Grayton Beach Foreclosure only 2 homes off the beach! This Grayton Beach home needs to be gutted and totally remodeled. Could be a rental machine. At $424,900 this Grayton Beach foreclosure won’t last.

Click here to view the embedded video.

So you purchase a foreclosed home (or bank REO), and you’re probably wondering what, if anything, could happen? Will the property go back to the seller who was (possibly) wrongfully foreclosed upon? My crystal ball is in the shop, but my guess is probably not.

The first thing I would like to ask you is “Did you purchase title insurance”? This is where that pesky fee finally comes into play. As long as you have title insurance, then the title insurance company is going to have to fight the battle for you. The Associated Press explains the situation very well in this article: So you bought a foreclosed home. Now what?

Here’s what I’m thinking…if, in fact, there are thousands of homes which were wrongfully foreclosed on, it is going to take years to straighten all the paperwork out. The seller was behind and would have been foreclosed on anyway. I’m not saying  lenders/banks should get away with doing things incorrectly. What I’m saying is that the seller was in default and would have gotten further and further behind, the longer it took to cure (or fix) any title issues. There is no way they would have ever gotten current with their mortgage., hence they would have been foreclosed on anyway. The longer it would have taken to foreclose, the longer the owner would have lived for free.

Brian Stevens & Frank Garay at ThinkBigWorkSmall, also do a great job at explaining the issue at hand. Check out this video: Think you own that REO you bought. Think again.

Let me know what you think.

The difference between a short sale and a foreclosure is that with a short sale the seller still has control of the property, whereas a foreclosure is bank owned, (and also called a REO, real estate owned).

Here are the definitions:

A short sale is a sale which the sale proceeds fall short of the balance owed on the property’s mortgage. Typically this occurs when a borrower (seller) cannot make the payments on their loan. The lender decides that selling the property at a loss is better than the cost of foreclosing, which can cost the lender upwards of $70,000-$80,000!  Both parties must consent to the short sale process. This agreement does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.

Foreclosure is the legal process by which a lender (can be the 1st or 2nd lien holder), repossess a property after the borrower (owner) has failed to comply to the terms of the mortgage. The most common violation of the mortgage is a default in the payments of the promissory note. When the process is complete, the lender can sell the property and keep the proceeds (if any) to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage”. If the promissory note was made with a recourse clause (Florida is a recourse state) and then if the (foreclosure) sale does not bring enough to pay the existing balance of principal and fees, the lender can file a claim for a deficiency judgment (against the borrower).

Other lien holders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue homeowners’ association dues or assessments.

When you purchase a property, with a mortgage, the promissory note describes the payments, interest rate and additional terms (30 year, 15 year, etc.) and is the promise to repay the money borrowed. A mortgage is security for the debt (note).

I’ve been working on a short sale, with Countrywide, since December 3, 2008. There is a 1st and 2nd mortgage on this gulf front condo, both with Countrywide. As of yesterday, my buyer backed out of the contract…that’s just over 4 months and I still don’t have an answer. The file is yet to be submitted to the investor who actually owns the loan. What in the world is Countrywide doing?

How long do lenders expect buyers to wait? There are agents who get mad at the buyer for “walking”, but can we really? In this case, my buyer is not at fault. The closing date and extension date to close has come and gone.  Until the lender (seller) has accepted the offer, the buyer can withdraw their offer at anytime…short sale or not.

Why is it some lenders can process their files so much faster than others? In fact, as I’m typing this post, I received an email from a different lender with approval of a (different) short sale contract. That offer was submitted on February 6. Granted the price is much lower and so is the deficit to the seller, but it’s approved. We will close within 30 days. That’s about 90 days from start to finish. Not unreasonable.

Buyers don’t want to wait. The real estate market is moving quickly and the “deals” are getting bought up. My Broker has this analogy: “Like any yard sale those who show up first get the best choices and those who show up later get what was picked over.”

Check out this chart from our local MLS showing activity over the past 6 months.

As I mentioned in my previous post, Destin, Florida has Buyers.

In these challenging times, we MUST keep our sense of humor…especially us Realtors

Happy Halloween everyone!

For more information about real estate along the Emerald Coast visit my website.

Debbie James
850.450.2000

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I’ve had a lot of people ask me what the difference is between these 2, so I thought I would help clarify…

Question #1: Short Sales versus Foreclosure Sales – What is the difference between a Short Sale and a Foreclosure Sale?

Answer: Foreclosure – “The legal process in which a mortgagee (lender) forces the sale of a property to recover all or part of a loan on which the mortgagor (borrower) has defaulted.” (The Dictionary of Real Estate Appraisal)

Short Sales are not Foreclosure Sales but they are sales which have some duress involved. In Short Sales, the owner often owes more on the home than it is worth, and is generally behind on the payments (also referred to as being in an “upside-down” position). The lender, hoping to avoid the expense and time involved in a foreclosure, allows the owner to list the property, with the condition that the lender can approve the sale price. The agreement may relieve the owner from an obligation to pay for the loss, or it may leave the owner open to a deficiency judgment, depending on the agreement. As a result of a Short Sale, the borrower may also face additional tax consequences as the forgiven debt may be considered as income.

In contrast, a true Foreclosure Sale is one that is generally auctioned off at the courthouse steps, and the buyer has to produce a cashier’s check for the full amount to purchase it.

Since Short Sales are advertised in the MLS, just like any other sale, they affect the market much more than Foreclosure Sales, which are available only to those who have cash and the time to research the properties they want to buy. The research is important because buyers can purchase a second trust deed instead of a first trust deed by mistake if they do not know the lien history.

So, should an appraiser use Short Sales as comparables in an appraisal? If they are common, many believe they should be included because they have become the market. Some argue that they may be in substandard condition, and if this is the case, adjustments can be made just as they would be for any other sale. Another consideration is that if Short Sales are relied upon, conditions of sale verification with the lender can be difficult if not impossible. In addition, the Short Sale sales price may reflect the lender’s motivations and business needs (i.e., number of potential loans in default) rather than “market value.”

If the appraiser decides not to include Short Sales, it is highly recommended they be noted in the appraisal with an explanation as to why they were not used. Short Sales may also be a predictor of where the market is going, for once buyers see the latest Short Sale prices, they often do not want to pay more.

For more information about real estate along the Emerald Coast visit my website.

Debbie James
850.450.2000

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