With the California economy expecting a sluggish recovery we are slowly creeping our way back. With this we can expect to continue to see foreclosures but more commonly short sales are increasing as an alternative. We are also seeing a fair amount of short sales on land now. There are some things that you should know about short sales:
• Unlicensed short sale “negotiators” are approaching homeowners, asking for thousands of dollars up front to negotiate with lenders, said Tom Pool, spokesman for the California Department of Real Estate. Only attorneys and licensed brokers can ask for money up front – and only after the DRE approves the agreement with an individual seller. The DRE recently published a consumer alert about this and other scams.
• Real estate agents or these negotiators are lowballing offers to overwhelmed banks, a practice called “flopping.” After the bank approves a short sale at a low price, the agent or negotiator quickly flips the house to a new buyer for much more. Would-be floppers often want to use their own title companies. That’s a red flag.
• Real estate agents say banks are illegally seeking extra money in hidden side deals before approving short sales.
Here’s how it works: A bank that holds the “second” loan, such as a home equity loan or down payment, asks a seller for more money without telling the lender that holds the primary loan. It’s an unrecorded deal outside the escrow process. The problem is this is illegal.
Short Sales are becoming increasingly popular since loan modification seems to take so long. Another option to the short sale is to ask the bank first if they will offer you a payment plan that you can afford (or propose a payment plan that you can afford). If they do not agree and offer you a short sale you then may also:
Ask for a FHA short pay off. This means that you could potentially refinance your home at the current value using an FHA loan and remain in the home. We call it a right side up refi. The catch is it is similar to a short sale but you do not actually sell your home!
After all is said and done be sure to get advise from your tax specialist and an honest real estate agent,and consult your mortagage company before you decide to move forward in any direction. Be sure to do your research.
If you are a buyer the good news is: It is a great time to buy! Please give me a call if I can assist you with the sale or purchase of a home or land.
Call Jessica Bailey
Shoot 4 the Moon Properties, Inc.
213-926-6471
jessiebaileyus@yahoo.com
• Some homeowners, especially savvy, well-off owners who owe far more than their houses are worth, are hiding savings and income to persuade lenders to agree to short sales. Many can afford their mortgages, but they also know it will take years to recoup their 2006 values.
Short sales do less damage to credit scores. They also make it possible to buy another house sooner.