Given the high number of 'bank invovled' listing in Monroe County right now, I thought I should clarify what many of you are hearing about in the media, or maybe even noticing in the comments section of listing of homes for sale. There are different types of 'bank involved' situations with homes for sale in our area. 

When a listing reads that a property requires third party approval or bank approval, that means it is a short sale situation. What is happening is that the list price of the home is less than what the owners owe on their mortgage note(s). Therefore, while they are free to negotiate a contract to purchase with a buyer, the lender has the right to accpet or refuse that offer because the lender has a financial stake int he situation. At this stage of the process, the is only a pre-foreclosure listing if the owners are behind on their payments, and the bank is moving toward taking ownership of the property. A true short sale does not have to involve the bank if the owners have the funds to bring to the table at closing to pay off the mortgage note. 

(with me so far?) 

SO, in my opinion, as a buyer's agent - I would be very wary of ahome on the market that is a hosrt sale, if th owners and listing agfent have not already been in communication with the lender to let them know the homes is on the market. Without having the lender's involvement in the process, the list price could be nothing but a pipe dream if the lender isn't likely to approve it. Because there are so many lenders out there, and each on is handling these situations differently, it is sometimes difficult for the listing agent to get the answers needed, and the process can take weeks or months to get to settlement. Some lenders are easier to work with than others, so there is no ‘typical’ time frame to get a short sale to settlement. Be prepared for it to be longer than the average 30 to 45 day contract to closing period.

Bank owned properties, by contrast, are homes that have already been foreclosed upon. The bank has title to the property, and has put it up for sale, typically selling the home “as-is.” And they truly mean as-is. They will do NO repairs. Most will allow you to have a home inspection for informational purposes (if you see something that you can’t live with, then you can void the contract based on the results of the inspection). Make sure that your buyer’s agent puts language in the contract that gives you the right to void the contract based on those results. Since the bank has ownership, the list price reflects what they want to get for the house, so you can negotiate in good faith with them. The prior owners of the property are gone, and the bank is who you will negotiate with. Again, as with short sales, some banks are more responsive than others, and in my personal experience I’ve seen response times of under a day! The drawbacks are that you are purchasing as-is, and there are typically lots of bank addendums holding the bank harmless should there be a problem with the property after closing (termite, spaulding, mold etc). There are definitely good deals to be had in the inventory of bank owned properties, just proceed with caution and a good buyer’s agent, as you will want help navigating the contract with the bank addendums. (Consulting a good real estate attorney is never a bad idea, either!)  

This article is pretty helpful if you are considering buying a short sale.  

Now, if you are a homeowner that is suffering right now, and you think a short sale could be in your future, please, please, please call your lender! They can’t help you if they don’t know what is happening. Most lenders have “home retention” departments set up now, trained to help homeowners before a foreclosure happens. If you qualify for a hardship exception, they might modify the terms of your loan. They will want to go over your financial situation with you, they will want to know why you are having a hard time making your payments, and they will try to find a way to help. They don’t want to foreclose on your house any more than you want to lose your home. If you still can’t afford to stay even with their help, the next step is to have a real estate agent give you a market analysis to see what your house would be worth. You can work with your Realtor and your lender at the same time to get the house sold. I won’t kid you, it’s not an easy process, but it can work with patience and a good Realtor. For clarification, I’m a Realtor, not an attorney or tax advisor. But, I can help you work with your lender to sell your home…and I can do my best to try to minimize your stress and help you through it.  

Short sales and bank owned properties make for very complex transactions. I’ve only truly skimmed the surface here to try to give an overview. Feel free to comment on your own experiences or ask questions! And as always, call or email me if I can help in any way.

Sincerely,  

Lela Ashkarian  

305-395-0814 

Foreclosure:
Foreclosure is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner's failure to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said, "the lender has foreclosed its mortgage or lien."
In the United States, there are two sorts of foreclosure in most common law states. Using a "deed in lieu of foreclosure," the bank claims the title and possession of the property back in full satisfaction of a debt, usually on contract. In the proceeding simply known as foreclosure (or, perhaps, distinguished as "judicial foreclosure"), the property is exposed to auction by the county sheriff or some other officer of the court. Many states require this latter sort of proceeding in some or all cases of foreclosure, in order to protect any equity the debtor may have in the property, in case the value of the debt being foreclosed on is substantially less than the market value of the immovable property (this also discourages strategic foreclosure). In this foreclosure, the sheriff then issues a deed to the winning bidder at auction. Banks and other institutional lenders typically bid in the amount of the owed debt at the sale, and if no other buyers step forward the lender receives title to the immovable property in return. 

Foreclosure Investing
Foreclosure investment has become more important recently in response to skyrocketing real estate costs. The average person nowadays needs to investigate all avenues to purchase real estate at a 'reasonable' cost. By investigating the foreclosure market, the investor can get a better grasp of the real estate investment arena. Depending on the type of foreclosure proceeding, the sale may be administered by the courts (Judicial Foreclosure) or by an appointed trustee (Statutory Foreclosure).
Proceeds from the sale are used to satisfy the claims of the mortgagee primarily, with any excess going to the mortgagor. Anyone may bid on properties sold at a foreclosure sale. As a practical matter, however, the lender acquires most properties, often for the amount owed on the foreclosed loan. When interest rates rise, homeowners with variable interest rates oftentimes become over extended, providing opportunities for foreclosure investment professionals to obtain investment properties at depressed prices. The most common reason for foreclosure is dissolution of a marriage. The next most common reason for is a failed business venture. Foreclosure investing can provide favorable returns. However, there is an awful lot to know in order to avoid the problems that can occur; thus, it is not recommended for beginners to the market. 

Stages of Foreclosure
The foreclosure process begins when a financially distressed homeowner fails to make a loan payment and is served with a summons from his or her creditors.
After service, papers will be filed with the county clerk's office and be made a matter of public record (in some areas the place where deeds and mortgages are registered may go by a different name, such as the office of the land registrar). This notice is usually known as Lis Pendens, which is Latin for "pending legal action." At this point, any attempts by the homeowner to borrow from public credit sources will be met with a negative response. On completion of the publication process, the foreclosure action will be permitted to proceed and the owners have a limited amount of time to pay up, sell, or make other deals with creditors.  

If none of these actions are taken, a foreclosure sale will take place. If no one bids the amount owed, the property reverts back to the lender and becomes a REO (real estate owned) property held in inventory by the lender. Experienced foreclosure investors may work in all of these various stages, but the possibility of making a transaction with the homeowner is no longer possible after the property is a REO. 

Why investing in foreclosures can be difficult
Oftentimes, the homeowner in foreclosure is in a financially difficult situation, and in addition to the calls from creditors. Call Lela 305-395-0814