DEAN GRAZIOSI: DEAN GRAZIOSI REVIEW – REAL ESTATE FEED BY DEAN GRAZIOSI

At the beginning of December, the Treasury Department unleashed some pretty powerful initiatives to expedite and encourage the influx of short sales.  As many as 33% of pending sales reported by the National Association of Realtors, are short sales.  Unfortunately many of these sales fail to close.

This trend has caused the Treasury Department to take a hard look at the process.  The most glairing breakdown in the system is the prolonged amount of time these transactions take.  Investors get discouraged and move on.  There are plentiful supplies of short sale housing.  With each failed short sale, the existing inventory of homes for sale continues to grow and lowers values of other properties.

The Treasury realizes the need to strengthen the real estate market and cut into the over-abundance of existing inventory.  In 2009, 500,000 short sales have been completed.  More than twice that number of short sales has failed to close.

The new plan is designed to assist homeowners who do not have the income or debt levels to capitalize on the government-backed $75 billion loan modification program called the Making Home Affordable.

To qualify for short sales assistance, the subject property must:

·                     Be the homeowners principal residence

·                     The mortgage must be delinquent or default must be in the offing

·                     The original loan had to be issued prior to January 1, 2009

·                     The homeowners total monthly mortgage payment must exceed 31% of their before-tax income

The short sale seller will receive $1500 to help offset moving costs.

Short sales are preferable to foreclosure because while they will affect the borrower’s credit rating, the negative effect on lasts about two years.  Meanwhile, neighborhood property values are not as negatively impacted as if a foreclosure had taken place. 

Lenders are finding short sales save them money as they do not have to go through the expensive foreclosure process.  While not the chosen result, the new short sale program should benefit all parties.   

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Opportunities are out there.  Great ones.  Are you ready?  When the short sale knocks, will you be ready to open the door?  Like all investors, real estate investors are thinking ahead and are in a position to move at lightning speed.  Building a savvy, experienced short sale team of experts is a wise decision that can reap big profits and facilitate the short sale process. 

The ideal short sale team consists of the investor, a financial backer, an accountant, an attorney, a certified home inspector and, of course, a licensed real estate agent.  Short sales can have legal and tax repercussions.  Avoid any surprises and engage the accountant and attorney in the process early.  A half hour of advice can facilitate the whole transaction.  In any case, every short sale purchase agreement should contain a one week period for attorney review.

Before you move on any short sale, the buyer should always insist upon a home inspection.  Check all vital systems such as plumbing, electrical, roofing, heating and cooling, foundation, paving and siding as well as termite and/or infestation inspections.  Every seller, including the mortgage holder, will respect the buyer’s right to a physical inspection.  A one week contingency can prevent a lot of hardship down the road.

The real estate agent is the critical component on your short sale team.  Spend some time with the agent and understand the agent’s responsibilities.  The investor should detail the overall investment plan, specific property criteria and property types that are not of interest.  Meet with the agent periodically.  These sessions will serve as the agent’s marching orders.

Increase the real estate agent’s effectiveness by creating a letter of authorization permitting the agent to discuss properties and investments on your behalf.  The letter should contain the date, investor’s name and address and any contact information and all the same information for the agent. 

When the agent finds the ideal short sale opportunities, authorize the agent to contact the lender and procure all financial information about the property.  While the attorney, accountant, agent, home inspector and financial representative are on your team, remember that it is your investment.  Check all reports relative to the short sale.

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