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Whenever a buyer starts looking for a home in the pre-forclosure market there are a few things that the buyer should expect to find and to happen during the process.

The Home;

The buyer should be getting good value for his investment in the property because the home typically sells for a significant amount under value. This is GREAT news for the buyer.

Whenever the buyer visits the pre-foreclosure home the home is, for the most part, abandoned. This means there may be some cosmetic (surface) defects with the property such as; high grass, needs paint, possibly replace appliances etc. In my previous post i used an example of a $300,000 home selling for $200,000. I sold that home for $180,000 but I like to use the rounded numbers. In that case the appliances were missing and the bathroom was in a middle of a remodel but for an investment of around $6,000 the buyer brought the home up to it's original condition. so you can see that with a minimal investment you can get a good deal if you can look past the surface defects.

The Seller;

Sometimes the seller still lives in the home. In this case the home is kept in better repair and the buyer gets the benefit. Occasionally the buyer purchases the home and leases it to the seller to live in. This is referred to as a lease back. The buyer has a ready made tenant and the seller does not have to move. This is a good deal for the beginning investor looking to create wealth. The buyer submits an "as is" offer to the property and when the buyer accepts the offer is sent to the lender for their approval.

Allow me say this, the seller is usually in very poor financial health by this time so please do not attempt to ask for any concessions other than the price. This means no to the seller paying any closing costs, repairs (remember it is an "as is" contract), holding a 2nd or anything of that nature. Frankly the seller more than likely can't do it and the lender wont allow it because they will rightly want that money and will reject the deal.

The Lender:

The lender is the obstacle in you buying a home or investment for a good deal and the seller getting out of a bad situation. The lender requires that the seller list the home with a realtor and market it to the community to receive the highest and best offer. The branch of the lending institution that coordinates with the realtor is the Loss Mitigation Department. Their mission is to get the lender all that they can without reclaiming the property (foreclosure). They have the say wether or not it will be sold or go to auction. I have had homes that have sold comfortably before the auction and a few that have sold on the day before the auction. It is up to the individual lenders as to their policy and each differ to their level of cooperation with the realtors. I can say that they are more inclined to be cooperative than in the past. 

The process can take between 30 to 60 days so make the offer your best one because if it is rejected then the process starts from scratch all over again.

And remember this, the seller wants to sell to be rid of a bad situation and the lender wants you to buy so they can get some money from the property. The lender is in the business of money not real estate.

 I hope that I helped you understand the process of a short sale a little better. It is a very complicated process that takes time and a lot of patience I have only lightly touched the basic process and thought processes of the seller, buyer and lender. Please do not get into the process without someone experienced in the market to help you. There are some people out there that want to take advantage of the inexperienced buyers and sellers. If you are asked to do something that sounds like it is unethical and below board it is best not to deal with that person. The people looking for a fast score are looking at your wallet.

Thanks for your time

Barron Reed

This is the question that a lot of sellers are faces with whenever they decide to market their home or businesses. There are a few factors that should enter into the decision to be made and I will touch on a few of them here.

MONEY: The seller wants to sell the property and receive all of the proceeds from the sale minus the closing costs. Let's look at this a little closer.

    The seller wants to sell the property for $200,000 and the seller believes that they will save the real estate commission of 6% ($12,000) on the sale by handling it themselves. However the buyer who is negotiating the sale for themselves wants to save that same commission. the result is that neither the seller nor buyer will want to give up the money that are expecting to save from the commission savings and is usually a HUGE sticking point in the negotiating of the deal if not a deal breaker.

TIME: The seller assumes the role of a realtor to market and how their home to prospective buyers.

    This is the one area of the sale of a home that the seller usually believes is the easiest (I'll just put a sign out, I'll just put an ad in the newspaper, I'll just put it on the internet, I'll just put it in the Multiple Listing Service myself (MLS) I'll just show it myself. I have heard all of these and more but the reality of doing all of these things turns out to be a whole new experience for the sellers.

    The truth of the matter is that it takes an enormous amount of time to effectively market a home and usually the sellers do not have the resources (time not monetary) to do an effective job. You have to be there to show the property whenever a buyer calls, you have to place the advertisements, maintain the listing in the mls, you have to negotiating and qualify the buyer, you essentially become a servant to the deal and it can consume all of your time and energy if the home doesn't sell as quickly as you initially hope.

PRICE: The seller sets the price of the home.

    This is a place that the seller believes that they know what the home is worth. They see what the neighboring homes are listed for and price it to match.

    I wish that it was that easy. Appraisers everywhere would be out of business overnight.

    The truth of the matter is that it is a little more complicated that that. There are a number of things that enter into the value determination of a home. The correct use of comparable is essential to setting the price. The first rule is you DO NOT adjust the price of the subject home you adjust the price of the comparable. If you have a 2.000 square foot, 3 bedroom 2 bath home with a garage , hardwood floors, average appliances and no pool and you have 3 close comparable but 1 has a pool with a nice deck and outside area, with a new kitchen you would subtract the value of those things from the price that the home sold for , another is a 2 bedroom 1 1/2 bath and 600 square feet smaller you would ADD the value of the value that it would take to bring it to the level of the subject property, and if you had one that matched your property you would either add or subtract depending on factors such as hardwood vs carpet, new vs old kitchen, landscaping and a host of tiny factors to come up with the price.

    Let me just say the a realtor offers only an OPINION of the value of the home reflective of the current market conditions in a particular area. It is the job to a licensed appraiser to set the loan value of the home.

NEGOTATING THE DEAL: "I thought that the negotiating would be the best part" (past client).

    At the heart of any sale is the negotiating of the terms of the sale. This is not always about price but about overcoming objections. First of all you have to qualify the buyer. This means that you have to make sure that the buyer can perform any contract that you agree to. This usually means making sure he has the financing in place. If this is not done then you are at great risk to losing the sale or worst yet wasting your time while having your home off the market during this time. QUALIFY THE BUYER BEFORE ACCEPTING ANY OFFER. The second part is the terms of the contract. Will you hold a second mortgage for the buyer, pay some closing costs, lease purchase, lease option, etc. There are too many to list but you have to negotiating the terms agreeable to both of you.

Let me tell you why you should list your home with a realtor.

I handle all of the items listed above and more. I coordinate with the other realtors through the MLS to show your home without an inconvenience to you.

I make sure that the buyer is qualified before the contract is signed.

I market the home through the various media that I have nurtured throughout the years.

I advise you on making your home look the best for the buyers (staging the home).

I use all of my expertise to sell the home for the highest price possible and the best terms .

I WILL GIVE BACK TO YO YOUR MOST VALUABLE ASSET...YOUR TIME AND THEREBY INCREASE YOUR QUALITY OF LIFE.

Lately I have had a lot of people ask me about listing foreclosure sales (short sales) wondering what they are and how they can benefit from them.

First of all "Short Sale" is an industry term that reflects  when the lender agrees to a sale of a home and the fair market value is  "Short" of the amount owed to the lender. The lender accepts the lesser amount and the seller is not held responsible for the  amount that is "Short". HOWEVER the lender may report the "Short" amount to the IRS and may consider it as income for the purpose of taxation. So, you can be taxed on the amount left outstanding without having to pay the lender the "Short" amount. For example if you owed $300,000 to a lender and short sell the property for $200,000 you would not have to pay the lender the $100,000 that is "short" BUT if the lender reported it to the IRS they can count the $100,000 as income and tax accordingly. I ask you though is it better to pay the IRS a few thousand in taxes or be held responsible for the $100,000 and probably declare bankruptcy and possibly have to put together a workout plan as a condition of the filing.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  DISCLAIMER   !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I am not an attorney so I cannot say how bankruptcy laws are one way or another. I would tell you that in that case PLEASE see a qualified attorney to discuss the results of any action resulting from any unpaid balance to the lender.

That is all for today. Tomorrow I will discuss the benefits to the buyer and the expectations you should have when purchasing a Short Sale property.

I am pleased to announce that I am now working with Century 21 Bay West, located in Westchase, on Montague Street. This may come as a surprise to some but not all of the people that I have been privileged to meet and work with. I fully believe am on the winning team which everyone has great enthusiasm and a lot of energy for. To all my clients, this means that I can still offer the highest quality of service to each of you but on a much higher and broader scale. This was not an easy decision to make but I am satisfied that I am doing what is best for myself and my existing and future friends and clients. I appreciate all of your support and in the words of my friend Larry Myers "Life Is Good".