Here is a snapshot of sales from 2009 in Maricopa County, separating short sales, foreclosures and “regular” sales.  Sales have increased by approximately 30% from 2008 to 2009.  In 2010, short sales and foreclosures will continue to dominate the number of sales.  In looking at the graph below, short sales picked up dramatically and were almost 1/4 of our sales in December.  I expect the number of short sales to rise even more this year and make up perhaps half of all sales!  Pricing has been flat the last several months but if the foreclosures and short sales continue to dominate the market, some areas have not seen the worst of it (whereas areas like Old Town Scottsale may continue to remain flat).  I like to be positive and think 2008 was the worst of it!!

Many homeowners think if they go to foreclosure they “wipe their hands” from their lien and will never hear from their old lender again.  Often, homeowners will avoid a short sale because they think they will have to re-pay part of their mortgage yet think if they go to foreclosure, they are “free and clear.”  Contrary to this belief, in many states the lien holder has 5-6 years to contact the homeowner for deficiency judgment.  With a short sale, a good listing Realtor will ask the bank upfront if the seller will be held liable for a future deficiency payment.  Banks are sending these unpaid liens to credit agencies, so it is not rare, both with short sale and foreclosure, that a creditor will be calling a seller that went to foreclosure.

For more info, visit this article from CNNMoney.com.

Last month, FHA released yet another mortgagee letter clarifying FHA’s position regarding borrowers who recently had a short sale on a primary residence and want to purchase a new primary residence using an FHA loan.

 Summarized below are a few of the key points:

1) These changes are effective immediately

2) Borrowers are not eligible for new FHA financing if they pursued a short sale agreement on his or her principal residence simply to:

•  Take advantage of declining market conditions, and
• Purchase ,at a reduced price, a similar or superior property near the residence they completed a short sale on (this is a key point)

3) Borrowers are eligible for new FHA financing if:

•  All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
• All installment debt payments for the same time period were also made within the month due, and
• The proceeds from the short sale serve as payment in full (another key point)

4) Borrowers whose mortgage was in pre-foreclosure status at the time of short sale are not eligible for FHA financing for 3 years unless they qualify for an exception

So yes, this means if you just sold your home via short sale you COULD qualify to purchase another home through an FHA loan (if eligible based on the requirements above) without waiting 2-3 years.

If you have questions or want to see if you are eligible, contact Kelly Zitlow at Suburban Mortgage, kzitlow@submort.com or 480-355-8105.

Kelly Zitlow, Suburban Mortgage, BK #10123

In 2010, expect short sales to be even more mainstreamed than 2009.  What a change in 2009!  According to the AZ Republic and real-estate analyst Mike Orr, “pending short sales, including all of the deals under contract, reached 9,343 in October, compared with 1,448 in January. Almost 40 percent of the homes currently for sale in the Phoenix area are properties homeowners are trying to sell to avoid foreclosure.”

Short Sales are expected to rise in 2010 while foreclosures are on the decline.  The chart below shows a slight increase in short sales toward the end of 2009 while REO sales are slightly down.

In terms of negotiations, most short sales are averaging less than 3 months to get a decision, whereas some banks will respond more quickly and others take even longer.  The federal government has been incenting banks for over six months to close short sales, similar to the monies the banks were receiving for homes that were foreclosed.

As we enter this new year and an expected increase of distressed homes, we need to put our faith in the banks to help close more short sales and loan modifications.  More short sales and less foreclosures will help our market rebound more quickly.

Could there be “light at the end of the tunnel” when it comes to selling your home via short sale?  If you do not qualify for a home loan modification, there is a chance the bank will provide a pre-approved short sale which will streamline the sale of your home.  No more waiting months and months for a short sale decision!  Could it be this easy?  Expect to see more on this topic… 

Read the full article “Treasury Releases Guidance for Making Home Affordable Short Sales.”

BUYING AND FLIPPING SHORT SALES HAS BEEN A LUCRATIVE BUSINESS AS BANKS LOSE OUT AND INVESTORS POCKET THE PROFITS.  WITH THE FBI GETTING INVOLVED THIS TYPE OF BUSINESS MAY BE NO MORE.  This article was recently published in Florida’s Herald Tribune.

The new flipping: short sales

Untold millions of dollars that banks could have recovered from the sale of distressed Florida homes have instead been pocketed as profits by a new breed of property flipper.  These flippers target houses on the verge of foreclosure and persuade banks and mortgage companies to accept lowball buyouts, sometimes by using questionable appraisals and not disclosing that a quick sale at a higher price has already been arranged, experts say.  No one knows how widespread the scheme has become. But a national glut of short sales — pre-foreclosure sales in which the lender agrees to let the house sell for less than the mortgage owed — has spawned a small industry of short-sale flippers, some of whom use these questionable tactics, experts say.

The Herald-Tribune examined nearly 18,000 property sales that occurred in Sarasota and Manatee counties in 2009. The review showed that:
• At least 250 properties have been sold multiple times at escalating prices so far this year. Nearly 50 of those properties were bought then resold within 24 hours, suggesting that banks were underpaid for properties that already had a buyer willing to pay more.
• Just the most suspicious sales, where properties flipped within a day, have cost banks $1.7 million in Sarasota and Manatee counties so far this year. On houses bought and resold within a month, the bank short sales were $3.2 million less than the houses fetched just a few days or weeks later.
• Real estate professionals are a key part of short sale flipping. Of about 120 short sale properties that sold twice within a month in the Sarasota area, more than half of the buyers or sellers were real estate agents, real estate attorneys or mortgage brokers.
• Questionable short sales accounted for 1.4 percent of all property sales in Sarasota and Manatee counties this year.  At the peak of the housing bubble, 2 percent of all sales statewide raised suspicions, based on criteria used by fraud investigators.
• Bankers and some organizations that regulate the real estate industry have taken steps to curb the latest form of flipping. But the measures, including restrictions on writing mortgages for flipped properties, have not halted questionable transactions. Experts warn the number of short sale flips is likely to continue growing nationwide.

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