short sale

When is an Offer on a Short Sale Too Low?

August 18, 2010 By Jon Griffith Leave a Comment

A short sale is not a bargain by default. Sometimes a lender will accept an amount below the Broker Price Opinion which could equal savings over the long term, in a market that’s increasing in value, obviously. If the market prices are still on the decline (more supply than demand), then buying a bargain below market value only assures you’ll be above board for a short time.

So, when it comes to offers on homes, the offer is too low when the bank says no, and on a regular sale, the offer is too low when the seller says no. In a short sale, since the parties to the transaction are still just the buyer and the seller, technically, the seller is the one who says no, but that’s based on common sense. Nobody who knows what they’re doing in the short sale arena is going to recommend that a seller sign a low-ball offer. Until the listing agent has navigated the bank’s personnel to acquire an approval for the seller, there’s really no way to know when the offer is going to be too low. If the seller signs a low-ball offer, it could tie up that property for a few months, which is not what you want to do when your seller is facing foreclosure.

Filed Under: Short Sales Tagged With: BPO, broker price opinion, low offer, short sale

When Do We Start the Short Sale Process?

August 6, 2010 By Jon Griffith Leave a Comment

If you’ve exhausted all other options, or those options are something you don’t qualify for, such as loan modification, refinance, etc., and you’re on your last leg, then that is the time to start the short sale process.

After all other options are exhausted, you have only one remedy to prevent foreclosure other than paying your back-mortgage payments. That process is the Short Sale.

We received a trustee sale notice, what now?

Well, you’ve waited far too long, but it’s not too late. Once your lender hires a trustee to sell your house at auction, you have approximately 91 days to remedy the situation. You’ve probably received your trustee sale notice about 15-30 days after it was actually filed, so in reality, you probably have about 60 days or so to get the house on the market, approved for short sale, and sold. Here’s the big news:

MOST SHORT SALES TAKE LONGER THAN 60 DAYS

I can’t stress enough how important it is that you begin the short sale process at the right time. The right time is when you determine that your resources are going to run out, and you’re going to be forced to sell your home. If you’ve already come to that conclusion, it’s time to get the home on the market. Don’t wait until it’s too late.

But I need to consult my attorney and CPA!

Yes, you probably do, but while you do that, let’s get your house on the market so we can bring an offer to the bank. You won’t need your attorney’s advice until the lender has agreed to sell the house for less than you owe, at which point you’ll be able to back out if the implications are unfavorable to you.

It takes time to find buyers for your property. It also takes time to submit offers to the lender and have a negotiator assigned. It takes time to have the bank evaluate the value of your home. It takes time to handle the ups and downs of the process. The key here is that IT TAKES TIME. So you don’t want to waste any if you want to prevent foreclosure.

Foreclosure is a nasty beast, and you don’t want it on your record. It doesn’t just lower your score, it destroys it. You can either choose to rebuild your credit history from scratch (foreclosure, 5-7 years) or minimize the damage (short sale, 2-3 years.)

I have seen many home owners lose their home to foreclosure because they simply waited too long to make a decision about what to do. Don’t be that person.

How Do I Know If I Qualify for a Short Sale?

July 28, 2010 By Jon Griffith 3 Comments

There really are only a few qualifiers that place you in the Short Sale category. The most obvious would be that your home is worth less than you owe on the note.

The real question you want to ask yourself is: “Is there a reason we need to sell our house?”

Whether or not you qualify for a short sale involves simple reasoning. Whether or not your lender will approve the sale of your home for less than you owe is a different story, and only because of all of the red tape that you’ll run into through the process. That’s why you want an experienced agent on your side to help work through the red tape.

Your average bank employee is instructed to look at a myriad of documents in order to consider your short sale. Bank statements, paycheck stubs, tax returns, a hardship letter, etc., will be required before a negotiator is assigned to negotiate a fair market value for your home with the investor.

When it comes to the meat of the matter, the investor who owns the note on your house cares only about two factors:

What is the market value of the home.
How much is the offer?

There’s nothing else that matters to them. Oh sure, there are plenty of obstacles to overcome, but I’m thoroughly convinced that these obstacles are designed to filter the work-load that the bank is experiencing, and to drag out the process as long as possible to break everyone’s spirits. Miss that dotted “I” or that crossed “T” and the bank moves on to the next file.

The collection of information through that your payment servicer or lender puts you through is a process that they use to gather as much personal information about you as they possibly can. It’s not necessarily what they use to determine whether or not you qualify for a short sale. Remember, the investor only cares about two things. Your servicer cares about four billion things.

But Let’s Be Real About This

Back to the original qualifier: “Is there a legitimate reason we need to sell our house?”

If you are in a financial position, or a position in life in which your home is worth more than you owe and you will be needing to move at some point, due to whatever legitimate reason (death in family, deployment, loss of job or income, relocation, etc.) then you automatically qualify for a short sale, and you need to do everything within your power to find someone to help you prevent the possibility of foreclosure.

If your attitude is to “screw the bank” because “they screwed you” then I’d argue that you don’t have a legitimate reason to sell your home. You signed a note to pay the balance of your loan, but there’s nowhere on your note where it says, “only if my home has equity.”

If you’re going to walk away, you owe it not only to yourself to save your record from being tainted by foreclosure, but you owe it to your neighbors to try to prevent accelerated devaluation in your neighborhood. Every foreclosure affects the value of surrounding homes negatively.

Don’t walk away without a plan, and more importantly, don’t wait until it’s too late to take action. The BEST time to begin the short sale process is when you recognize that it’s a possibility.

Filed Under: Short Sales Tagged With: qualified, qualifier, red tape, short sale, short sales

What is the Red Tape?

July 28, 2010 By Jon Griffith 1 Comment

There are no doubt an abundance of obstacles.

Most of the problems we face through the process of short selling your home are directly related to two problems, 1) bank employees following policies and procedures, and 2) work load.

In order to manage any large number of low-wage employees, which is what we’re dealing with, like any other corporation, boiler plate policies and procedures are created and employees are expected simply to regurgitate and follow those policies without thinking for themselves. This causes friction, typically enough to drive the average home owner nuts. It’s simply not worth your time to worry about it. That’s what we do for you…oh, and at no cost, by the way.

Since the dawn of the Short Sale age (It’s still 8:30AM there,) banks have not been prepared to handle the work-load. Servicers are literally stacked to the ceiling with requests for approvals to sell properties for less than they’re worth. Don’t worry, they will do it, as long as the offer meets their policies and procedures *sigh*.

Filed Under: Short Sales Tagged With: obstacles, red tape, short sale, short sales

Nationstar Mortgage: We Won’t Help You Until you Stop Paying Us

June 14, 2010 By Jon Griffith 7 Comments

What?

Yep. That’s the conversation I just had with a customer service representative at Nationstar Mortgage. “The investor will reject all attempts for a short sale if the seller is not delinquent on their mortgage payments.”

As of Wednesday, August 25th – A quick follow up note on this: The loan servicing company is hired by the investor who owns the note on your house and therefore dictates the terms of the short sale. Fannie Mae has in fact begun requiring that home owners be 30-days past due before they’ll even look at the prospect of a short sale.

Oh really? That investor is Fannie Mae. Fannie Mae told you that? I don’t think so. Fannie Mae backs most of the mortgages in this country. Nationstar is simply a servicer. Look, I understand that policy and procedure is designed to streamline processes, but we are human, and most of the time the policies and procedures are future-solutions to current problems. In other words, this is a living and breathing system of short sales that is constantly changing. The system doesn’t respond well to policies that out-date themselves the minute they’re written. There’s nothing more aggravating than dealing with someone who follows ridiculous rules. I’m okay with following rules that make sense, but whomever handed down this policy is attempting to accomplish one thing.

Banks will tell their customers that they have to be behind on payments in order to trigger fear of damaging their credit so the customer will continue to make the payments when it’s impossible for them to do so. It is a collections practice, and it’s deceptive.

So, according to Nationstar, it would be in their best interest for me to recommend to my client that they stop paying their mortgage, thereby reducing Nationstar’s income, allowing them to live freely in their home, until Nationstar incurs the expense of filing a trustee’s sale notice, and potentially losing a buyer and going to foreclosure. Makes sense to me?!

Update as of July 13th 2011: Not only does it make no sense, but MARS disclosures now require us to include the following disclosure in all of our communication and advertising. “If you stop paying your mortgage, you could lose your home and damage your credit rating.” Really FTC? Thanks for that morsel of brilliance.

This could be a multi-thousand dollar mistake on their part. As a short sale specialist, it’s my job to break through the front lines of ignorance by locating the person who actually makes decisions. That’s what I intend to do, because I will not be advising my client to damage their payment history.

This is a prime example of someone saying no in an environment that needs solutions, not roadblocks. It’s also one of the reasons short sales take so long.

Filed Under: Short Sales Tagged With: nationstar, short sale

The Lender Does Not Pay For Anything in a Short Sale

January 22, 2010 By Jon Griffith 2 Comments

This is one of those misunderstood technicalities that I face every time I work with a potential short sale candidate. The common mis-understanding has been that when a home is sold short of what is owed, the lender or lien-holder pays the associated costs of closing the transaction such as broker commissions, seller’s closing costs, HOA dues and transfer fees, 2nd lien-holders, etc.

This is actually not true. The lender is not a party to the purchase contract. They are an authority whose decision the contract is contingent upon. A lender’s role is to approve of a lesser payoff than the amount owed. When the lender takes less, they make room for the seller to pay the fees associated with closing the transaction. Those fees come from the buyer’s purchasing power, and the 1st lien holder is basically saying, “we’ll allow the funds coming from the buyer to be credited to the seller in order that the seller may cover the associated costs of closing the sale.”

To have a successful short sale with a home owner who has no money to bring to the table, the lender must reduce their payoff enough to allow the difference between the purchase price and the net payoff to the lender to add up to the seller’s closing costs.

It may appear that the lender is paying the costs because they are accepting less than what is owed, but this isn’t actually the case.

On paper, on the HUD-1 closing statement, there is no mention of the lender paying for anything. The HUD is a document outlining what the buyer pays for and what the seller pays for.

For instance, if the sale price of a home has been negotiated between the buyer and the seller to be $200,000.00, but there is a balance due on the 1st lien-holder’s note of $250,000.00, and there are commissions, closing costs, HOA dues, and taxes to be paid, the lender is going to have to accept less than $200,000.00 by exactly the amount of the closing costs.

Add together the closing costs and the net payoff to the 1st, and you should reach your sales price. The lenders do not pay for anything in a short sale.

Filed Under: Short Sales Tagged With: buyer, home, payoff, short sale

The Basic Short Sale Process

October 1, 2009 By Jon Griffith 5 Comments

Handling a Short Sale for a client is a very complicated and detailed process, but at its core, there are only a few basic steps involved. The real success of the Short Sale is attributed to the experience level of the agent representing the seller. If they don’t know what they’re doing, it’s likely you won’t have a very smooth transaction. In fact, if they are attempting to short sale your home without experience, then they are doing you a disservice, as its our fiduciary as Realtors to represent your best interests, which cannot happen without proper experience.

Short Sales Process at its Basics

Listing: The first step is to list the property for sale. Traditional marketing does not typically apply to short sale properties because we’re pricing it to sell as quickly as possible. The seller doesn’t make any money, and they don’t approve the sale, so essentially, the seller really isn’t the seller. The bank is ultimately in charge.

Offer: A qualified buyer presents an offer. Just like any other sale of any other property, ensuring the buyer is adequately qualified to actually purchase the home is just as important on a short sale as a normal sale.

Execution: The seller signs the contract. Provided the offer is within reasonable fair market value of the comparable sales in the neighborhood, when the offer is presented, the seller will sign it and it will be considered executed or “accepted,” but not “approved.”

Submit to Lender(s): Along with all of the required documentation, the offer and all associated listing paperwork, addenda, financial statement, etc., is submitted by your Realtor to the lender(s) on the property and the approval process begins.

Receive Letter of Agreement: When the lender approves of the sale, meaning they’re taking what they can get from the deal, they provide a letter of agreement which the seller reviews and approves or disapproves of. If the seller agrees to their terms, the normal closing time line begins.

Due Diligence: It’s now time for the buyer to conduct their inspections and obtain their funding. If everything checks out okay, and the property appraises for at least the contract purchase price, then the buyer moves on to the next step.

Signing: Woo hoo! This is where the buyer signs their final paperwork. Title will then record the property transfer with the county recorder and the new buyer will take ownership of the property.

That’s it. Those are the basic steps of a short sale. From start to finish, this entire process is completely dependent upon how cooperative each party to the transaction is, and no two short sales are the same. This entire process can take a few weeks, to more than 8 months. So, as a buyer or a seller, be prepared to wait.

Filed Under: Short Sales Tagged With: agreement, Closing, due diligence, letter of agreement, RECORD, short sale, short sale approval

The Truth About Loan Modification

September 25, 2009 By Jon Griffith Leave a Comment

When applying for a loan modification, be prepared to disclose your entire financial life to whomever is negotiating your modification. If you try to do it, you will fail, unless you are persistent, or insane. Some attorneys require $3000 up front retainers to even begin negotiating with the bank. There is no guarantee that it will work.

How Can I Qualify?

More than 60% of you do not qualify because a simple modification of your loan will not bring your financial position in line with the bank’s requirements. So what are those requirements? The lenders are simply looking at your finances to determine if your mortgage payment exceeds roughly 31% of your net take-home pay. This is an estimate, and every case is different, but it’s typical.

That means that if you have bad spending habits, or you’re paying bills that should be considered secondary to your mortgage before you pay your mortgage, your lender will call you out on it during the loan modification process. You may need to prioritize your spending.

So, regardless of your monthly mortgage payment, if it’s less than 31% of your net take-home pay, you will probably be denied. So don’t waste your time.

Loan modification typically results in a lowered interest rate, 10 years of additional payments on your home, payment deferral, or some other manipulation that will usually not help you anyway.

The real problem is that you owe money on a house that will not recover its value in enough time for you to break even on the future appreciation of your house, and therefore, you’re stuck in that house. If it comes time to move, you’re still stuck in a situation where you may have to do a Short Sale to sell the home.

The real truth about loan modification is that it’s possible, but it pacifies the homeowner long enough for the bank to continue to make money off of your financial hardship. Think about it. The bank wants you to be enslaved to their madness for as long as possible. At the same time, the banks are out of money and are going bankrupt, so your best option at this point in time may be to do a Short Sale.

Filed Under: Loan Modifications, Short Sales Tagged With: appreciation, distressed, interest rate, Lender, mortgage, short sale