Thursday, January 24, 2008

More About Short Sales


Contributed by Gary Kersteen, Realtor (508)255-4949 x731

What Are They?
A short sale is the sale of property at a price that would net insufficient monies to cover outstanding liens on the property, and the owner cannot cover the shortfall from other assets.
It does NOT simply mean that the owner may realize a loss on the transaction relative to purchase price – the implication of the term is that there are insufficient owner funds to cover liens.

Why Would One Do a Short Sale?
There are any number of reasons people may find themselves in such circumstances that would require this. In a down real estate market any property may, at any given time, be valued by the “market” at less than the purchase price. Persons may have borrowed the full purchase price of the property. Subsequently, it may be that they cannot afford their variable rate mortgage because it has increased dramatically, or perhaps the owners must move because of employment (or lack of such); in such cases they cannot refinance because the appraisal will no longer cover the value of any loan nor will the proceeds of any sale in the current market cover the termination value of the mortgage. One recourse in such situations is to “bite the bullet” and sell the property “short” of its purchased value and negotiate with the financial institution for friendly terms to release the lien.

How to Think of a Short Sale… NOT Bankruptcy!
When a property owner chooses to proceed with a Short Sale, they remain in control of the process; they still own the property; they still have a mortgage. But, in order to be free of the property they need to be able pass title deed- and to do so requires the release of existing mortgages and liens. So, they need to negotiate other arrangements with the financial institution who might then release the lien and title. So think of “Short Sale” as a title issue… not foreclosure.

What Is the Process?
A property owner puts the property up for sale at current market value. A realtor must do a thorough and well documented comparative market analysis since the banks will want to review this along with any appraisal they would perform. In the description and/or comments sections of the listing, it should be clearly and straightforwardly stated that this is a Short Sale and that all parties must agree to the terms and timing associated with this process.

Upon receipt and acceptance of an offer (owner selects the best offer to his liking if there are multiple offers), the owner’s attorney will forward to the bank the offer, a letter of explanation and whatever other documentation the banks require. The request may solicit complete forgiveness of the loan, or it may request an unsecured long term loan for the balance due perhaps at no interest, or some other arrangement.

The banks process these Short Sale requests on a first come-first served basis. There is no expediting. The bank may negotiate through the owner’s attorney for better terms, pricing, commissions, etc. Upon approval by all three parties to the terms, the transaction usually must take place in very short order – in a matter of a few weeks typically.

What Specialties Should Be Involved?
It is extremely important to use attorneys (on both sides of the transaction) who have experience with Short Sales. While it may seem straightforward, experience eliminates problems and enables negotiations to proceed more smoothly; knowing the institutions and the administrators facilitates such transactions. Ask your prospective attorney if they have such experience.

What Does It Mean for the Buyer and the Seller?
Short Sales may provide good property value because of the circumstances of the seller. But it also requires patience and flexibility on the part of the buyer since the timing as well as the final terms of any agreement must be approved by the lending institution. Such financial companies are burdened with these requests, the backlog is full and the lead time may be lengthy. These may or may not be acceptable to a buyer, but everyone should be aware of these factors up front.

Monday, January 14, 2008

Chatham, Cape Cod - Homes (1/2/08)

From John Scott, REALTOR®, ABR
The Real Estate Company at Sylvan

Here on Cape Cod, in Chatham, MA, while the price of entry may be high (median asking price of about 170 homes is about $850,000), Chatham's property taxes ($3.67 per $1,000 of assessed value) are the lowest on Cape Cod. Now, in addition to all of the other attractions you have come to know, our Community Center is open just outside the downtown area. With some 170 homes in Chatham alone to choose from, mortgage rates at/below 6%, 2008 might be your year. Based on information in the Cape & Islands Multiple Listing Service (CCI MLS), here is a quick comparison between 2006 and 2007 for single family homes sold in 2007:Number sold: 163 (versus 162 last year). There are 26 homes pending sale.Median selling price: $725,000 (versus just under $710,000 last year)Price range of homes sold: $230,000 to $4.6 million (versus $275,000 to $5.5 million last year)

Wednesday, January 9, 2008

Tighter Building Limits in Orleans Raise Alarm on Property Values

By David Newell, REALTOR
please visit my website:

The following story from today's Cape Cod Times details Orleans Wastewater Management Committee recommendations to the Orleans Board of Health. One key bit of information is found in the next-to-last paragraph of the story where it is stated: "Property owners could ask local health officials to review and certify building plans". This statement means that property owners who wish to build a home under these new guidelines with more bedrooms than the square footage of their lot would allow (10,000 square feet of lot per bedroom built) would need to have those building plans approved prior to May 1, 2008.

The Cape Cod Times
By Staff Writer
Susan Milton
January 09, 2008
ORLEANS — New limits on septic disposal in town have some residents worried about the value of their existing homes and vacant lots.
"I feel you are devaluing our property," Bruce Ayer, owner of a 20,000-square-foot lot on which he could build a three-bedroom house now, said during one of two public hearings Monday.
Under the new rules proposed by town health officials, Ayer would be limited to building a home with two bedrooms, one per 10,000 square feet of land.
"Will the town compensate us for the value we are losing?" said Susan Sargent of Crystal Lake Drive, who has a half-acre lot that she wants to keep as open space or, if needed, to sell in her old age.
Ayer and Sargent were among 40 people who attended the public hearings Monday about the new building limits, which will take effect no earlier than May 1, according to the town board of health.
The goal of the rules is to slow the rate of groundwater pollution from septic systems, according to health board chairman Jan Schneider.
Property values are important but pale in significance to protecting public health in general and groundwater in particular, health board member Sims McGrath said.
"Think of the ramifications if we did nothing," he said.
Local health officials said they plan to review public comments on the construction rule change and consider revising the policy.
The new rules would apply to additions and new construction but not in the village center, general business or industrial zones.
Existing homes could keep their current number of bedrooms. Property owners could ask local health officials to review and certify building plans.
"Then you'll always be able to have a house with that many bedrooms on that lot," health board member Gussie McKusick said.

Surprise! A Home Insurer Willing to Insure your Cape Cod Home!

Posted By David Newell, REALTOR.

Please visit my website:

The following article, written by Kimberly Blanton, is from today's (1/09/2008) Boston Globe. I had a client who was scheduled several months ago (Fall 2007) to utilize the Fair Plan, and after I advised her to speak with Rogers and Gray Insurance, she found that she would be accepted by Narragansett Bay Insurance Company, at a more palatable premium rate! Please read on....

Reversing the tide of home insurers that fled Cape Cod and other coastal communities, Narragansett Bay Insurance Co. said yesterday that it is expanding into those long-neglected markets.

Backed by $200 million in fresh capital from billionaire George Soros and other investors, Narragansett Bay said it is stepping up sales statewide, including offering policies to homeowners forced into the state's insurer of last resort, the Massachusetts Fair Plan, because they were unable to find affordable coverage from other companies.

Fair Plan's coverage in coastal areas ballooned as insurers pulled out in the wake of the Sept. 11, 2001, terrorist attacks and Hurricane Katrina in 2005. Fair Plan's rates have also increased sharply, 25 percent on Cape Cod last year, because of what the company says is the higher risk of damage from hurricanes.

But Narragansett Bay Insurance believes it could prosper in the market by undercutting Fair Plan.

"Some people look at all of eastern Massachusetts as risky. We look at eastern Massachusetts very differently," said Stewart Steffy, Narragansett Bay's chief executive. "We think there's a very large opportunity to become a super-regional homeowners' insurer in New England," he said.

The company will target midpriced houses that are considered the cream of Fair Plan's customers. Those qualifying homeowners may see prices 10 percent to 40 percent below the average Fair Plan premium of $1,500, Steffy said.

Insurance agents and even Fair Plan officials welcomed the new entrant, which is offering to provide coverage to homeowners who have, by default, wound up in Fair Plan but are relatively low risks and should be eligible for private insurance.

"We think that's excellent," said John Golembeski, the president of the Massachusetts and the Rhode Island Fair Plans.

In recent years, Fair Plan's exposure on Cape Cod has soared: The insurer writes about 59,000 policies on Cape Cod and the islands, up from just 4,000 in 2000. "The Fair Plan's role is certainly not to be a primary insurer," he said.

Consumer groups have argued for years that although Cape Cod and Boston's South Shore are coastal communities, they are not at great risk to storm damage. Nonetheless, they said these towns have suffered disproportionately from rate hikes and the increased caution by insurers after the 2004 and 2005 hurricanes hit the Gulf Coast.

Narragansett Bay Insurance is effectively doing business based on the same argument: The insurer will rate each house individually to determine whether it is willing to cover the house - rather than issue a blanket decree about providing - or denying - coverage for large geographic areas. Narragansett said it will use such detailed measures as how far the structure is located from the shore, how high it sits above sea level, how well it's constructed, and whether it has year-round or summer-only residents.

In December 2005, Steffy and three partners purchased the 158-year-old Pawtucket Insurance Co., parent company of Narragansett Bay, after a corporate reorganization under receivership by Rhode Island regulators. Under the new owners, the insurer began writing new policies last year in coastal areas, but the recent capital infusion will greatly expand its ability to take on more policyholders.

The partners, owners of Blackstone Financial Group Inc. in Pawtucket, initially put up their own funds to revive the insurer. In recent months, new equity investments by Soros Strategic Partners, RenaissanceRe Holdings Ltd., and Pine Brook Capital Partners LP are fueling the company's expansion in Massachusetts, Rhode Island, and other eastern states.

"They're well capitalized," Golembeski said.

But Paula Aschettino, who heads Citizens for Homeowners Insurance Reform, was concerned that Narragansett is essentially a new company. For example, while the insurer has obtained an "A" - excellent - rating from Demotech Inc., it has not yet been rated by A.M. Best Co., a primary rating agency.

Aschettino was hopeful a new insurer on the Cape would relieve financial pressures from Fair Plan and result in lower premiums for homeowners.

Chuck Robinson, the chief executive of Rogers & Gray Insurance Agency in South Dennis, which has started selling Narragansett's policies, said there is so much demand for private insurance on the Cape that he fears being inundated by homeowners looking for new coverage.

Narragansett, he said, will be "an important player, because they're more anxious to write business" than the handful of home insurers now on Cape Cod.

Thursday, January 3, 2008

What is a "Short Sale" and "Sub Prime Loan"

In 2007 we met with the inevitable rewriting of the "Variable Interest Mortgages" which were most often written for one, three or five years. The term "sub prime loan" comes from the mortgages that were written to persons having less than perfect credit, or no verification of income along with some other categories that put the borrowers at risk of not being able to pay back the note or mortgage even at the rate that was first quoted.

Now that the term of these notes is over the rates have gone up, many from 4% to 7% or higher if the borrow has had any late payments. If they have late payments they may not even be able to write a new note at any interest rate and of course are unable to pay the entire balance of the loan. The difference between a $300,000.00 loan at 4% and a $300,000.00 loan at 7% is approximately $565.00 per month.

With property values going down over the past two years many of the borrowers are faced with the fact that the home they purchased is now worth less than when the acquired it three years to five years ago in a hot investors market.

This brings us right to the "Short Sale". When faced with an inability to make mortgage payments or to rewrite the loan people are forced to sell their property for less money than they bought it for. Banks are well aware that these situations exist and are not anxious to own real estate in a declining financial market. The government is requiring strict lending guides and programs to get people out of the current debt. With this in mind bank and mortgage companies will take less to pay off the note then is owed.

Some of these require a note to pay the difference over time and some are a clean walk a way but credit is affected.

The use of a Realtor and legal council to negotiate this with the bank is absolute. The average person, even those with some knowledge of fiance should not attempt this negotiation on their own. Be sure that the professionals you work with in this instance have done this before and are confident with their relationship with the bank or mortgage company. For anyone this is stepping into the deep end of the pool and we need the best life jacket we can find.