Monthly Archives: August 2014

Short Sales Charlotte NC – The Short Sale Primer for Savvy Real Estate Investors

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Thanks to the housing crisis of the last decade, most consumers are familiar with real estate terms like “foreclosure” and “sub-prime,” even if they don’t fully understand them. But one term that might not be as familiar is “short sale.” Yet short sales provide a good opportunity for novice real estate investors to buy real estate below current market value.

Short Sale Math
A short sale, by definition, means that a lender has agreed to accept less than what’s owed on the mortgage as a debt paid in full. Short sales have been around for decades, but their existence was relatively unknown to the general public until lenders and agents alike began promoting the option. Here’s a typical short sale situation:

A homeowner buys a home five years ago for $500,000 and puts 10 percent down, borrowing $450,000. Over the next few years, not only does the home value fall, it falls to $300,000 based upon the relative selling price of nearby homes. But when property owners sell, they have to satisfy all existing liens on the property. In this example, the loan balance using a 30-year fixed-rate loan at 5 percent would pay down the mortgage to just over $413,000 after five years.

If the homeowner wanted to sell, the mortgage lender would say, “Fine, but you still owe us $413,000.” If the property value is $300,000, the seller needs to bring in $113,000 more just to cover the existing mortgage.

This scenario played out across the country during the housing crisis and still does to this day. Thousands of homeowners everywhere are “upside down” on their mortgages. That’s where a short sale comes into play and why real estate investors should be aware of them.

With a short sale, you’re negotiating more with the lender and less so with the owner. Why? Because the lender has the final say in whether they will accept less than what’s owed.

When a lender considers a short sale request, there are two possible outcomes: The home goes into foreclosure and the bank has another house in its inventory, or it accepts less than what is owed at a price closer to the current market value.

Advantages of Buying a Short Sale
So, what are the advantages to buying a short sale?

A better price. The primary advantage is a better price. Short sales are often priced below market, so a buyer can get a property for less than it would be worth if it were a traditional sale. The lender may be more anxious to negotiate a lower sales price in lieu of moving forward with a costly foreclosure.

A chance to inspect the property. With a short sale, you also have the opportunity to inspect the property before finalizing the sale. In contrast, you may have some degree of difficulty inspecting a home that’s already been repossessed — a full inspection may not even be an option. But when the home isn’t yet foreclosed upon, the owner may be more accommodating and allow you to hire an inspector to get a solid understanding of the property’s current condition. With that in mind, the property owner is required to provide you with a list of any known issues with the property, such as recent flooding or appliances that need repair.

Less competition. Considering a short sale purchase can also mean less competition. Investors who only concentrate on foreclosures — rather than pre-foreclosures — miss the short sale opportunity.

Financing is often available. Foreclosure or bank-owned sales typically require that you pay cash. With bank-owned sales, this is especially true if the property is in bad condition. In contrast, lenders are more likely to finance a short sale. Because the property owner still has a financial interest in the property — and is probably still living in it — short sales are by nature less “distressed.” A majority of the short sales offered are financeable.

The Short Sale Timeline
Short sales do have some challenges. One major consideration is the time it takes for a bank to approve a short sale request package. Some short sale approvals can take up to 60 days or more, although banks today seem to be reducing that time frame as more and more short sales are approved. Remember, you’re negotiating with the lender, and the real estate agent listing the home may not have very much experience with the short sale process, much less the owner.

Patience is important here. If the lender rejects your offer, you may receive a counteroffer that you can accept, counter and resubmit — and so on.

Finding a Short Sale
There are several ways to find a short sale. First, you can pay attention to “For Sale” signs that have a “Short Sale” rider attached with the contact information for the listing broker. The sign means the bank is open to a short sale request.

Another way is enlist the services of an experienced real estate agent like me. I know the market and will give you advice on whether a property is overpriced or underpriced. Do some of your own research on real estate websites, but keep in mind that their valuations of a property may not be entirely accurate.

You can also visit the local county recorder’s office and investigate “pre-foreclosure” notices or a Notice of Default. These are the first legal steps that lenders will take before filing for foreclosure. These notices show the property owner, contact information and the lender, along with other characteristics of the home. At this stage, the lender may be open to a short sale request but the owner must make the request, not you.

Understandably, these options can entail a lot of legwork on your part.

If you have your financing options ready to go and can find a short sale in this manner, not only will it streamline the process, but you’ll also have the opportunity to get a great deal at the same time.

Karen Kitzmiller’s Summer 2014 Update – Real Estate Agent Charlotte NC

Life has been moving fast! With a blink of the eye, the summer is about over… and it’s been too long since my last blog post!

I kicked off my summer with some great community-focused events. I was very honored to host a table at the annual Union County Community Arts Council Breakfast. This was my third year attending, but my first year hosting a table, and it was great fun! The Arts Council does so much for our community and for our schools, and I am always happy to support their efforts. Not only do they supplement activities and education of kids in schools, but they also make possible a lot of adult programs in the community.

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Also early this summer, C21 Real Estate Consultants hosted our first blood drive at our Ballantyne office. We had a great turnout supporting the American Red Cross. I gave along with lots of other agents, friends and vendors of our company. One pint of blood can save up to 3 lives, so it’s very important to donate whenever possible (as often as every 56 days!). Charlotte is perpetually in a blood shortage, so I’ve committed to begin donating regularly. In fact, I’ve already donated again since that initial drive!

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Lastly on the community front, I once again competed in the Low Country Splash Open Water Swim in Charleston. This is an event that supports the Logan Rutledge Children’s Foundation, which promotes the health and welfare of children. This swim is an open water, 2.4-mile swim that takes place in the Charleston Harbor. What made this year’s swim even more special was that my daughter, Anja, completed with me! It was her first open water swim; she was very nervous, but she did really well, and I was so proud of her. All of her training has paid off and I think it’s a great accomplishment for her at age twelve to have completed this challenge.

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While we were in Charleston we helped my sister Amy at a fundraising event. Amy is the Executive Director for the Center for Women in Charleston. The event we attended was a “beard and mustache” fundraiser/competition, and it was a blast! We raised more than $6,000 for her organization. It was crazy! People showcased their beards, mustaches and styling, showing off what they had! It was something very different, but a tremendous night. I love experiencing new things.

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This summer has been filled with lots of fun for my family. We had a full season of competitive swimming for Anja that resulted in her achieving “Most Valuable” swimmer for her age group. After just 3 years in the pool, this is a huge accomplishment! McKenzie has remained very active at Elevation Church with volunteering and with her youth group activities. She is becoming such a wonderful leader, and we really love the experiences she is having and the friendships she is developing.

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Both girls have had great travel experiences this summer. McKenzie spent 2 weeks at her favorite YMCA camp, Camp Harrison. This was her fifth year there, and her last… as she will be too old to go next year. She also spent a week with Roger in New York City – just the two of them for a father/daughter get away. Even after walking upwards of 15-20 miles, she still reports that it was an absolute blast. Anja had a week of swim camp at Duke University followed by a trip to Hawaii! Her best friend’s grandfather was gracious enough to include Anja on this trip that he was hosting for his granddaughter’s 13th birthday. I think we all need friends like that!

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In late July, my sister celebrated her 50th birthday!!! Roger and I traveled to celebrate with her in Charleston (where she lives). We had a great celebration with Amy and her family, and as an added bonus, I was able to spend a little time with 3 high school friends as a mini reunion!

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On the business front, the real estate market continues to be very strong with very low inventory! I am very proud of my year so far, and I thank all of my clients and referral partners for entrusting me with business! Thanks to you, I am so happy to report that I’m currently ranked #1 in NC for Century 21! Now the pressure is on to maintain!!!

Have a wonderful rest of the summer!
KK