Thursday, April 10, 2008

What is a Short Sale?

I am often asked what a short sale is.  This is the same situation as a contract requiring 3rd party approval as well.  I hope this blog post will explain the terminology a little better.  This is from the Buyers’ perspective.  Check back for a post later in regard to the Sellers’ prospective. 

While a short sale may be a last resort for many homeowners facing foreclosure, it also can represent an opportunity for potential home buyers and real estate investors.  A short sale is a legally-binding agreement to allow a home to be sold for less than the amount that is owed to the lien holder(s).  And, while short sales are not by any means common or easy (they take a very long amount of time in order to get bank approval – usually at least 6-8 weeks). 
Due to the increasing inventory levels and foreclosures in some parts of the country, lenders are much more eager to negotiate with borrowers who are having trouble paying their mortgages that want to sell their homes. For potential home buyers and real estate investors, a short sale also offers an opportunity to purchase a property (sometimes below market value).  Since short sales are negotiated by the lenders, a Buyer should expect to purchase the home in its “as-is” condition. 
The most important aspect to keep in mind when looking at homes that are short-sales or require 3rd party approval is that you need to be extremely patient with the process.  If you need to be in your next home within 2 months or less, I would advise trying to avoid this type of scenario all together.  If you have plenty of time, then it may present a good opportunity.  I also recommend continuing to watch the market, while you are waiting for the 3rd party approval.  The last thing you want to do is stop looking and then find out 2 months later that the bank(s) is not willing to approve the sale and possibly lose out on other homes that may have been a better fit.
Posted by Scott Smolen at 20:07:22 | Permalink | No Comments »

Monday, April 7, 2008

New Laws in Maryland Pertaining to Foreclosures and Loan Fraud

The Governor signed some new legislation last week that changes both the way foreclosures are handled in the state and also addresses mortgage fraud among lenders and brokers.  I am not exactly sure how this may impact the market in the immediate future, however I believe the idea of making mortgage brokers more accountable is long overdue.  In the past, when we have run into trouble with lenders there has been very little that can be done.  I believe the tougher laws will be better for both Buyers and Sellers alike.  When the market began to correct in 2005, it naturally has weeded out many of the bad apples in the profession.  However stronger laws are always welcome to make sure that those who are in a position where integrity and responsibility are a must as it will help to eliminate those who do not conduct their business properly.


ANNAPOLIS, MD (April 3, 2008) – Governor Martin O’Malley joined with Senate President Thomas V. Mike Miller Jr., House Speaker Michael E. Busch, Lieutenant Governor Anthony G. Brown, community advocates and other officials today to sign emergency legislation that would help thousands of Maryland homeowners who are at risk of losing their homes and to prevent future generations of homeowners from losing their homes due to foreclosure.   

“I want to thank President Miller and Speaker Busch for working with the Administration during this session, as we put forward a legislative package to protect homeownership in Maryland,” said Governor O’Malley.  “The financial security of our families as well as the strength and health of our communities depends on our ability to help preserve and sustain homeownership in our State.  These bills help ensure that we keep people in their homes.”

The emergency bills signed today include:

  • The Real Property – Recordation of Instruments Securing Mortgage Loans and Foreclosure of Mortgages and Deeds of Trust on Residential Property bill.  The legislation significantly lengthens the foreclosure process from 15 days to approximately 150 days making it fairer for homeowners and providing them with more time and notice before a foreclosure sale.  It requires a lender to wait 90 days after default before filing the foreclosure action and to send a uniform Notice of Intent to Foreclose to the homeowner 45 days prior to filing an action. It also requires personal service to notify a homeowner of impending foreclosure action and requires that a sale may not occur for 45 days after service. A lender must produce proof of ownership when filing a foreclosure action. The bill codifies the right to cure, which will allow a homeowner to stop foreclosure by paying what is owed up until one business day before the sale.
  • The Real Property - Maryland Mortgage Fraud Protection Act is a comprehensive criminal mortgage fraud statute that makes mortgage fraud a crime for anyone involved in the mortgage transaction. The bill provides for significant fines and imprisonment for violators, and it also gives the court authority to order restitution and forfeiture and enhanced penalties for cases involving vulnerable adults. The bill also authorizes the Attorney General, a State’s Attorney, and the Commissioner of Financial Regulation to take action to enforce the statute. The bill allows victims of mortgage fraud to bring private action against violators. 
  • The Protection of Homeowners in Foreclosure - Prohibition on Foreclosure Rescue Transactions – Enforcement is an emergency bill that bans foreclosure rescue transactions that scam homeowners out of their homes and the equity they’ve built. The bill as passed also provides additional consumer protections for people who are trying to sell their homes because they are in default.


 

Posted by Scott Smolen at 17:50:10 | Permalink | No Comments »