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Bonefish Grill

By | February 15, 2011

 

I lived in Chicago for half a decade, and I would have been mortified to bring a weekend guest to the Cheesecake Factory downtown.  Shortly after I moved here, a new friend suggested we go to Bonefish.  I said “sure!”all while turning up my inner nose at the idea.  Who would go to a chain restaurant with all these great seafood restaurants around?  Years later, I’m not ashamed to admit I’m a regular.  The service is always great, the food is always excellent, and as odd as it may be, it’s actually quite the locals scene.  It’s so packed during Season that you have to hover and stalk seats at the bar and common tables, but it’s a fun energy.  We usually sit in the bar, but if you want a table expect to wait an hour and a half during season.  Don’t worry though, they pass tasty snacks around on trays while you wait!  The bartenders make it a point to know your name too, which is a nice touch.  I get the same thing almost every time: Jumbo Sea Scallops and Shrimp (except I ask for all Scallops, and they don’t charge me extra!), around $16.  They are never overcooked and are always properly cleaned so you don’t bite into that tough little morsel from hell that they’re supposed to cut off.   You can pick from among four sauces (Pan Asian, Lemon Butter, Chimichurri, or Warm Mango Salsa), but if you’re nice you can ask them to serve your fish grilled and sample several of the sauces!  I like the Lemon Butter and Chimichurri.  I was brave enough to try the Imperial Longfin the other day and it was TO DIE FOR.  Fresh, tender, flaky, and rich enough that I suspected Paula Deen might just come walzing out of the kitchen yelling “Hey y’all, surprise, it was me that cooked this!” (Sidebar: Just how cool would that have been?)  They also have a seasonal side, which right now seems to be some kind of spaghetti squash which is just ok, but for $1 you can substitute one of their other sides, which I will now be doing on a regular basis.  The Haricot Verts and Potatoes Au Gratin are the best, though the Garlic potatoes are excellent as well.  On Wednesdays bang bang shrimp are $5, so if you want a seat at the bar come early.  When there is a bargain Sarasota, the locals will pack it in!  Oh, and if you’re lucky enough to go when they have the chocolate crème brulee, get it, but plan on your bill being permanently more expensive because you will always feel incomplete without it.  I’m not one to turn down bread, but if you plan on getting dessert or an appetizer (AHI TUNA, don’t ask, just get it), do yourself a favor and skip it unless your ultimate plan for the evening is laying on your couch in misery.

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Sales surge in December 2010 and Prices Remain Stable

By | January 13, 2011

The Sarasota real estate market saw a big surge in December sales, from 534 in November to 681 last month for a 27.8 percent increase. In addition, the median sales price for both single family homes and condos was up in December 2010, indicating a recovering local real estate market. The property sales breakdown in December 2010 was 500 single family home sales and 181 condos.

The statistics for December 2010 were even better than December 2009. The 681 total sales reported last month topped the 648 sales in December 2009. The median sale price for single family homes stood at $165,000, a small drop from last year’s figure of $170,000, but higher than the November 2010 figure of $160,100. For condos, the median price rose slightly to $160,000 from the previous month’s $159,000, down from last December’s median of $199,000. But condo prices have sunk below the $150,000 level several times in 2010, so the current figure indicates a sign of improvement.

Pending sales remained strong in December 2010 at 789, compared to 764 in November 2010, and higher than the 739 reported last December, when the market was still strengthened by the homebuyer tax credit initiative. This statistic is a strong indicator for the next two or three months of sales, as pending sales reflect current buyer activity. “2010 ended with a resurgent local real estate market, and the higher number of pending sales tells me we could see continued strength in early 2011,” said SAR President Michael Bruno. “For the second half of 2010, there was a fairly steady trend in sales and prices, another sign of stability and recovery. Word of mouth indicates we are seeing more showings and more closings this season than we have in quite a while. And this year, we don’t have the homebuyer tax credit to point to as a reason for the surge. Sarasota is just a great place to purchase a property.”

Inventory dipped in December 2010 to 6,047 from 6,207  – the lowest since August 2010 when 6,039 properties were on the market. The higher sales volume and lower inventory levels meant a major drop in the months of inventory to 7.8 months for single family homes (from 10.9 months in November 2010), and 11.7 months for condos (from 13.3 months in November 2010). The market is considered to be in equilibrium between a buyers and sellers market once the figure reaches the 6 month level.

There was also more good news on the distressed property sales front, as short sales and foreclosure sales once again fell to 44 percent of overall sales, from 46 percent last month. For the entire year 2010, distressed sales made up 36 percent of overall sales.  “The fact that we’re trending downward for distressed property sales is encouraging,” noted Bruno. “We are all hoping 2011 is a turning point and the worst is behind us. The improving national economic picture and recent drop in the national unemployment rate are signs that the economy is heading in the right direction.”

Overall, 2010 sales were up 12.4 percent compared to 2009 – 7,603 to 6,739 total sales. The median sale price for both single family homes and condos for 2010 stood at $163,000. For 2009, the median sale price for single family was also $163,000, and for condos was $190,000.
Sales in the Sarasota market have now risen for two consecutive years since a low point of 5,820 sales in 2008. The level of sales is now at its highest point since 2005.

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Condos Vs. Single Family Homes

By | June 25, 2010

One of the most common things people tell us when they’re considering a home in our area is that they haven’t decided whether they’d prefer a house or a condo.  This question, though basic on the surface, is a complex and significant choice that will help determine many big factors in the real estate process – and in the buyer’s lifestyle for years to come.

It’s important to determine the answer to this question very early on as it will dramatically change the price point, location, style, and condition of your upcoming purchase.

Why Purchase A  Condo?

Condos are very popular with buyers who want to relax and enjoy their lifestyle without worrying about excessive maintenance.  They’re ideal for people who only plan to live in the unit part-time because basic upkeep, like lawn and exterior maintenance, is included in the condo fees and isn’t a concern for an owner when he/she isn’t in the area.  Condos are also popular among people who want to live a resort lifestyle year-round, people who don’t have the ability or desire to perform maintenance, and people who want to live close to community hubs (downtown areas, beaches, etc.)

Because condos often share walls and amenities, they tend to harbor a social atmosphere among owners.  Buyers can expect to see their neighbors year after year by the pool, in the community room, or in the fitness center.  This closeness of living necessitates stricter rules and regulations than one could expect to see in single-family homes, particularly in relation to pets – buyers with birds, big dogs, or exotic animals will have a much more limited scope of units to choose from.  Unit exteriors also tend to be more cookie-cutter in appearance and it’s uncommon for an owner to be able to change anything outside the unit’s walls.

There are several types of condos to choose from.  True condos are apartment-style stacked dwellings with shared stairs and elevators.  Townhouses are generally multi-story and come in rows of 4-to-6 attached homes; unlike apartment style condos, these homes generally have garages and sometimes even small yards.  Villas generally come in groups of two with a single shared wall and roof and exterior maintenance is split between the neighbors; though still restrictive in nature, this type is the closest unit type to a single-family home.

View All Sarasota Condos For Sale.

Why Purchase A Single Family Home?

Houses, or single family homes, remain the most popular type of dwelling in most locales.  Houses afford owners more choices when it comes to use and appearance; although some communities are deed-restricted, owners typically have the freedom to use their homes as they wish.

Houses tend to be larger than condos and will almost always have yards.  They are also much more private than condos and there is separation between the neighbors.  Houses tend to be much more popular among people with young families, full-time residents, and people who put a high value on their property freedom.

Houses will usually cost more than condos – the construction cost is higher per unit, and there’s more demand – but they will also typically resell for more.  Homeowner’s association fees, if any, are typically significantly lower than condo fees but there are fewer included amenities.  Houses are also usually much easier to rent.

View All Sarasota Houses For Sale.

Condos

Single Family Homes

  • Tend to be closer to community hubs
  • Tend to be in residential areas
  • Most maintenance included
  • Most maintenance excluded
  • Restrictive rules, particularly in regard to pets
  • Fewer rules and regulations, pets usually OK
  • Higher fees, more included (often will pay for cable, exterior maintenance, water, and common areas; associations vary.)
  • Lower fees, less included
  • More social
  • More private

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Short Sale vs. Foreclosure – Seller Information

By | April 27, 2010

There are a lot of really, really good reasons not to let the bank simply foreclose on your property; to name a few, short sales have significantly less impact on your credit score, you can often avoid a deficiency judgement with a short sale, and short sales don’t jeapordize any security clearance you may have. Here’s a more comprehensive analysis.

Foreclosure Short Sale
> Primary homeowners who get foreclosed on are ineligible for Fannie Mae loans for a period of 5 years.

(Fannie Mae is one of the largest financers in the country.)

> Homeowners in a successful short sale are eligible again after only 2 years.
> Investors who get foreclosed on are ineligible for Fannie Mae loans for a period of 7 years. > Investors in a successful short sale are eligible again after only 2 years.
> On any future 1003 application, a prospective borrower will have to answer YES to question C in section VIII that asks, “Have you ever 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.
> Your credit score may be lowered anywhere from 250 to over 300 points. Typically foreclosure will affect your score for over 3 years. > Only late payments will show and after sale mortgage will be reported as paid or negotiated. This will lower the score 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.
> Foreclosure will remain as a public record on a person’s credit history for 10 years or more. > Short sales are not reported on a credit history. There is no specific reporting item for ‘short sale’ and the loan is typically reported as “Paid in Full, Settled.”
> Foreclosure is the most challenging issue against a security clearance outside the conviction of a serious misdemeanor or a felony. Police officers, military personnel, CIA, security, and almost everyone else who has a foreclosure on their record will in almost all cases have their clearance revoked and their position terminated. > A short sale on its own will not challenge most security clearances.
> Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure is in many cases grounds for immediate reassignment or termination. > A short sale is not reported on a credit report and is therefore not a challenge to employment.
> Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and can present a major challenge to employment. > A short sale is not reported on a credit report and is therefore not a challenge to employment.
> In 100% of Florida foreclosures the bank has the right to pursue a deficiency judgement. > In many short sales it is possible to convince the lender to give up the right to pursue a deficiency judgement against the homeowner.
> In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sell in a declining market. This will result in a higher possible deficiency judgement. > In a properly managed short sale where the lender has the right to pursue a short sale, the home is sold at a price that should be close to market value and in almost all cases will be better than a REO sale, resulting in a lower deficiency.

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Short Sale Tax Information

By | April 27, 2010

While there is a possibility that you will not have any tax liability after completing a short sale, there is also a possibility that the government will consider your debt forgiveness as income – and you may have to pay taxes on it. It’s very important to talk to a tax professional if you’re considering a short sale.

The following article is quoted directly from the IRS website.
See more at the following website:

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

Home Foreclosure and Debt Cancellation

Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The amount excluded reduces the taxpayer’s cost basis in the home. More details. Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

The questions and answers, below, are based on the law prior to the passage of the Mortgage Forgiveness Debt Relief Act of 2007.

1. What is Cancellation of Debt?

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

2. Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

  • Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
  • Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception.
  • Certain farm debts:If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception.
  • Non-recourse loans:A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.However, it may result in other tax consequences, as discussed in Question 3 below.

3. I lost my home through foreclosure.  Are there tax consequences?

There are two possible consequences you must consider:

  • Taxable cancellation of debt income.(Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.)
  • A reportable gain from the disposition of the home (because foreclosures are treated like sales for tax purposes).(Note: Often some or all of the gain from the sale of a personal residence qualifies for exclusion from income.)

Use the following steps to compute the income to be reported from a foreclosure:

Step 1 – Figuring Cancellation of Debt Income (Note: For non-recourse loans, skip this section.  You have no income from cancellation of debt.)

1. Enter the total amount of the debt immediately prior to the foreclosure.___________

2. Enter the fair market value of the property from Form 1099-C, box 7. ___________

3. Subtract line 2 from line 1.If less than zero, enter zero.___________

The amount on line 3 will generally equal the amount shown in box 2 of Form 1099-C.  This amount is taxable unless you meet one of the exceptions in question 2.  Enter it on line 21, Other Income, of your Form 1040.

Step 2 – Figuring Gain from Foreclosure

4. Enter the fair market value of the property foreclosed.For non-recourse loans, enter the amount of the debt immediately prior to the foreclosure ________

5.    Enter your adjusted basis in the property.(Usually your purchase price plus the cost of any major improvements.)                                    ____________

6. Subtract line 5 from line 4.  If less than zero, enter zero.

The amount on line 6 is your gain from the foreclosure of your home.  If you have owned and used the home as your principal residence for periods totaling at least two years during the five year period ending on the date of the foreclosure, you may exclude up to $250,000 (up to $500,000 for married couples filing a joint return) from income.  If you do not qualify for this exclusion, or your gain exceeds $250,000 ($500,000 for married couples filing a joint return), report the taxable amount on Schedule D, Capital Gains and Losses.

4. I lost money on the foreclosure of my home.  Can I claim a loss on my tax return?

No.  Losses from the sale or foreclosure of personal property are not deductible.

5.  Can you provide examples?

A borrower bought a home in August 2005 and lived in it until it was taken through foreclosure in September 2007. The original purchase price was $170,000, the home is worth $200,000 at foreclosure, and the mortgage debt canceled at foreclosure is $220,000. At the time of the foreclosure, the borrower is insolvent, with liabilities (mortgage, credit cards, car loans and other debts) totaling $250,000 and assets totaling $230,000.

The borrower figures income from the foreclosure as follows:

Use the following steps to compute the income to be reported from a foreclosure:

Step 1 – Figuring Cancellation of Debt Income (Note: For non-recourse loans, skip this section.  You have no income from cancellation of debt.)

1. Enter the total amount of the debt immediately prior to the foreclosure.___$220,000__

2. Enter the fair market value of the property from Form 1099-C, box 7. ___$200,000__

3. Subtract line 2 from line 1.If less than zero, enter zero.___$20,000__

The amount on line 3 will generally equal the amount shown in box 2 of Form 1099-C.  This amount is taxable unless you meet one of the exceptions in question 2.  Enter it on line 21, Other Income, of your Form 1040.

Step 2 – Figuring Gain from Foreclosure

4. Enter the fair market value of the property foreclosed.For non-recourse loans, enter the amount of the debt immediately prior to the foreclosure. __$200,000__

5.  Enter your adjusted basis in the property.(Usually your purchase price plus the cost of any major improvements.)                                        ___$170,000__

6. Subtract line 5 from line 4.If less than zero, enter zero.___$30,000__

The amount on line 6 is your gain from the foreclosure of your home.  If you have owned and used the home as your principal residence for periods totaling at least two years during the five year period ending on the date of the foreclosure, you may exclude up to $250,000 (up to $500,000 for married couples filing a joint return) from income.  If you do not qualify for this exclusion, or your gain exceeds $250,000 ($500,000 for married couples filing a joint return), report the taxable amount on Schedule D, Capital Gains and Losses.

In this situation, the borrower has a tax-free home-sale gain of $30,000 ($200,000 minus $170,000), because they owned and lived in their home as a principal residence for at least two years. Ordinarily, the borrower would also have taxable debt-forgiveness income of $20,000 ($220,000 minus $200,000). But since the borrower’s liabilities exceed assets by $20,000 ($250,000 minus $230,000) there is no tax on the canceled debt.

Other examples can be found in IRS Publication 544, Sales and Other Dispositions of Assets, under the section “Foreclosures and Repossessions”.

6.  I don’t agree with the information on the Form 1099-C.  What should I do?

Contact the lender.  The lender should issue a corrected form if the information is determined to be incorrect.  Retain all records related to the purchase of your home and all related debt.

7. I received a notice from the IRS on this. What should I do?

The IRS urges borrowers with questions to call the phone number shown on the notice. The IRS also urges borrowers who wind up owing additional tax and are unable to pay it in full to use the installment agreement form, normally included with the notice, to request a payment agreement with the agency.

8. Where else can I go to get tax help?

If you are having difficulty resolving a tax problem (such as one involving an IRS bill, letter or notice) through normal IRS channels, the Taxpayer Advocate Service may be able to help. For more information, you can also call the TAS toll-free case intake line at 1-877-777-4778, TTY/TDD 1-800-829-4059.

In some cases, you may qualify for free or low-cost assistance from a Low Income Taxpayer Clinic (LITC).  LITCs are independent organizations that represent low income taxpayers in tax disputes with the IRS. Find information on an LITCs in your area.

Related Items:

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Common Short Sale Documents

By | April 27, 2010

If you’re getting ready to apply for a short sale, please have these documents ready at your initial listing appointment. Your lender will require them to process your application, and you can save lots of valuable time if you can prepare them up front.

Please note: lenders may need recent updates of each item, so put your paystubs and bank statements in a safe place every week!

> Two months most recent mortgage statements (all mortgages)

> Two months checking account statements (all borrowers)

> Two months saving account statements (all borrowers)

> Two months other account statements (Roth IRA, 401k, Trust, etc., all borrowers)

> Last two paycheck stubs (all borrowers)

> Two years tax returns

> Hardship letter (see sample)

> Financial Worksheet (attached)

> Authorization Forms to allow your Realtor, attorney, and title company negotiate on your behalf

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Foreclosure and Short Sale Alternatives

By | April 27, 2010

There are several options you can pursue when you’re behind on your mortgage and you want to stay in the house. An attorney can help you work through most of these solutions.

Reinstatement – If the reason you’ve missed your payments was temporary and you’re now able to continue paying your mortgage, you may be able to reinstate your mortgage. You’ll probably have to pay all missed fees, late fees, and legal fees due up to the date that you reinstate.

Forebearance If you’d like to reinstate your mortgage but the one-time payment is too high, there is a chance that the lender will allow you to negotiate a repayment plan, or forbearance. The lender will allow you to pay your debt over a specific period of time or will tack the extra debt onto the end of the mortgage.

Rent The PropertyIn some cases a homeowner will have payments low enough to allow him/her to rent the property and pay the excess mortgage payment out-of-pocket.

Refinance – If you have sufficent equity and income, and your credit hasn’t taken too large a hit, you may be able to refinance to a lower rate or better terms – or get enough cash out to cover payments for a while.

Mortgage Modification – In cases where homeowners do have the means to afford their payments, or a payment close to their payment, lenders may qualify the borrower for a mortgage modification.

Short-Refi – The relatively new phenomenon shows just how far some morgage companies are willing to go to avoid foreclosing on properties. This process involves the refinance of a home with reduction in the principal balance and often the interest rate as well. While relatively rare, and attorney can help you negotiate a short-refi.

Deed-in-Lieu – Often called a “friendly foreclosure,” deed-in-lieu occurs when the homeowner gives his deed back to the bank. In exchange for a non-contested repossession the banks will often give up the right to a deficiency judgement; however, in most cases a short sale is more beneficial to the homeowner.  It is still a form of foreclosure and will affect your credit as such.

Bankruptcy – Bankruptcy may allow the homeowner to reorganize his debt and keep his property. An attorney can help you with a bankruptcy.

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Buying Short Sales Vs. Foreclosures

By | April 22, 2010

It’s an interesting market, to say the least.  A simple internet search will turn up tons of listings that are tagged with ‘foreclosure’ or ‘short sale’ (incidentally, if you’re interested in foreclosure listings, you can sign up here for free Sarasota foreclosure lists delivered right to your e-mail.)  Some of the prices look too good to be true; some of them are.  Here’s a quick comparison of short sale vs. foreclosure transactions.

Short Sales Foreclosures

Making the offer

Short Sales

The beautiful thing about short sale contracts is that they’re fair and straightforward.  Short sales, for all their special needs, are regular transactions – a private buyer purchases a property from a private seller, and the funds from the transaction pay off the remaining mortgage.

The problem is that there aren’t enough funds at closing to pay off the entire mortgage – so the bank needs to release their lien.  This can take some time. Sometimes, it can take a lot of time.

Foreclosures

Some Local Foreclosures

[idx-listings linkid=”60978″ count=”5″]

… And Some Local Short Sales

[idx-listings linkid=”80840″ count=”5″]

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How To Buy A Short Sale – Writing the Offer

By | April 19, 2010

How To Make An Offer On A Short Sale

So you’ve driven around the block a few times, checked out the neighborhood and the schools, done your homework, checked it twice – and you’re ready to make an offer on a short sale.

Here are some simple rules to follow:

Don’t be afraid to ask for a good price, but don’t make a lowball offer.

Banks are a lot of things, but they’re not stupid – and they’re good at math.  If they’ll make more money via foreclosure or letting the house sit on the market a little longer, they will not be afraid to tell you to jump in a lake.

Many banks have standing rules for their negotiators to dismiss offers that are significantly under fair-market value.  That said, it can take months for a bank to figure out what a property is worth on the open market.  Just because you’re able to get a contract signed by the seller (who’s not making any money on the deal in the first place) at an ultra-low price doesn’t mean the bank has to accept it.  They are even likely to counter higher than the list price if they determine it was improperly priced in the first place.

In a depreciating market, it’s important to think ahead.  If you’ve got a house that’s worth $200,000 today, and you think it will be worth $193,000 in six months, then by all means ask for $193,000 – but asking for $165,000 might be a little steep.

Write the contract ‘as-is with right to inspect’.

All short sale contracts need to be as-is.  That means that neither the seller nor the bank will be required to make any repairs to the property, but you have the full ability to inspect the property and cancel the contract if the property needs more work than you anticipated.  See a leaky roof?  Incorporate the cost to repair (NOT replace) into your offer price before it’s sent to the bank in the first place.  Don’t expect the seller to fix anything.

Make sure you leave lots of time for the bank to respond.

I hear the same things from buyers every week:

“I don’t understand what’s taking the bank so long.”

“Don’t they know they’re losing money every day this house is on the market?!?”

“Just call them every day until they HAVE to do something!”

Fact is, banks do know that the faster they respond the more money they’ll make, they do know that buyers are likely to walk away and buy something else if they dally – and they do know that they’re going to make damn sure they’re not able to recuperate more money from the seller or that a short sale is the last, best option on the table before they approve it.  They’re already losing hundreds of thousands of dollars on many of these properties.

Also, there are lots of people who have to approve short sale payoffs – although you make your offer to the servicing or originating bank, that bank probably sold off the mortgage long before the loan went into default.  In lots of cases there are second mortgages that need to be paid off in order to release the lien.  In many cases, people who aren’t paying their mortgages also aren’t paying their taxes or homeowner’s association dues.  These are all parties that need to be willing to sign on the dotted line.  It’s not going to happen in two weeks. In most cases, these aren’t things that are going to happen in two months.

Be flexible.

Above all, be flexible.  Banks will totally ignore your timeframes.  They’ll dismiss crazy contract clauses.  They’ll reduce closing costs and commissions.  They’ll nickel and dime you.  Be prepared to go the extra mile in order to get your deal closed.  It’ll be worth it.

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How To Buy A Short Sale – Things To Know Before You Start

By | April 12, 2010

In my previous article, I talked about what a short sale is and why a bank would accept one. Now I’d like to get a little more in-depth and show you how to successfully buy a short sale.

What You Should Know Before You Start

First of all, let me say that short sales have come a long way.  There was a time when banks were very hesitant to accept short sale offers and, as such, they were pretty unreasonable about the whole deal (wouldn’t you be, if it was you who was losing millions of dollars to bad debts?)

These days, acceptance rates are way up and processing time at the banks is way down.  Lenders, sellers, and buyers alike have embraced the short sale as a legitimate way to do business.

It can still take a while.

Depending on who the bank is, the number of banks who are owed money, and the borrower’s personal financial situation, expect to wait 3-5 months for a response from the bank BEFORE the regular clauses of the contract kick in (those are the mortgage, the inspection, and the title clauses.)  The bank needs to size up the specific situation, get a feel for the value of the property, determine the eligibility of the borrower for a short sale (if the seller has tons of liquid assets, the banks might hold them to their note) and exhaust all their options to try and get the highest payment for themselves that they can.

You have a contract with the seller, not with the bank.

Short sale contracts are regular real estate contracts.  Yep, you read that correctly – they’re absolutely normal in every way.  Like every other real estate contract, there are certain contingencies that must be met for the contract to be finalized: the inspections have to be done to the buyer’s satisfaction, the financing has to go through, and the seller has to provide clear title to the buyer.  Short sales just add another contingency – bank approval.

Banks aren’t bound to accept your contract.  They don’t have to accept your terms, they don’t have to accept your price, and they don’t have to accept you. If you have a solid offer, they still probably will – after all, banks can’t sell it over market value anyway, and they certainly don’t want to spend money they’re already losing  just to maintain a property they own through foreclosure.  If they can turn a profit (or reduced loss) through a short sale they’re likely to accept – but don’t be surprised if your lowball offer gets turned down outright.

The seller’s mistakes don’t follow the property.

I’ve talked to tons of buyers about short sales, and to a one they’re concerned about the liens on the property – the mortgage, the equity line, the delinquent HOA fees.  They don’t want to pay them after closing and they should never have to.

Most standard real estate contracts require the buyer receive clear title to a property.  That means that banks have to either accept an agreed-upon price minus any other liens that they will have to pay (including back taxes and real estate commissions) or foreclose on the property, pay the liens anyway, and then try to sell it.

Also, title is easier to convey if the property hasn’t been foreclosed on (as in a short sale situation.)  In a foreclosure suit, the bank forcibly takes title title from the borrower in default, then passes it on – in a short sale, they simply release the property from the note.

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