Not a day goes by that I’m not asked about Short Sales. In today’s market, the reality is they still represent over 60% of all real estate transactions.

With so much time and effort dedicated to this particular type transaction, you’d assume that everyone was relatively educated about what a short sale real estate transaction is and if interested in selling,  whether they qualified to sell their property in this manner.

Unfortunately, the subject is filled with misconceptions, misinformed agents and brokers, apathetic lenders and worse yet, predatory greedy slime balls presenting themselves as “short sale consultants” and advising and teaching their “clients” to commit bank fraud!

So What is a Short Sale?

A “short sale” occurs when a lender agrees to accept less than the amount owed on a promissory note (mortgage). It is often utlized when a seller cannot pay the mortgage on their property. Often, both the seller and the lender will agree or consent to the short sale process  because if allows both parties to avoid foreclosure. This agreement however does not necessarily release the seller from the obligation to pay the remaining balance of the loan known as the deficiency. Only the lender can release the deficiency at their own discretion.

What are the Signs of a Short Sale? 

Short Sales are usually thought to be useful to both mortgage companies and sellers in situations where:

* The seller is legitimately behind in their payments or is thought to be in imminent danger of becoming delinquent

* The seller has a legitimate hardship; and/or, the seller has little or no equity (generally 8% or less)

What’s Constitutes a Hardship?

A “hardship” is typically limited to job loss, decrease in income, increase in expenses, divorce, medical emergency or death. Most lenders will consider a short sale if mortgage payments or property taxes are too significant for the seller to pay.

What to Expect After the Short Sale is Agreed to by the Lender?

Although the lender is not “a party to the sales contract”, (this is between the seller and buyer only) – they do hold the cards with respect to final acceptance of the buyers offer.  Regardless, unless the lender releases the seller without recourse for the deficiency, they still have the right to sue for the balance, 1099 you for income tax purposes, or attach this amount to any other assets owned by the seller.

The lender may ask the seller to sign a promissory note for the difference at closing as well. Even if this does not happen, they do reserve the right to sue the seller for up to six years after the the closing date for the deficiency.  This is especially true if any subsequent investigation uncovers a fraudulent hardship or attempt to hide sufficient assets to satisfy the original loan.

What is Mortgage Fraud as it Relates to Short Sales?

Any material misstatement, misrepresentation or omission (filtering of information) relied upon by the bank, their lenders or investors and used in the decision making process to approve the short sale transaction.

This can happen as the result of a number of various situations and willing parties. Examples include but are certainly not limited to the following:

* The seller willingly and knowingly withholding or hiding sufficient assets to qualify for a short sale transaction

* The agent/broker artificially pricing the home significantly below true “market value” to induce a sale and then withholding information or subsequent offers to avoid delaying the sales process

* Colluding with an agent/family member/organization to conduct a follow up “flip” of the property back to the original seller after the short sale transaction has been completed

What is a Deficiency?

A deficiency stems from a seller defaulting on a promissory note. A promissory note is a promise to pay. The fact is, a short sale is a default. Although it does not carry the same stigma or consequences as a Foreclosure or certain types of Bankruptcies, it’s still a default and WILL have a negative affect on the sellers credit. Before a short sale is accepted and the transaction is complete, all sellers should consult with a tax advisor regarding any possible tax implications

What Next?

The worst thing a home owner can do is to stick their head in the sand and not get involved immediately to help mitigate their situation. Become informed, be careful, ask lots of questions.

Our best advise? Call FARKAS & Associates Realty Group  We’ll help you navigate through the confusing process and advise you every step of the way.

You’ll find we’re one of the best educated and informed Short Sale teams available.  Our team includes our managing Broker who was instrumental in composing the short sale contractual exhibits in use today and, were also affiliated with one of the leading Real Estate Law Firms anywhere, complete with a separate department of specialist specifically dedicated to Short Sale transactions.

We look forward to speaking with you soon and assisting in anyway we can.

 

 

Housing Crisis Over in 2012

Is the Housing Crisis finally seeing light at the end of the tunnel?  Based on our own experience and observations as well as reports from major lending institutions, the answer seems to be YES – FINALLY!

I have been cautiously optimistic for quite some time waiting for good news and predictions to prove true only to be disappointed by the “reality” of the market to follow suit with credible evidence. Recently, that has changed, and there have been subtle signs that have become more evident over the past few months.

First, home inventories are down; especially distressed properties in higher end neighborhoods located in prime school districts. We have seen a substantial reduction in both short sales as well as foreclosure properties compared to the last few years and a stabilization in home prices as well.

Unlike activity from as recent as last year, foreclosures are flying off the books and I’ve even witnessed a few healthy bidding wars on several prime properties. This has been especially evident with newer construction that builders have been unable to unload, complete with newer amenities and upgrades not often found at these prices.

Additionally, short sales, while still representing a healthy percentage of the homes available – seem to be spending less time on the market with sales prices creeping up ever so slightly. I’ve been predicting that once prices fell to the insane point of dropping below the cost to build, the market would eventually stabilize and self correct. This seems to be playing out exactly as expected. If you were one of the lucky buyers to take advantage of perhaps a once in a lifetime opportunity – Congratulations!

Additionally, banks and lenders have begun to relax some of the elevated credit requirements put in place over the past several years as well as introduced and reintroduced some mortgage products and programs making it easier for prospective buyers to enter the market place once again. Although I remain cautiously optimistic, it’s important to note that many of my observations are localized to specific areas and communities. We haven’t scratched the surface yet of returning to the good old days. The unemployment situation and economy as as whole must continue to improve but good news – any good news is a welcome relief. This also brings up a very good point as well. It’s always important to find out what is happening in your local market vs listening to information on the national news that has nothing to do with where you live, work and play.  Remember – the real estate market is always local, city to city, town to town, neighborhood to neighborhood.

My advice? – If you’re a buyer and have been sitting on the fence for some time – It’s time to start evaluating your motivation to act sooner than later. They’ll still be plenty of good buys available, but they’ll be fewer in numbers and the competition for those will be greater.  There is an abundant amount of buyers like yourself who have been sitting on the sidelines for quite some time just waiting for the right moment. Once this becomes more apparent, activity will increase dramatically. If you’re a seller – especially if you’re not in a distressed situation, good news is on the horizon.

Are you paying too much in Property Taxes?  If you’ve asked yourself this question recently, more than likely the answer could be yes. If you haven’t given the subject much thought and trust your local county government, I’d be willing to bet my next commission check that the answer is definitely YES!

Unless you’ve been living under a rock, everyone is aware that home values have dropped significantly over the past 5 years reverting back to values seen prior to 2003-2004. The decrease varies from 13 – 34% depending on where you live and when you first purchased your current home. Regardless, the effects have been far reaching.

One of the biggest impacts has been to our County Governments who are strapped for cash. Sales tax and property tax revenues are down across the board and County assessors are either reducing assessments begrudgingly or not at all without a fight. Subsequently, it’s going to be up to you to challenge the County to get your assessment adjusted,  just don’t expect it to be easy.

Most Counties have a rather complex process for adjusting property values and hope they’ll wear you down in the process and give up. It’s worth the slight inconvenience, especially given the fact that failure to act can result in even higher Property Taxes. This happens when the county adjusts or raises it’s millage rate to account for falling values.  The millage rate is the calculation (per thousand) used to calculate your property taxes based on 40%  of your homes current market value.

Unfortunately, the drop in revenues does not provide the County any incentive to make adjustments. Accordingly, it’s also important to note that it would be physically impossible for the county to re-appraise every home each year without adequate resources. So – what’s next ?

First, be on the lookout for your homes Property Tax Assessment from the County. These are sent out at different times. I’ve included the approximate distribution dates from various Atlanta area Counties below for your reference.

Dekalb County- Sent out mid May

Forsyth County – Sent out April 15th

Fulton County – Sent out the end of April

Gwinnett County – Sent out April 15th

Hall County – Sent out the end of April

Once you receive your notice, review it for accuracy. Professional appraisers find inaccurate information all the time on previous Tax Assessments so be relentless in your review. Even so, it may be difficult to ascertain exactly what your home is worth today. Your best defense during the appeal process is to collect accurate and valid data to support your case. You may need to obtain recent sales data for your neighborhood – or – more importantly, hire the services of a Certified Real Estate appraiser. This information can and should be sent along with your appeal for review.

You only have 45 days to file a written appeal with your counties Board of Tax Assessors so don’t delay! It could take up to 180 days for a decision to be made. If you’re not satisfied with the results of your request, there are several options to pursue including an appeal process through the Board of Equalization or an Arbitration hearing so don’t give up.

 

 

 

 

 

 

I’ll apologize and will warn you in advance that this posting may sound more like a wild rant or some serious venting than an informative article of valid real estate information. Regardless, this subject needs some highlighting and attention; I’m just not certain yet what actions will help.

Why all the fuss? I just opened my new Home Owners policy statement this morning and came very close to falling off my chair. By my calculations, my policy premium increased 49% since last year!

After taking some time to collect my thoughts, certainly there had to be a mistake? Unfortunately, a quick call to my insurance agent didn’t help. It was true. His explanation? A higher than normal occurrence of wind and hail damage in the area as well as the on-going reduction in revenues due to foreclosures etc. had forced the insurance company to raise rates to compensate. Seriously?

I’m a businessman and I certainly understand that sometimes situations dictate that the cost of doing business necessitates a raise in prices for services and must be passed on to the consumer – But 49%?, forty-nine percent ! That’s just consumer gouging at its very worst – or company greed at its finest. Unlike other consumer products/services, we don’t really have a choice to carry homeowner’s coverage. Subsequently as well, a few hours of “shopping” other insurance companies didn’t shed a happy ending on the story either. Basically, we’re screwed.

I’m trying to keep a level head. So I thought – we don’t live in a Hurricane Zone, not much chance of a devastating Earthquake hitting the area, mud-slides – wild fires, not likely. Tornadoes – yes, but even then, spread out over a large area with isolated pockets of damage, I can’t imagine that having too devastating of an effect on a company’s bottom line.  This is the 2nd insurance issue I’ve had in the past year, the first was with my Auto coverage (not the same company and not something I want to re-hash), and please don’t get me started on health insurance for the self employed unless you really want an earful.

Something is wrong with a business’s pricing model or ethics for that matter when they have to raise rates 49% over the course of several years, let alone, one year. Somewhere we’ve lost the very idea of what insurance is supposed to be. I thought we were partners in rolling the dice together? I give you lots of my money in hopes that I never need to use your services. You (The insurance company) get to keep my money, invest it wisely, keep lots and lots of profits and agree to bail me out and protect me if/when I need it?

Right now, my perception is that it’s become no more than an involuntary tax on homeowners with not much option to avoid. I may be over simplifying the problem and I’m sure I’ll be flamed by some of my insurance agent colleagues but my gut say’s no. So, since this raises the overall cost of home ownership and adds one more layer of complexity to helping fix the housing market, let me focus my efforts on exactly what CAN be done to lower your costs?

 

  • First, if you haven’t already done so, get on the phone with your agent and go over your policy with a fine tooth comb. Leave no stone unturned.  I’ve found that many companies have cut way back on things that were covered automatically before (like wind and hail damage for instance). Consider yourself warned.

 

  • Look at the value of your coverage. With home values down considerably over the past few years, many families are still paying for coverage for what their home were worth at the height of the market, not what they’re worth today. This gets a little tricky since home values don’t always match the cost to rebuild.

 

  •  Look at your deductable. How likely are you to file a claim against your home? Probably not likely at all so perhaps now especially, it’s time to raise your deductable if it will help. In other cases, consumers are being forced to deal with raised deductibles

 

  • If you haven’t already done so, look to see if combining home and auto coverage will make a considerable difference. In most cases it should, in fact, many insurance companies will ONLY cover you now if you combine both. (this forced requirement is something that doesn’t sit well with me either)

 

  • Shop – Shop and Shop some more.

 

  • Most important of all – File a complaint or forward your thoughts to the Georgia Insurance Commissioner’s office. Most times, consumer apathy is our worst enemy.   See: GEORGIA INSURANCE COMMISSIONERS OFFICE

 

I’m generally interested in hearing some feedback on this subject so I look forward to hearing back from you all.

 

In today’s volatile market place, it’s imperative for sellers to consider every advantage available to market  their home.  Not only to sell their home faster and for maximum value, but just as important, to protect the sale and close as expected when a seller and buyer have reached agreement.

Lately, it’s become increasingly common for home appraisals initiated by the buyers lender to come in lower than expected, subsequently delaying the closing or worse yet, blowing up the negotiated contract all together. There are many reasons, some more justified than others, but as Lenders have been forced to use an ever growing pool of inexperienced appraisers, sellers have an option to fight back.

One of the best ways of insuring against this problem is hiring an experienced “Certified” appraiser to conduct a Consultation Appraisal prior to listing their home for sale. There are many advantages:

- Allows you to obtain an unbiased, informed opinion of the current value of your home. Many agents are now requiring this and know that a properly priced home will sell 50% faster.

- The appraisal can be used as a selling tool to help justify the lowering of property taxes.

- Identify any repair issues which would adversely effect the value of the home.

- Help your negotiating position with potential Buyers & Agents.

- Alleviate the restless time between contract and closing worrying if the home will appraise. If there is a discrepancy, the firm you hired should be in a position to argue any conflicting results and negotiate with the lender to adjust its own findings.

Sellers should consider taking full advantage of this critical service. The cost is very reasonable, it provides a host of advantages,  and most importantly, it provides a significant return on your investment.

 

Luxury home in GAReal Estate is my passion and apparently – for much of America as well. No subject seems to provide as much pleasure or stress all rolled into one as Real Estate does. Don’t believe me? Just watch the news, or take a look at the explosion  in the number of Real Estate themed TV programming available today.  From “House Hunters” to “Selling New York ” and many others like it, it seems we can’t get enough of watching people like ourselves shopping for homes, selling them or trying to fix them up. (more…)

Atlanta Dream Living Farkas & Associates Virtual Properties Realty Equal Housing Opportunity Realtor

Virtual Properties Realty | FARKAS & Associates Realty Group | Phone: (678) 442-1509

6650 Sugarloaf Parkway, Suite 700, Duluth, GA 30097

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