Real Estate Information

"How do I write a short sale letter?" This question comes up weekly when speaking with sellers in Anne Arundel County, Baltimore County, Baltimore City, Howard County, Harford County and Carroll County.

We have provided two sample short sale hardship letters to get you started. Use a short sale letter when a buyer makes an offer on your house, but the offer is less than you owe.

 If you don't have a buyer, use a Deed-in-Lieu of Foreclosure letter. (Some seller's are now putting their house for sale without pre-approval, hoping their bank will approve a short offer once it's obtained.) Keep in mind your situation is unique. Therefore, you will need to make modifications to fit your individual situation.

 A strong letter is important. Many short sale request letters fail because they ramble. Keep your letter simple and make your case quickly.

 Sample Short Sale Letter #1

This letter is a request for your cooperation in a "short sale" of our home located at ___________________.

[Sample text regarding reason for request: My husband has been laid off from his job because of a work injury. He worked at Acme Manufacturers for twenty-five years. On June 15, 2006 a forklift ran over his foot and he has not been able to work since then. He receives $2,200 disability every month.]

I work at ______________ but only make ___________a month. Combined we both take home _________ which is not enough to cover our bills and the house payment.

The house is vacant. We are living with my elderly parents.

We have a real estate agent and she has found a buyer for the property with a purchase agreement offer of $__________(its current market value). This offer will not be enough to pay off our existing first and second loans on the property. It is a good offer and the buyer is anxious but I will need both the first and second existing lenders on the property to agree to cooperate in a short sale and therefore accept short payoffs. 

Attached is my written authorization for you to speak with my real estate agent, ___________and my escrow officer, __________, at _____________Title Company about this matter. [Ask your real estate agent and escrow officer for their forms.]

I have enclosed a Borrower's Financial Statement and Explanation of Hardship Form for your consideration. [You should ask for these forms from the lender.]

Thank you for your prompt attention to this matter.

Sample Short Sale Letter #2

[Name and Address of your lender]

Attention: Loss Mitigation Department

Re: Loan _____________________

Dear Sir or Madam:

As you are aware, I have not made payments on the above-reference loan for the last ____months. I am providing this letter to explain my circumstances and to ask that you accept a short sale of my house.

My husband left me six months ago for another woman. At first, he sent money for me and our three children and helped out with the house payment. He works for the electric company and three months ago he tried to rescue a cat and touched a live line. Now he is on permanent disability and can’t send me any money. His girlfriend left him and he needs financial help from me. I work at the cosmetic counter at Nieman Marcus and the $3,500 I make each month barely covers our basic living expenses.

I put our house up for sale as soon as my husband stopped sending me money. It’s listed with ___________ Real Estate Company. My agent is _______________ and her phone number is __________________. I have enclosed an authorization allowing you to speak with her. [Note: your agent will be able to provide you with an authorization form.]

We listed the house for $250,000 which is what we owe you. In the l ast three months we have had one offer. Unfortunately, the buyer has only offered $210,000. I am asking you to forgive the $40,000 difference and to accept the $210,000 (less commissions and escrow expenses) as payment in full on the note. If you can do that I will be able to avoid foreclose and bankruptcy. My agent says she will accept a reduced commission if necessary to facilitate this deal.

Sincerely,

[homeowner]

Sellers, please share your experiences with short sales. We would like to hear from you!

Nick Gioia | www.NGRealtyGroup.com

In Anne Arundel County, Baltimore County, Baltimroe City, Howard County, Harford County and Carroll County lenders use judicial foreclosure.

• The foreclosure begins with the petition in equity filing an order to docket.

• If no notice is given, the foreclosure may begin within 90 days from the date of default. If the lender provides notice, an action to foreclosure can begin with 45 days. In some cases, e.g. the loan was obtained by fraud or deception, the foreclosure action can commence immediately.
• The homeowner has the right to cure the default and stop the mortgage by paying all past due payments, penalties and fees and reinstate the loan up to 1 business day before the foreclosure sale occurs.
• A deficiency judgment may be obtained.

• The redemption period is decided by the court.

Explanation -  Process and Terms: 

In Maryland, deeds of trust are foreclosed judicially "like a mortgage" if the lender is seeking a deficiency judgment. A judicial foreclosure is a court action. A complaint is filed and a judge supervises the entire process.

A judicial foreclosure begins with a lawsuit filed in the proper court in the county in which the property is located.

A complaint is filed with the county clerk and served on all the parties. Usually a legal document called a lis pendens is recorded. A lis pendens is common in lawsuits involving real estate. It provides notice to any person interested in the real property that their rights in the property will be subject to the outcome of pending litigation.

A lis pendens puts a cloud on the title to the property and makes it extremely difficult to market.

Generally, an attorney prepares the complaint. In order to determine who to name as defendants, the attorney will order a foreclosure guarantee report or a report entitled a litigation guarantee from a title company. The title report shows who need to be named in the lawsuit. If you are on the title to property and are not named in the foreclosure lawsuit, the suit does not affect your interest.

If a junior lender is not named, that lender’s lien is not affected by the lawsuit and the lien remains attached to the property. If a husband is named and his spouse is not, only the husband’s interest is foreclosed.

With a judicial foreclosure you have the right to reinstate the loan by paying back payments and interest until the time that a court judgment is rendered that orders sale of the property.

Because a foreclosure action that is contested can take well over a year to makes its way through the court system, you will have plenty of time to cure your default.

Right of Redemption - You also have the right of redemption after the sheriff’s sale. This requires you to pay the full outstanding loan amount with costs, interests and other charges. The right of redemption is not used that often, because it requires full payment of the loan and because the right to reinstate the loan runs to the time of judgment.

Notice of Sale - If the lender does not seek a deficiency judgment, then the lender cannot begin to take your house away until after you have been notified that the suit is filed. After the statutorily mandated number of days has elapsed of the notice of sale is published for three to four weeks, depending on your state. Because of these statutory time constraints the minimum time from the filing of a judicial foreclose lawsuit until the sale can be substantial.

Default Judgment - A default judgment can be heard within a couple of months. A contested hearing can take six months to eighteen months or longer to get to trial.

Deficiency Judgment - Where the lender has not sought a deficiency judgment, the sheriff’s sale is final. There is no redemption period, and the sheriff issues a deed to the purchaser.

If the lender seeks a deficiency judgment when the lender initially files the lawsuit, the sheriff follows a special levy procedure. There is no waiting period after the levy, but in many states you get a period to redeem the property by paying the purchase price plus fees, cost, etc.

At the sale, the buyer receives only a certificate of sale, not a deed.

If the lender sought a deficiency judgment, but it turns out that there is not one because the winning bid exceeds the loan amount, the redemption period can be short or nonexistent.

Nick Gioia | www.NGRealtyGroup.com

"What are the 3 bigest challenges we are going to face in the 2010 housing market?" A good friend and VP at SunTrust Bank, Bill Peele, asked me this very questions at lunch today. My reply was as follows: 

1) Unemployment over 10% and around 20% if you account for the “Under-employed” or those who have given up looking.

2) Fannie Mae and Freddie Mac are still in trouble receiving over $500 billion dollars of Bail out money.

3) Payment Option ARMs are due to reset within the next 2 years with most borrowers being unable or unwilling to take on a higher payment.

I feel that Challenge #3 is the biggest problem of the 3 numbered challenges. Subprime mortgages almost brought down the country and financial system in 2007 and 2008 followed closely by Alt-A Mortgages (No Documentation, Stated Loans, and Little Documentation loans). This year starts the massive challenge of dealing with the Payment Option ARM loans or the so called “Pick a Payment Loan” that Wachovia was still running commercials on television in late 2008. If you are unfamiliar with this type of loan, the borrower gets a choice of whether they want to make a full payment, an Interest Only payment, or a “Minimum monthly payment”. The Minimum monthly payment is the MAJOR issue as in most cases it was 1%-2% of the loan amount which in turn leads to negative amortization which increases the mortgage balance instead of decreasing it. Couple that with Real estate values decreasing and you have a recipe for disaster.

I would love to hear what you think we will face in 2010!

Nick Gioia | www.ngrealtygroup.com

Jamie Smith Hopkins of the Real Estate Wonk wrote a very informative neighborhood review of Lock Raven Village and Knettishall that home buyers searching in Towson and Parkville may find helpful.

Neighborhoods: Loch Raven Village and Knettishall

Location: Mostly in Towson (Baltimore County)

Average sales price: $219,000 (January through June)

Notable features: Loch Raven Village and Knettishall have 1940s and '50s brick townhouses with more personality than most of the newer stuff. The yards are large enough for flower gardens, as you can see above, and Interstate 695 is less than a mile away. (Why "mostly in Towson"? Because the eastern half of Loch Raven Village is in Parkville.)

You've got all the locational benefits of Towson here -- malls, colleges, recreation -- without the usual Towson price. The 380-acre Cromwell Valley Park, which has a demonstration farm illustrating "sustainable" and organic practices, is a short drive from the neighborhood.

Of course, this is all true of fellow gem Lake Walker, a short drive to the south and just over the city line. So why pick Lake Walker and these twin Towson neighborhoods if they're so close together? Simple:

Because some people want to live in the city and some don't. The property tax rate is a common point of contention -- it's a little more than twice as much in the city as it is in the county.

So, to each his own. Loch Raven Village and Knettishall don't have the variety of housing types you can find in Lake Walker, but they're well-kept and wear their neighborhood pride on their sleeve, or rather their utility poles:

   
Here's an example of the architecture in Loch Raven Village, which the neighbors describe as "Georgian colonial":

Patriotic front yards:

And depending on the time of year, you might just happen across a farm stand on Putty Hill Avenue:

Wonk reader bryanintimonium nominated Loch Raven Village and Knettishall without comment, so I went hunting for details that could confirm or deny their hidden-gem status. I drove past both for years without realizing they existed, so that seemed a good start.

Mrs. Kirk, a real estate agent in Timonium, said she's been selling homes in the neighborhoods for 11 years and considers them gems.

"People love living there," Kirk said. "It's definitely a good area."

It reminds Kirk of Rodgers Forge, except less pricey. You'll also spend less than you would have before the housing slump ate away at home values. Homes in Loch Raven Village and Knettishall were going for more than $250,000 a few years ago, she said.

The two neighborhoods have a similar feel, but the Loch Raven Village homes are generally larger and the styles are a bit different. Ralph Simmers Jr., who built Knettishall with his father, based his design on the English townhouses he saw while in the Air Force during World War II. Knettishall is named after the village where he was stationed.

Leslie Jackson-Vallade, a mother of two who's lived in Loch Raven Village for 10 years, says lots of families live in the neighborhood because the townhouses are big enough to accommodate the space-eating needs of kids. Her home has three bedrooms, two bathrooms, a "huge" attic and a finished basement.

"We're a very close-knit group," added Jackson-Vallade, treasurer of the Loch Raven Village Community Association. "It's really conducive to young families."

Other residents have deep roots. Janice Krach grew up in Loch Raven Village, went away to college and came back. Since 1975 she's lived in Knettishall.

"It's a nice location," she said. "It's so easy to get to all the places in the Baltimore metro area."

Have personal experience with Loch Raven Village or Knettishall? Do share.

Nick Gioia | www.ngrealtygroup.com

The committee charged with mapping out new boundaries for Riderwood and Rodgers Forge elementary schools, as well as the new 451-seat West Towson Elementary School scheduled to open in August, has voted to recommend Scenario G -- the only one of the four proposed scenarios on the table that was one of four options that would keep the 1,777-townhouse community of Rodgers Forge intact -- to the Baltimore County Board of Education for its approval.

At a meeting on Wednesday evening, the 10 members of the West Towson Boundary Study Committee who were eligible to vote initally cast 7 votes for Scenario G and 3 votes for Scenario A-1, which would have removed 400 houses north of Stevenson Lane from the Rodgers Forge Elementary School district.

They then voted as a group to recommend G to Barbara Walker, central area assistant superintendent for Baltimore County Public Schools.

Walker cautioned the process is far from over.

She can accept, reject or amend the committee's recommendation when she makes her own recommendation to Superintendent of Schools Dr. Joe Hairston by next Wednesday, she said.

In fact, members of the committee asked her to consider amendments for Scenario G that would include Gaywood's 140 homes in the Rodgers Forge district and Ruxton Ridge children in the West Towson district.

The Board of Education will review the committee's recommendation, Walker's recommmendation and Hairston's recommendation before holding a public hearing Feb. 24 at 7 p.m.at Loch Raven High School.

Nick Gioia | www.ngrealtygroup.com

Greater Baltimore’s home foreclosures increased nearly 28 percent in the past year, but the region’s housing market has weathered the storm far better than some hard-hit parts of the country, according to California foreclosure tracking firm RealtyTrac.

The Baltimore City and Baltimore County ranked 108 out of 203 metro areas examined in RealtyTrac’s Year-End 2009 Metropolitan Foreclosure Market Report released Thursday. There were 15,064 properties that received foreclosure notices in 2009, or nearly 1.4 percent of the region’s housing market. That’s up 27.9 percent from the year before and up 88.7 percent from 2007.

Carroll County, Howard County, Harford County and Anne Arundel County posted a combined 16,260 foreclosure notices in 2009, for a rate of 2.6 percent of housing units. That’s up 1.4 percent from 2008.

In the Baltimore Metropolitan area, the hardest hit housing market was Howard County  where 9 percent of all homes received foreclosure notices in the past year.

Nick Gioia | www.ngrealtygroup.com

Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, sinking more than expected after lawmakers gave buyers extra time to use a tax credit. The report reflects a sharp drop in demand after buyers stopped scrambling to qualify for a tax credit of up to $8,000 for first-time homeowners. It was set to expire Nov. 30. But Congress extended the deadline until April 30 and expanded it with a new $6,500 credit for existing homeowners. December's sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, from an unchanged pace of 6.54 million in November, the National Association of Realtors said Monday. Sales had been expected to fall by about 10 percent. In Baltimore City, Baltimore County, Howard County, Harford County and Carroll County, home sales rose almost 10 percent compared with a year ago, according to Metropolitan Regional Information Systems. The local figures are not seasonally adjusted to allow for true month-to-month comparisons.

Nick Gioia | www.NGRealtyGroup.com

The FHA announces changes to ensure its long-term financial soundness late last week.

A brief overview of changes are: 1) HUD will allow the financing of the Mortgage Insurance Premium (MIP) - it will be raised from 1.75 to 2.25% via Mortgagee Letter ;  2) There will be a FICO floor - anyone below 580 will have a 10% down payment, anyone over 580 will remain at 3.5% which will be done by notice and comment; and 3) The annual premium of .55 is intended to be increased via legislation. 

These are painful but necessary steps.  HUD did not increase down payments because they were concerned that deserving, first- time and entry-level buyers will be shut out of homeownership.  While some REALTOR members were concerned with seller concessions being reduced from 6 to 3%, FHA had no choice as this is tantamount to seller-funded down payment which was a primary cause of the FHA fund ration being reduced.  The seller concession will be implemented by proposed regulation, so NAR will have time to comment regarding that if appropriate.

Nick Gioia | www.ngrealtygroup.com

WOW!  To many REO, Inverse Purchase, Short Sale and Wholesale investors, prayers have been answered!

Our (now) friends at the FHA have just amended the 90 day seasoning/flipping rules! The laws previously insisted you hold title to a property for ninety days before even entering into a contract if you wanted to sell to a buyer using an FHA loan in Baltimore City, Baltimore County, Carroll County, Harford County or Howard County.

Yeah yeah yeah, had they done this years ago, the economy may not be quite in the pooper like it is now, but nonetheless, this is big news to the creative real estate investor!

There’s certainly some “stipulations” on the process, but strangely enough, none of them seem too ridiculous… which is odd for HUD, but we’ll take it! (from the HUD website)

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Click here to view the HUD Waiver Requirements

Healthy Neighborhoods Consortium and Chicanos Por la Causa Inc. were awarded more than $31 million in federal stimulus funds to help stabilize some of Baltimore City's hardest-hit residential neighborhoods.

Federal Housing and Urban Development Secretary Shaun Donovan announced the awards as part of his department’s Neighborhood Stabilization Program. The Baltimore City funds were part of a package of $2 billion in awards announced by Donovan.

“Vacant homes have a debilitating effect on neighborhoods and often lead to reduced property values, blight, and neighborhood decay,” Donovan said in a statement.

The groups will focus their efforts on buying, renovating and getting new residents into foreclosed homes across Baltimore City.

Their efforts will focus on the following city neighborhoods: Charles Village, Northwood, Patterson Park, Ashburton, Idlewood and Mt. Washington.

Healthy Neighborhoods Consortium is a group that includes Healthy neighborhoods Inc., the city housing department and St. Ambrose Husing Aid Center. Other partners are Chesapeake Habitat for Humanity, Druid Heights Community Development Corp., and Telesis Baltimore Corp.

“The award of these funds reaffirms the strength of our neighborhoods and Baltimore’s history of effective partnerships with neighborhoods, lenders, nonprofits and the city government,” Healthy Neighborhoods President Mark Sissman said in a statement.

Supported by Mi Casa Inc., Chicanos Por La Causa will focus its efforts on properties in the Patterson Park neighborhood.

 Nick Gioia | www.ngrealtygroup.com