Fred Sed's Blog: October 2009

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My house is really nice, why is the short sale offer so low?

Sellers often have an emotional attachment to their home and often feel a short sale offer is too low. It is important to remember a few things. First, the seller in a short sale can never receive any money in the transaction, therefore it should be of very little concern at what price the short sale is done. The only real exception is when the seller has tax liability concerns. Otherwise, the price should not matter to the seller.

The important factor in a short sale is whether the lender will accept the price. Lenders OFTEN accept prices for short sales that normal homeowners or Realtors are surprised at. Discounts of 30% are no longer uncommon. This happens for several reasons:

Sellers are often in denial about how bad the market really is for housing and therefore how far the value has declined.

Lenders don't like the foreclosure process any more than homeowners do (especially in Southern California). Lenders incur substantial costs during a foreclosure process that can last more than 12 months. They have attorney fees, filing fees, publication fees, lost interest on the money that is tied up, property taxes, insurance, maintenance costs as well as the potential for vandalism of the vacant home. This is all BEFORE having to try to sell the home as a bank owned REO and pay commissions to do that. A short sale is a way to avoid some or all of these costs. If a lender calculates his cost of eviction at $50,000 for a house, they will often take a $40,000 loss on a short sale instead and they will be better off.

Lenders are emotionless businesses. They simply look at the numbers and make a decision. If the numbers favor a short sale, they will accept even if it means taking a large loss. They do not want to wait, they want the deal done NOW. These numbers and factors are what a short sale investor is focused on.

In a poor housing market, most of these numbers have very little to do with how nice a home is. The ultimate goal is to sell this home and help the seller satisfy there commitment to the bank and avoid foreclosure.

My house is really nice, why is the short sale offer so low?

Sellers often have an emotional attachment to their home and often feel a short sale offer is too low. It is important to remember a few things. First, the seller in a short sale can never receive any money in the transaction, therefore it should be of very little concern at what price the short sale is done. The only real exception is when the seller has tax liability concerns. Otherwise, the price should not matter to the seller.

The important factor in a short sale is whether the lender will accept the price. Lenders OFTEN accept prices for short sales that normal homeowners or Realtors are surprised at. Discounts of 30% are no longer uncommon. This happens for several reasons:

Sellers are often in denial about how bad the market really is for housing and therefore how far the value has declined.

Lenders don't like the foreclosure process any more than homeowners do (especially in Southern California). Lenders incur substantial costs during a foreclosure process that can last more than 12 months. They have attorney fees, filing fees, publication fees, lost interest on the money that is tied up, property taxes, insurance, maintenance costs as well as the potential for vandalism of the vacant home. This is all BEFORE having to try to sell the home as a bank owned REO and pay commissions to do that. A short sale is a way to avoid some or all of these costs. If a lender calculates his cost of eviction at $50,000 for a house, they will often take a $40,000 loss on a short sale instead and they will be better off.

Lenders are emotionless businesses. They simply look at the numbers and make a decision. If the numbers favor a short sale, they will accept even if it means taking a large loss. They do not want to wait, they want the deal done NOW. These numbers and factors are what a short sale investor is focused on.

In a poor housing market, most of these numbers have very little to do with how nice a home is. The ultimate goal is to sell this home and help the seller satisfy there commitment to the bank and avoid foreclosure.

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My house is already listed for sale on the MLS but isn't selling; can I do a short sale?

Yes, a short sale in this scenario is relatively common. Some lenders even require that a house be listed for sale before approving a short sale in order to show that a discount is necessary.

A typical short sale situation is one like this (as used before):

Homeowner purchases a home for $600,000 in 2004 with 5% down payment.

In 2005, value has increased and interest rates have declined so the homeowner refinances to pull cash out. Home value $660,000, new mortgage $660,000.

In 2006, homeowner gets laid off and continues to make payments from savings.

By 2007, savings are gone and still no job. Homeowner begins to miss payments and decides to sell home for the former appraised value of $660,000.

As the months pass, the home is not sold because values have fallen to $600,000 and after 3 missed payments, the foreclosure process has begun. The Real Estate Agent presses the homeowner to lower the selling price, but that would require the homeowner to come up with cash at closing to cover the mortgage shortfall.

Homeowner is stuck in the house. He can't sell and can't catch up with the payments, and the foreclosure is proceeding toward eviction.

Given the above example, you DO NOT want to wait until the very end to consider a short sale. If you feel your back is against the wall and you need a way to avoid foreclosure, do contact us.

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What is "Financial Hardship" and why is it so important?

"Financial Hardship" is a critical part of the short sale equation. No matter what you hear about banks "not in the business of owning real estate", etc., they DO NOT give homeowners a break easily. They require GOOD REASON to give a discount for a short sale. They have entire departments called "Loss Mitigation", which means their entire job is to reduce the loss the bank takes on a bad loan. Giving big discounts to sellers increases the loss on a bad loan, so they don't take it lightly.

The ONLY reason a lender will agree to a short sale is if they determine that the short sale will net the more money that proceeding with the foreclosure. Understanding the homeowner's financial hardship is a big part of the lender estimating whether they will be paid in full for the mortgage.

IF THERE IS NOT A LEGITIMATE FINANCIAL HARDSHIP, A LENDER WILL NOT SHORT SALE EVEN IF THE HOME IS WORTH LESS THAN THE MORTGAGE BALANCE. Quite simply, the lender will make the borrower pay the shortfall if there is no hardship.

Many homeowners try to use a short sale as a "get out of jail free" card to dump their poor investment. Lenders will not allow this and it is a waste of time to try. If you are employed and have some assets, but you have simply lost value on your home and want to sell, YOU PROBABLY CANNOT SHORT SALE. If you are current on your mortgage, IT IS VERY DIFFICULT TO SHORT SALE. Lenders need to see that you simply cannot pay them back before they will short sale.

IF YOU ARE HAVING TROUBLE WITH MAKING YOUR PAYMENTS OR ARE HAVING ANY FINANCIAL DIFFICULTIES A SHORT SALE MIGHT BE YOUR BEST OPTION.

CONTACT US TODAY TO SEE IF YOU CAN QUALIFY. OUR SERVICES ARE FREE AND EVERYTHING IS KEPT IN THE STRICTEST CONFIDENTIALITY.

CONTACT FRED SED AT 949-274-3733 OR EMAIL AT FREDSED@PGCOASTAL.COM

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1. What is a Short Sale?

A short sale is the process by which a homeowner can sell a house for less money than he actually owes on the mortgage(s). This is done by the seller and the listing agent providing proper documentation to the mortgage lender(s) to convince them to reduce the mortgage balance to allow the sale. The mortgage lender (or bank) actually takes a loss (or write-off) on the mortgage because the value of the home has fallen below the mortgage balance AND the homeowner is in a poor financial condition that will not allow him to continue to pay on time.

If the bank approves the discount on the mortgage, the home can be sold for a lower price without the seller having to come up with cash to cover the shortfall, and the mortgage is satisfied and the foreclosure process stops.

2. What type of situation is the short sale best for?

Most short sales are done on properties in foreclosure. This means the homeowner is at least 3 payments behind and the foreclosure suit has been filed by one of the mortgage lenders. Recently, more mortgages that are simply behind or "in default" are considered short sale candidates without actually being in foreclosure.

Also, the homeowner typically has negative equity or no equity in the home. In other words, the total balance owed on the mortgages is equal or greater than the price at which the house can be sold. This situation is growing increasingly common due to the easy availability of 100% mortgages (no money down) as well as the recent decline in prices. This is particularly prevalent in the Southern California area, which has a large glut of homes for sale and where prices have declined 10%-30% in the past year.

In addition, the homeowner must have some type of financial hardship that is preventing him from paying the mortgage. This is commonly job loss, medical bills, disability, or some other hardship.

A typical situation for a short sale is this:

-Homeowner purchases a home for $600,000 in 2004 with 5% down payment, the mortgage balance is $570,000.

- By 2005, the home's value has increased and interest rates have declined so the homeowner refinances to pull cash out. Home value $660,000, new mortgage $660,000.

- In 2006, homeowner gets laid off and continues to make payments from savings, hoping to land a new job soon.

- By 2007, savings are gone and still no job. Homeowner begins to miss payments and decides to sell the home for $660,000.

-As the months pass, the home has not sold because values have dropped back to $600,000 and the foreclosure process has begun. The Real Estate Agent presses to lower the selling price to entice a buyer, however that would require the homeowner to come up with cash at closing to cover the mortgage shortfall.

-Homeowner is stuck in the house and the foreclosure is proceeding.

If your situation sounds at all like this one, you might benefit from a short sale, Call Fred Sed at 949-274-3733.

Fred's Short Sale Video's

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Orange County Short Sale Realtor Specialist - Homeowner Hardship

*Have you lost your job?

*Have you taken a reduction in income?

*Do you have any medical complications?

*Are you going through a divorce or death in the family?

*Did your interest rate on your mortgage adjust upwards?

*Are you in financial distress at the moment or feel that you will be in the near future?

*Are you in foreclosure or heading toward it?

If you feel that any of the above do relate to you and you are a current homeowner, then contact us today!

We have been and currently are successful in assiting homeowners avoid foreclosure and avoid

damaging there credit for a long period of time.

Contact Fred Sed Today, Your Orange County Short Sale Realtor. Fred can help you with Foreclosure

Prevention.

Fred's Short Sale Video's

Fred Sed

(949) 274-3733

FredSed@PGcoastal.com

www.FredSed.com

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Orange County Short Sale Realtor : Foreclosure Prevention Consultant

Are you heading down the path toward foreclosure?

Are you wondering what options you have left?

Do you feel that the only option you have is to hand your keys over to the bank?

Are you financially unable to make your mortgage payments any more?

Whatever the reason DO NOT ALLOW YOURSELF TO FORECLOSE, so many homeowners are not aware of

the real options that they have when they can no longer afford there mortgage and are heading toward

being foreclosed on.

WE CAN HELP YOU! We specialize in assisting homeowners avoid foreclosure by way of a Short Sale. A short sale is when a homeowner can not sell the home for the amount that is owed to the bank, because the value has decreased below that amount. So the only way the property can be sold, is if the bank approves a Short Sale and allows the property to be sold for less than what is owed to the bank. Once successful then homeowner is able to sell the home and avoid foreclosure.

Please contact Fred Sed 949-274-3733, your Orange County Short Sale Realtor Specialist, to see if you qualify.

It is your duty to make sure if you qualify for a Short Sale. This service is FREE for you as a homeowner and there is NO COST for you to go through this process.

YOU HAVE NOTHING TO LOSE AND SO SO MUCH TO GAIN, SO TAKE ADVANTAGE OF THIS FREE SERVICE!

Fred's Short Sale Video's

Fred Sed

(949) 274-3733

FredSed@PGcoastal.com

www.FredSed.com

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Do you handle houses in my area?


Our focus is in Orange County, Los Angeles, and the Inland Empire areas; however, we will consider listings in other areas of Southern California. In addition, we work with other short sale specialists in the region and can often refer your case to another Short Sale Realtor if we cannot help you.

We typically need to have some knowledge of the local real estate market you are in to be able to make a convincing case to a lender to short sale your mortgage.

Do you handle duplexes, apartment buildings, condos or commercial property?

We do handle all residential properties in all price ranges, but currently we do not handle commercial properties.

To see if we might be able to handle your multi-unit property contact us.

IF YOU ARE HAVING TROUBLE WITH MAKING YOUR PAYMENTS OR ARE HAVING ANY FINANCIAL DIFFICULTIES A SHORT SALE MIGHT BE YOUR BEST OPTION.

CONTACT US TODAY TO SEE IF YOU CAN QUALIFY. OUR SERVICES ARE FREE AND EVERYTHING IS KEPT IN THE STRICTEST CONFIDENTIALITY.

CONTACT FRED SED AT 949-274-3733 OR EMAIL AT FREDSED@PGCOASTAL.COM

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Can't I just go down to my branch or mortgage broker and talk to them about reducing my mortgage?

Unfortunately, things don't work that way anymore in the banking business. Once you obtain a mortgage, it typically gets bundled with other mortgages and sold to other banks or investors. Oftentimes, the company to which you make your payments is not even the bank who holds your mortgage; they are simply paid to "service" the loan.

Also, once you mortgage lender begins the foreclosure process, the file is turned over to a loss mitigation company so the "lending" departments or the branch no longer have anything to do with the loan.

All negotiations regarding the short sale are done between the Listing Agent and whatever loss mitigation or asset management company works for the lender.

IF YOU ARE HAVING TROUBLE WITH MAKING YOUR PAYMENTS OR ARE HAVING ANY FINANCIAL DIFFICULTIES A SHORT SALE MIGHT BE YOUR BEST OPTION.

CONTACT US TODAY TO SEE IF YOU CAN QUALIFY. OUR SERVICES ARE FREE AND EVERYTHING IS KEPT IN THE STRICTEST CONFIDENTIALITY.

CONTACT FRED SED AT 949-274-3733 OR EMAIL AT FREDSED@PGCOASTAL.COM

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12.Who owns the house after a short sale?

The purchaser of the house is the owner after a short sale just as in a normal sales transaction. The mortgage lender is paid off and the previous homeowner moves to a different home.

13. What do I do about my back property taxes when I do a short sale?

Just as in a normal home sale, property taxes are the responsibility of the homeowner until the date the sale is closed. Then they become the responsibility of the buyer or investor.

If your property taxes have not been paid this will affect the negotiations between the buyer and the bank, so you must inform us or any buyer of those taxes owed.

IF YOU ARE HAVING TROUBLE WITH MAKING YOUR PAYMENTS OR ARE HAVING ANY FINANCIAL DIFFICULTIES A SHORT SALE MIGHT BE YOUR BEST OPTION.

CONTACT US TODAY TO SEE IF YOU CAN QUALIFY. OUR SERVICES ARE FREE AND EVERYTHING IS KEPT IN THE STRICTEST CONFIDENTIALITY.

CONTACT FRED SED AT 949-274-3733 OR EMAIL AT FREDSED@PGCOASTAL.COM

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LADERA RANCH REAL ESTATE FOR RENT / LEASE

FRED SED 949-274-3733

There is no cost to you as the potential tenant/renter, which means our services to you would be free. Our fees are paid for by the owner/landlord of the properties. For additional information, questions, or if you would like to set up a time to preview any property please contact Fred Sed with Fairview Realty at 949-274-3733.



(To reference a property, use the MLS # that is located next to the pictures. It is in bold and it starts with a letter then a series of numbers)

LADERA RANCH LEASES, LADERA RANCH HOMES FOR RENT, LADERA RANCH RENTALS

CONTACT FRED SED 949-274-3733 FOR ADDITIONAL INFORMATION OR TO SCHEDULE A SHOWING!

*Subject to credit check fee of $15.00 per person over 18.