If you are considering selling your home in a short sale, the selection of who will represent you is an important decision. Not only will the agent be marketing your home, but they have the added responsibility of representing you in negotiations with your lender(s) and securing approval of your short sale.

So if you are wondering how to select a short sale agent, here are some questions you will want to ask when interviewing potential agents:

• Does the agent personally do the short sale negotiation or do they hire an in-house or outside negotiator? If they use the services of a negotiator, the following questions should be directed to that person or company.
• How much experience do they have? No number of certifications will make up for lack of experience.
• What is their success rate? It is likely they have had at least one unsuccessful negotiation. Ask them why it did not get approved.
• Ask them to explain the short sale process and what you can expect in terms of a timeline and the documentation you will need to provide. (They should provide you with some sort of a handout explaining the process and describing the required documents.)
• Will they request a preliminary title report? (This is important in order to determine if there are additional liens on the property that will have to be cleared).
• Do they request that the buyer deposit their earnest money into escrow BEFORE the short sale is approved? (This is a good way to make sure you have a serious buyer and keep them in the game and not out looking at other properties. If the sale is not approved, the buyer of course gets their money back).
• How often do they contact the bank during the review process? (They should be in contact with the bank at least once, but preferably twice a week.)
• How often will they provide you with updates? (You should expect an update at least once a week.)
• If you have received a Notice of Default, and/or a sale date has been set, what steps will the agent take to have the sale postponed?
• Are they familiar with HAFA guidelines? Are they familiar with Equator? (If they do short sales on a regular basis, the answer to both should be “Yes”).
• Can they supply you with a reference from at least one client that was happy with their short sale services? Just because they advertise on TV doesn’t mean their clients are happy.
• And finally, are they empathetic regarding your situation, or is their only concern getting the listing? A short sale can be emotionally tough for you the seller and you should work with an agent who cares about you and what you are experiencing.

Do NOT believe them if they tell you they have an inside connection at your bank and can guarantee that your short sale will be approved. That is simply not true. Investors have the final say on approvals and it is highly unlikely that the agent even knows who the investor is at this point, not to mention that investors do not speak directly with negotiators.

If you have any questions about how to select a short sale agent for your San Diego County home, please don’t hesitate to give me a call for a confidential consultation.

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For most of the 22 million homeowners who owe an average of $40,000 – $65,000 more than their home is worth, the recent $25 billion dollar settlement with the banks will bring no relief. According to Robert Menendez, Chairman of the Senate’s housing subcommittee, “When you owe more than your house is worth, relief can be hard to come by.”   Among borrowers whose homes have dropped in value through no fault of their own, many choose to simply walk away, which according to Menendez, “Only exacerbates the problem.”

Menendez has introduced a bill that provides an interesting twist on the idea of principal reduction.  The Preserving American Homeownership Act would encourage lenders to write down principal balances by allowing them to share in the home’s appreciation at a later date.  The principal balance would be written down in increments over a three year period to 95% of the current value, so long as the homeowner remains current on their payments.

In exchange for the write-down, the lender would receive a fixed percentage of any future appreciation when the home is either sold or re-financed.  That share could not exceed 50%.  So if a principal balance was reduced by 25%, the bank would receive 25% of any future appreciation.

The Act would apply to primary residences only, but any homeowner could apply.  Borrowers who are in default or even in foreclosure could qualify, but would be required to make their reduced mortgage payment on time in order to remain in the program.

The article in DSNews where I read about the bill did not indicate if the Act would apply to all types of loans or whether or not the modified loans would be re-written at today’s lower interest rates. Presuming so, this Act could provide enough incentive to many underwater homeowners to persuade them to stay in their home versus initiating a strategic default.

As a fan of principal reduction, I like this idea as it seems to be a win-win situation for both homeowners and the banks.  Banks don’t take as big a hit as they would with a short sale or foreclosure, and the write-down is taken over a three year period, AND homeowners get to keep their homes with reduced payments and principal.  Even the opponents of principal reduction might find something to like about this plan!

If you owe more than your home is worth, and are having difficulty making your payments, you may be a good candidate for a loan modification or a short sale.  The important thing to realize is that this problem won’t go away on its own and the sooner you attempt to deal with it, the better your opportunity for a positive outcome.

However, before you pick-up the phone to call your lender, be prepared!  The person on the other end of the call is going to do a phone interview during which they will ask very detailed questions about your income and expenses.   In order to be ready you will need the following items:

  • A completed financial worksheet which outlines ALL of your income and monthly expenses. Make sure that the income you state matches the deposits to your bank accounts!
  • Last 2 months pay stubs or year-to-date profit and loss statement if self-employed.
  • 2 most recent bank statements for all accounts
  • Hardship letter
  • Last 2 years federal tax returns

This initial interview is a sort of triage, where they try to determine, what program, (if any), might work for your situation.  The more information you have available, the quicker you will be able to move to the next step.  Even if the interview doesn’t include questions related to your tax returns, these are the items they will want you to send to them so it’s best to gather everything before you get started.  When you do send or fax, make sure that your name, phone number, email and loan number are on a cover sheet with a list of the items included.  For the initial packet of information it may be best to send with a delivery confirmation so that you have proof of mailing and delivery.

Your hardship letter should clearly explain why you can no longer afford your mortgage payments.  You obviously could afford them at the time the loan was originated, what happened to change that?  Job loss?  Death of a spouse? Divorce?  This should be a heart-felt letter addressed To Whom It May Concern and be no longer than a couple of paragraphs.  Just state the facts.  It is helpful to write the letter before you call so that you have an answer ready when the interviewer asks.

On this initial interview, and all subsequent phone conversations keep a log, noting the date, time, who you spoke with and the key points of your conversation.  Always ask about the time frame for the next steps and be prepared to follow-up!  Never assume that something is happening….chances are good that your paperwork may become lost, so be ready to re-send it.  And if you don’t feel like you’re getting anywhere, ask to speak to a supervisor.  But remember that the folks working in the loan workout department are probably over-worked, and a nice comment and a polite “thank you” will make the process less stressful for everyone involved. 

Best of luck! Don’t hesitate to call or email with any questions. I also have a great Excel Financial Worksheet that I’m happy to share.  Just send me a request to marti@kilby.com.

 

In the second of a 2-part series, San Diego real estate broker Marti Kilby explains the short sale process.


 

San Diego real estate broker Marti Kilby explains the short sale process and what you can expect.  This is part I of a 2 part series.


 

 

Bankruptcy and Foreclosure

 A frequent question I receive is, “Can filing bankruptcy save my home?”  The answer is “no” and “maybe”.  And please note that I’m not an attorney and sharing this information is not intended as legal advice.

 

Foreclosure in California

Whether you’re facing an involuntary foreclosure or considering a strategic default, here is what you need to know about the process and time line for foreclosure in California.