According to one Arizona senator strategically defaulting on a property should cost you.

For those who do not know, strategic default is when a borrower (home owner) CHOOSES to stop paying their mortgage even though they can still afford the payments.  Typically these individuals would be way underwater on their mortgages and making a calculated decision to walk away or short sale their home rather than pay down the balance or wait for the market to turn around.

Check out this article on Strategic default in AZ for a bit mroe info.

If you are even considering this you need to get with professionals who can explain exactly what this process looks like and get in front of the right attorney and CPA to explain the legal and tax ramifications.

Contact us for a free short sale consultation

I have two mortgages on my house. Does that mean I am limited to foreclosure or can I short sale my home?

You can always pursue a short sale. It becomes a bit more cumbersome at this point though.

The key here is to understand a short sale is simply a negotiated settlement. It is an attempt to workout an amicable and mutually beneficial solution with your lender, when you are upside down in your property, and must sell it.

The fact that there are two loans means that there are 3 negotiations that will run simultaneously.

1. The negotiation of what the second lien holder will require to release their lien.

2. The negotiation of what the first lien holder will require to release their lien.

3. The negotiation of how much the first lien holder will agree to give to the second position lien holder.

The 3rd piece here is the most important and there are some guidelines that we use. Most first position lien holders are reluctant to give the second position more than 10% of their payoff balance. Most second position lien holders will settle for 3,000 or 8% of their payoff balance whichever is greater. Note this is most, not all, and in no way guaranteed.

If you are in a position where you are upside down and have more than one loan against your property, make sure you work with an experienced short sale agent that can counsel you through the process!  We handle a lot of short sales in Tucson, and can guide you through the process of short selling your home in Tucson.  Contact us today for more info on short selling your home with 2 mortgages

We are often asked “how do you determine how much to list my home for if it’s a short sale?”

Proper pricing of a short sale is paramount to success, and it is not substantially different than pricing any other type of home for sale.
We begin by looking at sold homes that are similar or comparable within the closest market area we can find, preferably that occurred in the last 90 days. We then rule out what I call the “deal breakers”

1. We don’t look at single story homes as a comparable to a multi story home, and vice versa.
2. We begin by staying within 20% + or – of the square footage of the subject property.
3. We don’t compare 2011 construction to 1955 construction and vice versa.
4. We look at the overall market data for distressed versus equity sales. If an area is more than 50% distressed sales there is no weight given to non-distressed property. I.E 7 of the 10 homes sold in your neighborhood in the last year were foreclosures or short sales, you need to be prepared to compete with them on a dollar for dollar basis as an equity seller.
Once we have determined a basis for the comparable properties, preferably 3 active, 3 pending, and 3 sold properties, we then adjust for size and features of the subject property versus the comparable ones.
1. We begin by looking at average $/sq. ft. and making an adjustment up or down from each comp based on this.
2. We look for major features such as pools, extra beds/baths, or garages etc. And then give value or take away based on each comparable.
3. Finally we look at average days on market at the average price and adjust our list price based on the seller’s motivation to sell.
i.e. average $/sq ft is 105 with an average days on market of 96. My seller is being relocated and needs an offer in 30 days or less, we would adjust the price by around 10% downward to have this affect.
So to circle back around and answer the initial question of pricing short sales, we must begin with the end in mind. Typically we are working with a seller who is in financial hardship, and we are looking for a buyer who can hold tight for 30-60 days while we negotiate with lenders to get approvals of the sale. Both of these factors impact our pricing dramatically.
1. The seller is in distress, the last thing they want to do is sit on the market for 6 months with no offers while the home goes to foreclosure.
2. The buyer must have a reason to stay in the game through the process.
That being said, we typically price our short sales 10-15% under market depending on property condition and the seller’s financial state. This DOES NOT mean that the bank will accept that price. We typically see our short sales sell for 15-18% over our list price once the bank counters and everything is said and done.

There really is no exact science to pricing, we do our best to get it right up front, but the “right” price for a house is the one that the buyer is willing to pay and the seller is willing to sell for, and nothing more.