Effects of Short Sales and Foreclosures on your Credit

Here’s an article I found regarding the effects of delinquencies, Short Sales and Foreclosures on  our credit. The article was written well so I am just passing it on to you. I hope you find it of value.

Here’s what we already knew:delinquencies are bad, severe delinquencies are usually worse, and recent and frequent delinquencies are the worst. As a result of study results, we also now know the following:

For someone with a FICO score of 680…

A 30-day delinquency and a 90-day delinquency have the SAME score impact.
Both of these events will turn the 680 into a score somewhere between 600-620.

A short sale (settlement), with a deficiency balance, will have the SAME
score impact as a foreclosure. The events will turn a 680 into a score
somewhere between 575-595.

A bankruptcy is the worst thing that can happen to your FICO scores. It will
turn a 680 into a score somewhere between 530-550.

The amount of time for your score to fully recover back to a 680 is 9 months
for a 30-day or 90-day delinquency, but it takes much longer to recover from
anything worse. Short sales, settlements, and foreclosures all take three years
to fully recover. A bankruptcy will take you five years to recover.

For someone with a FICO score of 780…

A 30-day delinquency and a 90-day delinquency have a different score impact.
The 30-day late turns the 780 into a score somewhere between 670-690. A 90-day delinquency will turn the 780 into a 650-670.

A short sale (settlement), with a deficiency balance, will again have the
SAME score impact as a foreclosure. The events will turn a 780 into a score
somewhere between 620-640.

The amount of time for your score to fully recover back to a 780 is much
longer than the amount of time for your 680 to recover. It takes three years to
recover from a 30-day delinquency and seven years to recover from a 90-day
delinquency, a short sale, or a foreclosure. It will take you seven to 10 years
to recover from a bankruptcy.

What I found to be especially important is the fact that a payment that’s
even just one cycle past due (a 30-day delinquency) has a profound negative
impact on your scores. This is especially problematic for consumers who have
chosen to be delinquent on their mortgages in an attempt to get help under the
Making Home Affordable plans.

“Consumers may be told in some cases that they have to go late before they
can get any help under one of the HAMP (Home  Affordable Modification Program) programs,” says Joanne Gaskin, Director of
FICO’s Global Scoring Unit. “It’s important for them to understand that even a
30-day late can be very damaging.”

This study also seems to finally put to bed the ongoing myth that short
sales are better for your credit scores than foreclosures. “There seems to be a
perceived view that a short sale is going to be significantly different to your
FICO score than a foreclosure”, Gaskin says. “While there’s a minor difference,
it’s not significant.”


Price Reductions When Selling Your Home

– Home Selling in Pleasanton –

Q: How many times do you recommend price reduction if I am not getting offers or an increase in showings in a model like condition home? I have already reduced $20K and I am competitively priced with the exact floor plans in community. My home location is on a busy street but has largest useable patio and I put over $25K in upgrades. My list price reductions seem to force other units for sale to reduce as well. No increase in showings or no offers, plus, little activity in other for sale homes in my community. If my home does not sell, my husband and I are OK to live here for another year. How many price reductions are recommended? Seems like it is just causing value of community to decline.


Home Seller
Pleasanton, CA
A: With the current market conditions, the answer to this questions is one! Pricing should not be a guessing game or something left to think about if a home doesn’t sell. There needs to be a pricing strategy when you list your home. Reductions should coincide with dates and marketing events.  When a market is slow it is important to get offers on your home ASAP. Activity dramatically slows after the 3rd week a home has been on the market. In addition, studies have shown that a home priced just 10 percent over the market value will decrease the percentage of qualified buyers that would purchase the home by 30%.

The larger useable patio and 25k in upgrades rarely equates to a higher value. It may however make a home more desirable when compared to the competition. Along those lines making your home more desirable to buyers may be your best option at this point. Pricing isn’t always enough to move a home. These days assisting the buyer at closing by offering credits, paying for inspections or purchasing a multi-year home warranty for them may be of more value than lower pricing. A 25k price reduction only equates to $150 dollars per month and no help to out-of-pocket costs at closing. Paying for inspections and appraisals (at close of escrow and only if escrow closes) along with a buyers credit of $5,000 may be much more enticing. Remember, not everyone is motivated by the same thing!

Pricing is not as straight forward as it may seem. The pricing strategies in an up market will differ dramatically from those of a down market. Furthermore, homes that are in pristine condition will generally require less creative pricing than homes requiring a  bit of TLC.

Best Regards,

Eric Soderlund
Steven Anthony Realty

5 Ways to Ensure Your Offer is Accepted With Short Sale and Foreclosures

Ok, are you ready for the “Top Secret” way to ensure that you are the chosen offer for that short sale or foreclosure. Here it is: Bring cash and over pay! Yup, that’s all you have to do.

 Now for those of us living in reality that don’t have boat loads of cash and actually want to pay fair market price, there are some ways to tip the odds in your favor. I work with many buyers in the San Francisco East Bay and quite a bit of the inventory consists of short sales or foreclosures (REO). This is why I put out the effort to become a certified Short Sale Foreclosure Resource (SFR) through the National Association of Realtors (NAR).

Here are a few things I tell my clients.

1) Be First

Be quick on the draw! This is especially true with foreclosures but also with short sales. With foreclosures, the realtor may have dozens or even a hundred homes he must move for the lenders. If a solid, fair price comes their way, they may submit it to the bank without waiting for additional offers. With Short Sales, the seller is probably facing a time crunch. If they don’t get an offer into their lender, they may be facing foreclosure!

2) Be Realistic

There are no “steals” out there. The homes currently for sale may never sell for these low prices again, but they all sell for what they are worth or Fair Market Value. If you really want the home I suggest you put in your best offer the first time. Especially if you are in a market where the average Days On Market (DOM) is low. If a home has been sitting for months, then try to bid low. But if it’s been sitting, there’s probably a reason for it. Use your Realtor as a resource. Get them to do comparables (CMA) on homes that interest you. Understand the market you’re in and the competition.

3) Keep it Simple

Keep the contract simple. You are better off offering a lower price than to ask for a bunch of repairs to be done or credits at closing. That said, if you offer less, make sure that your realtor explains why your offer is fair. Note the repairs that need to be done to bring the home up to par with the rest of the inventory on the market. People selling their home short generally don’t have the money or motivation to do these repairs and lenders don’t want the hassle. Also, make sure they are repairs and not just things you would like to upgrade.

4) A Quick Close

Try to shorten up any of the timelines in your offer without jeopardizing yourself. Have your Inspectors picked out and ready to go. They should be able to be done in 10 days or less instead of the standard 17. Ask your lender if the loan can be completed in less time than other lenders. If you can shorten the contingency periods and the Close of Escrow (COE) date on the contract, your offer will stand out. Make sure your realtor goes over the purpose of contingency dates. They are your safety net!

5)Look Strong

The more you .can put down the stronger your offer is. The more you are able to put down, the smaller the loan. This shows that you are serious and in a good position to close the deal. Be careful though. Don’t over extend. It’s always good to have some emergency funds. Do what makes sense for you.

Following these guidelines will tip the scale in your favor. Let me know what you think of these suggestions. I would love to hear your purchasing war stories. Leave a comment or contact me direct at EricS@steven-anthony.com

 For more information on buying and selling real estate go to: http://www.trulia.com/blog/ericsoderlund/2011/03/six_questions_and_answers_on_short_sales

 Best regards,

Eric Soderlund                                                                                                                       Realtor, GRI SRES, SFR                                                                                                        Steven Anthony Realty                                                                                         www.esoderlund.com

6 Options For Homeowners That Can’t Make Their Payments

 Let’s start by recognizing the fact that if you are having difficulties making your mortgage payments you’re not alone. The total share of all distressed property types sold statewide increased in February to 56 percent, up from 54 percent in January and up from 55 percent in February 2010.  Any home sold as a short sale or Foreclosure is considered distressed.

For many, this is a new and scary problem. And as with most of our serious life problems, action will be required to get through it in the best way possible. But what is best for your situation? For that matter, what are the options?

1. Refinance: This is for people that wish to keep their home. The “Hope For Homeowners Program” available through HUD is a great place to start. That program can be found at www.hopenow.com. If you qualify, you can take advantage of today’s low rates and lower your monthly payments.

2. Lender Workout: Again, this option is for those that wish to keep their home. There are generally two options here.
a. Forbearance: This is when the lender spreads the back payments, fees and penalties over a fixed duration.
b. Loan Modification: Here, the lender will reduce the interest rate to lower the payments. Back payments are rolled into the loan. This is usually only done if the rising interest rate is the reason for the difficulty in paying the mortgage. In cases where an Adjustable Rate Mortgage (ARM) has gone up, this may be an option.

3. Sell and Bring Cash to Closing: If you owe more than the home will sell for and you want to sell without harming your  credit, you can make up the difference at closing. While not an option for many, it is an option.

4. Dead In Lieu of Foreclosure: Here, the borrower literally trades the property in for exchange of cancellation of their note. This is generally accepted by the lender when the foreclosure process is long and this will lessen the expenses of the lender. An attorney is required for this option and the sooner it is explored the more likely it is to be successful.

5. Short Sale: This is when you sell the property for less than is owed. It is the prevailing option theses days over foreclosure. It is generally less detrimental to ones credit than a foreclosure. There are certain requirements for this to work which I discuss in :
How The Short Sale Process Works.

6. Foreclosure:  Here you are evicted from your home if you don’t leave on your own and the bank takes possession of your property. This is usually not a good option. Unfortunately, if you have ignored your lenders letters and calls for months and have not begun a short sale process this may be the reality. This is why it is so important to get informed and take action. If you do believe you are in the foreclosure process contact a real estate attorney. The damage of a foreclosure to your credit is far worse than that of a Short Sale.

If you are having difficulties take action. There are people and programs just waiting to help you.
Get informed and know your options.

I hope  you have found this information of value. Your questions and comments are always welcome.

Best Regards,

Eric Soderlund
Stenven Anthony Realty
“YourShort Sale Resource”

When to Buy and How Much to Pay? 4 Things Buyers Should Know

The saying goes “A home is worth what it sells for” and this is true most of the time. But how do you know when to buy and how much to offer? Here are 4 key factors to consider before  making your purchase in the Bay Area.

1. What are “like” homes selling for? Have your Realtor do a CMA or Comparable Market Analysis. Realtors use past sales of like homes (comparables) to come up with a homes value. They gather this data from their MLS. Some of the key factors I use in a CMA include:
• Distance from the subject home.
• Type of residence, Single family vs. Multi Unit.
• Square footage of the home.
• Number of bedrooms, baths and garage spaces.
• Age of the home.
• Amenities in the home.
• Condition of the home and upgrades.
 (To learn more about how the CMA Click Here)

2. What are the current and forecasted economic events?
• What is the unemployment rate? Is it rising or falling?
• Are wages increasing or decreasing?
• Consumer confidence
These factors affect the ability and perceived ability to buy a home. If these factors are positive, demand may be higher than supply and prices may be on the rise and purchasing sooner may be wise. If the indicators are negative, then the trend may be lower prices in the near future. Now more than ever these factors should be considered when you are deciding whether to buy now or wait.

3. Stay informed on mortgage rates and trends.
• The ease of which people can obtain a loan will also have an affect on supply and demand. Part of the current situation is that the Subprime lending market has all but vanished. This has taken many would be buyers out of the market
• Conversely, low interest rates are making it possible for people with less income to qualify for loans. This will put pressure on demand and contribute to rising prices.
Contacting a mortgage professional and establishing a relationship is one of the first things you should do when considering a home purchase. Get your credit reviewed early on. This will allow you to repair or strengthen your score prior to needing a loan. Even good credit can be made better which will lower your rate and save you money. It is never too early to make this contact. This person will be able to send you updates on rates and provide insight to predicted future trends.

4. Know the amount of inventory and DOM (Days on Market) in the area you’re interested in. We are again speaking to supply and demand.
• If homes are being purchased after just a few days or weeks of being on the market in a given area, then prices will rise in that area even if the surrounding areas are dropping in value.
• If homes are sitting for months in an area, supply is likely to rise in that neighborhood. Sellers will become desperate and lower prices and buyers will take advantage of the large supply and offer less. Both sides will be playing a role in decreasing prices. Location, Location, Location!

Purchasing a home is often the largest investment a you will make. Small changes in the economy or mortgage rates can raise or lower the cost of this purchase by thousands. In addition, you’re realtor needs to do his homework as to advise you of the correct price to offer. I hope this information is of value to you. Your questions and comments are always welcome. Please contact me EricS@steven-anthony.com.

Best regards,

Eric Soderlund
Realtor, GRI, SRES
Steven Anthony Realty

8 Factors to Determine Home Prices Using a CMA

When you go to buy or sell a home the biggest question will be “What is it worth”. Buyers want to ensure they don’t pay too much and Sellers want to get the highest price possible. It’s the job of your Realtor to ensure this happens. This is primarily done by constructing a CMA or Comparable Market Analysis.

The CMA is a study that takes recent sales in a given area and timeframe and compares them to the subject property. The subject property being the home that the Seller is trying to sell or the Buyer wishes to buy. While the CMA has guidelines and standards, it is by no means a template system that a Realtor simply plugs numbers into. It is part science and part art.

Some of the key factors I use in a CMA include:

• Close of Escrow Date. Only sales that have happened within 6 months of constructing the CMA should be considered. However, there are times when I am forced to go back further due to a lack of comparable sales in the target area.
• Distance from the subject home. For a home to be a comparable it must be within a 1 mile radius of the subject property and considered to be in the same neighborhood. Again, this rule is sometimes stretched beyond the 1 mile limit due to lack of comparable sales.
• Type of residence, Single family or Multi Unit. A condo can not be used as a comparable if the subject home is a Single Family Residence even if it is the same size and has the same number of bedrooms and bathrooms.
• Square footage of the home. This will translate to a price per square ft. Larger homes will generally have a lower price per square ft. than a smaller home in the same neighborhood. This is due to an areas price ceiling. Meaning that buyers will only pay so much to live in a given area no matter how large the home is.
• Number of bedrooms, baths and garage spaces. Bedrooms and baths have a value of their own. So two homes of the same size will have a different value if one has more bedrooms or baths. The value of these extra rooms will vary depending on the neighborhood.
 Age of the home. A home that is built in 1950 may be worth less than a home built in 2010 even if they are comparable in every other way.
(This is not always the case however)
• What amenities are in the home? A/C, central heating, pool, spa and appliances will all factor in to the homes value.
• Condition. Is the home updated? Items such as Landscaping, roof condition, cabinets, counters, floors, windows, molding and recessed lighting are all factors that will adjust a homes value up or down when compared to others. Again, there is no set amount for these features. It will vary from neighborhood to neighborhood.

All these factors go into determining the value of a home when using a CMA. Homes are chosen as a comparable then dollar amounts are added and subtracted depending on what the home does or doesn’t have. When done right, it is a very comprehensive way to determine the true value of a home.

I hope this information is of value to you. Your questions and comments are welcome. Send them to pleasantontrivalleyhomes.com.

Best regards,

Eric Soderlund
Realtor, GRI, SRES
Steven Anthony Realty

6 Questions and Answers on Short Sales


After answering several short sale questions on Trulia Q&A, I decided to share some of the questions I’m asked regarding short sales from my clients.

Q. Does a lender have to approve a sale if the offer price is equal to or above the listing price?

A. NO.  The listing price is set by the seller, not the bank. The bank has to approve any price.

Q. Can the lender foreclose on a home even if there is a short sale offer submitted to the lender?

A. YES. If timelines and legal procedures have been followed a bank can foreclose on the home.

Q. Can a lender decide on the close of escrow date?

A. YES. They usually do. Buyers need to be ready to close once approval is given.

Q. Can a lender cancel the contract if the sale doesn’t close on the appointed escrow date?

A. YES. This stipulation is usually written into the Demand Letter from the lender.

Q. Can the buyer legally walk away from a contract if the lender changes the contract?

A. YES. Assuming a Short Sale Addendum is used.

The Short Sale Addendum, What You Should Know!

Q. Are short sale homes worth looking at as a buyer?

A. YES. Short sales make up too much of the market to simply ignore.


Here is some additional information on short sales. Your questions and comments are welcome. Please contact me at EricS@steven-anthony.com

Is a Short Sale Right For Me?
How Do I Prepare My Home For a Short Sale?
The Short Sale Addendum, What You Should Know!
Short Sales, How The Process Works
Short Sales in the Bay Area, Start To Finish

Best Regards,

Eric Soderlund

Realtor, GRI, SRES