Everything You Wanted to Know About Short Sales

It has become a term that has been tossed around a lot in recent years. but what exactly is a short sale? What is involved? How does it differ from a regular sale? Short sales can be a daunting experience but if you have the right people involved and the right information it is not as bad. This week’s blog post is all about short sales.

What Is a Short Sale
Basically, a short sale is a property that sells for less than the balance owed on the mortgage. In other words, if there is a mortgage balance that is greater than the market value of the home, that property is a short sale. It can also be a short sale in the accepted sales price is higher than the mortgage but not high enough to pay all the closing costs and commissions. The term “short sale” comes from the balance needed to pay off the bank being short. It is by no means or terms a quick or short process.

Are You Guaranteed a Short Sale
Not every property qualifies as a potential short sale. Not every person or family qualifies as a candidate for a short sale. The lien holding bank must agree to grant a short sale and are under no obligation to approve a short sale. A bank will grant a short sale if the bank feels it is in the bank’s best interest to approve the short sale. It is in the bank’s best interest to approve the short sale if the bank will make more money through the short sale process than through foreclosure. It is estimated that banks might save 25% to 30% on foreclosure costs to grand a short sale over a foreclosure, but some investor guidelines make it more profitable for the bank to foreclose.

What Is Necessary for a Short Sale

Most short sale transactions are handled by real estate agents who specialize in short sales. Some agents choose to negotiate with the bank holding the mortgage themselves. Other agents will team up with an attorney and let them negotiate the short sale with the bank. There are 4 essential ingredients to a short sale; however, strategic short sales (those without a hardship) are also possible. If initiating a short sale you will need the following:
     • An underwater home
     • A willing short sale bank
     • A seller with a hardship
     • A buyer willing to purchase the home

What Role Do Real Estate Agents Play in a Short Sale

You should always make sure that your real estate agent knows what they are doing and have experience with short sales. Some aspects of the process are very similar to general real estate sales but it can vary drastically in other aspects. If a short sale is not successful you can lose your home to foreclosure. This processes should not be handled by a novice agent.

Some real estate agents throw homes on the market that will never close as a short short sale. That’s because the agents do not always qualify the short sale sellers. Some agents will place unrealistic price tags on the short sale, which the bank will never accept. Also, many agents will take the first offer that comes in whether it will close or not.


The following is what the agent does in the short sale process:
     • Gather the required paperwork and submit the short sale package to the bank. Sometimes agents hire a third party to negotiate the short sale.
     • Help the seller to price the short sale home. The price needs to be attractive enough to entice a buyer to wait for short sale approval but high enough to satisfy the bank’s payoff of the outstanding mortgage.
     • Put the home on the market. The agent must submit all offers received to the seller. Some offers will be lowball offers.
     • Negotiate the short sale. Sometimes sellers/agents will hire a lawyer to do the short sale.
     • Submits the short sale approval letter to the seller. Most sellers want a release of liability and no deficiency to do a short sale.

A short sale is one of the most important task a real estate agent can take on. If the process is not handled properly the seller can lose their home to foreclosure. We at Team Johnson take this responsibility entrusted to us very seriously and work very hard to make this process as easy as possible for our sellers. We have successfully negotiated and closed many short sale transactions in the past year. We have never failed to successfully negotiate this process. If we can be of any help please give us a call at 904-495-0146 or email us at teamjohnson@watsonrealtycorp.com

Team JohnsonWatson Realty Corp
St. Augustine, FL 32086
904-495-0146
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Do You Need a Home Inspection?

When buying a home some people will chose to forgo the cost of a home inspection, especially if they are buying a newer home that appears to be in good condition.  This is not a good idea.  Before you purchase a home you should have it professionally inspected by a licensed inspector.  This blog will explain some of the reasons why this is not an area to cut back and save money when buying a home.

What to Expect at a Home Inspection
A good inspector will examine certain components of the house and will produce a report explaining and documenting his/her findings.  A typical inspection will last approximately 2 hours and the buyers and the buyer’s agent should be present.  This will be the buyers and the buyer’s agent opportunity for detailed explanation and to ask questions.  Most inspectors will also point out routine maintenance issues that will help the buyers long after the purchase.  The inspector will note the following:
•    whether each problem is a safety issue, major defect, or minor defect
•    which items need replacement and which should be repaired or serviced
•    items that are suitable for now but that should be monitored closely

What the Inspector Will Note During a Home Inspection



It is impossible to list everything an inspector could possibly check for; however; the following list will give you a general idea of what to expect.

Exterior
          •    Exterior walls - The inspector will check for damaged or missing siding, cracks and whether the soil is in excessively close contact with the bottom of the house, which can invite wood-destroying insects. However, the pest inspector, not the home inspector, will check for actual damage from these insects. The inspector will let you know which problems are cosmetic and which could be more serious.
          •    Foundation - If the foundation is not visible, and it usually is not, the inspector will not be able to examine it directly, but they can check for secondary evidence of foundation issues, like cracks or settling.
         •    Grading - The inspector will let you know whether the grading slopes away from the house as it should. If it doesn't, water could get into the house and cause damage, and you will need to either change the slope of the yard or install a drainage system.
        •    Garage or carport - The inspector will test the garage door for proper opening and closing, check the garage framing if it is visible and determine if the garage is properly ventilated (to prevent accidental carbon monoxide poisoning). If the water heater is in the garage, the inspector will make sure it is installed high enough off the ground to minimize the risk of explosion from gasoline fumes mingling with the heater's flame.
       •    Roof - The inspector will check for areas where roof damage or poor installation could allow water to enter the home, such as loose, missing or improperly secured shingles and cracked or damaged mastic around vents. He or she will also check the condition of the gutters.

Interior
         •    Plumbing - The home inspector will check all faucets and showers, look for visible leaks, such as under sinks and test the water pressure. He or she will also identify the kind of pipes the house has, if any pipes are visible. The inspector may recommend a secondary inspection if the pipes are old to determine if or when they might need to be replaced and how much the work would cost. The inspector will also identify the location of the home's main water shutoff valve.
        •    Electrical - The inspector will identify the kind of wiring the home has, test all the outlets and make sure there are functional ground fault circuit interrupters (which can protect you from electrocution, electric shock and electrical burns) installed in areas like the bathrooms, kitchen, garage and outdoors. They will also check your electrical panel for any safety issues and check your electrical outlets to make sure they do not present a fire hazard.
         •    Heating, ventilation and air conditioning (HVAC) - The inspector will look at your HVAC system to estimate the age of the furnace and air conditioner, determine if they function properly and recommend repairs or maintenance. An inspector can also give you an idea of the age of the home's ducting, whether it might have leaks, if your home has sufficient insulation to minimize your energy bills and whether there is any asbestos insulation.
         •    Water heater - The home inspector will identify the age of the heater and determine if it is properly installed and secured. The inspector will also let you know what kind of condition it is in and give you a general idea of how many years it has left.
         •    Kitchen appliances – The inspector will sometimes check kitchen appliances that come with the home to make sure they work, but these are not always part of the inspection. Be sure to ask the inspector which appliances are not included so that you can check them yourself.
        •    Laundry room - The inspector will make sure the laundry room is properly vented. A poorly maintained dryer-exhaust system can be a serious fire hazard.
        •    Fire safety - If the home has an attached garage, the inspector will make sure the wall has the proper fire rating and that it hasn't been damaged in any way that would compromise its fire rating. They will also test the home's smoke detectors.
       •    Bathrooms - The inspector will check for visible leaks, properly secured toilets, adequate ventilation and other issues. If the bathroom does not have a window and/or a ventilation fan, mold and mildew can become problems and moisture can warp wood cabinets over time.

Inspection Contingency
Every contract, whether it is as-is or not, has an inspection contingency built in.  On as “as-is” contract, the buyer can walk away within a certain timeframe if they discover something on the home inspection they do not like.  On a standard contract, there are provisions written into the contract stating the seller must fix any structural defects up to the amount specified in the contract.  The buyers can submit a list of requested repairs to the seller.  If the seller does not fix the repairs, the buyer can walk away and cancel the contract.  If the buyer does not make their decision within the time frame stated by the contract, they buyer can still walk away but will be liable for damages to the seller upto and including forfeiting the escrow deposit.

A home inspection is not the be-all, end-all when it comes to determining whether there is something wrong with a house.  It checks for visual clues to problems.  The inspector cannot run the risk of damaging anything in the house to discover problems.  An inspector is not a jack-of-all trades expert.  For example, he or she might tell you that there might be a problem with the plumbing but will recommend you hire a plumber to verify the problem and give an estimate to fix.  To best protect our customers, all of the agents with Team Johnson of Watson Realty Corp highly recommend always performing a home inspection.  We work with great professionals and can provide you with a list of home inspectors.  Give us a call at 904-495-0146 or email us at teamjohnson@watsonrealtycorp.com for more information.


Team Johnson
Watson Realty Corp
St. Augustine, FL 32086
904-495-0146
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Mortgage Options

When it comes time to consider buying a home it is important to have all your ducks in a row.  With such low inventory levels you can lose out on a home while you are getting financing together.  Unless you are paying cash for a house, you will have to look at financing.  Once you decide to finance your home purchase you have to decide which type of mortgage to apply for.  This blog is about the most popular types of loan programs.

Conventional Fixed Rate Mortgages

A conventional fixed rate mortgage has an interest rate that will stay the same over the entire term of the loan.  Usually that means 15, 20, or 30 years.  The drawback of a loan like this is that if interest rates fall, you could be stuck paying a higher rate.

Adjustable-Rate (Variable Rate) Mortgage

An adjustable rate mortgage usually offers a lower initial rate of interest than a fixed-rate loan.  The drawback of this type of loan is that after the initial period is over, the interest rate can fluxuate over the life of the loan.  When interest rates are on the rise you could end up paying more in monthly payments than expected.

FHA (Federal Housing Administration) Loan

An FHA backed loan can make owning a home possible for people that would not qualify for a home loan under other programs.  The biggest difference is in the downpayment.  Whereas, a conventional loan (fixed/variable) might want as much as 20% down plus closing costs, an FHA loan will require as little as 5% down plus closing costs.  The drawback to this type of loan is that the amount you can borrow might be limited and you will have to pay MIP (mortgage insurance protection) which is an insurance that protects the lender in the event of a buyer default.

VA (Veterans Administration) Loan

A VA loan is a guaranteed loan for eligible veterans, active duty personnel and surviving spouses.  Usually you do not have to come up with a down payment.  A VA loan also offers competitive interest rates.  Like a VA loan, the size of the loan could be limited.

Interest Only

An interest only mortgage is when the borrower pays only the interest on the loan in monthly payments for a fixed amount of time.  After the initial period is over the loan is due.  This could cause a problem for some borrowers because at this point your options are to pay a lump sum or refinance.

Reverse Mortgage

A reverse mortgage allows seniors to convert the equity in their homes to cash that does not have to be paid back as long as the borrower is living in the house.  This is a good option for seniors that do not have retirement savings or pensions however it is subject to a lot of false advertising and aggressive lending practices.

The decision of which mortgage option to use should not be made solely by you.  A mortgage professional should be contacted before you begin looking for a home.  That way they can start the ball rolling before you make an offer.  This can give you more bargaining power and help you not lose out on the home you want.  Team Johnson of Watson Realty Corp can help recommend some great professionals in the mortgage lending industry.  Give us a call at 904-495-0146 or email us at teamjohnson@watsonrealtycorp.com

Team Johnson
Watson Realty Corp
St. Augustine, FL 32086
904-495-0146
Click Here to Search the MLS Like an Agent
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2014 1st Quarter Market Update on Homes For Sale in Saint Augustine Florida

The information provided here is provided by Team Johnson of Watson Realty Corp located in Saint Augustine Florida.  TEAM JOHNSON is available to assist buyers and sellers with homes for sale in Saint Augustine Florida.  We are available to help from preview to purchase, to answer questions about home ownership, and assist home sellers to get their properties sold as quickly as possible and for top dollar.  For all your real estate questions call Team Johnson today.

News for Sellers

The residential market for homes for sale in Saint Augustine Florida continues to look good for sellers.  The number of closed sales declined slightly by 2.9% from the 1st qtr in 2013.  This is due partly to the low inventory volume we are currently experiencing.  The number of closed sales is 10% higher than it was in 2012.

The best news for sellers is that the average sales price continues to climb.  It is currently at $209,821.  That is an increase of 4.14% over this period last year.  Also the average days on the market are declining.

News for Buyers

Due to interest rates on the rise it is important for buyers to act now.  Buyers have less purchasing power than they did a year ago.  If the market continues this trend a buyer will have more purchasing power now then they will a year from now.

For example:
Today, a buyer can finance a $250,000 house at 4.22% interest.  That will make the monthly payment roughly around $1,255.46.  A year from now that same buyer will finance a $250,000 house at 5.3% interest and the monthly payment will be roughly $1,388.26.  By waiting, this buyer just lost $162.80 in purchasing power.  This will knock some buyers out of qualifying all together.

Overall Market Conditions

The overall inventory of available homes is extremely low.  This is driving prices up and can even causing bidding wars on certain homes.  It is projected that due to the harsh winter this past year Florida will see and increase in the buyer market thus putting more of a strain on the lower inventory.  Don't get left out in the cold.

Overall, every line item statistic is looking very good in that the available inventory continues to shrink and buyer demand is still currently strong.  Buyers, if you have been waiting for the best price and best interest rate, you need to act now.  Prices are going up and so are the interest rates.  Don't get left behind.  Any of the members of Team Johnson of Watson Realty Corp would welcome the opportunity to find you your new home.

Sellers/Owners if you have been waiting for the market to rebound so you can sell, the time might be now.  Many Floridians have already seen and increase in the value of their home.  Want to know where you stand?  Call Team Johnson of Watson Realty Corp.  We perform detailed reports for you so that you know exactly how much your home is worth.  This will help you determine whether now is the right time to sell.  We put our customers best interests ahead of the sale.


Team Johnson
Watson Realty Corp
St. Augustine, FL 32086
904-495-0146
Click Here to Search the MLS Like an Agent
View My Website
Click Here to Email Me

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Contract to Closing

Many people believe that the hard work is done once a property goes under contract.  This is wrong!  The hard work is actually just beginning.  Many things can go wrong at this phase of the contract.  Some of the pitfalls can just be minor disturbances and others can cause the deal to completely fall apart and have the property go back on the market.  To prepare yourself fully it is important to understand the processes involved before continuing and make sure you are fully aware of any potential problems.  If you’re working with a REALTOR® he or she can guide you through this process.
 
Loan approval. Buyer-financing problems are the No. 1 reason houses don't close.  After what the market has gone through, lenders are leery. Most offer will come with letters from the buyer's direct lender, saying that the buyer had been preapproved for the loan. That's pretty standard.
Tip: As added insurance, however, ask for a pre-approval letter instead.  The difference between approval and qualification is simple.  A pre-approval with include the lending broker verifying what the buyers have told them (credit reports, income verification, etc). A pre-qualification will be based on what the buyers have said with no verification.

Appraisal. In today's market, getting a home to appraise for the purchase price is a big problem. Housing values are rising faster than appraisals, which rely on past sales.  Banks base loans off either the purchase price or the appraised value — whichever is less. So if a buyer is taking out an 80 percent loan, the bank will loan 80 percent of the lower number. If the house appraisal is lower, the buyer either has to pay more, the seller has to lower his price or the deal is dead. Low appraisals kill about 40 percent of deals.  
Tip: Have a good idea of what the house should appraise for.  A seller should have a CMA which includes past sales.  Appraisers will normally go no further back than 6 month and no further away than 1 mile in a suburban area.  Keep this in mind when looking for what other homes have sold for.  

Home inspection. Buyers should have an inspection done within a week of signing the contract so parties can address issues early. Deals rarely fall apart over a home's physical condition, but buyers can use these reports to get sellers to lower the price, make repairs or both.
Tip: Have the house in good repair before you list. Or, be proactive and have an inspection done before the house is listed. Present that report to buyers saying the home is for sale "as is." The buyer can get a second inspection, which won't likely be too different but having the inspection up front protects sellers from buyers who want to nitpick.  Also remember there are certain repairs that will be lender required.  This will have to be done in order for a bank to loan money.  There are also some repairs that won’t be lender required.  There is no mandate to fix these types.

Title clearance. A property's title lists who owns it and any liens against it, which owners are often unaware of. A house has to be clear of liens to transfer to a new owner, and all owners must agree to sell. Title issues rarely end deals, but can hold them up.
Tip: To head off such issues, title problems should be addressed before being listed or at least be in the process of being cleared before a home is listed.

Contingencies: Many buyers make offers contingent upon another transaction, such as their house, they currently own, successfully closing.
Tip: If presented with a contingency contract take a good look at how solid the other deal is.  For example if a buyer brings you a contract stating it’s contingent upon their house selling but their home is not even listed yet, this is not a good idea.  Not too many contingent offers are being accepted in this market.

Once clearing all these hurdles, the good news is it is time to close on your house.  Team Johnson of Watson Realty Corp prides itself on its strong listing presence.  We list and sell more units than another agent or team of agents in our region.  We have successfully negotiated and closed many homes and would love the opportunity to add your home to our list of success stories.  For more information give us a call at 904-495-0146 or email us at teamjohnson@watsonrealtycorp.com

Team Johnson
Watson Realty Corp
St. Augustine, FL 32086
904-495-0146
Click Here to Search the MLS Like an Agent
View My Website
Click Here to Email Me

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