are You Experienced in Short Sales?

If you are about to go through a short sale negotiation, there are some tips that will be helpful to you. Stay up to date with current events and news, as things change and lenders change policies and procedures. Some sellers want or need an attorney to be involved in their sale.

2. Get The Lender’s Short Sale Forms Package Right Away

Use a short sale package that is specific to the lender, some forms may seem irrelevant or unimportant, but they’re the forms you and your seller will have to submit.  There will be a lot of information to be gathered and entered on these forms.  The most important form to get to the lender is an authorization form allowing you to communicate with the lender on your client’s behalf.  Make sure you include every person that the bank and seller will be in communication with. Then  the hardship letter is also important which explains all the details about why the seller cannot continue to pay their mortgage.

3. Which Lenders Are Involved and How Do They Operate?

If you’re working short sales regularly, a  file of lenders you may encounter would be beneficial. It should include all the information you can gather on how they process a short sale, the time line involved, and the percentage that actually make it to closing if you can find that out.

4. Always Be On Top of The Time Line

Always be aware of where your seller is in the process. Make sure that you are aware of all communications from the lender.  Also know all deadlines that are communicated to your seller from the lender.

5. What Type of Loans Are Involved?

What type of loan and/or loans are against the property?  Is it VA, FHA, Conventional, USDA, or something else will make a difference in the lender’s response to offers.  Some loan types give them more flexibility, and some are more limiting on how the lender can negotiate an offer.

6. Work With Your Seller – Know About ALL Loans and Liens

Keep asking your seller for all documents and mortgage information, new documents they receive from their lender and every payment they make.

7. Don’t Submit Outrageous Offers

While you’re out waiting for a buyer to make an offer on your client’s home, it’s not wise to take any offer and submit it to the bank.  Lenders act differently when it comes to negotiations. A ridiculously low offer can often result in a flat rejection, not a counter offer.

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Check List for Taking a Short Sale Listing

Below is a checklist if you were to take on a Short Sale Listing:

•Do not lose out on possible income by being afraid to take the hard cases • Think outside the box and try not to generalize about short sales as a whole • Verify that the seller truly does have a hardship • Let the seller know they have to help you help themselves by providing required documents and signatures in a timely manner • Make sure your buyer is a quality buyer and willing to go the distance • Get as many backup offers as possible • Put your documents in the same order every time. • Choose your title company carefully. That is one of your greatest assets • Account for everything, but remember that your 1st HUD is a wish list • Think ahead for possible setbacks that may arise; expect the unexpected • Follow up every two business days or more if necessary • Form a healthy bond between you and your negotiator—this is someone you want on your side • Remember that the lender has to answer to a higher power—their investor or MI company • • Don’t take things personally, remain calm and patient! Remember two things: • Always work in the best interest of the seller • Always recommend Tax and Legal Counsel be contact by all parties

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HUD Announced New Rules For FHA Loans

FHA Just Announced New Rules for FHA Loans After

Foreclosure, Deed in Lieu, Short Sale & Bankruptcy


The Department of Housing and Urban Development (HUD) recently announced a  rule change for borrowers who have been through foreclosure, short sale, deed in  lieu of foreclosure, or bankruptcy.  In the past, these borrowers had to wait at least three years before they could qualify for an FHA loan, with a few exceptions. The new rule generates a set of extenuating circumstances that  could allow borrowers to get an FHA loan only one year after a bankruptcy or financial hardship resulting in a foreclosure-related event.  This significant change in the policy will  likely lead to an increase in the FHA’s market share

The housing crasy recession put millions of homeowners in a situation where they could no longer afford their mortgage payments. This resulted in  foreclosures, short sales and bankruptcies to rise sharply during the recession years. FHA recognized that many people in this situation were usually very responsible when it came to their finances.  So the Federal Housing and Urban Development (FHA) is allowing borrowers who can show that the negative event was due to income losses beyond their control could be eligible for an FHA loan within one year of the event.

Borrowers who were previously ineligible for an FHA loan due to the existing waiting period of 3 years may now qualify for the program under the following conditions:

  1. The borrower can provide documentation to show that the delinquencies or  default were the result of an ‘Economic Event’ beyond their control. See  definition of Economic Event below.
  2. The borrower has completed an approved counseling program. See requirements  below.
  3. The borrower meets all of HUD’s other guidelines for FHA Loan Eligibility

Homeowners who meet the above requirements would be eligible to apply for an FHA loan 12 months after a bankruptcy, short sale, foreclosure or Died in Lieu.

Counseling for FHA Borrowers

The revised FHA rule also has an educational component. To be approved for an FHA loan after a foreclosure, deed in lieu of foreclosure, short sale or  bankruptcy, borrowers must also take part in housing counseling. This counseling is designed to help borrowers understand their mortgage options, create a housing  budget, avoid common scams and more. The minimum requirements are as follows:

  • Borrowers must receive at least one hour of one-on-one counseling from a  HUD-approved counseling agency
  • Counseling may be conducted online, via Skype, over the phone, in person, or  through other HUD-approved methods
  • The counseling must address the cause of the foreclosure, short sale or  bankruptcy, as well as actions that can be taken to reduce the chance of it  happening again
  • Counseling may be conducted online, via Skype, over the phone, in person, or  through other HUD-approved methods
  • Counseling must be completed at least 30 days, but not more than six months,  before the loan application is submitted


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Internet Marketing Is Now Available For Short Sales

New Marketing Available for Short Sales

Internet marketing is not available for short sales. This is provided by There are more home owners looking to release their properties as a a result of oweing more on their home than it is worth. Because of this increase, a company in Florida, ARME Realty has released a new internet marketing program that specialize in the short sale market niche. They offer many different programs that specialize in this type of real estate transaction. ARME Realty offers many services inluding: email marketing, website design, video production, search engine optimazation and video distribution. These types of transactions usually take much longer to close than the typical real estate transaction and these services will give brokers a creative media stand point.


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