Brought to you by: JALEX Real Estate Services

It’s likely you’ve heard the term “short sale” thrown around quite a bit. But what, exactly, is a short sale?

A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.

To be eligible for a short sale you first have to qualify!

To qualify for a short sale:

• Your house must be worth less than you owe on it.
• You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc… also qualify.

Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. We take the most common myths surrounding both short sales and foreclosures and give a brief explanation. LET’S BUST SOME MYTHS!!

1.) If you let your home go to foreclosure you are done with the situation and you can walk away with a clean slate. The reality is that this couldn’t be any farther from the truth in most situations. You could end up with an IRS tax liability and still owing the bank money. Let me explain. Please keep in mind that if your property does go into foreclosure you may be liable for the difference of what is owed on the property versus what is sells for at auction, in the form of a deficiency balance! Please note this is state specific and in most states you will be liable for the shortfall, but in some states the bank may not always be able to pursue the debt. Check your state law as it varies widely from state to state.

Here is an example of how a deficiency balance works

If you owe $200,000 on the property and it sells at auction for $150,000, you could be liable for the $50,000 difference if your state law allows it.

Not only could you be liable for the difference to the bank, but in some situations you could also be liable to the IRS! Although there are exemptions (mostly for principle residences) under the Mortgage Debt Forgiveness Act, there are times when you could be taxed on both a short sale and a foreclosure, even in a principle residence situation. Since the tax code on this is a little complicated and I am not a CPA, I advise always talking to a CPA when in this situation as you are weighing your options. Hard to believe? Well, believe it or not, the IRS counts the difference between the sale and the charged off debt as a “gain” on your taxes. That’s right-you lost money and it’s counted as a gain! (I didn’t make that rule, that’s a wonderful brainchild of the IRS). Banks and the IRS can go as far as attaching your wages. Not to mention if you let your home go to foreclosure you will have that on your credit, as well.

Guess What? A short sale can alleviate your liability to the bank, in most situations. There are also exceptions to this, but in most cases banks are releasing homeowners from the deficiency balance on a short sale.

2.) There are no options to avoid foreclosure. Now more than ever, there are options to avoid foreclosure. Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option. Either way, there are more options today than there have ever been to avoid foreclosure.

3.) Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale. Banks would rather perform a short sale than a foreclosure any day. A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money. Banks have more foreclosure inventory than ever before, and certainly do not want any more. Banks more than ever welcome short sales. Qualifying for a short sale is easier than you think, you need to have a true financial hardship, or a change in your finances and your house has to be worth less than what you owe on it. Not only do consumers, but banks also now have government incentive to participate in short sales.

4.) Short sales are not that common. At this present time, short sales range from 10-50 % of sales in various markets and it is predicted that in 2012 we will have more short sales than any other year, to date. Due to economic changes in the last few years, this is something that is affecting millions of Americans. Short sales are in every market, and are not just limited to any particular income class. This has affected everyone from all facets of life. A short sale should be looked at as a helpful tool, not a negative stigma. That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.

5.) The short sale process is too difficult and they often get denied. Though the short sale process is time consuming; it is not as difficult as the media would have you believe. The problem is that most short sales are denied because of a misunderstanding of the process. It is true that if the short sale process is not followed correctly there is a good chance of getting denied. An experienced agent knows how to avoid this. Short sales require a lot of experience, and a special skill set. If you are looking to go the option of a short sale make sure your agent is skilled and experienced in this area.

6.) Short sales will cost me money out of pocket. A short sale should not cost you any out of pocket money. In fact, you could get between $3000-up to $30,000 to participate in a short sale. In many ways, a short sale may put you in a better financial position than prior to the short sale. Almost every short sale program now has some type of financial incentive for the home owner, as long as it is a principle residence, and we are even seeing relocation money being paid on some investment/second homes. As a seller of a property you should never have to pay for any short sale cost upfront to any professional service. Realtors charge a commission that is paid for by the bank. In most communities there are also non-profits and HUD counselors who can help you with foreclosure prevention options for free. The only potential cost you could incur is if the bank would not release you from a deficiency balance in the short sale, which is happening less and less now.

7.) If I am behind on my payments, I can perform a short sale any time. The farther you get behind on your payments, the harder it is to get a short sale approved. The closer a property gets to a foreclosure the harder it is to convince the bank to perform a short sale. As they get closer to a foreclosure sale more money is spent, thus deterring them from doing a short sale. If you think you need to perform a short sale, time is of the essence; the sooner you start the process, the better. Waiting too long can trigger the ramifications of a foreclosure, losing the ability to do a short sale as a viable option.

8.) I have already been sent a foreclosure notice so I can’t perform a short sale. For the most part just because you received a foreclosure notice or notice of default it does not mean that you do not have time to perform a short sale. The timeline and specifics do vary from state to state, but having done short sales all over the country, I have seen banks postpone a foreclosure to work a short sale option as close as 30 days prior to the scheduled foreclosure auction, but the longer you wait the less chance you have. If you have received a legal foreclosure notice, please reach out to a professional right away. The longer you wait, and the closer you get to foreclosure, the fewer options you have. If you have received a notice to foreclose this means the bank is filing paperwork and starting the process to take legal action to repossess the house. You still have time at this point to prevent foreclosure, but do not hesitate! The closer you get to the foreclosure date the harder it becomes to negotiate with the bank for whichever option you choose.

9.) I was denied for a loan modification, so I know I will get denied for a short sale. Short sales and loan modifications are handled by two separate departments at the bank. These processes are totally different in approval and denial. If you got denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification, as some loan modifications are denied because they cannot reduce the loan low enough based on the consumers income.

10.) If I go through a short sale I cannot buy another house for a long time. The time to buy another house depends on your entire credit picture and can vary from 12-24 months. There are even a few FHA programs that allow for a purchase sooner than that. I have worked with clients who went through a short sale and bought another house in less than 12 months.

These are just a few of the common myths surrounding short sales and foreclosure. With the options available today, no homeowner should ever have to go through foreclosure, and hopefully this information can help a few more homeowners think twice before walking away from their home not realizing the possible long term ramifications a foreclosure can have.

Brought to you by: JALEX Real Estate Services

It seems that the banks have finally realized that a short sale is a better option than foreclosure for them, the homeowner and the neighborhood. It is for this reason we believe that 2012 will come to be known as the year of the short sale. CNN Money reported on this exact point:

“We believe 2012 could be a record year for short sales,” said Daren Blomquist, vice president at RealtyTrac.

Banks are showing signs of being more open and willing to approve the deals — even if it means accepting less money. The average sales price for a short sale was $174,120 in January, down 4% from December and 10% year-over-year.

Market Watch also addressed the short sale situation recently:

Fitch expects the increase in short sales to continue because of the potential benefits afforded to both lenders and borrowers. Some borrowers may prefer short sales because, though they cannot stay in the property, they often walk away with cash incentives from lenders and healthier credit reports unmarred by foreclosure. For lenders, short sales provide a more efficient and cheaper alternative to the increasingly lengthy and costly foreclosure process.

Why Are the Banks Now Leaning Towards Short Sales?

The simple answer is that the banks lose less money when doing a short sale. The CNN Money article mentioned above explains:

Typically, banks get about 20% less for a foreclosed home. Foreclosure can also take years to unload, during which expenses, like property taxes, insurance and other expenses, mount up.

The Market Watch report breaks it down further:

Short sales…are currently getting completed 20 months after the last payment made on the loan, approximately 10 months less than the average time to foreclose. Shorter timelines reduce lenders’ carrying costs (i.e. accrued loan interest and property taxes, insurance, and maintenance) and eliminate most of the legal expenses associated with foreclosure and liquidation. As a result, loss severities tend to be considerably lower. Historically, for loans with similar attributes, short sales have severities 10%-15% less than REO sales. As the proportion of short sales increases, we expect average loss severities to improve further.

How Many Short Sales Could Be Completed?

JPMorgan has projected that over 500,000 short sales will be done this year. Also, NECN.com recently reported:

RealtyTrac estimates that if the January numbers it found hold up, there would be about 105,000 “pre-foreclosure” sales of homes, most of them short sales, during the first quarter of this year, and at that rate something like 400,000 for the year.

Brought to you by: JALEX Real Estate Services

May 2012

Number of Active Listings in the Shippensburg school district area (per MRIS MLS system): 162

Number of Homes Sold in the period (3 months): 39

Absorption rate = # of homes sold / period (3 months): 13

Month’s supply of homes = Total active listings / Absorption rate: 12.46

(6 is considered balanced market conditions, 6 is a seller’s market and above 6 is a buyer’s market)

Total homes sold on the past 30 days, Shippensburg school district: 13

Median sales price: $164,715

High sales price: $280,000

Low sales price: $19,900

Median days on the market for all sold homes in the past 30 days: 129

In March the weather seemed much like May.  Now, in April, the weather seemed much like March.  So, now that May is here, will we get May like weather?

The warmer temperatures that the Shippensburg area enjoyed in February and March really helped real estate sales.  In April things slowed a bit as temperatures turned colder.   As the weather warms up so shall the Shippensburg area real estate market.

Inventory of Shippensburg homes for sale has decreased.  Average sales prices have risen a bit over the past few months too.  If buyer demand strengthens through the Spring and Summer then the market will continue to improve and return to a more stable condition.    The big question now is inventory.  What homes and how many will be hitting the market in the next couple months to meet buyer demand.

Steve Coover

Associate Broker, Owner JALEX Real Estate Services

717-477-9326 Office – Shippensburg

717-496-8405 Office – Chambersburg

Brought to you by: JALEX Real Estate Services

To the bat phone!  717-830-9755 is the JALEX Showing Hotline number for all weekend and after housrs showings.  We want to make sure that you never miss a showing opportunity, ever!

The problem, real estate agencies are closed after hours and over the weekends, when buyers are off work and out looking for houses.  We know this because we leave pleny of messages with listing agents every weekend that some times are not answered.  The result is missed showing opportunities.

The solution, The JALEX Showing Hotline makes sure that we never miss a call from someone who wants to see your listing!   Selling houses is what we do!

Give us a call and let us know how we can be of service to you!

In Shippensburg – 717-477-9326 Office

In Chambersburg – 717-496-8405 Office

$116,500
Brought to you by JALEX Real Estate Services
Call for more information: 717.477.9326 or email at scoover@jalexhomes.com

Brought to you by: JALEX Real Estate Services

Number of Homes Sold in the period (3 months): 126

Absorption rate = # of homes sold / period (3 months): 42

Month’s supply of homes = Total active listings / Absorption rate: 11.16

(6 is considered balanced market conditions, 6 is a seller’s market and above 6 is a buyer’s market)

Total homes sold on the past 30 days, Chambersburg school district: 51

Median sales price: $154.000

High sales price: $437,500

Low sales price: $14,000

Median days on the market for all sold homes in the past 30 days: 133

Inventory levels of new homes in Chambersburg as well as re-sale homes in Chambersburg is dropping as we continue in to Spring.  The absorption rate is slowly dropping to a point where the market conditions are more normal.  The absorption rate is a measurement used to determine the rate at which homes are “absorbed” or sold in the local real estate market based on pulling data that reflect current real estate market trends.  That data is pulled for a 3 month period and is reflective of the current trending.  An absorption rate of 6 is considered normal which means at the current real estate sales pace it would take 6 months to sell through the inventory of homes on the market.  The April 2012 rate for the Chambersburg school district is 11.16 which is down from highs ranging from 13 to 17 over the past two years.

We have also provided you with the median Chambersburg area sales price for those homes sold in the past 30 days as well as the median days on the market for those homes that were sold in the past 30 days in the Chambersburg, Pa area.  The median sales price was $154,000 and the days on the market for those homes was 133 days on average.  Keep in mind that we use median data rather than average with the difference being that by using average we are using the farthest outlying data as well.  Instead we use a median number which removed the high and the low for a more accurate measure.  One Chambersburg house that sold was on the market for over 1,300 days!  It was originally listed for sale for over $250,000 but sold after all of that time for just under $199,900.

Overall, transactions have returned to the local Chambersburg real estate market.  The combination of a mild winter, low rates and a potential recovering local Chambersburg real estate market has caused buyers to return to the Chambersburg area real estate market in the first quarter 2012.  Reduced inventory levels are evident which should return some stability to the market in terms of pricing as increased buyer demand for those homes that are available occurs.

Here are a couple of thoughts that we have to offer.  First, if you are a buyer, NOW IS THE TIME!  I cannot stress that enough.  Most of the Chambersburg real estate agents you meet will tell you that because selling houses is how they make money to support their families, it is what they sell.  You cannot blame them for that.  We can sit down with you and explain why.  We can go a few steps further and share with you exactly why now is the time to buy your home.  If you are not sure, if you have questions, if you are looking for an educator who is committed to knowing the why then you need to call JALEX and I will sit down with you and show you why even Warren Buffett is quoted as saying that now is the time to buy a house.  If you have one then buy another!  Second, I know there are plenty of sellers out there who are looking at the reduced sales prices of the homes in their neighborhoods.  Perhaps you are waiting for the market to get better in the next couple of months till you are ready to get your home on the market and get the best price.  Based on the data and the information that we have access to that would be a mistake.  We believe that the best time for you to sell your Chambersburg area home in now!  We think that you will get the best price and terms now and certainly, with the decreased inventory in the local Chambersburg area real estate market, your Chambersburg house should get traffic from buyers looking to buy.  The other reason for you to sell now is this, the federal government is now requiring lenders to streamline their short sale approval processes therefore allowing short sale homes to sell faster.  Remember, a short sale is a sale in which the buyer is selling their home for less than what they owe on that home.  Nationwide, short sale properties sell on average between 10 and 20 percent lower than market value.  We expect the number of these sales to increase which will result in downward pressure on local Chambersburg area real estate values.

So, if you are looking for real estate advice or professional, integrity based real estate sales and support in the Chambersburg area the call JALEX.  We are new to the Chambersburg area but have become the real estate leader in Shippensburg HANDS DOWN!

Steve Coover

Associate Broker, Owner JALEX Real Estate Services

717-496-8405 Chambersburg Office – 717-477-9326 Shippensburg Office

scoover@jalexhomes.com

Nice 3 bedroom 1.5 bath split-level for sale,  Wonderful Solarium w/ full retracting awning.  Heated oval pool w/ sundeck for summer fun!  Large master bedroom in this tri-level home w/ very private back yard in Hillview estates.  Oversized garage and workshop and large shed for outdoor storage.  Great house, great yard, great neighborhood.
$192,000!
Brought to you by JALEX Real Estate Services
Call for more information: 717.477.9326

10226 Cardinal Drive Video Tour

VIDEO TOUR LINK