Short-Sale Dictionary

Absorption Rate - Key to Successful Pricing!
Telling sellers the price they want to hear may get that Realtor the listing, but it won’t sell the home. Only pricing the listing right will do that, and the right price depends in large part on the current absorption rate in that particular market. Below are the steps necessary to find out what the “absorption rate”:

• First, determine the number of homes closed in your market segment over a specific period — say, 12 months. You can get this data from your local MLS or your favorite Realtor www.primacyrealestate.com
• Next, divide the number of homes closed by the number of months in the period — in this case, 12. This calculation gives a per month absorption rate.
• Last, divide the rate into the number of current listings. This yields the months’ supply of homes.

Six months’ supply is considered a balanced normal market — and this is when the number of listings roughly equals the number of buyers. Numbers over six months represent a typical buyers’ market and those below six, a sellers’ market.

To assess sales trends, you can also calculate supply over shorter six- and three-month periods. “Price in real estate is mostly a matter of supply and demand, just like in every other industry”.

Once you have these basic calculations down pat, you can focus on absorption in particular neighborhoods or price ranges. A Realtor showing clients local absorption rates will give Sellers the information they need to price their homes to sell. “Once they’ve arrived at a price, the Realtor can decide whether he wants to spend his marketing dollars selling it”. If the Sellers don’t price the home realistically, then the Realtor should seriously consider taking a pass on that listing.

Even in a hot market, it’s rare for more than 50 percent of homes to sell. Here is a way to calculate the odds of selling any one home and the steps to the calculation:

• Search the MLS to determine how many transactions have closed in the last six months.
• Divide that number by the number of new listing that came onto the market during the same six months. (Don’t include listings that expired and then were re-listed.)
• This equation gives you the percentage of homes entering the market that actually sold. For example, if 100 homes sold and 200 were listed, the odds of selling are 50 percent.

Advertizing (or Publishing) - A copy of the Notice of Trustee Sale must be published once a week for three weeks.

Bankruptcy - A legal proceeding which allows a debtor to discharge certain debts or obligations without paying the full amount or allows the debtor time to reorganize his financial affairs so he can fully repay his debts. (A bankruptcy does not discharge obligations secured by a deed of trust.)

Bankruptcy Chapter 7 - Often called a straight bankruptcy-involves the liquidation of all non-exempt by the bankruptcy trustee, who in turn distributes the proceeds to qualified creditors. All dischargeable debts are discharged and the person(s) filing receive a ‘fresh start’.

Bankruptcy Chapter 13 - Often called debt reorganization. A Chapter 13 Bankruptcy is generally appropriate for those individuals who have non-exempt property they wish to retain and who have enough income to reasonably pay the reorganized debt after covering reasonable living expenses.

Beneficiary - The beneficiary in a foreclosure context is generally the mortgage lender. Also frequently referred to as the ‘Benny’. The lender or their successor in interest for whose benefit a trust is created and to whom the debt is owed.

Credit Counseling - Under the new bankruptcy law which took effect in October of 2005, those wishing to file bankruptcy must complete an approved credit counseling course within the six (6) months prior to filing.

Deed in Lieu of Foreclosure - The voluntary surrender of property by an owner/borrower to a lien holder that eliminates the need to continue foreclosure action by the lien holder. The lien holder can refuse to accept the Deed in Lieu and file a Notice of Non Acceptance with the County Recorder.

Discounted Pay-off - The pay-off of a mortgage loan where the lender accepts an amount less than the actual amount owed to pay-off the loan.

Equity Deficient - A property is Equity Deficient when, if sold, sales proceeds would not fully pay off existing mortgage debt.

Forbearance Agreement - An agreement between a mortgage holder and a borrower that lays out a specific loan payment plan and puts a stop on the foreclosure action so long as the borrower meets the terms of the agreement. The payment plan includes provisions for repayment to the mortgage holder of all delinquent interest and fees and could include extending the life of the mortgage beyond its original term. A Forbearance Agreement is a tool that allows the borrower to keep the property.

Foreclosure (judicial) - A foreclosure action conducted through the courts instead of through a foreclosure trustee. Judicial Foreclosures are very uncommon in California, particularly on residential properties. Should a lender elect to pursue a deficiency judgment, it would be through a Judicial Foreclosure.

Foreclosure (non-judicial) - A popular term used to describe the procedure followed in enforcing a creditor's rights when a debt secured by any lien on property is in default; however, the correct term for a "Foreclosure" involving a deed of trust is a "Trustee's Sale Proceeding."

Foreclosure Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Foreclosure Department” is often times used when referring to the “Loss Mitigation Department”.

IRS Form 1099-C - Issued by those canceling all of part of a debt to the person receiving debt relief. Note: The cancelled debt may not need to be reported as income. For more on a 1099-c, please go here http://www.irs.gov/

Junior Lien - A legal claim upon real property recorded subsequent (or recorded prior but has subordinated) to another legal claim upon the same real property. A lien, usually a mortgage loan that is subordinate to a Senior Lien, usually a first mortgage. Lien priority is generally established by order of recordation. NOTE: if you refinance a 1st mortgage on a property with a 2nd mortgage already in place the new 1st mortgage holder will require a subordination agreement from Junior Lien holders to legally establish the new mortgage holder as 1st or Senior Position.

Loan Modification Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Loan Modification Department” is sometimes used when referring to the “Loss Mitigation Department”.

Loss Mitigation Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through their Loss Mitigation Departments.

Mailing - A copy of the Notice of Trustee’s Sale must be mailed (certified and first class) at least 20 days before the foreclosure sale to the borrower and to anyone who was entitled to receive a copy of the Notice of Default and Secretary of State and IRS, if applicable.

NOD - Short for Notice of Default.

Notice of Default - A written document that gives constructive notice of a trustor's failure to perform his obligation under a deed of trust. This document does not require the acknowledgment of a notary public and must be recorded. An official notice filed and recorded by a designated trustee at the request of a lender indicating lender has commenced foreclosure action.

Notice of Rescission - A written document that cancels or annuls the effect of a notice of default when a default has been cured (reinstated). This document does not require the acknowledgment of a notary public, but must be recorded with the county recorder in the county in which the property is located.

Notice of Trustee’s Sale - A written document that sets forth the day, date and time of the trustee's sale, describes the property to be sold and gives an estimate of the unpaid debt as of the first publication debt. This document is prepared by the trustee and does not require the acknowledgment of a notary public and must be recorded with the county recorder in the county in which the property is located at least 14 days prior to the scheduled sale date. The notice of trustee's sale must be arranged to be published in a qualified newspaper in the city (or judicial district), in which the property is located. This publication must appear for 3 consecutive weeks, with the first publication date being at least 20 days prior to the sale date.

PAA C.A.R. Form - Short Sale Residential Agreement Addendum.

Promissory Note - See "Note."

Reinstatement - To bring the loan current. Borrower may reinstate up to five (5) business days before foreclosure sale.

Reinstatement Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Reinstatement Department” is sometimes used when referring to the “Loss Mitigation Department”.

Short Sale - The sale of a home which is completed through negotiation with the existing lender(s) in which the lender(s) agrees to accept less than the full amount owed them to satisfy the debt allowing the debt to be paid off, ‘short’.

Short Sale Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Short-Sale Department” is sometimes used when referring to the “Loss Mitigation Department”.

Trustee (Foreclosure Trustee) - A Foreclosure Trustee is appointed by the mortgage company when a mortgage reaches the default status for the purpose of processing the foreclosure.

Trustor - The borrower (or property owner) at the time the deed of trust was created. Trustor is often used to refer to the current owner.

Upside Down – The typical definition of a homeowner owing more to the lender than what his property is worth.

Work-Out Department - Home mortgage lenders look to limit losses on delinquent mortgages by working out solutions with borrowers through a designated group within the organization that is very familiar with this process. The name “Work-Out Department” is sometimes used when referring to the “Loss Mitigation Department”.