We will make an offer on a Brooklyn home with confidence when we know the answers to these 7 questions.

Retirement has always seemed to be a distant term. Then all of a sudden, it is not so distant. Well, that time of life for us is here. Because we want to downsize, we are looking to make an offer on a small Brooklyn home in a quiet area. I really like it and have imagined us living there with our belongings thoughtfully placed inside. There are many things we must take care of and consider before we can make an offer and move. To feel confident that we are making the right move on that small Brooklyn home we must be well informed.

7 questions we will ask before we make an offer on that home

1. What is the property worth in today’s market?

Charles can’t tell us how much we should make an offer for because that would be unethical. So we will investigate what we want to know about comparable sales instead of asking directly how much the home is worth. Charles will load us up with plenty of comps.

Comparable sales, or comps, list prices of nearby homes that have been sold recently. These homes are similar to the small Brooklyn home we are looking at. Comps list high and low ranges for the home we like also.

Charles can tell us how long homes in the area are staying on the market and how much of the asking price sellers are getting. This information will tell us how hot the market is, what the Brooklyn home we like is worth in today’s market and how much we should make an offer for.

We need to know how long the small home has been on the market. If it’s been on the market for months with hardly any offers, that could mean the market is slow or this Brooklyn home could be overpriced.

2. Is the seller flexible on their asking price?

We can choose to speak directly with the seller’s agent or have Charles ask this question. To make an offer to the sellers that is really low could be an insult and run the risk of us missing out on this home we like so well. Charles has advised that we ask the seller’s agent how firm they are on the price. If we do decide to talk with the seller’s agent ourselves, we will ask, “How flexible are they on the price?” instead of, “How much less will they take?” Asking in these terms will allow us to assess the situation without offending the seller.

The sellers may or may not even be willing to negotiate. But, if they were, and if our strategy were to make low offers, Charles told us we would need to plan to make an offer on several different homes before we would find a seller who would want to negotiate.

“Is the seller willing to help with the closing costs?” This question kind of goes hand-in-hand with, “Is the seller flexible on their asking price?” It’s okay to ask this question, too. Even if the answer is “No,” you will never know unless you ask.

This question is usually answered with a “Yes,” on foreclosed homes though. With Fannie Mae and Freddie Mac, it is common to have sellers help with closing costs. They want to sell their properties especially when they have equity in their property.

3. What is wrong with this house?

Just because a home is listed as “in perfect condition” doesn’t mean it is. The home we want to make an offer on looks like it is in mint condition. However, knowing how badly today’s sellers want to move their properties and that many today are not disclosing any real problems, we must ask directly, “What is wrong with this house?”

Charles recommends that we remind the sellers that if there are any problems with the home, the problems will be discovered when the home inspection takes place. He also said we should encourage the sellers to just get it out in the open to avoid wasting each others’ time.

Charles also told us that if the sellers’ agent recommended a home inspection before putting the home on the market, we should ask to read the report.

The State of New York mandates disclosure forms in which sellers have to reveal any issues or problems with the house. Disclosures provide great information and can even start a dialogue with the seller. Read about New York disclosure obligation here: Selling A New York Home: What Are My Disclosure Obligations?

4. Is this home in a flood plain?

We don’t think the Brooklyn home we are interested in is in a flood plain, but we still plan to ask this question. If this home is in a flood plain, we’ll have to budget for and pay for flood insurance, which will affect our cost of living in the house.

We can check with The Federal Emergency Management Agency. The agency posts online maps that show if a home is in a flood plain, and the maps are free to access. If we want to, we can double-check with the county and talk with Charles about this, too.

If we do discover that this home is in a flood plain, Charles told us we should ask to see the seller’s flood insurance bills. We need to know what type of flood plain the house is in and how much flood insurance will cost. Some ratings show higher risks than others and therefore, the flood insurance costs are higher.

If we find out that the house is in a flood plain and how much flood insurance will cost, we can then determine whether or not we can afford these additional costs. We can also decide whether or not we are still in love with this little Brooklyn home.

5. Will the lender allow a short sale?

First, what’s a short sale? Charles told us a short sale means the bank will allow the home to be sold for less than what is left on the mortgage. But, a short sale on this home or any home won’t happen if the seller’s bank won’t give its consent.

Sellers sometimes list their properties as short sales without talking with their lenders first. Even if a buyer and the seller were to agree on a price, if the bank won’t give its consent, there won’t be a closing. A seller must find out whether or not their financials meet the lender’s criteria for short sales before listing their property as a short sale.

That’s why we will ask if the lender agreed to allow the home to be sold for less than what is left on the mortgage if it is listed as a short sale. We would dig a little deeper and also ask, “What is the bank’s reason for giving permission for a short sale?” Then we can decide if the reason (divorce, loss of income or a job transfer) sounds reasonable. If you ever wonder about banks granting short sale requests for any reason, just ask.

6. Are there any foreclosures for sale in the area near this Brooklyn home?

Sellers and their agents hate this question. Foreclosures usually cost less, so we would have to figure this into our buying decision and the offer we make on this house.

We’ll ask if there are other houses for sale in the neighborhood, and we’ll ask if any of these sales are foreclosures. Foreclosures encourage price competition, and we could make an offer for less on this Brooklyn home.

7. Do you have the paperwork for the mechanical systems, hardwood flooring, etc.?

This is one of those questions not many even think about. Thanks to Charles, we will ask it!

For example, this house has air conditioning. If the seller replaced the air conditioner or happened to replace it shortly before they put it on the market, it would be great to have the paperwork. Simply put, if the unit malfunctioned after buying the home, we could use the documentation for the warranty. Warranties on the mechanical systems are great if and when a unit malfunctions. We don’t want to pay out of pocket if we don’t have to, right?

The Brooklyn home we are interested in has hardwood flooring in the kitchen and dining area. It would be nice to have the paperwork on the hardwood. With paperwork in hand, we could get an exact match if we wanted to install hardwood flooring in the living room or bedrooms.

We will make an offer on this Brooklyn home with confidence. With over 30 years of experience marketing Brooklyn homes, we know Charles is the real estate agent for us. Call him, Charles D’Alessandro, your Brooklyn real estate agent with Fillmore Real Estate at (718) 253-9600 ext. 206 or email [email protected] today.

Brooklyn Real Estate and Short Sales

If you haven’t read “Brooklyn Real Estate Investing:  Buying a Short Sale Steps 1 through 5,” start there.  This blog post provides steps 5 through 9 of the short sale process.

1. 6. Visit the Brooklyn real estate on your short list.  You’ve already searched for short sales, researched them and narrowed your list to a few short sales that meet your criteria and have the best chance of making it to closing.  Now it’s time to personally visit the few on your short list.  Your primary purpose in visiting the property is to get an estimate as to how much it’s going to cost you to repair the home.  As a real estate investor, you want a property that needs some work so that the average home buyer won’t want it, and you can get it at a lower-than-average price.   But, you also want a property that is in good enough condition that the cost of the property plus repairs still gives you a good return on your investment.
2. 7. Get a home inspection. Since short sales are typically sold “as is,” it’s crucial that you have a licensed home inspector evaluate the condition of the short sale that you’ve decided is the one you want to buy.  An inspection will find problems you might not have been able to see in your initial visit to the home.  It will also give you a more precise idea of how much it’s going to cost you to repair and renovate the property.
3. 8. Make an offer. Now that you’ve found the short sale you want to buy, you’re ready to prepare an offer.  Have your Brooklyn real estate agent prepare all the documentation and submit the offer to the seller’s agent.  The seller’s agent will submit the documentation to the lender.  Hopefully, you’ve chosen a short sale with only one lender, but if there is more than one lender, remember that all lenders have to agree on the terms of the sale.
4. 9. Make a counter offer or walk away.  After getting your offer, the lender has his real estate agent evaluate the offer.  More than likely the lender will make a counteroffer.  That’s the time for you to do a final evaluation.  Double check your numbers using the higher purchase price and ask yourself, “Is this property really going to give me the profit I want?”  If the answer to this question is no, or if you’ve already reached the maximum you’re willing to pay for the property, it’s time to walk away.

10. Finalize the deal.  After you, the seller and the lender have all reached an agreement, get everything in writing and officially record it.  Go to closing, and the property is now yours.  Congratulations!

If you’re a Brooklyn real estate investor looking for a well-priced property to invest in, I can help you find the true bargains, whether they’re short sales, foreclosures or just well-priced real estate.   Give me a call Charles D’Alessandro Your Brooklyn Realtor® with Fillmore Real Estate at 718/253-9600 ext 206 or email me at [email protected].

Members of the military who find themselves in a short-sale situation now have a new tool via the Homeowners Assistance Program (HAP) through the Department of Defense (DoD).

Congress expanded HAP when they passed the American Recovery and Reinvestment Act of 2009; and now nearly every military personnel involved in a short sale can get financial help through HAP if they find themselves upside down when they must sell because of a mandatory permanent transfer.

The HAP website (http://hap.usace.army.mil) contains several brochures for military personnel and for real estate professionals to help understand the expanded guidelines for those using the program.

Authorized under Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966, HAP is a law that is managed by the U.S. Army Corps of Engineers “to assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.” The American Recovery and Reinvestment Act expands the legislation temporarily for DoD employees caught up in the mortgage crisis. Those who can apply for assistance include:

• service members and DOD employees who are wounded, injured or become ill when deployed;
• surviving spouses of service members or DOD employees killed or died of wounds while deployed;
• service members and civilian employees assigned to BRAC 05 organizations; and
• service members required to permanently relocate during the home mortgage crisis.

The assistance is limited to employees who were reassigned within about a 5-and-a-half year period between 2006 and 2012 and the house being considered must have been the applicant’s primary residence. Some of the criteria for eligibility include:

1. Permanent reassignment requires move of more than 50 miles.
2. Reassignment ordered between 1 February 2006 and 30 September 2012.
3. Property purchased (or contract to purchase signed) before 1 July 2006.
4. Property was the primary residence of the owner
5. Owner has not previously received these benefit payments.

An online brochure, which can be printed via a PDF file, is available here.

This next paragraph is very important for purchasers of houses where the HAP program is being used.

The execution of this program requires the assignment of the contract to the Department of Defense, via the U.S. Army Corps of Engineers. In essence, the seller conveys the house over to the USACE and then the purchaser buys the house from the USACE all at the same time at the same settlement or escrow table. Your state laws may require a few differences, but this is how it’s executed on the ground level.

Many Realtor contracts contain paragraphs that will not allow the assignment of a contract, so military sellers using HAP may need to strike this paragraph to allow the contract to go through without any hiccups.

An “assigned” contract is one where one party in a sales contract can assign their interests over to a third party before settlement. It would say something like: “this contract is between ‘Mr. and Mrs. Seller’ and ‘Mr. and Mrs. Buyer and/or assigns.'”

With this language, it allows Mr. and Mrs. Buyer to slip in Mr. and Mrs. Buyer-2 at some point in the performance of the contract. It’s legal, and is usually used via a pre-foreclosure contract where one party is finding houses for sale and selling them to a secondary buyer once they get the terms of the contract in place.

Thus, in the use of the DoD’s HAP program, the purchaser needs to understand that at the end of their contract, before they go to settlement, the seller will no longer be Mr. and Mrs. Seller, but the U.S. Army Corps of Engineers.

Written by M. Anthony Carr
December 28, 2009

Charles D’Alessandro

[email protected]
tel 718 253-9600
fax 718 253-9573

Brooklyn Real Estate Blog Navigating Short Sales: What to Do When the Sale Price Leaves You Short

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If you’re thinking of selling your Brooklyn home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.

1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as:

· Refinancing your loan at a lower interest rate

· Providing a different payment plan to help you get caught up

· Providing a forbearance period if your situation is temporary

When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if

· Your property is worth less than the total mortgage you owe on it.

· You have a financial hardship, such as a job loss or major medical bills.

· You have contacted your lender and it is willing to entertain a short sale.

2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional* and a real estate attorney who specialize in short sales. Interview at least three candidates for each and look for prior short-sale experience. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed a lot of short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest.

A qualified real estate professional can:

· Provide you with a comparative market analysis (CMA) or broker price opinion (BPO).

· Help you set an appropriate listing price for your home, market the home, and get it sold.

· Put special language in the MLS that indicates your home is a short sale and that lender approval is needed (all MLSs permit, and some now require, that the short-sale status be disclosed to potential buyers).

· Ease the process of working with your lender or lenders.

· Negotiate the contract with the buyers.

· Help you put together the short-sale package to send to your lender (or lenders, if you have more than one mortgage) for approval. You can’t sell your home without your lender and any other lien holders agreeing to the sale and releasing the lien so that the buyers can get clear title.

3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include

· A hardship letter detailing your financial situation and why you need the short sale

· A copy of the purchase contract and listing agreement

· Proof of your income and assets

· Copies of your federal income tax returns for the past two years

4. Prepare buyers for a lengthy waiting period. Even if you’re well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. Some experts say:

· If you have only one mortgage, the review can take about two months.

· With a first and second mortgage with the same lender, the review can take about three months.

· With two or more mortgages with different lenders, it can take four months or longer.

When the bank does respond, it can approve the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)

5. Don’t expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:

· You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can’t pay back the balance, talk with your real estate attorney about your options.

· Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.

· Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure and bankruptcy.

Note: This article provides general information only. Information is not provided as advice for a specific matter. Laws vary from state to state. For advice on a specific matter, consult your attorney or CPA.

Charles D’Alessandro
Fillmore Real Estate
[email protected]
tel 718 253-9600
fax 718 253-9573

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