Homeowner Consequences for a Successful Short Sale Vs. a Foreclosure

I have written previous articles defining short sales and foreclosures.  I will now compare the consequences to a homeowner of a foreclosure versus those of a successful short sale.

Future Fannie Mae Loan–Primary Residence

•  A homeowner who loses a home to foreclosure won’t be eligible for a Fannie Mae-backed mortgage for 5 years.
• A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae-backed mortgage after only 2 years. 

Future Loan with any Mortgage Company

• On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 which asks, “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?”.  This will affect future rates.
• There is no similar declaration or question regarding a short sale.

Credit Score

• With a foreclosure, a person’s credit score may be lowered anywhere from 250 to over 300 points.  Typically, this will affect the score for over 3 years.  
• With a short sale, only late payments on mortgage will show.  After the sale goes through, the mortgage will be reported as paid or negotiated.  This will lower the credit score by as little as 50 points if all other payments are being made.  A short sale’s effect can be as brief as 12 to 18 months.

Credit History

• Foreclosure will remain as a public record on a person’s credit history for 10 years or more.
• A short sale is not reported on a credit history.  There is no specific reporting item for ‘short sale’.  The loan is typically reported ‘paid in full, settled’.  

As you can see, it’s better to have a short sale than a foreclosure.  If you have any questions regarding short sales or foreclosures, please contact me at steven@stevenhong.com.  I will be glad to help you.

A Brief Explanation of Foreclosures

These days, you can’t read the headlines without noticing that there are many foreclosed homes around the country.   Since it is so prevalent, we thought it would be best to offer a brief explanation of how the foreclosure process works.  First of all, a little clarification.  ”In foreclosure” is the process that leads up to being foreclosed.   In addition, we are offering an outline of the process, and the actual timeline will vary from bank to bank.  

As you know, there are monthly mortgage payments when you buy a house.  If you miss a month, you will get a notice reminding you that you missed a payment.  You will get a similar notice if you miss the next month as well.  If you miss another month, you’ll receive a stern notice.  The fourth or fifth month missed will net you a packet of legal documents that explain the foreclosure process to you.  You will also receive a notice of a Sheriff’s sale  that will take place two to three months out.  The bank that is owns your mortgage will most likely buy your house in the Sheriff’s sale.

Let’s break away from the timeline for a minute so I can explain something else.  Some people who’ve missed a month or two believe that if they resume their payments, they are no longer in the foreclosure process.  This is incorrect.  If you miss one payment, you are in the process.  The only way to get out is to be paid up in full.  Otherwise, you are still in the process of foreclosure.  Ok.  Back to the timeline.

After the Sheriff’s sale, you have a Right to Redemption period that lasts six months.  In the Right to Redemption period, if you repay your mortgage in full, then you get your house back.  Chances are, if you’ve missed a payment or two, you won’t be able to pay off your mortgage in full.  So, when the Right to Redemption period is over, and the mortgage hasn’t been repaid in full, the home is formally foreclosed.  

It helps to have an agent guide you in this process.  If you would like more information, please contact me at steven@stevenhong.com

A Brief Look at Short Sales

These days, in real estate, the term short sales is frequently heard.   What is a short sale, you may wonder.  Well, let me explain it to you by giving you an example.  Let’s say you bought a house two years ago with a mortgage of $200,000.  Let’s say you’ve paid of $5,000 of the mortgage.  I’m just using random numbers, so don’t worry about the math.  Fast-forward to now.  Your boss is offering you a job in California.  It’s more of an order, really, and you take it.  You have to sell your home, and it’s now worth $175,000 due to the recession.  So, after all the fees, you recoup $165,000.  You are still $30,000 short on your mortgage, and you don’t have the money or assets to pay down the mortgage.   This is a short sale.  You and your agent will have to enter into short sale negotiations with your bank.  

So.   How do you know if you are a candidate for a short sale?  First of all, you have to be experiencing a hardship.  The example I hypothesized above (relocation) is just one of 17 acceptable hardships.  Here’s the full list:

1. Loss of job
2. Business failure
3. Damage to property
4. Death of a spouse
5. Death of a family member
6. Severe Illness
7. Inheritance
8. Divorce
9. Mandatory job relocation
10. Medical bills
11. Military service
12. Payment Increase or mortgage adjustment
13. Insurance or tax increase
14. Reduced income
15. Separation
16. Too much debt
17. Incarceration

In addition to having one or more of the above, you must be financially insolvent.   As I said,  you cannot have any liquid cash or assets that could be used to pay down the mortgage.  

This is a brief summary of a short sale.  If you are in a situation like this, it’d would be helpful for you to contact an agent in order to help you with the process.  If you have any questions about short sales, feel free to contact me at steven@stevenhong.com.

How to Enjoy the Fruits of Your Labor

You’re selling your house.  It’s a big process, and you aren’t sure where to start.  You need to price it correctly; you  need to get it in tip-top shape for all the showings; you need to fix up a few things.  Now, many people think of the last item last.  In fact, many people put off the last item until after they have the house sold (on contigency, perhaps).  There are several reasons why people put off making the necessary updates and fixes to their house, e.g., buying new appliances, sealing the windows.  First of all, it’s time-consuming to fix up the house.  If the house doesn’t sell, it may seem for naught.  Secondly, it takes money.  Again, if the house doesn’t sell, it might feel like money that wasn’t well spent.  Why put in the time, effort, and energy if the house isn’t going to sell anyway, the thinking goes.

Think of it this way instead.  If you are going to put in new appliances and spruce up the house, shouldn’t you have some time to enjoy your freshened-up house before you sell it?  In addition, repairing the ceiling or putting in a new stove will attract buyers more readily than you telling them that you will get it down AFTER an offer is made on the house.  It’s far better for a potential buyer to see for him/herself how great the house is rather than how great the house could be.  Who knows?  Once you get the house all gussied up, you may fall in love with it all over again and not move after all.  

In the end, it’s a win-win situation for you to fix up your house before you put it on the market or in the early days of the selling process.  The possibilities are endless.

The Benefits of a Professional Opinion

Selling a house is time-consuming and hard work, especially in today’s market.  If you are thinking about selling your house, you might feel a little overwhelmed by it all.  That’s why it is helpful to have a professional by your side–one who can guide you every step of the way.  In this blog entry, I am going to give you a brief overview of how a realtor will help you sell your house.  This is just an overview, so if you would like to discuss it in more detail, feel free to contact me.  

Pre-listing:  This is the first meeting between sellers and agent.  This will be an interactive interview in which both sides get to discuss what they want and need from the relationship.

• Discuss and explain what are agency relationships.  
• Obtain a signed Agency Relationships in Real Estate Transactions form.
• Find out what the seller’s experctations are, as well as his/her wants, desires, motivation for moving, price, marketing plan, etc.  
• Find out what the sellers are looking for in an agent.  What is most important to the sellers?
• Discuss compensation in a real estate transaction, including the listing company’s policy for paying co-op agents.  This includes a discussion of the Code of Ethics Standard of Practice 1-12, Variable Commissions, etc. 
• What is the sellers’ position?  Are they first-time buyers?  Are they relocating, moving-up, or retiring?

Marketing Plan Presented

• Present a Comparative Market Analysis (CMA)
• Discuss the venues in which the sellers want to market.  Discuss the pros and cons of said marketing.  For the real estate agent, present a comprehensive marketing plan–including on-line marketing.

Read more

What are Agency Relationships?

There is a term in real estate that describes what type of relationship a buyer or seller could have with an agent.  This term is agency.  Each state has different agency relationships, and Minnesota state law requires us to disclose the types of agency relationships that usually occur in our state.  This agency relationship form should be presented to you upon substantive contact with an agent.  You can download a copy in PDF format by clicking on the image to the right.

Looking to Sell Your Home?

We’re experiencing some serious pangs here in the Minneapolis real estate market as, of course, are most markets around the country.  As a result, it’s a great time to buy a house, but it’s not such a good time to sell a house.  The market is soft, and people are tightening their belts.  In addition to that, it’s almost winter time in Minnesota, and house sales tend not to be as robust during this season. 

However, if you are thinking of selling your Minneapolis house, you needn’t despair.  Just because it’s not the opportune time to sell doesn’t meant you shouldn’t sell your home. 

If you are looking to sell your home, there is one major factor you have to keep in mind:  In tough times like this, you have to have the best possible priced house in your competitive market.   There are a plethora of houses available with less and less people buying, so your house has to shine. 

Simply put, your house has to be priced competitively with other houses being sold in your neighborhood.  Your heart my tell you that your house is priceless while your mind may tell you that since you paid x amount of dollars for it, it should be worth y amount of dollars this many years later.  Both of these responses are natural, but the truth is, your house is worth as much as the market will bear. 

To that end, you have to decide a timeframe for selling your Minneapolis house.  If you have to sell your home quickly and it’s not in tip-top shape, you will have to lower the asking price accordingly.  If, however, you have a more flexible timeline for selling your house, you can use that time to update your home by buying new appliances, painting faded walls, or, if you’re a bit more ambition, put in a new kitchen.  The more updated your house is, the higher you can price it.

Here are some articles we’ve written to aid people in selling their homes.

 Pep Up My Minneapolis Home!

Smart Renovator Guide

Smart Seller Guide

The bottom line is that you CAN sell your home in a down period; you just have to make sure the price is right.

Pep Up My Minneapolis Home!

Minneapolis House Curb Appeal

This is Minna, blogging about renovations for your Minneapolis home.  If you are trying to sell your house, you’ve no doubt been told to renovate on the inside.  Redo the kitchen, paint the walls, put in new carpeting-these are all mantras of the eager-to-sell set.  These are good ideas that will add value to your house.  They also will increase the attractiveness of your home, thus in turn engaging more potential buyers.

What many sellers forget, however, is that you need to get the potential buyers in the door first.  Too many sellers neglect to spruce the outside of their houses which means many potential buyers aren’t even stepping into the house to see the awesome interior renovations.

Outdoor Sprucing for Your Minneapolis Home

I can hear you thinking (no, really, I can), “I’ve already updated the bathroom and the kitchen and the floors and the walls; I don’t have the time or the money or the will to tackle the outside of my house, too!”  I understand where you are coming from, especially if you’ve already done the inside renovations, but hear me out.  You don’t have to sink a lot of time or money into perking up the exterior of your house so you can catch the prospective buyers’ eyes.  Add a few potted plants around the walk up, for instance.  A little splash of color can go a long way.  You don’t have to re-roof the house or rip up the driveway and install a new one.  You can easily add a fresh coat of paint with minimal time and money.

Your Minneapolis House At Its Best

I know that selling a house is a long, tedious process, and the last thing you want is to think about how else to renovate.  If you follow the few tips I give above, though, then you’ll at least be comforted by the increased number of potential sellers walking through your newly-painted door.

Little Touchups that Mean Alot

Research Before Buying a House

Hi, it’s Minna again, and I am back!  This time, I am blogging about how to sell your house in this tough market.  Many people think they have to totally rehaul their house in order to sell it, but that’s not true.  All it takes is a little bit of ingenuity to make your home stand out from the rest. 

Let me give you a hypothetical.  Let’s pretend that I am a first-time homebuyer looking for a house in the Powderhorn area.  What is the first thing I’m going to do?  Most likely, I am going to go online and research the area.  How?  Why, I’d go to www.StevenHong.com, of course, and use his search engine.  I’d put in the price range and other specs I had in mind (such as year of house built, number of bedrooms/bathrooms, etc.), and I’d see what I came up with.

Once I got my results, I would immediately discard any listing without pictures or a description of the house.  With this being a buyer’s market, I can afford to be even pickier than I normally would be.  Then, I would look through the pics of the remaining houses and see what immediately catches my eye.  Anything that didn’t elicit a, “That’s cute” or, “I like that one” or even an, “Interesting” gets deleted.  I would go from there.

How to Make Your Minneapolis Home More Attractive

This brings me to my point.  When I look at pictures of houses, the first thing I notice is color.  Maybe I’m unique in that, but I don’t want rooms that are all white or all monochromatic.  A maroon room or a sage-green room alone would be enough to get a second look, if not a third.  Empty rooms are not inviting, either.  A little bit of staging with, say, a vase of fresh gladiola immediately perks up an otherwise arid room. 

The changes don’t need to be overarching and on a grand scale.  A few little touches here and there can increase your house’s saleability, and they are a lot easier on your wallet, too.

Green Home Guide

Everybody is talking green, and by green, I don’t mean money. Green is in. It’s the latest thing.

The government has gotten into the act by forming ENERGY STAR, a joint program of the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Energy.  This program rates different appliances, office equipment, home electronics and more (there are over 50 categories total) to identify the most efficient of them all.  If an item has rated an ENERGY STAR, you can be assured that it has met strict guidelines for energy efficiency. 

For example, an ENERGY STAR dishwater are at least 25% more efficient that contemporary conventional models.  In addition, an ENERGY STAR clothes washer cuts watery and energy consumption by over 40% as well. 

I found these statistics in the RE/MAX-published Green Home Guide which also has useful tips on how to make your home more green, and best of all, it’s free for the asking.  The guide is clear, concise, and full of practical advice that anyone can follow.

This guide includes:

• What is a Green Home?
• 5 Essential Things to Keep in Mind
• Green Return On Investment
• And more….

Just send me an e-mail and I’ll send you a pdf.

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