Make sure your landlordship starts out on the right foot

What to Do Better the Next Time You Negotiate With Your Tenants

Due to uncertainty in the markets, renting has become more popular and more of a neccessity than ever. Renters today commonly find leasing less expensive and more stable than owning and former homeowners may find that renting is a more reassuring option after losing confidence in homeownership.

Many homeowners find that their life circumstances have changed and their homes no longer suit them but because they are low on equity, they cannot afford to sell. So renting is a viable alternative to selling via short sale or foreclosing.

In June 2010 Trulia called Seattle the 3rd most renter friendly area in the nation and Zillow reports that in December 2011 the median rental list price in Seattle for a single family residence was only $1400/mo. This is far less than the average mortgage amount based on the current median home price in King County and current interest rates.

New landlords can curb the competetive renter’s market to their favor by implementing the following tips the next time they go to negotiate their lease:

Super Landlord Tip #1:  Include in your lease the following wording: “Tenant shall be required to pay the landlord a service charge of $75 if it becomes neccessary for the landlord to deliver a legal notice for any violation of the rental agreement.” I had a tenant that consistently paid her rent 5-10 days late every month because she was just the type of person who was chronically behind. Around the 10th day I would deliver the ”3 Days to Pay or Quit” notice and sure enough I would get the rent money the next day. I beleive if I had added this languange into the lease up front, she would have had significant incentive to not be late and I would get paid on time every month. Or I would have had an extra $500 in my pocket.

Super Landlord Tip #2:  Put together a list of 5-10 churches or agencies in the area who will help residents who are unable to pay their rent one month. This can and does happen even to good tenants. Times are hard and life happens. Although it’s frustrating and you don’t want to make it a habit, assisting the tenant if they apear unable to pay will increase the chances of you getting paid rent.  When you have a tenant that has a good track record of paying rent but has a legitimate problem one month, give them the list.

Super Landlord Tip #3:  Charge $50 per person for a tenant screening even though it’s typically $25-35 per person. I think at the $50 mark it gives people pause and you’ll be able to weed out the tenants who are serious. Oh yeah, and actually DO the tenant screening including the credit and criminal checks.

Super Landlord Tip #4: Make the tenant feel like they are a ”preferred” tenant.  Write into the lease that if they pay on time every month and have no complaints against them for 1 year, they will receive a special service such as a free carpet cleaning. In addition, always let them know that if they pay ontime and have no complaints, you would be happy to write a glowing recommendation for them to their next landlord or employer.

Super Landlord Tip #5: Lease your parking spaces and storage units seperately if you’re renting a condo. If you have a parking space or two or a storage unit, rent that for an additional $35-75 month in order to generate more income. This is in keeping with most apartments in the Seattle area.

Super Landlord Tip #6: Ask tenants if they would like a ceiling fan, alarm system, espresso machine, furniture or tv added to their monthly rental. If they say yes you’ll recover your expenses within months and profit thereafter.

Super Landlord Tip #7: Make sure that in the lease agreement it states that the tenant must give the landlord at least 45 days notice before leaving because most of the time the 20 days notice that is required by law just isn’t enough time for a landlord to regroup and prepare for the next tenant. Also make sure that there is wording in the lease that allows you to show the home to prospective tenants (while the tenant is still living there) at a time and date that’s predetermined or mutually acceptable. For example the landlord would be able to show the property between 1pm and 3pm on the 2 Saturdays prior to the tenant vacating.

Super Landlord Tip #8: Be on good terms with your tenants and communicate. Be more than just the landlord collecting their money. Make sure that your tenant knows that they can come to you if they need anything within reason or see changes or problems down the pipeline.  If the lines of communication are open you’re more likely to get courtesy calls when they’re going to be a day or two late paying rent, rather than you chasing them down and losing sleep wondering what’s going on with your renter.

Super Landlord Tip #9: Trust your gut. If a prospective tenant shows up to the showing with their steady girlfriend who owns 2 giant dogs and the tenant says that he is going to be the only one living in the home and declines to pay a pet deposit, your inner voice is likely going to say ”there is a pretty good chance the girlfriend is going to be here in home with him most of the week and likely those dogs are going to be on my hardwoods.” And you’d be right. So although the single tenant will be the person responsible on the lease, clarify up front in the lease that the girlfriend, by name, will be able to stay in the home but the dogs will not. Or whatever you agree to. And even if they agree to not have the dogs in the home, increase the damage deposit because your gut is telling you that those dogs will be there at least some of the time.

Super Landlord Tip #10: In the lease, require that they have renters insurance with the landlord listed as ‘additional insured’. This way if they let their insurance lapse, you will be notified. Also, if there is damage to the house, the claim can be made on their insurance in most cases, not on the landlord’s.

Seattle Foreclosure has several offers, 2 all cash

Homebuyers: Be Prepared to Make A Few Offers Before Getting “Accepted”

A few weeks ago on Trulia a buyer wrote in asking about the number of offers that buyers today generally have to make before they have an offer accepted. They said that they have been looking for quite some time and it seemed like when they finally found something to put an offer in on, their offer got beat out by cash investors. They went on to say how frustrating that was and because supply is so limited right now, it may be months before something comes on the market that meets their needs.

Sounds about right to me. In my business I am seeing buyers who are looking for fixers/mild fixers/foreclosures in “in demand” areas,  under $400k, submitting about 3-6 offers before going under contract with a seller. A broker friend of mine wrote 9 offers for one of her clients before the 9th was accepted. If you think it’s a really good deal, chances are others do too. Especially investors with cash. If you’re using financing, it’s pretty tough to win out against a cash buyer. But ignore that for now. You can only do what you can do.

So are you doing all that you can do?

Here are some suggestions for beating out the other offers when you throw your hat in the ring.

1. Consider Short Sales - We eventually decided that for 2 of my buyers having the same troubles, that taking our chances with short sales was the way to go – at least until there is more inventory. Short sales can be uncertain, low probability, time consuming, and generally pretty frustrating but they are also less desireable. And therefore there is less competition.

2. Full Price Offers (or Better) with Aggressive Terms- Are you writing full price offers or better? This may be tough to think about because you’ve been told that we’re still in a buyer’s market (technically we’re no longer in a buyrers market, we’ve just barely entered into a balanced market) but any multiple offer situation you are in will likely require you to submit an offer above asking price.  I have had buyers who insisted on writing offers that we thought were too low, only to find out we were right. Are you willing to waive inspection or do a pre-inspection? Are you supplying a solid lender approval letter?

3. Hire a FREE Realtor - Are you working with a real estate broker?  If not, you’re missing out on valuable negotiation assistance, advice, and market info.  A colleague of mine is working with a group of out-of-state-buyers and they’ve been so misinformed about the Seattle market, they’ve lost out on a couple of properties.  The misinformation can stem from media outlets, friends, family, co-workers, etc.  Buyers also tend to rely to heavily on data and statistics about the greater Seattle area when in fact there are micro-climates and neighborhoods throughout the Seattle area that have very little to do with the larger picture. A broker specializing in your area can really pinoint market stats for your area, help you set expectations, and get you in sync with the current marketplace.

4. Take advantage of First Look Initiatives - On certain foreclosures, the banks or Fannie or Freddie will give owner occupied buyers the first shot. Duing this phase which is anywhere from 5-30 days after the home is listed, the bank will only consider owner occupied buyers,  not investors. On these homes getting the offer in ASAP usually knocks out the investors who often have a waiting period, with owner occupied buyers being favored.

5. Go With The Flow- By now you know that if you fall into this market, you may get put through the ringer a little. I suggest that all buyers adopt an attiude of “High Involvement, Low Investment”. Meaning that they do all that they can to make the deal, but they do not get emotionally devastated if the deal doesn’t happen. This attitude also allows the buyer an upper hand in negotiation.

6. Give Yourself More Time - Sometimes it can seem like buying a home is like buying a car – something that can be done in a few weekends. But you generally need a few months to complete the action. When you are experiencing multiple offer markets and low inventory, give yourself 4-6 months.

For well meaning buyers with the intent to close quickly, and the brokers who are working hard to make the deal happen for them, this situation can be a little deflating.  Hang in there. It’s clear that any well priced, decent, move in ready home is going to get attention today.  But buyers: Please don’t give up!  It is a great time to buy, rates are low, and only thing worse is if you end up not buying a home!

What the New WA State Foreclosure Fairness Act Could Mean to You or Someone You Know

Do you have friends or family members who may be facing foreclosure or a short sale situation? Perhaps you have been contemplating a short sale or may be in danger  of losing your home. The videos below videos can help!

Watch the videos below and please contact me through my website www.livekirklandwa.com if you have any questions. The videos are a 3 part series and feature Annie Fitzsimmons and Robb McKenna. The videos discuss:

* What the new WA State law changes for distressed property owners

* The homeowners right to a face-to-face meeting with their lender

* How to contact FREE housing counselors

Also:

• What to expect at your meetings with the lender
• When to act and crucial deadlines
• What paperwork is needed
• How to avoid scammers

* The “Short Sale” explained

• How to contact a listing REALTOR
• How and when to contact your lender
• Short sale negotiators and how they get paid

I am proud to present the information to homeowners facing foreclosure. These videos make the process clear and easy to understand.

The videos are hosted by Rob McKenna and the Office of the Attorney General along with HUD Housing Counselor Marc Cote, and Rob
Dickson, Attorney and Short Sale Negotiator. The videos are anchored by Annie Fitzsimmons, WR Legal Hotline Attorney.

Notice the videos are branded with the REALTOR “®”.  Brokers with the Realtor designation are more equipped to help distressed homeowners because of their access to extended training and the tools that the National Association of Realtors  and WA Realtors provide to only Realtors. REALTORS^® are here to help homeowners through the process. We are looking for the widest distribution to the public as
possible so please feel free to pass this page onto your freinds, family, and co-workers.

You can also visit WAHomeowners.com for consumer information.

Watch All 3 Videos Here:

http://warealtor.vidmeup.com/view?q=4e8914d6d3d3d.flv

You can also watched videos at www.livekirklandwa.com , click on “Blog“

Happy Homeowners in Kirkland Fight Mortgage Insurance Premium

It Took 12 Months but Homeowners Finally Happy To Save $2652 Per Year

In early 2009, when absolutely no one was purchasing homes, my clients, the Parkers, did.  Their lease was up on the home they had been renting and unable to lease the same home again and find another home that would take their 4 large dogs, they started thinking it was time to own again. They currently owned a home in Florida that was purchased using Bryan’s VA privileges. With VA loans homeowners don’t have to pay mortgage insurance so it was an adjustment to start thinking that they would have to pay an extra $200-250/month for something that would never really benefit from. Because VA can only be used on one home at a time and they couldn’t sell their Florida home just then, they could not use their VA privileges for this purchase.  

Purchasing private mortgage insurance is unavoidable for some homeowners, but you shouldn’t pay MI premiums any longer than required by your lender.

Mortgage insurance protects a lender in case homeowners default on their mortgage. Unless you make a 20% downpayment on a house, you’ll most likely be required to purchase MI. MI premiums on a median priced home in the U.S. in 2010 can run between $95 and $170 per month, according to the Mortgage Insurance Companies of America.

Sensing that many sellers were scared wittless and left uncertain by what was going on in the economy and lack of sales in the real estate market, they thought they might be  well poised to make a seller a lower offer. Bryan and Simadid, it was accpeted, and they ended up purchasing a small home with a one acre, fully fenced yard in Juanita using Conventional financing  and putting 10% down. The home was a stellar value and purchased for $360k, about $40k below market value.

However, the appraisal came in for exactly contract value. It didn’t reflect the almost $40k more that the home was actually worth.  Presumably nervous by the blacklisting of appraisers by banks at the time and presumably having found a newly conservative attitude towards appraising, our appraiser simply gave us the amount that would get us our loan. Nevermind the 2 nearly identical homes on the same street that had sold for $40k more just 3 months earlier. My hope was that if we could establish the home as having 20% or more in value right off the bat, the buyers, also having put 10% down, could avoid mortage insurance altogether on this. And if not initially (due to lender requirements) then it could be canceled shortly after closing.  Alas, the appraiser could not be budged and  it was what it was.      

Still unnerved by having to figuratively throw out $221 of their money out the window every month, the Parkers did something that was absolutely key to their success in eliminating their MI - they remembered they had it. Rather than passively making their payments on autopilot every month, the Parkers read their statements and saw the MI charged. Also realizing that this economy was still shaky and that there was the potential for home values to decline even more, they became determined to cancel the MI while they still had value.    

MI might be unavoidable, but it isn’t eternal. Knowing exactly when you’re entitled to cancel coverage can save you a bundle. If you own a median priced home, you’ll pocket between anywhere from $800 to $1,600 for each year’s worth of premiums you can avoid. That extra cash can be used to pay down your principal instead.

When MI is cancelled automatically

Though often begrudged, MI plays an important role. Many aspiring homeowners, especially first-time buyers, simply can’t afford to put down 20% on a house. Without the safeguard offered by MI, lenders would be reluctant to extend mortgages to low-equity purchasers.

For many borrowers, the coverage is short-lived. The Mortgage Insurance Companies of America, the industry trade group, estimates that 90% of homeowners are done paying PMI premiums, which are tax-deductible,  for some within five years. However in an unstable market, that could be up to 10 years.

If you purchased a house since 1999 and are still paying MI, you probably fall under the Homeowners Protection Act (HPA) of 1998. Your lender is required to automatically cancel your MI once you’ve paid down your mortgage to a 78% (0.78) loan-to-value ratio, or LTV. Put another way, once you have 22% equity built up. Many lenders will treat pre-HPA loans in a similar fashion. Call to your lender confirm.

To calculate your LTV, divide the outstanding loan amount by the original price of your home. If you have a $190,000 mortgage on a house you purchased for $200,000, the LTV is 95%. You’d need to get the mortgage balance down to $156,000–78% of the original value–to qualify for automatic cancellation of PMI.

When you need to request cancellation

You don’t necessarily have to wait for automatic cancellation. When you beleive your LTV hits 80% and you can prove it, you can petition your lender to end its MI requirement. Your lender isn’t obligated to grant your request, but you’ll bolster your case if you have a good payment history.

You can start by calling your lender, not the MI provider. You’ll probably need to make a formal request in writing  and pay out of pocket for an appraisal. The average cost of an appraisal is $400, according to a 2009 Bankrate.com. Your lender will usually select the appraiser.

Although an appraisal is conducted primarily for the benefit of the lender to confirm that your property hasn’t declined from its original value, a high appraisal can work to your advantage. As your property value increases, whether due to a general uptick in real estate prices or specific home improvements, your LTV decreases.

A few months after their purchase the Parkers called their lender to request a cancellation of their MI. They were told they needed to hold the mortgage for 1 year before they were eligable for review. Ugh. And unfair, right?

Nevertheless the Parkers waited 12 months so they could be “reviewed” and considered as candidates for their MI to be dropped. Luckily, in their neighborhood, home values stayed pretty steady and they even had 2 more nearby  homes sell for $40k more than theirs.  They called the lender and were told that the new policy was 18 months out for consideration of a review. That’s when they…. Got Jesse!   Only kidding. They didn’t go on theevening  news but they did get a real estate attorney to review their loan paperwork and draft a letter to the bank for $250. Meanwhile they were told by another bank employee that the policy was now 2 years out!

Shortly after sending the demand letter from the bank, the Parkers were notified in writing that their lender would consider them for a MI cancellation IF they were willing to pay for the $450 appraisal themselves and wait out the 90 day review period. The Parkers gladly paid for the appraisal.

This time the bank ordered appraisal came in at exactly what they bought it for and they were declined. They would continue to pay MI. Surprised (and yet not surprised) they wanted to contest. The bank said it would be another 6 months before they could contest. This time they waited 6 months, contacted the bank, and asked how to proceed.  Again they would need to order an appraisal – ordered by the lender – and hesitantly, they did.

What would happen if it didn’t come back with 80% LTV? They would certainly be out $900 in udeless appraisals. However, it was worth it to take the gamble one more time because they had seen the data and the stats showed their home value to be solid. This wasn’t an emotional plea but one based on facts. If this didn’t go through, they agreed to wait it out a few years an try again then the economy bounced back.

The second appraisal ended up coming back with a value that would put the Parkers at a 77% LTV. So close!! Yes no cigar. You need to be at at least 78% to qualify and more likely at %80+. 

But are the Parkers the kind of people to give up? No way! They continuously called and provided sold comparable info and evidence of their good payment history to the bank. When they wouldn’t get some where with one representative, they would go up the chain. Or call back the next day. Another harsh letter from their attorney might have helped their cause, too.

Then in May, the Parkers received notice that their lender was aleviating them from the burden of MI. And as of June 2011, they would no longer be required to make MI payments! They were finally MI FREE!

They estimate it cost them about $500 in attorneys fees and about $900 in appraisal fees plus about 60 hours worth of time but they feel that it’s worth it. Especially ongoing. Sima Parker told me, “At some point you think “You made a wise investment in the beginning and you shouldn’t have had to pay MI all along” but the bigger picture is that we wanted to be homeowners and live like we do in the area we do now. So sometimes in order to live your life the way you want, you have to play along with the banks to get the loan.”   

A way around PMI premiums

In search of a PMI loophole? Far and few between these days are piggyback loans, also known as 80/10 or 80/15 loans. Basically, the home lender finances 80% and immediately gives you a second loan for 10% to 15%. You put down 5% to 10%. MI is generally not required. This alternative has traditionally been available for homebuyers with minimal capital but excellent credit. In tight lending environments, however, this arrangement is harder to come by. And even when piggyback loans are available, the extra interest you usually pay on the second mortgage may actually cost more than PMI premiums. Do the math.

Another option would be the Fannie Mae sponsored Homepath Loan. These loans offer competetive rates, no appraisal fees, and no MI. However, they are only available on Fannie Mae foreclosed homes.

Also, if you have VA eligibility, you may want to look into that. VA loans offer no downpayment, are more  laxed on credit requirements, and charge no MI.

-Jennifer Nilssen, TEC Real Estate

Jennifer Nilssen is Realtor living and practicing in Kirkland, WA. If you have a question or comment about this blog post, please feel free to contact Jennifer at jen@tecrealestate.com or visit www.livekirklandwa.com for more resources. 

Our Real Estate Market: More Art Than Science

Many people want absolutes when making one of the largest financial and emotional transactions they’ll ever make- buying or selling a home. This is reasonable.  But making the leap into a fickle and still adjusting real estate market can seem more like a crapshoot than a sure thing.  

My client, Patty, is purchasing a short sale on Novelty Hill in Redmond. Patty is an unshakable woman and investor who has seen and done it all. I never have to worry about delivering news to Patty or bringing her a more creative real estate opportunity. Patty and her partner have flipped homes, rented duplexes, developed raw land, bought foreclosures sight unseen, and owned a resort in another   country.  She’s won a lot and lost a few.  Just a few weeks ago she told me that she really thought she’d seen it all but dealing with the bank on her first short sale was on a totally different level. And she certainly wasn’t implying that it was the best experience of her life. But not the worst either. Just something so unpredictable that she couldn’t gauge, she couldn’t get her bearings. It was confusing.  She couldn’t size up her competition because her competition was “a thousand moving parts.”  It’s really like David and Goliath.  In this example the buyer and seller are David and the banks are Goliath. With the right negotiator the banks will usually end up like Goliath, too.

My point is that something is askew.  Transactions in this market are as unpredictable as a moody teenager.  (Certainly not making any comparisons to anyone I know!)  Something is wrong when Patty the Unshakable is scratching her head, weary, impatient after 3 months of waiting for an answer from the banks as to what exactly may happen to her deal. And in the end it will be one of about six  scenarios.  

All buyers and sellers want absolutes. They want timelines they can stick to, accurate market statistics, and reliable comparables that will lead them to the favorable outcome they want. That’s why they hire Realtors; to give them just that. Well, that’s why they think they hire Realtors.  

The real reason that buyers and sellers hire Realtors today is because they want to guide them through the ART of real estate as well as the SCIENCE . Buyers and sellers think they want the numbers and stats but what they really want is someone to tell them what those numbers and stats mean in relation to the strange, new world of real estate today. They want to know numbers but really the question is ‘What can we expect out there?’ They want someone who is active in the market, encountering and confronting all kinds of problems, to tell them how to navigate the waters. They want to be warned upfront about the pitfalls and problems they may run into and to be prepared upfront to take advantage of the incredible bargains out there. They want to know the “price they will pay” for playing and what they can win.

What are some of the reasons that the market is asking more like an art?

1. Human Nature and Emotion – Understandably many sellers are tired and worn out. They’ve been beat up. Many are unsure about their futures. Some are sad or angry and just want out. When tensions are running this high, it’s natural for sellers and buyers to bring emotion into negotiations and to the sale. It’s important if you’re entering the market to remember at all times that the responses you get from the other parties are not personal or within the other party’s control.  

2. Speculation About Rates and Prices – Read all of the stats you want but no one can predict the future of rates and home values.  Home values were up compared to the previous year for 4 months in a row and then last month they dropped. Why? Consumer confidence seems to be getting stronger from what I see.  Don’t base your decision to buy based on speculation.  Does the home sale or purchase make sense for your personal and financial situation RIGHT NOW? That’s how you know you should be in the market. I concede, we’ve all been shaken to our core with what has happened to home values. We used to be able to count on homes gaining appreciation. Now we can re-appraise homes on a weekly basis.  Everyone wants the real estate market to bounce back. But how can that really get on a roll if buyers are unsure about the market and wondering if prices will go down again? Will rates go up? Speculation is inhibiting some buyers from acting.     

3.  Contracts vs. The Other Party- Yes, contracts are black and white. But sometimes the humans and banks (haha) responsible for carrying out those contracts don’t abide. Banks sometimes don’t respond to a request within the agreed time frame. Depending on the asset manager, the bank may complete lender mandated repairs, they may not.  Sometimes a seller is supposed to clean the home prior to closing but they don’t. They just leave.  Sometimes when negotiating with banks on HAFA short sales they represent in the contract that they will respond within 10 days but really they take 15-20. It is more common in this market for the other party to not strictly abide by the contract generally due to the bureaucracy with banks and lenders.  

4.  Appraisers – Some appraisers are working in areas in which they aren’t familiar. I just had an appraiser from Oregon appraise a home in Bellevue, WA. This was his first time to Bellevue. This happens because of the new HVAC appraisal rules created to protect the consumers and lenders and to maintain an arm’s length between influential loan officers and appraisers. But the unintended side effect was that you have appraisers in areas they don’t really know much about. This could result in inaccurate values and even the appraisers making calls for repairs for a home that aren’t mandated in that area.     

5. Non-Published MLS Comparables -  Most agents and appraisers get their stats from the MLS. But with the influx of unpublished Trustees’ Sales (foreclosures) many declared home values are inaccurately high because the foreclosure that sold down the street wasn’t taken into consideration when pricing the home. The repercussion is that when you go to have an appraisal, the appraiser may take these into consideration and home may not appraise if the offer was close to asking price. Then there is the question of should a beat up foreclosure, although right down the street, even be valued the same way as regular old resale home? That’s the debate.  And since Trustee’s Sales occur weekly everywhere, the landscape and the effect of these foreclosure sales on neighborhoods changes constantly.

6. HUD/FHA Approval for Condos – If you are the buyer or seller of an FHA condo, in most cases that condo is going to need HUD approval in order for the sale to happen. However, fewer and fewer condos today have HUD approval. HUD stopped renewing approvals unless condo associations renew under the new guidelines.  However, even if a condo has HUD approval, in rare cases, the lender still may not approve the association. And the process is such that you have to generally don’t know if the condo will be denied for financing until a few weeks into the process.  

7. Lender Guidelines -  In many ways the lenders, government and real estate markets are still in a major adjustment period. This is the main reason real estate is more of an art now than a science.  Lending was loosey-goosey to say the least (thank goodness the days of the stated loan are over) and now in the post-boom world, the pendulum has swung in the opposite direction.  Lending guidelines are tighter than they have been in years.  As you read, lenders and the government are still trying to develop systems to handle the influx of foreclosures and short sales. Finding a working system to facilitate them is a work in progress. The lenders and government are trying to pass regulation to protect the consumers and the future economy. The real estate agents are reacting to the effects as quickly as they can.

Ways we can cope and win when real estate is acting more like an “art”:

1. Be Organized and Alert Your Boss- Lenders are picky for paperwork and documentation in ways I have never seen.  True story:  I had a buyer who represented on her loan app that she works 40 hours a week. Her pay stubs showed that she clocked an average of 39.8 hours every week. The lender wanted her boss to write a letter of explanation of where the missing 12 minutes went.  Have your files handy, keep meticulous records, file your taxes on time, let your boss know they’ll have to help you document your employment, and just go with it no matter how overzealous it may seem. The end result is well worth it!

2.   Learn to Om - You will experience the inexplicable. Banks will respond to you with answers that don’t make any sense.  It will require utter patience as you wait for months for a response from a short sale representative. You may never get a response at all. Being patient and flexible actually IS the way to have control over the times you feel you don’t have much control.  Roll with the punches for your own sake and stress levels. 

3.   Forget the Money and Examine Your Personal Motivators- Imagine that money doesn’t come into play. Would you still want o buy a home without the promise of appreciation or tax benefits?  Why do you want to own a home? Many would say because they want a place they can call their own, or get their kids into a nice neighborhood, or reduce their commute.  Examine your motivators for buying. When you know your own personal motivators for owning a home and you clearly know what’s important about buying or selling to you, it’s easy to make tough decisions during the sale. When the bank in the short sale comes back with a sales price $10k higher than you offered, you’ll be able to ask yourself, “Is it worth paying $10k more if it means getting my kids into better schools this year?”  You can then make that decision with clarity.      

4.   Give Yourself Double the Time – Everything in this market takes double the time that it normally does. Lenders are backed up and banks can take weeks to respond. Count on it taking 45-50 days to close rather than the standard 30. Meet with a loan officer and Realtor in January, not April,  if your goal is to get a great deal and find a home by July.  

5.    Work With  an Active Agent – It’s really to your advantage to work with an active Realtor doing multiple deals a month. Admittedly there is a learning curve even for us agents in this market. Every single transaction brings new challenges and insights. The only way for you to get the best advice is to work with a Realtor who has very current experience and lots of it. And even when the Realtor is very active, we have a solid grip on about 90% and the other 10% is estimating based on our experience.      

6.   Hire a Negotiator for Short Sales- Don’t venture into a short sale without employing a negotiator. It is worth the fee you’ll pay because the probability of closing on your sale without one is very low.  Some agents are qualified to negotiate short sales but the reality is that they have a lot to work to do aside from the regular transaction and a professional negotiator will up your odds of closing and ensure that enough attention is paid to that portion of the negotiation. It’s fantastic if your agent has short sale experience but it’s best not to expect your Realtor to be a jack of all trades.   

Walkway on Lk WA in DT Kirkland

With Walkways Like This, How Can We Be Only a 60?  I Delve To The Bottom Of This…

A few years back when I bought my condo in Ballard the site agent kept telling me that by obtaining this address, I would have a WalkScore of 97! Amazing! I knew that Ballard (and specifically my condo) was within VERY close walking distance  to anything and everything that a person could ever want. Farmers markets, restaurants, movie theatre, banks….I felt secure that for resale value this was an important benefit. And now someone was telling me that it could be quantified and proved via new website called WalkScore.com

Since those days WalkScore.com has become a regular tool in my life as a Realtor.  WalkScore is a very cool resource for Realtors and buyers who are relocating because it gives a clear sense of how car-dependant one has to be in any given town or from a singular address in the US.

I tend to work with a lot of relocation clients and because I live in and love Kirkland – and mainly for its walk-ability – I always recommend that the relocating buyers take a look at WalkScore as one of the links they check out before visiting. It really gives a sense of layout and transit conditions for an area.

So I was shocked after a client relocating from San Antonio, Houston (known for its grand River walk), with whom I had talked up the outdoor and walk friendly nature of Kirkland, emailed me back to say that she wanted to stick with only looking at Seattle (snarky, whiny inoculation voice inferred) because Kirkland’s WalkScore wasn’t very high. WHAT?! Kirkland, just like Ballard with its 97, also had a movie theatre and a library and a bank, etc.,. Why the disparity?!

No matter, I knew what was true.   

But then another blow! Recently I have been revamping my Facebook page: Jennifer Nilssen Real Estate and added a WalkScore widget for Kirkland. So there it was staring me right in the face. A WalkScore of 60! What the H-E double hockey sticks? (Those who know me know I cuss like a sailor and it’s an ability that’s been genetically bred in me going back at least 3 generations but in this forum I prefer to be a professional and a lady.) I ask again: How can this be?

Some things you know are just plain good. Like U2 or flavored vodka.  And I know that walking around at a Kirkland Wednesday Farmer’s Market on a clear day is an innately good thing.  So is being able to walk or run or skate along the shores of Lake Washington with world recognized landmarks in the background at sunset.  You can’t do that in Sammamish, my friends.

A WalkScore is important because walk-ability offers easily forgotten benefits to the environment, our lifestyles, our overall stress, our finances and our communities. Also, driving is suspected to be the leading cause of climate change. Moving you feet one after the other to get you somewhere is pollution free! Plus people who walk tend to weigh less and be happier and lead healthier lives.

 And here’s the kicker if you’re financially motivated:  WalkScore claims that every value point they grant your address could be worth up to $3,000 in value add for your property because according to a study from CEOs for Cities (based on data from WalkScore and Zip Realty) depending on your metropolitan area, homebuyers today value car-less communities and greener living . Read the CEOs for Cities report here.  That’s a huge bright light at the end of the tunnel for Kirkland homeowners today.

So I ask you, WalkScore: My town only a 60?! If Ballard is an 87 we surely must be at least an 80. This is a misrepresentation. The picture on the front page of the City of Kirkland website is of a walking path for Heaven’s sake. I make it my mission for the next hour to delve into why this atrocity has been cast upon us.

Maybe this is just relative and 60 is a good score.  On the website I first notice that Bonney Lake is a tough 29. And Sammamish, rated the least walk-able city in WA is also a 29. But then I see that we’re rated alongside Lynnwood, Shoreline and Pullman who are also all 60’s. Huh?

Well, I can see on the website that WalkScore uses an algorithm that can tell you if you’re moving or living in a walker’s paradise or if you’re doomed to be handcuffed to your car. And that goes for any address in the country or a city as a whole. Walk Score measures how easy it is to live a car-less lifestyle—not how wide the bike lanes are or how pretty the area is.

The Walk Score model gives a city or an address points based on the distance to amenities in each category. If an amenity is within 1/4 mile they assign the maximum number of points. The number of points goes down as the distance approaches 1 mile and no points are awarded for amenities further than 1 mile. The points are given on a scale from 0-100.

OK, so let’s really explore this relative thing again. I see that Seattle overall is rated 72 and it’s the highest rated city in Washington. Although I would still like to see Kirkland rated a little bit higher, that makes a little more sense to me.  And I admit that Kirkland does have some areas that aren’t very pedestrian friendly with their amenities and you may have to walk a little further than ¼ mile.  And when I put my own address in which is not that far outside of DT Kirkand, it’s only a 42. Then I see that some ratings may be scewed because they don’t have data on local amenities and infrastructure  in their system. The good news is that  you can input any missing data to help them out. That will theoretically improve the overall city’s rating. (Local Kirkland business owners take note to input your shops in WalkScore) So it’s comforting to know that your WalkScore may improve as their data improves.  And lastly, when I input the address for Starbucks on Lake Street, the WalkScore improves to an 87! Wahoo! Redemption!

 Dear Kirkland, WalkScore may have sold you short overall in my opinion, but you’ll always be a 100 to me.

To read more or to contact Jennifer Nilssen, visit her website at www.livekirklandwa.com or follow her on Twitter @jennifernilssen.

What Local Sellers Are Doing to Beat the Competition and Close the Deal

Professional pictures are a good return on investment

Are you preparing to sell your home? Is your home already on the market? Have you seen sluggishness in showings? Or no traffic at all?  Wondering why you haven’t received any offers?

 Seller’s today are on the market because they have to be.  So just getting the job done is what counts. It’s not about selling for the most money but about being able to sell – period.  It’s tricky to sell and it’s going to be this way for awhile. The old marketing reliables (even using Craigslist) don’t work as well as they used to and if buyers think they are in the driver’s seat, they are right. In May the national statistics showed that home sales plunged 33% and in our own backyard more listings in Kirkland were cancelled in May after not selling than any other month in the past 2 years.

Cue the angelic music … Sellers of Today’s Market: There is a light at the end of the tunnel. In a brutal buyer’s market there are things seller’s can do to tilt the odds in their favor.  It’s called upping the ante compared to their competition. I have been on the front lines of this market and am in the thick of it daily. I am convinced that seller’s willing to take direction on the following are going to be in a better position to sell than those who do not. Why is it important to take this direction? For some the advice I am about to give it critical. Your credit may be in jeopardy of flat-lining. It may mean the difference between thousands of dollars and nothing.  All of the below can only help, none of it can hurt, and your ROI for each of these is going to be notable.

1. Don’t follow the “Active” Listings for Pricing Direction – Sellers often think that if there is a comparable neighbor for sale at $400k and they list for that price or slightly less, they are going to be priced right. Maybe, but not necessarily. What your neighbors are currently selling for has little to do with you. You really want to be priced in line with the SOLD comparables – the sellers in your neighborhood  that actually got it done. By pricing slightly better than the neighbors who have already sold, you are pricing ahead of the market and making the market, rather than chasing it. Today price is king.

Just because your neighbor is priced at $250k and you are priced at $225k, doesn’t guarantee  you look good to buyers. Buyers are so incredibly savvy about the market today and because technology allows them to get info on the recently sold comps at the touch of a button, you are still going to looked like you’re priced high if they see the last comp sold for $200k.

 2. Don’t Overprice in Hopes of Negotiating Down To The Price You Really Want – Again I repeat – buyer s today are super savvy. Overpricing in hopes of ultimately negotiating for the price you want to get will backfire every time for 2 reasons. First, there is far too much competition and you will get passed up in searches. Simple as that. Second, if you’re overpriced you’ll appear unrealistic and difficult to buyers.

 It’s counter-intuitive to not want to try and just see if there’s a chance to sell for more if you can, so if you insist on testing this one, test the market for absolutely no more than 2 weeks.

 3. Be Open to Creative Financing – It’s hard to consider when you just want the thing sold BUT be open minded to creative selling options if you have enough equity that you can. With financing today so difficult to come by, letting a buyer assume your mortgage, owner financing, lease options, carrying a note, or renting could be a way to make your listing distinctive and get the home off your plate. Also talk to your agent about simultaneously listing for sale or for lease and see which one takes first.

 4.  Don’t Be On The Market if You’re Not Seriously Ready To Sell TODAY- Some sellers would like to test the market  for a few months and then “catch up the a market” price-wise if the home doesn’t sell. There are pitfalls to this. A home can become “stale” and agents and buyers will become biased to a dog that has been sitting too long.

 Also, you want to make sure that your family is ready to handle to responsibility of having the home on the market. Can you show a home realistically and have it show well with only 2 hours notice during the school year? Do you need to paint over the purple accent wall? Don’t list until you, your home, and your price are able to put your very best foot forward.

 5. Don’t Price Your Home Based on the Net Proceeds You Want to Receive – This doesn’t make any sense. The market has nothing to do with what you hope to net at the closing. It may seem like a nice goal to shoot for a $50k check at closing, it may even seem like a plan, but this is not a pricing strategy.  Statistically, sellers who price too high and sit for too long due to this strategy, ultimately sell for 8% LESS than their original goal amount per the National Association of Realtors. 

 6.  Go with a Full Service Brokerage vs. Discount Brokerage -  When it already seems like you’re losing more than you should it may be tempting to try and save more off your bottom line by working with a discount firm. Why does this NOT make the most sense? The reason is that discount brokerages are treating your listing like the cattle call. Pictures a gray street with gray homes and gray sky and gray clouds. That’s how your listing is going to come off with the typical   one-size fits all marketing that is typical among most discount brokerages.(I said MOST, no letters please) Now picture a street that is in sharp, crisp, vibrant color with smiling homes and a future so bright you have to wear shades. That’s your listing with a full service brokerage who has the BUDGET to make your home stand out and pop the way it needs to in order to sell in this market. This is not the market to experiment in.  Stretch just a little bit more and hire a  brokerage that can and will give your home the marketing attention it needs.      

 7. Invest in Staging Advice – Your agent can help you with this. If they don’t offer it in their services or you’re a FSBO, hire a staging professional to come in and give you a consult for as little as $149. And then take their advice. I have never seen a home that didn’t look WAY better and more “sell-able”  after taking staging advice.

 8. Professional Pictures – Make sure your agent is including this in your listing. If it’s not included, professional pictures will run you $150-$350 depending on the size of your home. This is your first impression and professional pictures say 1000 lovely words about you. You will make a major impact with professional pics that 90% of the listings out there will not have. In Seattle, it is especially important because our homes need to look as light and bright as possible. The touched up pics will emphasize the light.

 9. Condos: Pay Off Any Remaining Assessments - If you are a condo owner and have any remaining balance on a condominium assessment and you are able to pay it off prior to listing, do so.  Realistically, pending assessments are a commonplace. But they are a turn off to buyers because they feel they shouldn’t have to negotiate that and it also appears as though the community may have structural or management issues. By paying off the assessment prior to listing or at the very least offering to pay it off at closing, you are giving an interested buyer one less reason to walk.

  10. Prep for Every Showing – When you get that call and find out that there’s going to be a showing,  this is a quick and easy checklist to put your best foot forward every time. Here is a list of “must do’s” that should occur in the home by the time the buyer gets there: dishes away, make sure the home smells good, shoes away, all counters cleared, no more than 1 appliance on the kitchen counters, window blinds open, lights on, low music playing,  generally all clutter away.

 11.  A Mind Trick For Sellers – Your best friend has a home that they must sell. The market has tanked and everyone knows it but it is very hard for them to accept about their home. After all, they had an appraisal 2 years ago for $100k more! Your best friend is telling you one day over coffee that they think they will list the home for $25k over what the Realtor is suggesting because they rebuilt the deck and replaced the wallpaper 3 years ago. You know how important it is for them to sell so they can move on with the next chapter of their life. Your gut tells you this doesn’t make any sense and it doesn’t sound like a good plan for them to get what they ultimately want.

 What advice would you give your best friend?

Hopefully you would tell them it sounds crazy not to take the professionals advice and price higher than recommended. The home will not sell that way. Of course that groovy wallpaper may help them sell but it’s not going to increase the home’s value in that way.

If you’re a seller, you need to let go of 2-5 years ago pricing and let your Realtor decide if you home is special enough to warrant higher pricing.  Even if you live in a hot, up and coming area.

If you’re having inner turmoil between the money you want out of the sale vs. what the comps are showing you should sell for, ask yourself, What would I advise my best friend to do in this situation? Then apply it to yourself.

12.  Don’t Wait to Drop The Price if You Know You Are Going To Drop The Price – A home is likelier to sell the lower the price is. There’s no use in wasting valuable time, especially during the summer, if you know you’ve already made the decision to drop the price and/or the market tells you that you need to drop the price.

Kirkland, WA-

If you’re a new buyer or you’re looking for a long-term investment, this could be a good time to buy a condo in the Kirkland area. Just use caution and our tips for screening title and the home owners association finding the smartest buy.

 Right now communities such as Esplanade in Kirkland, Serenity in Bothell, and others are not financeable through FHA, which is the bulk of the first home home buyers and condo buyers today. This is mainly due to unstable HOA’s, low reserves, and pending lawsuits. An unfinanceable condo or one tied up in litigation will drop in value significantly sometimes simply because it’s no longer a viable option financing-wise for most buyers. Some units are being sold for cash only at very low prices. Some for as much as 40% less than what they sold for just 4 years ago. If you can hold on while they get themselves sorted out and you are a cash buyer, you may be able to strategically walk away with a great investment. But you have to be informed and careful.     

Sue, a on-site liason to the property management company for Sundance Glen, a 55 and older condo community in Redmond that is in current good standing, was an insurance representative for 20 years.  With an eye for detail and property management, she is working with the WA State Condo Association Board to require new condo owners to take amandatory class on what living in and owning a condo is actually like.  She says that sometimes people don’t think through how entwined they will be with the communty and the consequnces of not being involved on the HOA. She believes this would eliminate misgivings and make buyers are realistic before they get too far down the buying road, thus preventing future headaches for them and their neighbors.

Depending on your needs, your financial picture and your location, the current condo  market woes in our area could make for good bargain hunting. If you’re crazy about a place and you expect to stay put for some time, shop away. Just keep the following tips in mind so you don’t mistake a money pit for the deal of the century:

Look for hidden debts. If you’re buying a distressed property, whether in a “short sale” (when the seller owes the bank more than the house is worth) or a foreclosure, find out if you’ll inherit liens or debts attached to the property — unpaid homeowners association fees or assessments . Have your agent specify in the purchase and sale agreement that all liens and assessments are to be paid in full by the seller or absolved at closing. And then verify in the short sale approval paperwork, if any, that all liens have been accounted for and will be paid off. Order a title report and see firsthand all debts against the property.

Look for trouble. Have your agent obtain a copy of the resale certificate for the condo. The resale certificate will include a copy of the updated Reserve Study. The Reserve Study Amendment of  The Washington Condominium Association  requires condominium HOA’s to have independent studies done annually which recommend what amount of dues the association should collect in order to have “healthy” reserves in their bank account considering upcoming maintenance. Keep in mind the Reserve Study makes recommendations but the HOA is not required to enforce them. Go a step further make sure that the HOA’s actions actually reflect the recommendations in the study.  Also get the homeowners association board’s minutes for the last two or three years — the more information the better. It’s good to see what the people who love there are saying and any ideas that are being tossed around. Also get any audited financial statements, if available. Look at the “assessments receivable” to see how much it is still owed in homeowner fees each year. If that amount increases from year to year, the association is having difficulty collecting dues.

The resale certificate will also disclose any pending or future assessments that the homeowner will have to pay.  Also be sure to look at the reserve study for the “life expectancy” of parts of the condo structure to deduce what might be coming up in the future. For example, the resale cert may not show any pending assessments, but if you can tell that the roofs only have 3 years left of life expectancy and the reserves in the HOA bank are low, you can expect that the owners (you) will likely be assessed for that expense in the next few years.   

 Make sure the community fits your lifestyle. Get a copy of the association’s bylaws or CC&Rs (covenants, conditions and restrictions) found on title or in the resale certificate to see what the HOA expects of you and provides for you. Even if it’s big as the Yellow Pages, take the time to understand them. Get a lawyer to interpret what you don’t understand.

If you have pet make sure they allow pets. If you want to bring your hot tub with you, research what it would take to get approval for that. What utilities are included in your dues? Can you hang planters on your fence? Do they allow you to rent the unit out if needed in the future?

Talk to the managers. Although property managers can’t discuss individual homeowners’ finances, they can discuss association business. A reluctance to share could cue you to a bad situation. Ask:

• How many units are in foreclosure or are overdue on homeowners association fees? 10% to 15% is a bad sign.
• How many units are bank-owned? Some associations are forced to take banks to court to get them to pay their delinquent fees.
• How many are rentals?

Give new developments with HOA’s fierce scrutiny. The lowest prices right now are in brand-new communities still owned by desperate developers stuck with lots of unsold units. You might score a screaming deal. Or you might get stuck holding the bag for the unsold units’ fees when the developer goes bankrupt. Your safest bet is an older, established association with a good financial track record and committed HOA board. Young HOA’s may also have low reserves but that’s ok in the beginning – as long as they have a plan for future success.

Questions or comments for Jennifer? Want to know more about Kirkland real estate?

Email her at jen@tecrealestate.com or visit her website www.livekirklandwa.com

Kirkland, WA

Let’s Talk Short Sales 

One of the most abundant types of property listings on the market today are the ever bittersweet and mysterious  short sale homes. Love ‘em because their great deals or hate ‘em because they are lowering the property values in your neighborhood, they make up approximately 17% of all homes on the market today nationwide. They are statistically more prevalent in the outskirts of more major metro areas and more than 60% on the market in King County are priced under $350k. Short sales are essentially homes where the seller is asking to bank to agree to accept a lesser pay-off than what the seller actually owes. It may be that the bank forgives the differential of the debt owed vs, the net proceeds completely or that they issue a pay-off and then lien the seller for the remainder of what they owe. Either way, the seller’s credit will be affected for any late payments and possibly re-negotiating that debt. These homes have not gone back to the bank yet and the sellers are still on title, distinguishing them from a bank owned foreclosure.

People love them some short sales. All over the news, bookstores, radio, and at the water cooler, people all know of some unbelievable foreclosure on their street or neighborhood that is a sweet deal. Short sales that do sell actually tend to close for less than market value. They can be a fantastic way to obtain a home with upside potential and maybe a little instant equity. They are vast and many on the market today. Agents are eager to get them off of their hands. Many agents are “going with the new flow” and rather than busting in this market, they’re making lucrative careers by specializing in short sale listings and negotiations.

So what’s the catch? Because there’s always a catch, right?  Or is it natural that sellers had it so good for so long with easy multiple offers, escalation clauses, and sky-high asking prices, that it’s simply the buyers “turn” to have it so good? Short sales can be a great treasure for some very patient buyers but you have to know what you’re diving into before investing the time and and a great amount of energy. 

 What You Should Know about Short Sales:

Listing Price:

One of the most confusing things about short sale listings is this: the price it is listed for on the market is NOT the price you may always expect to buy the home for. The listed price on the market is the price the sellers are HOPING to negotiate to sell for with the bank because all short sales are subject to final lien holder approval. So for example: If I owe $250k on my home but list it on the market today for $200k because that’s what market value is, I still cannot guarantee a buyer, who wants to buy, a sale for $200k. They may offer $200k and I may agree to it, but the bank may come back and say “yes, that’s fine”, “no, but here’s our counter”, “no, we’ll take it back into our inventory and foreclose if you can’t make payments”, or give no timely response at all.  Buyers get very excited when they see the price of a short sale home dropping every few weeks, but what many don’t realize is that means absolutely nothing. That new, lower price is absolutely obsolete because it is not currently sellable at that price without bank approval.  And depending on how that home was financed and who the investor on the loan is, Fannie Mae and Freddie Mac guidelines only allow lenders to accept a certian percentage of loss before they are forced to take it into inventory rather than short sale. What is the formula? They’ll never tell. It’s a mystery.

The ONLY time that a short sale can guarantee a buyer a purchase price in line with what it’s listed for  is if the sellers have already obtained a bank approval and have it in hand.  And this can be a challenge because you cannot get a bank approval without a signed purchase and  sale agreement. So this very fact makes the entire short sale pricing and approval process a catch 22. 

Making the Offer:

Always bring your highest and best offer no matter what because most of the time you only get one shot. And in the months of waiting that it may take to get an approval, you can almost count on there being other, competing offers submitted.  And the seller may submit other offers that come in. They know that any other offers submitted may give them a better shot of getting out of their home. 

 Keep Looking and Have a Plan “B”:

Short sales are low probability transactions. Even if your offer was the only offer, there’s nothing to guarantee that the bank would accept it or counter it. In King County alone there are over 1,100  single family residence short sale properties with an accepted offer, but only about 120 short sale properties closed in September (numbers from NWMLS sources, but not compiled or guaranteed by the NWMLS.) That isn’t because the banks are ramping up. It’s because a lot simply never close. So be sure to keep an eye on your short sale home but don’t stop looking in the meantime until you receive a bank approval.

Note: Always make sure that your agent has included a clause on your offer that allows you to rescind your offer prior to receiving bank approval in case you find another home while you’re waiting.  

Sold AS-IS, WHERE-IS:

Most bank owned homes and short sales are at least cosmetic fixers. I would estimate that in the SS homes I see, most need a minimum of $5k of work done before they are in sanitary, move-in condition. It may be that your home is structurally damaged enough that you would qualify for the FHA 203K or rehab loan which would include your repairs in a buyer’s loan, but more than likely the cost of repairs will come out of the buyer’s pocket. That is because 98% of all homes sold where the bank is involved, the home will be sold as is, where is. Sure, there are some exceptions where you will get a lenient, more attentive bank that realizes making a few repairs is more lucrative than taking the home back into their inventory or they realize that no one can obtain a loan without a certain item being fixed, but for the most part, it’s all up to the buyer.        

Who You Need to Hire:

Short sales and banks in general are tricky these days even for specialists. Before you jump in, you definitely want a SS specialist in your court. An agent or third party negotiator can definitely expedite the SS approval process. But beware: many agents and third party negotiators misrepresent their abilities and so you really need to make sure to do your homework and questions their achievements. If it doesn’t look good, use the agent for your basic representation and hire a qualified negotiator for the actual short sale. It may cost about 1% more, but typically the agents will split the cost for you out of the commissions. The banking industry today is complex and ever changing and requires someone with inside expertise and tenacity. PLEASE CONTACT ME FOR REFERRALS. I have several reputable parties I would be happy to refer you to for representation with a short sale. They may cost you slightly more, or not, but a competent attorney, agent, or negotiator is always worth it.

There is no one way to do a short sale and the bank can do whatever it wants. Anything that gets them the highest price is fair game for them. Though I have seen, through the listing agent, to get first consideration if an offer is first in and accepted, but it depends how strong the relationship is between the bank and the listing agent. Easier done on a bank owned than a short sale.

Note: In some cases, it may be mandated that the buyer is responsible for paying a short sale negotiation fee at closing. Some banks require a 3rd party negotiator or attorney that will charge  .5 – 1.0 %  fee, based on the cost of the home,  at closing. This fee will be added on top of your other closing costs. Not all short sales require this fee, but approximately 25% do. You will have to double check with your agent if the short sale you are considering demands this fee because the fee is not generally disclosed up front to buyers.

Waiting Out the Approval From the Bank

To be dealing with foreclosures and short sales, you have to have the patience of a saint! Not only do different banks have different protocols in regards to reviewing and accepting offers, but EVERYTHING, even your signed agreement with the sellers, is subject to  bank approval and their own time frames. Your offer filtering through the various levels of a bank’s bureaucracy, especially if you had a sub-prime loan or your bank was recently sold, may take months to a full year, if it get s accepted or countered at all. So be very patient and continue to look at other properties in the meantime.

A short sale is a process. The first step is to submit a short sale package, including financial information, a hardship letter explaining why the owner can no longer make the mortgage payments. Usually approval of a short sale requires weeks or months because the case manager is working with perhaps 200-300 cases, so they just work on the first case that comes up. Until the lender approves the short sale in writing there is no sale.

In most cases there are two lien holders, the first, or primary mortgage, and the second, which may or may not be a Home Equity Line of Credit. BOTH need to approve of the short sale, which is a loss to their investors. We are seeing cases where the first or second mortgage agrees, but the other wants more money than they are being offered, stalling the efforts and ultimately killing the sale. 

Timing for Tax Credit:

At this moment, the ship has sailed to meet the $8,000 tax credit deadline. It typically takes about 90-180 days to receive lender approval and close on a short sale home. Sometimes longer. As of right now we have less than 60 days to guarantee a buyer can take advantage of that credit if the government chooses not to extend the deadline. You can still make offers on short sales, but you will likely not get the tax credit, unless the government extends the November 31^st,2009 deadline. 

All Things Considered…

 Short sales and foreclosures can be the way to go if you’re willing to wait it out for the perfect home, but you may want your agent to try searching for homes that are “approved short sales” or “bank/corporate owned” or just simply a regular, old fashioned sale between buyer and seller. If you’re primarily looking for a bargain, I would suggest bank owned properties, where the bank has already foreclosed and put the house on the market. Most of those are at least cosmetic fixers, but if you can handle that, you might get an even better buy than a short sale. You will, however, have more need to have an attorney review the bank documents. Some bank’s documents are surprisingly poorly drawn and contradictory.

I think a lot of people don’t realize how competitive a short sale can be. A lot of buyers are getting beat up trying to chase a bargain. I personally have seen reasonable, capable people on the level of a nuclear meltdown over the levels of frustration and angst this can cause. Crying, demanding, literally on their last thread of patience. One person told me it was more frustrating than her divorce! It’s reminiscent of the competition we had several years ago where good homes were getting multiple offers, only worse. I have seen many of my clients give up on chasing short sales for this very reason.

Nothing gets me more than when a buyers tells me they want a short sale because they have heard it’s the best way to get a deal. That can be true, but not necessarily. Have your agent familiarize you with the local short sale market to determine if it truly makes the most financial sense. And the truth is, it you just want a GOOD DEAL, no matter what it is, right?

Jennifer Nilssen with TEC Real Estate can be reached directly at 206-853-1491 or at jen@tecrealestate.com. Her website can be accessed at www.livekirklandwa.com .