Thinking of Making an Offer on a Short Sale? What You Need to Know

Are you looking to buy a new home? Are you thinking that now's a great time to find bargains? That's true, but it pays to know a little about the seller's situation before you make an offer. 

If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

 A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You're a good candidate for a short-sale purchase if:

·          You're very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.

·          Your financing is in order. Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you're preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.

·          You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

If you're serious about purchasing a short-sale property, it's important for you to have expert assistance. Here are some people you want to work with:

·          Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who's knowledgeable about the short-sale process will increase your chances getting an approved contract. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.

·          A qualified real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they've represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”)

·          Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it's much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few.

Some of the other risks faced by buyers of short-sale properties include:

·          Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.

·          Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.

·          No repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers

* Not all real estate practitioners are REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS® and is bound by NAR’s strict code of ethics.

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA. 

Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

5823 Millstream, Garden City, ID

3 bedroom 2 bath 1618 SF blt 1978

This property makes for an interesting story. One of my agents, Dan Poole, had a client that drove by this empty house in the "GC". They were very interested so Dan called me to help him get some info on the property. I found out that it was going to auction on May 29th. I found the owners; this was a rental property / fixer upper gone awry. Payments have not been made for several months and the owners were resolved to let it go. 

With one phone call I convinced them it was more beneficial to go the short sale route; it benefits them from a credit perspective (2 years vs 7 years) and benefits the community. So now we have it listed with an offer to be submitted to the bank. Another foreclosure (potentially) bites the dust!!! Stay tuned. 

Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or 

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

2447 E Parkside Dr., Boise, ID

2320 SF 4 Br 3 ba 0.21 Acres 3 Car Garage Asking $330,000

Beautiful views and a steal of a deal! This desireable foothills location is sure to please. Updates throughout the home, daylight basement with separate entrance, fantastic deck perfect for entertaining! A must see.

Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com.

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

1505 E Roanoke, Boise, ID 83712 Asking $349,000

2980 SF 6 Br 3.5 Ba Two Story 0.24 acres. 2 Car Garage 

Asking $349,000

Priced to Sell! Ready to Move In! Come Home to the Foothills. Wonderful mature neighborhood. This home was renovated in 2004. Modern kitchen with a warm and cozy fireplace. Stainless steel appliances. Tiled floors in the master bath. Upstairs loft for the kids. Perfect for entertaining. Shade trees in spacious backyard. Use one of the bedrooms as your home office. BTVA

Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

1805 Overland, Meridian Short Sale Fourplex $325,000

Four year NEW Fourplex in Meridian, ID. Centrally located near two brand new business parks, movie theatre/restaurant complex, largest regional medical center in SW Idaho and freeway. Development has clubhouse, pool and weight room. This fourplex is in a great location. Asking $325,000. All 4 units are 2 br 1 ba. 

Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

1505 E Roanoke, Boise, ID Asking $349,000

Priced to Sell! Ready to Move In! Come Home to the Foothills. Wonderful mature neighborhood. This home was renovated in 2004. Modern kitchen with a warm and cozy fireplace. Stainless steel appliances. Tiled floors in the master bath. Upstairs loft for the kids. Perfect for entertaining. Shade trees in spacious backyard. Use one of the bedrooms as your home office. 

Click here for listing info. BTVA

Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

Pres. Obama's Housing Affordability and Stability Plan

I really hope Pres. Obama is smart enough to know that this first plan of his to rescue homeowners in foreclosure really misses the mark. If you bought your home between 2005 and 2007, there is no help for you. The loans on these purchases are way above the 105% maximum in the plan. As for homeowners in Boise, Nampa, Caldwell, Eagle, Meridian and Kuna Idaho, this plan does not help if they bought homes within those years. 

If you know of someone who is facing foreclosure, please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

Eagle Home Report

If you are looking to buy in Eagle, there are a ton of deals. 

Currently there are 497 active listings of which 40 are REOs and 82 are short sales. If you are interested in my weekly foreclosure and short sale list, please click here or email me to get on the weekly distribution list. If you want to search the MLS, please click here. Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or LinkedIn Profile

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

February Foreclosure and Short Sales Stats

This month I have decided to start reporting statistics on foreclosures and short sales in the Treasure Valley (i.e. - Ada and Canyon County only). These are stats from the Intermountain MLS. Here it goes:

Currently

REO  

595 Active 

247 Pending  

32 Sold in Jan. 

128 Sold in Feb

Short Sale 

1815 Active 

235 Pending  

48 Sold in Jan.  

58 Sold in Feb. 

138 Exp in Jan.  

42 Exp. in Feb. 

What do these numbers mean? They mean that we losing the battle. Banks need to smarten up and accept more short sales. Agents need to get a better understanding of how to work a short sale both from the buy side and list side. 

Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or LinkedIn Profile

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

$114,500 3 br 2 ba Craftsman in Nampa

1304 Sannetta, Nampa, ID 83651

3 Br 2 Ba 2 Car Garage, Single Level, 1406 SF

Short Sale. Currently tenant occupied. Stainless steel appliances and hardwood floors in kitchen. Open and spacious dining and living room area. Nice and new. Centrally located near shopping and freeway access. Please call me at 208 939 9033 ext 2 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com or LinkedIn Profile

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

My War on Foreclosures

According to a report on 60 Minutes last Dec. called The Mortgage Meltdown, the number of foreclosures that we will face in the next 12 - 36 months is frightening. The next wave of loan defaults will come from Alt-A and Payment Option Arm loans.


Watch CBS Videos Online

How do we deal with this next wave? Pres. Obama's Housing Affordability and Stability plan is a start but I think the administrative aspect is unwieldy at best. There are still a huge number of homeowners that will face foreclosure no matter what. Homeowners that don't meet the criteria of the HASP or those that don't have FNMA or FRMC backed loans. If you think about it, it's almost as devastating as terrorists driving jumbo jets into the World Trade Center. A veritable foreclosure tsunami.

How do we stop this wave? Can we stop it or slow it down? To take a line from Pres. Obama, Yes We Can; one real estate short sale at a time.

I know there are thousands of other Real Estate Brokers / Agents like myself that are focusing on successfully closing short sales across the country. The lenders that hold these loans are for the most part, not very helpful. Their organizations are byzantine at best and they seem to be adding gasoline to the fire by not cooperating with the foot soldiers in this war, i.e. - my fellow RE Brokers and Agents across the country.

This is why I am focusing my real estate practice on helping distressed homeowners short sell their properties. This is My War on Foreclosures. Please visit my website IronEagleRE.com, or my LinkedIn profile. 

Regards

Michael Hon

Broker / Owner

Iron Eagle Realty

Certified Short Sale SpecialistTM

Homeowner Affordability and Stability Plan

Dear Readers:

Here is a link to the new Homeowner Affordability and Stability Plan issued by the Obama Administration today. Here is another link to a NY Times article about the plan.

Regards
Mike Hon
Certified Short Sale Specialist
Iron Eagle Realty

I can help you avoid foreclosure

Hi, my name is Michael Hon and I am the broker and owner of Iron Eagle Realty. Did you know that 67% of homeowners don’t know where to turn to avoid foreclosure and don’t know what to do. Did you know that most lenders do not want to foreclose on your home? I specialize in counseling individuals in what their options are in a foreclosure situation, including, potentially staying their home. So if you have missed a payment or might miss a payment, please give me a call at 208 939 9033 ext 2. I am here to help. 

Regards

Michael Hon

Borker / Owner, Iron Eagle Realty

Certified Short Sale Specialist

Bank Owned Properties - Boise, Idaho

If you are looking to buy BANK OWNED PROPERTIES in the Boise, IDAHO area at 70% of current market value, please call me at 208 919 0458 or email me at michael.hon@IronEagleRE.com. I am a Certified Short Sale Specialist^TM. To download "Short Sales 101 for Buyers", please click here.

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale and Foreclosure Specialist
Investment Property Consultants
Direct 208 919 0458

Focused on Building Your Wealth

$149500 Move in Ready SFH in Meridian, Idaho

98 W Woodbury, Meridian, ID 1314 SF, 3Br 2Ba built in 1993. (This is not a SHORT SALE). Move in Ready! Clean as a whistle! Immaculate and private backyard. Perfect for “down-sizers”. RV parking on the side. Low maintenance. Bright kitchen with skylight and split bedroom plan. Fireplace in the family room. Backs up to walking path, no back neighbors. A Must See! Please call me at 208 919 0458 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

>

$160000 Meridian, Idaho - Short Sale 4 br 2 ba 1759 SF w/Big Bonus Rm

SHORT SALE! MAKE AN OFFER! 648 W Woodbury, Meridian, ID 1759 SF, 3Br 2Ba built in 1995. Spacious Two Story Home. Master on main and three bedrooms on 2nd floor. Huge bonus room with cozy gas fireplace. Large backyard, covered patio and built in wet bar. Backs up to walking path and common area. Please call me at 208 919 0458 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Certified Short Sale Specialist
Investment Property Consultant
Office 208 939 9033 ext 2

$145000 Pre-Foreclosure - 4 Br 2.5 Ba w/Office 1929SF - Meridian, IDAHO

SHORT SALE SINGLE FAMILY HOME! HUGE (1929 SF) Tri-Level Home in quiet neighborhood. Four bedroom, two and one half bath. Master on the main level with office downstairs off family room. Close to shopping and schools. Fireplace in family room. Plenty of space with 3 bedrooms on the main floor and one below. Please call me at 208 919 0458 or email me at michael.hon@IronEagleRE.com. Please visit my website at IronEagleRE.com

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Investment Property Consultants
Direct 208 919 0458

>

Free Foreclosure List - Boise, Idaho

If you are looking to buy properties in the Boise area at 70% of current market value, please call me at 208 919 0458 or email me at michael.hon@IronEagleRE.com. I am a Certified Short Sale Specialist^TM. To download "Short Sales 101 for Buyers", please click here.

Michael Hon
Broker - MBA, GRI
IRON EAGLE REALTY
Investment Property Consultants
Direct 208 919 0458

Focused on Building Your Wealth

Iron Eagle RealtyInvestment PropertiesCertified Short Sale Specialist: Foreclosures and Short Sales#links

<b>Iron Eagle Realty<br>Investment Properties<br>Certified Short Sale Specialist</b>: Foreclosures and Short Sales#links

Foreclosures and Short Sales

Short Sale 101 for Buyers

As a buyer watching the real estate market, you are undoubtedly aware that there are more "short sale" properties on the market, at least in many areas. A short sale is a home where the market value of the property is LESS than the loan amount owed to one or more lenders. And buyers often believe that these are the best deals, along with foreclosures. In the Intermountain MLS that encompasses South Central to South Western Idaho, 26% of pending deals are short sales and 10% of all listings are short sales with MORE TO COME. Short sales are and will be a way of life in the real estate market for the next two to three years.

Don't be scared off by these short sale properties as they may turn out to be a great deal for you.
But you need to know a few things before you decide IF you want to pursue a short sale purchase:

I. Be prepared for a short sale to take more time (total time may be 60 days – 90 days) - this is one of the biggest complaints from buyers. If you do not have the patience, don’t go down the path of buying a short sale.
II. It is CHEAPER for the bank to consummate a short sale than take the property back as an REO.
III. You as the Buyer are much better off engaging with a Buyer’s agent who is a Certified Short Sale SpecialistTM than talking directly to the Sellers Agent. The Seller’s Agent is representing the Seller, not the Buyer and will not do the Buyer any favors.
IV. A seller must disclose if the home either IS a short sale or likely will be due to the market value.
V. A short sale MUST be approved by the lender. Even though a seller might accept your offer, it will be subject to approval by the lender
VI. Lender will (likely) send out an appraiser to evaluate the property in light of recent sales - they are looking for market value, too, and you cannot expect a short sale to be a fire sale (i.e., it may NOT be a great deal after all)
VII. Lender must receive hardship letter and other required documents from the seller in order to approve a short sale
VIII. Lender will likely have a checklist of requirements and paperwork required for the short sale process
IX. Lender will likely request that the sale be "as is" and due to hardship will probably not approve any credit for repairs

If you are making an offer:

1. Make sure you make the offer contingent on the short sale being approved by the lender and set a time frame for approval
2. An addendum form is advised to outline the short sale contingency terms and conditions
3. A letter to the seller is also advised requesting written confirmation that the lender has received the hardship letter and other documents as part of the short sale application
4. There is a good chance there will be more than 1 offer
5. It is still prudent (I would say it is ESSENTIAL) to conduct a home inspection even though the lender will probably require an "as is" sale - you still want to know what you are buying and what repairs need to be made

Be sure to discuss issues and questions with your agent before proceeding, preferably someone who has some experience with short sales or is a Certified Short Sale SpecialistTM

I would NOT recommend taking on a short sale purchase without representation by a qualified, knowledgeable licensed agent who is a Certified Short Sale SpecialistTM. There is too much at risk for you, the buyer. And remember, the listing agent represents the seller's interests, not those of the buyer.

Michael Hon
Broker – MBA, GRI
Certified Short Sale SpecialistTM
Investment Property Consultant
Iron Eagle Realty

Footnote: Sections IV through IX and Sections 1 through 4 of this post were re-published with permission from an article by Jeff Dowler of Re/Max Associates in Encinitas, CA. Click here to link to the complete article.

Waiting to Buy may be the Wrong Strategy

The biggest risk for todays home buyers is interest rates not price depreciation. Yes, home prices are under pressure and there is inventory in the market, but waiting to define a bottom in a real estate downturn that is 24 months old and where prices have already adjusted, is very difficult.

The bigger issue and real risk to buyers are interest rates. A sudden rise in interest rates can easily erase the benefit of finding a home at a bargain. Long term interest rates are directly impacted by the health of our economy and inflation. If the economy if struggling or if there are rising expectations of inflation, long term interest rates will rise. Both of these factors are at work in the market.

Why are rising interest rates so bad for me? Because most people finance the purchase of their home and any increase in interest rates will decrease what you can borrow. The impact is significant. Here?s an example:

During the past 45 days (May 1, 2008 to June 15, 2008) interest rates on 30 year fixed mortgages have increased up to 0.75%. Now, this doesn?t sound like a large increase until you examine the impact on a borrower. A 0.75% increase in interest rate for a borrower who qualifies for a $400,000 loan would reduce their qualification to $369,900. This is a decrease of -7.6%. Unless the home has depreciated 7.6%, or the seller cuts you a deal, you've lost by waiting. You'll qualify for less or pay significantly more in interest over the term of your loan by waiting.

No one can accurately predict the future of real estate values, but historical trends tell us that over the long term, real estate is a great investment. In addition, prices have already adjusted in many markets. If you are considering buying a home, now is great time. Interest rates are still relatively low and the risk of rising interest rates is real.

Regards
Michael Hon
Broker - MBA, GRI
Iron Eagle Realty
208 919 0458
Michael.Hon@Iron EagleRE.com

Top 10 Tips To Get Good Deals in Short Sales and Bank Owned Property

Current real estate markets nationwide have created countless opportunities for buyers looking to purchase real estate priced well under market value. Many buyers have turned to short sales, foreclosures and bank owned (REO) properties hoping to be able to purchase real estate for pennies on the dollar. The buzz in distressed real estate has been perpetuated by urban legends; someone’s brother’s, friend’s, uncle’s, co-worker’s dog who bought a home at 10 cents on the dollar. This buzz is further fueled by late night infomercials filled with testimonials of people who "bought a $500,000 home for $12" and then try to sell you the secret program that teaches you to do the same. This article is intended to give you the straight scoop and also tips that will help get you a good deal.

How Low Will They Go?

People have a major misunderstanding of what they expect to accomplish when trying to purchase distressed or bank owned property. I emphasize trying because those same people end up never buying anything.

So how low will the bank go on a short sale or REO? If you’re hoping for a number, you can stop reading. If you’re hoping to steal the property, you can stop reading. If you’re hoping to buy property for 50% of market value, you can stop reading. If you’re hoping to wait and buy the property for less by dealing directly with the bank, you can stop reading.

There are four things you need to understand: 1) The bank only accepts short sales when they believe it’s in their best interest! 2) Banks do not voluntarily accept losses. 3) Banks will always try to limit their losses. 4) Banks know the fair market value of the property.

These four are in no particular order. If they were, number four would probably be number one. I talk to people on a daily basis who want to make offers so low, I can only assume they think the bank has no idea what the property is worth. Don’t be so naive. The bank has a legal obligation to get the highest amount possible for any property. The bank can even be held liable for the difference if they are negligent in approving a sale that is too far under fair market value with no justification. Stories of someone picking up a property at 50% of market value are either urban legend or missing critical factors that played a part in the purchase.

You Can Get Good Deals In Distressed Real Estate

Yes you can. Just be realistic. If you think you can purchase real estate at a 50% discount, you’re not realistic. There isn’t one single situation, no matter how desperate, that would cause an owner to sell their home for 50% under market value when an experienced Realtor can sell that same house for 30% under market value in the same amount of time under the same conditions. Anyone who tells you they did is leaving out part of the story. However, it is very possible to buy distressed homes at a 25% discount. Anyone who tells you a 25% discount isn’t a good deal, doesn’t know real estate or investing in it and you’d be better off steering clear of the real estate advice they have to offer. As a matter of fact, a 25% discount on anything you buy, whether it be gasoline, groceries or a car, is a great deal.

I see so many people that won’t buy unless they can get it for no more than 60 cents on the dollar. They pass on property that’s 25% under market value. Big mistake, here’s why:

Let’s assume there are 10 properties with market values of $100,000 each. 9 of these homes can be purchased for $75,000 each (25% discount) and one at $50,000 (50% discount). This is a fair ratio for illustration purposes. In the real world, it could easily take you more than a year to wait it out for the 50% discount. It’s very possible that you never find something discounted that much.

Investor A buys the 9 homes for $75,000 each

Investor B buys the 1 home for $50,000

Assuming a 5% annual appreciation for each property, this is what each investors real estate portfolio would look like 5 years later:

Investor A’s Equity = $473,653 ($100,000 original FMV x 5% annual appreciation x 5years - $75,000 purchase price x 9 properties)

Investor B’s Equity = $77,628 ($100,000 original FMV x 5% annual appreciation x 5years - $50,000 purchase price x 1 property)

Investor B’s strategy to wait for the great deal cost him nearly $400,000. He made the mistake most amateur investors make; focusing on only one thing - discounted value. Investor A created wealth through leverage. Professional real estate investors know that leverage trumps discounted value every day of the year. Leverage is so powerful, had Investor A bought all 9 properties at full market value ($100,000), he still would have equity of $248,653 or triple Investor B’s investment with a 50% discount. In this market, you can buy real estate at a 25% discount all day long and maybe never find the 50% discount.

Top 10 Tips For Purchasing Short Sales and Bank Owned Property

1. Be realistic. Reread the tale of two investors above if you still don’t understand how being unrealistic can and will cost you dearly.

2. Get off the fence and get in the game. If you’re waiting for the market to drop, reread the tale of two investors above to remind you of how much waiting can cost. Learn more about timing real estate markets here: Secrets for Timing The Real Estate Market

3. Know the true market value of your target property.

4. When making an offer, be able to support the amount of the offer. Pulling a low ball number out of thin air isn’t going to work. If you don’t understand why, reread the four things you need to understand in bold type above.

5. In a short sale, the bank will only accept your offer if it’s a better alternative to foreclosure. This means that the bank will take the fair market value of the property in its current condition, subtract the costs of foreclosure and selling it as an REO, and the "fudge factor". The "fudge factor" covers the costs that will accrue if the bank has to take the property back at foreclosure and includes lost opportunity, risk of vandalism of the vacant property after foreclosure, declining market risks and time to sell as an REO. The "fudge factor" will be the only area the bank will be willing to negotiate. This is the supporting amount mentioned in tip #4.

6. In REOs, the bank can be more "motivated" during certain times of the year. They will generally be more likely to entertain low offers at the end of the month, quarter and year. The banks want to get real estate off their books and these calendar targets can create motivation. But remember, be realistic. Just because it’s nearing the end of the year, doesn’t mean the bank is going to jump at an offer that’s ridiculous.

7. Having access to REOs before they are listed can give you a big advantage. How do you get this information? Here’s one way: Idaho REO Bargains

8. Don’t get emotional or stuck on any property. Real estate investing should be run like a business. Keeping emotions out of it allows you to make rational decisions.

9. Understand and accept the risks involved with these types of properties. To get the good deals, you will have to accept risks involved with them.

10. Retain the help of an expert Realtor with experience in these types of properties to help you. Don’t think you can do it yourself. That mindset can cost you thousands. Besides, as the buyer, you don’t pay for their services.

Michael Hon
Broker - MBA, GRI
Certified Short Sales Specialist
Iron Eagle Realty
208 919 0458
Michael.Hon@IronEagleRE.com

Certified Short Sale SpecialistTM

Within every major market shift lies opportunity. Although Idaho has not been hit as hard as California or some of the other larger states, short sales and pre-foreclosure properties currently make up 10%+ of the Boise, Idaho MLS. That number will continue to grow in the next two to three years.

I recently received a new nationally recognized designation of Certified Short Sales Specialist after taking an intensive two day class focused on all aspects of acquiring and listing short sale properties. In addition to my experience with short sales, this class afforded me a wealth of working knowledge that only a very small percentage of real estate professionals in our area hold. With the additional working knowledge that this designation brings, I can assist you in purchasing properties in Idaho at 70% of market value or less.

Banks do not want properties back as REO's. It will cost the bank 25% of the loan amount (on average) to take the property back and sell it as an REO. Banks want to avoid this scenario.

As I mentioned, there is money to be made with every major market shift. If you are interested in buying properties at 70% of current market value or less, please call or email for access to a list of local short sales. You can reach me at 208 919 0458 or email me at Michael.Hon@IronEagleRE.com.

Idaho foreclosures down from February, up 85% from year ago

Nationwide the trend is still negative; inventories of new homes in Ada and Canyon counties are slowly declining.

The number of Idaho homes in foreclosure in March was down 15 percent from the previous month, raising hopes that defaults may be ebbing.

RealtyTrac Inc., an Irvine, Calif., company that tracks the number of foreclosures nationwide, reported Tuesday that there were filings against 657 Idaho properties in March. While down from February, that's still 85 percent ahead of the comparable month a year ago.

A separate report last week said Idaho homes in foreclosure are now reaching the auction stage in massive numbers. But auctions by trustees follow initial foreclosure filings by several months, and as the number of foreclosures declines, the number of trustee sales is expected to follow suit.

The decline is most noticeable in the Treasure Valley. Ada County had 226 foreclosure filings in March, a 21 percent drop from 286 in February. Canyon County had 162 filings, down 24 percent from 212.

"It could be a sign that we could be getting close to the bottom," said RealtyTrac spokesman Daren Bloomquist. "But it's hard to tell after just one month."

Nationwide, the trend is still negative. RealtyTrac said 234,685 properties were in some stage of foreclosure in March, a 5 percent increase from the previous month and 57 percent higher than March 2007.

Idaho's foreclosure problem is being driven by subprime mortgages made at the height of the Treasure Valley building boom, said Marc Lebowitz, executive director of the Ada County Association of Realtors.

Research by the National Association of Realtors shows that the foreclosure inventory in Idaho for prime mortgages moved from 0.34 percent of all loans in the third quarter of 2007 to 0.42 percent in the fourth quarter, Lebowitz said . For subprime mortgages, foreclosure inventories increased from 3.78 percent to 5.08 percent of all loans serviced in the state.

Boise River Properties, a local real estate brokerage, expects to see fewer foreclosures now that the boom is over and buyers are not being encouraged to use exotic financing to buy more house than they can afford.

Caron blamed the foreclosure boom on lax lending practices and individual buyers and investors who used 100 percent financing to buy homes that were anywhere from $110,000 to $200,000 more than they could afford.

"Houses in the $250,000 range are moving," Caron said. "And we're talking with banks who work with developers, and they will finance houses in that range. And when you consider that the average two-income family in the Valley is $56,000, $250,000 is what they can afford."

He said the idea that there are "super bargains" to be had at auction sales is "non-existent." A bank with a home with an assessed value higher than the amount owed on the property will take the property back and hope to get most of its money back when the market ultimately rebounds, he said.

GOOD NEWS FOR SELLERS: NEW-HOME SUPPLY FALLS

Shaun Tracy, an associate Realtor with Re/Max Capital City said the number of newly constructed homes for sale in Ada County has fallen from 1,594 on Feb. 6 to 1,252 as of Monday.

"That's good for the (overall) inventory of new homes because builders are not adding to that number," Tracy said. "As long as they don't do that, then it (the inventory) should eventually come back into balance."

The same is true in Canyon County, where the number of new homes on the market has fallen from 713 on February 8 to 633 on Monday, Tracy said.

"The numbers are decreasing," Tracy said. "Not by leaps and bounds, but they are decreasing."

Iron Eagle Realty and Spectra Funding

Iron Eagle Realty and Spectra Funding have joined forces to offer our clients both real estate and loan services in the State of Idaho. By offering both real estate services and loan products, Iron Eagle Realty makes purchasing real estate a streamlined process. Through our partnership with Spectra Funding Inc., a mortgage banking company, we are committed to helping you find the right mortgage product for your needs. Because our partner is a mortgage banker, not a broker, we have the funds to close on your property. We understand that every borrower is different, and we offer a variety of products to meet your individual requirements. We make the process of securing a mortgage simple and straightforward by offering you the latest in financial tools that enable you to make sound financial choices. Please click here to start an online application.

Valley home sales drop 37% in first quarter, Average prices are down as inventories bulge to 12%.

First-quarter 2008 Treasure Valley single-family residential home sales plunged 37 percent from a year ago, according to industry statistics released Friday.
Experts said many homes that were sold in the last quarter of 2007 closed in the first quarter of 2008, but not enough to rescue the quarter.

"That tells you how dismal the first quarter of 2008 really was," said a real estate agent at John L. Scott Real Estate.

The Intermountain Multiple Listing Service, which tracks home sales, reported that 1,651 homes changed hands in Ada and Canyon counties from January through March, compared with 2,605 for the same period a year ago.

"I'd say that in the 14 years I've been selling real estate in the Treasure Valley, I don't think I've seen numbers as pitiful as they seem to be be," said an associate broker with Re/Max Capital City. "Things have slowed to such a crawl that a lot of Realtors, lenders and builders are not going to make it in this environment."

He knows of a couple who are both Realtors and who have just one sale between them this year. "And this is beginning to look like the new normal for now," Tracy said.
Median home prices have taken it on the chin, too.

In Ada County, the median price for a single-family home in March was $210,000, up from $205,000 in February, but down 7 percent from $224,900 in March 2007.
Canyon County's median price of $149,900 last month was down 2 percent from $152,990 in February and down 7 percent from $163,300 in March 2007.

However, median prices in both counties were still well above 2004 levels. Ada County's median price in March was 38 percent higher than the $151,881 recorded for the same month in 2004, while Canyon County's was 43 percent above the March 2004 median of $104,345.
Meanwhile, the bulging inventory of unsold homes remains a problem.

According to MLS statistics, there were 7,195 homes listed for sale in Ada and Canyon counties at the end of the first quarter, about 12 percent more than the 6,448 listings at the end of 2007.
Buyers continued to search for bargains below the $200,000 mark. Among the hot spots for sales in Ada County were the 138 sales in the Southwest Boise/Meridian area, where the median price of a home was $198,000. The Boise/Garden City area had 121 sales, with a median price of $190,000.

Scott Gray, also with Re/Max Capital City, said he is seeing more interest in Boise properties as the price of gasoline keeps rising. "It's getting a little more costly to commute to Boise," Gray said.

Another problem, he said, is that bankers have become more stringent in their lending practices, even for potential homebuyers with good credit. He speculated that as banks get back on their feet they will be more likely to start making home loans again. The second quarter will give a better indication of how the rest of 2008 will go, he said.

"There is a lot of pent-up demand out there," he said. "But people have been sitting on the fence because they were afraid that home prices would go down even further, or because they couldn't qualify."

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 editorial@idahostatesman.com.