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Agent Short Sales (5) [RSS]
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Recent Entries
Moody’s Expects Continuing Home Price Decline
Tentative Recovery is Spreading Across the Country
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Moody’s Expects Continuing Home Price Decline

Posted : February 25, 2010 9:36 PM | Posted By: Tim
Related Categories: Market Conditions
Moody’s Expects Continuing Home Price Decline

Moody’s Investors Service predicts another 8% decline in the housing market in many areas over the coming months.  They blame the anemic Home Affordable Modification Program (HAMP) for failing to put a damper on foreclosure and the continuing escalation of foreclosure sales throughout the country for the continuing slide in home prices.
 
The national home price drop from peak to trough is expected to be 34%. The one bit of good news is Moody’s revised downward the expected total value decline.  Previously Moody’s had predicted a 37% total decline.  The bad news is, instead of the trough being reached in the 3rd quarter of this year, Moody’s now does not expect to see the leveling out to impact the market nationally until the end of the 4th quarter 2010.
 
Moody’s analysis shows that only 400,000 to 1 million homes might be saved through HAMP.  The rest of the job of cleaning up the housing market will be left to the slow process of foreclosure, deed-in-lieu of foreclosure agreements and, of course, short sales.
 
Moody’s Predictions on Short Sales
 
Moody's Economy.com predicts that the number of deed-in-lieu of foreclosures plus short sales this calendar year will increase by more than 50% to almost 500,000.  This is still only a fraction of what is needed to save more than 1.9 million homes from foreclosure.
 
Moody’s sites the decisions by many lenders to loosen rules as an indication Lenders are now more willing to find solutions short of foreclosure.  Some of the recent changes by Lenders include:
 
·      CitiMortgage decision to allow beleaguered homeowners to remain in the home without paying if homeowners will sign over the home and take care of it.
·      Fannie Mae and Freddie Mac programs to allow Homeowners to remain in the home as renters while the disposition of the house is being sorted out.
·      Treasury Department’s recent decision to pay Lenders $1000 when they agree to a Short Sale and to forgiving the remaining debt.
 
While we believe there are flaws in the government’s Short Sale program, there is no question that this new willingness to look at selling a home for less than the mortgage amount is certainly going to increase the numbers of Short Sales that are approved this year.  There has never been a better time to be a Short Sale Investor!
 
First American CoreLogic HPI Says Price Decline is Slowing
 
First American CoreLogic Home Price Index (HPI) tracks home prices in all U.S. markets and basically concurs with Moody’s report that home prices are continuing to fall when considered nationally. The one silver lining the HPI reveals is that the decline is smaller and slower than before.
 
The December decline year over year was 3.7% compared to the 5.3% year over year decline the previous December.  Even when distress sales are removed both years registered a decline in home values year over year—3% in December 2009 and 5% in December 2008.
 
The HPI is expected to drop another 4.4% through spring 2010.  Then it is a matter of whether the latest homebuyer credit is extended beyond April as to whether the remainder of 2010 will show a faster decline, or begins to stabilize.  At the present time First American CoreLogic predicts a rosier home value prospect than Moody’s.  It believes home values will be up 3.5% by December 2010, or 2.7% when distressed sales are removed from the calculation.
 
Homeowners More Pessimistic About Home Value
 
Zillow has completed a survey which shows for the first time that Homeowners are no longer confident that their homes are going up in value.  Only 20% believed their home had gone up in value, where, in fact Zillow shows about 28% of homes appreciated in the past year.  For the first time since Zillow started surveying homeowner confidence, the level as a -2 showing that homeowners are actually more cynical than reality about the value of their homes.
 
Half of the surveyed home owners believed their homes had fallen in value, while 30% believed their home had stayed the same in value.  According to Zillow, actually 65% of homes lost value while only 7% stayed the same.
 
In the past homeowners found it easier to believe that their neighbor’s home was falling in value than to believe the same about their own house.  Now more homeowners understand that home value decline is the rule rather than the exception.
 
What this means for Short Sale Investors is that it may become a little easier to convince homeowners that a Short Sale is needed in order to sell the home, and their Agent may well be easier to convince as well.  You will have solid market sales data behind you to justify your offer, and more and more, homeowners are accepting that reality.
 
Have a great evening!
 
Tim Cook
 
 
 
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Tentative Recovery is Spreading Across the Country

Posted : February 24, 2010 9:18 AM | Posted By: Tim
Related Categories: Market Conditions
Tentative Recovery is Spreading Across the Country
 
According to Moody’s economists, the regional economic outlook shows that the economic recovery is gradually making its way across the country.  It started in the central core of the country, and spread west first.  Now it is beginning to impact the southeast and northeast positively.
 
The map at the Economy.com website shows a swatch of states “in recovery” down the middle of the country and in the upper northwest.  These states include Idaho, Montana, North and South Dakota, Nebraska, Iowa, Missouri, Arkansas, Oklahoma, Texas, Louisiana, Mississippi, Alabama, South Carolina, Tennessee, Kentucky, Indiana and Alaska.  The only northeastern states considered out of the woods as of December 2009 were Vermont and Massachusetts.  Most other states are listed as “moderating recession,”  except for Nevada, which is still considered to be in recession.
 
There is some evidence of a turnaround in manufacturing in the Midwest. Manufacturing employment is up in the Great Lakes region after lows were hit in June 2009.  The Plains region seems poised next for improvements in manufacturing activity.
 
There are caveats to the signs of life in the economy.  The greatest risk Moody’s identifies is that businesses will fail to continue to restock inventory.  Further restocking will depend on an upturn in consumer confidence and spending on durable goods such as automobiles. The housing market is still weak and is the second threat area to the economy long term.  The states that will lag behind in recovery are those that have lost the most in home market value, especially Nevada, California, Arizona and Florida. The faltering commercial real estate market is identified as the third weak link in economic recovery.
 
Bernanke Will Assure Feds That Interest Rates Will Not Rise
 
Amid concerns that interest rates may rise sharply this year, Bernanke is now expected to tell Congress in his semi-annual report on the economy that interest rates will not be going up soon.  The Federal Reserve chief is mindful that unemployment remains high and the housing industry is still weak.  The New York Federal Reserve President, William Dudley, indicated on Friday that helping to improve the economy’s growth rate is more on the minds of the Federal Reserve Board than the need to fight inflation.  Right now there is no real threat of inflation, according to Dudley.
 
There has been speculation that the Fed’s decision to raise the discount rate to .75% would also trigger a higher benchmark interest rate.  Dudley said that the two are not connected.  The discount rate was raised to “normalize” lending between banks.
 
Jobless Claims Are Falling
 
The Labor Department has posted a total of 440,000 initial jobless claims posted the week ending February 6, a drop of 43,000 from 483,000 posted the week before. This was a lower jobless total than economists had been expecting, according to Briefing.com.
 
There were 4,538,000 people already on the unemployment rolls who continued their claims in the week ending Jan. 30.  That was a decline of 79,000 from the previous week.  Economists were expecting continuing claims to have declined 2,000 to 4,600,000.  The 4-week moving average of continuing claims was 4,603,500, which is 17,750 less than the preceding week's revised average of 4,621,250.  Of course, many of the claimants have dropped off the unemployment rolls because they moved into programs providing extended unemployment benefits, have stopped looking for work already, or are “under-employed” with part-time jobs instead of full-time.
 
Investors are Snapping Up Residential Lots
 
One of the next big movements in real estate investment is in residential lots.  Throughout the west in particular are housing developments gone sour during the real estate crash that are now just waiting for a resurgence in the housing market to bring builders back to these abandoned projects.
 
Finished lots, while they are beginning to disappear fast, can still be found at 50 cents on the dollar. Larger projects are going to well funded investor groups at 30 cents on the dollar.
 
Investor groups are particularly looking at the Phoenix area and Southern California in expectation of the next big boom.  It is estimated that there are 40,000 unfinished single family lots in Phoenix alone.
 
Keep in mind, however, that single lots of this kind are not good material for flipping.  Investors who are into this market have money for a buy and hold strategy that will eventually mean doing off-book rolling options to home builders who are currently still money-strapped and unable to carry much inventory on their books.
 
Expect to hold these lots for 12 to 36 months and bank on the pent-up demand of 1.2 million new housing units needed in the next 10 years just to meet population growth.
 
Have a great day!

Tim Cook
www.Texas-AgentsAdvantage.com 

 P.S. - Also be sure to subscribe to this blog over to the right of this page.

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Dallas-Fort Worth home foreclosure filings jump 30%

Posted : February 16, 2010 9:51 PM | Posted By: Tim
Related Categories: Foreclosure Rates, Market Conditions
By BRENDAN CASE / The Dallas Morning News
bcase@dallasnews.com

 

Home foreclosure filings jumped in the Dallas-Fort Worth area again after falling last month, Addison-based Foreclosure Listing Service Inc. said Thursday.

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Lenders posted 5,548 homes for forced sale in the March auctions, up 30 percent from the same month last year.

March filings also were 18 percent above the number of homes posted for this month's auctions.

February postings were 4 percent below the level of February 2008, the first time monthly foreclosure filings had fallen on a year-over-year basis since October 2007.

"I said last month that it was welcomed news, but that I was not holding my breath," said George Roddy, president of Foreclosure Listing Service. "And in fact, postings shot right back up, climbing 18 percent in just one month, to above the 5,000 mark this month."

Foreclosure postings in Tarrant County rose 37 percent from the same month last year, while they were up 34 percent in Collin and Denton counties and 23 percent in Dallas County.

Foreclosure postings for the first three months of the year amounted to 16,137, up 22 percent from the same period a year ago, but down 4 percent from the fourth quarter of 2009.

Fewer than half of the homes scheduled for foreclosure auction each month are sold by lenders.

In many cases, the mortgage company is negotiating a debt restructuring with the homeowner and delays taking the house. In other cases, borrowers reach new debt terms or hand over their homes without foreclosure.

 

Residential properties scheduled for foreclosure in March and change from a year ago:
CountyNumberChange
Collin721+34%
Dallas2,344+23%
Denton649+34%
Tarrant1,834+37%
Total5,548+30%
SOURCE: Foreclosure Listing Service

For questions or help with a foreclosure email Tim at tim@texas-agentsadvantage.com

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Foreclosures Get Worse, Increasing Demand for Smart Investors

Posted : February 12, 2010 10:08 AM | Posted By: Tim
Related Categories: Foreclosure Rates

By Ben Pargman | Published: February 9, 2010

A recently released study from LPS Applied Analytics shows the foreclosure crisis keeps getting worse.  Here are some quick statistics from the report:

  • Delinquency rates have surpassed the 10% level; factoring in foreclosures, the total non-current rate sits at 13.3%.
  • Industry extrapolations indicate that over 7.2 million loans are currently behind on payments with an estimated nearly 1 million properties in REO status.
  • Average number of days delinquent for loans in foreclosure has increased 63 percent from January 2008 to December 2009, rising from 249 to 406 days delinquent.
  • Prime loans have experienced a worse pace of deterioration on a relative basis than subprime, FHA and all loans as a whole. Within prime loans, those with current unpaid principal balances between $417,000 and $600,000 have performed the worst.
  • The percent of “new” serious delinquencies (from the population of loans that were current as of year-end 2008) sits at 4.64%, higher than any other year analyzed for the same period. Extrapolated counts result in approximately 2.3 million “new” 60-day delinquent loans from December 2008 to year-end 2009.*

I said a couple of years ago (check out old blog posts) that we were entering a huge market correction and all the government programs, bailouts, and subsidies to stop foreclosures would not and could not prevent the inevitable from happening.

When a borrower is in a house that is worth far less than what it is worth, one of three things will happen: (1) if the borrowers can afford to keep making payments they may wait the several years it will take for the market to recover, or the borrower will default (either voluntarily or involuntarily) and (2) the borrower will work out an alternative with the lender to avoid foreclosure, or (3) the property will go to foreclosure.

If the borrower attempts to work out an alternative to foreclosure, there are only two options: (a) stay in the house, or (b) leave the house.  Despite all the efforts of the administration and all the talk by lenders, a modification to keep someone in the house is not sustainable unless the loan balance is reduced to the fair market value of the property and the payments are affordable.  Because many loan modification programs do not offer principle balance reductions and many borrowers are in houses that no matter how the loan is modified, they cannot afford, the only viable option is to work out a deal with a lender that allows the seller to move and avoid a foreclosure – that’s a Short Sale.

Short Sales are critically important to the U.S. economy right now.  They are perhaps the most honest and sustainable remedy to the foreclosure crisis.

It is well trained professional real estate investors who understand how to get these complicated deals done successfully.  As the number of foreclosures continue to climb as illustrated by the latest LPS Applied Analytics data, the need for well trained short sale investors also continues to climb.

For help on getting your short sales done or getting answers to your questions please email me at tim@texas-agentsadvantage.com or call 817-599-8058.

 P.S.  To keep current on our BLOG be sure to subscribe by entering your email address in the "Subscribe" box over to your right and click on the "Subscribe Me" button. 

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The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

Posted : January 31, 2010 9:47 PM | Posted By: Tim
Related Categories: Debt Foregiveness
If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition. More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17. The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation: What is Cancellation of Debt? If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

Click here to read the entire article.

For further information contact Tim at tim@Texas-AgentsAdvantage.com or visit us at www.Texas-AgentsAdvantage.com.

P.S.  To keep current on our BLOG be sure to subscribe by entering your email address in the "Subscribe" box over to your right and click on the "Subscribe Me" button. 

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HUD REMOVES THE 90 SEASONING REQUIREMENT TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Posted : January 19, 2010 8:36 AM | Posted By: Tim
Related Categories: Market Conditions
HUD No. 10-011
Lemar Wooley
(202) 708-0685		FOR RELEASE
Friday
January 15, 2010
HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS
Measure to help bring stability to home values and accelerate sale of vacant properties

WASHINGTON - In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

"As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers," said Donovan. "FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization."

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
  • In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD's website.

For further information contact Tim at tim@Texas-AgentsAdvantage.com or visit us at www.Texas-AgentsAdvantage.com .

P.S.  To keep current on our BLOG be sure to subscribe by entering your email address in the "Subscribe" box over to your right and click on the "Subscribe Me" button. 

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Some Good Economic News and Some Bad News!

Posted : January 8, 2010 9:51 PM | Posted By: Tim
Related Categories: Market Conditions
First to the good news: U.S. manufacturers seem to be staging a recovery with large gains in November in orders world-wide, according to the Commerce Department. Orders rose 1.1% in November, which was at least twice the percentage economists had expected. These manufacturing order increases affected most sectors of production, with the exception of autos and aircraft, which continued to decline. The Institute of Supply Management, which measures U.S. factory output on an ongoing basis, recorded the fastest manufacturing expansion in December that has been seen in three years. Now the bad economic news: The National Association of Realtors reported the seasonally adjusted index of purchase and sales agreements fell 16% between October and November following nine straight months of growth. Economists had predicted only a 2% decline, so this represented a surprise that is leaving economists wondering if we are headed for a double-dip recession in the housing market. Economists do not expect to see much improvement in sales until early spring when buyers tend to come back into the traditional real estate market. It is anticipated that a new surge will happen in the spring in an effort to use the newly expanded tax credit. Purchase and sale agreements act as a barometer of future sales, since there is generally a lag of a month or two in closings. For this reason, do not expect to see positive sales numbers over the winter. Pending sales were down only 3% in the West, but down 15% in the South and a whopping 26% in the Northeast and Midwest between October and November. What we can expect as Real Estate Investors is that Lenders may be even more eager to unload properties using a Short Sale in order to avoid having more inventories to sell as REOs at even lower prices in the spring and summer of 2010. So, now is the time to get out there and get those deals done! Who’s Optimistic and Who is Not? The banking industry is, on the whole, more optimistic about the start of a recovery than members of other groups, perhaps because they have benefited more from economic stimulus than other businesses. Goldman Sachs analysts expect the world economy to grow by 4.4% this year and 4.5% in 2011 and are predicting a fast rebound. On the opposite end of the scale, economists at the annual American Economic Association meeting warned that the recession is not over by a long-shot. They expect economic output to return to normal in 2013, and for unemployment to continue to be a problem until 2016. Simon Johnson of MIT’s Sloan School of Business believes the Obama Administration has shot the economy in the foot by making major banks feel as if they are too big to fail, thus encouraging more risk-taking by banks that believe they will be bailed out again if necessary. Fortunately for Investors, the foreclosure market is pretty immune to economic fluctuation because there is such supply in the pipeline that we will have Homeowners to help for years to come, just as long as the Lenders are willing to wash out their over-priced mortgage inventory with discounts and start afresh with homes where new Buyers are paying more affordable prices for housing. Long term, this adjustment will be good for the economic stability of the housing market. The key will be having a continuing flow of cash buyers, first time buyers and those with good credit to absorb the supply of reasonably priced Short Sale properties. Suspension of Foreclosure for Tax Liens Cuyahoga County, Ohio may be starting a trend by putting a six month suspension on foreclosures for delinquent property taxes. It is believed to be the first county in the country to be doing this. The County hopes that this suspension will give homeowners time to catch up on delinquent taxes. Many believe, however, that this will only make the delinquencies worse and only delay the inevitable. The County’s treasurer, Jim Rokakis, acknowledges that things are not getting better and that Cleveland is seeing a huge increase in vacant and abandoned properties that are harming the value of neighborhoods and causing untold human misery. By suspending foreclosures for now for tax liens the County hopes to forestall even more abandoned homes and homeless families. Homeowners who are behind in taxes are also typically behind in their mortgages. A tip for finding homeowners in pre-foreclosure is to contact the people who are on the delinquent tax rolls. With the tax foreclosure hold-off, now is the time to get in and help these people before the pressure from the late taxes catches up. Often tax liens can be negotiated down, paid by Lenders or, if the deal is good enough, something that the Investor is willing to cover to get the deal done.
 
Have a great weekend!

Tim Cook
 www.Texas-AgentsAdvantage.com

P.S.  To keep current on our BLOG be sure to subscribe by entering your email address in the "Subscribe" box over to your right and click on the "Subscribe Me" button. 

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Flipping Gets More Validation

Posted : January 6, 2010 7:44 AM | Posted By: Tim
Related Categories: Agent Short Sales, Pre-Foreclosure Process, Market Conditions
The stories keep coming in and time after time flipping property is being legitimized.  I guess after a rash of blaming flipping for everything, including causing the foreclosure crisis, people are realizing that their convenient scapegoat is actually a valuable good that needs to be done to alleviate the housing market of the flood of foreclosures and vacant houses poisoning our neighborhoods.
 
A recent Wall Street Journal article on the new trends in house flipping demonstrates that this form of real estate investment is now “in.”  The specific type of wholesale flipping discussed in the article is buying homes at auction for cash and turning them around to an end buyer, sometimes after completing some rehab.
 
The article points out the risks of this type of investment flipping, and these are essentially the reasons why this is not the approach we recommend to our students unless they are very experienced and know the area well.  It is easy in the heat of bidding to lose track of what constitutes a safe buying range and to buy too high, especially since in many markets Investors are flocking to auctions and making the most attractive deals highly competitive.  Sheriffs and Trustees are not equipped to show the properties about to go to auction, so often the only gauge of condition for an auction property is to drive by the outside and guesstimate repairs.  Investors must leave a very generous contingency for rehab in any bid made or face being stuck with a big loss.  Liens may also not have all been cleared before the sale leaving the Investor to negotiate or pay taxes, the previous owner’s student loans or other lien surprises.  Investors will h ave only three or four weeks to research the properties of interest and determine these pitfalls before the auction date from the time the sale is first announced.
 
In the mid-decade boom years hard money was more plentiful for Investors who wanted to participate in Sheriff and Trustee sales.  It is still possible to find a cash partner, but interest rates will be high because of the risks involved in actually taking possession of a property and being responsible in many cases for extensive rehabs before resale.  For those using their own money it ties up a substantial amount of capital that is then not available to leverage multiple deals.  It is true that in the past Lenders were much more likely to set the sale price at what remained on the mortgage, and now they are recognizing that distressed property must be discounted, even at auction, if it is going to sell that way. There are many more excellent deals at auctions these days than in the past.
 
It is interesting that the WSJ chose to focus on flipping property sold at auction.  No doubt, this is the model that most Investors follow when they get into the business of wholesaling, because buying auction and bank owned properties are what are advertised most heavily.  The secret to Investing that we teach with The Agent Magnet is that the safest and most cost-effective form of property flipping comes from being in the loop with Real Estate Agents who are working with over-leveraged properties before they go into foreclosure.  These properties have generally been looked after better and have suffered less damage.  They have experienced and attentive Agents there to liaison with the Seller, gather the Short Sale package documentation and to help find an end Buyer once the Lender has given its approval for a Short Sale. The disclosures included in the Purchase and Sale Agreement and its addendums make it clear to all parties that the Investor is g oing to resell immediately often with transactional funding.  We know that a growing number of Lenders and Title companies are becoming familiar with this form of flipping and are approving more and more deals using this model.
 
In fact, as we’ve pointed out in other recent posts, many top Lenders and Mortgage Underwriters are have come out explicitly with guidelines that prove legitimate flipping is here to stay as a helpful part of the Short Sale process.  Here are some documents to use in pointing out to Agents you approach that Short Sale flipping using the system we use at The Agent Magnet is an accepted practice:
 
  • Freddie Mac ‘s “Best Practices for Loans Involving Possible Property Flips” was issued October 9, 2009 to its servicers and explicitly states that resales after a distress sale as a result of a Short Sale, bankruptcy, tax lien sale or bank-ownership are legitimate as long as they are arm’s length transactions with full disclosure to all involved parties about the nature of the sale. Appraisals must also be arms’ length and not involve properties that have been artificially inflated in value. As long as transactional funding, intent to resell, and other disclosure requirements are met and there is no attempt to defraud the end Buyer with an overly inflated price, Freddie Mac will look at backing the deal.
  • Attorney’s Title Fund Service in a September 4, 2009 bulletin to its underwriters and agents indicated that Short Sales with an intermediary would be insured provided there is full disclosure about the nature of the sale and all disbursements are made exactly as they are stated on the HUD-1.  The intermediary’s “right to sell for a profit” must be clearly stated.
  • As we mentioned a week ago Wells Fargo just sent the bulletin to its officers that “due to current market conditions having a large volume of distressed properties, the existing policy of not allowing financing for flipped properties has been revised. Legitimate property flipping transactions are now eligible to be financed by Wells Fargo Home Mortgage…” The requirements for validating a legitimate flip are all within the range of practice that we recommend to our Investors and their Agents.
The good news for 2010 is that the work that we do as Short Sale Investors is getting recognized as a valuable part of the process that actually saves time and makes the Short Sale more likely to close successfully.  Short Sales were up 127% year over year in 2009 and are expected to continue to climb in 2010.  Happy New Year indeed!
 
Best regards,

Tim
www.Texas-AgentsAdvantage.com

P.S.  To keep current on our BLOG be sure to subscribe by entering your email address in the "Subscribe" box over to your right and click on the "Subscribe Me" button. 

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