From Kare 11 Extra, what a short sale is:

Since I never rarely watch the news, I get it all online in real time… hat tip to MPLSRealtors

If you’re buying…

Bad news for short sale sellers in the Twin Cities, sales lag bank owned homes by three times. Buyers no longer have half a year to wait for the bank to figure out what the hell they want do with the asset. That tax credit ending has also many buyers not wanting to be left out of the frenzy.

Just go with the property that is already bank owned and has a turn around time of 24-48 hours in “most” cases.

From the Minneapolis Association of Realtors:

Twin Cities Foreclosure & Short Sale Report 2009 Q3

Is the free ride over for sellers not having to come up with the cash to close? What has become so popular over the past few years has been the short sale, nothing new here… a term that has been tossed around all to much.

Short sales provide a way for the seller to sell short on what is owed on the mortgage, the only hit they take is to their credit. Ideally, the sellers would get a letter signed by the lender/investor/servicer stating that they weren’t liable for repayment of what is short.

Seems like things are changing as bank losses mount and the cost of going to REO for the lender tops $50k a home on average.

I have recently seen an uptick in lenders requiring sellers to come up with some sort of cash in order to close, whether they beg, borrow or steal. This is an exerpt in an email from a bank short sale negotiator:

Given the reason for default from Mr. Seller, mortgage insurance company and investor require that he participate in their $61.7k loss. I am proposing that he bring $10k to closing or $20k no interest no pre-payment penalty note payable of 10 years.

Ouch! The short sale negotiators sometimes won’t even submit the file to investors until a contribution amount is determined.

If your a buyer make sure your agent asks these questions or better yet… use a buyer’s agent who looks out for your interests.

I don’t why I didn’t think of this earlier. It is such a great way to share view and share documents.

The Minneapolis Association of Realtors always puts out a foreclosure and short sale report for the Twin Cities housing market every quarter and does a great job at interpreting data. Along with what is actually happening in the real estate market.

I have used the data before on numerous occasions but not like this.

fss

Sure we have had a few hot months of home sales in the Twin Cities, but let’s not kid ourselves this thing is not over after First American CoreLogic released some wicked stats a few days ago.

Further proof that the foreclosures are not letting up

From the Twin Cities Biz Journal

The number of foreclosure filings in the Twin Cities has more than tripled during the past 12 months to an average of 106.7 per day, compared to 30.8 per day for the same period last year.

Want to track what is happening in the Twin Cities with foreclosures and short sales? The Minneapolis Association of Realtors puts out a great quarterly report here that tracks the market.

Due to the current state of the real estate market in the Twin Cities, economic conditions… short sales are probably here to stay for awhile. There are some challenges to short sales that can be overlooked.

I’m touching on this topic because I have been showing quite a few short sales lately especially in the southwest metro and these questions have been on top of mind.

These little transactions can be fairly pesky if you don’t have somebody that actually knows what they are doing. Although ‘most’ real estate agents will claim these days they are experts because they took a class or claim to complete X% of short sales they list. Don’t be fooled by trickery.

By asking some questions up front, you have a better idea of what you are getting yourself into and therefore your short sale transaction is less likely of being derailed. Although it might happen later on down the road

• Is the listing agent experienced with short sales? Provide proof
• Who will be handling the short sale negotiation?
• Has the short sale package been submitted and noted receipt from the bank?
• Do you have a point of contact at the bank? Is there a loss mitigator assigned to the file?
• How many banks/creditors/etc involved?
• Who are the name(s) of the lender? Is it FHA or VA?
• Does the loan have private mortgage insurance (PMI)?
• How many liens are currently on the property?
• Has the borrower/homeowner quit making payments on the mortgage(s)?

These are questions that should be asked before you submit your offer on a short sale in Minnesota. The reason, simple… you the buyer need to make an educated decision when it comes to writing a purchase agreement on the property. You don’t want to get stuck in a transaction that you might not have the time for.

Issues affecting short sales being completed

Many agents as well as lenders have absolutely no idea what they are doing when it comes to getting a short sale accomplished. I seem to think that when banks want to fire somebody, they place them in the loss mitigation department that handles short sales. Banks lack staff and suffiecent training. A lot of short sales are lucky if they even close. By the time the lender digs through the stack of files on the desk getting ready to sign off, the redemption period is over the bank then has control of the property.

There really isn’t any uniform way of handling short sales. Each lender handles it differently and there really isn’t a streamlined process in place.

Sometimes a second lien holder will hold up the approval of the short sale in order to get more money before releasing the lien. It doesn’t make much sense because they can hold up the the sale and then the house goes into foreclosure, which results in nothing.

Having a buyer’s agent that knows what questions to ask can really save you in the long run. Hopefully this helps out and provides some cost or time saving advice.

Good story on Kare11 about the divide between homeowners and lenders when it comes to banks giving the run around to homeowners in need. If they received all that money bailout money, they sure are slow to act.

Here is the story

The anatomy of a Twin Cities real estate deal touches on variety of topics which will depend on if success happens or not. Investing in real estate is not for the faint of heart and leave people pondering what mind have been. Hindsight can lead to a lucrative future.

Basic Types of Twin Cities Real Estate Investors

Flipping houses or ‘turn & burn’ as some have called it obviously picked up a lot of steam with all those television shows the past few years. This process includes buying a distressed home (which is more than likely a bank owned home) that can be brought up to current standards and sold for a profit. Can you still fix and sell for a profit in the Twin Cities metro area? I will be straight honest on this one and leave it open ended to yes and no. Will leave it at that because certain areas are good and others, well not so.

Finding properties can be a struggle when so many real estate investors looking for that needle in the haystack property that will make them rich beyond their wildest dreams. It’s important to have all your ducks in a row so when that property pops up that you can make your offer quick and get it accepted.

Buy & Hold is when you purchase a property in the sole purpose of purchasing a home and renting it out to capture equity. Every investor knows that true wealth comes from your ability to have many properties which opens up the doors to creating revenue streams from income producing properties.

Know the Trends

Doom and gloom is all you hear all over the media, will the end ever appear, not by the way the national media makes it appear. I find it hard for them to know what is exactly going on in this specific neighborhood in one specific area. Isolated pockets of increases and demand are out there. Some areas are outperforming what is truly being stated in the media.

Keep your finger on the pulse of the local Twin Cities real estate community to find the best deals. This allows the real estate investor to know the true value of the property so overpaying is never a factor. Never take a shot in the dark when it comes to property values.

Knowing trends can help assure that an investor gets in on the ground floor of an emerging or re-emerging area. Don’t be late to the party because you have already missed the curve and you might walk into a soon to be deflated area, thus making your real estate investment rendered useless.

True Scenario

Enough talk, show me how? Recently I helped a client get into a great opportunity in St. Louis Park which was purchased using a FHA 203k Streamline loan. The area is hot because of the close proximity to downtown Minneapolis and Uptown, without the high prices of living. The house was in prime condition for a fix and sell because of the price point and area. The house was a REO Bank Owned home in badly need of repairs, but with a little creative thought was surely to be profitable. Total days on market was a whopping six.

The guts of the deal:

• Sold @ $169,000
• Down Payment of 3%
• 203K allocates $17,000 for immediate fixes
• Total investment = $5070 at closing
• A total of $23,000 invested for remodel
• Sold for $279,000
• Carrying Costs $5900
• Seller Costs to sell $16,740
• Profit of $47,360

Umm, I don’t know about you but that is still a nice takeaway. I thought this wasn’t suppose to happen the way the real estate market is right now. Money is made in a down market, this is wear the strong survive and create true wealth for themselves. The deal was successful because of the steps that were followed and making an educated decision.

The best thing about it was this was their first home ever bought. So there you have it, one of many successes that are occurring in a down market.

Fantastic Opportunities

For those that know the variables of making a good real estate decision, has always been a way to create that nest egg or expanding your financial opportunities.

In a note to say that not all real estate deals end up this way and each deal is structured different, but if you think you have what it takes then I invite you to find out how.

There has been a lot going on lately especially with the current outlook of mortgage rates falling. Another big thing that has been gaining steam has been mortgage loan modifications. I read a great article on why it is so difficult to modify a loan and it is probably the best one seen yet.

Most people are unaware of who has control of their mortgage. The fact is, there might be hundreds and it is hard for people to find the point of contact to renegotiate the loan. Mortgages are bought and sold in the secondary market, bundled up into packages and sold in the bond market to investors, the lender may not own a specific mortgage. So it is not just banks that have to take a loss, it is investors and many are unwilling to do so because of ladder that has to be climbed to get approval from each one.

Recent articles have said that up to 50% of loan modifications performed this year are re-defaulting. It seems that good money is being thrown after bad.

What is A Loan Modification

When different terms are negotiated with the lender or loan servicer on the mortgage to change the original terms of the contract.

Factors that influence a loan modification all depends on the loan servicer who is handling the modification. If you don’t contact the lender, they will never work with you. There is a huge chunk of borrowers who never contact the lender, it never ceases to amaze me. Can’t get anything done if contact hasn’t been made.

A loan modification can change one of a few things

• Reduction in the Interest Rate (Temporary or Long Term)
• Forgiveness on Principal
• Wrap payments on the backend of the loan.

You will need a hardship letter that spills everything, this is your chance so let the lender hear it. You will have to have missed up to three payments and not on purpose either, along with showing that you can make payments if you are lucky enough to get a modification at this point. Proof on income earned along with monthly budget reports will have to be submitted. Being responsive is one of the most important things that can be done when working on modifying the terms of the mortgage.

So who to contact

Be careful in the company you choose to work with first off if you need to do a loan modification. Never pay an upfront fee for work to be performed. Although these are trying times for many individuals or families, there are always people out there that are trying to make a buck off people’s situations.

The Minnesota Department of Commerce just had a press release warning consumers about using unlicensed mortgage originators or companies. Actually they advise you to contact the loan servicer first or contact the Minnesota Homeownership Center. Which is a non-profit organization that is free of charge that offers a network of providers in Minnesota.

Not Enough

Unfortunately not enough is being done and there is little legislation in affect. Lenders have to protect their investors profits and maybe, just maybe one of these bailouts that graces the television almost every day will focus on loan modifications that actually work.

Short sales are still here and it doesn’t look like they will be going anywhere anytime soon. I have been writing a few posts to help people better understand the nature of them. Part one of the work flow is here and this one touches a little bit on what elements come into play to make sure that a Minnesota short sale is successful.

Most Minnesota short sales are not successful these days and if you are going to do one, make sure it is done right. The best thing to do is make sure there is a pre-negotiated price that the lender will accept before the property is listed.

If a Minnesota short sale is going to be successful, certain elements need to come into play

• A hardship occurs and the homeowner has no way of being able to keep the property
• The obvious one is that the property is worth less than what is owed on the mortgage
• The lender then needs to contacted and be willing to do a short sale
• All materials (hardship package) are presented to lender to justify short sale
• Property is listed with real estate broker/agent and marketed
• Offer is made on a property and accepted by seller. Then approved by lender with a short sale package

No Proceeds

Because the house was a short sale, no proceeds will be given to the home seller. Make sure to check with necessary people for legal or tax implications.