Kansas City North Real Estate Blog

30% of Home Sales Don't Close On Time

According to a recent survey of Keller Williams agents across North America, the majority of homes close on time, but what can keep a home from closing?

Common Reasons for Delayed Closings

1. Short sale approval took longer than expected

2. Appraisal issues

3. Lender took too long

4. Loan underwriting took longer than expected

5. Additional documentation needed

6. Buyer did not provided documents to lender in a timely fashion

7. Home repairs needed to be conducted

8. Could not close with an active dispute on credit

9. Additional requirements by down payment assistance program

10. FHA loan requirements took additional time to complete

11. HOA application

12. Escrow company did not complete all required activities in a timely manner

13. Title issues

If you'll notice, 8 of these have to do with the lender. That's why it's so important for you as a consumer to go with a lender recommended by your real estate agent.

There are a ton of mortgage companies out there which give you a lot of options as far as who you'd like to work with. The fact is though, that in the end, you are only going to work with one lender. Your agent on the other hand, has had the opportunity to work with lots of lenders, because sometimes clients come to their agent with the lender already chosen. Thus the agent is forced to complete the deal with a lender they don't know. The agent quickly learns who is a good lender and who is not.

So when you're buying a home in Kansas City and your agent gives you some lenders to call, be sure to do exactly that. Your transaction is much more likely to close on time if your agent already has a relationship with your lender.

The lender wants to keep the agent happy so that the agent continues to send them business. Additionally, the agent gets absolutely no financial gain from recommending a lender to you. Lenders are prohibited by law from paying agents for referrals. The only advantage an agent gets when you choose a lender they recommend is peace of mind! And that means YOUR transaction is more likely to be a piece of cake rather than a delayed mess!

-Elizabeth Gilbert, Licensed Executive Assistant

Why foreclosure is not a good option. Consider a short sale.

Why not be foreclosed? Why sell short? Agents who have closed hundreds of these transactions provide this list of reasons:

• Avoid the foreclosure stigma – Homeowners will always have to disclose that they had a foreclosure on any mortgage application and (many job applications) that they submit in the future. This can have an adverse affect on their future mortgage rates. Foreclosure is asked about specifically in credit inquiries. There is no seven-year time limit on this item.
• Protect credit score – Credit scores will be lowered by 300-plus points (per loan) by foreclosure. The impact of a short sale—about half that much.
• Improve eligibility for a government insured loan – The homeowner will be ineligible for a government insured loan for 5-7 years (only two years in a short sale). A foreclosure is the one credit report item that is almost impossible to have repaired.
• Avoid a deficiency judgment – Lenders can seek a deficiency judgment against the homeowner and collect any amount they do not recover at sale.
• Protect employment prospects – Many employers run credit checks on prospective employees. Foreclosure is one of the top items that will put a potential new hire, or even current employment, in jeopardy.

via www.kw.com

IF YOU OR SOMEONE YOU KNOW IS BEHIND ON YOUR HOME PAYMENTS DUE TO LOSS OF INCOME, DIVORCE OR MEDICAL BILLS PILING UP AND YOU NEED TO SELL YOUR HOME, CALL RON HENDERSON AT 816-651-9001 TO DISCUSS YOUR OPTIONS.

Realtors Strive to Reduce Stress in Short Sale Transactions

According to the most recent Realtors® Confidence Index, buyers continue to be discouraged with the extended short sale process, resulting in foreclosures that could have been prevented. New resources from the National Association of Realtors® aim to help Realtors® and consumers successfully navigate the short sale process to help more homeowners avoid foreclosure.

“Our members report that short sales are often riddled with delays and red tape,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, Realtors® are dedicated to help streamline and improve the short sale process for both buyers and sellers.

via www.realtor.org

I would certainly agree with the frustrations over the amount of time it takes to get a short sale approved. Some of the lenders I've worked with jump on board relatively quickly, but others like Bank of America can drag out 6-12 months.

I think I've been more successful than most, but I've had 3 short sales this last year that ended up going into foreclosure. Honestly though, all three sellers simply waited too long before contacting me. When your already 6 months late on your payments and they're sending you a final notice of sale (via certified letter) it's much harder to stop the foreclosure at that point.

Short Sale in Kansas City, KS - Piper Estates Home for Sale

Almost 2 acres on large corner lot! Open Ranch w/large kitchen & breakfast nook. Gorgeous oak cabs, Andersen & Pella Windows & Doors, 6-panel stained doors, huge pantry and large island. Large walkout basement ready to finish. Beautiful and private views from the large deck in back. One year old roof. Custom marble in master bath. Slate Tile entry.

"the sale of this home is contingent upon the seller receiving an acceptance from all lien holders - property is being sold "As-Is" - Short Sale Disclosures must be signed and accompany all offers" FOR MORE INFORMATION ON THIS HOME OR IF YOU ARE CURIOUS ABOUT HOW A SHORT SALE  WORKS, PLEASE CALL RON HENDERSON, KELLER WILLIAMS REALTY AT (816) 651-9001.

What's a Pre-Foreclosure?

What are Pre-Foreclosures?

Pre-Foreclosure is the term used for homes that have been scheduled for a foreclosure sale but have not yet gone to auction or been sold off. Often times this period of time can range from anywhere from a month to a year, depending on the customs and laws of the state or county. Just because they have not yet been sold off does not mean they cannot be purchased, as many home owners look to sell their home before a foreclosure sale takes place.

How Preforeclosures Begin

The process of foreclosure begins when a homeowner defaults on their loan. Generally when this occurs, the lender involved will issue the homeowner a notice of default, and for all intents and purposes this begins the preforeclosure period. From here on out many things may happen—the homeowner may raise the money to pay off their default debt to the bank or lender and stay in their home, the lender issues a Notice of Sale and arranges to put the property up for sale at a later date, or the homeowner finds someone willing to buy their home and avoids a foreclosure sale. This last option is becoming increasingly common, as investors and home buyers alike often look to find great homes for sale at extremely low prices through the preforeclosure market.

Low Prices on Pre Foreclosure Homes

Buying or investing in preforeclosure homes can be extremely lucrative, because often times a homeowner will be willing to sell off real estate in danger of foreclosure for very low prices simply to avoid a foreclosure sale. Many buyers end up finding deals of anywhere up to 50% off the true market value of a property.

Finding the Right Pre-Foreclosures

Since real estate sold by agents and brokers dominate the market, it can be hard to find properties available through this means. A good idea is to consult a pre-foreclosure specialist to find property available in your area, as well as information on how to go about purchasing these valuable properties.

If you have questions about buying a pre-foreclosure home in the Greater Kansas City area, please contact Ron Henderson at 816-651-9001 for more information.

Divorce and Real Estate

Divorce is certainly difficult enough on it's own, but when there's a home involved it can be even more complicated. Obviously if one party can afford to stay in the home, this can be an option, but many times neither party can afford to keep the home by themselves. Also, they may not want to stay in the home with all the "memories".

If you have enough equity in the home to get it sold, then that's probably the best option. If that's just not possible, there are actually several options available given this situation and each of them carries their own good and bad issues.

Short Sale:

A short sale can be an option when each party is not financially able to afford the home on their own and the home is over-leveraged.  For example, if the outstanding mortgage balance is $300,000, but your home will only currently appraise for $275,000 you will suffer a $25,000 loss if you accept the offer (actually it's much more than that with closing costs and Realtor commissions).

http://In today’s economy and due to the Real Estate crisis there are many lenders who will accept such a deal and allow you to do a “short sale.” The reason for this is they fear both parties will simply move out of the home and allow it to go into foreclosure. Too many times, when this happens the lender will lose much more money than what they stand to lose in a short sale.

Be sure though that you talk to a Realtor that has experience doing short sales in your area. Choose an inexperienced agent and it can cost you big.

Negotiated Ownership:

You can also use the house as a negotiating tool during the divorce process and divorce settlement negotiations. If your spouse has an interest in remaining in the home, he/she could refinance and buy you out of your interest in the home.

For example, if you want spousal support but the house is putting you both in a financial bind, you can offer a buy out in place of the spousal support you desire. In such a situation, you receive a lump sum of money, your spouse receives the home and you both get what you want. Of course, this solution only works if there is equity in the home.

Rent the Home and Sell At A Later Date:

You and your spouse could rent the home until such a times as the real estate market improves. This is easily negotiated in a divorce settlement agreement. You want to be careful to cover all your bases and make sure every contingency is covered.

You and your spouse would agree to who pays the mortgage or how the mortgage payment will be split. There should be wording in the divorce settlement agreement that covers who is responsible for what maintenance on the home.

The agreement should also specify a date the home is to be placed on the market. How the listing price will be determined, what Real Estate agent will handle the sale and how any profit from the home is divided. Waiting until a later date to sell allows you to protect the investment the two of you have in the marital home because the Real Estate market will eventually turn around. When it does you will be in a better position to get a return on your investment.

If you have any questions about this or would just like some advise, feel free to call Ron Henderson, Keller Williams Realty at (816) 651-9001

The Facts about Real Estate Short Sales in Kansas City

Check the facts when it comes to Short Sales and call a professional with experience.

Whenever there is the misfortune of individuals, you'll have "helpers" running rampant and along with them are all the rumors. These "helpers" can come in the shape of individuals who think they're helping and really don't have any malicious intent and then there are "helpers" who see an individual weakened by an unfortunate circumstance and are going in for the jugular; the latter "helper" are the scum of the earth.

Check the facts. Don't believe everything you hear. Didn't we all learn that when we were growing up and later realized it to be true through our trials and errors? So why then do we forget this when we're experiencing stressful situations?

• Only low income people qualify for a Short Sale - wrong
• You must be unemployed to qualify for a Short Sale - wrong
• You must be behind on your mortgage payments to qualify for a Short Sale - wrong, again
• You  must live in the property that you want to sell as a Short Sale - wrong
• As a Seller I can never receive any money at closing - wrong. HUD pre foreclosue guidelines offer incentives to Sellers to avoid foreclosure. A Seller can get up to $750.
• You must sell your home close to your mortgage balance - wrong
• You must pay back the deficiency in a Short Sale - still wrong. This can be negotiated with Seller's Lender and many Lenders will not pursue.
• You will always have to pay taxes on the deficiency in a Short Sale - wrong as this depends on the Sellers situation. As always recommended, check with your CPA who's knowledgeable in Short Sales as not all CPA's are up on this.
• Any Real Estate Agent is qualified to list your home as a Short Sale - so wrong
• It's too late to sell your home as a Short Sale once you've been delivered a notice of default- wrong
• You can't sell your home when you have other Liens on it (taxes, HOA dues, etc) - wrong
• Sellers must pay out of pocket for their closing costs - wrong
• You must remain current on your HOA fees - wrong many Lenders will authorize to pay
• Most Short Sales do not get approved to close - so so wrong. I have a 95% success rate!

 

 

So to reiterate the importance of getting the right answers to your questions, check the facts with a Realtor who knows how to process a Short Sale. Many claim to be experts yet all are not. Ask your Kanas City Realtor questions and search them out on the Internet to find information on their expertise. This is critical and can make or break the success of avoiding foreclosure.

 

The more you know, the better prepared, the better the outcome.

I serve the greater Kansas City area and am licensed in both Missouri and Kansas as your dedicated Realtor ready to work for you. I'm looking forward to hearing from you soon. Please call me at 816-651-9001 or email me at: ronhenderson@kw.com  It would be my pleasure to help you!

Grabbing a Great Deal on a Kansas City Home - Short Sales

When Allen Beir, a sales and marketing director, and his wife Sarah, an accountant, got married last year, they knew they would need a larger home.  Between them they had 6 children and Allen's 4 bedroom home just wouldn't be enough. 

The Beirs had spoken with their lender and decided it would be easier to simply get approved for buying their new home, moving into it, then putting Allen's current home on the market.  "It would simply be too much trouble to keep all the kids bedrooms clean and have all eight of us leave the house every time there was a showing" said Sarah.  

SInce the Beirs could afford to by their next home without any contingency on selling their current home, they figured they'd look for some great deals on larger homes.  "We were hoping to find a larger 5 or 6 bedroom home at a huge discount." said Allen. "Homes in this price range just weren't selling so we knew we were in a great position to negotiate a real bargain."

The part about the bargain turned out to be true. The Beirs bought a five-bedroom house in Copperleaf, an upscale neighborhood just outside Liberty, Missouri. And it was a steal at $325,000, a full $100,000 less than they would have paid just two years ago.

The amount of time it took to land the deal was another story. It was more than five months from when the Beirs first saw their dream home to the moment they held the keys in their hands. The reason: The home they bought was a short sale.

Not along ago, few people had even heard of a short sale, which occurs when the bank agrees to discount the loan balance for a seller who owes more on his mortgage than the home is currently worth.

If you're in the market for a home today, you're almost guaranteed to be looking at some short sales. Nationwide, 14% of homeowners are currently underwater on their mortgages, calculates real estate website Zillow.com.

The good news is that short sellers are likely to still be living in the home and some may even be current on their payments. That means these aren't the run-down, distressed properties that you often find among foreclosures; in fact, there's a good chance that some of the most deluxe homes for sale in Kansas City could be short sales.

Before you get too excited about buying a short sale, know that they generally aren't, well, short. For the sale to go through, the seller's lender must approve the price and agree to take the shortfall as a loss. That extra step can cause the process to drag on three times as long as a normal home sale.

But as the Beirs discovered, the hassles can be well worth it. Some buyers and realtors don't want to deal with short sales, leaving many choice homes with very few bidders. So if you're willing to brave the intricacies of the process, you'll be far more likely to land the home you always wanted at a fantastic deal-of-the-century price.

Kansas City Short Sales

Frequently Asked Questions by the Seller

What is a Short Sale?

It is the sale of a property short of what is owed on it. The lender agrees to accept less than what you owe to sell the home.

Why do lenders or banks accept short sales?

Two reasons: 1) in almost every case they will lose less by accepting a short sale then they would by taking the property back through foreclosure and selling it themselves. 2) the sooner they get a non-performing loan off the books the quicker they can loan money to another customer. It all boils down to what makes the most financial sense.

Will every lender or bank allow a short sale?

The answer is no. The majority will, but there are a few that do not.

What is the criteria that must be met for a lender to accept a short sale?

The seller must be in provable financial hardship, behind on their mortgage payments, no available liquid assets, no equity in the property and a lender with a clearly defined short sale process.

How long do I have to be in default before I can start the short sale process?

Depends on the lender. Typically the seller must be behind a minimum of 30 days.

Can the owner of the property being short sale'd also be the listing agent?

Legally yes, but many lenders will not reduce the commission as a condition of the short sale so the owner ends up listing is for free.

What is required to process a short sale?

Each lender has its own requirements and some even have their own proprietary paperwork. In general most lenders require the following: hardship letter, personal financial statement, 2 years Federal tax returns, two recent paycheck stubs, 2 months bank statements for all accounts including retirement, a listing agreement, an offer, and a HUD-1 settlement statement. 

What are the steps of the short sale process?

There are 6 main steps. 1) Home is marketed 2) Offer is received 3) Short Sale package is assembled and submitted to the lender 4) Lender orders an appraisal 5) The final price is negotiated with the seller's lender(s) 6) Property is sold

How long does a typical short sale take? 

On average it takes 90-120 days from the time the short sale process is started to the time the lenders provide a written acceptance of a short sale. Once the written acceptance is received there is another 30 days for the buyer to close on the property.

Do I need to contact my lender to let them know I'm doing a short sale?

Typically not. There are a handful of lenders that require the seller to call in once the short sale package has been received. We will let you know if that's the case.

What do I tell the lender when they call me?

In most cases when the lender calls it is from the Collections dept. and short sales are done in the Loss Mitigation dept. When they call tell them you are trying to sell your home and working with someone that is helping you with the short sale. They will likely keep calling you and it is up to you if you want to accept the call.

A foreclosure sale date has been scheduled for my property. Can I still do a short sale?

It will depend on the lender, but as long as you are at least 3 weeks our from the sale date we can get something done. It will require you to get all of the required seller documentation to us as quickly as possible.

Will the foreclosure process stop when we submit a short sale package to the lender?

No, the foreclosure clock will continue to click. Postponements can be made if necessary to entertain an offer, but only if the offer meets the investor's requirements and they are certain the buyer will perform.     

Do we have to have a purchase offer to get the short sale process started?

Yes. The lender will not begin their due diligence until they have a potential buyer.

Does a short sale damage my credit?

From experience only, we can say the short sale unto itself is not what damages your credit, it's the requirement of being behind on your payments that does. For further information, please contact a credit restoration specialist or a financial advisor.

What's worse, a short sale, foreclosure or bankruptcy?

From experience only, we can say the following: foreclosure is the worst. It will be on your credit report for 7 years and bankruptcy will stay on your credit report for 10 years.  A short sale will be reported on your credit report as "paid in full - settled for less than the full amount" or "settled debt" and less harmful to your credit. For further information please contact a credit restoration specialist or financial advisor.

How long after a foreclosure or filing bankruptcy can I buy another house?

You will not have to wait the full length of time that each of these shows on your credit report, but just how long will be determined by the rest of your financial and credit picture. A credit restoration specialist or financial advisor should be contacted. They will be able to provide you with what you can expect in addition to what you can do to shorten the wait time.  

How many years after a successful short sale can I buy a house?

There are new loan programs designed to help people who have recently had to do a short sale on their homes. You can apply for a home loan in as little as two years provided you have maintained a good payment history, kept your debt-to-income ratio within lender guidelines and have verifiable income.

Will I be required to make any of the repairs to my home?

No. All short sales are sold As-Is.

Can I rent or lease to own my home from the person that buys my home?

No. The lender will require that by allowing the privilege of a short sale you are required to relinquish all use and benefit associate with the property.

Can I make money on the sale of my property?

A homeowner cannot receive any financial benefit from the sale of their home if the lender accepts a short sale payoff. The only exception to this rule is if the homeowner has an FHA loan. FHA will allow the homeowner to receive $1000 in a short sale.

Will it cost me anything to do a short sale?

In most instances no. A short sale is designed to assist the homeowner by accepting enough of a discount so that all costs of selling the home are covered. Depending on your specific financial information some lenders, albeit very rare, may ask that you bring some money to closing.

How much do we charge for our services to perform the short sale?

We will never ask you for money. We get paid only if we are successful in completing the short sale.

I'm considering bankruptcy, how will that affect the short sale process?

If bankruptcy is a consideration, or you have already filed, notify your agent immediately. The short sale can still be done, but it definitely slow the process down. Depending on the lender it could completely stop the short sale process. When bankruptcy is filed an "automatic stay" is put in place by the courts requiring all creditors to cease their collections efforts and any foreclosure sale will be postponed. For further information, please consult your bankruptcy attorney.

Will filing bankruptcy STOP foreclosure?

Yes, but only temporarily. The lender will eventually be granted a "relief of stay” from the bankruptcy and the foreclosure will proceed from the point at which it was when the bankruptcy was filed. For further information, please consult with your bankruptcy attorney.

What happens if the lender counters the first offer sent to them in the short sale package?

The Buyer will need to either increase their offer to meet that number or your agent will need to find another buyer that meets your lender's requirements. 

What do I need to do to help sell the home?

The same things you would normally do when selling your home. Keep it in show-able condition, stay in communication, be available to sign paperwork and keep the utilities on. If you are planning to move out prior to the home being sold you will be asked to sign a Vacating Homeowner Checklist that outlines your responsibilities.

What about the new federal government Bailout plan?

To determine your eligibility, please visit: www.financialstability.gov

Will I need an accountant or attorney to represent me?

We always recommend that everyone in your situation seek the advice of an accountant or other tax professional. Consulting legal counsel is often a wise choice when making these types of decisions and they will tell you whether continued assistance is necessary.

I am behind on my property taxes…

Delinquent property taxes are negotiated in to the offer we present to your lender with the short sale packet. Whether your lender accepts the short sale or forecloses, they will still have to pay the property taxes owed the county and/or city.

I have not paid my HOA dues…

This is handled in the same way as any delinquent property taxes.

Can I rent the property if I’m not living in it?

This is a decision best answered by a real estate attorney. Keep in mind that if you are not paying your mortgage you should not be profiting from rental payments.

The property is vacant. Do I have to leave the utilities on?

This is your decision however, the house will show better if buyers can turn on lights and the house is at a reasonable temperature. If your decision is to turn the utilities off and it is winter time you will need to make sure the house has been winterized or you could be held liable for damage should a water pipe break from freezing.

When should I move out?

Different loan types have requirements regarding occupancy that could affect your eligibility for a short sale. Please notify your agent before making the decision to move.

Can I take anything with me?

Anything you take from the property that is determined by your agent to be a “fixture” needs to be clearly disclosed to any Buyers viewing the property.

What happens if I do nothing?  

If you do nothing and are not making your mortgage payments, your lender will foreclose. You will have a foreclosure on your credit report, be liable for any deficiency and/or subject to a taxable event.

Does the fact that this is an investment property, not a primary residence, make any difference?

Yes. Since this is not a primary residence you may not be eligible for an exemption. In addition, most lenders are not as lenient in their short sale acceptance guidelines as they are when it is a primary residence.

Will I receive a 1099 if my lender takes a discount?

Yes, it is an IRS code. The IRS states that a reduction of debt is a taxable event. However, the Government has passed the Mortgage Debt Forgiveness Act and it states that for certain period of time some homeowners with primary loans on primary residences may be exempt from the tax on the amount on the 1099. Contact your local tax professional regarding how this applies to your specific situation.

If I receive a 1099, can I file as “insolvent” and be exempt from the tax normally owed on the 1099?

There are certain tax codes that enable someone in a financial hardship to be exempt from any tax liability outside the exemption already provided by the Mortgage Debt Forgiveness Act. You will need to consult your tax professional for more information.

Will my lender pursue a deficiency judgment for the amount they lost from the short sale? 

Your lender can pursue a deficiency judgment, but that does not mean they will. We will always request in negotiations for a full release of lien and that your lender(s) consider the debt “settled” or “satisfied” and paid in full. Another option available to the lender is an unsecured promissory note or ask that you bring some money to closing.

What if my lender requests a promissory note or money at closing?

Your lender can make such requests, but it is up to you as to whether you agree to accept that as a condition of the short sale. In many cases these can be negotiated to a lower amount or for better terms. Keep in mind that any amount requested by your lender will likely be much less than they could potentially pursue from you as a deficiency should the property be foreclosed upon. 

 

 

Questions about Short Sales in Kansas City

This was taken from a conversation with a potential short sale client in Kansas City.  These are only a few of the questions you may have about short sales.  For more information or to discuss your specific situation, please call Ron Henderson at 816-651-9001.

From what I've been reading on the internet about short sales, I need to owe more than the actual worth of the home. Is that correct?  Yes, the house has to over-leveraged.

And I need to be having trouble with month to month expenses? Yes and the "hardship" needs to be viewed as long term, typically 3 months or longer. Financial hardship is determined by the financial infomation that you will have to submit to your lender (2 paycheck stubs, two recent bank statements and 2 years tax returns and financial statement showing that your expenses are higher than your income). Financial hardship can be due to the loss of a job or possibly a medical condition that prevents you from working. Each situation is different.

You can't have enough money saved to pay off the difference between what the house would sell for and what you owe? If you have money any where other than a retirement account they will require that you use that to make up the difference at closing to pay all of your obligations in full. If the only accumulation of money you have is in a retirement account (one that will incur a penalty if withdrawn) they cannot require that money be used but they will likely require that you sign an unsecured promissory note for a portion of the loss they are expecting to take since you do have some ability to pay.

Do I need to be late on at least one month payment? You do not need to be late to apply for a short sale, but you will need to be behind in your payments for them to approve you for a short sale. It comes down to why would the investor agree to take less money than they are contractually owed if they are still getting their money each month. There are many people out there that want to do short sales because they don't like the idea of paying for a house that is no longer at the value it was when they bought it, even though they can afford it. Unfortunately no one guaranteed that the price of houses would always go up when we bought them.

What if I have a second mortgage? Having a 2nd mortgage is an issue only if you want a Deed In Lieu, not a short sale. I've done short sales on houses with 3 mortgages, so it's not a problem.

If the house is short saled, will the second become due in full? No.

It appears that the latest legislature wipes out the consequence that the amount of foregiveness is considered "income" for tax purposes. Is that the case? Yes, but you have to prove that you were insolvent at the time of the short sale and the house has to be your principle residence.

**