Jacksonville Florida Short Sales, Pre-Foreclosures and Foreclosures

"Due to the nature of short sales, buyer can cancel at any time" Jacksonville short sale sellers BEWARE!

I laugh every time I see this.  Why should a seller, who is headed down the road to foreclosure be bound to a contract that a buyer is not bound to.  We've seen this appear in several offers that we have received and this clause has to be dealt with at the time of the offer.  If this is not resolved in the beginning, you just may get your lender approval only to find out that the buyers have already closed on a different home.  Don't think it can't happen to you.  We've seen it happen in Jacksonville short sales. 

If a seller is in preforeclosure, this type of clause can destroy your chances of a successful Jacksonville short sale.  While you are sitting there patiently waiting for lender approval on your short sale, your buyer may be out buying another home. 

Under our current Jacksonville MLS rules, the listing must reflect that there is a contract on the home once you have an accepted contract.  This, unfortunately, will turn away most prospective buyers. So are you willing to take your home off of the market for a buyer who is not willing to take themselves off the market for your home?   If the buyer comes up and later lets you know they have purchased another home, you have lost all of that time you can never get back and, more importantly, you may have missed out on your SERIOUS buyer.  Do you want to lose a serious buyer for a buyer who won't even commit completely to purchasing your home? 

Make sure you work with a Jacksonville short sale specialist who knows what to look out for and can help protect you.  While no short sale is foolproof there are ways to greatly increase your odds for success.  A specialist in Jacksonville short sales can do just that.  Let us know if we can help you!

Does the list price matter on a Jacksonville Short Sale? Well that depends on whether the list price accurately reflects the fair market value of the home.

Good Jacksonville short sale specialists will price the home right to start with.  This means pricing the home at fair market value and keeping it priced that way until an offer is received and accepted by the seller.  That is why when you are making an offer on a short sale you can not just decide that you want X% or $X off asking price.  You have to evaluate the situation based on what the true fair market value is and what will likely be reported to the bank as the fair market value via the BPO or appraisal.

If a Jacksonville short sale is overpriced in relation to the fair market value, then a buyer SHOULD lowball the asking price to bring it in line with what the home is truly worth.  Offering substantially lower than fair market value is a poor strategy for a buyer.  A bank will not allow a short sale transaction to proceed if the net proceeds are not within the acceptable range as determined by the loan type and who holds the loan.  These are percentages that Jacksonville short sale specialists are familiar with and will use to back into a number for your offer.  A good Jacksonville short sale listing specialist will not advise that their seller lock into any deal when the net to the bank is too low to be acceptable.  In the time it takes the bank to refuse to release the lien for the deal, the seller will usually have moved much closer to foreclosure.

Before making an offer on a short sale the buyer needs to understand what the home is worth.  The trick to getting a good deal on a Jacksonville short sale, and ultimately completing the transaction, is to offer the lowest price that will generate the net proceeds that will be acceptable to the bank.  We get quite a few offers on our short sales, some are reasonable and some are just stupid.  But we have never had an agent or buyer call us and ask what type of loan the seller has even though it matters.  You have to know this to put together the lowest possible offer that a bank will accept.  If the contract amount wasn't backed into based on the loan type and your short sale offer was ultimately approved by the bank, chances are that you paid too much.

Keep in mind, the homeowner is the seller, the bank is not the seller in a short sale.  The bank does not own the home and can not sell the home to the buyer in a short sale situation.  The closing statement and closing paperwork still has to be executed by the seller just like in a normal transaction.  To demand that a homeowner send a lowball offer to the bank so the bank can make the decision  "because the homeowner shouldn't" is just silly.  Yes, we get that one too.  If you understand how the process works, you will be much better off and your likelihood of success will be much greater.

To greatly increase your odds of success in a short sale purchase, you should seek out a Jacksonville short sale specialist that has gone above and beyond to learn how to complete this type of transaction.  There are many great agents in our area, some are skilled and knowledgeable  in short sales, most are not.  It requires a different set of skills and education regarding the short sale and loss mitigation process. This is not a reflection on the overall quality of the agent, however, you do need a short sale specialist to increase your odds of success.  (Would you go to a cardiologist for kidney failure?)

Let us know if you would like to purchase a short sale and we can help you!

Pre-approved Jacksonville Short Sales? Do you know what you are asking for? Why we think that the results of this are far from the theory behind it.

Pre-approved Jacksonville short sales.  This topic is creating a lot of buzz these days.  In large part by people who do not truly understand short sales.  You now have HUD and Fannie Mae sticking their toes into this arena.  We get a lot of calls every week from buyer agents on our short sale properties asking us if the short sale has been approved.  Most of the time this is from agents who have buyers planning to come in significantly under fair market value on our Jacksonville short sale listings.

As Jacksonville listing agents, and Jacksonville short sale specialists, trying to help our sellers avoid foreclosure, or as buyer agents trying to get our buyers a great deal, we do not want any predetermined price that the bank will accept.  This is setting the deal up for failure unless the buyer is willing to overpay. 

This is the part where we see a lot of confusion coming from the other side.  Many agents and buyers believe that the amount the seller owes is an important factor.  It's not.  Many believe that they have to get a certain amount off of the list price and submit offers that are too ridiculous for the bank to allow the transaction to proceed.

The way to have a bank ultimately approve a contract between the buyer and seller is to write the offer based on what the fair market value of the property is.  When making a decision whether or not to release the lien the lender will have either a BPO or appraisal in the file that tells them what the fair market value is for the home.  Even if this amount is high, it is what they will use in their assessment.  The amount they must receive at the end of the day, so to speak, is what they are looking at.  Depending on the seller's loan type (VA/FHA/Conventional) the net amount they will need to receive is different.  VA has required the highest net of this fair market value historically.  Unfortunately, HUD has changed the guidelines for FHA, raising the acceptable net amounts substantially.   For an FHA short sale (keep in mind we're talking about the seller's financing, NOT the buyers) the amount of time the home has been on the market now also matters as the ratio changes based on this.  For conventional, there is a rule of thumb, but as we've found, some banks require higher than this rule.

It truly is a numbers game for the bank, detached from all emotion.  That is why the BPO or appraisal (once again depending upon the seller's loan type/lender) coming in at true market value is essential.  In a declining market, what will happen if we are working off of a three month old lender's appraisal?  The lender will have an inflated perception of what the home is worth and will have unrealistic demands regarding net proceeds.  Ultimately the transaction will fail and the seller will be that much closer to foreclosure.  The buyer will be incredibly frustrated and the doomed deal will contribute to the rampant myth that short sales don't work.

Jacksonville short sales and foreclosures. It is NOT just the people who bought too much house. This is an inaccurate generalization.

Every day I hear someone else being interviewed on CNBC that states, in some form, that the people being foreclosed on are those who overbought or were "irresponsible."  This is a careless generalization.  Most of the people we encounter in a Jacksonville pre-foreclosure or a Jacksonville short sale situation did not overbuy at all. 

In reality, we are seeing people who have since lost their jobs and can't find work.  We are seeing people who have since had devastating medical problems.  We are seeing people who have since experienced a drastic and unanticipated reduction in income.  We are seeing people who would love to be able to keep their homes.

When these people found out that they had to try to sell their home and reduce their bills they also found out that they couldn't.  The market had already dropped and they owed more than their home was worth.  They did not cause the market drop to the point where they could no longer get out and pay off their mortgage.  But because of the market drop they no longer could sell their home for what they owed. 

This forces those in this position to either give up their home, or explore the option of a short sale.  Either scenario further drives down neighborhood prices. 

The next person to find themselves in the same situation faces an even deeper deficit.  And so the cycle goes.

Popular Short Sale Misconception: Who Is The Owner Of That Jacksonville Short Sale Property?

This is one we've seen and heard quite frequently.  We got it again this week on one of our listings.

In a short sale, the SELLER is the seller.  Confused?  The homeowner is the seller.  Not the bank.  There is a misconception out there, that seems to be pretty common.  Buyers don't always understand that the lender is not the seller.  When the lender is the seller it is an REO, a Foreclosure.

In a short sale, the homeowner is trying to prevent foreclosure.  They have had a change in circumstances which makes it impossible for them to continue to keep the home.  Usually they are not up-to-date on their payments, sometimes they are.  When they realize that they can't keep their home and do not just want to sit back and wait for a foreclosure to happen, and can not get a modification or refinance, some homeowners will attempt to sell their home short.

The lender is not the one responsible for negotiating the contract.  The homeowner is the seller.  The homeowner is who the negotiations take place with when there is an offer on the property. 

The lender's function in a short sale is to release the lien.  This is the same as the lender's function in any other straight resale.  The only difference is they have to make the decision about whether they should release the lien or not given the price, market conditions and fair market value of the property.  If the offer is good and meets specific criteria, and nets the bank a high enough dollar amount, they will usually approve the deal.  When they approve the deal, they are agreeing to release the lien.  This is what it is about.  This is simple, and a non-issue, in a straight resale because why would they not release the lien when they are getting all of their money.  The fact that the bank will not be getting all of their money back is the reason that it is more complicated to get the bank to release a lien on a short sale.

When an offer comes in on a short sale, the negotiation is between the buyer and the seller.  If the buyer and seller can both agree on the price and terms both parties sign the contract and are bound to the terms of the agreement.  The transaction then proceeds.  The only difference is that an extra layer is added because you have to get the bank to agree to release the lien.  That is what makes a short sale take longer.

We have seen short sale offers listing the bank as the seller.  This is not correct.  The homeowner is the one who has to agree to sell the property.  The homeowner is the one who is selling the property.  Not the bank.

We have seen short sale offers (got one this week) where the buyer wants to submit the offer, but refuses to deal with the seller.  They want the seller to submit the offer to the bank because "they want to negotiate with the bank" and "they don't want the seller to decide what price the bank will accept"  This is wrong.  The seller is who the sales contract is with.  It does a buyer no good for the seller to submit an offer to the bank that is not binding on the homeowner who is the seller of the home.  A bank wants to see a legitimate CONTRACT (not an offer no one is bound to).  Without a contract, there is no deal to release a lien for.  The seller is not bound in any way to the deal and can sell the property to any buyer who comes along.  Why would a buyer want to submit an offer to someone who is not even the seller and wait for them to respond when the real seller can enter a contract with someone else to sell the property?  We don't have the answer to this.  We think it's because the potential buyers simply don't understand what a short sale is.

Make sure you are educated!  If you would like to buy a short sale, make sure your agent is a specialist and is well versed in the way a short sale works and very comfortable with the process.  We can help you with any short sale in the Jacksonville real estate market.  Let us know if you need help.

If you can no longer make payments and need to sell your home, give us a call.  Representing a seller in a short sale is a very complicated, detailed job.  Make sure you are giving it to someone who knows how to handle this type of transaction successfully.  Winging it is not an option on a short sale.  You can contact us here.

A Tale of Two Appraisers: Appraising homes in Jacksonville Florida, Distress Sales or no?

When I was looking over HUD's new guidelines last week for FHA short sales, one part particularly bothered me.  The statement was in the document that in appraising a property in the Pre Foreclosure Sales Program no distress sales can be used as comparables.

Well, that sounds like an incredibly stupid statement if you look at the fact that 22.36% of all homes sold in the past year in the Jacksonville real estate market were distress sales. 

In the past month over 35% of all sales were distress sales-either short sales or foreclosures.  For the end of December this number was 31.69%, November was 33.5% and October was 30.59%.

Currently, 53% of Jacksonville area homes under contract are distressed properties.  These number are calculated without taking out builder homes, which I would argue are distressed in that they have lowered their prices and many builders are scrambling just to maintain some sales.  So if we were to extract that number, the number of distressed homes sold would be even greater.

Back to my story.  So after seeing this in the new HUD mortgagee letter issued  at the end of December, I got worried.  How can you not include any distress sales in an appraisal when it is short sales and foreclosures that are selling quite well.  You are eliminating over one-third of all sales.  In addition to that, a home that is in HUD's Pre-Foreclosure program is, itself, DISTRESSED. 

I picked up the phone and called a FHA approved appraiser and asked this question.  She said that rule was nothing new, however, if there are not enough recent sales, you have to use distressed properties.  She said that you shouldn't go back more than three months for comps when appraising a property in this market.

Everything she said agreed with my thoughts.  I felt much better.  Then the following business day, a chance encounter with another appraiser opened my eyes.

When asked the same questions, this appraiser said that she absolutely will not use distressed properties, short sales and foreclosures, because they are not the market.  Whoa!  How wrong she is!  At the end of 2007, she would have been correct.  At the end of 2007 short sales and foreclosures had barely broken 6% of all sales for the entire Jacksonville metro area.  At the beginning of the second quarter of 2008 this number began to increase dramatically taking us to roughly 22% of sales at the end of 2008.  Now distressed properties are very much the market with the numbers continuing to climb.

On a short sale, just hope you get the first appraiser, not the second.  The second will go back a year and pull the highest comps and present that to the lender as the value of your FHA short sale.  This will not accurately present the true fair market value of the home.  The seller will lose because the deal will fall through and they will eventually end up in foreclosure.  The buyer will lose because they will be cut out of a good home at a good price.  The bank will lose because they will have to dump the home at a much lower price eventually.

I didn't realize that there was such a shocking difference in the knowledge and awareness of appraisers in the current Jacksonville market.  I guarantee that the second appraiser does not understand the Jacksonville real estate market at all.  A crucial part of being a good appraiser, like being a good real estate agent,  is having your finger on the pulse of the market.  I have no way of knowing what percentage of appraisers are like the first and what percentage are like the second.  Like everything we will just have to see how this unfolds.  I definitely see appraisals come in too high all of the time, although most come in at values that are not high enough to blow the deal.  I even recently heard a story about 2006 values being used by the lien holder(s) to value the home in today's market for short sale purposes.  This is absolutely ludicrous and should never happen.

This is just one of the many challenges a great agent has to learn to maneuver to successfully complete short sales.  If you are in this situation, or would like to pick up a short sale home at a great price, make sure your agent is a specialist and has the knowledge to successfully complete a short sale transaction or your chances of being successful go down. 

HUD Issues New FHA Short Sale Guidelines Making Numerous Changes and Increasing Ratios For Sales Price To Fair Market Value

The changes to the HUD rules for FHA mortgage short sales supersede the prior rules of the Pre-Foreclosure Sale Program.

The ratio of sales price to fair market value has gone up!  Previously the sales price had to net 82% (after closing costs) of fair market value of the home.  Now the ratios have gone up to 88%, 86% and 84% of fair market value.  (This is okay if the appraisal is realistic, but since many come in high, the extra 2% was helpful)  The ratio used depends on the amount of time the home has been on the market.  Here is the way the tiered system works:

• For the first 30 days of marketing the property, the lender may only approve offers that will result in minimum net sales proceeds of 88% of the as-is appraised fair market value as determined by a FHA approved appraiser.

• During the next 30 days of marketing, the lender may only approve offers that will result in minimum net sales proceeds of 86% of the as-is appraised fair market value.

• For the remainder of the Pre-Foreclosure Sale marketing period, the lender may only approve offers that will result in minimum net sales proceeds of 84%.

• Even if the ratios are met, HUD is giving the lender the discretion to deny or delay a sale that meets the minimum 84% ratio if they feel that continued marketing will produce a higher net sales price.

They have defined what allowable closing costs are that go against the proceeds to arrive at a net proceed amount.  

Closing costs items specifically NOT allowed to be charged to the seller's side are:

• Repair Reimbursements or Allowances

• Home Warranty Fees

• Discount points or loan fees for non-FHA financing  (They WILL now allow up to 1% of the buyer's loan amount in closing costs to the seller's side ONLY IF the buyer is buying the home with a new FHA-insured mortgage)

• Lender's Title Insurance Fee 

For agents that are familiar with FHA short sales, they have eliminated the 63% for fair market value to outstanding mortgage balance (including unpaid principal and accrued interest).  With the declining market, this change is a very favorable change because previously this 63% requirement could create problems.

The new guidelines specifically state that if the Pre-Foreclosure sale is unsuccessful, after a homeowner participates in good faith, and the home ultimately forecloses, neither HUD nor the lender will be pursued for deficiency judgments.  It also states that a pre-foreclosure sale has to be reported to the national credit bureaus as a "Short Sale."

There are many other guidelines that are outlined in this 18 page lender letter, but these are the important changes that relate to how a short sale offer must be written by the buyer's agent (or negotiated to this point by the knowledgeable seller's agent) to qualify.  It is pointless to submit an offer on a short sale property when it is a FHA loan if the offer does not meet this basic criteria.  Another reason to make sure your agent completely understands the short sale process.  Whether you are buying or selling a short sale property, you should make sure your agent is a trained specialist and thoroughly understands the process to save yourself months of frustration and the increased likelihood that the short sale will be unsuccessful.

News For Jacksonville Short Sales- Fannie Mae Is Testing Short Sales of Homes. Study Finds Short Sales Result In Losses of 19% For Lenders, Foreclosures Result In Losses of 40% On Average

CNBC just ran a small story about how Fannie Mae is testing short sales of homes.  They were reporting that this keeps lenders from having to take the home back and finds a new buyer for the home.  They reported that the average short sale results in losses of around 19% to the lender while an average foreclosure results in a loss of around 40%.

This is what we have been saying.  Short sales are truly a win-win for every party involved, the buyer, seller and the lender.  So with this being the case, the question is why are some lenders still so slow to process and approve short sales?  Many lenders are doing much better at this.  The ones that aren't really need to streamline their process to allow for faster approval and closings since that is what turns off many buyers currently.  Why not get the process down to under a month from start to finish?  Rumors about the impossibility of short sales are rampant.  While short sales are not at all impossible...the actions and performance of banks are why these rumors got started in the first place.

Banks need to sharpen it up.  Why aren't they being held accountable for increasing profits and reducing losses?  The fact is that if a home is sold in a short sale it never has to go on the banks books and the bank mitigated their loss. 

Why are stockholders standing by and allowing them to sit on short sales, lose buyers who are willing to pay around fair market value, then foreclose on the house later...which adds significantly to the loss.  They then end up selling it later for lower than the short sale price multiplying losses! This is what is happening when banks don't approve good fair short sale deals.  You don't fix bad decisions with more bad decisions.  They need to be held accountable for knowingly making decisions that increase the losses to the bank.

Worse is the second mortgage holder.  Sometimes this is a straight second mortgage, sometimes a HELOC.  In this market many of these loanholders will never see a penny if the home is foreclosed on.  Yet some of these banks either refuse to accept the short sale, demand a large payoff that is out of the realm of possibility in the deal (and the seller obviously doesn't have it or they would be making their payment), or insert crazy terms or conditions that wreck or threaten to wreck the deal.   This type of behavior by certain banks is what gives the short sale a bad reputation.

Jacksonville short sales are great deals!  While not all Jacksonville Short Sale transactions will  be successful, most Jacksonville short sales will be successful when done correctly.  We can help whether you are a Jacksonville short sale buyer or are a Jacksonville homeowner who is upside down on your home but need to sell. 

January 8, 2009 Jacksonville Florida Real Estate-Jacksonville Short Sales And Jacksonville Foreclosures Continue To Be A Great Opportunity For Buyers!

Today Jacksonville distressed properties (Jacksonville Short Sales and Jacksonville Foreclosures) represent almost 55% of all Jacksonville homes for sale that are under contract.  Only 45% of pending homes are straight resales.

Over 25% of homes on the Jacksonville real estate market are short sales or foreclosures.  This number continues to rise weekly, sometimes daily.  Between 32-33% of the homes sold in the past 30 days have been Jacksonville short sales or Jacksonville foreclosures.  Of this number 37% were short sales. 

Jacksonville short sales can be successful  (no matter what you hear!) and can be a great deal for buyers!  Hire an agent who knows and understands how to successfully complete a Jacksonville short sale.

Jacksonville short sales are much, much harder for the agent.  It is a lot more work for what is usually less pay.  A multitude of obstacles can and will come up in a Jacksonville short sale transaction.  Every day is a new challenge.  Agents have to be on top of things, sharp and able to think outside the box to increase the closing rate of Jacksonville short sales.  Agents who are able to maneuver the challenges are very successful in closing Jacksonville short sale transactions. 

If you are a buyer, you have to consider Jacksonville short sales these days if you don't want to overpay for your home.  We can help you with a Jacksonville short sale transaction.  We think they are great...and such a win-win...for both the buyer or the seller.  Are they all successful?  Of course not.  But no transaction is bulletproof in these volatile times.  Let us get started helping you today!

The overall Jacksonville real estate market has a pending to active ratio of only 13.82%.  Jacksonville distressed properties have a pending to active ratio of just under 30%!  This is proof that this is generally where the deals are for buyers.  What are you waiting for?  Contact us today to see the Jacksonville Short Sale and Jacksonville Foreclosure opportunities that are waiting for you.

Jacksonville Short Sale Buyers need to understand they can't just walk-away and if they do, what it means to the seller.

Today a buyer for one of our Jacksonville short sale properties just "changed their mind."  There was no contractual reason, so the buyer will lose their binder deposit that was put down at the time of the contract.  But that doesn't make up for the fact that the sellers have lost a month of marketing time and are a month closer to foreclosure.

Jacksonville short sales are serious business.  A Jacksonville short sale buyer needs to understand the importance of being serious when they put down a short sale offer.  I've heard some agents joke that since short sales take so long, they just get their buyers into several contracts.  Kind of like throwing darts and seeing if one sticks.  This is entirely unacceptable and this practice needs to stop.

When you put down an offer on a short sale and it is accepted, the status in the MLS has to be changed to "Contingent" or "Pending."  This turns away other buyers.  Why would you want to see a home already under contract when there is plenty of inventory to chose from, right?

Once the home goes under contract, buyers quit coming.  You have effectively taken the home off of the market.  The short sale package is submitted and the listing agent begins to work with the bank to negotiate the short sale.  This is very detailed and time consuming work, and a great deal of effort, and number of hours,  is put into this by the listing agent.  Depending on the bank the answer can come back in a week, or it could be a couple of months.  This can not be controlled by the listing agent, but the wait can be minimized by a knowledgeable listing agent correctly and completely putting the Jacksonville short sale package together and submitting it promptly to the bank.

In the mean time the home moves closer to foreclosure.  The payments are usually still not being made.  Every day is another day that the seller is late.

So when the buyer "changes their mind" the seller does not get any of this time back.  They are unquestionably harmed by this behavior.  This is especially true if the educated and knowledgeable listing agent made sure the offer was at a price that would be acceptable by the bank and the package was correctly submitted.  These Jacksonville short sales are usually approved.  So what has happened is that the buyer walks away from an offer that would have been accepted by the bank.  When the contract falls through the bank usually continues the foreclosure process, if you were lucky enough to have it halted due to the short sale.

While the home was not on the market due to the slippery buyer, a sincere buyer who might have purchased the home didn't even have an opportunity to see the home.  The seller lost serious buyers because of a buyer who doesn't take it seriously and has no respect for the seller who is experiencing a hardship and trying desperately to avoid foreclosure.

Do NOT be this buyer.  If you don't fully intend on following through with a contract...DO NOT put in an offer in the first place.  The ramifications to the seller are so much more severe than to a straight resale property where the seller is not behind on payments.  Please be respectful of this fact.

We have gotten calls from agents who told us that they were putting in several offers on several short sales with the intention of getting them all under contract.  They just want to see what closes first.  We explain to them why this is not an acceptable option.  Generally they understand.  Just this week we found out that a buyer that we have under contract on one of our other short sale homes closed on a different property.  We had been in constant contact with the buyer's agent.  We are STILL technically under contract because a release has never been signed.  This agent could have gotten the buyer into a lot of trouble.  They had binding contracts on multiple properties and were obligated to buy both.  This is a dangerous game.

The purchase contract states that "In the performance of the terms and conditions of this Agreement each party will deal fairly and in good faith with the other."  This is not dealing in good faith.

If you are contemplating buying a Jacksonville short sale, please be sure you chose an agent who is experienced in short sales and knows how to handle the transaction.  This is even more important if you owe more on your home than it is worth and need to sell.  Successfully closing a Jacksonville short sale transaction requires dedication, education and experience.  Please make sure your agent qualifies.

If we can help you buy a Jacksonville Short Sale, let us know.  We would be happy to help you purchase a Jacksonville distressed property for a bargain price.  If you are no longer able to afford your home and have to sell your Jacksonville Real Estate and suspect that you owe more than your home is worth, please let us know.  We can explain the process and begin trying to find your buyer.