Do a Short Sale or Apply For a Loan Modification?

A short sale is when your lender allows you to sell your property for the current market value (or a price agreeable to all parties) that is less than your current mortgage balance. The difference is usually split between the lender and borrower (percentages vary) via a 1099, promissory note, or with cash contribution from the borrower. A short sale is only a viable option if you are looking to move out of the property. But what if you want to stay but you cannot afford the current mortgage? That's when the dreaded loan modification is your only hope.
Loan modifications--a new way to elevate your blood pressure. More than half of the clients who hire me to assist them with facilitating a short sale have tried to modify their loan with their current lender--often to no avail. They borrower is forced to provide tons of paperwork, wait for months on end only to get declined or they receive an unreasonable proposal. The proposals given to consumers from their lenders range from a small reduction in payment to an increase in the payment!!! The truth is banks do not make it easy to do a loan modification and seem to only be interested in meeting federal guidelines of providing clients with a proposal or a decline to meet the requirement that they have to do one or the other, whether it makes sense or not, within a certain time frame. The phone conversations with condescending customer service representatives are enough to make anyone irate. The best option is to use third party companies like NACA to successfully get an affordable payment option. The process is simple, but not a fast one. On average it takes 6-12 months, but in some cases the lender will suspend foreclosure attempts while a borrower is in the loan modification process. I have personally used NACA for a loan modification, represented one of their borrowers in purchase and another in a short sale. There are other outfits that assist with short sales, however, any that require money to begin the process are a SCAM! Use only a HUD approved counseling agency. This way you can be sure the company is legitimate.
Some lenders will require that you contact one prior to allowing you to do a loan modification.

A GOOD DEAL. Would you know one if you saw one?

Chances are if you are currently looking for a home, or know someone who is, everyone is looking for a steal of a deal. In this market, there more deals than ever before and some purchasers are finding once in a lifetime opportunities. But what about you? Chances are, you wouldn't know a good deal if it fell in your lap! Here's how you know when you have a golden opportunity on your hands and it's time to make a move.
First, DO YOUR HOMEWORK!
Homework consists of knowing what has recently sold, what's currently on the market, and what the history of the area is. It could be a particular subdivision or an entire school district. Whatever the case, know the area. Just like shopping for a car, if you don't research BEFORE buying, you'll pay too much---even in this market. You won't be able to identify a good deal if you don't know market value. Too many times people will see a property that is way under-priced and will waste time trying to get it even lower when they should be offering full price before other offers roll in. Some banks & even HUD list properties aggressively knowing that the demand will net them bids over the asking price.
Second, KNOW YOUR LEVERAGE!
If you are financing a property, know the pros and cons that a SELLER sees when looking at your offer. If you have an FHA loan, and the house needs repairs, chances are the seller would rather a buyer who has a conventional loan or is paying cash rather than deal with FHA repair requirements. If you are paying cash, know the market and use your ability to close faster than a buyer with financing contingencies to get a deeper discount.
Third, BE READY TO DO SOME WORK!
Very few of the GREAT deals are move-in condition. The truth is that the discount on the price is usually taking into consideration an issue with the home whether it's the condition of the property, extensive repairs, title issues, the surrounding area, or seller's need to sell. No matter what it is, expecting to find a home with $20K+ in equity that needs no work is not realistic at all. Know your thresholds of repairs and work within those means.
Four, CASH IS KING!
We all know that an all cash offer is always the most attractive to a seller, however, they are usually the lowest offers a seller will see. If you are using financing to purchase, having the ability to pay your own closing costs in exchange for a better sales price, buying a home AS-IS, or even putting down more to use conventional financing are all to your advantage because a seller will feel less pressure and in turn will come down substantially on price and not feel offended as they would with low-ball cash offers. You must paint the picture for the seller and make them feel as if they are getting something---even if they aren't!!!

Gwinnett still GREAT?

Even though the water towers started coming down, residents still believe that "Gwinnett is Great" and that "Success Lives Here." The AJC had a write up on the demo of the iconic towers and it made me start to wonder if just because the visible proclamation would be removed from I-85, would the ideology still remain? The answer is an astounding YES!



As a resident of Gwinnett County since 2002, the main drive for my relocation was to purchase a home in a good high school district. I knew that chasing good elementary and middle schools was not the route to go to maintain stability for my kids and sanity for myself. Being a Realtor, giving people a reason to move is something I put into action for others everyday, but I don't like doing it myself! Sure enough Gwinnett has stayed atop the ranks for public schools and Brookwood High School was ranked in Newsweek's top high schools in the nation! You can read my blog with full details on that accomplishment AND search BROOKWOOD HIGH SCHOOL REAL ESTATE. There are numerous schools (Archer High School being the most anticipated) being built as I type to accommodate the new and existing residents of Gwinnett.

The second reason I consider Gwinnett to still be one of the top counties to live in is because of the retail establishments. With 3 shopping malls and numerous retail centers like The Avenue Webb Ginn in Snellville, you don't have to venture out to get what you want to spend your money on. On top of the booming retail there are attractions that are only rivaled by Fulton County like the Gwinnett Arena (Phillips Arena), the new Gwinnett Braves Stadium (Turner Field), and Town Center Park in Suwanee (Centennial Olympic Park).

The third reason is interstate / highway expansion and road conditions. With the completion of the I-85 and SR-316 interchange two years ago being the most prominent, expansions of major roadways are combating the notorious traffic unlike other counties (who shall forever remain nameless) that have had the same issues for years. On a side note, cheers to Dekalb for finally finishing the Wesley Chapel and Memorial Drive bridges--good stuff.

The last reason is crime! According to the GBI stats from 2009, even with the second highest population of all of the counties in Georgia, Gwinnett is lower than a couple of neighboring Atlanta counties. Check out the stats for yourself!

Myths about short sales

The term short sale has become a term that has almost become a household name. There are a ton of questions and myths about short sales from the buyers side of whether or not to purchase one. On the seller's side they range from why you should and why you cannot do a short sale. I'll address the most common myths I come across when buyers and sellers inquire more about the infamous short sale.

FROM THE BUYER'S SIDE
"Short sales can't close quickly, they can take months to close!"
This is a true statement on an unapproved short sale. If the seller's lender hasn't approved a short sale then there are numerous steps and paperwork that must be completed before selling the home at the short sale price is even possible. However, once the short sale has been approved, the transaction can be closed in 7-45 days. If you're under a time constraint only pursue APPROVED short sales.

"Banks will forgive the difference."
I have personally yet to see this happen. Most banks will want some form of repayment or some form of distributing the loss that they agree to take. One popular method is giving the seller a 1099 for the loss whereas the seller would have to claim the loss as income the following year and pay taxes on it. You should definitely consult a CPA on how to make this a viable option.

"Banks will come after you for the difference"
Within the last few months this is becoming a more true statement. Banks do not file judgments on borrowers as they did in the past. What they are doing is installing lingo in the short sale approval that allows them to collect the difference. This practice is frowned upon by the government and as of February 2010, there have been moves to abolish this practice.

"You have to be late on your mortgage to be considered for a short sale"
Untrue until recently. I have personally closed short sales when the mortgage was not delinquent. In these cases there MUST be a current or upcoming financial hardship along with a decrease in property value to prove to the bank that a short sale is the best option. Some banks that service your loan do have investors that will not consider the short sale if you are current.

FROM THE SELLER'S SIDE
"I can do a short sale on my own"
Even your lender will advise against this. Most lenders want your home to be marketed up to 90 days and even an offer to purchase the home prior to reviewing the file for short sale consideration. Lenders even require activity reports, market research on sales in the area, and other information that only a realtor would have instant access to.

"Buyers don't want to buy a short sale"
Untrue. If buyers see value, they will want to buy the home. The exception is if the short sale is not approved yet and cannot close within 60 days. Most buyers actively looking at homes are looking to close anywhere from 2 weeks to 45 days. The problem usually lies within their real estate agent (did I just say that?) Most agents see the reduced commission and the uncertainty of when the deal will close as an automatic red flag. But to their credit, you do have many unskilled agents attempting to perform a short sale on the sellers behalf causing drawn out and sometimes failed transactions. If this is indeed the case, a buyer's agent would not lead a buyer into such an uncertain situation.

Landlord Do's and Dont's

With the housing market finally seeing the end of plummeting prices, the window of opportunity is wide open for those who have restrained from buying during the dive (i.e. cash investors)to now establish themselves as property kings if they want to flip and become property kingpins if they buy and hold. There is a better long term opportunity to secure solid, profitable rental property and then sell it in 5-7 years when property values eventually increase. But what if you don't have all cash or even 20% to put down on an investment property? You can still take your shot at property profits by utilizing your current home. Here are some viable candidates:

* Leasing your vacant home that you can't sell right now
* Leasing your current home and moving into the city
* Leasing your current home and moving into the suburbs(who does that?)
* Leasing your house out-of-state home and relocating (to Metro Atlanta I hope!)

HERE ARE THE DO'S
Advertise your property on any listing website you can get your property on for free. However, in my experience the yard signs and directional signs will generate the most calls on rental properties.

To begin utilize a realtor or property management company to procure the tenant. Any prospective tenant who's chosen representation to locate a place is usually more dependable.

Use a thorough rental application AND VERIFY THE INFORMATION. You cannot take the first person that comes along with a security deposit because you are desperate! I personally like citicredit.net. However, I still recommend verifying the employment personally if you aren't using representation.

Charge an application fee to cover the rental application. Apartment complexes do this and so should you. Again, this will weed out a lot of bad tenants.

Get names and ages of all intended occupants and run background checks on anyone over 18 years old. An old game is for a grandmother to rent a house, have a son or daughter, or grandchild (grandmothers aren't as old as they used to be!) on the lease as an occupant and never actually move-in. So now the individual has free reign, they're listed on lease, but no liability. Also, you may have a home full of adults in which case EVERYONE needs to be on the lease and you definitely want to increase accordingly and within your states landlord tenant laws.

I personally recommend interviewing the prospective tenant after they pass the application process and getting a gut-feeling if you think they are genuine. Now if you're utilizing a property management company this will be unnecessary, but if you will be the point of contact, this is a MANDATORY step.

HERE ARE THE DONT'S
Rent to someone you know closely. In my opinion, it's easier to be a firm landlord with someone you have no emotional ties to. You will hear every story in the book and you have to be immune to it to not breed bad tenant habits. Tenants will only try what they think you will let them get away with.

Entertain any offers online that solicit you offering more than asking price, renting to anyone outside of the US, or offering to send you funds to deposit. THESE ARE ALL SCAMS!!!

Include any personal items outside of appliances in the lease unless you are holding a separate deposit.

The biggest don't for any landlord is to lease your property without a sufficient security deposit. 99% of the time it will come back and burn you.

In-Town vs. The Suburbs

I have clients from out of state and current residents that are split down the middle about going ITP (inside the perimeter of I-285 for all non-Georgia dwellers) versus moving out to the suburbs due to the decrease in home prices making it possible to live in the city. Here is my hit (or miss) guide for deciding where you should move to:

If public schools are a concern you should move to the suburbs. Mainly Gwinnett (where I reside) and Cobb County. Private schools and Montessori's vary in either area. Even surrounding counties like Henry have some noteworthy school districts.

If you want to have great retail establishments it's a toss up. Gwinnett has a ton of newer retail along with three malls Discover Mills, Gwinnett Place, and the Mall of Georgia. In-town gives you Lenox Mall, North Dekalb Mall, and Atlantic Station which is sort of a mall with more of a feel of shopping in downtown Chicago or Washington D.C.

Sporting Events by far are more plentiful in the city. While Gwinnett has the Gwinnett Arena and the Gwinnett Braves stadium they cannot compare to the GA Dome, Phillips Arena and Turner Field. But if it's racing you crave then the suburbs will call you-offering Atlanta Motor Speedway in Clayton County and Road Atanta in Gwinnett County.

Commuting is definitely a win in-town because of the use of Marta and surface street traffic not as bad as any of the major interstates. But if you're self employed or you can tele-work then this wouldn't be as much of a factor.

Nightlife is BARELY a win for in-town only because more and more night clubs are finding their way outside of the perimeter for various reasons. But still if you like pubs, tapas spots, salsa dancing, and lounges.....it's the city hands-down.

Crime is a concern throughout the metro Atlanta area, but more so in the city because of the mix of housing. It is very likely to have a street of $500K+ homes on same block or a street over from abandon homes and drug houses. Old Fourth Ward is probably the best example I can think of off the top of my head. Violent crimes are higher in-town, but home invasions and undercover drug houses and brothels are very prevalent in the suburbs.

When it comes to cost of living-mainly gas prices, groceries, and property TAXES, the suburbs win again. The City of Decatur has the highest property taxes in the state followed by Fulton County and Dekalb County--all located (mostly) inside the perimeter.

Ultimately, you have to assess your personal needs and plans to decide which is best, but in today's current real estate market your wallet will not affect your decision as much!!!

Flip that house?

With the new changes in guidelines of sellers needing to own a property for 90 days before FHA will finance has investors looking to get back to the days of flipping rather than holding. Flipping is always attractive because of the quick income. HGTV made numerous shows based on people buying, renovating, and selling homes for a profit!!! I've represented numerous investors who buy beat up homes, make them beautiful, and they re-sell them at a tidy profit--preferrably within 2-4 months. I posted the most recent flip here done in Washington Park on a duplex-- we're in negotiations to buy another on the same street. But knowing how to use the right contractors and lose your shirt is an art within itself! You can eat into most if not all of your profits if you are not careful!!!

Buying and holding was always my personal preference for the tax write off, but not everyone is cut out to be a landlord! Even with property management companies in place, not buying the right home at the right price can cause you to hemmorage money monthly. But in this market, there are alot of unsaleable homes being leased and with the interest rates low, fair market rent is in the toilet! So you may get a good rental property, but you'll need to get it at a GREAT price to compensate for the rents that you'll be able to reasonably collect.

The same pitfalls of flipping from years past are still the same. A nationwide change is that now if you're financing an investment property you're going to need a minimum of 20-25% to put down. Gone are the days of 100% non-owner occupied properties!!! The big change in the Metro Atlanta area is theivery of the copper plumbing, light fixtures, appliances, and the infamous A/C units!!! Even when caged these units can be stripped for the interior metals or some theives just remove the cage!!! I honestly think rouge contractors are stealing these as there is no why the 'common theif' has the tools to pull this off! Vandalism is at a fever pitch on vacant homes. My listing in 30314 has a VPS system installed to deter anyone even thinking of getting in this house!

I'd definitely recommend buying and holding for novice investors, because it allows you time to heal your wounds if you over pay or under estimate costs of repairs. In this market it's hard to overpay but it happens everyday!!!