Tag: Orlando short sale news

Orlando Short Sale Guide part-2 of 2

Posted on by Jenny Zamora

Finding the right Orlando Short Sale Realtor for you

Regular listings and short sale listings are 2 completely different beasts, which is why if you need to short sale your home, you should seek out an “Orlando Short Sale Expert”.  This is an agent that specializes in doing only short sales and nothing else. Your short sale realtor should know the Orlando short sale process inside and out. This includes being up-to-date with all of the latest programs and laws that are in place to help homeowners that are going through financial hardship. If you choose the wrong realtor to do your short sale it could end up killing your short sale and put you in worse shape than you started out in.

Doing a short sale can be one of the most important decisions that a homeowner can make in their life and you need to be with an Orlando short sale specialist that understands this and that takes his or her job very seriously. You should also make sure that your short sale agent is a Certified Distressed property expert [CDPE]

If you want some helpful tips on finding the best realtor for you check out my article “9 critical questions you must ask an Orlando Realtor Before Listing your home”

Putting together the Short Sale Package

One of the biggest complaints that I’ve heard from short sale negotiators over the years is that realtors fail to submit complete short sale packages to them. This part of the process is extremely important because it can set the tone for the rest of your negotiations with the loss mitigation rep that is handling your file. Here’s a basic list of what most lenders require in order to submit a short sale package.

1-Hardship Letter-[A letter explaining the reason for your financial hardship]

2-Last 2 years’ tax returns

3-Recent pay stubs or profit and loss  statement

4-Financial statement-[most lenders have their own that they will require you to fill out, these forms can easily be found online]

5-Listing  agreement-[all lenders now require homeowners to have the home listed for 3 months or more]

6-Contract-[this is a contract between seller and potential buyer]

If this package is submitted incomplete or incorrectly, it can make the process a lot slower or stop it all together. A short sale package will not even be considered unless it’s complete to the satisfaction of the lender. Sometimes negotiators will even close the file and make you start from all over again.

I always tell my clients to call the bank themselves so that they know where they are in the process and how things are going. If are currently working with a short sale agent, you should be doing the same thing, call your bank and check on the agent’s work, and don’t just take the realtor’s word for it.

The Brokers Price Opinion [BPO]

After the lender receives the sort sale contract complete with the contract, the bank will then order what’s known as Brokers price opinion or BPO. The person that does the bpo is not an appraiser, but a local realtor. The BPO is crucial in completing a short sale because whatever that number comes in at will be the negotiating point. This will be a back and forth negotiation between the lender and the agent which can sometimes drag on for several months before both parties come to an agreement.

The Terms of the Short Sale

Negotiating what terms the short sale can be completed with is again very important. You need to make absolutely sure that you understand exactly what you are agreeing to. The last thing that you want to have to happen is finding out a year from now that you have a deficiency judgment against you for the balance of the short sale that you did on your home last year. I’ve seen it happen many times over the course of my career as a short sale broker and it’s a shame because usually, all it would’ve taken was for the short sale realtor to go that extra mile and continue negotiating until the lender agrees to not pursue the balance of the loan.

After it’s all said and done there is still another step that is crucial for you to follow up with and that is to make sure that the payoff has been legally recorded. As a matter of fact, you should continue to follow up with the short sale realtor as well as the title company until you have written proof that the payoff was recorded. If your payoff doesn’t get recorded for some reason this could kill your credit score.

The Mortgage Debt Relief Act of 2007

This is the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lender.  However, the tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners are about to come to an end at the end of 2012. The good news is that if you’re considering an Orlando Short Sale,  there is still time to take advantage of this very important law.

According to the law, borrowed money doesn’t need to be reported as income because you have an obligation to repay. But if your lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists. So, if you owe $350,000 and your lender forgives $50,000 of that debt in a $300,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36 percent, you would owe $18,000 in taxes. Ouch!

Although the law doesn’t officially expire until Dec 31, 2012, anyone considering a short sale should get started now. We’ve had short sale files in our office that have taken up to two years to complete. It’s true that banks are moving Florida short sales along much faster now but overall they still move pretty slow.

Cash Incentives to Sellers for agreeing to a Short Sale

Bank of America, JPMorgan Chase, and Wells Fargo have all been offering cash incentives to their delinquent customers in Florida who agree to a short sale. It’s not unusual for a lender to give a cash bonus to foreclosed customers who leave their properties in good condition, which has become known as “Cash For Keys”. What is different about these new programs at the nation’s top three mortgage lenders is that the amounts are significantly higher, sometimes up to $30,000.00.

Short sales, while still not a particularly short process, are much more efficient and overall more beneficial for everyone involved.

In short sales, homeowners are protected from potential deficiency judgments and severe credit hits, while the banks themselves are able to recoup something, instead of nothing, from defaulted loans. They also save money that would otherwise be spent on the eviction process. It is the smarter business move for sure.  Encouraging short sales is also a public relations boom for banks reeling from a recent lack of confidence from consumers. By helping people to avoid foreclosure, they present a more beneficent image. That improves their overall bottom line by bringing in new customers.

It may be smart business to offer a cash incentive for a short sale, but it really does help people, too. Those facing foreclosure frequently don’t know where they are going to live once their home has been taken away. They are often so strapped for money that they cannot afford a typical first-and-last-month’s upfront payment on a rental property. The cash makes a big difference in helping people to land on their feet. Some may even be able to use it as a down payment on a more affordable home.

The government also has a program, the Home Affordable Foreclosure Alternatives (HAFA), that provides cash, up to 3000 dollars, for short sales. To get the government credit, homeowners must meet certain minimum criteria, including that the loan is owned by Freddie Mac or Fannie Mae.

Jenny Zamora, Lic. RE Broker

Orlando short sale expert

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Orlando Short Sale Guide part-1 of 2

Posted on by Jenny Zamora

 

What are Orlando Short Sales sales all about?

Working as an Orlando short sale specialist for over eight years, I get questions from both clients and realtors about short sales all of the time; How does a short sale work? Do I have to be behind on my mortgage to do a short sale? How will it affect my credit? Will my lender come after me for  the balance? Can I get money  back even though I’m in foreclosure? What are the tax repercussions?…just to name a few.

This two part post ” Orlando Short Sale Guide” is for people who have unanswered questions about short sales.  This week  I will talk about every aspect of short sales; what they are, how they work and the do’s and don’ts of whole process. In my next post I will also be talking about probably the single most important part of the whole process and that is finding the right Orlando realtor for you.

I think the best way to  start this off,  like anything else is by giving you a clear definition of what a short sale is.  A short sale is a sale of  real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the property and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.

An Orlando short sale is most often the best method to Stop Orlando foreclosure because it mitigates additional fees and costs to both the creditor and borrower. While credit is also typically damaged much less than from a foreclosure, both often result in a negative credit report against the property owner.

Who qualifies for an Orlando Short Sale?

Even though someone can easily prove that their house is worth less than what it owes, most lenders require the mortgage holder to be  at least 30 days late on their payment to even consider a short sale. In my opinion, this is a huge flaw  in the short sale process and I believe that any property that is worth less than what it owes should qualify as a short sale candidate. Creditors also require the borrower to prove they have an economic or financial hardship preventing them from being able to pay the deficiency.

  The Short Sale Process

Creditors holding liens against real estate can include primary mortgages, junior lien holders—such as second mortgages, home equity lines of credit lenders, home owners association HOA—all of whom will need to approve individual applications for a short sale, should they be asked to take less than what is owed.

Some liens such as student loans, back child support and I.R.S. liens cannot be discounted and have to be paid in full in order to get the deal closed. In our office, these liens are sometimes referred to as “Deal Killers”.
Most large creditors have special loss mitigation departments that evaluate borrowers’ applications for short sale approval. Often creditors use pre-determined criteria for approving the borrowers and the terms of the sale of the properties. Part of this process typically includes the creditor(s) determining the current market value of the Orlando real estate by obtaining an independent evaluation of the property with an appraisal, a Broker’s Price Opinion or [BPO]. One of the most important aspects for the borrower in this process is putting together a complete  short sale package including hardship letter explaining why a short sale is needed on you Orlando property.

Due to the overwhelming number of defaulting borrowers due to mortgage failures and other causes as part of the 2008–2012 global financial crisis, many creditors have become adept at processing such short sales applications; however, it can still take several months or even a year for the process from start to finish, often requiring multiple levels of approval.

 

Jenny Zamora, Lic RE Broker/ Orlando short sale expert.

 

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Who decides the value of an Orlando Short Sale?

Posted on by Jenny Zamora

Are Orlando Short Sale properties being valued correctly?

The valuation of an Orlando short sale, as determined by the short sale lender, is probably the single most important factor of the transaction. The way it works is; we submit an offer  to the bank, then the bank will order a BPO [Brokers price opinion] on the property. This person will usually be a local realtor that will go out and take photos of the property, record any damages that need repairing and after they put everything together they will complete their “BPO report” [their opinion of what the property is worth] to send to the short sale bank or the agency that hired them.

At this point there are three things that can happen that will dictate what follows.

1- The BPO comes in at a fair number that everyone is happy with and we proceed to closing.

2- The BPO comes in too low and the bank insists on another one being  done. I hate when this happens because the 2nd BPO will almost always come in too high.

3- The BPO comes in so ridiculously high that the Orlando realtor has no choice but to insist that the short sale lender either order another BPO or walk away from the deal. [not on my watch]

Getting the Orlando short sale lender to order another BPO

Like an attorney presenting his case in court, it’s all about what you can prove to the lender.

We do this by preparing a report of our own called a CMA [comparative market analysis]. This report contains even more information than the BPO agent provided them with. Although reports can vary, from a two-page list of comparable home sales to a 50-page comprehensive guide, the length and complexity of the report depends on the Orlando realtor preparing it. What a CMA basically comes down to is a list of Active, Pending and Sold listings.
 
 Active Listings- Active listings are homes currently for sale. These listings matter only to the extent that they are your competition for buyers.

Pending Listings-Pending sale homes are formerly active listings that are under contract. They have not yet closed, so they are not yet a comparable sale.

Sold Listings- These are homes that have closed within the past six months and are typically your best source for comparable sales.

In addition to preparing a CMA for the short sale lender we provide them with a contractors estimate for repairs, lots of photos and a detailed letter explaining our case and why our offer is what it is.

 
 
Here at Orlando Realty Consultants we take the Orlando short sale process very seriously because we know what’s at stake for everyone involved, especially the sellers that I am representing. I tell all my Orlando agents to treat these situations as if they were an attorney preparing for the case of a lifetime.

 

Jenny Zamora, RE Broker

 

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Orlando Re-Habbers Cleaning Up

Posted on by Jenny Zamora

Re-Habbing Homes in Orlando has become a very popular business model lately

With Orlando short sales on the rise and inventory becoming scarce, many Orlando re-habbers are cleaning up. The truth is that most people who are looking to buy a house, don’t want to have to deal with any repairs once they move in, or before moving in. Most potential home buyers just want to move their stuff and family in and not have to worry about the kitchen or bathroom that needs remodeling. For property investors who dedicate themselves to remodeling houses, this is great news.

We have several Orlando re-habbers that have been coming to us for years always looking for their next project. Although there are still some risks involved, if you do your research correctly there’s big money to be made.

Here’s a list of things you need to be aware of if you’re planning to re-hab an Orlando property.

* Stay away from houses needing major repairs.  Unless you’re an experienced re-habber, don’t buy a property that needs any major structural repairs such as rewiring the electrical system, major plumbing repairs, foundation damage or severe fire damage.

*Get a home inspection as soon as you sign the contract. Getting a home inspection will cost you around $300 but can ultimately save you thousands by exposing some big ticket repair items that would have gone undetected without the inspection. Once your inspection report is complete, you can use the report to further negotiate with the seller or bank to lower the price even more.

* Never, ever try and turn a non-deal into a deal. What I mean by that is, some new investors are soo eager to start their 1st re-hab project, that their judgment gets clouded and they bend the numbers to make it look like they are making a good investment. [ kinda like when you fall in love with that sports car you’ve always wanted at the dealership, and you make up situations in your mind in order to justify the horrible decision you’re about to make]

* Consult with an Orlando Real Estate Expert to do some research for you. The most important thing to do when you’re planning on re-habbing a house is to make sure that your numbers are correct. There is nothing worse than buying a property at the wrong price, spending a month fixing it up and then finding out that you have to pay $5,000 to get it sold because you didn’t take the time to speak with an experienced Orlando realtor.

Jenny Zamora, Lic RE Broker

If you’re in the market for an Orlando Investment property,  feel free to use our MLS search tool to search of all the great investment properties throughout the entire state of Florida. You can also contact one of our Orlando Realty Experts for a free consultation.

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Growing Demand for Orlando Real Estate is Absorbing Shadow Inventory

Posted on by Jenny Zamora

 

Orlando Realty Sales are slowly overtaking the number of distressed properties coming on to the market

Chief Economist Dr. John Tuccillo says “The fear is that the inventory of delinquent and foreclosed loans will be released onto an already weakened market,” , explaining the findings of a new report conducted by the Florida Industry Data and Analysis department. “But the reality appears to be different, even here in Florida where distressed properties make up a significant portion of the market.”

Lenders have no reason to flood Florida’s real estate market with more homes especially if it ultimately affects their profit. Think about it, if the Orlando real estate market gets flooded with homes all at once then this would drive prices down significantly. Many people thought that lenders were holding inventory back on purpose when the true cause of this hold up was because of all the robo-signing issues they had to figure out.

Tuccillo says, “We looked at the recent history of distressed property listings and transactions relative to normal market data, as well as estimates for the shadow inventory, and came to some conclusions about the likely course for the future.”

 

These are the findings of recent studies done using data from the Florida MLS

* Even though Orlando Florida remains one of the Country’s hardest-hit areas for distressed property sales, foreclosure sales keep dropping while Orlando short sales continue to steadily rise.

* Prices for all residential properties including both distressed and normal property sales have been steadily increasing.
Orlando Realtors have learned how to cope with distressed properties in a way that stabilizes the market. It’s no longer an issue whether the  property is in distress or not.

* Currently, the number of distressed property sales [Orlando short sales and REOs] is more than keeping up with the amount of distressed  properties [90 days or more behind] coming on to the market.
 
 * The number of Orlando foreclosures and REOs were significantly lower in February of 2012 than one year earlier, suggesting slower shadow inventory growth.
 Distressed properties in Orlando will be a common trend for many years to come.  It will be so common that “distressed property” will be considered just another property type to a potential buyer.
 
Orlando Real Estate Broker

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