Why isn’t the bank doing a short sale?

I had a great question asked this week. The person asked me about a house in their neighborhood. It had been vacant for a while and they were interested in the stats and possibly purchasing it. I looked up the house and found out the property was scheduled for foreclosure in less than a month.

The question: “Why isn’t the bank doing a short sale?”

The consideration for a short sale is requested by the owner of the home. It may be in the owner’s best interest to do a Bankruptcy, and let the property foreclose. If the owners had consulted with a tax attorney, they may have been advised to move forward in the manner they were.

Doing a short sale is not the choice of the bank. They (the bank) cannot opt to sell the property, as they do not own it. The current owner could at the last minute pay the bank the fees owed, renegotiate their loan and get out of default. The foreclosure process allows the owner to get out of trouble if they can.

The bank is not at liberty to do anything until they have ownership of the property.

Foreclosures in the Active Adult Communities

With today days real estate market I get asked about foreclosures all the time. Specifically about foreclosures in the adult communities. As people are looking thru the listings from our website (Active Adult Communities in Arizona) they don’t see many foreclosures. I am not hiding them, or keeping them from the selection available, I promise.

It is the nature of the buyer in Adult Communities. They are much more conservative. Many if not most, purchase with cash. If they require a loan, the amount down is usually greater than 10 or even 20% and the loans are all fixed rate loans. Only investors in those communities purchased with interest only, adjustable loans. And most new build communities did not sell to investors.

So we don’t see many home foreclosures in the adult communities. When they do come on the market, many times was an investor that got in over their heads, or some major personal issue, or the property passed on to the family and they couldn’t handle paying the additional mortgage.

The result, the housing prices in the adult communities have not been affected by foreclosures like the all aged communities. Instead, the conservativeness of the buyers, and the balance of retirement accounts has kept the buyers away, bringing the prices down in those communities.

In conclusion, the adult communities see far fewer foreclosures, and though the prices have come down with the real estate crisis, they prices have not come down as much as the all aged communities.

New Real Estate Scam to be aware of

I don’t mean someone selling the Brooklyn Bridge: When you are working with money, there is always a scam around. Some are easy to detect, others a bit harder.

This past week I was at a training class sponsored by Lawyer Title. They identified and shared with us the newest scam to be aware of. Sellers having a “dirty” Release of Lien. The release has been filed with the recorder’s office, so when the title company goes to provide clear title, there are no mortgage notes attached to the property. (Those have been released)

The scam is: the release if fraudulent. The seller still owes. The seller continues to make their payments, so no one is aware and once the home closes they walk away with all the proceeds from the sale of the home. Then they stop making payments and the house starts to foreclose.

When a call is made to the previous mortgage lender, the fraudulent actions are exposed. If this is detected by the title company prior to closing, the buyer is out of luck. They will get their earnest deposit back, but they won’t be getting the house. If it is not detected and the house closes, the title company is in for a big payment to the sellers bank as they guarantee clear title to the buyer.

So if a seller recently paid off their mortgage, and has the ‘paperwork’ to prove it. Be aware. Things may not be as they seem.

The Foreclosure Transaction and what to know - part 1

Foreclosures are sold “as is”, which translates to “the seller is gone and we (the bank) don’t know anything about this property and we will not do anything if we find something amiss, you inspect it and either take it or leave it”.

It is the giant red flag telling sellers to be very careful and to get the best help they can in purchasing this home.

The basic home inspection:

You are permitted to do whatever inspections you wish on the foreclosure property.

The purpose of these inspections is not to find items for the seller to repair, but to find out what you as the prospective owner will have to repair.  Will the repairs found to be needed exceed your budget?

The general home inspector may suggest that a specialist in a specific field be called upon to further evaluate a situation.  It may be the air conditioner, the roof, the plumbing or wiring or any other system or situation. The home inspector does not give estimates for repair so if you require replacing or repairing anything, you will need time to get a tradesman in for an estimate.

In your purchase contract the standard default for inspection time is 10 days, we suggest you amend the contract to give you 15 days to complete your inspections and determine if you will go thru with the sale.    With the possibility of needing time to contact a specialist, get them to the house and come up with a report, you will want every extra day you can get.  The day count starts with the date of the last signature on the contract.  You may be responsible for turning on the utilities for the inspection, even though the contract may say that it is the seller’s job.    That takes a few days.  The gas company will not turn on gas unless someone is at the home to allow them to light the pilot lights, the water company will want someone there for turn on as well.

The bank as sellers will not do anything to correct any problems that have been found, nor do they warrant that there are no additional problems. They may occasionally,  but rarely,  agree to a decrease in price to compensate for the cost of a major repair needed.  They are totally washing their hands of anything to do with the condition of the property.  If termites are found, it is your problem, and it is still your problem even if your lender requires a “clear termite” report or a “clear roof report” (clear meaning that if termites were found they have been treated and if roof leaks were found they have been repaired).

When all the inspection reports are completed and estimates done you will have the opportunity to accept or decline purchasing the property.   If you decline, your deposit will be returned .  If you accept you do so with knowledge of what has been found and no warrants from the seller that there are not problems that are yet to be discovered.

Be sure to read these other posts as well:

The Foreclosure Transaction and what to know - part 2

The Foreclosure Transaction and what to know - part 3