Archive for the 'Uncategorized' category

Proactive Sellers and Realistic Agents…

Tuesday, September 15th, 2009

Two closings I had a couple of weeks ago were Short Sales where I represented the buyer for a change.  Interestingly enough, both sellers were proactive.  They knew all the parties involved wanted to achieve the same goal: Close.  That is why they allowed me to talk with their lenders on their behalf during the final stages due to the fact that their Listing Agents were not familiar with Short Sales.

Both of these short sales took less than 2 months to complete and close, and the attitude of one of the Listing Agents was great.  He knew that the only way to close was with my help.  He was open to learn, to listening to all the advice I gave him along the way, and to share with me all the difficulties he encountered during the process.  We solved them together, without ever failing to represent his client’s best interests.

I am working right now with another Listing Agent who does not have a clue about Short Sales, and her ignorance equals the size of her ego.  I’m sorry if that makes me sound rude or egotistical, but the truth is that I am not comfortable if someone else is playing with a Seller’s financial future. 

We are living through some tough times, but I think our values and ethics as Real Estate Agents needs to rise above any kind of personal need of the moment.  My advice for all agents who are getting involved with Short Sales is to learn the process, and the obstacles you might encounter, from a specialist before you play with someone else’s financial future.  If you do not feel savvy enough, be proactive.  Co-op with an agent who can share with you their knowledge and experience, or work with the buyer’s agent who has been through several of them and knows the ropes.  Use their experience to build your own.  The war of egos should be over, try to give your client the best service you would expect for yourself in their situation.

We can all work together in situations like this where we generate a win-win situation for everyone, not competing and starving each other.  Share your ideas for how we can cooperate in this fashion for everyone

Do Your Clients Get Deficiency Notes?

Thursday, July 2nd, 2009

A couple of days ago, I was talking with one3 of my colleagues about Short Sales.  I was astonished when my colleague told me the story of one of her clients in Woodstock, GA.  The client had a first mortgage and a line of credit with one of the banks that was saved from collapse by being bought out during the crisis.  During the Short Sale process, the second lien holder said that the only way the Short Sale could happen was if the client signed a deficiency note – because when they signed the papers for the line of credit, they signed two types of notes: one against the house, the other was a Personal Note.  Since the lender had the Personal Note, they felt they had the right to have a deficiency note signed by the home owner, or otherwise the Short Sale would not happen.

The client decided to sign the deficiency note.  Three months later, and life has moved on.  They now live in a different state.  Their son won a scholarship to go to college, and their life was taking a positive turn.

Last week, they found out that their bank accounts had been frozen.  They had left their checking and savings accounts with that same bank that had required the deficiency note.  The bank froze their accounts and took all the salary earned by the husband – and did not stop there.  The son who was going to college also had his account with that bank, and had received his scholarship payment as well.  But since he was a cosigner for them…..  The bank took all the scholarship money as well.

How far can a bank go with a deficiency note?  Far enough to ruin the life of a student waiting to start his college career, certainly, and without a moment’s troubled conscience. 

This story has helped me fight even harder every day for my clients, and to NEVER accept a deficiency note in any of my transactions.  If you end up agreeing to one on behalf of your clients, at least tell them to make sure they don’t have any other accounts with that bank – or any of its tangled siblings as the banks buy each other out.

Please share your good and bad experiences with me – we can learn from each other.

Short Sales Program for FHA Loans

Tuesday, June 16th, 2009

In February 2009, new rules were announced for those who cannot pay their mortgages, who want to make a Short Sale on their property, and whose original mortgage was backed by HUD, VA, FHA and other government entities.

The Pre-foreclosure Sale Program allows a Mortgagor in default to sell his or her home and use the sales proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount owed.

FACTS
• Outright sale of mortgaged property to a third party and must be an “arms length” transaction.
• Outstanding indebtedness includes; unpaid principal balance + delinquent interest + Partial Claim (if applicable).
• HUD will pay $750 – $1,000 incentive to the Mortgagor.
• HUD will pay an additional amount up to $1,500 for the discharge of junior liens after the Mortgagor’s incentive has been applied.
• HUD allows all reasonable costs of the sale including up to 6% sales commission, transfer tax stamp and other customary closing cost.
• HUD allows up to 1% of the buyer’s mortgage amount for closing costs if the transaction involves a new FHA-insured mortgage.  Certain categories of costs are excluded.
• Sale amount must be between 84% and 88% of the “As-Is” appraised Fair Market Value depending on the number of days since application.

Some restrictions exist on the condition of the property and how repairs are valued.  Check out the official site for details.

ELIGIBILITY
• The property must be owner-occupied, no “walk-a ways” or investment properties, with some exceptions on investments.
• The Mortgagor must be 31 days or more delinquent at the time of the Preforeclosure Sale closing.
• The Mortgagor must provide documentation substantiating a reduction in income or an increase in living expense, and documentation that verifies the Mortgagors need to vacate the property (if applicable).

Under no circumstance should the Mortgagor be encouraged to default on their mortgage for the purpose of participating in the Pre-foreclosure Sale Program.

Sharing this information with all of you means that more Short Sales transactions will complete, and that Loss Mitigation negotiators will be more fair in our transactions.  As I mentioned in an earlier blog, I am still negotiating a Short Sale since September, 2008, with one of the “Big Boys” who instead of making a price reduction when they needed to in order to make the transaction happen, they instead increased the sales price of the property.

Let’s continue to help people, and please share all the comments and knowledge you have and tell me your stories.  Together we can make this market work for us all.

Reality Check #6: For Agents who list Short Sales

Tuesday, December 30th, 2008

Before the end of the year, I wanted to finish my Reality Check series.  I think I have VERY GOOD NEWS for the new year!.

 

But I think it important to make a remark about the responses I’ve received from this series – like Gene Allen: “Seems like everyone will be  a short sale expert by the time all this is said and done.”

 

Ladies and Gentlemen, I have to say that there are very FEW experts in short sales in this market.  Recently I have come across several agents who think they know short sales, such as the case of one of my Alpharetta Short Sales.  The client was referred to me by an agent in Illinois.  Her ‘strategy’ was to list the property for 10% below the cheapest in the subdivision, and lower it 5-10,000 every week.

 

Another case is one I ran across yesterday.  I was looking for a condominium for my buyer in Atlanta.  I found a Short Sale for $20,000 below the foreclosures that sold in the same building, and that agent proudly commented that she had multiple offers on the property.

 

OK, so you are all going to ask me: And what does it matter?  For me, a lot.  The mentality of many agents that start working in Short Sales is to reduce the price of the property, without studying the area and the subdivision to have a clear idea of how much the lender will be likely to accept in an offer.  Since they do not do this homework, their idea is to get the most offers under that percentage, send them to the lender, and the buyer waits for a month or two without a response thinking that the lender is going to accept it.  When the lender comes back with a counter for more than the listing price of the property, the buyer is so involved in the transaction that he’ll accept the increased price.

 

If I were the buyer, making an offer for the listing price, and after two months I am told to accept a price higher than the listing price, I would not buy that property.  Why?  Because I would feel like I was being scammed.  Nor would I ever work again with the Agent “representing” me, the one who involved me in this transaction.

 

If I as the buyer have the option to choose between several equal properties (such as a cluster home, townhouse, or condo) on the market, and I have to wait for months only to have the price increased on me, I would rather buy one of the foreclosures where I don’t have to wait for months for a transaction that is never going to happen.

 

Now: do you think the agent that listed the Short Sale was really helping their client?  Acting in their best interest?  How many of these offers have a realistic chance to work?  Lenders pay for appraisals and BPOS, and if the numbers do not make sense, they foreclose anyway.

 

Negotiators have way too much work to review all the offers submitted by agents who follow this shotgun strategy – especially when those offers do not make sense.  It is difficult to sell Short Sales, and these kind of agents are not helping the market at all. 

 

Let me know your opinions, now that we know we are going to all be experts…  Or maybe just a little more realistic about the market, lenders, and short sales.

 

 

Big Myths About Short Sales – Part II

Thursday, July 17th, 2008

During the last 2 months, when the market is turning even tougher, I have been spending more time dealing with Agents and Buyers that have big myths about Short Sales.

Here are a couple of the big myths I would like to share with you.  A couple more can be found in my last post.

3.  I don’t want to deal with Short Sales, I would need to deal with an eviction process.  FALSE.

All sellers that understand the Short Sale process KNOW that it is a WIN-WIN for everybody.  They do not want to cause any kind of problem in leaving the house, as they are also benefiting from the transaction by not having their credit damaged.  The seller, as in any transaction, will be leaving the house on their own as of the closing date.

4. I don’t want to work with Short Sales.  It is a long process and at the end, the lender is not going to accept it.  FALSE.

Short Sales are going through a BOOM right now.  Many Real Estate Agents, in this current slow-moving market, want to work with short sales.  Please, when you are considering making an offer, ask the Listing Agent some questions about the Short Sale Process.  For example: what experience the agent has with short sales, how many have they closed in the last three months, and if they have an established relationship with the specific lender for that property, etc.

The KEY in short sales is to work with an experienced Listing Agent.  If you have found an inexperienced one, the short sale could be a nightmare.  Unfortunately, due to the inexperience of many agents, millions of sellers are living the affects – not just because they lost their houses, but also because the buyers and their agents think the process is endless and they decide to buy a different house with less hassle.

Also, remember that the economy as a whole gets a little shot in the arm as it avoids yet another foreclosure.

Let me know what you think about these myths, as well as those in the previous article, by posting a comment.  And if you are in trouble, struggling hopelessly to make your mortgage payments, please give me a call and let me tell you how I can help.

Don’t Leave Your Home!

Wednesday, July 2nd, 2008

I cannot tell you the number of times I have been called by a distraught homeowner ready to call U-Haul and move out of their house because they’ve been intimidated by the folks trying to collect back mortgage payments.  What I can tell you, however, is that it is a big mistake to do so.

If the bank comes by during the short sale process, and determines that the house is unoccupied, they are likely to consider it “abandoned” and foreclose immediately.  This stops the short sale process, and the homeowner experiences all the negative impacts on their credit of a foreclosure.  In the mean time, the homeowner is paying someone else for housing as well.

If the homeowner stays, the foreclosure can only happen by following the proper legal procedure which takes a considerable amount of time and cost for the lender.  It is one of the major reasons the lenders agree to do a short sale in the first place.  In addition, while I cannot advise anyone not to pay their mortgage, if you are already behind and not paying, there may still be several months before the foreclosure forces you out of the property.

Once you have begun the short sale process, the collection calls should cease, and the Lender knows they can’t use any intimidating tactics.  And you can continue living in the house right up until the last moment.

So do not let people intimidate you out of your home, or into any bad financial decisions that will make your financial picture even worse than it already is.  Call me for advice, let me help. 

What financial or credit liabilities will a seller have as a result of a short sale?

Tuesday, June 24th, 2008

Many lenders ask sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation as a condition to a short sale. In such cases, the note gives lenders the right to sue a seller and attach other assets if the note is not paid when due.

It’s particularly important to understand this distinction if you work in states such as California that have a nonrecourse mortgage. In such states, the lender cannot pursue a deficiency judgment against a seller for any deficiencies after a property is foreclosed. Because of this distinction, sellers who are already in default on a mortgage and do not have the resources to pay off a separate promissory note after a short sale might be better off letting the lender foreclose.

Tip: Having a portion of a loan forgiven may have an adverse affect on the seller’s credit. For example, it would be best to sign a lease on an apartment before your credit is further damaged.

If you work with a good Agent, they will know all this in advance, when you need to do a lease.  At the same time, DO NOT leave your house until the process is over – you may be there for some time, without worrying about monthly payments, and be ready when it is time to leave.