January 17, 2012
A short sale is an attractive alternative to foreclosure, mainly because the impact on your credit is far less severe. However, just because you owe more on your mortgage than your home is worth doesn’t necessarily mean that a short sale is a viable option.
December 1, 2011
Well, we saw it coming, and sure enough, as a result of Senate Bill 458 2nd lien holders in California short sales are putting on the squeeze. The bill was well intentioned, as it restricts 2nd lien holders in a short sale from issuing a deficiency judgment or demand that the sellers bring money to the table.
But since the bill passed in July, I am increasingly seeing the 2nd lien holder holding out for a pay-off of as much as 35% of the remaining balance on the 2nd TD. And they don’t care who brings it to the table. I recently had a 2nd lien holder request that the seller ask her friends if they could contribute! Are you kidding me? The result of course is that 2nd lien holders may be blocking California short sales.
Case in point: I have a short sale that I’m negotiating with servicer G—-T— in the 2nd position. They are demanding 25% of the outstanding balance on the 2nd, which is approximately $40K, so they want roughly $10K. The 1st lien holder won’t allow more than 6% ($2400) to pay-off the 2nd. The buyer is contributing another $2K and the selling agent and I are each kicking-in $1K…but that still puts us short of what the 2nd lien holder is demanding by $3600.
So, I’m in the process of trying to negotiate with G—-T— to lower their demand. Don’t they understand that if they refuse to accept a lesser amount the property will foreclose and they’ll get nothing? The 1st lien holder is holding firm at 6% and there is simply no other source of funds. Will they lower their demand, or will this be a failed short sale, killed by the 2nd lien holder?
November 13, 2011
Well, as noted in Part 3, the clock started ticking on Monday, October 17, when I submitted the offer and estimated HUD1, and let’s see….today is Wednesday the 26th. Despite several emails and phone calls, no one has contacted me to confirm the new negotiator or let me know what the next steps will be. I feel as though the file has already slipped between the cracks…..
Just left a message for a supervisor…..
OK. Now it’s the 28th and I’ve no reply from anyone so I called again and finally got hold of a supervisor. And it appears my gut feeling was right and the offer is no where to be found. Arrrrggghhh! The supervisor set-up a task for me on Equator so at least I could be connected to the file, though they still have not requested I upload the offer.
So far, this has been a bit uncoordinated because the homeowner started the process and I’m coming in after the fact. More on Monday.
On November 1 I finally received a task to upload the offer into Equator and then on the 3rd received notice of some “additional items” needed by the mortgage insurance company…so it took about 2 weeks to actually get it in the system.
In the offer we requested a pay-off to the 2nd lien holder in the amount of $10,000, which is what the 2nd lien holder told us it would take to get it approved. On November 8 I received a counter offer from B of A….they only want to give the 2nd lien holder $6,000. I forwarded the counter to the 2nd lien holder and am waiting for a reply.
The good news is that B of A did not counter the offer price, which is considerably lower than what they originally requested, and they were pretty quick about issuing a counter. I’m not very hopeful however about the 2nd lien holder accepting $4,000 less…will keep you posted. We’re now at 26 days on this B of A Cooperative Short Sale…..
September 20, 2011
Well, probably not a show we’ll see in the new HGTV line-up, but reverse staging is a form of short sale fraud that is becoming increasingly common. Unlike traditional staging where a home is de-cluttered and dressed-up to present the best possible appearance, reverse staging accentuates the negative features of a home. Reverse staging is part of an attempt get a low Broker Price Opinion (BPO) of the actual value of the home by inflating repair estimates and making the home appear to be in greater disrepair than might really be the case.
A Broker Price Opinion is a mini-appraisal, ordered by the lender in a short sale to determine how much they should expect to recoup from the sale of the property. It is ideally performed by a real estate broker or agent who is familiar with the market and is a critical component of the short sale process. If a BPOcomes in above fair market value it becomes more difficult to get a short sale approved, as it is likely the lender will want to hold out for a high offer in line with the BPO.
Trying to manipulate the BPOto reflect a below market price is usually done to accelerate a sale. However it is also done by agents who will hide a higher offer from the lender, rig the sale, and then turn around and flip the property for a profit. No two ways about it….this is fraud.
In most every short sale transaction all parties are asked to sign an “Arms Length” Affidavit that acknowledges that there is no fraud in the sale of the property. As a short sale agent, it is my ethical responsibility to protect the best interests of my clients – this includes protecting them from any involvement in a fraudulent sale. So, reverse staging might help short sale a home more quickly, but it could also land you in jail.
August 29, 2011
With short sales accounting for over 17% of all sales in July, and thousands of homeowners upside down on their mortgages, the California Association of Realtors believes that short sales will be a part of the real estate market place for years to come. Economic growth just isn’t happening quickly enough to keep pace with the number of homeowners who are sinking closer to foreclosure with each passing month. For many, opting to sell their home in a short sale is the best option because of the less damaging impact on their credit. But agreeing to list a short sale can be the start of an uphill battle for the Realtors involved.
One of the biggest issues facing short sale transactions is the time involved for even a preliminary review of the offer and submitted documentation. This step alone can often take one to three months before the lender even assigns a negotiator to the file. Another annoying reality is lost or misplaced documentation. With many lenders one feels that there must be a trash can on the other end of the fax machine as requests for the same documentation are made over and over. All of this takes time…and the buyer is often out there still looking for something they can buy more quickly, with less hassle.
The California Association of Realtors has recently sent urgent requests to the heads of all the major lenders, JP Morgan Chase, Bank of America, Citigroup and Wells Fargo with recommendations about how the whole process can be streamlined. A few of the items requested include:
As a dues paying member of C.A.R. and a Realtor in the short sale trenches I’d be thrilled to see even one or two of these recommendations become part of lender procedure. In the meantime, I’ll just be the one on the phone politely nudging them along, every step of the way.
May 30, 2011
In March of this year, I reported on the newly introduced Bank of America Cooperative Short Sale Program. As noted in that post, the two key elements of this new program are the relocation fee of $2500 paid to the sellers, and the timeline. Instead of waiting for the short sale seller to find a buyer, this program was designed so that a seller could submit all paperwork in advance and be approved prior to a purchase offer. According to Bank of America, by approving the property value and seller hardship up front, this would decrease the amount of time needed to process the actual sale and approve the buyer once an offer is presented to the bank. At that time, the bank indicated this would shorten that approval timeframe to about 10 days.
So when my negotiator called last Friday to let me know that Bank of America had determined that one of my files might be eligible for a Cooperative Short Sale, my first thought was, “Great!” I figured that we’d be able to get this closed quickly as we already have a strong buyer, and my sellers would receive $2500 to help with moving costs.
I then asked about any down-side to my sellers accepting the Cooperative Short Sale versus a traditional B of A short sale, and my negotiator’s response was surprising. She said that in her experience, (and she has been a full-time short sale negotiator for several years), the Bank of America Cooperative Program takes about 6-8 weeks LONGER than their regular short sales. Longer??? The normal B of A processing time is 6-8 weeks, and now participation in this program would essentially double that? According to my negotiator, the reason it takes longer is because there is a more intense review of all seller financials – probably needed to justify the $2500 relocation payment.
My first thought as a Realtor protecting my seller’s interests, is that participating in this program could double the chances of a buyer to walk! It is hard enough to keep buyers waiting 6-8 weeks for an approval, but to extend that period for another 2 months is asking for trouble! I have also heard it rumored that by performing a more intense financial review B of A is actually looking to see who has sufficient assets to target with a deficiency judgment. I don’t have any evidence to support this, but it could pose a potential risk if there is any question as to whether or not the seller’s loan is protected under the state’s anti-deficiency laws.
I presented the choice to my sellers who quickly decided that the risk of losing their buyers was not worth a $2500 gamble. Who knows? Their file might have been processed quickly, but on the other hand we might have ended-up back at square one looking for a new buyer. It is definitely a choice that each seller will have to make based on their unique situation. If anyone out there has experience with this B of A program, I’d love to hear from you!
May 10, 2011
No secret, actually. The success of your short sale all comes down to your listing agent. Really. Negotiating a short sale is one of the most challenging jobs in real estate today. An agent representing a short sale client is responsible for helping them get out from under a huge financial burden and save their credit, and responsible to the new buyers for closing the deal in a reasonable length of time. Without the right agent representing your interests it’s easy for the deal to fall apart and your home go to foreclosure.
Here are some important questions to ask a perspective agent before listing your home as a short sale:
1) What is their short sale experience and what percentage of attempted sales have they successfully closed? This is not the time to hire an inexperienced agent as short sales are an intricate process that requires an understanding of lender procedures and requirements.
2) Do they do their own negotiation, or do they work with a professional negotiator? An experienced, professional negotiator may be a real plus as that leaves the agent with more time to focus on marketing your home and finding a qualified buyer. Also, a professional negotiator will have established relationships with a greater number of lenders which can often help expedite approvals.
3) Will the agent pre-qualify you for the short sale? Although the lender will have the final word, an agent should be familiar with all required documentation and be able to pre-qualify you for a short sale. If economic hardship cannot be proven it is unlikely that the bank will approve a short sale. They should also be able to let you know if you might be eligible for HAFA.
4) How will the agent determine the list price of your home? Listing your home too low may get you a quick offer, but it’s likely the bank will counter and you may lose your buyer. Remember, the bank needs to recoup as much of the loan amount as the market will bear.
5) What is the process? An agent should be able to explain the entire process and timeline and describe exactly how and when you will be updated on progress. They should also be able to provide information about the pros and cons of moving early in the process or staying in your home until closing.
6) How will they market your home? Over 90% of buyers begin their home buying search online. Make sure your agent can provide an extensive online presence for your listing.
7) What is the outcome that you can expect? The agent should be able to discuss the potential outcomes including 1099s and deficiency judgments. They should also make recommendations to you about seeking the advice of other professionals, such as a lawyer and accountant.
8) And finally, can they provide you with references of past short sale clients? Hearing from a satisfied client can go a long way to easing your concerns.
A short sale is a complicated transaction, but it needn’t be stressful. Please don’t hesitate to contact me with your questions or concerns. I have a 100% short sale success track record and look forward to hearing from you.
May 3, 2011
You have a buyer and their offer is submitted. The bank has accepted the financials and reviewed the BPOs. You’re happily waiting for a short sale approval, when out of the blue, the bank drops a bomb in your lap: They counter with a sales price that is $25,000 more than the offer submitted. What now?
Agents can find this very discouraging, and with lack of experience as to how to proceed, a counter can often kill the deal. For the novice short sale agent, the first thought is often, “I’ll never be able to convince the buyer to pay that much more!” But digging deeper into the buyer’s wallet is not the place to start. Get ready to go to work; it’s time to prepare for negotiation.
Armed with solid comps, a list of repairs, and some wiggle room to negotiate price, your chances of getting the deal done are great!
April 17, 2011
Believe it or not, a Republican and a Democrat are working together! The two Representatives are sponsors of a bill that would require lenders to provide a decision of approval or disapproval of a short sale within 45 days of submission of the file. Hallelujah!
For those of us in the short-sale trenches, the most painful part of the process is the long period we spend waiting for the bank’s decision. We meticulously prepare the file and then fax it off into a nameless abyss where it seemingly lies hidden at the bottom of someone’s in box. Weeks later, we are informed that half of the information we submitted is missing from the file and would we please re-send it, or what we sent is now outdated (because they took so long to review it), and would we please send new pay stubs and bank statements. It is a vicious process that can make a normally calm Realtor want to jump through the phone and strangle someone.
So yes, a decision in 45 days would be a Godsend! The Bill is sponsored by Reps Tom Rooney (R- Florida), and Robert Andrews (D-New Jersey), who believe that by imposing a deadline on lenders, more short sales would be successfully executed and fewer homes go to foreclosure. Although a few banks such as Bank of America have made an effort to improve their processing systems by utilizing a technology platform such as Equator, most banks rely on outdated systems and under trained personnel, ill-equipped to handle the thousands of short sales landing on their desks. Thus in the current market, many short sale transactions fall-apart because the buyer gets tired of waiting and simply moves on, often leaving the homeowner to face foreclosure.
The Prompt Decision for Short Sale Act of 2011 is currently waiting to be referred to a Committee. A similar act with the same name was introduced last September, but never came up for debate before the legislative session ended…let’s hope the support of the National Association of Realtors will help prevent this bill from a similar demise.
At the end of the day however, even if we have a shortened time period for decisions, any short sale is only as strong as the negotiator acting on behalf of the homeowner. Please don’t hesitate to contact me for more information on how to improve your chances for a successful transaction.
Inside San Diego Short Sales 