Archive for the 'Short Sales/Foreclosure' Category

Freddie Mac Breaks Up Duplex Party

said on November 15th, 2012 categorized under: Short Sales/Foreclosure

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it is duplex party timeJust when we were starting the party for the return of the Minneapolis duplex market, Freddie Mac called and asked us to turn down the music.

In fact, according to their November Housing Market Outlook, if trends continue along their current trajectory, we can celebrate a full recovery in 2017.

Yes, Freddie says, there were seven consecutive months of positive gains through August. Yes, home sales through the first nine months of the year were up 9 percent from last year and on pace for five million units but…

There’s those nagging issues of 7 percent unemployment and modest family income growth, which have put something of a damper on the formation of new households.

It seems the rate of household growth during the housing collapse of 2007-2011 ran at a paltry .5 percent per year. Between 1990 and 2006, that figure ran closer to an average of 1.2 percent. Over the last four quarters, we’ve seen that figure around 1 percent. Encouraging, but there’s still a lot of making up to do.

In its caution, Freddie is also taking into account demographic shifts among Generation Y and the Baby Boomers. It appears the former are living with mom and dad longer. Meanwhile, the Boomers are delaying buying retirement homes — because their kids are still living with them.

Freddie’s report did offer one reason to celebrate. They actually believe we will see house and duplex prices appreciate at a rate of about 3 percent a year.

Since that’s a whole lot better than declining values, I say, party on!

Duplex Market Shows Signs Of A Cure

said on November 1st, 2012 categorized under: Short Sales/Foreclosure

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duplex sales get betterThere’s reason for hope in the duplex market.

According to CoreLogic, the number of properties lost to foreclosure nationally fell 31 percent from September one year ago. There were 83,000 homeowners who lost their properties to foreclosure in September 2011. This year, that number was 57,000.

To put it i context, between 2000 and 2006, the average number of properties lost to foreclosure nationally every month averaged 21,000.

So what’s the difference?

According to the company’s Chief Economist Mark Fleming, short sales, which are up 27 percent from one year ago.

Foreclosure inventory is also on the wane, with 1.4 million homes somewhere in the process. This amounts to 3.3 percent of all homes with a mortgage, or 1.4 million homes.

Last year, this number was 1.5 million homes, or 3.5 percent of all properties with a mortgage.

Objectively speaking, while those totals don’t add up to a cure, they are nonetheless, a step on the road to recovery.

Comments Off on How To Make Your Payments And Still Qualify For A Duplex Short Sale

duplex paymentsStarting November 1, underwater duplex owners who are not behind on their mortgages may qualify for a short sale if their loan is with Fannie Mae or Freddie Mac.

Prior to this change in policy, only duplex sellers who had missed mortgage payments could qualify.

Remember, while you may make your payments out to a lender like Wells Fargo or Citimortgage, they may only be the servicer for the loan. Loan servicers are a bit like property managers, except they collect money and pay bills for investors who are ultimately, who you really owe the money to.

To be eligible, duplex owners will still need to demonstrate a hardship in order to qualify for a short sale. Those hardships may now also include unemployment of the death of a spouse.

The downside of this otherwise good news is, as of now, the short sale would report to the credit bureau as if the duplex seller had been behind on mortgage payments.  This could drop a duplex owners credit score anywhere from 150 to 175 points.

Officials at the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie, acknowledge there’s a problem with this. FHFA initiated discussions with the three national credit bureaus to come up with a possible solution.

To find out if your loan is with Fannie Mae or Freddie Mac, click here.

Why A Minneapolis Duplex Short Sale Takes So Long

said on October 8th, 2012 categorized under: Short Sales/Foreclosure

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waiting for duplex short saleBy now, you’ve probably heard all the horror stories about buying or selling a Minneapolis duplex that’s a short sale.

Most likely, all of those stories included references to the extreme length of time they take to close.

And if you’re anything like me, you’ve wondered what the banks are doing that’s taking so long.

Last week, I received an excellent outline that answered exactly that question. It came from the local firm, Christensen Law, which negotiates short sales on behalf of duplex sellers.

I thought it was worth sharing.

Step 1:  Weeks 1 – 4 – Lender Package Review

The lender reviews a package submitted to them by the person representing the seller. This package includes the purchase agreement, financial documentation explaining the seller’s financial situation, and a hardship letter from the seller, stating why they are no longer able to own the property.

Step 2:  Weeks 4-5 – Package Assigned to a Negotiator

The file is assigned to a negotiator after the lender has reviewed all the documents. The file then goes through another level of review.

Step 3: Weeks 6-8 – Broker’s Price Opinion (BPO) Ordered

The listing agent is contacted by the lender to arrange a time for someone representing the bank to gain access to the duplex in order to give them a price opinion. It usually takes 5-10 days for the BPO to be returned to the lender.

Step 4:  Weeks 9-10 – Lender Review of BPO

While the lender is reviewing the BPO, they may request more documentation from the seller, or create a counteroffer.

Step 5: Weeks 11 – 16 – Final Approval

The file is submitted to the investor for final approval. The investor, in this instance, is the party who the seller actually owes the money to. For example, while the seller may be making payments to Wells Fargo, they may simply be collecting the money on behalf of Fannie Mae. When approval is obtained, the title company prepares the final HUD statement, which is submitted to the lender for approval. Once approval is received, the title company schedules the closing.

Comments Off on How To Get Paid $3000 To Short Sale Your Duplex

Duplex foreclosure like starting down a gun barrelI had a duplex owner call yesterday who is staring down the barrel of foreclosure.

And the government is willing to pay him up to $3000 to do a short sale.

The Home Affordable Foreclosure Alternative (HAFA) program, gives struggling duplex owners two options for transitioning out of their mortgage: either a short sale, or what’s known as a Deed-in-Lieu of foreclosure — which is, essentially, simply handing the keys back to the bank.

In order to receive a HAFA payment, a duplex owner must have:

  • Lived in the duplex within the last 12 months
  • Have a documented financial hardship
  • Not have purchased a house or another income property within the last 12 months
  • Have a balance left on their first mortgage that’s less than $729,750
  • Gotten their mortgage prior to January 1, 2009
  • Not have been convicted in the last ten years of larceny, theft, fraud, money laundering, forgery or tax evasion in connection with a mortgage or real estate transaction.
  • Fallen behind on mortgage payments
  • Have a duplex payment larger than 31 percent of their gross income
  • Applied for the Home Affordable Modification Program (HAMP) and been denied

Like all government programs, there are a lot of hoops to jump through. But without trying, what’s the alternative?

Comments Off on How To Be In Foreclosure AND Sell Your Minneapolis Duplex For A Profit

Stack of $100 billsIf you’re a Minneapolis duplex owner who is losing his investment property to foreclosure, did you may be able to sell it for a profit?

In Minnesota, when a duplex owner is delinquent on mortgage payments, the lender on their property will schedule a sheriff’s sale.

At that sale, which is usually held in the county sheriff’s office, a representative for the bank will, in essence, bid for the right to redeem the mortgage six months later and take control of the duplex.

From that date, the duplex owner has six months to come up the money to pay off, in full, the amount bid at the sheriff’s sale.

Most of the time, that figure is equal to the amount of the mortgage on the property.

Sometimes it’s less.

Why would the bank representative ask for less that what the duplex owner owes?

Because believe it or not, banks are not interested in owning more real estate. This seems especially true if the duplex is located in an area that has experienced a number of foreclosures.

When this happens, the duplex owner may, in essence, sell either pay that amount, or sell their rights to redeem the loan.

Failure to do so means the first lien holder (usally the bank with the first mortgage) is next in line, followed by the second mortgage holder (if there is one) and anybody holding any other kind of lien on the property.

And if that duplex owner happens to sell the property for more than the amount that was bid at the sheriff’s sale, he or she is entitled to pocket the difference (less any additional penalites, interest, fees and commissions).

For some duplex owners there’s an even better outcome. Many buyers are willing to let them stay on as tenants.

For many distressed duplex owners, this is the happy ending they’ve been hoping for.

Duplex Short Sales Gaining On Foreclosures

said on April 20th, 2012 categorized under: Short Sales/Foreclosure

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Nationwide Foreclosure StartsRealtyTrac, the nation’s leading authority on short sales and foreclosures, announced yesterday they have spotted a shift toward short sales in the distressed property market.

In January 2012, there were more than 35,000 short sales nationally; a number which puts us on pace for 105,000 short sales in the first quarter. That total would be the highest since the first quarter of 2009.

January’s short sale total reflects a 33 percent increase over January of 2011.

Here’s where things get interesting. In the past, sales of bank-owned (REO) properties always outnumbered the number of short sales.

And, yes. That’s still true.

However, the gap is narrowing, with just 2600 more bank-owned properties selling than short-sales nationwide in January.

The average price of a short sale in January was $174,120; a figure which is 10 percent lower than the average in January 2011.

The average sold price of a bank-owned property during the month was $145,597– almost $30,000 less than a short sale.

This should be important to banks, because the troubling news is that while March foreclosure starts were down 11 percent from a year ago, it was, nonetheless, the third consecutive month where foreclosure starts increased from the previous month.

This trend is not limited to a handful of states. In all, 31 states reported monthly increases in foreclosure starts in January.

Nationwide, there are more than 1.4 million duplex and home owners 90 days or more late on their mortgage payments, 587,629 60 days late, and 1.471 million 30 to 60 days late.

In other words, all the duplex, triplex and apartment building owners who’ve been behind on their payments but had a foreclosure delayed due to the bank’s 11 month long robo-signing foreclosure freeze, are beginning to move through the pipeline now that there’s been a settlement.

If you’re a duplex owner facing foreclosure, remember, while a short sale may be a hassle, the damage it inflicts on your credit, and your life is far less than those of foreclosure.

Comments Off on Why A 2013 Duplex Short Sale Could Increase Your Taxes

duplex debt forgivenessIf you’re considering doing a short sale on your Minneapolis duplex, waiting too much longer could increase your taxes.

Under the Morgage Debt Relief Act of 2007, debt forgiven that was incurred to buy, build or substantially improve an owner-occupied duplex may be excluded from taxable income if the duplex owner meets specific criteria.

This exclusion expries December 31, 2012, unless the bill gets extended. With improving economic news, this may not be as likely as it once was.

In order to meet the December 31 deadline, a duplex seller must have received, accepted, and negotiated an offer with a buyer that the lender or lenders agreed to.

As this process and take 4-6 months, duplex sellers will need to have their properties listed for sale no later than the middle of May.

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Why A Duplex Short Sale Could Save You Taxes

said on March 21st, 2012 categorized under: Short Sales/Foreclosure

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Duplex debt forgiveness tax consequencesIf you’re considering selling your duplex as a short sale, if you don’t act soon, further delay may result in your owing taxes.

Historically, if a lender forgives some or all of your debt, with certain exceptions, the borrower must pay tax on the forgiven amount.

Thanks to the Mortgage Debt Relief Act, however, a borrower can be excused from paying taxes on forgiven mortgage debt on a principal residence. (In other words, the debt and tax forgiveness applies only to owner occupants.)

And this applies in the event you’re able to stay in the duplex thanks to a principal reduction , taxes on the amount of the reduction will be forgiven.

Here’s the problem. The current law for this tax forgiveness expires on December 31, 2012.

While there’s always the possibility Congress will extend this deadline, encouraging economic news may spell the end of some of the government’s recent incentives.

Stay tuned.

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hamp-logoUntil now, it’s been difficult for upside down duplex investors to get the government-backed loan modifications available to owned-occupied duplexes and single family homes.

In late January, however, the Obama administration announced an expansion of the HAMP program to allow investors to qualify.

According to a report in Bloomberg News, Timothy Massad, the Treasury’s assistant secretary for financial security said starting in May, landlords can use the Home Affordable Modification Program (HAMP)  for up to four loan workouts, as long as they rent out each property or have plans to fill them.

The federally-subsidized program pays banks to cut interest rates, lengthen the terms or forgive some of the mortgage principal.

The theory behind the change in policy is keeping current owners in place prevents tenants from being evicted. Massad said, “Vacant properties are a problem no matter how they became vacant.”

Almost one in every four home purchases in January were investment or vacation properties.

It is estimated that about 700,000 landlords will be eligible to modify their mortgages.