Sellers – Tips for Successful Short Sale

short sale

The number of homeowners defaulting on their mortgage has declined compared to a few years ago.  However, a recent article states that the Chicago area has the lowest amount of home equity and the highest number of households that are underwater for big cities.  This points to short sales continuing to be an issue in our area for the foreseeable future. Note though that these trends vary by community with many communities not affected as much.

Short sales can be frustrating for both sellers and buyers.  For the homeowner, there are some tips for a successful short sale: Continue reading “Sellers – Tips for Successful Short Sale”

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

SEARCH FOR HOMES

Zombie Foreclosures Still Problem in 2015

Zombie Foreclosures Still Problem in 2015

In a standard foreclosure situation, the bank takes possession of the home from the current owner and then sells it at auction. However, Zombie foreclosuressometimes the bank chooses to save on costs associated with seizing the home and never officially forecloses on the property.  The home will become a zombie foreclosure and the owner’s name will remain on the property title.  According to RealtyTrac, these “zombie foreclosures” are declining but in Chicago still represent 21% of all homes in the  foreclosure process.   Homeowners often do not discover that they are still in possession of the home for months or even years after they have moved out.

 

The consequences of a zombie foreclosure

Zombie foreclosures can result in serious consequences for home owners.  For example, according to Reuters, a man and his wife moved out of their home after falling behind on their mortgage payments.  They received a note from his bank telling him that his property would be foreclosed upon. Due to this, the man thought that he would never have to worry about the home again.

However, about a year later, the man started receiving bills from a tax collector for waste removal, sewer fees and back taxes. After this occurred, a debt collector started pressing the man to pay his mortgage, which had risen substantially due to penalties and property fees. Not only was the man held liable for thousands of dollars in debt because he still technically owned the home, but he was denied disability coverage from the Social Security Administration because ownership of his home rendered him ineligible.

What homeowners need to remember

To prevent themselves from the effects of zombie foreclosures, there are several things homeowners should keep in mind before they choose to walk away from their mortgage. These include the following:

  • Their name remains on the property title until it is sold to someone else
  • Banks do not always tell property owners that they have stopped the foreclosure process
  • Owners can be held liable for repairs, property taxes and maintenance fees by their local government
  • The bank is under no obligation to seize ownership or take responsibility of the property
  • They can work with their bank to get them to agree to devising a deed or putting the home up for a short sale instead of a foreclosure

Understanding how the foreclosure process works can help homeowners avoid the disastrous and stressful consequences of dealing with a zombie foreclosure. Those who are facing foreclosure may benefit from speaking with an attorney who can provide information about this process and what they can do to protect themselves in case the bank does not take over the property.

 

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

SEARCH FOR HOMES

Are Short Sales Still A Good Idea in 2015?

Are short sales still a good idea in 2015?

Yes, definitely.

short sale

 

 

 

As a realtor, I will be the first to say that short sales can be a real pain in the rear. However, despite the paperwork, haggling and the uncertain timelines —- short sales are a good idea for underwater sellers.

5 Reasons to Consider a Short Sale:

  1. More Control – One of the biggest reasons to consider a short sale is that you have more control in the process of settling your mortgage. It is true that the banks (and the current market) ultimately decide what the dollar amount they are willing to accept but the homeowner has a greater role in when the home is sold and a seat at the table in negotiating the terms of the sale.
  2. Timeline of Sale – In recent years, many foreclosures in the Chicago area have taken years to complete foreclosure. A short sale gives the homeowner more certainty in when the home is sold. Can you imagine finally bouncing back from a job loss or divorce to find you can’t get a mortgage because the actual foreclosure sale was a lot later than you thought? Or, checking two years after you’ve decided to leave your house for the bank and finding out it’s still in your name.
  3. Protection of legal interest – “Zombie foreclosures” are homes abandoned by the homeowner but not yet possessed by the banks. This is a significant issue in the Chicago area market. Note that while banks have a financial interest in the home, the homeowner is legally responsible.
  4. Waiver of personal liability – A short sale occurs because the sale proceeds from the home are less than (short of) what is needed to satisfy the mortgage balance.  The sale of the home whether through a short sale or foreclosure leaves an unpaid balance (deficiency). Banks have the right to pursue collection of this remaining balance from the borrower for up to 7 years in Illinois. Generally, banks have not elected to pursue collection but in many cases they have. In addition, there are reports that some banks are going after these debts more often. In a short sale, the seller’s attorney negotiates a waiver of this personal liability.
  5. Credit Score – After a short sale, the debt is reported to the credit bureau as settled debt. Also, more often banks are not forcing homeowners to fall behind on payments before considering a short sale. This helps mitigate the impact to your credit score.

As seen, there are benefits to the homeowner to doing a short sale rather than just walking away from the home and choosing foreclosure. They can be a pain (not always) but they can be worth it nonetheless. Also, it should be noted that with price increases in the last couple of years, your home’s value may no longer be underwater.

If you are looking to buy or sell in the Chicago area market, give me a call.  I can also answer any real estate questions you have about the value of your home or real estate in general.

 

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

SEARCH FOR HOMES

Chicago Foreclosure Trends – March 2015

Chicago Foreclosure Trends – March 2015

foreclosure trends

Nationally, foreclosure trends have declined significantly.  However, in some states, foreclosure activity continues to be a problem.  It appears that problems remain primarily in those states with a judicial foreclosure process.  Illinois is one of those states.

Foreclosure trend levels for Illinois have improved.  Since 2012, foreclosure trend levels have consistently declined month by month.  However, in March 2015, there was a sharp spike in new foreclosure filings in the city of Chicago.  In March, the number of properties that received a foreclosure filing in Chicago, IL was 200% higher than the previous month and 74% higher than the same time last year.

chicago foreclosure trends - march 2015

 

According to RealtyTrac, the spike in foreclosure activity is not because of increased new mortgage defaults (those actually had a slight decline) but because of a clearing of the backlog in foreclosure cases.  Some of the most stubborn foreclosures are being flushed out of the foreclosure pipeline which has resulted in a dramatic increase in foreclosure auctions and judicial sales.  Hopefully, these homes will soon make their way to the market to increase the available inventory.  Note that although the bulk of increased activity is in Chicago, increases were also seen in nearby communities like Schaumburg, Aurora, Palatine, Cicero and Elgin. The backlog is most problematic for prices at lower end of the spectrum.

One good thing about this increase in auctions and judicial sales is that title to these homes are transferring out of the hands of homeowners.  One problem in Chicago is the presence of “zombie” foreclosures where homes remain stuck in the foreclosure pipeline because banks don’t complete the process of taking title to the home.  Many times, the owner has been in the foreclosure process for years and has little incentive to maintain the home or ends up abandoning the home.  However, it should be noted that as long as owner is still listed on title, they are subject to liabilities attached to the home.  These include:

  • the tax collector may come looking to collect back property taxes
  • an HOA may file a lawsuit to recover unpaid assessments
  • you could be threatened with fines for not complying with housing codes and ordinances (and even face jail time in some instances if you don’t meet repair deadlines), or
  • the local government may send you a bill for yard maintenance, repairs, trash removal, and/or graffiti scrubbing.

For these “zombie” homeowners, the clearing of the foreclosure backlog is good news indeed.  For buyers, this may also result in a welcome increase to a market needing more homes for sale.

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

SEARCH FOR HOMES

Tips For Successfully Buying A Short Sale

sold-sign-home-for-sale

In the Chicago area, many homeowners continue to be underwater in regards to their mortgage.  This is reflected in the percentage of short sales to total available homes in the Chicago metropolitan area.  In February 2015, short sales were 14% of total available.  This is significantly lower than the 30% level of two years ago.  However, for homes priced below $200,000, the percent is 26%.  This is lower than previous levels (44% in February 2013) but still very significant.  For this reason, buyers have to consider whether a short sale is a good option for them. This is especially true given the overall shortage of homes available in our area.

Not all buyers are good candidates for purchasing a short sale.  Here are some issues you should be aware of if you’re looking to buy a home that is a short sale:

  1. It is important that your agent determines the market value vs. list price before submitting the offer. If the list price is significantly below market value, it is unlikely that the bank will approve the short sale.  The bank will be ordering its own BPO (similar to an appraisal) and use that value in determining whether to approve the offer price.  Remember a short sale means that the bank is considering whether to accept a sales price below the loan amount owed by the seller.  This is sometimes a significant deficiency.  Short sales may offer some discount to market value but they should not generally be viewed as a lowball opportunity.
  2.  Short sales can take months to be approved by the bank. If you have a short timeline for moving, a short sale is probably not for you.
  1. Short sales are unpredictable. If you have a hard type “A” personality, you may not be able to handle a short sale. There are several common complications that can derail the approval:  multiple liens, a BPO higher than the market value (the bank may ask you to raise your offer), the bank may press a reluctant seller for a financial contribution toward the sale, or the bank sometimes will transfer the file mid-approval process (at which point everything starts all over).  Surprises are the norm for short sales.  Know your own tolerance for the unexpected.
  1. If your loan is an FHA or VA, you have to be choose your property wisely. These loans have strict property condition standards in qualifying the borrower’s loan.  Generally, the seller does not have the resources or inclination to do repairs.  Make sure that you are not waiting through a lengthy short sale approval process only to be denied your loan.  Of course, you can secure a 203k or other rehab loan to fix the property conditions.
  1. I also usually advise my client to do their home inspection as usual after the offer is accepted by the seller. It is better to find out right away about structural problems or a leaky roof than wait for months for short sale approval.
  1. Finally, make sure your agent is familiar with the short sale process. It’s just easier if at least one of you has been through this before and can anticipate the twists and turns.

The challenges are definitely there for short sales.  However, so are the benefits.  As mentioned, short sales are a material percentage of the supply of homes available.  They are often less likely to need extensive repairs because the sellers are still in the home. Finally, there tends to be at least some discount to a traditional listing. These can be a great option for the right buyer.

 

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

SEARCH FOR HOMES

What Can We Expect From the Mortgage Settlement

Image

More details are coming out about the specifics of the recent mortgage settlement .  As I wrote last week, the settlement was for $25 billion and the settlement was with five of the nation’s largest banks:  Ally Financial (GMAC), Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo.  However, excluded from this settlement are loans purchased by Fannie Mae, Freddie Mac or insured by HUD (FHA loans).  This excludes more than 50% of all mortgages.

In the Chicago area (and especially the south side and south suburbs), a huge percentage of homes are underwater.  Foreclosures and short sales make up more than 50% of available listings in many communities.  While the mortgage settlement itself is limited in the mortgages directly involved, the changes outlined will probably flow to the greater market. .

1.   There is expected to be an acceleration in the processing of foreclosures.  There was a significant slowdown in foreclosures since the 4th quarter of 2010 while this challenge on the banks’ handling of foreclosures was being settled.  Illinois has a large shadow inventory of unreleased foreclosures so expect a much higher inventory of foreclosures in 2012.  This affects not only homes where foreclosures were fully processed but those where there was a holding pattern.

2.   The 49 state’s attorney generals (all except Oklahoma) will have oversight over the implementation of this settlement.

3.   Banks are encouraged to work with homeowners to provide loan modifications or short sales to struggling homeowners.  Some of the key protections for borrowers seeking loan modifications:

a.    Banks/servicers must review and make decision of completed loan modification applications within 30 days of receipt.

b.   Banks must stop practice of loan modification consideration with simultaneous foreclosure proceedings (dual track foreclosures).

c.    The bank must establish a single point of contact for each homeowner who reaches out to the bank due to difficulty making their loan payments.

4.   The short sale process for many banks is expected to be streamlined making it easier and quicker for homeowners (we’ll see).  Banks are seeing the value of short sales vs. modifications since 35-50% of loan modifications end up defaulting again.  The banks will get settlement credit for short sales.

5.   Although some news reports are giving the impression that banks will start reducing principal balances on loans, don’t expect a lot of them. Principal reductions are one option but loan modifications are more likely.  Principal reductions would be a huge hit for banks.

The bottom line is that homeowners that are struggling should take action now.   The news media reports national trends but real estate is local.  States have different procedures for handling foreclosures and some states were never impacted as hard as other states.  Illinois has a judicial foreclosure process so it takes longer. Other states don’t.  In Illinois, banks have a right to pursue borrows for the loan deficiency remaining after foreclosure.  Other states don’t. Some states are already recovering in this crisis. Others are not.

The first step is to contact your bank and see if you are able to refinance or modify your home loan.  If you are past this point then you need an exit strategy.  Contact a realtor to get an estimate of your home’s value.  Get educated on the pros and cons of short sales vs. walking away from the mortgage (foreclosure).  Decide what’s best for your personal situation.

If you are in the Chicago or south suburbs and want advice on your situation, please contact me.  I would love to help.

For more information on the national mortgage settlement, visit http://nationalmortgagesettlement.com .  This is the official website.

Millie C Lumpkin, SFR
Realtor
Cell: (312) 217-5644
Email Me: mclumpkin9@att.net
Vist My Website: http://ChicagoSouthHomes.com

    Forget the doom and gloom, this is a GREAT time to buy”

sfr logo    

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

SEARCH FOR HOMES

Feeling Stuck???

I read an article recently that stated that the economic recovery was being hampered by people unwilling to relocate for jobs.  They are unable or unwilling to sell their homes in this current market. For some, an underwater mortgage makes relocation difficult. You also have dual income households where one spouse would be forced to quit their job in an uncertain job market.  There are other reasons I’m sure but this gives some substance to news reports that speak to the number of unfilled skilled jobs.

This makes me think about what other segments of our lives might be negatively impacted by people feeling locked into their homes and unable to sell?

  • Growing families unable to move into larger homes
  • Empty nesters that would like to downsize or move into a condo where there’s less property maintenance
  • Senior citizens unable to sell their homes to be closer to their children or to enter assisted living facilities or retirement communities
  • People wanting to upgrade into something bigger or more upscale
  • People with personal relationship situations like divorce or break-ups

Unfortunately, it will take several  years for many communities to recover.  Once the bottom is established, prices are not expected to grow at levels experienced during the bubble.  That means, decisions have to be made either to sell, get comfortable where you are, etc.  Millions of foreclosures are yet to be released or processed. Prices will take further hits in many communities before the bottom is hit.

Speak to a local realtor to find out the specifics of your situation. If you are in Chicago or the south suburbs, I would love to talk with you about your options.

Millie C Lumpkin, SFR
Realtor
Direct: (312) 217-5644
Email Me: millie.lumpkin@gmail.com
Visit My Website: http://ChicagoSouthHomes.com

Millie C Lumpkin
Broker
Stages Real Estate
Phone: (312) 217-5644
Email:     millie.lumpkin@gmail.com
Website: ChicagoSouthHomes.com
Blog:       ChicagoSouthRealEstateBlog.com

 

SEARCH FOR HOMES