WORD: Days on Market (DOM/D.O.M.)

And the WORD for Today is...

DOM stands for “Days on Market” and is used primarily by real estate agents to indicate the number of days between when a property was first listed and when it eventually closed. You would think this would be simple math and not likely to be misleading, but the reality is that it (like most things) can be manipulated to give a more favorable picture than the actual truth.

First, let’s discuss WHY the number is important. If you are a buyer, you are likely interested in whether or not the listing is a new one (with a low number of DOM). This might indicate the seller has not gotten too worried about getting an offer and may be less willing to negotiate. On the flip side, a larger number of days on market could very well signify a seller who is starting to worry about the chances of getting the price they want and has become more willing to negotiate as a consequence.

Next, let’s discuss how this is one of those times when what you see may be an illusion. If the property has been listed with Agent Y for 95 days, then the listing sheet will show 95 DOM. But suppose the property has previously been listed with Agent X for a full 6months, 180 DOM but the listing expired without being sold. The cumulative DOM is actually 180 + 95 = an astonishing 275.

A seller might prefer you not be aware of the lengthy timeframe the home has been marketed, without success. Many REALTORS would also prefer that you not have access to that information. Only recently have real estate boards begun changing their guidelines to include CUMULATIVE days on market as information which can be accessed by the general public. While the information has always been available for an agent who chose to check the listing history on a property, a potential purchaser could not gain access to this information which was controlled by MLS systems.

As a consumer advocate, I believe it is only appropriate that the potential buyer have full disclosure of ALL pertinent facts. It is certainly important to have an opportunity to question WHY a home has been marketed for over 9 months and not been sold. The answers to the WHY could shape the decision of this potential buyer—whether the issue was the price, condition, some external factor, whatever it might be. Those boards which have chosen to fully disclose this important information are to be commended; those who still fail to do so should consider the implications of providing less than full disclosure a material fact to the public.

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Short Sale Fast Facts for Consumers

Short Sale Fast FACTS for Consumers

1. Short Sale could be your solution—but it has some pitfalls

Get informed and Get started

2. Short Sale is an Option Not a RIGHT

You will need to “qualify” for the option to dispose of the house by using a short sale.

Most lenders use the same basic criteria—what I call the “Universal Hardship Test”

• Was the default ‘trigger’ something beyond your control
• Did the trigger lead to an increase in expenses or a decrease in income?
• Are you still an occupant in the home secured by the loan?
• Have you depleted all of your assets available to make mortgage payments?
• Are you willing to pull together the documents required by the lender/guarantor to determine if they believe you qualify for a workout?
• If there is a co-borrower, are both parties committed to this workout attempt?

3. Finding a competent REALTOR could be difficult

A short sale is a Speciality transaction. You need to find a

REALTOR who:

• Works full-time—yes, even in today’s climate
• Is experienced in short sales (means they closed)
• Is familiar with your area and price point
• Whom you feel comfortable with
• Who is able to demonstrate to you what the value of your home is compared to similar homes in the neighborhood
• Has the ability to effectively market your home
• Is pleased to share with you that they have had specialized training in Short Sales (I mentioned this last, because if they haven’t mentioned by now, it is because they don’t have any—Not a good sign)

4. You can list the home for short sale—BEFORE the lender approves the

short sale—

**As long as you indicate that “all offers are subject to lender approval” This should be included on your listing contract, on the seller disclosure form and within the comments on the MLS sheet

**You can’t ACCEPT and CLOSE without the lender’s approval but you don’t have to wait to get started. Why not start today? Is your house ready? Do you have the documents needed for the hardship package?

5. Might leave you with a deficiency—which could be used to get a judgment against you

Negotiate to get the lender to agree to “waive their right to a deficiency judgment” as part of the short sale approval letter.

You should NEVER assume that because the lender agreed to the short sale that they have waived their right to pursue you for the shortage.

If it’s not in writing—signed by an authority—you should expect them to pursue you for the shortage.

6. Foreclosure process—will most likely continue, even while you have the house on the market for sale

FHA loans which are subject to HUD regulations—require that the foreclosure process STOP while the home is marketed for short sale

Foreclosure action continues on ALL other loan types

7. Listing Termination—can be mandated by your lender when you are in default

The Lender is not a party to the listing contract and you might logically assume that therefore they had no say so about what does or does not happen with the attempt to sell your home.

Unfortunately, you would be mistaken.

Government guarantors, HUD, VA, USDA, Fannie Mae, Freddie Mac, and Rural Development have the right under Federal regulations to compel you to withdraw the listing IF:

You are cooperating with showing the property as a show of ‘good faith’

Title issues are uncovered which would prevent the transfer to a new buyer

The condition of the property is such that a sale is unlikely

You have failed to comply with request for information to determine your eligibility for a workout. Remember: This is an Option, not a RIGHT.

8. Second Liens can present a challenge—also known as a ‘stumbling block’

Second lien holders seldom initiate foreclosure; they block short sales all the time with their obstinacy. You cannot transfer real estate to a new buyer when there is a second lien holder without their cooperation.

They must either:

a. Release the lien

b. ‘Lift’ the lien and permit the closing

Usually they can be enticed to do one of these things, preferably the first. Many will accept a token payment as a settlement for the obligation if foreclosure is imminent and they stand to get nothing after the lien is wiped out. Other they may agree to an unsecured loan in exchange for

their cooperation.

Your lender may make a contribution toward getting this second released, especially if you have a government backed loan. Their regulations have a stipulated amount set aside for this purpose. Get your facts and get going.

9. Tax Implications—Didn’t Your REALTOR mention that?

When there is a deficiency (difference between what you owe on the house and what the new buyer is willing to pay for it) you are taxed on that amount as though you received it as a gift.

IRS rules require that the lender provide this information directly to IRS for tax purposes.

You should NEVER assume that because the lender agreed to the short sale that they have waived their right

10. Now about signing those papers…….WAIT

I believe strongly that the seller of a property which is upside down would do well to pretend their fingers are broken once they have signed the listing contract and seller disclosure form until Mr. Smitherman, the supervisor at the bank, has:

a. Approved their short sale, with all continguences

b. Given them permission in writing to sign something

As a trainer, I take the position that ‘lender approval’ means getting the lender’s approval before you agree to anything with a potential buyer.

That means do not sign a purchase agreement, no matter what contingency clauses have been included by a so-called sharp REALTOR. Do not sign a counter offer. I said, ‘pretend your fingers are broken until the supervisor at the bank tells you to sign something.

If you sign BEFORE he tells you to, you are agreeing to terms which he has not yet agreed to. You cannot perform (or deliver the deed to the house) without his agreement. He may:

a. Select a difference ‘potential purchaser’

b. Counter and ask for a lot more money

c. Go ahead and foreclose, then you have nothing to sell.

Don’t get ahead of the bank. “Lender approval required” means the bank gets to decide everything: to whom we will sell, and for what amount, on what terms. Don’t allow yourself to be lulled into thinking it’s okay to make an agreement and then get his approval. That is risky business. Remember, your fingers are broken.

Please share today’s blog with someone you know who is struggling and not sure what steps to take next.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Pended House—Available?

Q: My wife found this house which we really, really love from looking at the outside and peeping in the windows. When we called our agent to tell her we wanted to look at it she told us ‘It is pended’. If a sale is pending on a house, can I still take a walk-through with my agent and if I want it, make an offer?

A: Yes and Maybe. Real estate is changing at break neck speed these days and things which were iron clad just a few months ago are not so concrete any more. Coupled with the fact that all real estate agents do not understand exactly what certain terms mean, causing them to misuse terms and confuse the general public as well as other agents.

“Pended” is SUPPOSED to mean that there is an accepted offer between a bona-fide buyer and a seller. It is SUPPOSED to mean that the parties have agreed on all terms and are waiting for a closing date in the near future. However, it does not always mean that in today’s market. Today there are agents who “pend” properties which have been listed as potential short sales once they have an “offer in hand”. Such an offer must always be accepted not only by the homeowner who is upside down and possibly in default, but also by the lender who will be ‘shorted’ at a potential closing. When this is the case, an offer being submitted does not equate to an acceptance by the lender. Additionally, the fact that the homeowner who is attempting to sell has agreed, does not necessarily mean that the lender will go along with that specific offer.

Under the scenario I just described, it is possible to have an offer ‘pended’ in your local mls which has not been lender approved and which could be viewed, followed by an offer being written which the lender could entertain. On short sales, the lender reserves the right to consider all offers until THE LENDER has granted approval and ordered a closing. They reserve that right up until the time of the actual closing

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth #5

Myth #5: There should be no ethical concern if you inform the co-op agent at the time the lender approves a short sale that there isn’t enough money there to pay the percentage of commission which your brokerage firm advertised.

Reality: If you have advertised a co-op fee to promote the sale of a home, then you should be prepared to pay whatever you advertise. If you do not do so, you are begging to be taken before the Ethics committee.

Reason: You have promised to abide by the NAR ethical standards, one of which states you will deal fairly with your fellow agents. Is it fair to promise me (through your advertising) $4,700.00 if I bring a ready, willing and able buyer for your listing and then tell me at the last minute you made a little mistake and I will only be getting $3,200? While the lender is controlling what commission they will ALLOW on the short sale, they do NOT control what you advertise, what is to be paid to my brokerage firm, nor what your client agreed to pay for the service of having their home listed and sold. I understand the short sale game; that does not change the fact that I am legally and ethically entitled to receive the amount of commission you advertised. As a buyer’s agent my relationship is with you and your brokerage firm. I am not a party to, nor do I care what contractual concerns or restrains are involved, on the listing side of the transaction. It would be extremely helpful if real estate boards got some clarity about WHY lenders can control the amount of commission paid from proceeds and then made the necessary accommodations to address the new reality. Changes to commission policy, mls guidelines for advertising, data input sheets, and training for practitioners are sorely and urgently needed to address this matter.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)