Let’s start this with a basic definition - a short sale takes place when a piece of real estate is being sold for less than the amount of the existing mortgage(s).

In markets such as the Phoenix real estate market, where many homes had been purchased through 100% financing or where equity was taken out of homes at the height of the market through a second mortgage or refinance, short sales are becoming increasingly common.

Last night, I spoke with a couple relocating to New York and facing a short sale to make the move. Fortunately, these folks were current on their mortgage payments. In fact, if not for the corporate relocation, they would not be selling their home. But life has a habit of getting in the way.

Many others are not so fortunate and are facing short sales in advance of foreclosures. No matter what the circumstances, preparing for a short sale requires the same steps:

1. Contact a real estate agent to determine at what price your home is most likely to sell. Zillow gives its Zestimates and has some data on recent sales but Zillow doesn’t take into account currently active homes or new-build inventory.
2. Contact your accountant. There usually are tax ramifications to a short sale as the IRS likely will see the mortgage reduction as income. Check with whomever takes care of your taxes to make sure and see the impact it will have.
3. Contact your lenders and let them know your situation. If you have two mortgages, you need to contact both lenders as you’ll be negotiating a reduction in the mortgage with both. The first lender (the one holding the larger loan) likely won’t act until it knows the second also is surrendering some money.
4. Be patient, but stay in contact. Most lenders have two-foot-high stacks of homes going into foreclosure on their desks. Short sales tend to move to the back of the pack, and there are only so many bodies working on files. Don’t expect an answer right away - in fact, it may take a couple of months to get final agreement from your lender(s) on the short sale.
5. Price your home aggressively and get it sold.  There’s no reason to try and stretch above the current market on a short sale - at the end, there’s no equity coming back to the homeseller. What the seller does get is freedom from their mortgage.

Short sales should not be taken lightly because of the tax impact and also the possible impact on your credit. But sometimes, such as in the case of a corporate relocation, there may not be other options available.

Got questions? As always, drop me a line and I’ll be happy to help.

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Tags: Real Estate Bubble, Real Estate Financing, Phoenix Market, General Real Estate by Jonathan Dalton
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… as I continue to deal with the imbeciles at Hostcentric. After spending 25 minutes arguing over which version of WordPress I was using, I was told I had to press their update version. Even though I already was updated.

The result? The temporary loss of every plug-in and the (hopefully) temporary loss of the ability for everyone to add comments.

I apologize for the inconvenience.

UPDATE: It’s a theme-specific issue, so we’re now back to our old theme while I head out to an evening listing appointment. I’ll figure out what happened after that’s over.

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Tags: Miscellany by Jonathan Dalton
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It often is said in management that pointing out problems with solutions is all but useless. And maybe my first solution of eliminating the counts for answers and questions made by real estate agents was too extreme to be considered seriously.

So I offer an alternative solution based on what’s taking place in the Trulia Voices section on a daily basis. Success will depend on participation not only by me and by Trulia but by all of you as well.

Step One: Trulia’s given us the ability to rate answers with a thumbs up or thumbs down. Let’s put them to use …

1) Anytime an agent answers a question by providing a mini sales pitch without actually providing any value whatsoever, all of us give the answer an automatic thumbs down.

Case study one: A seller asked today whether the builder will drop the price on his new home because the declining market is forcing him to sell his current home for less. One of the responses:

“Possibly. One of the advantages that I have is that I am a Certified Negotiations Expert … “

Coincidentally, I’m a certified expert on voting procedures in the Roman Senate. Thumbs down!

Case study two: Seller asks how to drive traffic to their home. The response:

“You should contact a real estate professional with market knowledge and a great marketing program. I not only live in N Phx, but have extensive knowledge in the local residential real estate. “

Oh yeah. And if your home is currently listed with a real estate broker, please disregard my blatant ethics violation for trying to solicit your business. Thumbs down!

2) Anytime an agent from out-of-area answers a question clearly directed at agents with local knowledge, all of us give the answer an automatic thumbs down.

Case study: Sunday’s post is all you need to see. Take note of the comment from the person whose question was met with “advice” from all comers across the nation, if you will.

Step Two: Weight the number of answers given by the overall score for the answer.

If an agent provides an answer that ends up with more votes for than against, they get a point. If it’s the opposite, they lose a point. If they have the first answer and it’s given a negative vote, that’s two points off. That will teach agents to think before typing up the sales pitch in hopes the client (and the rest of us) are too dumb to notice.

And to keep evil entities like Athol from voting no for everyone just because, an answer has to have a minimum of three votes total to count either positively or negatively.

Step Three: Keep the pressure on Trulia to make the Trulia Voices section something useful for all involved.

If the point is to build a purposeful community, where there’s useful discourse between real estate professionals and the general public, those agents blatantly chumming for possible leads need to gleaned from the pack.

Of course I’d be happy to get some business from a response in Trulia Voices. But I can’t see where answering questions with links to my great marketing plan is going to be the way it will happen. You have real estate 2.0 clients dealing with a real estate 1.0 mindset, albeit one with a keyboard and a mouse.

Become too heavy with 1.0 thinking and the 2.0 set will find better avenues for their questions. Like my wonderful Dalton’s Arizona Homes Blog.

(thumbs down)

Bollicks.

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Tags: General Real Estate, Marketing, Tips for Sellers, Tips for Buyers, Technology by Jonathan Dalton
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Our Phoenix Mortgage Rates Report from last week advised clients to float their loans. We still maintained a lock-in stance for all non-conforming and jumbo loans as that market is changing daily.

Rates decreased an average of .125% this past week. Now, we think Phoenix home buyers should reap that reward and lock-in interest rates for all loans at application. We think there is more risk to rates rising before the Fed meeting in September than there is opportunity for lower rates during that period.

One of our portfolio lenders is offering an annual ARM, interest only, at 5.5% with an APR of 6.44%. This means that the first year is locked in at 5.5%, the second year at 6.44%, and then the loan becomes a LIBOR-based ARM. There is no pre-payment penalty associated with this loan. We particularly like this loan product because we believe that interest rates are in a 12-24 month downward trend; we think there will be some opportunities to refinance to a fixed rate loan as low as 5.5% in the next two years. Borrowers with a short-term horizon (meaning they may consider a move in 12-24 months) should ask for more information. Admittedly, this is a teaser rate but sometimes teaser rates have the right application when the hold timeframe matches up to the interest rate term.

Mortgage Rates as of 8-28-2007-

Subject to Market Fluctuations (max loan amount= $417,000)

Program Rate APR

30 Year Fixed 6.125% 6.195%

5/1 Interest Only 6.375% 6.446%

Annual ARM 5.75% 5.819%

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Tags: Real Estate Financing, Tips for Buyers by Brian Brady
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It struck me the moment I stepped into my client’s kitchen for an afternoon listing appointment yesterday: a piece of memorabilia marking him as former U.S. Navy. And then I saw the USAA calendar hanging on the wall. Immediately I knew what I had to do.

You see, I’m one of those real estate agents who works with USAA clients through the company’s Movers Advantage program. Here’s the gist of the program - if a USAA client uses a Movers Advantage program agent to buy or sell a house, they receive cash back from USAA at the end of the transaction.

Now where do you think that cash comes from? (What is “your back pocket, Jonathan?” Correct!)

Mentioning Movers Advantage would cost me a percentage on the sale and do the same on the purchase, with which he also wants my assistance.

So I ask you … what would you do in this situation?

1. Keep your mouth shut, knowing you already have the business secured?
2. Tell the client about the program and willingly surrender the dough in the interest of good karma?

If you read this blog, you don’t need me to tell you what I chose. Personally, I believe sleeping at night with a clear conscience is a wonderful thing. I will tell you that I’m probably in the minority for this answer - probably not among those enlightened agents who inhabit much of the real estate blogging world - but in general.

Choosing the second option isn’t an official violation of real estate ethics as set for by the bureaucrats at NAR. But that doesn’t make it ethical.

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Tags: General Real Estate, Marketing, Tips for Sellers, Tips for Buyers by Jonathan Dalton
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