How to Qualify a Short Sale

While the amount of time it takes loan servicers to decide to accept a short sale has shortened considerably, it can still be frustrating to go through the process only to have the servicer determine the seller doesn’t qualify.

I’m not talking about rejecting the offer or making a higher counter offer. Both of those keep you in the game as the buyer. You can decide whether to make a higher offer. But when the seller doesn’t qualify, the game is over. You’ve wasted your time and had your money sitting idle on the sidelines with no hope of completing the deal.

For that reason, it’s prudent for you to prequalify the seller before entering negotiations with the loan servicer. Not all sellers are going to be willing to share their financial information with you. You need to walk away from those that won’t. There are too many opportunities in today’s market for you to waste time with an uncooperative seller.

With more and more short sales coming on the market, there are more realtors becoming involved in the process. Many lack experience with the short sale rules. At the same time, most sellers think a short sale is the answer to their mortgage nightmare but what they don’t know is they don’t qualify for a short sale.

Unfortunately, the rules are complex and there is still not an industry standard process. The closest there is to a standard is the Home Affordable Foreclosure Alternative (HAFA) process. Here are the highlights of the process:

• The mortgage must have been written prior to January 1, 2009.
• The seller must have attempted to qualify for a loan modification under the Home Affordable Modification
Program (HAMP). This means either applying for but not qualifying for the program or initially qualifying but failing to stay current with mortgage payments.
• Financial and hardship information obtained during the loan modification process can be rolled forward to the short sale process.
• Allows but does not require loan servicers to pre-approve short sale terms before listing the property.
• Requires the property to be listed with a real estate professional.
• The property must be the primary residence or have been vacant or rented out for less than 12 months. Long-term rentals and vacation properties aren’t going to qualify.
• There must be a genuine financial hardship experienced by the seller.

Have an Exit Strategy Before You Buy

If you’ve been a real estate investor very long at all, you should know how important having an exit strategy is. Frequently, the first question I ask new real estate investors is – “How do you plan to profit from the investment you are about to make?” Way too often the answer I get is – “Hmmm… I like the price I’m paying but I haven’t thought about how I’ll profit.”

When you invest in real estate without first having an exit strategy, you don’t have a plan to make a profit. When you don’t have a plan for a profit, you can’t determine what the property is worth to you. The asking price compared to the value to you can be very different depending on your exit strategy.

Make sense?

Long Term versus Short Term Investing

You’re first consideration should be whether you plan to hold the property long or short term. When you can invest in a property for little or nothing down, you probably want to go with a long term investment strategy allowing you to build equity over time.

There are many strategies to getting into a property with little or nothing down. Seller financing is one way. A seller offering seller financing has a much larger pool of buyers. They do this to obtain the maximum price for the property. As an investor, you can get in for very little cost but you have no equity. Your exist strategy should holding long term while profiting from rental cash flow.

If you want a short term investment to turn a fast profit, you’re going to want to buy the property as cheaply as possible. Probably wholesale. In today’s market, getting the best price on a property means paying all cash when others are making financing contingency purchase offers. When a seller is willing to sell at a deep discount, they usually wanted the money yesterday. You’ll get the best price when you offer all cash and can close in a matter of days – not weeks. Now you have plenty of equity in the property and can flip it to a rehabber or sell on the retail market for a nice fast profit.

What You Need to Consider in an Exit Strategy

Now you understand the first question to answer about your exit strategy is whether you’ll hold the property long or short term. Here are other points you need to consider.

• If you have a staff or use a CPA or attorney, make sure they know your exit strategy so they treat the investment accordingly. For example, a CPA needs to plan either for depreciation or capital gain, depending how long you’ll hold the property.
• For long term investments, you should have a specific amount of time in mind. 5 years, 10 years, 20 years? Then you can calculate expenses like putting a new roof on if holding for 20 years.
• For long term investments, you need a plan to review the financials regularly. At least every six months you need to look at expenses, profits, and market value. If the investment isn’t going as planned, you need to either adjust the plan or start looking at a different exit strategy to cut your losses.
• When it’s a short term investment, you need to have a good idea who your end buyer will be. With that in mind, be sure you’re buying a property they will be interested in. Don’t buy a mansion when your end buyer is interested in white picket fence houses.
• Remain flexible. When holding the property long term, someone might come along that values the property much more than you do. They may offer you a price you can’t refuse.

You can make money in real estate regardless if the market is skyrocketing, sliding sideways, or in a down turn. However, your chances of succeeding greatly improved when you have an exit strategy before you invest.

Foreclosure annual rate decreases

USA Today reported today that for the first time in 5 years, the annual foreclosure rate has dropped. This is a strong signal that the housing crisis is ending.

The newspaper reported that there are three reasons for the improving rate: job creation, a stabilizing housing market and tighter lending practices.

This is great news for our country, the economy and for homeowners who need to sell. It is also another reminder to buyers and investors that the market is turning up and that prices are following.

Though timing the market is never easy or recommended, it is clear that prices have likely hit their bottom and in coming years we can expect increases.

Of course, most experts agree that we have another year of real estate uncertainty and if you look at the historic data, we shouldn’t be surprised. After the Great Depression, housing took a double dip a few years after the first crash.

But our economy is on the mend. Hundreds of thousands of jobs have been created this year. Tighter lending means more people enter their mortgage with a better handle on their payments and are less likely to fall behind.

In the housing market, USA Today reports that fewer homes are in negative equity and owe more than their house is worth. That is a very good sign for some markets in the country that are saturated with bank-owned inventory. People tend to keep their homes if they have equity in them.

All indicators are pointing to a much better real estate market.

Of course, there is always money to be made in real estate, whether the market is “good” or “bad.” Be clear about how you are investing, where and when. Know why you are investing and you will come out a winner.

Falling Mortgage Rates is More Good News For the Real Estate Industry

Both buyers and sellers received good news from Europe this week. The financial chaos in Europe has investment money flowing out of Europe and into the US mortgage market. And just when most investors were braced for a rate increase caused by the ending of the Federal Reserve’s $1.25 trillion mortgage-securities purchase program.

The ending of the fed’s purchase program coupled with the end of the first time buyer income credit could have sent the real estate industry back into a tail spin before the recovery ever took a firm hold. Instead, record low mortgage interest rates mean buyers can afford more house for the same payment. For sellers, it means prices should gradually increase as buyers can afford more. For the banks, it means more people will qualify to purchase their REO and begin stabilizing the entire housing market.

There is a rough correlation that says a one percent decrease in interest rates equals a 10% increase in buying power. Before the sudden influx of European money, interest rates were expected to climb towards 6% over the summer. Now, they are heading down from an already low 4.86% percent were they ended last week.

The result is that instead of raising interest rates, the flood of European money into the bond markets is expected to drive 30 year fixed interest rates to 4.5% or lower. Fifteen year fixed rates were already down to 4.24% at the end of last week.

These low rates will let people on the margin qualify for loans they couldn’t just a few weeks ago. That means more buyers in the market. And people will refinance out of expensive loans to put more money in their pocket each month. That has the potential to further spur the general economy to better health.

A negative factor that remains is too many buyers are underwater with mortgages worth more than the house being financed. These people still cannot qualify to refinance homes. The other negative factor remains the tough underwriting standards borrowers must meet to qualify for a mortgage.

With nearly half of America’s fixed rate mortgages at 5.75% and above, rates approaching 4.5% start to look like a good reason to refinance. Even as investors, we need to be considering refinancing into lower mortgages that can result in better cash flow from rental housing.

Rates below 4.5% will reach a 50 year low not seen since the 1960s. It’s hard to believe rates will go much lower than that. Don’t find yourself nine months down the road wondering why you didn’t take advantage of these rates when they were available.

Escrow Accounts Protect Your Sandwich Lease Option

I’ve blogged before about lease with purchase options. They are a great way to get into real estate for very little down to start making money right away. Today, I want to talk a little about what you can do to protect yourself against the possibility of foreclosure on the owner of the property.

Foreclosures are a reality of the real estate industry right now. However, I encourage this technique regardless of the business climate. It just makes good business sense.

When you go into a ’sandwich’ lease with a purchase option, you are essentially creating an informal business partnership with the property owner that you are leasing from and the leaser that leases the property from you. The two biggest calculated business risks that you are taking are that the owner will make his mortgage payments and that your leaser makes his monthly payment to you.

For the person that is making the payment to you, you want to do a thorough background check making sure he has a history of timely rent, lease, and/or mortgage payments.

Once you have a sandwich lease option in place, you’re already making a profit on the deal. However, your biggest profit comes when your leaser agrees to purchase the property, which in turn triggers you to activate your option to purchase from the current owner.

To be assured that you can complete the deal, you need assurance that the owner pays the current mortgage on the property for the duration of the lease agreement. If, for whatever reason, he becomes delinquent on the mortgage and it goes to foreclosure, there are several negative consequences to your deal. First, the bank will then own the property and is not obligated to honor the lease made between you and the previous owner (laws on this are being changed as I type, so check your current state laws).

Once the bank owns the property, it means you no longer have the ability to sell the property to your leaser unless the bank voluntarily agrees to do allow it (you have no contract with the bank). If the bank knows you are going to turn around and sell it for more to another buyer, they may very well not agree to allow it, in anticipation they can sell it to someone else for more than you had a contract for. Why wouldn’t they?

In that scenario, you have no way of fulfilling your obligation to sell to your leaser. The consequence of that is you’d almost certainly be obligated to refund your leaser the ‘nonrefundable’ deposit that was to apply to a down payment as well as any rent amount that is above the market rate and also to be applied towards the down payment.

If you’re still with me, you have a couple of options to protect yourself from this scenario. First, in the lease/purchase contract with the owner, you can include a clause requiring him to disclose the mortgage information necessary for you to contact the lenders automated payment system so that each month you can verify the owner made the payment. At a minimum, you’ll need the telephone number, the account number, and his PIN.

And all that does is let you verify the payment is made. If he defaults, your options become to either start making the payment yourself (using the money that your leaser pays to you) or let the whole deal fall apart. But there is a better answer.

Every city has companies in the escrow account business. Your better option is to have your monthly payment made to an escrow account that in turn makes the owner’s mortgage payment before turning over any profit due to the owner.

Doing this assures the mortgage payment is made each month without the headache of making calls to the lenders account system where you’re only able to verify the mortgage is current. Working smarter is always better than working harder.

Buying a waterfront property in Australia


Waterfront property is that property that rims a water body or a lake. This type of property is in demand these days and with the rise in demand, the property for sale has also gone up.

Waterfront property is close to the nature and presents a very lavish way of living. Most of the property investors as well as home builders warwick qld  purchase this housing sector and are constructing properties that are in command.

Besides this, buying a waterfront property can also benefit you, if used as a vacation rental purpose.

This type of property is available for sale and rent in many states of the Australia.

In order to buy this property, you can contact real estate agents, builders in Sydney and the realtors that can help you find this property. There are many realtors that specialises in selling as well as buying only water front properties.

Thus contacting those who specialises in waterfront only is a better option.
The waterfront real estate may include:

  • Waterfront cottages
  • Waterfront Homes
  • Waterfront cabins
  • Waterfront Lots
  • Retirement homes
  • Waterfront Land
  • Waterfront Vacation rental homes

You can buy or rent the property adjacent to water body as per your need. The price of waterfront properties has risen, because of the exotic locations, pristine environment and views.

There are a variety of properties that are listed in many states and cities of the Australia. Besides this, you can also purchase a land on the water and make your customised home on that land.

Carry out proper research, in order to find cheap property. But while buying a property besides water, there are a few things to be kept in mind:

  • Check the area, quality of water and land properly, as it will define your property’s value.
  • You will also have to manage the native animals as well as vegetation along with the waterfront property.
  • Get the home properly inspected
  • Check the records of tests for the drinking water and
  • Check the flood certificate and the floodplain restrictions