Why do Short Sales Take So Long?

Buyers get excited about the listed price of short sales when they see them online, but that excitement fades over the months, as they wait to hear back from the bank on their offer. Most short sale offers end with buyer disappointment. RealtyTrac recently reported that "Pre-foreclosure short sales took an average of 245 days to sell...". That's 8 months. Compared to a normal 30 day close--8 months is a lifetime. What is worse than that is that buyers can very often wait 4-6 months before the bank even engages to consider a short sale offer in the first place. So, it not the closing process that holds things up as much as it is the first engagement by the bank that takes the longest period of time. Buyers can wait for months and months with no definitive answer on an offer from the bank.

Why to banks not want to address short sales? Why does it take so long? Well, first you have to understand what a short is to understand why a bank makes this their lowest priority of business decisions. A short sale is essentially a request to a bank to take a loss on a property loan, where the home owner is still paying their monthly mortgage and has not gone into default. The home owner is usually still paying their home mortgage, but the home owner needs to sell their home. The problem is, they owe more money to the bank than the home is worth to a new buyer.

Here is an example of a potential short sale:

• George bought a house in 2006 for $200,000.


• George has been paying his mortgage payments every month.


• George decided he wants to sell his house now


• George discovers that all the houses like his house, same size, same age and condition, are now worth only $150,000. 


• Buyers are buying houses like George's house all around him for $150,000.


• George has a problem.


• George owes $180,000 to the bank on his home.


• George is "Up-side-down". He owes more than his house is worth.
  


• To sell his house, he will also have to pay Realtor fees and closing fees, totaling about $11,000.


• So, George and his Realtor start asking the bank to cover the difference between what he owes and what a buyer may be willing to offer to him on his house.


• Here are the numbers:


• House is worth $150,000 to a new buyer.


• George owes the bank $180,000.


• That is a $30,000 "short" fall.


• Plus the cost to sell is another $11,000, making the short fall $41,000.


• George's Realtor has a buyer interested in the house at $150,000


• So what does he do?


• George's Realtor team start calling the bank to ask, beg, plead with the bank to forgive the $41,000 difference, and allow him to sell the house as a "Short Sale". To do this, the bank has to either make up the loss difference, or get George to agree to pay them back some portion of the $41,000 short fall.

So, why do Short Sales take so long to happen? Why do most short sales never come about? The answer is very simple. Put yourself in the bank President's shoes and tell me what you would do. Here is the situation that I just described from his point of view:

• George agreed to pay off the full amount of his $200,000 loan.


• George still owes $180,000 on this loan.


• George is still making monthly payments every month.


• To sell, George has to pay the bank and pay closing costs.
  


• George is asking for the bank president to write him a check for $41,000--at no charge. 


• Most banks don't like giving away money--so what do they do? Nothing. No response. No answer. No $41,000 check.

Our friend "George" is one of MANY MANY people who are asking for forgiveness of large amounts of mortgage debt in the US today. Banks get requests from Realtors and home owners every day, asking for the bank to forgive the debt and cover the short fall in their home value. In a short sale, the home owner is normally still make payments or maybe just missed their first payment or two. When the home owner stops making payments, banks normally start their foreclosure process. At that point the bank has to take action. This is a "non-performing loan" now. The bank is forced to take possession and attempt to re-market the property independent of the home owner. But as a short sale, there is very little motivation for the bank to act and lose so much money while the home loan is still "performing" as intended.

This is a very sensitive matter today. With so many home owners struggling with devalued properties, and banks trying to manage foreclosures and per-foreclosure short sales, the decisions are difficult and the process is long and drawn out. Most buyers and most sellers never make it to the 245th day to see a short sale actually happen. And banks don't normally even respond to short sale requests during the first several months of requests. When the bank does start talking to the home owner, it is a long, painful, and difficult waiting period for both buyer and seller. Both parties must stay in the game for a short sale to actually happen. This is not for the faint of heart or impatient, and anyone who tells you that banks are better now about handling short sales and banks are giving away money in 60-90 days, just simply does not understand how banks work, or why a bank president would rather deal with a foreclosure, than have to deal with the ambiguity and problems of a short sale. At least with a foreclosure, the bank president does not have to justify why he signed off on the loss. It was no longer his choice.


Austin has been lucky during the past couple of years. Compared to the nation and hard hit areas, we have had a very small percentage of foreclosures and short sales.

Disclaimer: I am not a CPA, Mortgage Banker, nor am I in the field of Finance. If you believe you are in a situation of a potential short sale or pending foreclosure, or having problems making payments on your home mortgage loan, please do not consider this blog article to be advice to you or your situation. This should in no way be considered advice. This is simply a description of situations and stories that I see every day in the business of helping clients buy and sell Real Estate in Austin Texas. If you have questions about your particular real estate needs, don't assume that this is advice to you or someone you know. Call me, and Let's talk. If I can not help you, I should be able to find someone who can.  tT

Sunday Brunch Downtown Austin

I have never been accused of being a "Foodie", but some experiences should be shared--regardless. Sunday Brunch. "Brunch" has suffered the unfortunate demise in many restaurants to become code for the marketing notion that "we serve breakfast past 12--Noon." Let's be honest, IHOP fits that definition, but I am sure you won't read a lot about brunch at IHOP's or Denny's. On the other hand, if you are looking for a wonderful Sunday Brunch, the real deal with great food, outstanding service, relaxing atmosphere, and downtown Austin eye appeal--keep reading.

Lamberts. Downtown Austin. Don't be misdirected by the fact that this place is a BBQ restaurant. It is so much more than just Austin BBQ. However, as for the BBQ at Lamberts--Wow, to those ribs. Unbelievable. I still love Rudy's for brisket, and baby bribs, but the smoked ribs at Lamberts--Wow. Back to brunch. Wonderful, wonderful food for the dedicated or occasional foodie. You won't be disappointed. 

On paper, the menu is ho-hum. Looks a little light for a brunch. Don't believe it. You will be stuffed and waddling out of there in short order. Here are a few of the surprises that you should not miss:

• The most dreamy blueberry muffin is served with your drinks to wake up your taste buds and get you ready. 


• From the line: Coriander and Maple Crusted Berkshire Pork Ribs. Humble in appearance. Dreamy in taste. 


• Neiman Ranch Ham, Poached egg and Tobasco Hollandaise--Benedict. This smoked ham just makes this little Texas-English breakfast sandwich so robust and rich. It just tastes right.


• Wonderful southern deviled eggs with caviar. This is the kind of thing that makes a Memphis boy peak into the kitchen to see if mama is in the back, waiting to surprise you later.


• Cheese grits with just a touch of spicy peppers. This is the stuff that broke the feuding of the Hatfields and McCoys in Kentucky--back when. Excuse me--can I get seconds please.


• The smoked bacon. Oh my goodness. Bacon is bacon is bacon--well, and then there is Lambert's Apple smoked Bacon. If you miss the bacon, you missed breakfast. 


• House. Hot. and Mustard. Three small bottles sit on the table. If you miss these bottles, you should turn around and go back. Sweet and tart mustard. Just a little on the meat to accent the flavors.


• And the deserts. If you read my Thanksgiving blog on making Pecan Tarts, well the chef at Lamberts has created a Pine nut tart that sits on a whipped cream smudge that I swear is my pecan tart recipe--only better. It just melts in your mouth. I was sure my tarts were the best on the planet. Now I know I was wrong. My tarts are great. These tarts are possibly the penultimate pastry on the planet.

Oh, there is so much more on the menu. Half of the food is on the line and the other half is waiting for your order from the grill. Rich black coffee with cream. And a drinks menu to delight. Just a little piece of culinary heaven here.

So, if you are looking for a relaxing and rich Austin Sunday Brunch experience--head down to Lamberts, and when you get back, log back in and tell me what you thought about it. If you didn't love it, I will find some way to make it up to you, but I don't think you will be disappointed.

I am not much of a Foodie, but If you need an Austin area Realtor ®, give me a call--let's talk.

Tim Thornton, Realtor ®
Top Producer 2010, 2009, 2008
Century Club member
Zip Realty, Inc.
Austin, Texas
(512) 914.4665 

Do NFL Players need a Coach?

It may sound like a strange question to ask on a Real Estate blog, but I think it is a worth while question to ponder.

Here are the facts for you to consider:

• NFL Players typically spend most of their life dedicated to their sport, leading up to signing a contract to play pro-ball.


• Work-outs. A typical player may work-out several hours a day on non-game days, not to mention regular weight training and drills.


• And on game days, players have to be 110% engaged and "turned on" for the game.


• Other sports. Players may be involved in other recreational sports, such as golf or basketball to help exercise other muscles and give them a different physical and mental advantage, or to just help them de-stress.
  


• Study. The best players study the game and the sport. They know game strategy inside and out. Physically, and mentally. Mental preparation and stability is a key element in any sport.


• Practice with the team. Players work with the team. Even the super stars are recognized team players. 

So, if a professional NFL Player spends so much time in practice, preparation and study of the game, why do they need a coach? What can a NFL coach possibly offer to the best of the best in professional athletics? A lot.

First of all, coaches are professionals as well. And, football, like Real Estate, is a team sport. It takes a full team effort to win a game, and create a winning season. From the watchful eyes and sideline advise of an observant coach, to the fast thinking reactions of the quarterback, to the skillful hands of the receivers--everyone works together to create success. In our culture, we focus a lot on the QB's, Receivers and a hand full of "key" players, the closing scores, and the seasonal record, but behind the bench the coaches (plural) are looking at every play, every player, and every detail of the strategy from the opening kick off to the last minutes of the game. It all adds up to create a single winning game.

In Real Estate, if you have bought a house or several houses in the past, you may feel like you are a seasoned quarterback, and don't really need coaching, or professional assistance in your Real Estate search or transaction. You may feel like you have already played the game enough time that you can't possibly miss something, or learn something new about local Real Estate or a given transaction.

In the end, you may determine that one can be overly confident in sports or in business, and this kind of "confidence" usually leads to one's downfall, not one's success. Real Estate is a sport better played with a professional team, with a good coach who has both the big picture view and detailed plan to execute on any given day or situation. A coach that knows his extended team, and how to lead his team to wins--play by play. And a good coach knows that no matter how many games you have played, the next one will be different. The next play is always the one that counts most--not the last one.


If you are looking for a Real Estate coach to help you buy or sell your next home, please give me a call. Let's talk.

tT

Tim Thornton, Realtor ®
Top Producer 2010, 2009, 2008
Century Club member
Zip Realty, Inc.
Austin, Texas
(512) 914.4665  mobile

Caught you looking!

If you are learning about Austin Real Estate from my blog, imagine what you could learn if I were actually helping you find your Austin area home in person. All you have to do is call.

 

 And if you are a Realtor learning about what is happening in the Austin Real Estate market from my blog, there may be a place for you on my team. Either way--you should give me a call. 

Changing Standards for TEA School tests means changes in School Rankings

The new 2011 Test scores were just released and there were a number of changes in how individual schools were rated for the coming school year. Many schools that had been rated Exemplary in 2010, have a new Recognized rating coming into 2011. The same is true for Recognized schools, Academically Acceptable schools and Academically Unacceptable schools--many dropped in test score ranking for 2011. Did Texas students lose it in 2010 or was something else going on here? Well, there is indeed more here than just a change in rankings. The standards changed, and the new standards will become even more strict over the next couple of years, according to press releases issued by Texas Education Agency (TEA), July 29, 2011. According to the TEA, Texas is strengthening accountability measures to create greater excellence among Texas students.

“'Each year, we raise the bar to push our schools to keep growing and improving. These changes will help prepare schools and districts for the new accountability system in 2013, which will be based on the new State of Texas Assessments of Academic Readiness (STAAR™) and in response to House Bill 3 passed by the Texas legislature in 2009,'” (quote from Commissioner of Education Robert Scott).

As a result of these changes, in 2011 we have seen changes in Eanes ISD, Round Rock ISD, Austin ISD, Leander ISD, Lake Travis ISD--in all Greater Austin area school districts and across the state. 

Some of what has changed includes:

• Elimination of the Texas Projection Measure (1); this may be the single largest impact to the standard from the past couple of years.
• Inclusion of results for more than 119,000 students receiving special education services who were tested on the TAKS-Modified and TAKS-Alternate assessments
• Inclusion of a measure for English language learners based on TAKS passing standards and progress on the Texas English Language Proficiency Assessment System (TELPAS) reading, an assessment that measures a student’s English reading proficiency and progress
• Increasing the TAKS indicator standards for the Academically Acceptable rating by five points each for mathematics and science.
• Adding a new commended performance indicators
• Increasing the annual dropout rate riggor for grades 7-8 from 1.8 percent to 1.6 percent for the Recognized and Exemplary rating categories.

So, Texas standards for testing and rating is becoming more demanding on several fronts. In the end, this should give us a clearer picture of how well our schools are performing, with a rising bar of excellence.

Reference TEA press release:
http://www.tsta.org/news/current/accountability2011.pdf

(1) According to an article in the NY Times, July 23, 2011, TPM rating worked like this: Instead of using students’ actual scores on standardized tests, the TPM ratings formula gauged students’ future test scores based on a campus-wide average.
http://www.nytimes.com/2011/07/24/us/24ttaccountable.html

Rating standards for each category:
http://ritter.tea.state.tx.us/perfreport/account/2011/manual/table8.pdf

Buying a Condo in Austin

Austin's condo market is broad and varied. These homes range in price from around $100,000 to over $2,000,000. The Austin area has several areas where there are high concentrations of condos and townhouses, and some areas where almost no condos have been built. These homes come in a variety of sizes, shapes and flavors--High Rises, Mid Rise, Townhouses, Conversions, "Student" Condos, and Luxury condos. There are as many different kinds of condos in the Austin area as their are different kinds of buyers. "To each his (or her) own". This year (to date), over 1000 condo/townhouses have sold in the Austin area.

When Austin City Counsel approved the building of high rises in downtown Austin, the world of Austin Condo ownership suddenly became electrified. Austin has had condos and townhouses for many years, but when the high rises started going up, the whole market changed. Like giant bill boards on our downtown horizon, condos interest went main stream overnight. The high rises gave rise to a whole new generation of condo interest and advertising. Not that every buyer wanted to live downtown, or could afford to buy an expensive downtown condo, but the ever-present temptation of the high rise put condos in the line of sight for any person who spends time in downtown Austin and raised the question "Should I consider a condo?".


Of course, downtown Austin has the highest concentration of condos in the Austin area. This area is divided between UT Condos and DT condos. Just over 240 condos have sold here this year to date (YTD), weighted a little more toward the downtown area. An additional 69 condos are under contract here before the school year starts.

• Median price in DT area is around $310,000
• Approximately 1000 sf
• 137 condos SOLD YTD

• Median price in the UT area is around $180,000
• Approximately 850 sf
• 107 condos SOLD YTD

One of the next highest concentrations of condos/townhouses in the Greater Austin area is in NW Austin along the 183 corridor, up to the edge of the Lakeline Mall community, and into Cedar Park (not many condos in Cedar Park area). In this area, we have seen

• Median price is around $163,000
• Approximately 1350 sf
• 168 condos SOLD YTD

The next corridor is equally weighted, in the SW Austin area, starting south of Lake Austin, and east of I-35. This area has a number of new townhouses and condo conversions (from Apts to Condos). Due to the easy access to downtown, this is a popular area along SoCO, SoLA and beyond:

• Median price in this area is around $170,000
• Approximately 1100 sf
• 147 condos SOLD YTD

In the North Central area, just north of UT all the way up to Parmer Road, we have another concentration of condos in the Austin area. Each area, and each complex has its own features, benefits, and costs. This are looks a little like this:

• Median price is around $105,000
• Approximately 850 sf
• 120 condos SOLD YTD

West Austin, starting in the Enfield/Tarrytown area and moving toward Westlake has a surprising number of condos tucked in a fairly dense area of West downtown Austin. 

• Median price is around $237,000
• Approximately 1300 sf
• 94 condos SOLD YTD

 
East Austin is a dynamic and changing area in Austin. A newly developing "Warehouse District" has a number of warehouse conversions. This is one of the many changing landscapes in the Greater Austin area.

• Median price is around $175,000
• Approximately 1250 sf
• 45 condos SOLD YTD

 
South East Austin has a few communities with condos:

• Median price is around $99,000
• Approximately 1100 sf
• 66 condos SOLD YTD

North East Austin has one of the fewest number of condos in the Austin area:

• Median price is around $142,000
• Approximately 1400 sf
• 35 condos SOLD YTD

Around Lake Travis one can find a variety of condos, and luxury condos:

• Median price is around $195,000
• Approximately 1400 sf
• 55 condos SOLD YTD

Of course, this is a very broad stroke of information about condos in the Austin area. There are many wonderful condo/townhouse communities across the greater Austin area. One to meet your needs--I am sure.


If you need a Realtor ®, I would be honored to assist you in your home purchase, search or selling your Austin area home.

Tim Thornton, Realtor ®

Top Producer 2010, 2009, 2008
Century Club member
Zip Realty, Inc.
Austin, Texas
(512) 914.4665  mobile

Austin area Investments -- Where to invest

Investors have returned to Austin during the past 12+ months. Why? While virtually every US city that went through "the bubble" of inflated and unjustified home prices and then experienced "their bubble burst" (and the reality of real market value), the Austin area as a whole did not participate--in either the ballooning of prices or the dramatic overnight fall of home values. Our numbers over the past 20 years have been very consistent, steady, up and to the right.

Buying investment properties are a little different than buying a home to live in. Investors need a plan, a financial model to measure return on their investment, and a strategy. I work with investors who have a clear investment strategy. An investor needs to know where they are going to get their money, how much over 20% they plan to put down, how much they are going to need to remodel or repair their new property, and they also need to know how and when they plan to exit the market (Exit Strategy). They know when they plan to sell. It could change--but they have a plan.


Then there is the question of tenants and leasing. How quickly can you lease the house? When is the best time to lease a given home in a given community. Is your investment for short-term cash flow (the money you make when mortgage and expenses are paid), or for long term appreciation. Very seldom is it both, though I know a few communities that I believe have some of both to offer these days.


If you were hoping that I would tell you in this article which communities you should shop for investments--just give me a call and let's talk. It is never quite that simple, and I can't give away all of my secrets for free on my blog. I can tell you that I just sold an investment home to a client in an area of Greater Austin that is seeing very steady growth, and property values have remained strong--even during the worst of recent years. My client closed on Friday. Worked on the house on Saturday and Sunday, after putting a "For Lease" sign in the yard. Monday morning the new tenants were moving in...Amazing! Not all stories end this way, but if you have a plan, and you work the plan hard with a smart Realtor, you might have a similar story to tell (I have several investors in this area that have a similar story as well).


If you need a Realtor ® to help you with your Austin area investments, I would be honored to assist you in your home purchase, search or selling your Austin area home.

tT

Tim Thornton, Realtor ®
Top Producer 2010, 2009, 2008
Century Club member
Zip Realty, Inc.
Austin, Texas
(512) 914.4665