Things Buyers Should Know About Backup Offers

Thursday, June 19th, 2014

What is a backup offer and what purpose does it serve in this exuberant Denver Real Estate Market?

A backup offer is a second place offer. The home is already under contract with Buyer 1, but Buyer 2 submits a contract to the seller. When the seller signs the backup contract, it means that, if Buyer 1’s contract terminates for any reason, Buyer 2 will likely go under contract to buy the home.

1. Submitting a backup offer is never a waste of time. 

Submit a backup offer and if the seller accepts it, then you’re next in line. Some experts say that submitting a backup offer motivates the primary offer to close the deal on the house. Sometimes this is true, and sometimes it causes them to back out faster. You cannot control what a seller does with your backup offer. You submit it to put a claim on it and prevent it from going back on the market if the primary deal does fall through.

Real Estate Lingo

Sunday, December 22nd, 2013

Learning real estate lingo is an important part of buying/selling a home. Here are a few common words you may hear if you’re buying or selling a home.

Alaris Properties Golden Colorado

1. Appraisal
An appraisal is an assessment done by a certified appraiser justifying the purchase price for a property. The appraisal is usually based on an analysis of comparable sales of similar homes nearby.

2. Commission
Commission refers to the money that is paid to real estate agents after the closing of the transaction.

3. CMA (Comparative Market Analysis)
A CMA is a professional report that real estate agents give to their clients. The report is an analysis done on the values of similar homes in the neighborhood or area that have sold or that are for sale at the same time. This report helps give a realistic listing and selling price.

Waiting Periods Waived

Monday, September 30th, 2013

The Great Recession that started in late 2007 forced many responsible Colorado homeowners into mortgage loan default and/or bankruptcy. Because of this, the Federal Housing Authority (FHA) realized that credit histories don’t always reflect a person’s true ability or willingness to pay on a mortgage, and on August 15, 2013, announced its shortening of the mandatory waiting periods for homeowners with a black mark on their credit.

This means that if you have experienced a foreclosure, short sale, bankruptcy, etc., you now only have to wait 1 year instead of 3 years before you can apply for an FHA mortgage.

Here is a link to the actual FHA Mortgagee Letter (the document number is 13-26).

Mortgage Forgiveness Debt Relief Act

Thursday, January 10th, 2013

Under normal circumstances, debt forgiven as a result of a short sale or mortgage modification would count as income for tax purposes. Lenders send out 1099s to account for the amount of the debt they have forgiven.

However, the Mortgage Forgiveness Debt Relief Act (Act) that was passed in 2007 states that mortgage debt that is forgiven (for instance in a short sale) can be excluded from income, with certain limits, so long as the taxpayer qualifies under the Act. In 2008, Congress extended the Act through 2012. Because of the “fiscal cliff”, many were worried whether the Act would be extended again; however, as part of the American Taxpayer Relief Act of 2012, the Mortgage Forgiveness Debt Act was extended to December 31, 2013.

It’s important to note that the American Taxpayer Relief Act extends dozens of other tax cuts that were scheduled to expire. Check with your tax professional to see if you may qualify under the Mortgage Forgiveness Debt Relief Act and how you may be able to take advantage of other tax cuts included in the American Taxpayer Relief Act.

Foreclosure Volume Slated To Rise This Spring

Monday, April 2nd, 2012

Foreclosure increases by state Feb 2012

After a series of months during which foreclosure volume was low, total filings have started to rise again, says RealtyTrac.   In February of 2012, 21 states posted a year-over-year increase in monthly foreclosure filings, according to the national foreclosure-tracking firm.  This is nearly twice as many states as compared to December 2011, marking the highest monthly reading since November 2010.

A “foreclosure filing” is defined to include any one of the following foreclosure-related events : (1) The serving of a default notice, (2) A scheduled home auction, or (3) A bank repossession.  Nationally, the number of foreclosure filings fell 2 percent from January.  However, it’s a trend that may reverse. Foreclosure volume is expected to rise over the next few months.

This is because the $25 billion mortgage servicer settlement provides a framework for servicers to execute necessary foreclosures, from notice-to-auction. Some analysts believe that foreclosure filings were artificially depressed in 2011 because of the absence of such guidance.

Foreclosure versus Short Sale

Tuesday, October 11th, 2011

In these difficult economic times, I am commonly asked whether it would be better to have a short sale or a foreclosure on ones credit report. The answer is complicated and has lot of moving parts.  A short sale shows up on your credit report as a “derogatory report”; however, it will usually show up on your report as “short sale” or “settled for less then the full balance”. Of course, this will reflect negatively on your credit report. If you have not had any late pays prior to the short sale, your score will likely drop somewhere between 75 and 120 points. Each person’s credit score will vary depending on several factors, such as how much credit you have, how much of your credit facility you are currently using, and how long you have had certain types of credit.  You will unlikely be able to obtain a home loan for a couple years. As a general rule, if one has a foreclosure on a credit report, then the waiting period is up to 7 years. The period may be reduced to 3 years if you fit into one of the extenuating circumstances. You should speak with a mortgage broker to see which of the extenuating circumstances may help you reduce the hold period to 3 years. In fact, my best is advice is to speak with more than one mortgage lender so that you may educate yourself about various lender requirements. Please know that different lenders may vary their interpretation of the underwriting requirements, and private lenders may adopt their own underwriting requirements.

Great Short Sale Debate: Reflections from Linked In

Monday, August 22nd, 2011

As part of our series on Short Sales, we posed some questions to the Linked In community and I thought the questions and answers were worth sharing.

As we have discussed, short sales can be a positive solution by helping one avoid foreclosure. Owners facing foreclosure have some hope and a way to relieve some of the stress. Many of our clients tell us they will be able to sleep better knowing that this situation is being handled. Moreover, buyers can oftentimes get a good deal when they buy short sales.  Lastly, lenders can minimize their losses when they approve legitimate short sales.  I call this the “win/win/win” formula. 

On the other hand, especially when folks are operating on partial information or, even worse, wrong information, then short sales can be extremely frustrating.  In addition, some lenders have poor policies, inadequately resourced departments, and/or other priorities (like keeping the doors open and the FDIC at bay) that can cause long processing times. Let’s illuminate the truth about short sales from the many interested parties commenting from Linked In: seller, buyer, lender, mortgage insurance carrier, investor, attorney, and broker.

Getting Good Advice in a Short Sale: Know the Players

Thursday, July 7th, 2011

How do you get good advice when considering a short sale? First, make sure your trusted advisor has extensive experience in the short sale world.  Research the process and the advisor, ask tons of questions, and be wary of anyone who thinks they know it all. Each bank has several short sale programs each with their own set of rules and requirements for participation. You should understand what the Making Homes Affordable short sale program is and whether you qualify.  This program is known as HAFA or Home Affordable Foreclosure Alternative.

Moreover, understanding the players, their role and motivation within a short sale is critical. There are several people involved who must work in tandem for the sale to be successful:

Short Sale Frustrations: How Do I find the best deal?

Tuesday, June 28th, 2011

Given the volume of short sales and default resolution cases that we help buyers and sellers complete, we hear a great deal of frustration expressed by all concerned.  The sellers have legitimate concerns about deficiencies, buyers have concerns about waiting around for what seems like an eternity, Realtors® wonder if they will ever earn their commission, and some of the lenders feel overwhelmed with the number of requests to approve short sales. It seems to me that a lot of the frustration stems from false expectations, a great deal of misunderstanding, inconsistent information on the web, overgeneralization, desire for discernable logic to play some role on the part of the lenders, and the hope for a “great deal” in a short time frame.  The good news is that there many great deals out there. The question is “how do I find the best deal?”

The Great Short Sale Debate: Critical Steps in the Short Sale Process

Wednesday, June 22nd, 2011

There are a number of critical steps through the short sale process. Once the first lien holder has reviewed all the documents, determined they have a complete package, and determined that the seller is eligible to participate in a short sale program, they will order a broker price opinion (BPO) or an appraisal (this is dependent on the requirements of particular lender, investor and/or mortgage insurance company who is in charge of making decisions) on the property.  It can take up to 30 days to complete these initial tasks.

The value obtained by the lender is one of the lynchpins in a short sale transaction. Those who are processing short sales will be well served to work with the brokers or appraisers preparing the valuation.  The value must support the contract or offer price. If the value comes in high, then you can expect a counterproposal from the lender or a rejection of the offer.