One of the very first steps in the home buying process is determining how a Buyer will pay for their new home. Not only must a Buyer determine much they can afford, but how an offer must be structured–whether closing costs must be paid by a Seller, gift funds will be used for a down payment, how much of a down payment will be paid, and so on.

Having a great lender as part of the Buying team is critical, but especially so with short sale purchases.

It can be difficult for a lender to help a Buyer determine exactly how much they might need to close the sale. A good faith estimate on the front end of a short sale might not be appropriate; interest rates, dates of closing, and other terms may change before lender approval occurs several months later.

Will the Buyer have sufficient funds to close? Will they have sufficient reserves; will they be comfortable with their payment?

A GREAT lender prepares an estimate of costs at the beginning, then meets periodically with the Buyer throughout the process, updating them on the changes and making sure they understand the numbers. They help the transaction succeed – from start to finish.

Working with an agent experienced in both listing and assisting buyers with short sales … and considering their recommendations for a great short sale lender will ensure success and confidence as a buyer proceeds through the process.

In Washington State, folks that get behind on their house payments have options as described in the

One of the first steps a lender must take for a home in Washington is to send a letter to the homeowner describing their options – the first of which is the right to request an informal meeting with the lender before a Notice of Default is filed.

But here’s the thing … the homeowner has to make the request within 30 days from the date of the options letter.

• So … open every piece of mail that comes from your lender.
• Read it carefully and then  exercise your option to meet with the lender to discuss the situation.
• Do it by phone and ask insist that they confirm your request in writing.
• Follow up with a letter to them in writing — maybe even registered mail so that you have a record of your request.
• Keep copies of anything and everything you send and notes about every conversation you have with them.
• Get the names of the people with whom you talk … and write down the phone numbers and dates you make any calls.

and finally …

Engage an attorney to represent you at the meeting. Talk everything through with him/her … and with your real estate agent so that you know what your options truly are.

But first … Just Open the Mail!

The Washington State attorney general’s office recently released three videos that explain your rights and options should you be facing a foreclosure or short sale of your home.

As an active Realtor®, I frequently receive phone calls from people that are already behind on their payments, or feel as though they will soon be in trouble with their mortgage. Sometimes, the call is from someone that is trying to get out from under a home that has lost significant value and is now worth far less than what they owe. Each of these types of calls requires a knowledgeable response and action. Sometimes the best response is to refer the person to an attorney. Most often, however, it’s a chance to help education the caller as to their possible options based on their personal situation.

The three videos provided by Rob McKenna (Washington State Attorney General) and his staff explain some of the options available and the impact of these options on the consumer who may be facing a foreclosure or short sale of their home.

Each of the videos is moderated by Annie Fitzsimmons, the legal counsel for Washington Realtors. They are easy to understand and just a few minutes long. If you are facing a foreclosure or short sale, I urge you to take the time to view these videos, then give me a call if you have any questions or if you would like to discuss them.

In Part One, Mr. McKenna provides an overview of the options that are available:

In Part Two, Marc Cote, a Certified HUD Housing Counselor, discussses what will happen when you meet with a HUD Housing Counselor, what you need to be prepared for the meeting, and the options available when working with a HUD Counselor:

Part Three, presented by Rob Dickson, Lawyer and Short Sale Negotiator, discusses the short sale process, along with some of the difficulties that are faced when negotiating a short sale.

Obviously, at this moment many of us that are homeowners are facing significant loss of value in our homes and sometimes it takes just the smallest event to trigger an inability to make mortgage payments. Should that happen to you, please contact me at 206.300.8421 or gabrielle@gabriellenemes.com just to talk … and take advantage of the resources outlined in these videos.

Selling a manufactured home on land is a bit different than selling a stick-built home. There are a few more inspections and requirements, not to mention finding a lender that will lend!

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Here in the Auburn area of Western Washington, I’ve had the dubious pleasure of working through a few sticky manufactured home transactions over the last few months. Now, don’t get me wrong — working with the buyers and sellers was truly a pleasure! It’s just that there are so many different steps to be taken that sometimes clients can feel a bit overwhelmed by the whole process;  and it’s so necessary to be the knowledgeable hand that helps guide the sale.

With a couple of caveats that every transaction is truly different and that different jurisdictions have slightly different requirements, here are a few starter points.

1.       Not every manufactured home qualifies for traditional financing methods – only those built after June 15, 1976. Your home built on May 31, 1976 won’t qualify for traditional financing — you’ll need to appeal to a buyer that has all cash or some source of private funding.

2.       Know that in order to get any sort of financing for the purchase of a manufactured home, the home must have gone through a title elimination process. A bit of background – when a manufactured home is purchased, it’s personal property – like a car or boat. Title is maintained by the Department of Licensing just like the title to a car. This is likely a testament to the fact that a manufactured home is towed down the road on its own axles and tires, which are then typically removed when the home is placed on its foundation.

That personal property title must be eliminated and the home married to the real property (the land) on which it sits. Home loans are for real property – not for vehicles.

3.       Speaking of Foundations — this gets a bit tricky. Prior to 1996, manufactured homes were often trucked to their site and then set up on a series of concrete blocks. Those blocks often sat on poured or prefab cement slabs. Then tie downs were attached to the underlying steel beams that run the length of the home and subsequently secured to the earth or the cement slabs, or whatever. In our area, which is generally not subject to enormously high winds such as hurricanes, some homes were installed without the tie downs and just sit on the blocks.

Now then – bear with me – FHA and VA loans are often used for manufactured homes. It used to be that conventional funding was a bit more lenient with requirements, but I’ve found lately that conventional and FHA/VA requirements are similar. So here’s the thing. In 1996, HUD (Dept. of Housing and Urban Development) placed a requirement that all manufactured homes on private land must be secured to a “permanent foundation,” which they defined. These permanent foundations are designed to prevent the home from shifting or moving away from their supporting structures.

HUD guidelines state that compliance with the guidelines must be certified for all re-sales.

This means that a homeowner must ensure that the foundation system complies with the guidelines by hiring a licensed professional engineer to examine the current foundation structure and certify, in writing, that the foundation is compliant. If not, the homeowner must have the foundation retrofitted prior to sale.

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4.       One additional step can also be critical, and yet is so often overlooked by an existing manufactured home homeowner. Prior to adding anything to the exterior structure of the home, such as deck, porch, awning, an extra room, etc., you should have obtained an L&I permit in addition to obtaining the appropriate jurisdictional building permit (if required). That’s right – the Dept. of Labor and Industries must also permit and inspect your addition and certify that it meets the manufactured home standards.

See, manufactured homes are designed to be dismantled from their foundation and pulled down the road. That means all exterior structures surround the house must be self-supporting. For example, that deck must have supports and beams of its own – not merely attached to the home by means of a ledger board.

Similarly, electrical modifications, replacing your hot water heater, adding a wood burning or pellet stove, etc. must be approved by L&I. You’ll likely need proof of the modification. If you did not obtain the L&I permit before altering your home, you may need to obtain an L&I inspection before your home can be sold.

Absolutely your manufactured home can be sold. Paying attention to these 4 Critical Facts when selling your manufactured home can make all the difference in an easy sale!

Some folks are emotional buyers. They drive into a neighborhood, walk into a house and instantly fall in love. THIS is the house. The sofa goes there. The kids can set up the WII there. The stand mixer fits perfectly into that corner of the kitchen counter. They walk away from the house emotionally invested, talking about the colors of the walls … that sort of thing. These emotional buyers aren’t the best ones to introduce to short sales, where the offer they make may be rejected by the bank two or three or four months down the road. They crash hard when things don’t work out and it’s a bit more difficult to rally them to taking the next step forward.

Some folks are all about the money. They just want a good deal. They see themselves selling the house quickly – perhaps in months; perhaps in just a few years — and adding to their nest egg or retirement fund or stepping up to another house. They can fix it up. They see themselves re-doing the kitchen, or recarpeting the stairs. The “house” isn’t as important to them as their ability to make some money. They also feel it’s imperative to make a low offer and perhaps get every penny paid in closing costs. These can be good Buyers to introduce to foreclosure properties and maybe to short sales if they can make offers on several houses and wait out the process.

Other folks are just barely able to qualify for a mortgage. They desperately want a house before they get shut out in some way. They have a dream of home ownership, but know that they really can’t afford their perfect vision, so they look for the “fixer.” And yet that fixer is an unrealistic purchase for them. It needs a lot of work, won’t easily qualify for a loan, isn’t in their financing geographic area (such as for USDA loans), etc. These Buyers need education. They need to see lots and lots of houses to understand the market and what their money will buy and how they might finance it. They’re often emotional buyers too, but reality needs to sit in before offers make sense. These folks are often good bank-owned, Freddie, Fannie, or HUD-owned house buyers, especially where the house has had some basic repairs made with an eye towards livability.

Some buyers, especially move-up to the next house buyers, want their buying experience to be as hassle-free as possible. They may have a young family that tags along at every showing. The kids run through the house picking out their bedrooms. They’re emotional buyers as well, but grounded in the reality of looking for a well-priced home. They want a house that’s been loved. Sometimes they want new construction with all the pretty bells and whistles. They may want some space to spread out. They often have a good list of “wants” and “must haves.” These are good candidates for homes that are seller-owned and not short sales.

Finally, there’s the “down-sizing” buyer. Often they’ve had a large house, which could be fully paid for, and now want a place with less maintenance, smaller footprint, and quiet. Money is important to them as they don’t want to spend the entire gain from the sale of their previous home on a new one. They want a good deal and a comfortable home. These Buyers can good prospects for bank-owned sorts of homes where the necessary fix-up isn’t huge, along with private seller sorts of homes where the seller is moving up. Sometimes they’re good candidates for that manufactured home on an acre or so. Sometimes they’re perfect candidates for a condomium.

Of course, many folks feel that they fall into a mix of these buying styles. As an agent, it sometimes takes a while to “get it right.” Helping you identify how you see yourself proceeding through a transaction can greatly simplify and shorten the house search and increase your satisfaction with the buying process. It’s all part of getting to know you!

So what, exactly, does a Buyer Agency Agreement obligate a Buyer to do? Likewise, what does it obligate the Broker to do?

Here are the essentials of a typical Buyer Agency Agreement:

• Appoints a specific Broker (agent, salesperson—ME!) to work with you, but also creates an agency association with the Firm with whom the Broker works. It helps you understand that, not only are you represented by your specific selling Broker, but also by the Firm with whom the Broker has association.
• It asks you to acknowledge receipt of the Law of Real Estate Agency pamphlet, which specifically sets out laws by which a Broker works in the State of Washington.
• Sets out whether or not your relationship with the Broker governs any home you purchase in a given area and time frame, or whether your relationship is only for those homes in which the Broker participates (shows) you. It also clarifies what happens if you buy a home the Broker showed you after the term of the Buyer agreement has passed?
• Allows the Broker to work as a dual agent in a transaction where the Broker represents the seller as their listing Broker, and you as their selling Broker.
• Specifies exactly how and how much the Broker is paid. Your Broker may agree to only accept what the Seller has agreed to pay through the listing agreement the Seller has with their listing Broker. But …
  • What happens if the Seller’s contribution to the Broker’s compensation is minimal or insufficient to pay for all of the services a Broker must perform in a transaction? … or …
  • What happens in For Sale By Owner properties? Agency law in the State says that a broker doesn’t have to show you or pursue properties for you if there’s no compensation involved – but wouldn’t you as a Buyer still want representation by a trusted advisor? (After signing a Buyer Agency Agreement with me, I’ll represent you in a For Sale by Owner transaction, unless the seller is in a distress situation.)
• Possibly one of the most important points in the agreement clarifies what the Broker will do in a Distressed Property Conveyance – one where you wish to participate in a distressed property transaction where the Seller will remain in the home after your purchase is complete, or will somehow gain in the transaction through retention of an interest in the property or will benefit from resale of the property.

In short … as with any critically important matter, you want the assurance that you are working with a professional who understands the laws governing real estate transactions and who will fully and competently represent your interests, and your interests alone (unless you agree to work within a dual agency situation).

But working with Buyers is a tremendous amount of work. There’s a lot of stress involved, a myriad of big and little steps, lots of time on the phone, on the computer, in the car. Sometimes several offers are written and negotiated before an offer is ever accepted by a seller. In today’s world of bank-owned homes, short sale properties, pre-foreclosures, government-owned houses, the work can be difficult, exacting, and LENGTHY!

And I LOVE it!

Sometimes one of the trickiest negotiating points when working with Buyers begins early in the relationship between the Buyer and their Broker. After all, there’s often a presumption of loyalty very early on. You trust that the Broker will work with your best interests at heart … and the Broker trusts that you’ll use them to complete your home purchase.

Often a Buyer initially contacts the Broker asking to see that perfect house – you know, the one they’ve just driven by and it’s exactly what they want. Or the house on the internet with great pictures, or a great price, or a great neighborhood, or whatever.

So the Buyer calls the Broker. Could be the listing broker, could be a broker used by their best friend, or could be a broker for whom they’ve seen some advertising, found on the Web, or whatever.

The best Brokers start by doing a bit of careful screening prior to meeting a prospective Buyer at a home. The screening has a couple of purposes: Is the Buyer qualified to buy? Have they been looking long? Who have they worked with in the past? Are they working with an agent already? And, subtly, do they sound trustworthy? Should I take another agent/hubby/wife with me?

After agreeing to meet, whether it’s at the office for a prescreening, down the street at the local coffee shop, or at a home that’s just too good to delay, it’s typically a careful and somewhat cautious first date. Sometimes the first date is a lengthy phone call where everyone asks and answers a fair amount of questions. It’s a good way to see if there’s a fit – can the Buyer work with the Broker? Can the Broker work with the Buyer? Is there a formation of trust beginning to occur?

I’ve also found that there’s usually a whole portfolio of information the Buyers should receive prior to jumping in to make an offer on a home – sample contracts, definitions of terms, how the process works, a few legal documents including a copy of the Law of Real Estate Agency and a Buyer Agency Agreement. We’ll have a frank discussion about money matters as well. It’s important to me to learn what exactly what you can afford and how we should structure any sort of an offer to purchase. It’s important to you to learn how I get paid and by whom. It’s an important step to forming a trusted relationship between a professional (the Broker) and the Buyer.

Now, I won’t necessarily ask you to sign a Buyer Agency Agreement the first time we meet. YOU need to see if you can work with me as well. But I do request official formation of an agency relationship through acceptance of the Agreement at the conclusion of either the first or second showing session, after you’ve had some time to digest whether you like my working style, whether you trust me to represent your best interests, and, as well, whether I feel we can work together well as a team. Terms are negotiable, of course, but endorsement of the Agreement as we move forward will be necessary.

Follow the link here for more information about what’s in a basic Buyer Agency Agreement.

I was reminded of this fact this morning when receiving a marketing piece by one of my favorite statistical companies, Estate of Mind. Simple little graphs like this one provide such a powerful visual guide of just how far interest rates have dropped and the resulting impact in purchasing power.

Now, granted, $1,500 was certainly a lot more money in the pocket in 1981 than it is now … and a home at just over $100,000 at least compared with the the $300,000 home in today’s market. (That cute little 3 bed/1.75 bath 1300 square foot house we bought at $89k is now worth about $250k.)

But what this graph does show is, on the short term, that $1,500 at today’s phenominal interest rates will buy more now than it will as interest rates rise. I wish this chart included an overlay that showed the average interest with reasonably comparable terms year by year … but the cart was free and helps get the point across — Buying at lower rates buys more house!

For a full size copy of this chart, click here.

“Oh Mom, the agent just opens the doors. We’re perfectly capable of finding houses on our own and we don’t need any other help.”

Yikes! Now this young lady, of whom I am very proud by the way, has been raised to think for herself. However, she’s also seen me work and, gee I would have thought, understood exactly how much work I really do on behalf of my clients. Needless to say, I was terribly disappointed with her assumption that all I do is “open doors!” For Pete’s Sake!

With that in mind, I set out this morning to create a list of what I typically do for most buyer transactions. Certainly not every buyer requires each item, and certainly these are done with an eye to the specific house, experience of the buyer, and so on. I know there’s more, but this is a good stepping off point.  

1.    Find Houses

• Help you identify areas, neighborhoods, commute options
• Set up searches that narrow the list of “everything out there” into homes that more precisely fit your requirements
• Keep an ear to the ground, coupled with hard research, to find homes that are just coming on the market, price reductions, those that have offers that may not have been reported in the MLS, and so on
• Help you narrow down your choices
• What about For Sale By Owner properties?

2.    Open Doors

• Yes, there’s that elusive MLS keybox. And for that, you need me.
• Help you assess any/every house you see with regard to its condition
• Help you assess any/every house you see with regard to how it may fit your lifestyle / needs
• Evaluate the Competition — research and assess your “choice” with regard to asking price, condition, availability, and issues

3.    Financing

• Recommend proven lenders
• Review and help you understand your Good Faith Estimate (GFE)
• Review and help you understand your HUD Statement
• Keep you up-to-date on financing options
• Help you understand/evaluate those you’ve been offered; i.e., does FHA make more sense than Conventional loans … or how about a USDA option, etc.?
• Help you understand how your financing choices may affect a home you are considering

4.    Write Your Offer

• Believe it or not, there’s a lot of legal knowledge that goes behind writing a strong and safe offer for you … and a bit of an art, too. After all, what if you need to back out? Is your earnest money protected, or did you just give it away? And heavens, what if you change your mind?
• Help you put together an offer that’s as strong as possible, identifying any strengths and/or sticking points and presenting them in the offer in the most favorable way.
• What if the house is in a distressed situation? What if it’s a Short Sale? What if it’s Bank Owned?
• Be sure your paperwork is complete and top notch at every step

5.    Open Escrow

• Help you understand forms that escrow may send to you
• Stay on top of the escrow process to be sure your everything is complete so that your home purchase will close on time

6.    Legal Documents

• Be sure that you have copies of all legal paperwork regarding your home
• Be sure that you have a complete copy of the title report
• Read the title report with you to identify any tricky spots
• Be sure that you have a copy of and have read and understand any CC&Rs
• Be sure that you have access to and have read homeowner association documents, including minutes from meetings that might identify future issues with your purchase

7.    Recommend other proven professionals:

• Inspectors
• Roofers, electricians, painters, plumbers, landscapers, etc.
• Attorneys, accountants, tax professionals
• Testing services for wells, septics

8.    Help you identify, locate, and understand specific jurisdictional requirements

• County septics, wells, etc.
• Setbacks
• Permits, etc.

9.    Be your representative

• Present and negotiate on your behalf in a positive and professional manner
• Present you in the best possible light
• Be there for you at every event: all showings, inspections, repair trips, signings, builder meetings, septic inspections, well inspections, etc.

10.    Be the intermediary between yourself … and everyone else! (The listing agent, the seller, title reps, escrow officers, etc.)

• Clarify and draft responses to all communications, being sure that each item is presented in a clear, precise, concise and professional manner
• Schedule appointments to meet everyone’s schedules
• Field endless phone calls and e-mail messages regarding the transaction

11.    Counsel

• Help you remain objective throughout the homebuyer process
• Appreciate your excitement and enthusiasm for the house you find … and help you evaluate that choice as a business decision
• Offer suggestions when faced with difficult or complex decisions
• Act as your sounding board when things just aren’t going smoothly

12.    Offer skillful & professional guidance

• Suggest research you may want to undertake — what is the permit process, what about wetlands, property corners, schools, bus routes, etc.
• Help you identify issues that could cause difficulty down the road, i.e., “lawsuits waiting to happen”

13.    Communicate, communicate, communicate

• Do you know what’s going on?
• Do you know when answers are due?
• Do you know your deadlines?
• Did you get it done?

14.    Be there for you after the purchase

• Answer questions
• Suggest solutions (how do I adjust the hot tub? — or … I love this one … “The alarm keeps going off, could you please call the Seller and see if this is normal?”)

and finally …

15.   Get it done!

• Things fall apart at the most inopportune moments. We’re here to be sure your transaction stays on track and to help when things go sideways!

Short sales can be lengthy and difficult, but if you know what you're doing, you can end up with a great deal. Image: fotog/Getty Images

By preparing for a real estate short sale, you can emerge with a great home at a favorable price.
 
When sellers need to sell their home for less than they owe on their mortgage, they’re shooting for a short sale. Short sale homes can sometimes be bargains, but only if you do your homework, stay patient, and remain unemotional during the sometimes lengthy and difficult short sale process.

Here are six tips for protecting yourself emotionally and financially when bidding on a short sale.

1.    Get help from a short sale expert

A real estate agent experienced in short sales can identify which homes are being offered as short sales, help you determine a purchase price, and advise you on what to include in your offer to make the lender view it favorably. Ask agents how many buyers they’ve represented in short sales and, of those, how many successfully closed the transaction.

2.     Build a team

Ask agents to recommend real estate attorneys knowledgeable in short sales and title experts. A title officer can do a title search to identify all the liens attached to a property you’re interested in. Because each lienholder must consent to a short sale, a property with multiple liens, like first and second mortgages, mechanic’s and condominium liens, or homeowners association liens, will be harder to purchase.

A title search may cost $250 to $300 up front, but it can help weed out less desirable properties requiring multiple approvals.

3.    Know the home’s fair market value

By agreeing to a short sale, lenders are consenting to lose money on the loan they made to the sellers to purchase the home. Their goal is to keep those losses as low as possible. If your offer is dramatically less than the home’s fair market value, it may be rejected. Your agent can help you identify the price that’s good for you. The lender will determine whether approval is in its best interest.

4.    Expect delays

There are two stages to a short sale. First, the sellers must consent to your purchase offer. Then they must submit it to their lender, along with documentation to convince the lender to agree to the sale.

The lender approval process can take weeks or months, even longer if the lender counteroffers. Expect bigger delays if several lienholders are involved; each can make a counteroffer or reject your offer.

5.     Firm up your financing

Lenders will weigh your ability to close the transaction. If you’re preapproved for a mortgage, have a large downpayment, and can close at any time, they’ll consider your offer stronger than that of a buyer whose financing is less secure.

6.     Avoid contingencies

If you must sell your current home before you can close on the short-sale property, or you need to close by a firm deadline, your offer may present too many moving parts for a lender to approve it.

Also, consider ordering an inspection so you’re fully informed about the home. Keep in mind that lenders are unlikely to approve an offer seeking repairs or credits for such work. You’ll probably have to purchase the home “as is,” which means in its present condition.

This article includes general information about tax laws and consequences, but isn’t intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Other web resources:

• More on short sales
• Real-life discussions of short sales

G.M. Filisko is an attorney and award-winning writer who luckily has avoided the need for a short sale on her properties. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.