By Henry B. Nathan
For the last couple of years or so, the new terms ?short-sale?, ?pre-foreclosure?, ?bank-owned? have become very familiar to any active realtor.
Yes, there are courses and classes and conferences to make us aware of the opportunities of this new sector in real estate. And I am continuously receiving emails offering leads on foreclosures and short sales and ?BPO?s?.
I have been involved in a few short sales and I even lend occasionally advice to people who ask me what I know about the subject. The fact is that there is not so much to explain about it. It?s just a logical way that a lender can use to handle bad or problem-loans and cut its losses.
So far so good. However, every time I get involved in a short sale or ?pre-foreclosure? deal, the bizarre takes over the rational, and weirdness supersedes common sense. Let me explain why I think so:
1) There are some conventions in how we usually handle a real estate sale in the US. Usually we list a property when a seller designates us as his ?listing agent? and we place it on the MLS. There are some requisites to do that. He must give us an exclusive right of sale; otherwise we wouldn?t put it on the system.
2) If we have a buyer looking for a property, we will search on the MLS system and establish a relationship with its ?listing agent? by asking to show it to our buyer, or requesting additional information.
3) Once an offer is made, an answer is received within a short term, usually 2 or 3 days. It can be an acceptance, a counteroffer, or a rejection. A non-reply within the given term is considered a negative answer.
Now let?s compare this to what a bank involved in a short sale, or foreclosure sale usually does:
A) After talking to his bank, the seller of the troubled property agrees with a real estate agent to list his condo for sale in the MLS. The agent will place a special clause in the listing, stating its special status as a short sale and its contingency to a bank?s approval.
B) When an offer is received, the bank sometimes requires that it must be accompanied by a loan approval or a proof of funding if it?s a cash offer.
C) The buyer?s agent will often find a clause in the listing, stating that no commission is guaranteed. It is known that banks do not like to pay co-operating brokers more than a 2.5% compared to the usual 3%, but even this is not guaranteed. You must accept whatever the bank will definitely wants to pay you. No discussion.
Do you think that this is the perfect way for the banks to attract the best and most motivated realtors? Work double for less money?
Usually, in a buyers’ market, a smart seller often increases the commission, so buyers? agents are motivated to give him some priority. But apparently, banks have discovered that they can dictate their conditions, nickel-and-dime us so that they can save a few pennies after sinking billions of dollars in dubious transactions. Naming a listing agent who lives 200 miles away from the property isn’t the smartest move either.
But let’s not discuss their marketing skills.
They must know what they are doing.
D) When an offer is presented, the bank does not answer within any agreed period.
E) First difference: the listing agent does not remove the property from the MLS.
F) Second difference: the bank can take many months to reply. Meanwhile other offers are frequently received and presented to the bank by the listing agent. The process gradually resembles an auction and the higher bidder might get finally an answer. Or not.
G) Third difference. When a buyer?s agent contacts a bank-owned or foreclosure sale, and even some short sales, we often observe that the same agent or broker has his name on a lot of listings. This agent is sometimes based in a location that is distant from the property. I have seen brokers in Tampa handling listings in Miami.

Open the paper or switch on the TV news or a radio talk show, and chances are you’re going to encounter something about the real estate market and its recent downturn.
Typically, those who have staked their professional reputations on being dark horse skeptics are predicting nothing short of a global economic apocalypse.
Others often those on the take from the real estate industry scoff at such dire visions. Don’t listen to the doomsayers, they say we’re in for a soft landing, and I don’t believe it
But how these perspectives affect the average person with a mortgage or with a dream of buying his own house is anything but clear. So who do you listen to, and what does it all mean?
But what if you’re not an investor? For the average home buyer, these market generalizations and big trend stories may not mean a whole lot.
Why not? Even in our global economy, real estate is still a local matter. And what holds true for your brother’s house in Poughkeepsie may not have much bearing on your condo on Nob Hill. Indeed, your condo may share a very different fate from the multi-million-dollar mansion down the street.
Different areas have been hit by the slowing real estate market in very different ways. Places like San Diego which witnessed Wild West style appreciation seem to have been hit the hardest.
In contrast, undiscovered markets like Boise, Idaho, and Marfa, Texas, have been discovered big time. Since homes in these towns and small cities are still considered cheap by many living in big cities, they are enjoying an extended, no end in sight boom, largely funded by second-home buyers and investors.
Some markets seem especially schizophrenic. For instance, in Solano County California prices have risen over 16 percent since last April, while the number of houses sold in April 2006 plummeted a full 35.7 percent in the same period.
Sales numbers tend to get a lot of attention in real estate punditry because they mean so much to the real estate industry itself. After all, high sales mean high commissions. But for the average homeowner, it’s the price that counts.
So while most homeowners can congratulate themselves on another year of insane appreciation, local real estate agents may be wondering where their next meal is coming from and many of their clients will still be left out in the cold.
A change in the number of sales is typically taken as an auger of where prices are headed. As inventory increases and sales drop, the stage is set for desperate sellers to begin lowering prices. But that doesn’t always happen. April sales numbers dropped precipitously between 2000 and 2001, but prices rose.
Don’t get me wrong, I’m not predicting another replay of 2001.
Nationally, inventory has increased by over 300 percent since 2001. And many places are already showing signs that prices are being slashed like a proverbial blue light special. Last month, for instance, a quarter of Marin Country California listings saw their prices reduced. For many years Marin County was the highest priced real estate in the country.
But so far, the bubble has shown signs only of leaking, not popping. Most localities despite steep declines in sales continue to appreciate, though rates have dropped to single digits.
In layman’s terms that means the home you bought a 18 months ago at a ridiculous price would still command an even more ridiculous price today.
At this point, I think the best answer is it that it all depends on what you’re buying or selling and how it’s priced. Does this mean that home prices haven’t significantly declined? Not exactly.
Real estate agents have ways of relisting their properties at lower prices without signaling a price reduction. Sometimes it’s their way to make the listing seem fresh.
But even if there have been substantial sleight of hand relistings by real estate agents, a serious buyer’s market as many of my renter friends would define it has not yet arrived, nor will it ever.
The problem for most home buyers is is that even with substantial price reductions, the market still looks absurdly overpriced when compared to their wages.
Bubble or no bubble, it’s as if real estate froth had become like fog: a permanent part of the landscape that many of us, for better or for worse, have decided to live with.

A short sale is a sale that aids individuals that are nearing foreclosure by the lending company accepting less than the amount owed on the loan. This process can and does help those that are willing to negotiate with the lending company, however, the lending company, bank, or Mortgage Company has to agree to this discount. The individuals that wish the lending company to agree to a short sale must prove they have financial problems and cannot pay their mortgage. The problems in most cases prove to be economic situations, hardships due to illness, or death in the family. If the home is sold in this manner all the money will go directly to the lending company, the homeowner will not receive funds of any type and will lose all equity in the home. The reason most individuals go with a short sale is to save their credit. If you are considering a short sale, you may wish to talk with an attorney and of course a real estate agent that understands the negotiation process. The lending company will of course, want to receive as much money as they can that is still owed on the loan, as this is how the lending company stays in business. If all individuals defaulted on their loans or received a discount on their loan, the lending company would soon go out of business. This is why you need a professional on your side to help you with negotiations.No matter how much negotiating you do, the lending company has the final say as to whether they will agree with the short sale. The lending company the majority of the times will agree to a short sale if you can prove financial hardship. If the lending company does accept the short sale, you may still be responsible for the remainder of the loan. In almost all cases with a short sale, the full amount of the loan is not met and the original homeowner will still have to pay the remainder of the loan. If the original homeowners still owe money on the loan, this can be a problem for the new homeowners, as the lending company will hold the title until the remainder of the loan is paid. In too many cases, the lending company will not accept a short sale, as they believe the person can pay their loan or that they can still receive the amount owed on the loan through foreclosure and resale. However, the decision is often based on the real estate market in the area. A short sale is actually negotiating with the lending company to get them to take less than you owe on your mortgage loan. If at all possible, the idea is get the lending company to accept the money received from a short sale as the full amount on the loan whereas, nothing more has to be paid to satisfy the loan. In most cases, during the negotiating the lending company will provide an amount they will accept to satisfy the loan. If this amount is not met, the seller will then have to pay the rest before the lending company will give the title of the home to the new owners.

The process of getting a loan modification or resorting to a short sale is complicated, but can be explained in about five main steps.

Step One: Fill out a complete evaluation of your financial situation and your expected recovery value for a foreclosure. Asset dispositions as well as acquisition dates need to be projected accurately, and you must be sure to include an overview of property data, like copies of your loan-agreement, promissory note, the security agreement, the deed of trust, and every other liens that was secured by either you or the property’s operations, including taxes and assessments. Don’t forget, if you have them, rent rolls, current leases, rent concessions, and any and all tenant improvements. Also, if you have has any listing agreements or offers of purchase in the last year, these will need to be included as well. And every operating statement for both income and expenses for the last three years need s to be included in order to establish trends and accurately calculate the total operating income of the household.

Step Two: Every expense relevant to the situation will be analyzed as well as compared to the expense models that the lenders used- this will help to show a fair position on your behalf. Capital and leasing expenses for brokerage commissions or buyouts, as well as total debt service expenses will cut down the net-operating income that was previously calculated. The result of this subtraction is the ‘net’ proceeds from operations that your lender could realize after acquiring the title. This is important to produce so that they can have an accurate projection of what will happen.

Step Three: Establish the market value of your home. This is an obvious one. Then, you will need to add the operations proceeds to this net-sale amount, creating what is known as the expected recovery value which will become available from the collateral.

Step Four: Go over your exposure to a deficiency judgment- you want to avoid this if you can. All of your federal tax returns for the last three years will be included in this perusal, in addition to a recent financial and cash-flow statement that clearly outlines income sources and expenditure categories and amounts. This will help develop strategies for protecting your personal assets, and demonstrate that it is not in your lender’s best interest to go after you in a judicial foreclosure. After this, exposed asset values will be cut down by litigation and liquidation costs, and risk factors in losing a judgment. The resulting, lower value is the recovery rate that is expected from personal assets.

Step Five: Add and discount the expected-recovery value that we just calculated form ht collateral and personal assets mentioned to come up with a ‘present value’. Disocunt rates consider the price of administration, risk, and funds. Developing this present value is no mean feat, and negotiations always begin with this value. The only thing left to do after that is negotiate with your lender.

If you have found the home of your dreams and are pursuing a short sale, you had better be prepared to write a proposal to buy the property. In most cases, if you were smart you will have a real estate agent by your side to aid you in writing up a proposal that will get you in that home whether for an investment or for your self.

The proposal will include the application for a short sale, an authorization letter, and the purchase and sale contract signed by the seller and you. The contract will have the amount that you and the seller has agreed to prior to sending the offer to the bank. Do not think you are going to steal the property, the bank can rightfully ask for the full amount of the loan and they are not going to take an offer that will put them in red farther than a foreclosure would. The proposal must be a reasonable offer. This is where a real estate agent is loads of help. A real estate that works with short sales, can guide you in the right direction as the true value of the home, what other homes are valued at in the area, what the real estate market is like in the area, and of course, a pretty good guesstimate as to what the bank will accept as an offer.

In most cases, you will need a rather large down payment. The lending company does not desire to have another buyer that cannot make their payments. In the majority of cases, the lending company will not even look at a proposal until the seller is 90 days in arrears on their mortgage payment. However, a smaller loss now can be better for the lending company than a huge loss after a foreclosure.

In your proposal, you should include a letter from the seller giving an overview of the situation that has caused them to be in default on their home loan. The lending company must see that the homeowner does not have the means to repay the loan, before they look at another buyer. The seller will need proof and documents that show the situation that has caused their financial problems such as loss of employment, illness, or death in the family, divorce, etc… If the lending company believes the homeowner has the means to repay the loan, they are not going to agree to a short sale.

You will need a statement of the value of the property such as an appraisal. Of course, the lower the estimate the better. Write a list of all repairs that will need to be done, which will show the home does not have a good resell value. Include a list of costs and liabilities. You want the lending company to know the home is in bad shape, thus it will take longer to sell. The longer the lending company has the home the more money they lose.

Even though a short sale is always an “as is” property, you want the lending company to realize all the problems with the property. They will be ready to unload a home if they think it will be a hard sell.

By nature Mutual Funds are not tax saving instruments but some mutual fund investment products also offers tax saving plans. Generally income that is earned from Mutual funds is categorized under two heads dividend and capital gains. Given that the tax implications can have a significant impact on the return earned it is necessary to understand the tax for both these heads of income. Income earned through dividends is tax free in the hands of the investor. The tax on most occasions is actually paid by the Mutual Fund Company itself. Investors who fall in the highest tax bracket should opt for the dividend option in mutual fund schemes. Capital gains from mutual funds are of two types – short term (1-3year) and long term (more than 5 years). This classification is based upon the period of holding. If the investment is sold within a year 15 days from the date of purchase, any capital gain made would be treated as a short term nature. Hence the tax deducted will be normal. If the mutual fund investment is sold after a year from the date of purchase, any capital gain made during that period will be treated as a long-term capital gain. Here the tax that would be deducted will depend on how long the investment is kept after a year prior to getting it sold. The longer the fund is kept the lesser the tax to be paid.

A Good Fund that could be used to invest upon is the equity linked saving schemes fund (ELSS). They are strong favorites for investing as they provide tax concessions on investments and are also exempt from long term capital gains tax. Apart from ELSS schemes, diversified equity schemes are a good investment considering that capital gains in equity funds below one year are taxed at a rate of 10% and over a year are tax-free. This option can be best exercised using Growth Funds. The primary objective of Growth Funds is to provide investors long-term growth of the capital invested. Dividend paid in Dividend Plans

If you want to be a competitive vendor in the market of real estate, you must know the technique of short sales. The main advantage of this technique is to allow discount to real estate investors from the lender.
What are short sales in real estate investing?
A short sale process comes in the picture when lender accepts a discount on mortgage in order to avoid a possible bankruptcy or foreclosure auction. In this method, instead of buying the property from a seller itself, you have to purchase the corresponding property from the lender. As an advantage you will get a handsome discount on that property. For instance, suppose a home owner facing foreclosure, has an existing mortgage of $400,000. Then you offer to the lender directly for $300,000, which may be accepted as a full payment loan.
The question arises here that why they are willing to accept this kind of deal and give discounts? Well, there are two main reasons behind this deal. First reason, banks do not want bad loans to be written on their books or record because bad record hinder the growth of the banks. Therefore, whenever banks get the opportunity to sell the property without any huge loss, they will sell it. Second reason, lenders know that if property goes to auction, they will pay heavy loss because if the property goes for auction, there are so many fees involved in it. Thus, they would give discount and finished it.
It is the best time to jump in the short sale process of real estate and invest in it since the foreclosures are increasing rapidly.
Lenders’ willing to give discount
Almost every lender offers discount. Market is inundating with lenders, who are willing to give discounts. It might be possibility that you find lender who dose not provide any discount but it is rare. Only two or three lenders in many may not offer any loan or provide small discount.
What kind of property is best for investing in short sale?
According to shrewd investors in short sale investing system, the best property for investing is the houses that requires lot of repair and renovation because on these kinds of properties, lender will give you a huge amount of discount to investors. Properties that are leveraged are also very good for investing. Most experienced investors are willing to invest in over leveraged properties.
Properties having large amount of second mortgages are also recommended as gold because second mortgage can be eradicated at the foreclosure auction.
Important step while dealing in short sale
There are many steps required to take while dealing in short sales. But the most vital step is to getting the deed of property. Most of the investors forget this essential step while investing in short sale. It might be the case when, homeowners change their minds, and want to back out from the deal as they scared or in other case, they want to do negotiation again. If you have property deed then you could easily escape from the trap, otherwise you might get in trouble by bearing heavy losses.

In the next few minutes, you are going to learn the steps to implement a fund raising idea that can raise significant cash within a very short time frame. As opposed to simply asking donors to dig deeper into their pockets, this fund raising idea provides tax and increased income benefits to the donor. If you are involved in any facet of nonprofit fund raising, you can use this technique, for example, to buy or pay off the church organ, add another kennel at the local animal shelter or add a room on to the private school.

Three Steps to Funding Your Project

1. Select an insurance agent

This fund raising idea involves annuities; annuities can only be placed by a licensed insurance agent. I would suggest selecting an insurance agent from outside the organization. Look for agents with the CLU, ChFC or CFP professional designations.

My experience is that you are asking for trouble if you try to use an insurance agent who is on your board or active in your cause. Chances are there are several insurance agents to choose from and you don’t want to hurt anyone’s feelings. Resist the temptation to spread the business among several agents, as you want to keep things simple.

Having been in the insurance business for 35 years, here is my rationale: If any agent within the organization expects to earn the commissions resulting from this fund raising idea, they should have brought the concept to the organization long ago.

2. Communicate the Fund Raising Idea

Prospects for this fund raising idea are senior members of your organization support group. They should be age 70 or older. The older the donor is, the greater their benefit.

Here is a simple outline of the fund raising technique.

a. A person donates cash or a highly appreciated asset.

b. If an asset is donated, your organization sells the property and pays no tax on the sale.

c. A portion of the sale proceeds purchases a single premium immediate annuity on the life of the donor.

d. Your organization keeps the difference and can immediately fund your need.

e. The donor receives an income tax deduction, which can be spread over 6 years if necessary.

f. The donor also receives a guaranteed life income. The rate of return that the income represents is normally much greater than they have been receiving.

g. The net result is that the donor receives an income tax deduction and increased income benefits. Your nonprofit receives immediate cash.

The agent can assist with presenting this fund raising idea to your constituents. That is his or her forte. Many types of media can be used to communicate the idea; for example, a mailing, a post on your web site, a seminar, or an audio CD outlining the benefits.

3. Set Up the Simple Administrative Procedure

Mechanically, this is how the entire fund raising idea flows:

a. Your organization uses the cash or the proceeds from the donated asset to buy a single premium immediate annuity on the donor. A simple letter is usually required, signed by the donor, to establish insurable interest. A one-page agreement, which complies with the laws of your state, outlines each party’s obligations.

b. Each month your organization receives a check from the insurance company for each donor.

c. Your organization could endorse these checks over to each donor or you could issues separate checks. The process is very simple. It is just a couple of new line items in your accounting system.

Summary

You may recognize this fund raising idea as a charitable gift annuity. Many national nonprofits have gift annuity programs. However, most small nonprofits do not. This is the power and simplicity of this fund raising idea. It is simple, straightforward and your organization receives funds immediately upon the completion of each transaction.

National gift annuity programs do not fund your program immediately. Furthermore, national programs do not realize any gain until the person dies and then the gain goes into their coffers, not your organization’s.

If you are involved in a charter school, a church or any nonprofit, here?s how the numbers could work out.

Let’s assume there are 500 supporters and this fund raising idea applies to just 2%, or ten individuals. Further, assume that the range of donations is between $10,000 and $50,000, with the average being $25,000.

This would bring in $250,000. The cost of the immediate annuities will vary by age, but let’s assume this cost is $125,000. That puts $125,000 in your organization’s pocket.

This fund raising idea appeals to the average person. The donor benefits financially in two ways: a tax deduction and a guaranteed life income. Moreover, they get to see the end result of their gift. Your organization receives a large influx of cash quickly to fund a pressing need. This fund raising idea is a win-win for everyone.

TWO PITFALLS TO AVOID IN A SHORT SALE

There are two different methods a lender can go after a home owner for owed funds, after the sale of their home. The two methods the lender does not want the borrower to know about are a deficiency judgment and a 1099.

DEFICIENCY JUDGMENTS

In order to recoup any shortfall in the amount bid, including attorney?s fees, court cost, and accrued interest charges, the lender must file a deficiency judgment. A deficiency judgment is defined as a judgment that has been issued when the collateral for the loan is inadequate to satisfy the lender?s debt completely. In other words, a judgment is issued against the party being foreclosed on to recover any shortfall in the amount owed to them. A deficiency judgment is issued when real property is sold at auction for less than the amount owed on the lien. For example, if a house was sold at auction for $ 160,000, but the amount of the loan balance was $ 180,000, than a deficiency judgment could be issued for the shortage, or deficiency, which is $ 20,000 in this example, In summary, deficiency judgments are issued by court action in favor of a lender to help them recover any amount not collected at an auction sale.

MORTGAGE FORGIVENESS DEBT RELIEF ACT

Until recently, if a lender approved a short sale, the IRS required the lender to submit a Form 1099 for the amount of the loan it forgave. In other words, if a lender accepted an offer of $450,000 a loan of $475,000, the difference of $25,000 was considered income and subject to tax. That changed in December 2007 when President Bush signed into law the Mortgage Forgiveness Debt Relief Act. At least, it changed for sellers who short sell their primary residence. Sellers who short sell a second home or investment property can still expect to receive a 1099.

HOW WE CAN HELP

My company has a 98% success rate of getting deficiency judgment waived against the borrower. Our company policy is to help the seller first and give them the option if we are unable to obtain a full satisfaction whether to proceed with the foreclosure or accept the deficiency judgment.

Contact We-Buy-Houses-Atlanta-Gerogia.com