Loss Mit Services

Short Sale Tip of The Week 7-15-09

Posted on 15. Jul, 2009 by ctlms in Short Sale, foreclosure

At what point do I consult with a short sale professional?

You just got a call from a past client.  They are months behind on their payments and foreclosure is imminent.  Do you go it alone and figure out for yourself what price to list it at, if and when to lower it, what to disclose to buyer's agents, what paperwork to start gathering, etc, etc, etc.  OR, do you call your LOCAL short sale professional and ask those questions before you make a potential misstep that could derail your path to a commission?

You call the pro right away.  Part of a professional short sale negotiators job is to help the real estate agent set all the proper expectations right from the beginning.  Along with set the transaction up from the start so that it has the highest possibility of ending in a successful transaction for the sellers, buyers and of course the real estate agents.

Just like in all real estate transaction, every short sale transaction is different.  The pitfalls to watch out and plan for are different for each deal.  Certain facts have to be determined at the beginning to set the proper expectations with the sellers and the eventual buyers and their agent.  These facts include, the number of mortgages and or liens on the proper, the lenders involved, is the house in foreclosure and is there a date set yet, have the sellers declared bankruptcy or are they considering it.  These are just a few of the questions that need to be answered early on.  Just a few minutes on the phone with your negotiator can set your listing on as smooth a path as possible.

Some sellers will be unsure if they want to do a short sale and what it may mean for them.  Another common request is for me to speak with the sellers to answer their questions and explain the process to them.  I have even meet with the agent and the sellers so we can all discuss the options and how to best proceed.

At a minimum, if you have a short sale listing and you receive and offer, this is the latest point at which it is important to contact your chosen negotiator.  If you have waited this long, the negotiator may already be in a more difficult negotiating position than they would like to be.  But either way, before the sellers sign an offer, have your negotiator review it to be sure that the required short sale specific issues have been addressed in the offer.  Issues such as the offer being AS-IS, subject to short sale approval, when the buyers will inspect the property and mortgage contingency and closing dates.

Some of these term, if not addressed properly from the start can delay the process due to changes required by the lender.  We all know that one of the big killers of short sale deals is the time it takes to get an approval.  Anything that can be done to avoid delays will go to minimizing the time involved.

Bottom line is there is absolutely no reason not to call your local short sale professional right from the start, before the listing appointment.  If you know who the lenders are, we may even have the lenders specific short sale documentation on file to forward for your use at your very first face to face appointment with the sellers.

That’s a rap for this week.  See you all here next week for my next Short Sale Tip of The Week.

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As always Visit the Ask The Expert Page to leave your questions or contact me directly if you need immediate assistance at [email protected] or visit www.CTLMS.com

Short Sale Tip of The Week 7-8-09

Posted on 07. Jul, 2009 by ctlms in Short Sale, foreclosure

Common Short Sale Myths and Misconceptions.

This week we will delve into some of the common myths and misconceptions about short sales, properties facing foreclosure, and bankruptcy.

My client has a foreclosure filed against them so there is not enough time to sell the property.

The process in CT usually takes a minimum of 90 days and often well over 6 months, so there is usually plenty of time to help your client.

My commission will be cut and it's not worth the hassle.

It is true that there is always a possibility that the lender will require a reduction in the commission.  Some lenders such as Ocwen always try to reduce the commission.  However loans owned by Fannie Mae cannot be reduced below 6%.  But in a market like we have today, isn't some commission better than none.  And with a professional doing the negotiations there is a better chance of retaining the full commission and limiting the hassle involved for all parties involved.

The seller is just better off doing a deed in lieu or bankruptcy.

A short sale has less of an effect on the sellers credit than any other option including deed in lieu, foreclosure and bankruptcy.  If the seller wants to buy a home at any time in the next 7 years, a short sale is a better option.

The bank will still come after the seller for the deficiency.

If the property gets foreclosed on the bank will almost definitely come after the sellers for the difference and they will already have the authority to attach wages and bank accounts.  In a short sale we have the ability to negotiate the deficiency, hopefully completely eliminated.  Also if the contract has the proper contingency the seller will always have the last say after the negotiations are complete.  If the seller doesn't think the outcome is their best option, they can back out.  However most times a negotiated short IS the best option.

Short sales are to complicated and take to long and aren't worth your time.

If your client knew that was your attitude, do you think they would recommend you to others?  However if you did whatever you could to help them, or at least referred them to agent that was willing to help them, don't you think they would speak highly of you to others?

My client can just declare bankruptcy to keep their home.

It is true that bankruptcy is a option and can help some homeowners keep their homes.  However if the seller cannot afford their house payment then bankruptcy will most likely just delay the inevitable.  Either way that is a decision for the sellers with proper legal advice.

The seller will owe taxes on the forgiven debt.

There are a few exemptions that the seller may qualify for.  HR 3648 provides an exemption if the debt forgiven was purchase money and on a primary residence.  Also an exemption that has always been in the IRS code is the insolvency rule.  Put simply, if the sellers debts exceed their assets, the IRS considers them insolvent and they may be able to exempt the forgiven debt from their taxable income.  Obviously the sellers will need to consult a CPA for tax advice specific to their situation.

These are some of the most common myths and misconceptions regarding short sales.

That's a rap for this week.  See you all here next week for my next Short Sale Tip of The Week.

Subscribe to this blog via RSS for instant updates.

As always Visit the Ask The Expert Page to leave your questions or contact me directly if you need immediate assistance at [email protected] or visitwww.CTLMS.com

Short Sale Tip of The Week 7-1-09

Posted on 30. Jun, 2009 by ctlms in Short Sale, foreclosure

Why the BPO is the most important part of a short sale!

So you have had a short sale listing for a while and you finally have an offer.  The offer has been accepted by the sellers and all the required documents have been gathered from them.  You, or your professional negotiator, have created the estimated HUD-1.  The short sale package been professionally assembled with a well thought out offer sheet and other additional documents included.  And it has all been faxed to the proper location at the lender(s).  Now you just sit back and wait for the acceptance....Right?

Wrong!

The next step for the Real Estate agent is the crucial BPO.  The banks evaluation of the current value of the property.

A BPO is a Brokers Price Opinion.  Similar to a CMA but more detailed and more closely resembles an Appraisal.  As a matter of fact Government loans such as FHA and VA will order an actual appraisal.  But most lenders are cheap and order a BPO for about $150.

The problem with BPOs is that they are often done by real estate agents from outside the area.  Also the bank sets the required guidelines for the BPO and they can be unrealistically restrictive.  Such as requiring the value of the property to fall within the range of the comps used.  Which would mean if the comps ranged from $150,000 to $165,000 the value would need to come in within that range, even if the roof was missing or there were other issues that would reduce the value of the property.

Also BPO agents are paid very little to do these valuations and cannot justify spending much time on them.  That is where your work comes into play.

You should always meet the BPO agent at the property. Do not just give them the lock box code and let them go on their own.  Meet them with a copy of the offer, any and all comps that justify that offer, a list of needed repairs and any market statistics that demonstrate the current market conditions.  Also print out the listing history showing all the price drops and any showing feedback that stated the property was in bad condition or the price was too high.

In todays declining market, a BPO that uses 6 month old comps will certainly come in higher than the offer.  Showing the agent market stats, for instance,  that show a 5% drop in the last 6 months will help to avoid that.  Plus if they like your comps, they may use them rather than search out their own.

There is nothing more important though, than rapport.  If the BPO agent likes you, they are more likely to do what they can to help you get what you need.   Telling them the plight of the homeowner in distress can't hurt either.  Also be sure they see any defects in the property and preferably take a photo of it.

Lastly, always ask the BPO agent if they think the BPO will come in around the offer.  If we know what the BPO is, we can estimate what the bank will want to net from the offer.  Then a day or so later, call the agent up and ask if they have everything they need for the BPO or have any questions.  Then ask what the BPO came in at.

This brings us to why the BPO is so important.  All the investors behind loans, such as FHA, VA Fannie Mae, Freddie Mac, etc, have discounting guidelines.  These guidelines determine what the bank will want to net as a percentage of the BPO.  That's right, the BPO is what is important at this point, not the amount owed.  For instance VA will accept 88 percent of the BPO as the net to them from an offer.  If the closing cost are say 7% of the offer, that leave 5% to play with.  So as long as the offer is not less than 5% below the BPO the offer would fall within the guidelines and most likely be accepted as-is with little negotiation.  If it were lower than that, or the BPO came in higher than it should, it drastically reduces the likelihood of a successful short sale approval.

So the big take away here is, do not underestimate the importance of the BPO.  It is crucial and requires your utmost attention and due diligence to avoid an unrealistically high BPO that will surely kill your deal.  As we all know, a dead deal pays no commissions.

That's a rap for this week.  See you all here next week for my next Short Sale Tip of The Week.

Subscribe to this blog via RSS for instant updates.

As always Visit the Ask The Expert Page to leave your questions or contact me directly if you need immediate assistance at [email protected] or visitwww.CTLMS.com