Huntsville Foreclosure | Huntsville Alabama Foreclosed Homes Blog

Here are the latest market updates for the North Alabama area for the month of July 2010.

A short sale is a real estate transaction where a lender or lenders approval is required to complete the sale of the property.  There are many short sale scenarios.  Sometimes the banks will write off the debt, or convert the debt to a non-secured loan while releasing the lien against the property.  Each bank has its own policies and procedures.  These policies and procedures change often and without notice.  It is a very fluid environment.  

The short sale process is complicated and there are many pitfalls.  Be sure to find someone who has experience and can guide you step by step through the process without charging you additional fees outside a typical real estate transaction.  If you need someone to talk to you can reach us at:

Bert Klimer- 256.656.3759

or Paul Schuppener- 256.658.9340

Many short sales never actually make it to a closing table.  There are many ways a short sale can fall apart.  There are also more decision makers than you would  see in a normal transaction.  It is important for all parties involved to have a clear understanding of reasonable expectations and the process.
In a short sale there are at least three separate decision makers.  The buyer, the seller, and each bank that has a mortgage on the property.  If any one of these parties does not agree with the negotiated terms through the contract process, the deal can not proceed. 

Many short sales have someone handling the process.  This person is usually referred to as a "short sale negotiator".  This is typically an attorney, listing real estate agent, seller, or a third party.  If you plan on having a successful short sale, it is important to find someone with experience in successfully completing these types of sales.  The better the "short sale negotiator", the better chance you have of making it to the closing table. 

The more prequalifying that is done, the higher the likelihood of a successful closing.  There are clear expectations that need to be understood for both the buyer and the seller to increase the likelihood of this successful transaction. 

Let's begin with the seller.  It is important to know the sellers overall financial situation.  The seller is also going to need to put a short sale package together.  Think of this package as a mortgage application of sorts.  The only difference is that the seller will be  explaining why he or she can't afford the mortgage.  It is important that the seller understand that the stronger they are financially, the higher the likelihood they will be asked to take a signature loan for the difference.  This is especially true lately with the second mortgages. 

The buyer needs to understand that it is highly unlikely that this  contract will close in 30 days.  It could easily take 90 - 120 days.  Depending on the banks involved and the number of mortgages against the property, I have seen some take up to six months.

In the not so recent past a first and second mortgage when purchasing a property was very popular.  Negotiating short sales with a second mortgage comes with some extra challenges.  These challenges multiply when the mortgages are with different lenders.  Add a buyer who will need loan approval and you are walking the ultimate tight rope.

Many lenders policies and procedures have been changing rapidly regarding short sales. We are even seeing banks that were holding first and second mortgages split and become separate entities.  Short sales can be tricky simply dealing with one lender. 

The challenges multiply with each bank you add to the mix.  The biggest challenge is meeting the timelines of both the first and second mortgage.  The amount of time it takes to get a short sale package successfully through is different for each bank.  Once the package is approved you normally have an expiration date for that approval.  With two mortgages to deal with, you need both banks to approve the package before either acceptance expires.  It is very common for one to be ready to complete a package before the other even assigns someone to work it.  I believe you can see where I am going with this.  

While a short sale negotiators'ability and experience can not a guarantee success, you will notice that some peoples' success rates are very impressive.  There are things that can be done to expedite the process and provide a much higher success rate.

When negotiating a short sale with a second mortgage and a buyer requiring a loan you add another approval to the mix.  It is common for lenders to come back to a buyer days before closing and reveal that they aren't ready to close yet.  Bank underwriting seems to be moving at a snail's pace these days and have little regard for closing dates.  This can be disastrous when you are trying to stay within two other banks time constraints.

It is now becoming common to see the second mortgage holders refuse to write off their mortgage.  Some banks are requiring  sellers, without regard to their financial strength, to take a signature loan for the remaining balance.  If the seller is unwilling to accept the terms, they do not approve the short sale.

Many people don't understand how a short sale will affect their credit.  The short sale itself does not harm one's credit in any way.  It is possible to complete a short sale without having a major impact on the person's credit.   We are going to go through several scenarios to explain short sale options and the ramifications of each scenario.

The largest impact to ones credit is the missed payments.  If someone is 30, 60, 90, or 120 days late on a mortgage, it will significantly impact their credit.  There is a misconception that one has to be  late on the mortgage to be eligible for a short sale.  This is not accurate.  It is possible to negotiate a short sale without missing any payments on the  mortgage.  If someone does this and converts the remaining balance due at closing to a signature loan, their credit should not be impacted in any way.  The credit report should show one of two following scenarios:

• The existing loan shows "paid in full" and a new loan shows up with the remaining balance.
• The existing loan balance is reduced and your payment is adjusted.

It is also possible to not miss a payment and have the bank write off the remaining balance.  This will affect your credit and the account will show that some sort of settlement was reached on the account.  Depending on the person's credit score, they can expect a 50-100 point reduction in their credit score initially.

If one misses payments and reaches a settlement on the mortgage or mortgages then they are likely to see a much more substantial credit impact.  There are several advantages to completing a short sale if one is having financial challenges.  By relieving this debt, that person may put themselves in a position to keep  other accounts in good standing.  A short sale is also significantly easier to recover from than a foreclosure.  One can bring their credit score back up in a relatively short period of time after they have started making all their remaining payments on time.  This has a much smaller impact than the long term credit damages that a foreclosure or bankruptcy can create.

Alabama home prices, including those in Madison County, are more affordable than ever, according to a University of Alabama study released Friday.

The Alabama Housing Affordability Index for the first quarter reached 210.4, the highest number on record, according to the study.

The affordability index is defined as the ratio between a market's median income and the median home selling price. An index of 100 means a family earning the median income has just enough money to qualify for a loan for that market's median-priced house.

According to the report, a Huntsville-area family earning the area's median income of $67,500 has 2.27 times the income needed to qualify for a loan to purchase the median-priced home of $143,467, or an affordability index of 227. That's a 16.7 percent increase in affordability from the previous quarter, which had an affordability index of 194.6.

Courtesy of The Huntsville Times by Gina Hannah

Our April tour was held on another day with sunny and beautiful weather!  We featured 9 properties, down from 10, as one just went under contract the day of the tour.  We started in Southeast Huntsville at a HUD home and then swung just outside the 5 Points area to another HUD Home.  The remainder of the tour was in the Madison and West Huntsville area where we saw a couple move in-ready builder foreclosures and a few homes in great starter neighborhoods. At the conclusion of the tour, we arrived back at the office to lunch provided courtesy of attorney Alan Judge who also gave a presentation on foreclosures and Alabama Real Estate law. 

We had an entire bus full of new riders who were excited about seeing some of the best foreclosed properties in the area.  The riders were busy taking notes and asking questions and once again we feel as if we made a new set of friends on the tour today!

Sales of single-family homes in Madison County jumped nearly 20 percent in March, the Huntsville Area Association of Realtors reported Monday.

The increase - from 284 homes sold in February to 340 homes sold in March - marks the second consecutive month to see an increase in sales. In January, 268 homes were sold.

March sales were down 9.6 percent from the same month last year.

 Written by Gina Hannah- The Huntsville times

Original article

Statistics for Entire MLS from 03/01/2009 to 03/31/2009

Many Smaller Cities Dodge Crunch in Consumer Lending

Wall Street Journal | MARCH 30, 2009

Consumer-lending activity has increased in numerous midsize cities in the U.S., a sign they are riding out the recession better than big cities and rural towns, an analysis of credit data shows.

As banks pull back on risk taking across the nation, consumer-loan balances in places like Huntsville, Ala., are rising. In Huntsville, a metropolitan area of 376,000 that is home to many government contractors, borrowing increased 13.2% per household in last year's fourth quarter, compared with the year-earlier period, according to data provided to The Wall Street Journal by Moody's Economy.com and Equifax Inc.