Bank Owned R.E.O’s & Short Sales
EDWARD LORD, BROKER / SALESMAN 775-843-3333 OR 775-843-3333
EdLord@NetworkRealty.net
When contemplating Buying or Selling any Distressed property, always make sure that the Broker / Agent has the Experience and special Training afforded by a “R.E.O. Certification” and “Short Sale Certification” from an accredited R.E.O. / Short Sale Institute, which EDWARD LORD, BROKER SALESMAN with BOARDWALK REALTY NETWORK REALTY TEAM has this experience.
FORECLOSURES & BANK OWNED R.E.O.’s:
Bank Owned R.E.O.’s can offer tremendous Real Estate Opportunities for First Time Buyers to Seasoned Income Investors, because these properties have all ready went through the entire Foreclosure process, and can close escrow within a normal 30 to 45 day time period, just like a normal sale that does not have any “Special Conditions” or other “Drama” associated with the property. Smart Buyers looking for opportunity always seek out Bank Owned R.E.O.’s because they know that there transaction and escrow will close as scheduled, and that there will be no disappointments… you just have to make sure that your offer is a quality, clean offer, with few contingencies, that will stand out and get accepted FIRST by the Bank Negotiator.
You should be aware of the fact that NEVADA is for the most part, a “Statutory Foreclosure State” vs. a “Judicial Foreclosure State“… meaning the foreclosure process is essentially set and scheduled by “Automatic” statutory timelines that are “triggered” upon the Debtors receipt of certain required Statutory Certified Documents, whereby typically there is no judicial approval, or court intervention required.
After a homeowners mortgage is approximately Three (3) months into “Delinquency”, the Bank WILL FILE, a “Notice of Default” (a.k.a. “N.O.D.”). The filing of a “N.O.D.” STARTS… the “Foreclosure Clock” and the “N.O.D.” initial time period is a statutory 90 Day timeline. During this 90 Day period, the Debtor has 35 Days to “Cure” the delinquency, to bring the mortgage current and back in good standing… without fear of the Bank / Mortgage Company demanding to “Accelerate” the loan.
After the initial “N.O.D.” 120 Day “First Stage” period runs out, the Foreclosure process then advances into the “Second Stage” called the “Trustee Sale Notice” period, which will initiate a second phase “21 Day timeline clock”, in which the property is then advertised for sale, three (3) different times, over a 21 Day period… in the “Legal Section” of the local newspaper.
After the 90 Day + 21 Day statutory timelines Totaling ~111 Days transpire, the property will then be auctioned off on the “County Court House Steps”… to a new owner or investor… If nobody bids on the property, because the amount of the Note owed significantly exceeds the current market value of the distressed property, the Bank / Mortgage Company will then have the Trustee bid the full “Credit” of the Note owed, and then take possession of the property through Foreclosure… Then the property officially becomes a Bank Real Estate Owned, “R.E.O” property.
Although, if the Debtor goes past the INITIAL 35 Day delinquency opportunity window, and fails to “Cure” the delinquent payments in that time frame, after the initial filing of the “N.O.D.” Notice of Default, the Debtor takes the risk that acceptance of the delinquent payments, is now totally up to, and at the discretion and APPROVAL of the Bank or Mortgage Company… whereby they not only have the authority to actually REFUSE the payments… they can “Call the Loan” and “ACCELERATE” the Total Loan Amount Due… and FORCE the Debtor into Foreclosure… if the Total Loan Amount is not paid on demand…!
This Bank / Mortgage aggressive behavior typically would only happen in an upward moving healthy market, if the Bank or Mortgage company knew that there was enough “Equity” in the property to make it worth their while, to essentially “capture” your equity (i.e. Steal your Equity). In this current distressed real estate market, that is not likely to happen, and the bank will most likely graciously accept your late payments to bring your mortgage current. In fact they will do EVERYTHING possible to induce you to continue to pay your mortgage loan. Although, if you are considering doing a “Short Sale”, contact your Real Estate Professional at Network Realty,Inc., before you make any further mortgage payments, because most Banks / Mortgage Companies require you to be at least 2 – 3 months delinquent before you can qualify to do a “Short Sale”.
For BUYERS, Buying “Real Estate Owned” “R.E.O.” by a Bank, represents a True Buying Opportunity, because the property will be treated almost as a NORMAL sale, and typically can Close Escrow within a normal 30 – 45 Days window, without all of the drama, delays, disappointment, and uncertainties, that are always associated with a “Short Sale”.
SHORT SALES:
A “Short Sale” is defined as the voluntary sale of real property for LESS MONEY than is what is OWED on the property, with the mutual consent of the Bank /Mortgage Company and the Seller.
Short Sales, currently make up more than 75% of all distressed residential sales in our area, mainly due to the fact that our State Legislatures have passed legislation, whereby Banks / Mortgage Company’s now have to actually produce original mortgage documents to “Prove” that they actually own the “Mortgage” and have the “Legal Standing” to actually file a “Notice of Default”, to initiate the first stage of a “Foreclosure”… which has made it extremely difficult for Banks / Mortgage Company to do Foreclosures in the future, due to the fact that these mortgages have been packaged as “Collateralized Debt Obligations” or “Mortgage Back Securities” (a.k.a. “MBS’s” or “CDO’s”) that have been sold and re-sold into the “Secondary Mortgage Market” all over the world… whereby the original files and critical paperwork required to document the loan… for them to exercise their right to “Foreclose”, is very difficult if not impossible to produce. Therefore, because the bar has been “Legislatively” set to such a high level of documentation disclosure…an onerous standard that they cannot meet… Banks / Mortgage companies really have only one choice to eradicate their excess distressed inventory, which is to cooperate in doing a “Short Sale”… because they have also learned and determined that they lose ~40% LESS money avoiding Foreclosure vs. a “Short Sale”.
Therefore, many times a Bank / Mortgage Company’s ONLY avenue to get rid of their current “Hidden Inventory” of over 6 Million distressed properties nationwide, that are conveniently “Parked” off their balance sheets in “Structural Investment Vehicles” (a.k.a. “SIV’s”)… and bypass the new State legislative requirements to document and prove “Legal Standing” in order to be able to Foreclose… is to voluntarily engage Sellers in the executing a “Short Sale”…!
Certainly, an unintended consequence… because in my opinion, governmental intervention interfering with the dynamics of a “Free Enterprise” system , always ends badly… but you might as well “Jump on the Bandwagon” while the getting is still good, and take advantage of these synthesized economic anomalies while they are still available…!
When a distressed Seller and the Bank / Mortgage Company decide to execute a “Short Sale”, the advantages in taking this course vs. choosing to do a “Foreclosure” or filing for “Bankruptcy” have very specific economic benefits for all parties involved in cooperating during the transaction from the Bank losing less money, because they no longer have to “carry” the property and maintenance costs on their books, and the recovery of the majority of their “principle” that they had invested in the property which increases their reserves, to loan out again.
The distressed Seller is able to get out from under an “Underwater” property, and incur less detrimental impact on their Credit vs. a Foreclosure / Bankruptcy, and often will receive a “Waiver of Deficiency” whereby the Bank / Mortgage Company essentially “Forgives” the amount of the loan that was “Short”… when the property sold for less than what was owed, and as long as the IRS Mortgage Debt Relief and Forgiveness Act is still enforce, the Seller will not incur any tax liability, interest, or penalty, related to deficiency being qualified as “Income” on a Sellers “Primary Residence”, which prior to this Federal Legislation being enacted, a Seller would have had to “pay taxes”, interest and penalties, on this accounting anomaly.
So in effect, the unintended consequences of Government Intervention…creates an unpredictable “Economic Moral Hazard” whereby the Government is essentially rewarding homeowners… who chooses to “Short Sale” their property vs. Foreclosure… because Banks / Mortgage Companies realize that they lose ~40% less money in cooperating doing a “Short Sale” vs. the costs involved in executing a formal Foreclosure…
Although, as we all know, these Government Sanctioned Enterprise “incentives” have to be Guaranteed by the “Good Faith and Credit” of our US. Treasury… on the backs of the American Taxpayers, which is one of the main reasons why our National Deficit has escalated “exponentially” from $5 Trillion to $16 Trillion US. Dollars…!
This unintended consequence, is also the stimulus that is now creating what we refer to as encouraging “Strategic Defaults”: Whereby a Home Owner / Mortgage Debtor, who may have a “Hardship” situation, but who is still employed and can easily afford to continue to make their higher than market rate monthly mortgage payments… they are angry that everybody else is “Short Selling” their homes bringing down the values in the entire neighborhood… yet these “Distressed” property owners… also are qualifying to do a “Short Sale”… and make up over 50% of all “Short Sales.”…!
So Don’t DELAY… CONTACT Network Realty TODAY to Short Sale Your property before its too late…!
BANKRUPTCY:
Note: Unless a debtor files for Bankruptcy, which in most cases, will only “Delay” a foreclosure… unless the Debtor can convince the Bankruptcy Court that serious irregularities or elements of fraud exists in the origination of their mortgage, whereby the Bankruptcy Court can make a finding and determination that there is “good cause”… to further delay, dismiss, or cancel the foreclosure, which is statistically very rare, whereby the Bankruptcy Court will more than likely eventually rule in about ~120 days in favor of the “Beneficiary” (i.e. Bank / Mortgage Company ) who holds the Deed of Trusts… the “Stay” gets lifted, the foreclosure process starts again, and is back on tract.
Although, a Debtor may have “Bought some Time”… filing for Bankruptcy, taking this route is not only very expensive… but it will ruin the Debtors credit for ~10 years, whereby, had this Debtor decided to simply “Short Sale” their property, their credit will be minimally impacted for ~2 years, and they then will become eligible to Buy another FHA Federally Insured property in as little as 2 years, upon reestablishing their credit… at a time when the market will finally hit the bottom, and begins to truly recover…!
Therefore, the “Hierarchy” of the most desirable “Types of Sale” in a distressed market that Buyers typically look for FIRST are;
#1.) Property that have “No Conditions of Sale”, a.k.a. “A Normal Sale” (i.e. Sellers with equity who need to do a: Relocation, a Move up, Move down, Probate, Divorce, or Bankruptcy etc.)
#2.) “Real Estate Owned” (a.k.a. “R.E.O.) by a Bank or Mortgage Company, which will close escrow in a typical 30 – 45 Day normal time frame, with little complications and no disappointments…!
#3.) Buy a “Developer Built New Home“. ( Note: The Disadvantage of buying a new home in todays distressed financial market from a developer is that they have minimal “construction financing” available… whereby a Developer WILL “Bump” your offer… over a “Cash” offer from another Buyer, even after receiving a formal written acceptance… and you end up holding the bag, and end up losing a lot of time, because a builder is ALWAYS afraid that their new home product… WILL NOT APPRAISE”… and end up having to sell their new home for the lower appraised value to a Buyer doing an FHA Loan! This phenomena is occurring without impunity, on a regular basis, so Buyers beware… particularly if the real estate market goes into a “Double Dip” market downturn… which KRCH Network Realty Team is predicting, particularly the current 60 year historically low interest rates begin to rise dramatically.
#4.) Buy a “Short Sale”. Although the procedure, protocol and data sharing platforms (i.e. Equator System) for collecting and disseminating the plethora data and information that Banks and Mortgage Companies demand is improving and shortening the time it takes to close a Short Sale Escrow, depending on the Bank, Short Sales still take anywhere from 60 days to 120+ days to complete. The disadvantage here is obvious, in the time it takes to do a Short Sale, interest rates can begin to move against the advantage of a motivated Buyer, and end up costing you more money in the long run. Although, as of this posting, interest rates are still hovering around 60 years Lows…!
For Distressed Sellers, you should monitor and be aware that the IRS “Mortgage Forgiveness Debt Relief and Cancellation Act” is set to “Sunset” ( i.e. Expire ) after >December 31, 2012…!
So if you own a “Distressed Property” and are contemplating doing a “Short Sale” to get out from under your “Underwater” mortgage, whereby you owe significantly more money on your mortgage than what the property is currently worth… YOU really need to make a decision SOON... in order to take advantage of this Federal Legislation, so as to avoid creating a potential “Taxable Event”… that may also include interest, and penalties, on the “Deficiency” owed to the Bank… and miss out on the current opportunity to do a “Short Sale” without penalty…!
In the eyes of the Internal Revenue Service, even if the Bank were to grant you a “Waiver of Deficiency” which they do regularly upon the successful close of escrow on a Short Sale… if your short Sale effectively closes AFTER December 31st., 2012… you will no longer be grandfathered in and protected by this legislation, and you will then possibly owe taxes, interest and penalties on the amount of the deficiency.
So “Time is Truly of the Essence”…!
There is STILL time to successfully complete a “Short Sale” before the IRS Mortgage Forgiveness Debt Relief & Cancellation Act expires..! (See: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-)
Do NOT DELAY, CONTACT; BOARDWALK REALTY NETWORK REALTY TEAM TODAY:
775-843-3333 OR 775-843-3333
E-Mail us at: EdLord@NetworkRealty.net
(Always seek additional professional advise for your Accountant or Legal adviser. )
#5.) Gamble by bidding (Buying) a “Pre-Foreclosure” at the “Court House Steps”. The disadvantage of using this Buying technique is that it takes a tremendous amount of expertise, research, and due diligence, in understanding exactly what you are Buying, because many times, you may not even be able to have access to inspect the interior of the property. (i.e. tenant or hostile owner occupied property) Remember, when your Buying a property on the “Court House Steps” you need to analyze not only the “Property” itself… but you have to have a full and accurate understanding of the “Priority” of the “Debt” and “Deed of Trust” that is also associated with the property…!
For example, we had a client who turned out to be a “Do it Yourself” kind of guy… who initially sought our advise and expertise to Buy a distressed property, but then “disappeared” off our Network Realty “Radar”, who ended up probably watching too much late night real estate get rick quick TV shows, who eventually justified and convinced himself to take the leap on his own, and bid on a distressed Pre-Foreclosure property on the “Court House Steps”. ( i.e. to save a modest $3,000 negotiated Buyer Broker fee for doing the necessary research and due diligence in helping him… but he felt he could do this himself…?)
As it turned out, after the sale, he literally ran to our office immediately to “Gloat” at what a great job “He did all by himself”, buying this 1700 S.F “fixer upper” house for $80,000, ~$50 / S.F. which initially seemed like a screaming deal… until I did a “Quick” preliminary title search on the computer, which took all of two minutes… in which I had to break the news to my “Do It Yourself” non-client… that what he had actually bid and bought on the “Court House Steps”… was a “SECOND DEED OF TRUST”… and that he was now responsible and on the hook for paying off the $140,000 “FIRST DEED OF TRUST”… which had priority over the “Second”… on a “Fixer Upper” no less… in which he also confessed, that he was “The Only Bidder”…! Oh well, live and learn…!
6.) Buying a property through the “Bankruptcy” and or the “Probate” Administrative process called a “Confirmation of Sale”, which deals with the liquidation of real property, upon the death of a person. Procuring properties through “Bankruptcy” and “Probate” channels, can produce tremendous real estate opportunities, but these conduits typically require specialized real estate expertise… that only a seasoned and very experienced Real Estate Broker can offer… experience… that Krch Network Realty Team Brokers have a proven track record in delivering…!
ALWAYS… seek the advise of a Licensed Real Estate Professional Broker / Agent at Krch Network Realty Team, when contemplating doing any kind of a “Distressed Property” purchase…
The “Krch Network Realty Team” takes the “Stress”… Out of “Distressed” properties…!”
CONTACT: Krch Network Realty Team @ 775-843-3333 OR 775-843-3333
CONTACT: E-Mail: EdLord@NetworkRealty.net
