Short Sale Blog

Great news for this Seattle, WA, homeowner! Not only did he avoid foreclosure through a short sale, he also had the $141,000 deficiency balance waived.

He owed over $215,000 on his Wells Fargo mortgage, as well as another $31,910 in arrears - a total of $247,000 of debt. But his home was valued at only $124,000.

Wells Fargo issued an approval letter for the short sale, accepting $106,000 net proceeds on the $247,000 mortgage balance owing - a discount of $141,000. However, the approval letter did not waive the deficiency - which means that down the road, debt collectors could pursue our Seattle homeowner to repay that deficiency.

We had our lawyer write a letter to Wells Fargo, explaining to them that if they did not waive the deficiency balance, they would end up owning the home outright (and have to absorb all of the costs of marketing it) - either by the homeowner declaring bankruptcy and not having to repay the deficiency, or through foreclosure.

Wells Fargo promptly reissued the short sale approval letter, waiving the Seattle homeowner of having to repay the deficiency balance.

You can read the original Wells Fargo short sale approval letter here: 4.25.12 - Wells Fargo - 1st Lien - 141k Deficiency - Lien Release - Short Sale Approval

You can read the revised Wells Fargo short sale approval letter, waiving the deficiency, here: 5.16.12 - Wells Fargo - 1st Lien - 141k Deficiency - Debt Settled - Short Sale Approval

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

Good news on the national front regarding mortgage payment delinquencies - but, as usual, the Seattle area and Washington state seem to be lagging behind the national trends.

According to a new report by TransUnion, as published in the Silicon Valley Mercury News, the percentage of homeowners who are 60 or more days delinquent on their mortgage payments dropped in the first quarter of 2012. The nation-wide delinquency rate is now at its lowest level since 2009.

But that drop is small. The national delinquency rate was 5.78% for the first three months of this year - down from 6.19% a year ago. Before the housing crash, the delinquency rate was about 2%, and it peaked at nearly 7% in late 2009.

Throughout this housing crisis, though, Washington state seems to lag behind national trends. As the national delinquency rate declines, there are only eight states where the delinquency rate is still increasing: we in Washington are one of those eight.

The regions that were hit hardest and earliest by the financial crisis and high foreclosure rates are showing very strong signs of recovery. A report published this week by HousingWire, using figures published by Move Inc., lists the regions that show the “top turnarounds.” These are the towns showing the highest level of housing market recovery, as reflected by declining inventory and increasing house prices. Those top turnaround towns include Phoenix-Mesa in Arizona; Orlando, Florida; and Oakland and San Jose in California - all of which have already been hit hard by foreclosures.

We are confident that Washington state and the Seattle real estate market will also follow those same trends and see recovery in the housing market. We just seem to continue to be a year or two behind the national trend.

As delinquency rates are still on the rise here, homeowners who are struggling to make their mortgage payments will continue to look for solutions such as short sales, in order to avoid foreclosure and the negative affects that mortgage payment delinquency will have on their credit rating.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Spring and fall are the busy times for us, and spring 2012 is no exception to that. Short sales are booming - as we reported to you earlier this month, short sales have now outpaced foreclosures. We have just finished putting together the figures for last month: in March, 2012, we managed to negotiate $3,951,000 of loan discounts from lenders for our short sale clients.

The discount, or deficiency, is the difference between what the homeowners owes on the mortgage, and how much she or he is able to pay back on that loan following the short sale. Many homeowners whose home is now worth less than the balance owing on their mortgage may worry that they will never be able to get out of debt. But this March, sixteen of the thirty short sales we negotiated were for loan discounts of over $100,000. And nearly all of those homeowners - twenty six out of the thirty - had the deficiency balance waived. This means that that loan discount is permanent: the lender has put it in writing that they will never pursue the seller to pay it back.

Total debt discounts that we negotiated through short sales in January was $3,370,000, and in February was $4,390,000. Adding March’s $3,951,000 to those figures brings us to a total of $11,711,000 of mortgage relief that we have negotiated for distressed homeowners through short sales for this first quarter of 2012.

All of our short sale approval letters are posted on line: http://seattleshortsales.com/approvals.htm. Here you can see what a real approval letter looks like, what each loan discount is, and how different lenders word a deficiency waiver.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Could it be that things are finally starting to look up? There is some good news this week from Realtor.com - especially for Seattle. Stats from March indicate that the nationwide median list price for homes has increased by 5.56% over March 2011. And the inventory of homes listed for sale has dropped by 21% nationwide over the same period.

But the numbers for Seattle-Bellevue-Everett are even better! Median home prices have increased by 4.98% over the past 12 months - only slightly less than the national average increase. But inventories here have dropped dramatically - by more than 39% compared to a year ago.

The median age of our inventory here in the Seattle area has also dropped by 31% over the last year, to 53 weeks. This is also much better than the national average, where the median age of inventory is 89 weeks, a 20% drop from the previous year.

These numbers are all very promising indicators that the housing market is beginning to recover - nationwide, but even more so here in Seattle. The remarkable drop in inventory here can be expected to tighten the market, create more competition and, consequently, raise home prices.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

A revision of Senate Bill 6337 (companion to House Bill 2718) was passed last month. The aim of the bill is to protect homeowners who short-sale their homes from being pursued by their lender for the deficiency.

The deficiency is the shortfall owed to the lender after a home is sold short. For example, if a homeowner owes $200,000 on their mortgage but, following the short sale, can pay the lender back $120,000 on the loan, the difference - $80,000 - is the deficiency.

This bill sounds great in theory. But, for the majority of homeowners who process their short sale here through Seattle Short Sales, Inc., this bill will make no difference at all.

Why? Because the majority of our approvals - in fact 93% of all short sale approvals we negotiated last month - already come with a clear wording that waives the homeowner of ever having to pay back the deficiency. Our homeowners already have the protection that this bill would offer.

The new bill applies only to short sales for which the lender has issued a Form 1099 to the borrower: the homeowner to whom the debt was forgiven. Lenders are required to issue a 1099 any time that they forgive a debt of over $600. This means that the borrower must declare the forgiven debt, and they may have to pay tax on it as if it were income. It also means that the lender may write off the bad debt as a loss, which means that they may get a tax break on that loss.

So, really, what Bill 6337 does is prevent a lender from both writing off the bad debt as a loss, and also pursuing the borrower to pay back that debt. They must choose one option or the other. (Which - really - should be the case for whenever a 1099 is issued, not only in the case of short sale deficiencies).

And that seems only fair.

But, as we pointed out, 90% or more of our recent approval letters already specify that the lender will not pursue the deficiency. Here are some sample stats showing how our track record of obtaining deficiency waivers with short sale approvals has increased over the past two years:

 

(A quick point here, in case you were wondering why we’ve only shown stats for a few months over the past two years: We could not afford the time to go through all of the hundreds of short sale approvals we have negotiated over that time period. So we used the March 2010 and March 2011 stats, which we had already gone through for our blog post on deficiency waivers. And then, starting last July, we changed our file-naming system so that whether the deficiency was waived (“Debt Settled”) or not waived (“Lien Release” only) is in the file title, so we selected the two months at the beginning of that period as well as the last two months. You can review our complete short sale approval letter database here).

So two years ago, back when the majority of short sale approvals did not explicitly waive the deficiency, this bill might have made a difference. But now that lenders have realized that short sales are in their best interests, too, and are willing to write into their approval letters that they will waive the homeowner of ever having to repay the deficiency… well, Bill 6337 won’t do anything. They have already said they will not pursue the deficiency.

For the minority of our short sale approval letters where the lender does not explicitly waive the deficiency… well, even then, Bill 6337 will not change much. According to the wording of the bill, the lender is only prevented from pursuing the deficiency if they have issued a 1099. But if they don’t issue that 1099, again, the bill won’t prevent them from chasing borrowers up for that deficiency down the road - or to selling that loan on to debt collectors.

The take-away here is that the protection for homeowners who are considering a short sale is that Bill 6337 will not likely protect you. Your security lies in the wording of your original approval letter. Make sure that the negotiators who are working on your behalf work towards clear and unambiguous wording about waiving the deficiency balance - and then you will know that your future is safe, Bill 6337 or not.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

According to a news clip from CNN (click Play below, of view here), summarizing information provided by the National Association of Realtors and by Zillow, home prices in Seattle could drop by nearly 7% more in 2012.

Home prices in the USA are the lowest they have been in a decade. Currently, the median home price nationwide is $154,700, less than half of what it was in 2007. Housing prices are expected to drop across the country by a further 3.7% this year.

But the report goes on to break out home prices by region. Some cities, such as Washington, Los Angeles and Phoenix, have already passed through the worst of the foreclosure crisis and are even expected to show small gains in home prices this year.

However, many regions have not yet seen the worst, and are expected to show price drops that are worse than the national average for the coming year. Seattle, not having been hit as hard by the crisis so far, fits in this category.

The prediction is for home prices in Seattle to drop by another 6.9% over 2012 - a rate nearly twice that of the national predicted price drop. The only two cities with more dire forecasts than Seattle are Atlanta (8.5% drop) and Chicago (7.6% drop).

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

Bloomberg reported this week that U.S. home prices fell even more than forecast for the one-year period October 2010 to October 2011.

According to the Bloomberg report, the median prediction of 27 economists surveyed last year was for home prices to fall by 3.2% over 2011. But the figures now in show that home prices actually fell by 3.4% (according to the S&P/Case-Shiller index of property values in 20 U.S. cities).

That difference may not seem much - but the damage here in Seattle is much worse. As reported by the Puget Sound Business Journal, home prices in Seattle have fallen by 6.2% from a year ago - a drop that is nearly twice the national average. Home prices in Seattle fell by 1% between September and October alone, and by 1.1% the previous month.

The one good side to the drop in home values is that it may turn renters into potential home buyers - bringing new players into the real estate market. As homes become more affordable, some renters may choose to take advantage of the twin opportunities: low home prices and low mortgage rates, and enter the housing market.

There is still a lot of inventory available at present, and it may take time before an increase in buyers is reflected by actual rising home prices - but more buyers is a necessary early step towards any eventual recovery in the real estate market.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

California is one of the states that has been most affected by the housing bust and foreclosure crisis. Over the past year, close to one half of home sales state-wide are sales of distressed properties. In some parts of California, the numbers are even worse: last month, in Madera County, 86% of home sales contracts accepted were for distressed-property sales.

A new move by members of the California Association of Realtors (CAR), as reported by DSNews today, may help to streamline short sales for homeowners across the country.

California, like Washington, is a state that implements non-judicial foreclosure. This means that lenders can pursue foreclosure without going through the courts. Foreclosure is initiated by mailing a defaulting borrower a notice of foreclosure.

CAR recognizes that short sales are important to clearing out the inventory of distressed properties, and that short sales will continue to be important in the coming years. But they are concerned that some of the requirements that lenders have in processing short sales may hold up future transactions. So CAR has sent letters to many of the major lenders, including JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo, with recommendations for streamlining the short sale process. These recommendations include:

• asking lenders to disclose whether or not they actually own the original loan
• asking lenders to disclose who has the finally authority to approve a short sale (e.g. the lender or the investor or some third party)
• requesting that lenders implement a standard process to pre-approve a request for a short sales before a property is listed for sale
• asking that lenders increase the amount that junior lenders may receive from a short sale, as second mortgages often hold up short sale approvals.

Although this request is coming from CAR in California, if the lenders approve CAR’s requests, this will help to further speed up the short sale process across the country. The number of short sales continues to grow nationwide. Short sales now account for 25% of residential property sales - up three times from two years ago.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

The Seattle real estate market continues to operate, in large part, contrary to national real estate market trends.

We reported to you last month that, despite foreclosure rates dropping nationwide, foreclosure rates in Seattle had jumped by 10% over the first half of this year.

Now, a new study by the National Housing Conference, a non-profit housing advocacy organization, reported this week in The News Tribune, indicates that Seattle is one of only 12 of the largest US metropolitan areas where the rate of “serious delinquency” grew over the 12 months ending March 2011. A year ago, 7.7% of mortgages in the Puget Sound region were seriously delinquent (i.e., 90 days delinquent or in foreclosure). That rate has increased to 8.4%.

While Washington state has not been hit as hard by the economic crisis and the nationwide wave of foreclosures as some other states, there are worries that this may reflect that it is simply lagging behind national trends. A year ago, home prices in Seattle were still considered to be overpriced relative to their real market value - a statistic which could mean that they have more potential to drop further.

An article published yesterday in the Wall Street Journal, and summarized on the Seattle PI blog, indicates that Seattle area homes are still considered to be 14% overvalued, relative to historical (pre-year 2000) trends. However, this is one figure where Seattle is in line with the national average, which is also 14%.

And another report released by CNNMoney on Tuesday indicates that, while home prices have come down nationwide enough so that buying is cheaper than renting in most US cities, in Seattle the opposite is true. This study examined the country’s 50 largest cities. Seattle was one of only 12% of those cities where renting was cheaper than buying - another indication that home prices here are overvalued.

Data from earlier this year indicate that one third of Seattle area homes are worth less than the balance owed on their mortgages. Recent predictions see home prices dropping nationwide by another 5% over the coming year. Both Seattle's currently overvalued home prices, and Seattle’s tendency to buck the national trends, together suggest that the slide here could be even steeper.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

A press release published this week by foreclosure-listing firm RealtyTrac indicates that, while foreclosure rates have dropped across the nation, Seattle showed the greatest rise in foreclosures of the 20 most-populated metropolitan areas in the country.

The report compared the foreclosure rate for the first six months of 2011 with the foreclosure rate a year ago, for the first six months of 2010. It looked at data from all of the nation’s 211 metropolitan areas that have populations of more than 200,000.

178 of the 211 metro areas, or 84%, showed a decrease in foreclosure rate compared to mid-2010. Cities in California, Nevada, and Arizona accounted for the majority of high foreclosure rates.

Although the foreclosure rate is dropping nationwide, the RealtyTrac study does not take this as a sign of improved economic conditions. Rather, they attribute the drops in foreclosure rate to hold-ups in the system.

According to the statement: “These dramatic decreases indicate the foreclosure pipeline continues to be clogged in many local markets across the country, sometimes by a glut of already-foreclosed properties that are not selling quickly, sometimes by a mountain of improperly filed foreclosures that are blocking the inflow of new foreclosure filings — and sometimes by both.”

The news for Seattle is disturbing, however. The report looked specifically at the 20 largest metropolitan areas in the country. Of them, 19 showed drops in foreclosure rate. The only exception within the 20 largest cities was Seattle, where the foreclosure rate jumped by 10% compared to the same period a year earlier.

One in every 98 Seattle homes received a foreclosure filing in the first six months of 2011. Seattle had the 97th highest foreclosure rate in the nation in the first half of 2010. But in the first half of 2011, Seattle’s ranking rose to 57th-highest.

High foreclosure rates, and more homes ending up as bank-owned REO inventory, will continue to keep home prices low. Two recent studies predicted that further house drops, of up to 25%, may be on the horizon. And recent estimates are that the current shadow inventory of foreclosed homes will take three years or more to clear.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/