An UPDATED Guide to Buying Foreclosures and Short Sales - Shadow Inventory Discussion
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Where homeownership education takes flight! A Updated Guide to Buying Foreclosures and Short Sales Thank you for attending We will begin in a moment Class Scheduled to begin at 6:00pm Presented by Scott Schang Branch Manager Broadview Mortgage Corporation 1-866-667-6724
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Updated insight into buying foreclosures and short sales. Understand what a short sale is and why it's such an unpredictable way to buy. Foreclosures typically require the buyer to compromise or give up many of the rights provided in the purchase contract - learn what to watch out for and how to protect yourself so you don't lose your deposit money. We also discuss the "shadow inventory" that some talk about. Is there a flood of foreclosures yet to hit the market.
Transcript of An UPDATED Guide to Buying Foreclosures and Short Sales - Shadow Inventory Discussion
Where homeownership education takes flight!
A Updated Guide to Buying Foreclosures and Short Sales
Thank you for attending
We will begin in a momentClass Scheduled to begin at 6:00pm
Presented by
Scott SchangBranch Manager
Broadview Mortgage Corporation
1-866-667-6724
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
The Purpose and Goals of this Class
• Purpose: To Create and Empower Home Owners
• Goal: Update you on changes and new things we’ve learned about buying Short Sales
• Goal: Update you on changes and new things we’ve learned about buying Foreclosures
• Goal: Leave you more informed about the landscape of today’s real estate market
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Topics We Will Cover In This Class
• An Updated Guide to Buying Short Sales
• An Updated Guide to Buying Foreclosures
• Managing Expectations
• Challenges in Today’s Market
• Making Competitive Offers
• What is Shadow Inventory – What it means to you
• Wrap up and Take Aways
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Questions and Answers
• You may type questions in at any time during the presentation – Questions Box on your screen
• Home Buying experts are available to answer questions throughout presentation
• This is an interactive learning environment. You will get the most value by having your specific questions answered
• The only dumb question is the one you don’t ask
Write number down now in case you get disconnected
1-866-667-6724
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
The Basics about Short Sales
• Current home owner is the Seller
• Seller is usually behind on payments or experiencing a financial hardship
• Seller owes more than home is worth
• Seller attempts to sell home to avoid foreclosure
• Foreclosure process can be suspended or postponed if an offer has been submitted
• Seller is not always motivated to sell
• Motivation may be to stay in home as long as possible
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
What to be aware of with Short Sales
• Short selling lenders are “accepting” offers with an agreement that allows later litigation– Lenders are using boiler plate acceptance letters– Letters leave the door open for them or others to
pursue later action to collect on forgiven amount– Mortgage Debt Relief Act of 2007 only offer post
foreclosure rights – not pre-foreclosure– Attorneys are speaking out and advising home
owners of their rights
• Sellers are choosing to allow foreclosure to avoid later problems with lenders
• Sellers are accepting loan modifications
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Identifying Short Sale Opportunities
• Home is vacant or boxes are packed– Seller is not attempting to stay in the home
• Selling agent is experienced with short sales– Some agents that have very effective processes
for getting short sales processed and accepted– Your agent can determine experience of selling
agent
• Approved short sales are in high demand– Expect multiple offer situations on approved short
sales
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Update on Foreclosures – What we know now
• AKA – Bank Owned, REO – Real Estate Owned
– Foreclosure inventory is greatly reduced
– Recent polls show that lenders are purposely withholding foreclosure inventory
– Listing price low to instigate bidding wars• Taking a page from short sale play book
– Much more competition than ever before for homes under $400,000
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Update on Foreclosures – What we know now
• Buyer’s Rights – Or rather, the lack of…..
– Banks are exempt from disclosing condition• Seller agent should visually inspect homes but
many times do not – too many, no incentive
– REO addendum attempts to undermine all buyer protections in CAR Purchase Contract• Standard purchase contract is 8 pages and
was designed to protect you the buyer• REO addendum is typically 12 to 16 pages and
designed to protect the lender• Pay close attention to contingencies
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Update on Foreclosures – What we know now
• Buyer’s Rights – Or rather, the lack of…..
• Multiple Offer Disclosure Removing Contingencies– Actual disclosure from an asset management
company
• “HIGHEST AND BEST OFFER SHOULD BE BASED ON OFFER WITH NO LOAN AND NO APPRAISAL CONTINGENCIES. WHAT YOU OFFER WILL BE WHAT YOU PAY.”
• “If you fail to execute and return this document, we will not consider your offer.”
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Update on Foreclosures – What we know now
• Do your own research and due diligence
– Bank owned homes are sold “As-is”
– Home inspector should run under $400• Roof, mold inspections maybe
– Damage to property will prevent financing• Red flag – length of time on market• Red flag – listing price is unusually low
– May not disclose HOA fees• Meet the neighbors
– Check with city for special tax assessments
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Expectations for closing
• Foreclosures and Short Sales require final “sign off”– Fannie Mae, Banks, Asset mgrs & Lenders are
bureaucracies – Expect RED TAPE and delays
– DO NOT move out of your place until you have your keys in hand!• Many landlords are ok with being flexible. Give
notice and pay rent on time until you have your keys
– DO NOT hire moving companies or deliveries to new home until after you have your keys.
• Anything that can go wrong…shouldn’t – But it might
Don’t take any chances!
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Challenges with Appraisals and Value
• New appraisal rules for Conventional loans causing challenges for sellers and buyers– Mortgage Brokers and Loan Officers not allowed
to order appraisal – only lender providing financing
– Appraisal panels are being used – most lenders not equipped to implement compliant appraisal process
– Sellers are questioning value and putting homes back on the market
– In all fairness, home values are on the rise – older comparable sales may not reflect accurate values
– FHA to adopt similar rules on January 1st, 2010
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Gaining an edge on Value
• Successful purchase offer strategy addresses Value– Many offers are being made above “Value” to gain
competitive advantage– Acknowledge to seller that value may be a
challenge– Offer to pay above and beyond appraised value
• Your lender will not lend more than the home is “worth” – aka appraised value– Lender will allow you pay the difference out of
pocket– Allowed with CalSTRS 80/17– Allowed with all loan programs
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
What is Shadow Inventory?• Expiration of the foreclosure moratorium did not flood
the market with new inventory• Foreclosures are actually down in August compared
to July• Banks are not foreclosing on delinquent
homeowners without explanation• Pre-foreclosures and delinquencies are at record
highs – Bloomberg, WSJ predicting 7 Million foreclosures projected over next couple of years nationwide
• Pre-foreclosures will result in loan modifications, payment recovery or foreclosure– Loan modifications are a ticking time bomb
• History of foreclosure default filings chart
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Is this the Shadow Inventory?
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Inventory questions yet to be answered
• Why are banks not foreclosing?
• What will happen with loan modifications?
• Will the Government try to manipulate the housing market again or allow it to take it’s course?
• Will “Shadow Inventory” pour onto market as through a fire hose or a drip from a garden hose?– A flood of inventory will bring home prices down– A trickle of inventory will make prices and competition rise
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Wrap Up and Take Aways• Is this a Seller’s Market?
– Supply and demand - there are many more buyers in today’s market than there are sellers
– This drives up prices through multiple offer scenarios making larger down payments and “no concessions” more attractive – sellers choice
• Is this a Buyer’s Market?– Any home you buy today is as much as half what
it was selling for 3 years ago– Homes may be overly deflated due to loan
qualifying restrictions and less options for buyers
• The timing is right if it’s the right time for you• By the time you hear about it – it’s too late!
Where homeownership education takes flight!
Buying Foreclosures and Short Sales
Wrap Up and Take Aways
• We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA, FHA, VA, USDA and Community based down payment assistance programs
• We want the opportunity to be your lender if you have not already chosen one
• We are more than happy to be your “second opinion” if you are already working with someone
• We can recommend a qualified Real Estate Agent in your area that shares our values and expertise
• We are committed to educating and empowering homeowners - Please join us for other classes
Where homeownership education takes flight!
Thank You for AttendingIf you enjoyed this class – Tell a friend
Please tell us how we’re doingThank You email includes a link to “Praise” page
Your feedback is greatly appreciated
For more information
1-866-667-6724Homeownership Educator
Scott SchangBranch Manager
Broadview Mortgage Corporation
