Should I try to do a short sale or a deed in lieu, or should I let the bank foreclose on my house?  This is a question I got yesterday.  In this market this is a question that you may be asking yourself?  Many are unable or financially unwilling to continue to make mortgage payments on a property that is upside down, and there are only three options:  do a short sale (if the fair market value is less than the mortgage balance), let the bank foreclose, or get the bank to take a deed in lieu of foreclosure.

Short Sale Procedures

A short sale is a sale of your home for less than the mortgage balance, and your bank must agree to the sales price because they will take a loss.  I wrote in an earlier article on the Short Sale process, “Banks only accept a loss and approve a short sale if certain conditions are met.  Sequim short sales require that sellers complete an  extensive application, and they must persuade the bank that they have little or no assets to their name, no financial resources from any other source, and their income must be insufficient to continue to make the full mortgage payments.  The sellers have to provide written third party proof with bank statements, tax returns, and often a great deal of additional documents.”

The short sale process is uncertain, because you have to list your home for sale, hope a buyer will make an offer, and hope the bank will accept that price.  All of that could take six months or a year or two years.  It’s quite unpredictable.

Short Sale or Foreclosure

The foreclosure process is quite involved and takes a minimum of 6 months and more often 12 months.  As a Realtor I don’t list foreclosures, but I do act as a Foreclosure Buyer’s Agent, and in that capacity I owe my clients full disclosure on the state of the foreclosure market and the risks inherent in buying a foreclosure.  The process to foreclose a property is a statutory process in Washington [RCW 61.24].  When I was still practicing real estate law, I created a detailed checklist for the foreclosure process, and as you can see from this foreclosure process checklist, it is quite detailed and cannot be compromised.  [Read my article entitled  The Truth About Foreclosures and the foreclosure process.]

Short Sale Process is Slow

The short sale process is very slow and uncertain.  The foreclosure process is painful, too.  The deed in lieu of foreclosure may be the best option for a homeowner if your bank will accept the deed.  Not all will accept a deed in lieu, but if you have time and you have a beautiful home in a beautiful area, you may want to start the process of listing your home and trying to do a short sale early.

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Seller financing may be making a comeback.  In th1960′s’ and 1970′s it was not uncommon for sellers to finance the sale of their home to qualified buyers, but all that went away when interest rates skyrocketed and when anyone could get a loan.  Since the mortgage collapse and the real estate recession, it has become much harder for buyers to get loans, and without a job or some other disqualifying data, buyers cannot buy homes and sellers cannot sell homes to those buyers. 

Seller Financing Making a Comeback?

We may be coming full circle back to seller financing as an option.  The circumstances have to all fall uniquely in line, but if they do, seller financing could be the key to selling and buying.  What are all the circumstances that must fall in line, and how does seller financing work?

Seller Financing – How it Works

Here’s what needs to fall in line for seller financing to persuade a seller to carry the contract and for a buyer to be able to close on the deal.  All of these need to happen:

1. The seller’s home must be free and clear, unless the existing balance is small enough to be paid off by the buyer’s down payment.  You cannot get away with seller financing that wraps an underlying loan like you could in the ’70′s and ’80′s.  All loans have “due on sale” clauses now, so any sale will trigger that and the entire balance will be due and payable immediately.  This is a big hurdle that filters out a lot of homes for sale, but if you can find the right home in the right area at the right price, and if it is free and clear, you might be able to put a sale together, subject to these following conditions.
2. The seller must not NEED the cash at closing from the sale.  In order for seller financing to work, the seller must be financially capable of taking the payments over a long period of time.
3. The seller must not have any liens, judgments, or tax liens on the property, which must be paid off in full if the property sellers.
4. The buyer must have a sufficient down payment to take care of the seller’s closing costs, including the excise tax, the title insurance costs, and the real estate commission.
5. The buyer must be able to demonstrate to the seller that the buyer is a reasonably safe financial risk, which means the buyer’s credit report should not be horrendous, and if the buyer doesn’t have an existing job, he should have a source of income that will make the payments and property taxes and insurance.
6. The buyer must be able to persuade the seller, preferably in person, that the buyer is likable, a good person of good character who is honest and diligent.

Seller Financing with a Deed of Trust

In Washington state seller financing can be handled in one of two ways:

The first seller financing option is a real estate contract, which is a single contract that includes the buyer’s commitment to make the payments and the security for the seller.  Real estate contracts, or contracts for deeds, or land sales contracts are not used so much anymore.  A real estate contract is forfeited, not foreclosed, and it only takes 90 days to forfeit a real estate contract.

The second seller financing option is the one that is much more popular.  This is a promissory note and a deed of trust.  The note is the evidence of the obligation to make monthly payments and the terms, and the deed of trust is the security instrument which secures the seller’s interest.  A non-judicial foreclosure with a deed of trust in Washington takes a minimum of 190 days from the date of default, but typically a foreclosure takes 7 to 10 months from the date of the missed payment.

Seller Financing is Back

Having been a real estate attorney I understand the details necessary to make seller financing possible.  Contact me by email or telephone, and I’d be delighted to help.  While seller financing requires a number of unique circumstances or conditions, seller financing seems to be making a small comeback in this current real estate market.

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Sequim Realtor Chuck Marunde went jogging in Las Vegas on a beautiful sunny day, albeit 96 degrees.  Here is Chuck out having fun to Vegas and back to Sequim.

Sequim Realtor out for a jog.

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Where are the Best Places to Live in the U.S.?  Sequim has been identified as one of the 10 Best Places to Retire in magazine articles and has been praised in many articles over the past 15 years as one of the Best Places to Live.  CNN Money Magazine recently published its list of the 100 Best Places to Live in the U.S., and the State of Washington has three slots in the top 18.  Here is the list of the top 25.

Best Places to Live in the U.S.

Rank    City                  Population

Best Places to Live in Washington

Mukilteo, Sammamish, and Newcastle are the three Washington cities identified in the list of Best Places to Live.  The reason I mention this is because Sequim has so much in common with these three winners, it is obvious that based on the criteria for choosing the Best Places to Live in Washington, Sequim is clearly a winner too.  Of course, there can only be 100 on the 100 Best Places to Live list, so there are undoubtedly many cities that should or could be on the list, too, but there’s no doubt Sequim is qualified to be on this list, and Sequim has been on top 10 Best Places to Retire lists in the past.

Best Places to Live – Sequim WA

Sequim WA is a community of 4,000 people, 2.5 hours from Seattle by road or ferry, has the beautiful Strait of Juan de Fuca on the north and the gorgeous Olympic Mountains on the south, which also means we sit in the Olympic Rain Shadow where we get 1/3rd the rainfall of Seattle, and we are outside the I-5 corridor.  This also means we don’t get drive through traffic, and the crime rate is so low it feels like we went back in time 40 years.  The lifestyle is wonderful, the area is pristine, and the list of recreation is long. 

There’s no doubt that Sequim is one of the Best Places to Live in the America.

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Sequim Real Estate Blog published its 1,000th article this week.  That’s exciting news, because these articles have helped thousands of buyers over the years.  These articles have also helped many people who are not buyers, including Realtors.  The Sequim Real Estate Blog is the brain child of Chuck Marunde who has spent a lifetime in real estate and loves to give everything he has ever learned away free to anyone who reads this blog.

Sequim Real Estate Blog Hits 1,000 Articles for Clients

The Sequim Real Estate Blog represent a lot of hard work, many years in the school of hard knocks, 37 years in the real estate business (20 years as a real estate attorney), thousands of hours of writing and editing, thousands of photographs (not to mention the editing), over a hundred videos, a passion for the subject of real estate and a heart to give his clients all they need to make wise decisions about buying real estate.

The blog has been a huge success with people all over the country who regularly express their appreciation for the rich content and all the free information that truly cannot be found anywhere else.  All the content here is original and is written by Chuck Marunde specifically for the readers, buyers, and clients of Chuck Marunde.   There is absolutely no registration requirement for anyone to access all this information.  There are no gimmicks, and there are no required contact forms.

Sequim Real Estate Blog is Free

“I believe that people want to find good relevant information when it comes to buying or selling their home, and I also believe they want the truth and credible answers to their questions and concerns.  But I also think people want it free without having to reveal any personal information, so I give it all away.  I write about every real estate issue that comes up for buyers and sellers, and I share what I call insider information that is not classified by any means, but is rarely ever discussed outside the real estate profession.  I think buyers and sellers deserve to know the truth about marketing, sales, and how real estate agents work (or don’t work).  So I give it to them in the Sequim Real Estate Blog.”

Do You Like the Sequim Real Estate Blog?

If you enjoy reading the Sequim Real Estate Blog or you have found it helpful in the past, would you comment below?  Let us know what you like and how you’ve benefited.  Of course, you’re also welcome to tell us what you would like in the future, and if we can provide it, Chuck Marunde will on the Sequim Real Estate Blog.

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Many buyers want to know how to get a home loan in this real estate recession, especially because it’s commonly known that it has gotten much harder to get a home loan.  Higher credit scores are now required.  660 is the new 620.  Manufactured homes are getting a lot of scrutiny these days, and many banks have quit lending on manufactured homes.  In this interview with Buck Gieseke of Integrity One Home Mortgage, learn more about how to get a home loan on a manufactured home.  This is Part 3 of our “How to Get a Home Loan” series.

How to Get a Home Loan – Manufactured Homes

Did you know that the land value cannot represent more than 30% of the total appraised value of your manufactured home and land?  Did you know that manufactured homes cannot have structural changes in the trusses?  Did you know that a garage attached to a manufactured homes must meet strict foundation requirements?  Did you know that you cannot get a home loan guaranteed by the VA if it was ever moved from another property?  A manufactured home must be 1976 1/2 or newer to be financeable.  Your debt to income ratio must be no more than 30% of PITI (principle, interest, taxes, insurance)  and no more than 41% of your PITI plus other monthly obligations that come up on your credit report (they don’t count your cell phone or gasoline).

You also cannot have modifications to the roof lines, dormers, or trusses (like the garage roofline).  As with all home loans, borrowers must have a two year job history.  It is still possible to get a 96.5% FHA loan on a manufactured home, but conventional loans require 10% to 20% down.

How to Get a Home Loan – Manufactured Appraised Values

Appraisers are required to use true comps when doing an appraisal on a manufactured home, which means they look for very similar manufactured homes, not site built homes.  This can result in a lower appraisal for a manufactured home compared to a site built, which Buck Gieseke explains in this audio series.

Get a Home Loan Interview Part 3

In this interview Buck addresses many of the most difficult issues when getting a loan on a manufactured home.  [You can contact Buck Gieseke at buck@iohmi.com.]

Get a Home Loan on a Manufactured Home at a Local Bank

Get a Home Loan Part 1
Get a Home Loan Part 2

 You may be able to get a home loan for a manufactured home at a local bank, but they also may charge a higher interest rate.  Options for manufactured homes are dwindling as values drop and banks drop out of the manufactured home loan programs.  I hope this audio series on how to get a home loan is helpful.

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