OfflineForeclosures are still moving along in every state. Some states are getting ahead of the curve, with foreclosure activity down in the first quarter of this year and new delinquencies down as well. One activity that’s contributing to this trend is the new attitude by banks as regards short sales.
From 2007 into the last quarter of 2011, short sales worked for fewer than 25% of buyers of all types. Many investors avoided them, as banks took months to respond to offers, made repeated demands for the same paperwork, and generally just seemed like they had no desire at all to sell short, preferring to go on to foreclosure.
Things began to change going into 2012. Banks started to examine the short sale compared to foreclosure, and found that there could be significant savings in taking a short payoff rather than going through the foreclosure process. This is particularly true since the settlement with the states Attorneys General, and an overall more stringent process for making sure foreclosures are documented and completed properly.
Now, instead of dragging their feet and appearing to want to discourage short sales, lenders are encouraging them. Some are selecting certain early delinquency borrowers and sending them letters suggesting that they find a buyer to make a short sale offer and avoid foreclosure.
But, the big news is from Bank of America. Bank of America is offering some distressed homeowners payments of up to $30,000 if they sell their homes in a short sale and avoid ending up in foreclosure. The program was first tested in Florida last year. B of A will pay between $2,500 and $30,000 to selected homeowners in trouble with their mortgages. It’s being called a relocation payment.
This should put a whole new emphasis on short sales. Now the homeowner can actually walk away with some money to start again, when in the past they were not allowed to take away any cash if the mortgage wasn’t paid in full. This should make it much easier to convince a homeowner that a short sale is a good idea.
If you’re marketing for distressed home sellers, ramp up your ads and signs to push the short sale idea. Trying to locate those homeowners who have been offered this option could bring you some properties in good condition and ready for a flip or tenant move-in. Some investors are even renting the home back to the previous owner. Getting a relocation payment not to relocate is one way for homeowners to get over on the banks a little. However, look for a clause somewhere to stop this.
Can you please elaborate on renting the home back to the owner if they already can't afford it?
Chances are that they couldn't afford it because they got an ARM loan, and when it reset, it jacked their monthly payments through the roof!
But,
As we would be purchasing on the short sale, we would be getting it at a discount, and so able to charge a reasonable amount for rent that they can afford, and will still cover expenses.
So -say a homeowner was drowning under $4000/month payments -
WE buy it on the short sale for a third or half, and we are able to rent it back to him for $2000/month, which he can afford. AND we DON'T fall for those evil ARM loans, we either have the cash in hand, or use one of the other techniques to find the money that we've learned from Dean!
Does that help?
Alton,
Keep in mind that when someone is being foreclosed on, they have lost the option, in most cases, of just making the monthly payment which in some cases they now are able to pay. Versus having to pay all the back payments or even the loan in full plus extra fees from the legal process.
So, renting it back to the owner may or may not be an okay thing to do. If they want to stay offer them to L/O.
Really each situation is unique and it depends on your exit strategy.
Much success,
Joshua
Looking forward to purchase, fix and keep!!!
Thanks B of A (and others) for finally waking up and starting to do what makes sense. And thanks, Dean, for keeping us updated on the best investment strageties to pursue.
Short Sales are my specialty and I have been focusing on them for 2 years now. There are many strategies that you can use to profit from short sales... Lease Back, Sub to, lease purchase and of course negotiating the short sale and wholesaling or purchasing the property.
Short Sales are the majority of the market today so we must learn how to leverage them instead of bypassing them.
Do not fear, for I am with you; do not be dismayed, for I am your God.I will strengthen you and help you; I will uphold you with my righteous right hand. Isaiah 41:10
http://realwholesaling.com FREE wholesaling tips and resources!
To your success,
Carol Stinson
Can you help me how would I work this deal.a friend of mine told me she can not get the bank to help her and she is so upside down with her house. She is going to miss a payment in hopes that they will help her if not she is going to walk away from it. How could I go about helping if I have no money and no credit?
I have been following some markets across the country to help out some students. In California the numbers show what has been going on. The supply is definitely going down. Here are the numbers reported:
CAR's Pending Home Sales Index was down 3.8 percent from May to June, but at 121.4 was up 4.7 percent from a year ago. An index of 100 is equal to the average level of contract activity during 2008.
REO's accounted for 20.2 percent of pending sales in June, down from 29.2 percent a year ago. Short sales were up, but only slightly, accounting for 21.4 percent of sales statewide, compared with 20 percent a year ago.
All told, distressed properties (short sales, REOs and others) accounted for 42 percent of pending sales, down from 49.5 percent a year ago.
"Pending sales declined in June, partly due to a lack of housing supply -- especially in REO properties," CAR President LeFrancis Arnold said in a statement.
"The shortage of REO inventory is also putting upward pressure on bank-owned home prices, with the median price of REO properties showing a double-digit year-over-year gain of 11 percent in June."
http://www.inman.com/news/2012/07/24/decline-in-reos-blamed-sagging-cali...
We can understand why there is such a demand for the properties in california right now, it is almost a rush to the bank when the stock market crashed.
Keep moving forward!
I always say Keep Moving Forward! Never Give Up On Your Dreams!
As Matt Larsen says "Feed the Need" - Edge 2013
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