Metro Atlanta Short Sales Blog

Statistics show a 25% increase this year in foreclosures, from September 2007 to September 2008.  Foreclosures are at an epidemic level we have never seen before.  The bailout was supposed to help, wasn’t it?

Well, yes it was.  But keep in mind, it happened in October and will take some time to have an effect.  In addition, it was never intended to stop foreclosures, but to prop up the credit market overall so that money can continue to flow.  At best, it stops the slide in prices that occurs when buyers cannot get loans to buy.  Its aim was the overall economy, not the individual. 

The original bailout idea was for the government to buy “troubled assets” meaning those mortgages that were in default and near foreclosure.  The thinking was that it would provide funds to the banks to loan again, and provide some cover for those facing foreclosure so they don’t lose their house immediately.  Renegotiation of the loan might be possible, allowing the homeowner to afford to keep paying on their home.

But all that has changed.  The government has decided instead to invest in stocks of the banks.  It provides them with the same cash to operate, but they keep the bad loans.  And many banks, instead of using the money to make loans, are using it to purchase other banks.

So where does the homeowner stand in all this?  On the sidelines.  Essentially, for you, nothing has changed.

The FDIC, however, actually has proposed an idea aimed directly at you.  They want to create a 300 billion dollar program to renegotiate loans.

Also Wednesday, Housing and Urban Development Secretary Steve Preston said the government may let more borrowers qualify for a $300 billion program designed to let troubled homeowners swap risky loans for more affordable ones. The program was launched Oct. 1, but there are concerns that lenders won’t participate because they have to voluntarily reduce the value of a loan and take a loss.

Unfortunately, the treasury secretary is adamantly opposed to this, and the President has already expressed his opposition to it.  So there is no relief in sight right now for the homeowner in trouble.

This means that Short Sales are just as needed, or more so, than they were before.   Call me and let me see how I can help you get out of financial trouble, and preserve your chance at a financial future.  And comment here with your opinions of the bailout, the economic crisis, and the government’s response.  We’d love to hear from you.

As a Short Sale Specialist in the Atlanta area, I run across all kinds of people in a variety of hardship circumstances.  The first thing I need to do is figure out if a Short Sale is right for them.  It is not for everyone, and I only take on the Short Sale if it is right for the client.

After hearing what has caused the current hardship, I try to help the client understand their options.  Each situation is different, and there are no clear lines to which option is best.  Generally, though, there are seven different options.

1. Refinancing.  Can you qualify for another mortgage, one that you can afford?  That’s always the best option.
2. Selling the house as a normal transaction, even if it means bringing cash to the table - if you can.
3. Working out a plan with the Lender.  Amicable settlement is better for everyone.
4. A Short Sale.  The lender must agree to accept less than the principle and not hold the seller responsible for the difference.
5. A deed in lieu of Foreclosure.  Give the house to the lender to terminate the mortgage.  The homeowner might be responsible for the difference between what the lender sells the house for and the principle.
6. A Foreclosure.  The homeowner loses the house and their credit rating is damaged.
7. Walking away.  This is the absolute last resort.  The homeowner’s credit rating is heavily damaged.

Let me help you figure out what option is best for you.  Give me a call, or leave a question or comment here.  I’d love to hear from you.

Today, someone asked me what kind of creative ideas have I used in my business to become so successful in Short Sales.  This is a very interesting question, and one which made me think about what had been these creative ideas.

Being a Short Sale Specialist for more than two years, very early in my career I understood that my practice must not focus exclusively and only in doing a Short Sale on every property that came to my attention.  One of the things that makes me feel very proud is complementing my services with help to the Homeowners – not only with their Short Sale on their property.  For many Homeowners, the solution is not a Short Sale, maybe it is a payment plan to recover the overdue payments, or a loan modification.

I have helped many clients with these processes as well.  Sometimes I get the feeling of being in a satire when I being the process of modification with a lender, and their response is to raise the monthly payment or make a second loan for the homeowner for the past debt that they owe.  I ask: Do these people think it is going to make it any better to add an extra payment for the homeowner who has already shown that they cannot pay for and because of that are behind.

Well, even so, I have had many good experiences, with many homeowners able to stay in their houses, no longer facing foreclosures.  And these are clients for a lifetime – clients who generate the referrals that comprise 78% of my business.  There have been people who only needed a few months of help in order to look for better work, renegotiate their medical bills, or maybe restructure their finances in a short time of crisis.

If you would like to work with an agent who takes creativity seriously every day in overcoming the difficulties in dealings with the lenders, contact me and ask me what I can do for you.

A few days ago, talking with a loan officer about the government’s plan to give a stimulus for the lenders to refinance the loans that are in default, and the government would commit to buying them.  This loan officer told me that “the government does not obligate the lender to do this, it is only a suggestion that they make to the lenders, but they are not obligated to do so.”

Now, let’s look at the reality: in order to refinance any property, the first thing that must happen is an appraisal.  It is no secret that in several states, people owe more than their houses are worth. 

Some questions would be:

• Who is going to pay the difference between the refinanced amount when the property does not appraise for the loan value?
• If the property does not have any equity, who will be responsible for paying for the months the borrower is behind, and refinance it for the same value as when the person first purchased it years go?
• Will the lender pay the closing costs, including the appraisal?

At the end of the day, the lenders will be able to use this money for other types of transactions, and the benefit will go only and exclusively to the lenders.

Personally, I hope that they use some of that money to create a Loss Mitigation department that is more efficient and quick, and the Short Sales can move more rapidly with a timeframe more acceptable for the serious buyers.

Take a look at what the short sale process is like, and give me a call to see how I can help you.  And leave a comment here telling us what you think of how the bailout is being managed and what the government should do now.

Even though the percentage of short sales I’ve closed has been very high (85% of them were successful), the remaining 15% leaves a bitter taste in my soul.  And I always come to the same conclusion: If I had a little more time…. It would have been another successful transaction.

Short Sale transactions are full of emotions.  None of us would like to be in this position and lose that for which we have worked for many years, a home for our children and our family.  When those emotions pull at our hearts and hinder our reasoning, we are not only playing with our house, but also with a person’s complete financial future.

Studying the cases of properties that go to foreclosure, we have seen the same path:  the person had high hopes when they asked for help.  The large part of the houses that I have had in Short Sales which have gone to foreclosure have done so because the sellers called me when they were already 3 months behind in their payments.  What that ends up meaning is that we’ve lost at least 2 months in marketing the house, receiving an offer, and starting the Short Sale process.  A small percentage was because the Banks were being completely unreasonable, with things like giving me a counteroffer that was completely impossible to achieve, and the buyer decides to move on to another property.  By the way, the big majority of those unreasonable banks are now bankrupt themselves.  I wonder why…

People have been asking me: and now what?  My response is very conservative: I don’t know, but I believe that the mortgage companies are going to be more open to accepting short sales, and are not going to continue choking the market with more and more foreclosures.  I think that after a year and a half of FORECLOSURE MADNESS, finally the lenders are beginning to be realistic: this path isn’t working.

So let me help you be in my 85% success rate, or even improve it.  Give me a call before the clock starts ticking down.  Give me the time to help get you out of trouble and save your financial future.  As a Short Sale Specialist, let my experience work for you and help you through the process with more confidence and less worry.

Yes, short sales can take a while to work through, and here is an example.  Back in May, I published an article about Interviewing the agent who will represent you.  The transaction that inspired that story will close this week.
The controversy at the heart of that article was whether to choose the “expert in the neighborhood” or the “short sale expert”.  It was a high-end home in a prestigious neighborhood, and the Seller was worried about choosing between The Neighborhood specialist (Agent) or an agent outside his neighborhood who specialized in Short Sales. Well, the client chose me, the Short Sale Specialist.

The transaction took months, including several long weeks of negotiations with the Lenders, multiple competing offers with contentious agents, and lots of care making sure the Seller and his Lenders accepted an offer, did not foreclose on the house, and protected their financial future.  The transaction is closing this week, both lenders will receive a fair amount on their loans, the buyer gets a good house at a great price, and the seller gets out of his oppressive mortgage owing nothing and no more damage to his credit report.  The only ones who lost out were the foreclosure lawyers.

And the client is thrilled.  To quote the survey I received back from him: “Sometimes you look back and you know you’ve made some good decisions and some bad ones.  My wife and I often commented to each other that we chose Adriana to handle our sale.  …looking back at the complexity of this type of transaction, there is no way a ‘normal’ agent could have helped us with all the things that came up.”

This is the kind of success story I got into the Short Sale specialty for.  I help everyone reach a mutually beneficial transaction, and know that I’ve done a great job. Even more important in the long run: giving someone a second chance to start over financially, learning from past mistakes.

 If you are looking at the need for a short sale, please make sure you do your homework and select an agent who knows this process, a Short Sale Specialist.  Give me a call and let me tell you how I can help you.  With me, you can expect extrordinary experience and service, as well as caring attention to your personal needs - like this client’s financial future and getting a second opportunity.

For the time being, this will be the final installment in my series about why Short Sales fall through.  I will likely revisit this topic in the future, as I hear more stories, but I plan to move on to other topics for the next few posts.  The purpose of this series is to contrast my approach with those agents who have recently come into the Short Sale market in order to keep their numbers up.  As a Short Sale Specialist, I have learned to avoid these mistakes that inexperienced agents have made.  I keep your transaction on-track.

As new agents move into this market to keep their numbers up, the ‘numbers’ are my topic for this article.  They are another reason why Short Sales fail, but in this case with even more disasterous results for the seller because the agent was not prepared.

I read about a transaction where the listing agent did not know that they were responsible for getting a “HUD-1″ to the lender before closing.  The HUD-1 is a preview of the closing statement which contains all the numbers that everyone is paying or gets out of the transaction: the lenders, the seller, the lawyers, the agents commissions, all the fees, etc.  The agent was caught unaware, and needed to get it done quickly.  The HUD-1 was prepared hastiliy and sloppily, showing the lenders getting the full amount of their loan and a negative net to the seller.  This would mean that the seller is bringing cash to the closing table - contrary to the purpose of a short sale.

This never happens to me.  I know all about the process, and have the HUD-1 prepared well in advance.  Beyond that, I have the taxes checked and the property investigated for leins.  This saved several transactions, but let me tell you the story of just one.

The closing attorney called me a week before scheduled closing with the information that the property had two leins - people had filed legal paperwork saying the property could not be sold if they did not get their accounts paid by the seller.  This would derail the closing if not dealt with.  We had 4 days to deal with the problem, and two of them were weekend days.

We found that one of the leins had already been satisfied, and with some effort, got it lifted.  The Seller had to find a way to get the money to pay the second one, get a bank check or money order for it, and present it in person to the lein-holder.  And he had to get a signed letter from them saying the lein had been settled.  But the amount of the lein was more than the Seller could manage.  We negotiated a reduction, that the paperwork would be ready when he showed up, and that his credit report would be cleared.  He managed to get all this done on the morning before closing, brought the paperwork to the closing table, and the transaction went through.

Imagine a new agent working their first Short Sale faced with this situation.  The agent above, the one who did not know about the HUD-1, would not have known about this until the closing appointment.  Very few agents would go through the title clearing process far enough in advance to find out about this deal-killer.  I do.

Let me help you with your short sale process, so I can help keep this type of thing from happening to you.  And if you have horror stories like this, please share them with us all by posting a comment.

Today’s installment in my series on Why Short Sales can fall through is about times when the buyer walks away from the deal.  As I mentioned before, agents are entering the Short Sale market because the “normal” market is now declining.  To keep thier carreers alive, they are turning their eyes to short sales.  But their lack of experience can cause the deal to fail, and everyone to lose.  As a Short Sale Specialist, my years of experience has prevented this problem for my clients.

Short Sales are a long process requiring patience - from everyone.  Sometimes, in this long process, a buyer gets ‘cold feet’ or decides there is a more attractive opportunity around the corner.  Or they simply get tired of waiting.  For whichever of these reasons, they walk away from the transaction.  If this happens after the lender’s acceptance, of course, they forfeit the earnest money.  So more often, this happens during the negotiations with the lender.  This process can extend for weeks, and lenders often do not communicate their status throughout this time.  Under these conditions, it is natural for the buyer to get nervous or frustrated.

Even worse, sometimes, is when the buyer convinces the agent to put the listing in Pending status when the seller accepts the offer, so that they can be assured of being the only offer.  Believe me, it happens with some agents.  I don’t do that.  First, by definition following the terms of my contract addendum, the offer is not a contract, and therefore pending, until the lender accepts the offer, not the seller.  Second, a key to success of the short sale process is ensuring that the lender believes they are getting the best offer they will get on the property.  Putting the listing in Pending status makes it unlikely that better offers will come in during the process.  Finally, as has happened to some of these other agents, the buyer may still walk away after the listing has gone Pending, and the agent needs to start all over again.

Certainly buyers can walk away through the long process, and I cannot claim that it has never happened to me.  It has, but very rarely.  I make sure the buyer is informed, and that I keep up to date with the lender’s status and communicate that back to all parties, calming everyone down. 

But let me tell you a story about when a buyer did walk away on one of my transactions.  I had a sense that this buyer was getting distracted and unreliable.  Just days before the acceptance from the lender was due, the buyer’s agent stopped returning my calls - a sure sign of trouble.  But I was ready for it. 

I got a backup offer in place that resulted in the same net for everyone and closing on the same date.  That was one of the most frenzied Short Sales I ever had, but in the end, all worked out for everyone involved.  And the buyer, a wonderful immigrant lady, invited us to her housewarming dinner in her great new house just a month later.  That dinner, and her obvious pride in owning her first house and participating in the American Dream, made all the hard effort and long hours scrambling to put the transaction together worthwhile.

You can rely on my expertise in Short Sales to help you get through the process without this happening to you.  Give me a call and let me walk you through what a short sale is and how it can help you when your mortgage is “upside down”.  If you have stories about buyers who walk away, or other thoughts on how to keep it from happening, please post a comment here.  I’d love to hear it.

Continuing my series on why Short Sales can fall through, today’s topic is deals that fall through because the buyer’s mortgage gets denied.  As I mentioned in my last article, agents are entering the Short Sale market because the “normal” market is now anything but normal.  In order to remain a full-time agent, they are turning their eyes to short sales.  But their lack of experience can cause the deal to fail, and everyone to lose.  As a Short Sale Specialist, my years of experience has prevented this problem for my clients.  Not one of my short sales has fallen through because the buyer’s lender denied their loan.

Traditionally, it is the buyer’s agent’s responsibility to ensure that the financing comes through.  In my experience, this is insufficient.  I have special provisions in my contracts that ensure that the buyer has not just been “pre-qualified” but also pre-approved, and that it has been checked by another lender - a second opinion if you will.

Other agents have had the buyer’s lender deny the loan after the seller’s lender has officially accepted the offer - and more than once, not learning from the experience.  This has never happened to me, and not by luck.  I make sure of it. 

If you are thinking of doing a short sale on your home, make sure your agent is an expert in Short Sales - one who can protect your interests from unexpected turn of events, not by luck but by design, with a well crafted set of paperwork.  If this problem has happened to you, or you have other suggestions for avoiding it, please post your comments here.  I’d love to hear from you.

In this market, many agents have started doing short sales as they watch their “normal” transactions decline.  But they have entered this very complicated market late, and have not gathered the experience to make the transactions work.  I wanted to take a moment and share with you some reasons why this occurs.  Each of the next few articles will cover a different reason why Short Sales can fall apart.

The first reason?  The BPO.  A BPO is a Brokers Price Opinion, it is the bank asking for an “independent opinion” of the market value of the property.

Who does a BPO?  A Real Estate Agent.  One who is not involved in the transaction.  And if it comes in too high, the lender may terminate the transaction because they feel they are not getting enough or money is being left on the table.  So what’s the problem?  The agent may not know anything about the area or the type of property involved, and turn in a bad BPO - a price not supported by the market.

There have been cases where the BPO came in 30,000 to 40,000 over the reasonable value of the property - over the last two recent sales in the same complex, for example.  The lender stopped the transaction unless the buyer could come up with an additional 25,000 in their all-cash deal - when the buyer had offered more than the last comparative sale.  This is not the lender’s fault, they just asked for a second opinion, and relied on someone they thought would do a competent job.  The seller’s agent could not affect the outcome because they are not involved in the process.

But there is something the seller’s agent could have done to keep this from happening.  Something I do on every transaction, when submitting the Short Sale packet.  I prepare and submit a detailed market value analysis with the package that can easily refute an overvalued BPO, showing that the offer is valid and the best the lender is likely to get.  While I can’t put that information here, where other agents can learn in hours what it has taken me years to develop, I will gladly show it to you at my listing appointment if you like.  This has saved many transactions from falling through this trap.

In a few days, I will post another article about another reason why Short Sales fall through.  Please let me know your thoughts by posting a reply to this message.  And take a look at my Short Sale FAQ (Frequently Asked Questions) to learn more about what it takes to put through a short sale packet.