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Posts Tagged ‘New York short sales’

Fannie Mae’s recent edict forbidding the cutting down of the broker commission as part of the short sale negotiation is very good for distressed sellers and buyers, not just the agents. I’ll explain.

Naturally, brokers and agents are relieved because it ensures that the considerable time and effort that goes into selling a short sale property will not end with their compensation being raided by the lender in what has always amounted to 11th-hour extortion. In a market like mine in Westchester County, where the typical transaction is 45-60 days, the time to sell a short sale is easily triple that time in some cases.  Sometimes the bank has accepted short sales with the caveat that the brokers get paid less, often with the rationale that something is better than nothing.

This decision is made by an out of state negotiator whose obtuse agenda is to minimnize the loss to the lender, but the consequences are far more damaging than a little pinch, because many brokers and agents are now refusing to show short sales to their buyers. While it may not amount to a blatant boycott, the agents will discourage their buyers with a variety of reasons, such as the long wait, the uncertain nature of the time invested, and the condition of the house. The real reason, however, is that they want to get paid. In this economic climate, that rationale is understandable.

I don’t agree with it, but it is understandable.

The ecology of the agent’s unwillingness to sell short sales is disastrous. Fewer showings mean fewer sales, and that hurts not only the sellers in the short term, it hurts everyone.

  • More unsold short sales mean the market will take longer to adjust.
  • Toxic assets remain on the books longer. Non-performing loans do no one any good.
  • Tax bills are not paid, hurting municipalities.
  • Buyers may be discouraged from buying what may be the perfect home for them.
  • Brokers who take longer to sell a buyer the right home may eventually lose that buyer to another broker, a for sale by owner, or inertia.
  • People who might otherwise benefot from selling their home in a short sale face foreclosure.
  • More foreclosures are the last thing this economy needs.

While Fannie Mae does not hold all loans, it holds enough to influence other entities. My local market of Westchester County has lots of Fannie Mae borrowers who are in negative equity. If brokers have confidence that they will get paid in full for selling a short sale, it will expedite the wringing out of bad loans, helping sellers and lenders alike, and speed an economic recovery.

J. Philip Faranda is Westchester & the Hudson Valleys’s Premier Short Sale REALTOR. He has listed and sold successful short sales in Westchester, Rockland, Putnam, Dutchess, and Orange County, as well as the boroughs of New York City. Find out more at www.NYShortSaleTeam.com

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This short sale closed at the end of this past year. The clients were divorced, and the home they had built while married was incomplete and upside down. The house was listed this past summer.

Divorce cases are in and of themselves difficult. I have to give both clients credit in their dealings with me- they kept it to the transaction. It still was more difficult than with a happily married client, and there were the dicey moments one might expect, but in context we did well in spite of the circumstances.

There were numerous offers on the property, but getting consensus on which one to submit to the lender complicated matters. No offer separated from the pack- price was an issue with one (rather crucial in a short sale), another was an acquaintance of the husband, which the ex wife was reticent to accept, and we were unsure of how to go forward for a time.

Not long after, what appeared to be a tie-breaking offer came in. Price, terms and details did give it a distinct advantage, that is, until the incomplete state of the home came into play. Without a final certificate of occupancy, they reduced the offer by $20,000. A decision had to be made, and with time running short the acquaintances were chosen.

It took another 90 days to get approved. Unfortunately, the buyers then asked for an extension! Given the rigid guideline of the approval we could only grant one brief extension. When another was requested, we had to deny it. We began to get concerned that the buyers might no longer qualify, but the file was cleared to close the day after their extension was denied. They might have been jockeying for a better loan; it might have been a stroke of luck. Because the closing was scheduled in haste for a morning I was already booked, I was unable to be present for the closing.

I later found out that the buyer voiced a complaint about me at the closing. I have never dealt with this person (just his agent), nor was I the source of any of the difficulty on our side. The combination of a short sale and divorce would make any transaction difficult, and perhaps the buyer transferred his frustration to me. I have no way of knowing. I do know that the seller’s attorney advised him that he was mistaken and that I was a good guy. You know you are living right when an attorney sticks out their neck for you and you don’t get a bill!

J. Philip Faranda is Westchester & the Hudson Valleys’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

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Unless otherwise indicated, all data in this post is from the Westchester-Putnam Multiple Listing Service.

There are 3,454 single family homes actively for sale in Westchester County. Of those, 148 are disclosing either a short sale or foreclosure proceeding in process. This is about 4.3% of the available single family home inventory.

The actual number is probably far higher than that. That is because on many homes the listing agent has not disclosed, either knowingly or unknowingly, that the house is upside down or delinquent. Also, there are hundreds of overpriced listings which would be short sales if the price were lowered to market value. In other words, there are lots of $450,000 homes listed for $550,000 because the mortgage balance is $500,000.  Continue reading here

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

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A recent posting from an Ohio broker highlights how real estate differs from place to place. In it, she says that she advises her clients to not sign a contract with a buyer if the house is a short sale prior to getting the bank’s approval. While I won’t quarrel with what works for someone else in another market, I disagree.

That may work in Ohio, but it is ill-advised in New York. I do most of my short sales in Westchester, Rockland, Putnam, Dutchess, Nassau, Suffolk, Queens, Orange and Fairfield (CT) Counties. It is the same in each place- when the buyer makes an offer, it is submitted to the lender with the seller’s hardship package and a contract that is conditioned on the approval of the short sale. The contract is prepared by the seller’s attorney. If the short sale is approved, we have a deal. If it is not approved, my seller is not obligated to sell and incurs no financial obligation to the buyer. Most of the time we continue to negotiate with the lender anyway, but the contract protects both parties.

For the buyer, the contract ensures that they will not lose the house to another buyer after enduring the long process of short sale approval.

For the seller, whom I represent far more often, the contract ensures that the buyer will not simply walk away without penalty or recourse after that same lengthy process. If I list a short sale, my job is to protect my seller. Handshake deals do not protect the seller, only contracts and deposits protect them. This does not “imprison” the buyer. It is virtually the same sort of contingency as their own financing, which is in almost every real estate contract, and no seller objects to such contingencies.

Moreover, the lenders require a valid contract of sale before they approve a short sale. With no contract, the offer is hypothetical. Hypotheticals don’t help my clients whose goal is to avoid foreclosure.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

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Zillow has published a graph on how many homeowners have “negative equity,” or owe more than their home’s value. Not all these home owners are in touble; but the numbers are instructive.

Zillow Negative Equity Graph

Zillow Negative Equity Graph

As you can see, the downpayment rquirements after 2007 became far more stringent, no doubt due to the sub prime crisis. Negative equity started to rise in 2004 before the market peaked; that really tells us how much the bubble was inflated by bad loans.

Many of these people, should they need to sell, will either have to come up with money to close or face a short sale. This chart is for the New York metro area. If you’d like to see your marketplace, click here.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

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