What is a Short Sale?
Adam Dalton, Turlock Homes
It’s been a few years since the market fell apart, but I still get this question at least weekly…
What is a short sale?
To put it simply, a short sale is an agreement of terms in which the lien-holders of a loan on a home agree to accept less than the amount that is owed from the borrower on the home, through an offer by a 3rd party buyer. The inability to pay the remaining debt is usually a result of financial hardship on the part of the homeowner, accompanied by a substantial decrease in property value. This is seen as a less detrimental alternative to letting the home be foreclosed on.
To explain it in real-world terms, it is a 3 to 12 month+ dogfight between the borrowers, the lien-holders, the buyers, and the agents to push this short sale through. People lose patience, money, hair, and sometimes their sanity during the process of working a tough short sale. However, to help a seller get out from under a mountain of debt they cannot pay and to assist a buyer in finding their perfect home, its what we do at Century 21 M&M and Turlock Homes.
Lets break it down with a very simple, common scenario. Mr. Smith has been laid off in a very tough economy where finding a new job is tough. He is very diligent but unsuccessful and has burned through his reserves and is starting to slip on his bills. Mr. Smith also bought a home using two loans to get 100% financing back in 2005, the height of the typical CA market. Mr. Smith has fallen behind on his mortgage and has little option but to try and short sale his home or let it be foreclosed on. Mr. Smith enlists the help of Adam Dalton,Turlock Homes and they list the home at a competitive price as a short sale.
At the same time we gather Mr. Smiths financials:
-Most current bank statements
-Last pastubs
-Last 2 years tax returns
-A well written letter explaining Mr. Smith’s situation over the past months and a clear request to allow an attempt at a short sale. This is called a hardship letter.
-Different banks will also request other forms so be ready for that.
We also need Mr. Smith to sign a Letter of Authorization letting the lien-holders know that Mr. Smith gives Adam Dalton,Turlock Homes his permission to speak to them on his behalf in regards to the short sale. This is sent in at the beginning of the process so that when an offer comes in, the lein-holders are aware that you exist and a short sale is being attempted.
Mr. Jones has found Mr. Smith’s house to be a perfect fit for him and puts in an all cash, full price offer. Mr. Smith accepts and signs off on the offer. Should be a lock, right? Nothing in a short sale is easy or guaranteed (first lesson of “Short Sale Fight Club”). Now the offer the estimated HUD, and the sellers financial packet go to the banks to be processed. After processing, the file is, hopefully, assigned to a negotiator from each lein-holder. Now keep in mind that both liens are going to lose money, how much is the variable. Now the listing agent must get the 1st lien and the 2nd lien to agree on terms of the short sale and get the 1st(senir) lien to make an offer to the 2nd(junior) lien. If either bank refuses to sign off on terms, you do not have a successful short sale if you cannot resolve their issues.
If both banks agree to the price and terms of the offer, how much money each will net from the sale, and agree to fully release the owner from financial responsibility, then you are on your way to having a successful escrow and a successful short sale.
This is a very simple and uncomplicated version of a short sale. Multiple factors exist in each step and any Realtor who doesn’t learn something new from each short sale isn’t doing something right. If you are considering a short sale and would like more information, please contact us here at Turlock Homes.
Adam Dalton, Realtor – Century 21 M&M and Associates
Filed under Uncategorized
For Sale: 2912 7th Street – Medium Density Development Parcel
2912 7th Street in Hughson, CA has been reduced to $299,900. That is just over $100,000 an acre for a medium density, within the city limits parcel that is ready for development once your plans are cleared by the city. The home on the property is currently leased, creating an income, and the potential to use the land to farm a small crop of trees or crops is there. Call listing agent for more information and set up an appointment to see this unique property.
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Posted: Sep 21, 2011, 2:13pm PDT
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Filed under Uncategorized
USDA Loans – 100% Financing
USDA loans
It may not be widely know, but the potential for a 100% financing loan is still available. Backed by the U.S. Dept of Agriculture, the Rural Housing Service has 100% financing for you to use to purchase a home. USDA offers direct loans as well as guaranteed loans to individuals who meet their eligibility requirements and are purchasing homes that meet specific criteria.
In order to be eligible for a USDA loans, the household must meet certain income guidelines. Also, the home must be in an eligible rural area as defined by USDA. You can find their service maps or search by specific property HERE. While homes in larger cities in the area such as Modesto and Turlock will not typically qualify, much of the surrounding areas such as Oakdale, Hughson, and Denair have eligible properties.
As of October 1, 2011, USDA loans will have a built in .30% annual fee attached for the life of the loan. This will be increase the average loan by about $17/month for every $100,000 borrowed. In addition, the up front cost to obtain the loan will be decreased.
For more information on USDA loans, please visit USDA Rural Development.
And when you’re ready to buy or sell in central California, visit us at Turlock Homes
Adam Dalton, Realtor @ Century 21 M&M and Associates
Filed under Homebuyers, Mortgage/Lending
New FHA Loan Limits
New FHA Loan Limits
Starting October 1st, if you are looking at trying to buy a Turlock home with an FHA loan, you may have to lower your expectations a little. At the end of the month, FHA loan limits will drop in Stanislaus from $423,750 to 276,000…nearly -$150,000 difference! Loan apps with an FHA case number assigned on or after October 1st will be subject to the new limits. The current FHA loan limits have been in place since 2008, when they were passed as part of the Emergency Stimulus Act. FHA loan limits will drop to 115% of local area median home price with a cap of $625,500.
While the majority of the country will experience little to no change, if you are looking to buy in central to southern California, chances are your limits will dip by $50,000 or more with many counties like Stanislaus, Merced and San Joaquin dropping between $145,000 – $200,000 respectively.
What does this mean for you. Well if you are currently looking to purchase a Turlock home with an FHA loan and you want to put the standard 3.5% down, your price range will now top out at about $286,000.
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Stanislaus Co. |
Merced County |
San Joaquin Co |
Calaveras Co. |
Tuolumne Co. |
Mariposa Co. |
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Old Limit |
New Limit |
Old Limit |
New Limit |
Old Limit |
New Limit |
Old Limit |
New Limit |
Old Limit |
New Limit |
Old Limit |
New Limit |
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423750 |
276000 |
472500 |
271050 |
488750 |
304750 |
462,500 |
373,750 |
437,500 |
331,200 |
412,500 |
322,000 |
Click here to find your loan limit by area: FHA Loan Limits
And when you’re ready to buy or sell in central California, visit us at Turlock Homes
Adam Dalton, Realtor @ Century 21 M&M and Associates
Filed under Homebuyers, Mortgage/Lending
