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A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth.
This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. We invite you to explore why our clients feel so strongly about their experience with Armstrong Real Estate Services LLC. Housing options within the metro area range from urban lofts and downtown high-rise buildings to horse properties and rural acreage. Sporting News ranked Denver as one of the top seven best sports cities in the country in 2007.
If you’re a potential home buyer, chances are, you will come across a foreclosed property or a short sale during your search. Not only does a short sale require a significant amount of due diligence, it also can take a long time to get a response back from the bank. Given the major discrepancy in possible timelines between a short sale or foreclosure the best question to ask yourself is “do you have time to wait?” If there is no pressing need to buy your next home and you are in love with a specific short sale, then the short sale may be a valid option.
According to a blog post by Freddie Mac SVP Tracy Mooney on Monday, there are common misperceptions regarding eligibility requirements about short sales that act as a barrier in their use. A short sale can be a viable option when a homeowner owes more on the house than it is worth or they are unable to make their mortgage payments. The Standard Short Sale offered by Freddie Mac necessitates servicers to deny or approve the application within 30 days of filing.
In the case of second mortgages, Freddie Mac is “offering up to $6,000 to subordinate lien holders—who are like second mortgage companies—in exchange for releasing the subordinate lien, extinguishing the underlying indebtedness, and waiving the right to pursue deficiency.” For homeowners, the main concern of a short sale or a foreclosure for that matter is the impact it will have on their ability to obtain another mortgage in the future.
The average selling price for a home in Fort Collins has remained relatively stable in recent times while other markets have plummeted, making Fort Collins real estate a sound investment.
These low sales didn’t affect sellers until the advent of the HVCC (Home Valuation Code of Conduct). Most buyers want to know the difference between the two and whether or not either is worth pursuing.
Purchasing a short sale usually requires lots of paperwork, explanation from the sellers, and multiple departments reviewing the file. A buyer and seller may come to agreement in terms and conditions on a short sale, only to have the bank deny the offer or counter the offer months later. The special scenario of a short sale will limit viable purchasers which could yield to a better purchase price. For both the homeowner and the mortgage-holder, a short sale circumvents the negative repercussions of a foreclosure.
Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Metro Denver is home to 12 four-year public and private colleges and universities with enrollments totaling more than 140,700. There have been 11 new schools built since 1986, providing excellent learning opportunities for Fort Collins children. It can be a tedious process and some folks do not have enough time to wait for the bank to respond. So, if you’re willing to wait, be patient, and hold your plans loosely, you may just luck out and get a terrific deal on your next home.
Common perceptions such as it is harmful to personal credit, restricted to specific circumstances, difficult and lengthy cause many over burdened homeowners to shy away from the option. It also contains a network of 20 community college campuses and over 60 technical and vocational schools.
Picturesque Colorado State University is centrally located in Fort Collins near the down town area. A foreclosed property, however, is owned by the bank and operates more closely to the settlement parameters as a typical resale. If you are current on the loan, “the property must also be your primary residence and your debt-to-income ratio must be greater than 55 percent,” said Mooney. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage. Colorado State University was founded in 1870 and today over 70 undergraduate programs are available that range from liberal arts to veterinary science. Most likely, they are still making payments on the property and still living in the home, but they are aware that they are underwater. In addition to being Fort Collins’ largest employer, CSU adds recreational and cultural spirit not found other places.

What HVCC did was to eliminate any discretion that the appraiser had to deviate from the raw numbers when choosing the most appropriate comparable homes. Sometimes they are behind on payments, but they are working with the bank for a reasonable resolution. Colorado has earned a worldwide reputation as an area that offers an unrivaled lifestyle and Fort Collins represents the best of Colorado. It also provided intense oversight and scrutiny from appraisal management over appraisals.Before HVCC, distressed sales would not impact our ability to obtain fair market value for my sellers because appraisers had professional leeway when considering condition.
Even though the individuals still own the property they need third party approval from the bank to sell for a lesser amount than what’s owed for the debt to be forgiven. In town, residents take advantage of the nationally renowned park system with trails that offers scenic views of the Poudre River and the beautiful Rockies. Now that HVCC is in place, discretion and common sense have been thrown out and replaced with rigid conformity. Distressed sales now affect our ability to get great properties appraised at fair market value.A beautifully maintained, well presented home with many expensive upgrades will justifiably sell for a significant premium over a bank repo or short sale. Just outside the city limits lie miles of cross country trails, ski resorts, rock climbing, biking paths and more. Yet when the appraiser uses comparable sales, this nice home is lumped in with those distressed properties. Accurate consideration is not given to the actual costs of these upgrades because appraisers work off a comparable method of appraising homes and not a cost method.
This is where the problem is created.Appraisers often have the hardest time appraising the nicest homes because there is a push for conformity in the numbers, and nice homes represent the upper end of value.
They like the home to be bracketed with higher and lower priced sales.Prior to HVCC, the appraiser had professional integrity and interpretation of the data to consider when appraising a property. Most of the time there were comparable sales to justify the price, and a local appraiser, hired by the lender, could see why the buyer was willing to pay more for a special house.However, now appraisals are ordered by appraisal management companies that oversee the whole process.
In addition, they know that their work is going to be scrutinized by management, which will rake them over the coals if their value is out of line with the averages.Today, appraisers have much less leeway.
Yes the nice home being sold may have $50,000 to $100,000 in upgrades compared to the short sale or bank repo, but the appraisal reviewer will want them to use the short sale or bank repos as comparable sales, because it is right across the street or it is more comparable in square footage. In this case, the nice home is likely to have an appraisal problem, and have a tough time selling at full valueSince enacting the HVCC, if other agents and sellers under price their listings it now affects my clients home value.
Needless to say, this is disturbing because their actions now affect our ability to get my client top dollar for their home.How do Bank Repo sales negatively affect the market?Let me first say that I prefer Bank Repo’s over Short Sales because banks have clear title and short sales don’t. Agents and buyers know that if an offer is accepted, the sale WILL close in the agreed upon time frame. Even if the Bank Repo is wildly underpriced, multiple offers will pile up within a short period and fair market value will likely be negotiated. The market usually corrects errors made by listing agents pricing homes too low.The problem with Bank Repo’s is not marketability, it is reduced value as a result of poor condition.
Most foreclosed homes were over encumbered (more is owed than the home is worth) by the previous owner.
Large home payments swallowed a large portion of an owners spendable income, with no money left to improve the property. In the 1990’s foreclosure market, many lenders at least painted and carpeted their listings before putting them on the market. That was back when Home Savings, or Glendale Federal foreclosed and it was their property and their responsibility to maximize value.
Oh yes, back in the “good old days” of accountability, rather than today’s situation of Collateralized Debt Obligations, where people aren’t even sure who owns the loan. Many Bank Repos are justifiably worth $50,000 to $100,000+ less than well maintained homes.How do Short Sales negatively affect the market?Short sales are a whole different ball game. Because you are motivated you have selected an aggressive agent that knows the market and will get you the best possible home within that time frame.
The liability is that there is no guarantees of ANYTHING.With a short sale, the seller is the legal signer to list the property, yet everything is subject to “Lender Approval”.
The lender on the home is the real seller, and they approve or disapprove of the proposed sale.The sellers must complete a Short Sale package (which includes the offer) before the lender will even start negotiations. There must be job loss, significant reduction in income, relocation, or divorce to qualify for short sale consideration.2) The seller, listing agent or lender may not be capable or competent enough to work through all of the details of the process to obtain approval within the time required.
The are notorious for losing paperwork making communication difficult.3) The lender may appraise the property at a higher price than what was negotiated. In which case the lender will want the higher price, and the buyer must decide if they want the property at the higher price.

With standard listings, buyers negotiate down, but with Short Sales buyers often negotiate up.4) The buyer’s lender can’t get loan approval quickly enough once short pay approval is given by the lender. While short sales packages can sit on a lender’s desk for months while they obtain appraisals, assign negotiators and process paperwork, once a short pay is approved, the lender wants the transaction closed within days.5) While a short sale package is being reviewed by a lender, the foreclosure department is often concurrently proceeding with the foreclosure process. Often times the property goes to foreclosure before the lender can process the short sale.6) While gaining approval from one lender is tough enough, when there are two loans on the property, it becomes even more difficult. If the 1st trust deed can foreclose on a property leaving the 2nd trust deed holder no money. Why would the 1st trust deed holder want to give partial payment to the 2nd trust deed holder to incentivise them to release their lien?
When there are two loans on a property, both lenders fight over the remaining equity.Buyers should be aware that the list price on a short sale should be taken with a grain of salt. The price was selected by the listing agent and seller to generate offers, and often has no bearing upon what the lender will accept, because the lender hasn’t been consulted yet.A sharp agent will understand that buyers and agents avoid short sales because of the uncertainty and unnecessary complication.
The listing agent then needs to make a short sale more attractive with a lower list price to generate offers to see what the bank says. And because the net to the seller (zero) is the same no matter what the price is, the seller has little objection to listing and advertising the property at an artificially low price.The sellers lack of financial incentive also often shows up in less effort expended in preparing the home and maintaining it, just like a bank repo.
Why improve the property for sale when there is no financial incentive?Short sales, like bank repos are affected by an owner with no financial incentive to maintain and prepare their home for sale.
The best buyers that want to be in a home in the next 90 days, assisted by agents that are committed to making it happen, give first consideration to conventional sales and bank repos.
They only look towards the short sale market after the other alternatives are exhausted.The main reason a buyer will sit patiently waiting for an answer, with no guarantee of anything, is because they are getting the property for a great price. As long as the area that I was researching is relatively homogeneous the results should be accurate.For example, if I were to pull data from all of Long Beach, this might not work, as there will be more foreclosures and short sales in the less expensive areas like North Long Beach, than there would be in the upper end neighborhoods, like Alamitos Heights. Originally it was my assumption that short sales might sell for less than bank repos, due to their reduction in marketability, but this was not the case. Maybe, and this is just a hypothesis, short sales sell for more than bank repos because sellers are trying to do the right thing, and minimize the banks loss. The above numbers bear this out, with sale prices slightly lower in 2010 than in 2009 for conventional sales. Distressed sales actually show a slight gain, but when corrected for square footage, this gain becomes flat.Another concern I had was that the market was becoming more dominated by short sales and repos, which would not be a good for property values. But this is still not a huge chunk of the market.The percentage of the market that are short sales and repos versus conventional sales greatly affects the stability of the marketplace. East Long Beach has been more stable than other areas because short sales and bank repos were few and far between.
If you are a conventional seller, your price is going to be determined by these distressed sales.In our neighborhood of East Long Beach, where 75% of sales are conventional sales, short sales and bank repos are lifted by a healthy conventional market.
Unfortunately, the conventional seller that has been fiscally conservative and responsible is the one hurt by the lower priced short sales and bank repos.Final ConclusionsShort sales and repos are a significant but not an overwhelming issue in the East Long Beach marketplace. The appraisal issue becomes a factor because there is less leeway for appraisers to adjust price based upon condition.
As home owners you and I both know that it is pretty easy to spend $50,000 fixing up a home, and $100,000 might easily be a more appropriate difference between and fixer and a well maintained home. As stated earlier, appraisers don’t work off of costs differentials, they have to base their appraisals on comparable sales. The result is better homes often have a hard time getting credit where credit is due, and can be dragged down by distressed sales, through the appraisal process.Bonus Section – Other interesting FactoidsCurrent value versus peak valuesHow do today’s prices compare to prices obtained at the peak of the market? My general assessment if that peak values were obtained during the second half of 2005 and the first part of 2006. This is due to areas such as North Long Beach, which have lost more value, and brought the city wide average down. My own personal assessment of the last correction from 1990 to 1995 was home prices corrected about 25% for a typical East Long Beach home.
The good news is that we are close to reaching the previous correction.Total sales volumeCity wide there were 2,782 single family sales. When corrected for price the dollar volume of home sales has dropped from 143 million per month to 72 million per month, nearly a 50% drop in dollar volume.Thanks for taking the time to read our newsletter about the Long Beach real estate market.

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