Stupid Things Banks Do

March 15, 2012 By Jon Griffith Leave a Comment

A mini rant for the day may shed a bit of light on one of the multitude of ridiculous requests we get from the lenders when negotiating short sales.

I am negotiating a short sale for a property located in Laveen, Arizona, recorded on the tax records as being in Laveen, not Phoenix. Due to the fact that the lender who wrote this loan in the first place got the city wrong on the note, the processor assigned to the file continually flags the file as inconsistent and repeatedly rejects my documentation because the tax records, which are the correct records, don’t match theirs.

This is a common occurrence in the Short Sale world. Banks reinforce the notion that they are unable to properly think through the possibilities surrounding the myriad of potential turbulence surrounding a real estate transaction to come to a rational and logical solution.

So, for today, I’ll be changing files, and modifying documents, hunting down parties for signatures, etc., and none of it has any bearing on the bottom line to the bank.

Filed Under: Short Sales Tagged With: note, Phoenix, short sale, short sales

Short Sale Cash Contributions at Closing

January 13, 2012 By Jon Griffith Leave a Comment

On many short sales, there’s a point at which the bank will tell us that the seller is required to come to the table with cash or a promise to sign a note for a certain amount of money.

In a specific example, a home owner has been told that they are on the verge of an approval, but until they either pay $3,500.00 cash or promise to repay $7,000 in cash over 120 months (that’s 10 years,) the approval will not be issued.

What’s Presented

The bank will typically represent that the mortgage insurance company who holds a policy on the note is asking Wells Fargo to ensure they get a cash contribution before they’ll pay the claim on the loss from the short sale. They’ll say that it’s their request.

What’s Really Happening

Sometimes the MI company does request cash, but remember, the bank is in the business of getting your money in their pocket, and they’re not beyond using the ruse of a mortgage insurance company request to ensure you pay them so they recover more of their losses. So more than likely, the MI company has has NOTHING to do with the request.

The bank is telling the seller that the mortgage company needs a cash contribution, but the mortgage insurance company never told the bank that they needed it. This is a tactic that negotiators use which I contest is converted to incentives paid to negotiators for bringing in more money for the bank. The bank is still going to file their claim with the mortgage insurer to recover a vast majority of the losses, but the insurer will be none the wiser that they’ve just squeezed the seller for even more.

How I Handle This

I call their bluff.

As a “private investigator” for short sale approvals (that’s basically what we are,) I hunt down the truth. A simple friendly phone call to the mortgage insurance company will easily reveal whether or not the bank or servicer is telling the truth. When we learn that there was never a request, it means we have more information than they’d like, and that’s how one wins negotiations. The person with the most information wins, every time. (It’s also assumed that that person has walk-away power.)

What if they actually did make the request? That’s okay too, because that can also be negotiated away directly with the mortgage insurance company provided the details can be “worked out” as they call it. If the seller has no money, and no room in their budget for a promissory note payment (in our example $7,000 ÷ 120 months = $58.33 per month) then there can be no contribution.

Now, in light of the situation, $58.33 per month is a small price to pay for the mess that we’re cleaning up, but it’s absolutely unnecessary, and likely to be defaulted on. The notes are usually proposed at 0% interest, and $58.33 per month to a behemoth of a bank is less than peanuts. It’s not even peanut dust.

So, if it comes down to blows, and the MI company absolutely won’t budge, then a payment might be wise just to make the problem go away. You can see that we do everything we can to make sure that this is never the case.

Filed Under: Short Sales Tagged With: Closing, money, mortgage, note

Short Sale Basics Part Two: The Offer

December 16, 2011 By Jon Griffith Leave a Comment

(This is part 2 of 5 of the short series entitled Short Sale Basics)

The Offer

When a house goes on the market and someone makes an offer, if that offer is less than the seller owes on their mortgage, then you have a problem. You have a short sale. You are going to need to ask your bank if they will accept an amount “short” of what you owe them. There is a very methodical way to go about this process as a result of miles and miles of red tape surrounding the processing of the transaction that is different for each and every lender, and each and every investor holding a note or notes on your house. That is why you hire someone who is experienced. Not every real estate agent knows how to do short sales the right way.

The bank does not determine what an acceptable sales price is. Period. The buyer and the seller determine the sales price. The important resulting number is the net payoff to your lender after all costs have been calculated.

Filed Under: Real Estate Basics, Short Sales Tagged With: house, note, payoff, Short Sale Basics

We Don’t Do Foreclosure In Arizona

April 14, 2011 By Jon Griffith 1 Comment

There’s a misconception amongst the Arizona communities that we have “foreclosures.” Even to this date, I have referred to the loss of a home in Arizona as the foreclosure process. I have technically been incorrect, even though we all know what it means.

In Arizona, we also don’t have Mortgages. We have Deeds of Trust, also known as Trust Deeds. In the event that you stop paying your payments, your lender has the right to throw their hands in the air and say, “forget it! You won’t pay your bills, so we’re going to sell your house out from under you.” They don’t hire attorneys to sue you through a Judicial Foreclosure.

Most lenders in arizona will start sending you notices that you’re past due, and eventually they’ll try to scare you with a Notice of Intent to Accelerate your note, which basically means they’re threatening to exercise their right as defined in your note to call the entire note due in full. This action is done on what’s known as a Trustee Sale Notice.

A Trustee Sale Notice is issued publicly, recorded with the county, and mailed to you, and posted on your front door. From the date this is filed, you have 90 days before the house goes on the auction block.

So, rather than hiring attorneys, filing suit, and taking your home through the lengthy and expensive Judicial Foreclosure process, they simply put your house up for sale at an auction.

So then what?

Well, the bank will set an opening bid, and often this opening bid is a completely unrealistic amount. As a result, nobody will bid on the property, and the only entity that will actually buy it will be the bank itself. Once that happens, you’re out of the house. If there’s a bona fide tenant living in the house, the new owner must give them 90 days notice to vacate.

So Does Judicial Foreclosure Exist in Arizona?

Sure. It exists. In Arizona, when your your lender notifies you that they’re going to sell your home at a Trustee Sale, you have the right to re-instate the loan and get caught up all the way until 5PM the night before the auction. If you do so, it’s possible that you could again default, in which case the bank would once again issue a Trustee Sale Notice, which you have a right to re-instate. There’s a point at which you may abuse this enough that the bank would finally just say “screw it, we’re going to start a Judicial Foreclosure.” It’s rare.

Filed Under: Real Estate Basics Tagged With: Arizona, house, Judicial Foreclosure, note

Are You Still Renting?

March 18, 2011 By Jon Griffith Leave a Comment

Guess what! Interest rates are REALLY low. They have been REALLY low for a while, and based on historical data, a) they can’t go much lower, if they go lower at all, and b) that means there is a relative guarantee that they will go up in the future.

So, if you’re renting, and you’re on a month to month, or your lease term is up soon, or the savings would simply justify making the change, you may be surprised to know that at today’s rates, you can buy an $80,000 property and your monthly payments will at about $700.00 / month.

Still renting?

Did you know that as a result of the economic climate over the past few years, millions moved back into their parents homes and are now considering moving out again? That means (considering there are lots of people who are still skiddish about buying) that rental supplies are going to go down and rents are going to go up, as those people move out and rent. That’s basic supply and demand.

Still renting?

How much are you paying? Think your rental rate will stay there? Not likely. CNN Money predicts that rental prices could increase up to 10% annually in some areas.

In some areas of the valley, home prices have fallen to levels that we haven’t seen since the late 90′s. That’s a setback of more than 10 years of growth. What that also means is that you got lucky enough to be growing up in a time when all real estate appreciation essentially was put on hold while you grew up. And as a young professional with a burgeoning career and a bright future ahead of you, thousands of opportunities to build wealth are sitting right in front of you.

Still renting?

Stop! It’s time to start putting your money to work for you instead of giving it to the guy who is doing the same.

A simple illustration:

12 months of rent at $800.00 = $9,600.00. Gone…not deductible from your income, not put into retirement, simply gone.

Purchase an $80,000 home with 20% down on a 15 year note at today’s rates and your monthly payment would be $482.24.

Not including Taxes and Insurance, that’s $5,700/year.

For a more in depth look at what it would take to purchase an $80,000 home.

It’s Not the Bank Who Pays the Short Sale Fees

September 17, 2010 By Jon Griffith Leave a Comment

I’ve probably written about this before, but every time I overhear another agent advising their client that the lender pays the commissions on the transaction, I think, no, that’s not exactly true.

The lien holder on your property is a third party to the real estate transaction. They aren’t involved in the actual real-estate part of the deal. They’re absolutely involved in the note that is secured by your home. The job of getting a short sale approved involves convincing the bank that their note is secured by a property that is worth less than the amount of the note.

Technically, the seller pays the commissions, closing costs, etc. On the HUD-1, in the seller’s column, it’s clear what the “Seller’s” responsibility is. It’s clear what the “Buyer’s” responsibility is. It’s also very clear that the bank doesn’t get a column. Therefore, they do not pay anything.

The Money Flow in a Transaction

It goes like this.

The buyer secures funding.
The buyer’s lender sends money to the Escrow company.
The Escrow company disburses funds to the lien-holder, the brokers, and the seller.

This is a very basic example. In a short sale, there aren’t enough funds to cover the lien holder(s), so where would the funds come from to pay the brokers and the seller? Well, the seller receives nothing in a short sale. The brokers get paid because they do the hard work of selling the property short. The only way they can get paid is if they allow the seller to pay them less than they owe on the note, so the seller has the funds to bring to the broker(s) at closing.

So, while it’s the lender who takes the loss, it’s actually the seller who pays the commissions.

Filed Under: Real Estate Basics, Short Sales Tagged With: commissions, escrow, Lender, note, payoff