Short Sale Mahem from Another Aspect

You know, Banks have gotten a really bad rap lately.  Yes, they did do some pretty risky and unconscionable loans over the past 6-7 years but you know I have been dealing with a really nice “negotiator” at the bank of America and yesterday, after 6 months, the short sale that I was working on crashed and burned, and it wasn’t the bank’s fault.  The property in question has been under contract twice in the past 6 months.  The first one involved a loan and for reasons that I don’t want to go into right now (would take too much time).  It did not succeed even though it had bank (the seller’s bank) approval.  The good thing about this failed attempt is that I was able to ascertain just exactly what the bank wanted.  Armed with this piece of information, I was able to find an agent who had a cash buyer and was willing to pay the closing costs that the bank would not accept.  15 day escrow  . . . . . well you guessed it, the buyer decided after 15 days to pull out of the contract.   Bummer for everybody!

After 20 years of working in this industry, you would have thought I would recognize all of the warning signs of something too good to be true.  Well, maybe I did but was just thinking that just this once, things would work out.

When the press reports about the difficulties we are having getting these about to be foreclosed upon homes sold, they don’t mention that the banks aren’t always the ones that stymie the deals.  Yes, they are difficult to work with, unless you follow the rules.  On this particular transaction, I felt that the bank was totally up front about what they would accept and considering that the loan amount was $640K and the sale price that they agreed to was $379K, I am sure you would agree that this constitutes the bank working with the seller, the buyer and the real estate professionals.

Yes, this time it was the consumer who messed up the deal.

Oh well, enough of this feeling sorry for myself — back to the drawing board.  Back on the Market!

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Short Sale Explanation

It occured to me today, after typing the following explanation on an e-mail for about the 6th time, that I should just save it in my documents so I could use it again without having to re-create it every time.  So since I have done that, I would like to share it with anyone out there who is unfamiliar with the term “short sale.”  I have asked some non-real estate related consumers (who are also my friends) what they think a “short sale” is and at least 50% of the time, they come back with the answer:  “it is a really short escrow.”  Well, this answer could not be further from the truth.  Please, if you are interested, read on. . . . .

1)  The owner of the house decides for one reason or another he cannot make the payments on mortgage that is secured by his house;

2)  The owner of the house stops making payments;

3)  The owner of the house and his real estate agent put the house on the market at a price that they are certain will bring some offers and this is published in the mls as a “short sale” which is subject to the lien holder (bank’s) approval.  It is called a “short sale” because the amount of money that the market will bear for the house is not as much as the mortgage indebtedness,  there will be a shortfall;

4)  An offer comes in from a buyer;

5)  The owner of the house agrees to the offer – they really don’t care what they agree too as long as it does not involve them actually paying any money;

6)  The contract goes to the lien holder for their approval.  The lein holder essentially agrees to take over the contract and perform as the seller and buyer agreed;

7)  The lien holder orders a BPO (broker’s price opinion) or an appraisal and sees how close the offer he has in hand is and makes a decision as to whether to accept, counter or reject the buyer’s offer.

8)  Once the bank approves, the escrow goes forward as if it is normal – getting approval takes anywhere from 1-4, 5, 6 months. 

In the meantime, the bank is working on foreclosure proceedings on this house too.  So one never knows whether one will beat the clock and stop the foreclosure proceedings.

Kind of interesting, huh?

Now what can I help you with?

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Distressed Homeowners Beware!

In our weekly e-mail blast from the California Association of Realtors, we were brought up to date on yet another way that distressed homeowners are being taken advantage of.  Apparently there are companies out there who will take your money under the guise of helping you “renegotiate” your loan with your lender.  After they take your money, the service that they provide you with is questionable.   According to CAR’s report, the California Department of Real Estate reported only 10 complaints last July about these companies.  This year they have 750.  If you are about to give one of these types of services your business, you may want to check this list and if they are on it, ask them why.

This is not to say that all companies of this type are illegal or unethical.  If the DRE has reviewed the company and has approved of them, they perform a useful function and until they prove themselves differently, are reputable.  Ask them if they have a license from the Department of Real Estate and if you have a question, be sure to contact the Department of Real Estate.  You can find them here.  And while you are at it, look at that handsome devil up there in the left hand corner.  Looks like he may have been a movie star, huh?

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Short Sale Help from Obama’s Administration

Here is welcome news from CAR:

Obama Administration Announces Financial Incentives and Uniform Process for Short Sales

 The NATIONAL ASSOCIATION OF REALTORS® (NAR) today announced that the Obama Administration has added new incentives and uniform procedures for short sales under its new Foreclosure Alternatives Program (FAP), part of  the administration’s Making Home Affordable plan.

 Loan servicers may consider short sales or deeds-in-lieu of foreclosure for borrowers who do not qualify to have their loans modified on a permanent basis under the Making Home Affordable Loan Modification Program.   

• Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program, but don’t qualify for a modification or do not successfully complete the three-month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.

 

• Incentives include: $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; $1,500 for borrowers/homeowners to help with relocation expenses; and up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).

 

• The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.

 

• Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.

 

• In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.

 

• The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.

 

• Servicers may not charge fees to borrowers/homeowners for participating in the FAP.

 

• The program is in effect through 2012.

 

• Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).

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Short Sale Information updated

A week or so ago I attended another Short Sale Seminar put on by Coldwell Banker.  The location was down the hill at the Placer County Board of Realtors and Kathy Mehringer of Coldwell Banker NRT was our teacher.  She brought us up to date on all of the requirements that the bank will want and need to see if they are to approve a short sale.  Coldwell Banker has put together a template to try to help all of us Coldwell Banker agents remain consistent in our offer presentation to the banks, thus making it easier on the person processing the offer.  We are hopeful that this will move the process along.  Kathy also has published, in PDF form, a Q & A on the short sale.  Be sure to read up here if you want to understand the pitfalls, advantages and logistics behind the Short Sale.  Thank you Kathy.  Kathy’s Frequently Asked Questions – Short Sales  This mechanism is here to stay for awhile as we all look for ways to buy and sell real estate.

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