I'd like to relocate to be closer to family but my house is not worth what I owe. Can I just call the bank and do a short sale?

Short sales aren't easy or a sure thing. On one of the short sales we have, the bank took almost six weeks to reply and the two lenders still couldn't come to terms with what they would accept. They were still bickering by the time the buyer found another house. In the meantime we see every other non-short-sale-listing go into contract, usually within 30 days of listing.

Banks also aren't the most communicative people to work with. Many buyers and agents avoid them for this reason. If you can call your bank and have them agree to a short sale just like that, it's a good sign. Far more likely you will call and call and be redirected and call and redirected and….you get the picture. So if you think this is the best solution, start communication with the bank now and see if you can get in touch with someone who can really respond. You need a point of contact first and foremost. If you don't have contact with a decision-maker you can not sell the house for less than the payoff amount. If you have a first and a second mortgage it becomes doubly difficult.

Consider renting your house out if that is a financial option. If you can get 80% of your mortgage covered by rent it is better than paying it all while you're not living there and the credit issues that may arise to position yourself for a short sale. Or, postpone your relocation if possible, especially if you have the finances to keep your mortgage current.

Seller’s situation

It can be helpful for a buyer to find out where a seller is coming from before making an offer. How long have they lived in the home? Is the home a short sale? Was it a rental property? Are they relocating and need to move quickly? Will they accept a contingent offer or do they want an as-is sale?

These things can affect the timing of the purchase, what type of financing the seller will accept, how much information you will get on disclosures, and how flexible the seller will be if the buyer makes repair requests.

If you are looking for a move-in ready home an owner-occupied home may be a better choice than a long-term rental. If the home was a rental for most of it's life, usually there will be some deferred maintenance to expect, that even a well-intentioned seller may not be aware of much of it. Rentals usually will suffer more wear & tear than owner-occupied homes.

A home is a big purchase and financial commitment. A seller who will give a thorough history on the property may be more comfortable to deal with than a faceless entity who never lived in the home. Offers can be priced and worded accordingly to the benefit of both parties.

We plan to purchase a second home we may retire to in 10 to 15 years. What advice do you offer in selecting a good investment in today’s market?

There are good opportunities to be found in today’s market. However, be cautious in what you deem a bargain. Homes that are in foreclosure, short sales, or on the market by an over-extended seller aren’t always a deal. Some of those homes may be overpriced due to the debt against them. And, often as not, they are sold as-is under stringent loan terms you can’t negotiate.

If you are a knowledgeable, experienced investor and understand the foreclosure/short sale process and can evaulate the integrity of a home before making an offer, a distress sale may be a great opportunity. I recommend you research comps or have an experienced buyer's agent assist you through the process. Interest rates are low and you can, with some cash down, make a good investment purchase that will pay off in the long term. House flipping is risky, so your plan to keep it 10-15 years is a wise strategy.

Remember that if you offer on a short sale or bank-owned property, it usually will take longer to get acceptance than if you were buying directly from an owner. The bank must approve price and terms.

A short sale occurs when a home is sold for less than the loan held on it. For instance, a home sold in 2006 was purchased for $475K with 5% down. The market drops, the value is less, and the owner has financial difficulties or is in an adjustable mortgage and can't make the payments. If the loan is $450K and the current market value is only $350K, the home can't be sold unless the lender agrees to take a settlement of less than the amount borrowed.

Everyone wants a bargain, right? I got a call from a foreclosure buyer who saw one of my listings on a foreclosure site for $200K. They called off the sign and were surprised to find the listing price was really $729K. So where did they see $200K? A website: www.bargain.com.

If you visit this site, I bet your first impression would be "Wow! I can get a home in San Jose for $60,000!" Right. Sounds too good to be true?

To me, at a glance, this looks like a site that captures note amounts based on NOD (notice of default) filings. NODs are of public record. That $60K, or in the case of my listing, the $200K was a trustee sale bid amount. The house is privately owned by the bidder–who took the property that was encumbered by more than one loan–and listed it for sale on the open market.

Yes, there are plenty of foreclosures (REOs) and short sale listings on the market, but they are not pennies on the dollar bargains. They are priced at what the market will bear…or what loss the bank or owner can bear.