"Short sale" is a term we are hearing a lot recently.
A short sale occurs under any or all of the following conditions:
1. A declining market - the seller paid more for the house than the house is currently worth.
2. The outstanding loan balance is higher than the property is worth. This can happen, even if a buyer did not pay too much, but has taken out equity loans since purchasing the property.
3. The buyer is unable to make loan payments and must sell quickly (perhaps under market value) in order to avoid foreclosure.
Short sales sound like a great deal for a buyer, but in many cases, may not be the bargain you think you are getting. Here are some reasons to think hard about a short sale purchase:
1. These transactions are entirely dependent on the lender agreeing to your purchase and allowing the sale to close. This can be a very time intensive process.
2. The existing lender will almost always require that financing for the purchase be done through them. This lender will often NOT offer the best rates and terms for this transaction. In almost no case will the lender:
a. pay for any inspections or repairs. You are buying the property "AS IS."
b. pay for any closing costs, or assist in any way with down payments.
c. The property may NOT have been pre-approved with the lender for a "short sale," so this process has to be initiated at the time of your offer. This is a very time intensive process, and terms, purchase price, etc could all change at this point.
d. Lenders can change terms at any point in the process. For example, if a home in the neighborhood sells for a better price than expected, your purchase price can suddenly be increased as well. Also, if new lending guidelines occur during the process, the lender will probably adjust the terms of your loan to comply with those new guidelines.
e. Lenders often do not pay the typical "seller share of closing costs," which means your closing costs will be higher.
f. Sellers are sometimes not very motivated to get this transaction closed, or move out of the property - which could also be a problem for you as the buyer.
g. Short sales affect the values of properties in the neighborhood - so you are, in effect, decreasing the value of all the houses in the neighborhood in your transaction.
Be aware that lenders are very aware of property values in any given neighborhood. Sometimes, in the middle of a transaction, the lender could cancel the short sale altogether and decide that filing a foreclosure against the borrower would be more profitable for the lender than closing your transaction.
As a home owner, if you are contemplating working out an arrangement with your lender to get out from under a property you cannot sell, and cannot afford to make payments on, all of the above pitfalls could apply to you as the seller.
In addition:
1. the lender can still report this transaction as a "deed in lieu of foreclosure" which will hurt your credit almost as much as an actual foreclosure. Even if the lender agrees to not report, they are not bound by this agreement.
2. the lender can still hold you responsible for any outstanding balance after the short sale transaction closes (because you signed a NOTE for the amount of debt.)
3. The lender may not allow the real estate commission you agreed to with your realtor, making you responsible for the difference.
Are short sales ever good buys?
The answer is yes - in some cases, you as a buyer can pick up a good deal. This could be the case when there has been a death or disability of the seller, and the seller or their family just wants to unload a house as quickly as possible. Again, all of the above pitfalls could apply, but these good buys do happen on occasion.
Be careful out there.
Under the temporary Economic Stimulus package, new loan limits have been established for government secured loans (FHA/VA) which will be honored through December 31, 2008.
While these loan limits have been in effect for approximately 30 days, lenders are just now offering loans at these new limits.
In the Portland Metro area, that new limit is $417,000. This is great news for buyers and sellers alike, as it allows buyers more financing options up to a higher selling limit.
We are hopeful this will stimulate sales in this area.
Did you know that FHA allows co-signers on loans. The co-signer must be a relative, (some exceptions can apply, but are very difficult to get). The loan can actually be done based on the credit score and income/assets of the co-signer alone - which makes this a great option for housing for students or even credit challenged borrowers. All occupants of the property can be named on the loan and deed of trust, which will generate credit histories for the occupants.
In addition, FHA financing has become the last way that buyers can still obtain 100% financing on a home purchase. There are still a few lenders willing to allow "gift programs" from Non-profit agencies, to help buyers come up with the 3% down payment required. However, per an article from the NY Times recently, this is the first time in the 74 year history of the FHA, that this federal agency is facing financial losses. It has been determined these loans, borrowers with NO equity, have a much higher history of delinquency and foreclosure. There are currently debates going on in Congress about whether or not to continue allowing these programs.
Stay tuned.
The National Mortgage Bankers Association's index of applications to buy a home or refinance a loan rose 5.4%. The purchase index gained 8.1% and refinancing increased 3.4%.
Lower prices have made homes more affordable, while rates on fixed mortgages retreated over the last month after the Federal Reserve cut the benchmark and pumped money into credit markets. Still, stricter lending rules and rising foreclosures indicate housing will remain a drag on the economy this year.
``The housing market seems to have thawed a bit, helped by a more aggressive Fed and lower home prices,'' Michael Larson, an economist at Weiss Research in Jupiter, Florida, said before the report. ``There appears to be some bottom-fishing going on.''
While financing for housing is becoming more difficult, commercial financing is becoming more creative.
We all know that keeping businesses afloat in difficult economic cycles is of prime importance to our economy. With that in mind, commercial lenders are stepping up to create many new financing opportunities.
Whether you own your own business, or are just thinking of opening a business…..
Whether you own the property, or are just leasing the building……..
Do you need a business line of credit? Or cash out of your building? (We can get that for you, if you own the dwelling).
Do you need to purchase new equipment? We don’t care if you own, or are leasing the building; we can find the financing to get that new equipment into your plant or office quickly, and at very competitive rates.
Unlike mortgage lending, commercial lending is NOT credit score driven.
Rates on equipment are more dependent on the following types of criteria:
Call or email us today, to find out if we can “beat the competition” and get you the best loan for your needs.
Shelby
503-819-6545 (direct)
shelby.tnc@comcast.net
There are many ways to finance business equipment.
Yes, I do routine commercial loans, with your property held as collateral for any of your business' financial needs. Now, I also can handle your equipment financing, even if you lease your business space. Are you thinking hard money? Think again. I can get you very good rates on your business equipment, whether you're a doctor looking for new medical equipment, a manufacturer requiring new equipment, or even a restaurant owner.
Do you need to expand your business space and own the building? I have lenders that can help you there too.
Whatever your business needs, please call me first. I just might be able to help - in any of the 50 states.
Please call at 503-819-6545 (mobile)
503-653-5012 (office direct)
or email me at
I'm looking forward to working with you.
P
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