Archive for the 'Short Sales/Foreclosure' Category

Can Duplex Investors Do A Short Sale?

said on February 6th, 2012 categorized under: Selling A Duplex, Short Sales/Foreclosure

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Minneapolis Short Sale Real Estate Sign Many duplex investors who are upside down on their property believe a short sale isn’t an option for them.

Nothing could be further from the truth.

So I asked Morgan Kavanaugh, an attorney with Wilkerson & Hegna P.L.L.P, who specializes in negotiating short sales for duplex owners, to write the following guest blog.

Often you will hear people say, “You won’t qualify for a short sale, so don’t bother.”

Is that sound advice?

Unless that person is the bank president or investor on that particular loan, I’m not sure that advice is based on any facts whatsoever.

There isn’t a uniform, mathematical formula to determine if someone qualifies for a short sale. Every short sale is different, given the circumstances of the property owner and the particular investor or lender on the loan.

In the investment property context, rental properties may be underwater with negative cash flow. The owner of the duplex may be in sound financial shape, but the annual loss on the property is starting to take its toll.

Could that investor do a short sale on their duplex?

The answer is almost always “maybe”.

It’s important to understand there is no legal right to do a short sale. You agreed to repay the debt, regardless of the value of the property, and the bank did not promise your duplex would increase in value.

However, when it comes to making a sound business decision, it might make sense to do a short sale on an investment property.

Lawyers have been doing what are known as “loan workouts” on large commercial deals for decades. Short sale is simply another term for a smaller scale “loan workout”.

A bank will certainly take a hard look at a sound buyer for a duplex, and it is possible they will consider settling the accounts with the duplex investor-seller. If the duplex owner has some available cash, or is willing to sign a promissory note for a percentage of the deficiency balance on the loan, there is a greater likelihood the bank and seller will come to terms.

How will you know if your lender will work with you?

First, you have to start the process by listing the duplex and letting your Realtor market it to find a good buyer.

Given the complex nature of these deals, getting an attorney and law firm on your side is always a good idea too.

Comments Off on The Facts About Waiting For The Duplex Market To Rebound

Real Estate Market ReboundOne of the most common phrases I hear when I visit with prospective Minneapolis duplex sellers is they “want to wait until the market comes back” to sell.

The trouble is, in our heads, most of us like to think that’s going to be in the next year or two.

There’s a flaw in our thinking.

According to the latest Case-Shiller housing report, Twin Cities real estate experienced a 5 percent loss in value between 2010 and 2011.

This brings our grand total, according to Case-Shiller, to a 31.35 percent loss in value since 2005. (It’s important to note there are some differences of opinion on this. A recent University Of St Thomas report suggests the decline in value is closer to 18.06 percent.)

In either case, we would need to see an immediate and dramatic turn-around in the housing market to start up the appreciation ladder again.

In fact, in 2012 alone, momentum would need to swing from a 5 percent loss to a 5 percent gain. After that, we would need to see anywhere from three to six years of steady, 5 percent annual appreciation just to get back to 2005 duplex values.

And that’s a big “if”.

For many of the Minneapolis duplex sellers I speak with, hanging on to their duplex means years of juggling young children, a full time job and landlord duties.

And that’s the optimist’s interpretation of the housing market.

With a rumoured 5-6 million more homes and duplexes in the foreclosure pipeline nationally, a more realistic forecast for full recovery of duplex values might be closer to a decade.

For some Minneapolis duplex owners, that might be too long.

If you would love to sell your duplex because your life has changed, call or email me. You have more options than you think.

Comments Off on Duplex Mortgage Delinqencies Increase, Improve In Minnesota

deliinquent duplex mortgagesAmidst the noise of the holidays, Lender Processing Services (LPS) somewhat quietly issued a news release detailing performance statistics about the 40 million mortgage loans their company helps service.

Perhaps they did so deliberately, as much of the data their report contained wasn’t necessarily cause for celebration.

A full 8.15 percent of their 40 million loans, which represents 3,260,000 mortgages were 30 days or more past due, but not yet in foreclosure.

This figure, while down 9.6 percent from the year before, nonetheless represented an increase of 2.7 percent over November.

According to LPS, they have mortgages on 4,144,000 properties that are 30 or more days past due, but not in foreclosure. Of these, 1,809,000 are actually 90 or more days delinquent, but not yet in foreclosure.

Their inventory of properties in foreclosure but still in the pre-sale process, stands at 2,116,000.

In all, they report they have 6,260,000 properties with mortgages that are 30 days or more delinquent or in foreclosure.

The states with the highest number of contributers to this mess are Florida, Nevada, Mississippi, New Jersey and Illinois. Those with the least are Alaska, Montana, North Dakota, South Dakota and Wyoming.

Minnesota foreclosure numbers actually appear to be improving according the report. In fact, the number of non-current mortgages they service in Minnesota dropped 12.9 percent year-over-year, with 7.9 percent in all not being current.

Looks like we have a ways to go before this is all over.

Comments Off on Lenders Give Delinquent Duplex Sellers A Gift– Sort Of

duplex lenders make like scroogeIn an effort to show a bit of holiday goodwill, Fannie Mae and Freddie Mac announced they will not foreclosue on delinquent duplex and single family home owners during the holidays.

The moratorium will run from December 19 to January 2. 

Apparently, this freeze applies only to the eviction of homeowners and tenants at the end of the redemption period, as they did warn that the legal and administrative proceedings for the evictions may continue.

Not wanting to look like Scrooge himself, Bank of America, Chase and Wells Fargo said they would follow suit.

It’s important to note this policy only applies to loans the banks actually own, not those they service for other investors.

For example, if your loan is managed by Wells Fargo, but the folks borrowers actually owe the money. This may be a group of investors or yet another bank, who want to go forward with the eviction.

Bah humbug.

Comments Off on Duplex Sellers Don’t Have To Be Behind To Qualify For A Short Sale

confused duplex investorOne of the most common misunderstandings among prospective duplex sellers in today’s market is in order to qualify for a short sale, you must be behind on your payments and facing foreclosure.

Nothing is further from the truth.

Being “short” simply means you owe more on your property than it’s worth.

And, while I’ve gone over this before, it’s probably a good idea to look at it again.

In order to qualify for a “short sale”, a duplex seller needs to have one of the following hardships:

  1. Payment Increase or Mortgage Adjustment- If your adjustable rate mortgage suddenly increases dramatically, it can result in a loss of cash flow, and make mortgage payments difficult to come up with.
  2. Loss of Job – If a duplex owner is laid off and suddenly finds she must tap into the duplex’s cash flow simply to survive, a short sale is justified.
  3. Business Failure – In a down economy, many duplex investors find themselves on the hook for expenses associated with that endeavor, and become spread too thin financially to continue owning the property.
  4. Damage to Property – Contrary to belief, insurance doesn’t cover every disaster or even all of the damage inflicted by the accidents and forces of nature it does. For example, a duplex owner may find the cost to replace his roof that was blown off in a storm is covered, but not the flooding in the basement that resulted from the storm. The out-of-pocket cost to repair this damage can be prohibitive, and until the repair is made, the property may be uninhabitable, causing an additional loss in revenue. Read the rest of this entry »

What Bette Davis Knows About Duplex Foreclosures

said on October 13th, 2011 categorized under: Short Sales/Foreclosure

Comments Off on What Bette Davis Knows About Duplex Foreclosures

Bette Davis predicts duplex salesTo quote Bette Davis in “All About Eve”, fasten your seat belts, duplex buyers and sellers. We’re in for a bumpy ride.

RealtyTrac, the nation’s leading source for foreclosure data reported that while foreclosure activity was down nationally for the third straight quarter, there were signs it was beginning to ramp back up.

Remember, starting last October when the robo-signing controversy cropped up, banks have dramatically slowed their foreclosure filings while being investigated for their paperwork.

Realty Trac President Rick Sacchio stated, “Third quarter foreclosure activity increased marginally from the previous quarter, breaking a trend of three consecutive quarterly decreases that started in the fourth quarter of 2010. This marginall increase in overall foreclosure activity was fueled by a 14 percent jump in new default notices, indicating that lenders are cautiously throwing  more wood into the foreclosure fireplace after spending months trying to clear the chimney of sloppily filed foreclosures.”

Notices of default were filed on 195,878 U.S. properties in the third quarter; a jump of 14 percent from the previous quarter.

Read the rest of this entry »

Duplex Foreclosure Report A Sign Of Things to Come?

said on September 15th, 2011 categorized under: Short Sales/Foreclosure

Comments Off on Duplex Foreclosure Report A Sign Of Things to Come?

Past and Future of Duplex ForeclosuresOur friends over at RealtyTrac just released their Foreclosure Market Report for August, and the news was mixed.

While the number of Default Notices issued nationwide was down 33 percent from August of last year, the 78,880 single family home and duplex owners who received those notices this August represented a 7 percent jump from the number who did in July.

Foreclosure auctions, or sheriff’s sales, were down 1 percent from July, and 43 percent from August of 2010.

Nationally, the 64,813 properties repossessed by the banks in August was actually  a 4 percent drop from July, and a 32 percent decline from August 2010.

In Minnesota, there were 2403 new notices of default issued to delinquent home and duplex owners. The vast majority of these came from the Twin Cities metro area. 

Hennepin County lead the way with 843 foreclosure filings. Ramsey County contributed another 330, followed by Anoka County with 255, Dakota County with 241, Washington County with 118 and Scott County with 69.

Minnesota averaged one homeowner out of every 971 experiencing some sort of foreclosure average. This puts us in the middle of the pack when it comes to the foreclosure averages for all 50 states.

However, when breaking the data down on a county basis, Hennepin County averaged 1 out of every 600 homeowners officially in trouble.

These figures may be about to change, with rumors swirling the banks have begun stepping up foreclosures, now that they have the robo-signing and documentation issues behind them.

Comments Off on Why Duplex Short Sale Lowball Offers Get Rejected

half off duplexesSome of the best duplex deals out there are short sales.

Not only are they often in better shape than the foreclosures, but there tends to be a better selection of duplexes to choose from.

Some people even think they are such good deals that you can outright steal them.

This is such a common belief that I’ve been getting lowball offers on my Minneapolis duplex listings all summer long.

I understand the impulse. After all, the seller may need to get out, no matter what, and the buyer has to wait a long time for an answer. So heck, that’s worth a good deal, right?

Except there are some problems with that thinking.

First, the seller may be required by the lender, especially if the duplex has a second mortgage, to bring money to the table to keep the mortgage holder from pursuing a deficiency judgment even after the property has been sold or lost to foreclosure.

Needless to say, the bigger the offer the seller receives, the greater the likelihood is there will be some money available to give the second lien holder.

So don’t be surprised if the seller gives you a counter offer.

Second, not every short sale owner is in foreclosure or behind on payments. Many need to sell their duplexes due to a job relocation, marriage, divorce, death or any number of other legitimate reasons.

“Short sale” is NOT synonomous with foreclosure, it simply means the seller owes more than the property is currently worth, and is “short” in the amount he or she owes the bank.

Third, the banks aren’t stupid. Well, not always. They hire Realtors to do something called a Broker’s Price Opinion or BPO before they agree to any sale. Essentially, they retain an agent who doesn’t represent the buyer or the seller, for independent opinion of what  a property is worth.

These agents are familiar with the market, and have access to not only data on duplexes that have recently sold, but also those currently for sale. If an offer on a duplex seems way out of line with the market, they will advise the bank to respond to the purchase agreement with either a counter offer or an outright rejection of the price.

All of this doesn’t mean you can’t simply make an offer on a duplex listing. Just know the odds and be realistic.

Comments Off on Why You Shouldn’t Pay To Get A Duplex Mortgage Modified

Smiled Business Shark Holding CashIf you’re a duplex owner considering exploring a loan modification, be extremely cautious of companies who offer to help in exchange for a fee.

For an upfront charge of anywhere from $500 to $3,000 or more, some companies will offer to work with lenders to get a duplex owner’s interest rate reduced or loan length extended. And in return, they do little or no work in return.

Many of these companies are located in a state other than the one in which you live. As a result, they may not be familiar with all the laws in your state regarding the foreclosure process.

Worse yet, their “counselors” may not be trained or certified, and therefore may not meet national and state foreclosure prevention service standards.

So where can you find qualified help?

The U.S. Department of Housing and Urban Development (HUD) provides on its website a list of approved non-profit foreclosure counseling agencies by state.

If you’re in Minnesota, one of those agencies is the Minnesota Home Ownership Center, which offers its services to single family and duplex owners facing foreclosure absolutely free.

The Center cautions duplex owners everywhere to seek advice from a foreclosure prevention counselor before signing any papers or making any payments to a company that charges for modification services.

The Center also suggests you contact your state’s department of commerce to make sure the company is licensed to provide services in your state.

Comments Off on Distressed Minneapolis Duplex Owners Find Help

Duplex Foreclosure HelpIf you’re a Minneapolis or St Paul duplex owner occupant and at least three months behind on your mortgage payments due to becoming unemployed, under-employed, or medical challenges, help may be available.

The Emergency Homeowners Loan Program (EHLP) is accepting applications between now and July 22, 2011, for zero interest, forgivable loans for duplex owners. The loan will pay some back payments and fees to your lender, as well as provide monthly assistance for payments on your first mortgage.

This payment help is available for up to 24 months, with a cap of $50,000. It is forgivable over 5 years if the duplex owner continues to meet program requirements.

Qualifying criteria is relatively strict, and not everyone who qualifies will be given a loan. Rather, applicants names will be put into a lottery. Those selected will receive duplex payment assistance.

To qualify, you must owner occupy the property. There can be no more than 4 units in your building. You must be a U.S. citizen.

Prior to the change in your employment circumstances, all of the people whose names are on the mortgage must have had a gross income below 120% of the median area income or $75,000. Your current household income must be at least 15% less than it was in 2009.

You must also have a history of making duplex mortgage payments on time prior to the change in your circumstances, have no more than two liens on the property and be current all of your federal debts (including income tax).

Finally, you must also have received written notification from your mortgage company that you are in danger of having the duplex foreclosed upon.

To find out if you qualify for Minneapolis duplex payment assistance, click here. If you live elsewhere in the United States, you may find help available by clicking here.