Short Sales and Foreclosures, at Christmas?

There is a description by Scrooge in the Muppet Christmas Carol (my favorite Christmas movie :-) that says Christmas is "Harvest time for the money lenders". In truth, most lenders do not want to foreclose in the winter at all, let alone Christmas, and especially not this year (they own enough homes they don't want already!). It's just not good business. Nevertheless, there are those who are hopelessly behind in their payments at this point, and the lenders can't exactly let them live rent free forever either.
This morning we heard a talk by Shawn Morgan, a short sale negotiator with Wells Fargo, who gave us a some interesting tid bits to mull over. First, just as a reminder, a short sale is when the bank agrees to take less than they are owed, usually to avoid having to foreclose on the property. Very often this is without seeking the difference from the borrower, making it an attractive alternative to borrowers who might otherwise let their property be foreclosed upon, and eventually be pursued for a deficiency judgement. Pursuing a short sale is by far the best alternative for many (though not all) homeowners who are underwater and HAVE to move.
Despite their best efforts, the process at Wells Fargo is still pretty much 6-8 weeks (slipping to 10 at times) to get an answer, no matter how good everyone is doing their job. For buyers, this means patience. If you need a house in 30 days, don't even bother. On the other hand, these deals are often going at 85% of the current appraised value, which may very well be off another 20% from the peak of the market here in Colorado Springs.
Other bits and pieces included:
1. Corporations can't do short sales
2. Trusts and LLC's can only do them if the note was originally done in their name (not very often the case), so likely title will have to transfer back to the individual prior to receiving any attention from the short sale negotiator
3. Hounding and threatening that 'the buyer will walk' if they don't answer fast, doesn't get anywhere with these guys, they've got a big enough stack on their desk already to put up with the brain damage.
4. Having realistic expectations for dates and dollars, and a very thorough and complete short sale package usually gets the job done.
The Colorado Springs foreclosure rate is still running at record levels (El Paso County Foreclosure Data), but healthier buyer traffic is holding down the percentage of sales that are distressed (unofficially 22.2% last month), so maybe this problem will be less of an issue over time. We are told that nationally, there is another wave of option ARM loans resetting over the next 18 months. It remains to see how many of those we really have locally, since our market tends to be more heavily influenced by FHA and VA loans that are 30 year fixed rate loans.
It has been a wintry day today, but the sun is back out, and the snow has stopped, even though it is cold and windy. Looking forward to the 40's again by this weekend, enough of this single digit stuff. What global warming?!!!
Got questions about living in Colorado Springs? Call me at 719-590-4768 or 888-568-6784! www.facebook.com/rickvanwieren for more photos, www.twitter.com/rvanwieren for more frequent updates!

Days Like These are What Makes Colorado Springs So Popular

Since our wet Memorial Day weekend, we have had close to perfect weather here in the Springs. Glorious sunny warm days (around 80 again today), cool nights, a thunderstorm here and there in the afternoon, wildflowers blooming, even the snow is still on Pikes Peak!
I've been a little busy to write this week, as we've been getting my wife packed out of her classroom, showing properties, inspections, what have you. Not to mention I'm still moving kind of slow after being sick. While it is still not as busy as in some past years, the pace has quickened a little, especially in light of interest rates starting to go back up. In addition, short sales are making a lot of unproductive work out of this business. I previously wrote about one that finally gave up after 3 months and found another house. Many short sale buyers just give up after the lenders (who we taxpayers just gave hundreds of billions of dollars to) sit on their offers for months. For anyone who wants a house in the normal 30-60 day time frame, short sales are just not an option, and a big waste of time. Foreclosures will continue to be a problem until the banks get their acts together on this issue. In the mean time, it severely constrains the homes you can show for some buyers, and makes them feel cheated when a house comes up that looks great, only to find out they are a short sale. While only 9% of the 5079 homes in our MLS are indicated to be in any kind of distress, the actual percentage in many segments is significantly higher, and overall these are under reported, largely due to agents not wanting to restrict showings on their listings.
Interest rates jumped late this week, all the way to 5.25% That doesn't sound like much, but when you consider it was 4.75%, that is a big jump. While we all hope it will go back down, all this government borrowing isn't helping mortgage rates, and oil prices jumping again isn't going to help consumer confidence much either.
I'm off to show some more homes today. Being such a nice day, I'd guess we might even sell one!
Got questions about living in Colorado Springs? Call me at 719-590-4768 or 888-568-6784!

Certified Distressed Property Expert Course Was Well Worth It!

We always have opportunities to get smarter in our business, and sometimes I am so busy working IN my business, I don't have enough time to work ON it. This week however, I finished the the CDPE Course (Certified Distressed Propery Expert), and I have to say it was one of the best classes I have taken in a while. Alex Charfen is an excellent instructor, and his knowledgeable presentation on the ins and outs of short sales and foreclosures will be very useful in helping my clients and their friends and families.
One of the many important points that was brought out, was how important it is to NOT let your house go into foreclosure if at all possible. Realistically, for this to be an issue, homeowners are often behind on their payments to begin with. But there really can be time to come up with a better solution, and while it doesn't necessarily mean they can keep their current house, it does mean that they may be able to replace it again at some point, not always an option when foreclosure happens. Also, sometimes the homeowner can see hardships coming, and the consequences of foreclosure are far more devastating than people think. Doing something about it before it is too late can make a huge difference in how the future will look. Sometimes there really are MUCH better options, and it was good to hear more details about how it can work.
Got questions about living in Colorado Springs? Call me at 719-590-4768 or 888-568-6784!

Short Sales - Not All They're Cracked Up to Be

This past weekend I showed a LOT of short sale properties. In the lower price ranges for Colorado Springs, the percentage of properties that are in some level of distress is much higher than in more expensive price ranges, (under $150k it is 1/3 of the homes in our MLS). The problems with short sales are multiple.
1. You don't know if you get the house for quite a while, even if the seller likes your offer. You can wait for weeks to find out that even though the seller likes it, their bank doesn't, and you are back to square 1
2. Many sellers in short sale situations have no real intention of trying to make things work, and so they make it intentionally difficult to show their homes (must be present, short showing window, 24 hour notice, no showings during the week, etc)
3. Some of the agents listing short sale properties are playing games with pricing, using listing prices that they know will not work in hopes of generating calls and showings and multiple offers, with no expectation that the house will sell at the price in the listing. This is pretty hard on first time home buyers or someone who is buying the house to live in, because it really means the house is not in their price range. This happened to my own buyers twice this weekend (separate buyers), where a house was such a good deal they wanted to write, only to find out the property had been bid up 10-20% higher than the list price anyway. The irony is that the sellers lender may still not approve the transaction at the higher amount. In both cases the properties were listed at less than 2/3 what the seller owed to the bank.
4. The house is almost always "as is". For VA and FHA financing, even something as small as peeling paint can blow up a deal, and with short sales, the deferred maintenance can go WAY beyond peeling paint
If you are buying for investment only, have some cash on the side to do repairs, have patience and time to deal with the vagaries of short sales, they can be a great opportunity. If not, they can be the source of a lot of headaches.
The sun is out again today, and the temps should be back into the 40's, about average for this time of year.

Short sales and foreclosures were a major topic at this morning's sales meeting. The context? Discourage your sellers from pursuing these routes. The long and "short" (pun intended) of it, is that there are longer term repercussions in terms of damaged credit, inability to own again for a long time, tax liabilities, deficiency judgments, insurance rates, and even job possibilities being affected by these things. If at all possible, don't do it was the message we heard.

What is the best solution when you owe more than your home is worth, and you HAVE to sell? Find a source of credit to fund the shortage that can be paid off over time after the closing. Especially if the shortage is not huge, usually the result will be a happier future.

The weather has been pleasantly cool and even wet the last few days, with the highs around 80. A big warm up is on the way though (94 on Saturday!), I may have to look for another opportunity to go up to Breckenridge, or somewhere else where it will be cooler! Today's photo is from 2 weeks ago, downtown Breckenridge

What you can expect when buying distressed properties in Colorado Springs (ie short sales, pre-foreclosures, foreclosures, bank owned, etc) is both more and less than you bargained for. Less money, there are some great deals out there. Less amenities (the sprinklers may not work, the A/C compressor may be gone, along with the stove!). More headaches, angst, problems, etc. And possibly more sweat equity and return on investment. I worked some folks this week in the "under $150" category, and thought I would share a few things.
1. In this price, we did not used to see much at all, and I was pleasantly surprised by both the quantity, and in some cases even the quality of what we saw. There were definitely some "dogs" out there however, with foundation problems, water issues, etc. Houses are not always large in this segment, and almost all of them needed something to be done after closing, generally in the $10k plus category.
2. The water is off in virtually all of bank owned (and other vacant) homes right now, meaning there will be some additional expense for de-winterizing the property, and some nervousness when the water first comes back on for possible leaks. A broken pipe inside the walls can really be a mess to clean up, but if you don't get that sort of thing looked at, the problems can be even bigger.
3. We did not see a lot of badly gutted homes this time, but I have seen them where even the light fixtures are gone, along with appliances, cabinets, etc. On the property they selected, the stove, some cabinets, and most of the carpet was gone.
4. The response time from the bank that owned the house they wrote on was surprisingly quick. Many will tell you right up front that they need several days, and with short sales, it can be weeks. Bank owned properties are usually 2 or 3 round negotiations, and sometimes more.
5. The match between the house and the buyer should be right, and it was gratifying to see that this particular buyer was very knowledgeable on the particular things this house needed, making it a good fit.
6. Out of state banks don't really pay much attention to our contracts, and have all kinds of forms, addendums etc that are not really "buyer friendly", shortening inspection and other contingency deadlines, etc. That does not make them bad, but it is something to be prepared for.
7. Have your lending situation nailed down tight before you start. These kinds of properties don't give much time to "fool around" with getting your loan situated.
8. They like quick closes, so expect to close in 30 days or less, or else wait before you shop.
9. Don't expect to use a government loan (ie VA or FHA) for your financing. Many of these properties are neglected to the point where they will not pass muster for a VA or FHA inspection. Keep some cash on hand for doing the repairs, that is not so easily financed.
10. Don't expect the owner to fix anything. These are pretty much all "as is" deals, and sometimes that will not only mean you have to do the fixes yourself, but in some cases, you mght want to stay in a motel until the fixes are done!