Thursday, March 06, 2008

What is a Short Sale?

The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan(s), and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.

This situation can be a great deal for buyers or investors. This process can take longer than typical transactions, but the wait can be worth it.

In today's market, this situation is becoming all too common. For example, One year ago, there were less than 50 short sales marketed in the MLS (Ada and Canyon County). Now there are over 300! This means banks are beginning to competing with each other. And if you are looking to sell you home, you'll now be competing with the banks.

It is important to understand that extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation.

A short sale typically is executed to prevent a home foreclosure.
Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.

In short; A short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.

The whole process starts with a notice of default. It's filed after an owner misses a series of loan payments. This notice is filed at the county where the property is located and becomes public record.

As bad as this sounds, once that happens, investors and real estate agents spring into action in an effort to explore the opportunity. In all honesty, this is the best situation for the seller if they are unable to catch back up with the lender. It can be far better for the owner to exit the loan obligation in a short sale process then actual foreclosure. It means the seller has a chance at preserving their credit.

Micron official: Boise best place for expansion when time comes

BOISE, Idaho — A Micron Technology Inc. executive says the computer chip maker has decided that when the time is right, Boise is the best place to build a new manufacturing plant.
Company officials have no definite timeline for a new facility, but say future plans are tied to market conditions and other economic factors that would make expansion viable.

Chief Operating Officer Mark Durcan's comments about a new facility came during a briefing Monday on the company's pending joint venture with Nanya Technology Corp., a Taiwan-based company that also specializes in dynamic random access memory, or DRAM, and other advanced memory products.

Durcan said the venture will enable the companies to cooperate on research and development in the design and production of smaller, more advance memory chip technology.

The cooperative arrangement also allows Micron to lower design costs, share research and manufacturing assets and better compete in the global market, Micron spokesman Dan Francisco said. Final details of the partnership will be completed in coming months, officials said.

"Partnering with Nanya would be significant to Micron as we continue to drive toward the most cost-effective ways to grow and innovate," Durcan said in a statement. "Nanya has proven its capabilities to be a leader in manufacturing technology and is strategically located near our growing customer base."

The news is some of the most positive for a company that has struggled in the last 12 months.

The Boise-based company posted a $262 million loss for the first quarter of 2008, which ended in November. That report followed a series of decisions that led to layoffs for more than 1,000 Boise-area employees.

Company executives blame the big losses on the cyclical nature of the market and an oversupply of chips made by South Korean manufacturers eager to boost market share.

During Monday's briefing, Durcan said the company has decided that when the time is right, Boise is the best place to build a facility capable of producing the next generation of memory chips

Durcan said Boise emerged as the front-runner after an analysis that considered its proximity to existing Micron research and development offices and a series of tax incentives passed by the Legislature three years ago.

A new plant is not likely to create many new jobs, Durcan said, as much as help secure the company's existing work force in the Treasure Valley.

"There is no firm timeline," Francisco told The Associated Press. "Our entire business is dependent on market conditions. All we've done is determine that Boise is the preferred location when we decide to build another wholly owned facility."

Micron stock traded down Monday on the New York Stock Exchange to $7.17 a share, down from the previous day's $7.52.

Our View: News about plant is encouraging - as far as it goes

A new manufacturing plant would be good news for Micron Technology, and the Treasure Valley.
The plant could, at least, stabilize a local work force battered by more than 1,100 layoffs since June. The plant could help solidify the future of Idaho's largest private employer.

Monday's announcement was encouraging - as far as it went. Micron said it planned to build a new fabrication plant in Boise, but offered no timetable. The expansion was tied instead to two big variables: market health and economic conditions.

Micron offered considerable hope but scant detail. Micron told everybody what they wanted to hear - in limited amounts. And Micron left questions for every group of stakeholders:

- Employees. For the roughly 9,000 Treasure Valley workers who still have a paycheck-to-paycheck interest in Micron's future, does this news translate into some welcome stability at the Boise campus?

- Businesses. What sort of short- and long-term message should retailers and Realtors take from Monday's announcement?

- The economic development community. What does the announcement say about the future of one of Boise's corporate icons, and the viability of the state's high-tech sector?

- Political leaders. Will lawmakers finally see a return on their investment in tax incentives? In an attempt to attract just the type of plant Micron promised Monday, the 2005 Legislature provided Micron a tax break that, in 2007, exempted some $282 million of Micron's Boise facilities from the property tax.

- Investors. Micron has lost $582 million since the start of the 2007 fiscal year, with stockholders taking their share of the brunt. Is an investment in a new plant a sign that Micron expects its losses to reverse?

- Civic groups. With Micron saying it plans to invest in Boise, how will this affect philanthropic contributions to groups that have benefited from corporate and Micron Foundation support?

All of these groups have an interest in hoping the new fabrication plant becomes reality. So do we. Micron is critical to Idaho's economy and central to the Valley's culture. After months of layoffs and losses, who doesn't want to see the historically turbulent memory market rebound?

Our enthusiasm is tempered only by a disappointing shortage of details. Better days are ahead. Someday. Market willing. If you were left wanting more, that's understandable.

Absent any alternative, we're left to hold Micron to its word. Micron has publicly committed, however conditionally, to making a new investment in Boise. This is the kind of commitment Idahoans should applaud - but a commitment this company must honor.

"Our View" is the editorial position of the Idaho Statesman. It is an unsigned opinion expressing the consensus of the Statesman's editorial board. To comment on an editorial or suggest a topic, e-mail

Newsmaker Q & A: Valley housing market strong, Realtors group president says

Dan Hernandez, the newly installed president of the Ada County Association of Realtors, says you have to earn the right to be a successful residential real estate agent. As a young man back in Los Angeles, Hernandez routinely stayed after hours making up to 50 cold calls a night. He also went door-to-door introducing himself to people, most of whom had no use for his services. There was time spent working the "For Sale By Owner" and expired listings markets, as well as various Internet lead generation systems. The hard work, and the law of averages, has paid off in a career dating back 14 years. Hernandez now heads an organization of some 4,000 Ada County Realtors who are struggling to weather the worst sales downturn in recent memory.
Q: Has the art of selling residential real estate changed?

A: The basic fundamentals have not changed, As I told you, I cold called, knocked on doors and worked the lead box. In my view, many agents came into the business for quick buck. And they have not paid their dues of developing relationships or databases that an experienced agent has. That, in my view, has a lot to do with why they have failed. They were not willing to put in the work needed to be successful. Today, the basic fundamentals have not changed. You need to go out there and meet the people. You need to put yourself in a position where you are handing out your card and saying, "Are you interested in buying a home or selling one in the near future?" Too many agents don't succeed because they sit down and wait for the phone to ring. It requires much more than that. Buyers and sellers are a lot more sophisticated than they have been. They're looking for a qualified professionals.

Q: In your 14 years, have you ever seen a market as bad as this one?

A: This is nothing. I was in Los Angeles when the market crashed in the beginning of 1990. The market almost died overnight and seemed to hit rock bottom. So this is nothing. We're in a very strong, healthy market. I'm still representing buyers that are buying homes, and I'm still selling homes.

Q: Are there any signs that we've bottomed out and are turning upward?

A: I can tell you from my personal experience as a Realtor out there on the streets that, in the last three or four weeks, I have seen more activity than I have seen in several months. Homes that had been languishing for a period of time now have multiple offers. I have spoken to other agents and asked, "Is it just me?" Their response has been no, that they have seen the uptick, too.

Q: What do you say to people who say the Treasure Valley has not seen the worst when it comes to the mortgage crisis?

A: My understanding about the subprime crisis is that more homes with those types of (adjustable) loans will reset in '08 than in '07. So I believe more homes will go into default this year than we had last year. Having said that, the January (sales) numbers showed that the median price for resale (existing homes) continued to increase, jumping almost 4 percent from January to January.

Q: But how can we be in a downturn and still see increases in median prices?

A: The January numbers showed that in Ada County sales were down 33 percent from the previous January. So people are being much more cautious. But once they get something, it holds its value. If you look at as a multiyear investment, you're going to come out ahead.

Q: But there are lot of things putting downward pressure on home prices nationwide. Whyhasn't it happened here?

A: Because Boise continues to be one of the most desirable places to live in the nation. I deal with quite a few out-of-state buyers. I'm going to have to use the C word here, but the majority are still coming in from California. The number of Californians who have been able to sell their homes has dropped off because that market is flat. But those that are successful in selling want out and are still moving here. Boise is their location of choice.

Q: Again, what about those median prices?

A: If you look at other areas, they mention having home appreciation of 35 percent or even 50 percent. We didn't have that. We went up 20 percent. But averaged over five years, we're a solid 10 percent a year. People here ask me when is the housing bubble is going to burst. My response is that there is no bubble because what we've had was steady growth that has been relatively conservative compared to what we have seen elsewhere. When appreciation rates shoot straight up, they're bound to come back down. And that's what's happening elsewhere.

Q: Was having so many outside investors here bad for the market?

A: I can't say yes and I can't say no. But I look back at the level of investors we had, and it was bad for the community. I saw many transactions where the buyers were investors who wrote and offer on new construction with the expectation that by the time the transaction closed there would already be some equity there. And when it did not reach the level that they anticipated, I saw investors bail, giving up there ernest money just to get out.

Q: Will we see investors returning to the Treasure Valley?

A: I think Californians are "flirting" with the Idaho housing market.

Q: We're seeing a lot of foreclosures locally. Won't dumping that many homes on the market depress home values even more?

A: Again, I'm looking at my own experience as a Realtor out there on the street, and not as president of the association. And as I mentioned before, I'm still selling homes - even with the high numbers of homes out there that are in default. I know many agents are working the default market and are doing quite well. Even with the number of defaults, I have not seen any change in the level of activity.

Q: How many agents has the association lost during this downturn?

A: Strangely enough, we're not seeing a lot. We budgeted for an 8 percent loss overall. But based on dues collection, it has been less than half of what we expected.

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