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How to properly evaluate a potential investment property

photo credit: Håkan Dahlström via photopin cc
photo credit: Håkan Dahlström via photopin cc

Life is full of sayings that seem contradictory at first.  Expressions like “a chain is only as strong as its weakest link” and a “team is only as good as its worst player” seem to make no sense until they have been analyzed and understood.  In flipping homes, you make your money when you buy.  Quite simply, if you buy a home at the proper discount then you have a much better chance of selling at a profit.  Here is a general outline to help you evaluate a potential home for investment.

First, Take a Casual Drive

It is a good idea to only consider homes that you can actually inspect.  Being able to drive by the home gives you a firsthand perspective. On your way to the home pay attention to the little details such as

  • condition of the roads; are there large potholes, pavement patches, adequate street signs?
  • local area; are there any schools, shopping, offices, or factories nearby?
  • Appearance of the actual street; how do the other homes on the block look?
  • The prospective home; what is your first impression when you see the place?

Second, take a Casual Stroll

Now that you have had the time to look at the home and surrounding area from the road, it is time to actually look at the property up close.  When you are in the home ignore things like carpeting and paint.  Take time to look over the roof, the foundation, the electrical box, the HVAC unit and any plumbing pipe that is easy to access.   Walk outside and see if the septic tank or well has any problem.  These are the areas that can cost major money to fix.  If there are any noticeable problems with these primary parts of the home you can use that to negotiate with the seller.

Third, crunch some numbers

Now that you have looked over the home and determined that it is a possible investment, it is time to do the math.  You need to have an idea of what the total repairs will cost along with how much the home should be worth after the repairs are completed.  Once you have these numbers you can make an offer to the seller.

When putting together your repair estimates it is always better to over price.  Trying to cut corners and dream that the kitchen can be remodeled for $2,000, or some other wishful hope, will cause you tremendous grief later on.

After you have looked at a few homes and talked with the same contractor a number of times you can start to get a feel for how much repairs will cost.  This one skill takes some time to master for those that are new to real estate investment.   Once you are comfortable estimating repair costs you will be much better at spotting a deal when it pops up.

Search for: Madison, WI Foreclosures for Sale

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Unfortunately there's no website for Umpqua shortsales. After the First agreed to a HAFA shortsale; they said to ask the 2nd lienholder if they participate in HAFA shortsales.  They said they "HAD TO."  Now 2 months later after accepting paperwork, then NOT accepting the same paperwork, they agree to the shortsale AND with the payoff but will NOT release my seller of the liability. I asked them to rereview the file with his new updated financial statement and hardship letters, HAFA Affidavits, Arms-lengths signed by all parties and NOW ten days in rereview with Umpua Bank.

The Ocwen Servicer said to send them a link regarding the HAFA guidelines through the USgov site and then to escalate the file.  I've contacted Fannie Mae helpdesk since the first is a Fannie Mae product, can they help with getting the 2nd to comply?  Or WHERE else can I and how do I escalate the file?

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Hello- I need some info from anyone able to help- I am at my end of the rope with Chase , Chase is requiring the first who is SPS loan servicing to give them a HAFA letter of approval before they will give there letter of approval- well the 1st per HAFA guidelines can not do this-they need the 2nd approval before submitting it for approval from there investors- I have been going round and round with these 2 banks for 6 weeks and getting absolutely no where- Has anyone gotten one approved with SPS being the 1st and Chase being the second ? I need a high up contact at Chase and SPS to get this done-

any info anyone has I would greatly appreciate.

Laura Mitchell

ECO properties

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Stoughton Wisconsin Home Listings

Just Sold! 409 East Street, Stoughton WI 53589

We are happy to announce a recent home closing in Stoughton, Wisconsin. This was a home closing where Rock Realty represented both the buyers and the sellers. The sellers had moved out of state and left it to Michael Collins at Rock Realty to guide the transaction to a successful close. I know the buyers are excited to start their planned renovation to make the home just right for them! Congratulations to everyone involved!

If you are thinking of selling or buying a home in Wisconsin, our home buyer specialists would be happy to assist you. Give Rock Realty a call at 877-774-7625. We are a full service real estate brokerage.

 Stoughton Wisconsin MLS Listings

Stoughton, WI Homes for Sale


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I am a buyer on a shortsale property in los Angeles.

The file was transfered to NationStar and property going to be Auctioned by

My offer is already signed by seller and I was waiting for shortsale approval from BOA that BOA informed the listing agent that they transfered the file to NationStar and shortsale process must start all over with them.


I need to know since I have a signed contract do I have a any right.

I feel that  I am being pushed and forced to accept the highest bid that will be on a auction date and my right of doing appraisal and inspection which was in my contract is no good anymore.


Please help me to find an attorney to fight.


Thank you

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Nationstar forcing the use of

I have read a lot of posts regarding this over the last few days since I found out that they are going to "require" my client go through the process.  First of all is a licensed Real Estate firm out of California licensed to do business in the Commonwealth of Virginia where I am located.  Which means that they are in violation of no less than Article 16, Standard of Practice 16-3 and 16-4.  We have a valid Ratified contract in place along with a signed listing agreement through January 31, 2014 so they are in violation by interfering in that transaction and contacting my client.  To top it off, they called me last night on my home phone.  How in the world did they get my home phone number?  Nationstar is not the owner of the property and as such has not right to auction off the property.  They have two BPO's and they can get an appraisal if they want.  The offer we have on the table is an excellent offer which falls in line with both BPO's they have received.  Their excuse of using to make sure they are getting the best offer is totally wrong.  

I want to recommend to everyone who is going through this to do exactly what I have done over the last few days.  I have contacted the following:  Senator Mark Warner of Virginia, The Attorney General of the Commonwealth of Virginia, DPOR - our Licensing board, NAR's Government Affairs office in Washington DC, the Virginia Association of Realtors, and will be calling HUD today. My client has filed a complaint with the Consumer Financial Protection Bureau and if you go on their website you will see thousands of complaints against Nationstar.  My client has also contacted an attorney.  I will be filing a complaint with our licensing board as soon as my client physically receives their letter.  

We need to put a stop to this!   

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$60,000 opening bid!    Previously valued at $210,600!


Property Highlights

  • Large Wooded Lot
  • 2 Car Garage
  • Walk Out Basement
  • Five Bedrooms
  • Three & 1/2 Baths
  • 2 Fireplaces
  • Basement Bar
  • Deck
  • House Vacuum


  • Bedrooms: 5
  • Bathrooms: 3.5
  • Home Size: 2,708 sq.ft.
  • Garage: 2+
  • Lot Size: .55 Acres
  • County: Rock
  • Property Type: Single Family Home
  • Year Built: 1984
  • MLS Number: 1687806

Click here for additional information: 3141 W Danbury Dr, Janesville WI 53546

Call Michael Collins at 608-921-8536 for additional information.

Madison Wisconsin Area Homes for Sale

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Just Sold! 1817 Anhalt Dr, Madison Wisconsin 53704

We are happy to announce a sale for another Madison Wisconsin Rock Realty home seller!

This home was the perfect little tri-level on Madison's East Side. The buyers got a great price on this bank accepted short sale. Congratulations to the buyers and our sellers on this successful Madison short sale transaction!

If you are thinking of selling or buying a home in Wisconsin, our home buyer specialists would be happy to assist you. Give Rock Realty a call at 877-774-7625. We are a full service real estate brokerage.

 Search Madison Wisconsin MLS Listings


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Pursuing Foreclosure Purchase

I know with all the collective experience on this site, someone has to know something about this.

I have a Realtor friend who is interested in buying a home that has been foreclosed but is not yet listed. It is with JP Morgan. What office would she contact to find out whether the bank would deal directly with her to purchase OR do  they not do that and just prefer to wait until the asset is ready to list and then just list it?


I work foreclosures for an arm of Springleaf Financial Services of NC but want to branch out to some of the bigger companies, like VA, Bank of America, etc..

No agent in my market will share with me how they got started because so many people are just scared that there won't be enough business if they share their "secrets".  I hate that mentality because I have always shared whatever little I may know about something when other agents ask but it is what it is.

Does anybody have any suggestions, advice on how to get on with those larger accounts?


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How To Dispute A Fannie Mae Value On A Short Sale

Hi folks. If you work Short Sales you know that one of the issues we have right now is Fannie Mae coming back with values that can not be supported by the market.

Inflated property values are the norm with FNNMA. They counter EVERY transaction with a very high price. You can count on it. If you are not prepared for this you can easily have your Fannie Mae HomePath Short Sale blown out of the water.

Since we know Fannie Mae is going to counter on price it is imperative that we can prove to FNNMA that the Short Sale Offer we have is "highest and best" and IS the market value for the short sale property.

So what do we do if we are listing a Fannie Mae HomePath Short Sale?

First, go to the Fannie Mae Loan Lookup Tool to verify that Fannie Mae is the investor for the loan you are getting ready to Short Sale. You will need a signed authorization to do this. Or the borrower can do it for you.

If the investor is Fannie Mae then go ahead and have your seller complete a Fannie Mae Borrower Authorization Form. You will need this later.

Now you have two choices.

  1. Ask Fannie Mae to give you pricing before you list the property.
  2. Wait and find a buyer and submit the short sale knowing FNNMA will counter the deal.

I prefer the 2nd choice. Why? Because I really need showing history and listing history to help support my value. I'm not concerned with Fannie Mae giving me a listing price as that is what I do for a living. I am concerned that I may need to justify my contract price.

To do that I need data. Lots if it!!

You can dispute a Fannie Mae Value at Fannie Mae's HomePath Short Sale Site.

I've done this about a dozen time and was able to close on all of them at our contract price.

I use data from:

  1. MLS
  2. RPR (Realtor property resource) use a full report with stats for the area.
  3. Zillow. Why not? FNNMA does.
  4. Tax records
  5. Private sales
  6. List history (FNNMA requires the property to be active on the market at least 7 days with 2 of them being over the weekend)
  7. Showing history with agent feedback

Overwhelm them with data that supports your pricing. My experience is that as long as you can prove your case they will eventually agree. I've done this numerous times and all were successful. My average dispute is roughly 25 pages long including a cover letter explaining what we did to price, market and sell the property. 

You can also dispute value at time of listing through  Fannie Mae's HomePath Short Sale Site. And be sure enter you offer details in Homepath as soon as you send the Short Sale Submission to the servicer. That way FNNMA will monitor the transaction and keep it moving forward.

So don't let a high value from Fannie Mae derail your deal. Expect it and start preparing for the Fannie Mae Value Dispute at time of listing. I hope this helps.

Fannie Mae HomePath Short Sale Quick Links

  1. Fannie Mae Loan Lookup Tool
  2. Fannie Mae Borrower
    Authorization Form
  3. Short Sale Affidavit
  4. FAQs
  5. Contacting Fannie Mae about
    an Active Short Sale Fact Sheet
  6. Listing Agent Checklist
  7. Report potential fraud on a
    Fannie Mae short sale
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I just received an email from our Seterus negotiator asking for the seller to sign a promissory note for $27,000 and make payments of $450 for the next 60 months.  Is there any body who has received a fannie mae counter and been able to counter back at a lower amount and get approved?? 



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Fannie overpricing +/-125% of market value.

I began noticing about nine months ago; confirmed with several other short  sale Realtors and a law firm that does a lot of foreclosure defense and  short sale negotiations.  Have you also noticed Fannie has been countering  offers at +/-125% of fair market value?  I recently had one Fannie short  sale were they countered at $215K and three weeks later changed their mind,  reneged and recountered at $230K.  The buyer met both counter offers and  the FHA appraisal was ordered which came in at a fair market value of  $210K.  FANNIE REJECTED THE FHA APPRAISAL!  One of their managers told  me an FHA appraisal is only an opinion. I asked him, "than why do all the banks  and investors require an appraisal"?  Of course, he couldn't answer that  questions.  He also gave me his "BPO" comps and not a single one of them  was a comp!  What seems to be happening is Fannie is taking homes back and  putting them in their Homepath program for +/-125% of market  value.  With Homepath properties there are no appraisals and from what  I can determine Fannie arranges the financing.  So, now we have some poor  schnook who doesn't know any better buying an overpriced home, unappraised  home that will take many years before having any equity. Last  week, I had a conversation with a short sale supervisor at one of the major  lenders I work with who has a friend that paid $460K for  a Homepath home.  He had it appraised on his own and it  came in at about $400K.   Please note Fannie reported profits of $17.2  billion in 2012.  While their practices may be legal I would question their  ethics.  You can Google what I am saying and verify for yourselves, and I  would like to hear if you have had  similar experiences.
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Lately, there has been much made of the current “housing recovery,” with many thinking that the market turn around has begun and that the end is near for short sales.  I could not disagree more, and here’s why:


Has the market recovered?

According to Steve Berkowitz, CEO of Move, Inc., which operates®, “Where we have seen significant volatility in many markets — including double-digit declines in inventories as well as increases in median price for both yearly and monthly views — we are now looking at a housing market that is less heated and moving closer to normalcy. Future home-price increases may be driven more by market demand than inventory shortages.”  As for pricing, Core Logic has released estimates of near 12% in price growth in 2013, but also shows a distinct cooling trend for 2014, with lower priced property leading the slowdown at just 2% price growth.  This can be attributed to rising interest rates, a slowdown on investor participation, changing short sale rules, and expanding inventory.  It is this last market segment –Inventory, which I believe holds the key to determining how 2014 will play out.


The inventory scam

Anyone active in real estate sales can tell you that inventory can be tight in some segments, and this has lead to increased prices.  Increased prices sets the tone that the market is rebounding and this “good will” feeling about the market can go a long way to changing people’s perceptions about the market, encouraging many who are waiting on the sidelines to jump back in.  While the price increases are encouraging, they have a long way to go to erase the equity losses of the last decade.  Clearly, any housing market restart is tied to inventory, and this is why I think that the current market rebirth is an illusion.  The “shadow inventory” that has been much speculated about is real, and when it is revealed, it will erase one of two segments of the market that is propping up growth, the other being artificially low rates.  My definition of “shadow inventory” is simply inventory not reflected on the market, most notably the MLS. There are many reasons for shadow inventory, including those in some sort of foreclosure work out program, such as a loan modification, those who are actively litigating foreclosure, and those who have simply given up trying to short sale due to agent short sale incompetence or lack of success with their lender (which many times gets the blame when short sales are mishandled by the agent).  The biggest reason for shadow inventory though, and one that is most troubling, is the property that has already been foreclosed and taken back by the lenders. In many cases, it could be months, or even years before these properties hit the market.  The reason for this is that the servicers who foreclose will end up conveying those properties back to the investor, and in the last year, many of those investors have been dumping property back to Government Servicing Entities, or GSE’s such as Fannie Mae and Freddie Mac, and HUD.  This process takes time, but there is another, more sinister undercurrent to the consolidation of the distressed property market to the GSE’s.


The GSE market monopoly

While our collective focus has been turned towards the economic recovery as a whole, the GSE’s, and Fannie Mae in particular, have been quietly and thoroughly attempting to monopolize and control every aspect of the US mortgage and real estate market.  They now control, or seek to control, all aspects of the purchase finance market.  Simply said, if you are attempting to get a mortgage, you will have to abide by Fannie Mae purchase guidelines and both HUD and Freddie Mac now seem to march lockstep with whatever Fannie is doing. Conversely, Fannie is now seeking to control all aspects of the real estate sales markets, setting standards and guidelines on how all property is valuated and sold.  The new GSE short sale guidelines, while certainly streamlining the process, are far more restrictive in how sellers are determined to qualify, how the property is listed, how the property is valued, and how the buyers purchase.  Moreover, control over what the seller and buyer can and cannot pay for mortgage and sales related services, as well as what the buyers can and cannot do with the property after it is purchased complete a very troubling picture of just how far GSE control is established.  In short, anyone buying or selling or valuing or financing real estate in the United States now is beholden to GSE, and particularly Fannie Mae rules.


Both ends playing against the middle

Back in November, new GSE guidelines took effect that promised a great streamlining of the short sale and deed in lieu process, and for the most part they have.  I have seen short sale times fall dramatically, and with the proper set up and preparation, it is no big deal to get an approval in less than 60 days.  There is a catch, however.  The GSE’s greatly tightened short sale qualification standards.  At one point, in 40% of the short sales I closed, the sellers were not delinquent.  Now, this has been virtually eliminated.  Guidelines are also cracking down on hardship, and they are actually reading and researching hardship letters and rejecting many hardship scenarios.  Conversely, new GSE purchase guidelines are now coming out that will make it exponentially harder to qualify for a mortgage. Some of the news rules coming out are the lowering of the maximum LTV to 95%, tripling FHA purchase costs and required insurance, and the coupe de grace, severely tightened underwriting and secondary marketing guidelines. As it stands now, when a mortgage originator underwrites a loan to GSE guidelines, they agree to purchase the loan back from the GSE if there is a default within the first 12 months.  In other words, a loan originated by Bank of America, then sold to Fannie Mae would have to be bought back by Bank of America if the loan went into default within the first year (this time can vary.) Under the new rules, if the GSE determines that the proper due diligence has not been completed, and the originator had any reason to believe that the borrower was a default risk; they could be liable to buy back the loan FOR THE ENTIRE LIFE OF THE LOAN. Think about that.  This means that if you ever missed a payment, ever were late on a credit card or car loan, ever did a short sale, ever bounced a check, your mortgage lender will now fear approving you because they would be liable to buy back the entire mortgage if you went into default 20 years down the line.  Add in rising mortgage rates and you have a nice shiny bullet right between any housing recovery’s eyes.


Value Roulette

Another landmine to the housing recovery is the perception of property value.  As we all know, an appraisal is an opinion of value, and this can vary widely.  In most areas, I can find very low comps and very high comps for the same property.  This is problematic because on the short sale side, buyers use the lowest comps to justify buying a distressed property.  The director of short sales for Fannie Mae, Tim McCallum, recently revealed that Fannie no longer considers short sales and REOs as distressed property, and therefore will value them no differently that normal retail property. This includes the ludicrous practice of not considering short sale or REO comps when valuing these properties, as if these other sales didn’t exist.  This is a very big statement, because the market definitely distinguishes between the two and buyers will simply not pay full market rates for the hassle of dealing with a short sale or buying a run down REO.  On the flipside, mortgage lenders, underwriting to GSE guidelines, absolutely consider distressed comps, and routinely undervalue their appraisals.  So, we have on the sales side, controlled by the GSE’s, inflated values, and we have on the purchase side, also controlled by the GSE’s, the refusal to lend at these inflated prices.  This is not the recipe for a comeback.  But wait, there is some purchase gold at this tunnel end, and that is the reckless and risky Fannie Mae “Homepath” and Freddie Mac “Homesteps” purchase loans that disregard appraised values and allow 100% financing.  Sounds suspiciously like the same risky speculating that got us in trouble in the first place, yeah?


How does this affect the market for 2014?

Real estate professionals have long buried their heads in the sand as to what the GSE’s are really doing.  This is a mistake.  When this much control is exerted by these entities, how long will it be before they start deciding that 6% commission is too much?  Think it is fantasy?  Ask the attorneys, who have repeatedly seen allowable attorney fees cut, now down to $1,500 or less.  If you are the only game in town, you get to make the rules to your advantage, and this is the very definition of a monopoly.


Add to this increasing mortgage rates

Add to this tightened short sale qualifications

Add to this GSE control over what buyers and sellers can and can’t do in all aspects of the transaction

Add to this short sale property overvaluation by the GSE’s

Add to this Purchase undervaluation by the GSE’s

Add to this hyper restrictive purchase guidelines

Add to this the inevitable implosion of risky Homepath and Homesteps loans


And finally, add to this the “Shadow Inventory” being quietly held off market by these GSE’s.  What will happen when the prices propped up by artificially lowering inventory expires after the GSE’s start to list these shadow properties?  They cannot hold them forever.  Still think that 2014 will be the year we go back to the good old days?  Still think that short sales will go away?  Think again.


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Counties of WIThe Wisconsin housing statistics are in for August of 2013. Here is an excerpt from what the Wisconsin Realtors® Association (WRA) had to say:

Home sales and median prices both grew at a healthy pace in August, continuing the hot real estate market in Wisconsin. Existing home sales were up 13.7 percent in August compared to last August, closing out a very strong summer for home sales and 26 straight months of sales growth. Home prices showed similar strength with the median price rising 6.3 percent to $152,000 in August. Median prices have been up 17 of the last 18 months.

This has been a very strong summer for home sales, which is important for a state like Wisconsin where there are strong seasonal sales patterns,” said Steve Lane, broker with First Weber Group REALTORS® in Stevens Point and the new Chairman of the WRA board of directors. "We started the year strong, and we’ve carried that momentum through the summer, which bodes well for the remainder of the year,” Lane said.

Existing home sales were up in every region of the state, with five of the six regions growing by 9.9 percent in August compared to August 2012. The area with the fastest growth over August 2012 was the Central region, which was up 23.2 percent. Also up by substantial margins were the South Central, increasing 18.4 percent, and the Southeast, growing 14.5 percent compared to August last year. The West was up 11.1 percent, and the Northeast grew 9.9 percent over the period. Finally, home sales in the North were up 5.6 percent compared to last year.

Below are the number of Home Sales and Median House Prices for the state of Wisconsin, Rock County, and Dane County. These stats include Janesville and Madison. Feel free to contact me if you have any questions pertaining to these figures. As you probably have heard, home sales & prices have been increasing over the past few years. Both Dane and Rock counties are showing marked improvements in the number of homes sold and the price at which they are being sold at. This summer and fall has been really hot for the properties that are priced right!

I'd be happy to show you any homes currently listed for sale. Feel free to visit Janesville, WI Homes for Sale to search for current properties listed in the Janesville area or visit Madison, WI Homes for Sale for MLS Listings in the Madison area.

If you would like some insight into how much your home is currently worth, I would be happy to provide you with a free comparative market analysis. This is a report that gives a close estimate to what your home might sell for in your current local Wisconsin real estate market. Click below:

What's My Wisconsin Home Worth?

Has your home value fallen below what you currently owe? A short sale may be right for your situation. Visit the following page on Wisconsin Short Sales.

Housing Statistics for the State of Wisconsin:

August 2013
Home Sales: 7,608
Median Home Price: $152,000

August 2012
Home Sales: 6,643
Median Home Price: $143,000

Housing Statistics for Dane County, WI:

August 2013
Home Sales: 900
Median Home Price: $219,900

August 2012
Home Sales: 690
Median Home Price: $212,700

Housing Statistics for Rock County, WI:

August 2013
Home Sales: 199
Median Home Price: $107,500

August 2012
Home Sales: 191
Median Home Price: $105,500

View my report from last month. Wisconsin July 2013 Housing Statistics

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These home renovations tend to not pay back your investment.

photo credit: Jeremy Levine Design via photopin cc
photo credit: Jeremy Levine Design via photopin cc

Home investors have to walk a very thin line in their prospecting and repairing.  They want to find a home that others have ignored due to necessary repairs and updating.  However, they don’t want to waste money on improvements that simply look nice but fail to increase the home’s overall price.  Here are the top renovations that do not add much value to the home.

Grandiose Landscaping

Potential buyers will appreciate a well-kept lawn and may be somewhat attracted to a nice flower bed by the front door, but elaborate landscaping will not add to the home’s price.  Even worse, if the prospective buyer has no inclination to spend hours in the yard weeding, fertilizing and replanting then you may actually scare off a few buyers.  A simple lawn with low maintenance bushes are the best bet for most homes.


A new pool is extremely expensive and you may not recover even half of your investment when the property sells.  The average home buyer looks at the pool as a major expense and a potential problem in the form of injury or a lawsuit.  Some contracts in recent years have actually been structured to include filling in the pool with dirt and sod just to avoid potential problems.

Carpet throughout the Whole Home

It can be rather expensive to replace the carpet in an entire home.  Additionally, styles and preferences change over the course of time and homeowners may wish to have a more updated look in the home.  The need to replace a large amount of carpet sometime in the next 3-5 years would likely be daunting for most homeowners.  A better bet is to have hardwood and tile in the home.  They are easier to clean and most people appreciate the simple upkeep. Although the initial investment in hardwood or tile is more expensive, you are more likely to get a greater amount back when you sell the home.

More Home than the Rest of the Neighborhood

One of the fundamental basics of flipping homes is to search for a property that conforms to the neighborhood.  Never buy the absolute biggest home or the smallest home in the neighborhood.  They will be harder to sell.  Along the same thought process, never add more to a home that will make it vastly different from the neighborhood.  If all the properties on the street are single story homes then it makes no sense to tack on a double story addition.  Stick with the norm for the neighborhood in order to be able to move the property quickly.

Expensive Cosmetic Features

Some people like to brag about the Italian tile in the kitchen or the gold chandelier in the dining room when they are working on a remodel.  However, these expensive items add little to the value of the home.  It is better to make sure the home has plenty of lighting, has ample space and that the closets and cabinets are well organized.  Those expensive add-ons can be purchased by the next owner.

Basically, the best improvements you can make to an investment home are the ones that add function and space.  Anything else will simply be for show and potentially cost you too much in the long run.

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NEW FHA Short Sale Requirements

Effective October 1, 2013 U.S. Department of Housing and Urban Development (HUD) has announced the following changes to their Federal Housing Administration (FHA) Short Sale requirements:

  • Eligibility Requirements: To successfully complete a short sale under the FHA short sale program, the borrowers must meet the following requirements:
    • They cannot list the property with or sell it to anyone with whom they are related or have a close personal or business relationship.  In legal terms, it must be an "arm's-length" transaction.  Any knowing violation of the arm's-length requirement may be a violation of federal law.
    • Your mortgage must be in default, on the date the short sale transaction closes.
    • Before closing, any additional liens against the property must be released. A lien holder who demands a payment to release its lien must submit a written statement, and an agreement to release the lien if that amount is paid.
  • Financial Hardship Validation Requirement: For a standard preforeclosure short sale sale, servicers must use a Deficit Income Test (DIT) to determine a homeowner's financial hardship.  The IRS Collection Financial Standards will be used to verify homeowners expenses not reflected in their credit report.  Only owner-occupied properties are eligible for the standard preforeclosure sale.
  • New Streamlined Short Sale Option: Homeowners eligible for a streamlined short sale may not be required to submit financial information or have a financial hardship.  Principal residences, second homes, investment properties and service members who have received Permanent Change of Station (PCS) Orders are potentially eligible.
  • Property Appraisal: The appraisal of your property should be completed within approximately ten business days.  After the appraisal, the short sale file will be updated and prepared for review.  In some cases, approval may be required by the investor and/or FHA, which may take more time.
  • Cash Contribution: As a new condition, you might be required to make a final payment (sometimes called a cash contribution) before or at closing.  This payment will reduce the deficiency balance.
  • Borrower's Incentive Compensation: If you are an owner occupant, acting in good faith, and successfully selling your property, you may be eligible for an incentive of up to $3,000.  If you are required to make cash contribution, you are not eligible for this incentive.
  • Short Sale Contract Addendum:
    • The revised FHA short sale addendum must be signed and dated by all parties.  Under this addendum, all parties agree that the subject property must be sold through an arm's-length transaction.  An arm's-length transaction is defined as a short sale between two unrelated parties that is characterized by a selling price and other conditions that would prevail in an open market environment.  Also, no hidden terms or special understandings can exist between any of the parties (e.g., buyer, seller, appraiser, sales agent, closing agent, and mortgagee) involved in the transaction.
  • Action Required: Review the Short Sale FHA Program guides located on the Agent Resource Center:

To review additional information about FHA requirements, please log on to Questions can be directed to Short Sale Customer/Agent care at 1.866.880.1232.

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I am frustrated with the lack of consistency and organization at the loan modification dept that you have to go through before you can go to the short sale dept. Can anyone out there get that dept straightened out?

My average time in that dept is about 5 months, with one still stuck in there after over 6 months and they already had gone through the loan mod process before we listed it. One assigned representative says that if they are approved for a loan mod even if it isn't an amount that they can afford then they can't go to short sale dept, despite what the loan mod letter says (which it does say that they can decide to not accept the loan mod and go to short sale). I call the manager and she agrees. And then on another deal, the seller just said that the loan mod amount that was approved is too much and that assigned person just sends it on through to short sale. 5 out of 6 will not return any phone calls and don't keep you informed at all. If I call their manager, the manager does not call me but has the assigned person call me and they don't know what is going on. 

In addition, they aren't keeping the paperwork straight and we have to resubmit often.

They are driving me crazy. Why can't they get organized like the short sale dept which I think does a decent job?

Any success in this area or suggestions? Do the managers at B of A know how bad it is?

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I was just told on a Wells Fargo, Freddie Mac loan that they won't accept doing a short sale on the property and basically said that their minimum acceptable net is exactly what is owed. The price that we would need to sell it for is about $50K higher than Fair Market Value on a $200K - $220K valued property. Wells Fargo did say that they are not privy to the BPO value that it goes directly to Freddie. We did get a BPO agent that many agents in our office have been having value problems with, so there is a chance that it is simply this BPO that has caused the denial.

Where do I go to file a value dispute with Freddie Mac? I've done Fannie Mae's several times on Does Freddie have a similar process?

Thank you for your help,

Holly Jessop

RE/MAX Metro

Layton, Utah

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