Tag Archives: Overland Park Short Sale Realtors

Short Sales Surpass Foreclosure Sales As We Near The End Of The IRS Tax Break On Short Sales

Posted on by

Checking The Pulse Of The Kansas City Real Estate Market

The volume of Short Sales continues to rise as under-water homeowners and the lender’s who hold the loans understand the benefits of avoiding foreclosure. In almost all situations, a lender does not want a foreclosure on the books as it causes many direct and indirect problems for a lender. Seller’s don’t want a foreclosure on their credit history and can rebound in most cases to buy a home within a year or two of a successful Short Sale.

A Short Sale means a homeowner selling their home for “short” of what they owe the lender on the home. For this to occur, the seller has to locate a buyer, get the buyer under contract and then submit the contract (along with a detailed short sale package on the homeowner) to the lender… From there the lender begins considering whether they’ll accept the Short Sale — i.e. whether it’s better for the lender to accept the Short Sale or whether the lender will come out ahead by simply foreclosing on the property.

Currently homeowners don’t have to pay federal tax on the unpaid mortgage amount that was forgiven. This unpaid amount (viewed by the IRS as a form of “income”) has received a tax break since the Mortgage Debt Forgiveness Act went into effect several years ago. The potential end of this tax break is part of the reason for the increase in Short Sales. In fact, Short Sales have become so prevalent that they have surpassed the volume of distressed bank-owned REO homes.

For buyers, Short Sale listings are almost always in better condition than bank-owned properties. This is because the homeowners are often in the home up until the closing occurs, making the sale similar to a traditional home sale, in that regards. This means the homes are usually maintained to some degree and is one of the main reasons that Short Sales have been selling on average for about 15% more than bank-owned properties.


Posted by Jason Brown

Add to DeliciousAdd to DiggAdd to FaceBookAdd to Google BookmarkAdd to RedditAdd to StumbleUponAdd to TechnoratiAdd to Twitter

Consider This Before Calling Your Buyer’s Agent To Schedule A Showing On A Short Sale Listing

Posted on by
Checking The Pulse Of The Kansas City Real Estate Market

Many buyers call in wondering why a particular home appears to be such a great deal. It’s become routine really. I get the call, I log into MLS and check the “Showing Agent Info” section of MLS and, bam, there it is…  SHORT SALE, SUBJECT TO LENDER APPROVAL.  The public can’t see the Showing Agent Info section of MLS, so it takes an agent logging into the Kansas City MLS to actually tell (in most cases) whether a home is a Short Sale listing. Once I know we’re dealing with a Short Sale, I always provide an abbreviated layout of the Short Sale process. At this point most buyers choose to go a different direction with their home search.


The main reason most Kansas City home buyers won’t mess with a Short Sale is because they need a closing date they can rely on. Short Sales however rarely close on the date written into the contract. In the last year, I found around 1,200 Short Sale listings came on the market in the Kansas City metro area. I then searched to see how many Short Sale closings occurred and found 375.  At that annual sales rate and considering the , that’s 13 months of Short Sale inventory in the Kansas City area.  I’m betting that more than half of the current Short Sale listings do not make it to the closing table — which means they’ll head into foreclosure.

Still thinking you want to mess with buying a Short Sale? Let’s dig into WHY Short Sale listings are such a challenge. The definition of a Short Sale is the homeowner is “upside down” on what they owe on the home. Many buyers think of Short Sales as the same or similar to a Foreclosure and that couldn’t be further from the truth. A bank foreclosure is a listing ALREADY taken back by the bank (the homeowner is out of the home), the bank now has ownership of the property and can sell it in any fashion the bank sees fit. A Short Sale on the other hand still has the homeowner in the home (in most cases) and they may be struggling to get/keep their house payments current still.

In a Short Sale, the seller is HOPING their lender will accept a “Short” payoff of what’s owed on the home. The problem for buyers is you have no idea whether the seller’s lender will be willing to accept losing the money necessary in any particular Short Sale contract proposed to the lender. So a buyer and seller can be on the same page in regards to the contract price, but what REALLY matters is if that price is high enough for the lender to accept the Short Sale, rather than just letting the home go into foreclosure. If a Short Sale offer is too low, the lender could easily determine they’d do better by foreclosing on the home, taking possession of the home and selling it after the foreclosure process is complete. Either way, the bank loses. So it becomes the bank choosing the lesser of two evils.

Some buyers are willing to take the chance and feel all they have to waste is some time. That may be true and the inspections are often allowed to be postponed until after finding out whether the lender will accept the proposed Short Sale. But most buyers can’t wait 2, 3… 6 months to find out. If you can, then you may be the perfect Short Sale buyer. But there’s one more trait that any buyer must have for me to work with them on a Short Sale purchase — complete patience with the process. There is little a buyer’s agent can do to move the process along. The success of the transaction lies with the listing agent because they are the only one the seller has authorized to have discussions with their lender.

It’s also not out of the question that the lender will never respond to the Short Sale contract that’s presented. You’d think they’d provide a yes, no or some type of other response. But they’re not required to do so and sometimes you never even hear back. For this reason, there’s a place in the base Short Sale addendum we have where we can write a maximum amount of time the buyers are willing to twiddle their thumbs waiting for a lender response. 60 to 120 days is pretty common. One more tip. Before you EVER think about making a Short Sale offer, have your buyer’s agent ask the listing agent “have you received a complete short sale package from the seller that’s ready to be submitted today to the lender?” If the answer is no, the chances of that particular home making it the closing table just dropped into the single digits.

Click this link if you’re considering selling your Kansas City area home in a Short Sale.

 


Posted by Jason A. Brown