How Does a Short Sale or Foreclosure Affect me and my credit?

How does a short sale or foreclosure affect me and my credit?

That is the question that many people are asking. Times are statistically tough for many during this recession and people want to know what their options are and what they need to do. Im not a lawyer but this is what I am seeing in the loan world and in the credit arena.

My rule of thumb is always the following when it comes to making payments:

1. Always make your payments and fulfill your obligations.

2. If things are tough and there is no way out, call your lender BEFORE things are bad and before late payments are made. Always call your lender if you are going to be late. This is the same rule with landlords and tenants. The tenants that call the landlord and tell them things are going to be rough establish trust. The tenants that avoid the landlords calls develop no trust.

(Dont avoid your lender calling you. They can and may work with you during tough times. It may be embarrasing or something that one would rather hope goes away...but talk to your lender.)

3. Call a Realtor - One that specializes in short sales. Hopefully one that is very good before foreclosure comes. (We receive many referrals from Realtors that know how tough a short sale is and they send us their business because its a sale that only certain people can negotiate with the bank. We even help Realtors with their short sales.)

Here are the options and how it relates to you. Now Remember, if it is an investment property there may be tax consequences. Consult your accountant regarding this.

1. Foreclosure - In a nutshell, you could be sued, have a judgement against you for the difference, and unable to buy and own a home for 5 years.

When a foreclosure happens this hurts your credit very badly. Judgements for the deficiency can be placed on you for up to 20 years. Again consult your attorney regarding this. Im a Realtor, not an attorney. Credit is the worst it can get.

We have a friend that waited too long to sell their home as a short sale. He just received a letter in the mail sueing him for over $100,000 for the difference on the home.

2. Deed in Lieu of Foreclosure - Basically the same thing as above, however, you may be able to negotiate to not have a judgement against you. Still cant buy a home for 5 years.

3. Short Sale due to not making payments. - Earliest to buy a home..2 years.

In most cases the bank will forgive you of any money you owe them. You walk away from the property having "Settled" with the bank.

Not making payments causes the severity of the credit damage. When payments are being made, credit goes down the toilet really fast.

4. Short Sale while keeping your payments current. - Earliest to buy a home..2 years with LITTLE CREDIT DAMAGE!

The bank forgives you of your debt. You walk away from the home. You dont pay anything out of your pocket.

There are people reporting anywhere around a 50 point drop in fico scores immediately after this type of short sale. There are people reporting their scores dropping from 800 to 750 or from 715 to 680.

What options do you have with your current home and scenario? For a free evaluation find out online here.

View Fannie Mae Rules here with terms of buying a home after Short Sale and Foreclosure.

Lower commissions means you are supposed to save right? Heres what it can cost you!

You have seen the headlines "Why Pay 6%? Save $2,000 to $4,000!"

Did you really end up saving? Lets take a look at a couple scenarios.

Sometimes its tough to really know, many times you will never know. Why? Because there rarely is the exact same home for sale at the exact same time as each other listed with different brokerages. But we found some for you to look at. These two homes were on the market at the exact same time and were considered competition as they were exact comparables.



EXAMPLE A:

This home was listed with a discount brokerage, and 2 different nation wide traditional brokerages.

Time on market: 470 Days

Net to seller after paid closing costs: $206,200


EXAMPLE B:

This home was listed with a Discount Brokerage for 6 months before we took it over.

Utah Dave Sold within 120 days

Net To Seller: $295,000

These two homes were exact comparables. These two homes had the same finishes and should have sold for relatively the same price and within the same timeframe.

The seller A and B first tried to utilize discount services. But look to what happened to SELLER A! Seller A lost $90,000.

The seller could say to their neighbor, "I saved $2,000 on commissions when I sold my house." But what he really doesnt know is that he lost $90,000 in trying to save on commissions.

Is this a one time deal? No, it isnt. I will be uploading about a dozen of these that I have found.

CONCLUSION: What do we learn from it?

The Biggest Mistake Sellers make is when they pick an agent based on commissions or based on the price of their home the agent thinks it will sell for If you pick an agent based on commissions, it could cost you not save you. Pick an agent based on the agent's results, not cost. How do you know what their results are? Try asking them for a list of homes that they have sold and show comparables that they outsold. If they are results oriented, you will get the list! Heres a list for you regarding our sales.

More Case Studies: What do we mean by Traditional or Nationwide Brokerage? Many of these homes that were being sold were listed with a Coldwell Banker/ReMax/Exit/Century 21 or discount brokerage type. These case studies use comparisons of homes that are almost exactly alike. Prices and timeline to sell should be equal if you base it on the home. Most people believe their home is better than everyone elses. Most people believe their home will sell for a certain price no matter who helps them. Some people believe that the MLS System sells 90% of the homes. Well if the MLS were to sell the homes, why would certain agent's listings take longer to sell? Why do certain agent's listings not sell? Why do certain agent's listings take longer? Take a look at these case studies and see for yourself that it matters who lists your home. People who base choosing an agent off of commission or choose an agent based off them being someone they know or based off of a promise of a quick sell at a certain price end up losing in each of these scenarios. How do you choose your agent? Hopefully, its off of the agent's results.

UTAH DAVE SOLD:

Time on Market: 75 Days

Sold net to seller: $294030








Traditional Brokerage:

Time on Market: 319 Days

Sold Net to Seller: $293,000









UTAH DAVE SOLD:

Time on Market: 2 days

A Nationwide brokerage listed for 6 months and could not sell it.)

Net to seller: $290,000






Traditional Brokerage:

Time on Market: 275 days

Net to Seller $251,000








UTAH DAVE SOLD:

Time on Market: 4 days

Net to Seller: $410,000

Same Home except this is .17 acre (smaller lot)







Traditional Brokerage:

Time on Market: 120 days

Net to Seller: $370,000

This home had a .27 acre lot. (larger lot)







UTAH DAVE SOLD:

Time on Market: 44 Days

Net to Seller: $285,000

(This home backed a busy main road.)

2200 sq ft with a 2 car





Traditional Brokerage:

Time on Market: 1.5 years

Net to Seller: $245,000

This home was in the same neighborhood but newer, 2800 sq ft and a 3 car garage.





UTAH DAVE SOLD:

Time on Market: 1 day

Net to Seller: $327,750

Condition: Fixxer Upper, Poor condition.







Traditional Brokerage:

Time on market: 529 Days!

STILL HASNT SOLD Listed at $325,000

Totally Remodeled with a 5 car garage.

These people listed with another brokerage because the other brokerage promised them a higher price and a lower commission than us.)



UTAH DAVE SOLD:

Time on Market: 3 Months

Net to Seller: $290,000



Traditional Brokerage Sold:

Time on Market: 464 Days

Net to Seller: $249,000









UTAH DAVE SOLD:

Time on Market: 4 days

Previous Nationwide Brokerage listed for 6 months and could not sell.)

Net to Seller: $224,000



Traditional Brokerage:

Time on Market: 240 Days

Net to Seller: $219,200

This home also had a partially finished basement that the other didn't.



Another Traditional Brokerage Sold:

Time on Market: 4 months

Net to Seller: $210,000



UTAH DAVE SOLD:

Time on Market: 21 days

Net to Seller: $255,000








Traditional Brokerage Sold:

Time on Market: 171 Days

Net to Seller: $243,000









UTAH DAVE SOLD:

Time on Market: 74 Days

Net to Seller: $259,600








Traditional Brokerage:

Time on Market: 180 Days

Net to Seller: $236,000










UTAH DAVE SOLD:

Time on Market: 61 Days

Sold at $255,000


Traditional Brokerage:

Time on Market: 150 Days.

NEVER SOLD at $250,000

(Had $30,000 in upgrades too!)







UTAH DAVE SOLD:

Time on Market: 1 Week

Sold $375,000

Invested $15,000 to finish basement.

Total sq ft 4653





Traditional Brokerage Sold:

Time on Market: 447 Days

Sold: $330,000

Sq ft at 4955



UTAH DAVE SOLD:

Sold in 28 Days

Price: $499,000

4200 sq ft fully finished


Traditional Brokerage:

Time on Market: 2 years!

STILL HASNT SOLD Listed at: $449,000

4966 sq ft Fully Finished







UTAH DAVE SOLD:

Time on Market: 1.5 Months

Sold for $255,000

Basement was unfinished.

(Previous Discount Brokerage attempted to sell for 3 months)




Traditional Brokerage Sold:

Time on Market: 6 months!

Sold for $240,000 (They also fully finished their basement)

On market the same time but estimated losses on this is $30,000. Looks like even if they paid twice the amount of commission they would have saved more money.

Utah Housing Market Update for December 2008 including predictions for 2009

Utah Housing Market Update for 2009

Current Situation...and the CRYSTAL BALL for the future

A week ago we were talking in our office about demand. We have been watching 'pending' home sales decline and decline. This is typical during this time of year. Generally 1rst quarter after 4th quarter is where it bottoms out. So we thought, when was the last time home sales have been this low? We can't find data that goes back that far. We speculated it must be as far back as the 1980's. It also seems like the demand should be there to buy homes, but where are the buyers? We speculated as well that the demand is there and that it would arise soon. Im not an economist (Im a salesperson, I sell real estate not analyze numbers, we are diffrent breeds) and I dont have the data they do, so I looked forward to hearing what these specialists had to say. Today I had the opportunity of meeting with Wells Fargo Senior Economist Kelly Matthews, the U of U's department heads, and the National Association of Realtors Regional Economist. All of these people shed some great insight on our thoughts and to what is happening. Most of these men's charts and predictions were very similiar. They shed some great light on certain aspects of the economy. Here is the nutshell.

Unemployment/Employment in Utah:

Utah has been losing jobs. Our low unemployment rate according to Wells Fargo Kelly Matthews was 2.7% in 2007. In 2005 before the real estate boom Utah was at 4.3%. Kelly's prediction for first half of 2009 is 4.5%. That is taking us back. We are still well below the national average!

New Construction

Single family Building permits in 2005 according to Kelly Matthews was at 20,912. Now watch this drop and fall out of the sky. 2006 was 19,888 and 2007 was 13,507. The sky is falling number for 2008? Almost 6,000. His prediction for first half of 2009 is 2790. James Wood at the U of U also had similiar numbers.

What is his prediction for new construction? Its a continued shake out till 2010.

What do I see out there happening? There are so many new homes and neighborhoods that are in foreclosure right now. There is also a forced liquidation happening. Im seeing many banks forced to sell their inventory at lower prices to clean their books and get some cash back in the bank. Im also seeing some builders and developers in a cash crunch that are forced to liquidate their lots at pre 2005 pricing. This is very good news. Land is now becoming very affordable once again. Now, this doesnt mean go buy anything. We know where the good deals are and what you can sell them for. There are bad deals and great deals alike out there.

The Good News for those who have Home Equity or Credit Cards tied to Prime.

During 2005 to 2007 Prime was 7.25 to 8.25. Right now Prime has been around 4%. The prediction for first half of 2009 for Prime according to Kelly is 3.5%. The news yesterday announced this just recently hit 3.25%! People are able to save money with the rate dropping in half!

What about Foreclosures?

James Wood also showed us some charts of foreclosure rates. When we looked at the past foreclosure rates typically it peaked out at about 3% whenever we had recessions. Right now our current foreclosure rate is at 1.5%. This data means that we can probably look to having about 3500 homes foreclosed arrive on the market for sale during the next year or two.

What about Housing Affordability in Utah?

Kelly Matthews a year ago predicted the Utah market. He said prices will fall, they have to fall in order for us to have affordability. He stated that we needed appx 20% price decline. If you look at the numbers we had 10% price decline. In the coming months you will see numbers even lower than that once data is gathered. Interest rates are low though. Typically one point drop in interest rates means 10% price affordability. Kelly thinks we are very close if not there for housing affordability once again.

According to our experience in making offers, we are seeing homes have multiple offers in many instances where the homes prices make it very affordable to buy. The buyers are there, but they are cautious to what they are going to buy. It must be priced right.

When is the bottom?

Sell high, buy low is everyone's motto right? Can you effectively predict the bottom? Maybe. You need to remember though that real estate is local. So for instance, the bottom depends on the area. Example: Washington D.C. rarely has any foreclosures, but as you move outward into the suburbs foreclosures start to skyrocket. What does this tell you? That certain areas and neighborhoods will hold value. So predicting the bottom can't be done with nationwide statistics or statewide statistics. Also, you have to take into consideration your negotiating skills, the current distress of the property owner, your efficiency at evaluating properties, and how many buyers are looking at the property. Just because you bought a home at the bottom doesnt mean you got the bottom price. I have met many people who paid top price at the bottom of the market. They didnt make anything. I also know people who bought bottom prices but it wasnt near the bottom of the market.

What does this all tell us? That buying at the bottom isnt as important as buying bottom prices according to the neighborhood and area that you are buying in. Now if you were to predict the bottom of the market I would predict 1rst quarter of 2009 but no later than 1rst quarter of 2010. How will we know which one it is? The Numbers for 2nd quarter this year probably will tell us. Stay tuned come July 2009. But by than you might have missed the bottom. But that doesnt matter right? What matters is you get bottom pricing! This past few months have been amazing at getting awesome deals. This year will be awesome as well!

Where are the buyers and the demand?

Our population grows at 2% currently. We have potential buyers that need homes. They are either living with parents, friends, or saving up for a down payment due to most 100% financing loans disappearing. These buyers will come out of the woodworks. Between saving for a down payment and waiting for consumer confidence to rise these buyers are in hiding. These buyers cant stay where they are at for long. They need housing and will be out looking for it. Once the consumer confidence picks up you will see everyone starting to buy. By than though, the bottom has passed. I remember so many people in 2005 that were so upset they didnt buy a year earlier. It sneaks up on you.

Conclusion, according to all these men?

2009 is the bottom, things will start to improve in 2010. This year we will see record amounts of foreclosures on the market. We will also start to see all the buyers in hiding starting to come out of their shells especially by 2010. Our population has to grow. It would be like a 5 year old still wearing 2 year olds shoe. We have to get new shoes. Our economy is very different where our own population feeds our growth. Interest rates could be at lows not seen since the 1960's. Homes are very affordable and people can actually buy homes under what they would normally appraise for. There are 100% financing programs still and even grant money to buy a home up to $22,500 from the government. All of this is happening right now as we speak. That is exactly why I am having a record month in sales this month. With all the bad news, good things are actually happening!

Strangers in your Home when it is for sale ! Watch out!

Strangers in your Home, when it is for sale! Watch out! Who's in your Home and What are they really doing there?

Our local Realtor's association posts warnings time and time again about people who have been stealing medicine in cabinets, staking out homes, or are just up to no good.

3 Ways in keeping your home safe from these types of predators.

1. Utilization of a REALTOR Keybox. (Dont use a code keybox.) Most REALTORS utilize a keypad that they have to update through their computer weekly. If they dont update the keypad they cant gain access to homes. They also are given their own pin number to use the keypad. Whenever someone accesses your home via a REALTOR Risco Keypad system, it is logged for the listing agent and the board to know who gained access. This way you will only have authorized people in your home.

2. Only allow Agents to use the keypad...even if they knock on your door. Recently there was someone claiming to be an agent who entered a home by a for sale by owner. They used a business card of another agent and went inside the house. Whenever an agent knocks, make sure that they call your agent or use the REALTOR keypad to gain access.

3. Have the agents ensure the people are qualified. If someone has gone through the preapproval process you know that they are serious about buying a home. I had a friend once list his home on craigslist.com and ksl.com He received many calls from an interested buyer in his home. He would run home from work just to show the buyer. The buyer would ask to come back later with his wife. This friend would change his schedule to meet the potential buyer. Than the buyer was negotiating with him getting him to come down on his price. Than after all is said and done the buyer really couldnt buy a home. This doesnt only waste people's time, but it also allows people in your home that you really know nothing about.

Following these three tips will ensure safety of your home, your possessions, and your family. Use a REALTOR keybox, only allow agents into your home via the keybox, and have a REALTOR ensure the potential buyers are preapproved.

Top 3 Areas & Price Ranges to Sell a home in Utah

You can sell your home for top dollar and within 45 days if you are in these areas. You also have the opportunity to buy more house with less money if you are trading up into a bigger house. Rates today were as low as 5%. Sellers in these areas are prime to take advantage of making money in today's market.

1. Salt Lake City 84105 Zip Code $100k-$200k

List of Homes for Sale

Home Sold History

2. Sandy 84094 Zip Code $100k-$200k

List of Homes for Sale

Home Sold History

3. Taylorsville/SLC Zip Code 84123 $100k-$200k

List of Homes for Sale

Home Sold History

4. Salt Lake City 84105 Zip Code $200k-$250k

List of Homes for Sale

Home Sold History

5. Salt Lake City/Cottonwood Heights/Murray Holladay 84119 Zip Code $100k-$200k

List of Homes for Sale

Home Sold History

View the ranking for November Sales Statistics Here