Loss Mit Services

The Real Short Sale Tip of The Week 5-27-09

Posted on 26. May, 2009 by ctlms in Short Sale, foreclosure

Facing Foreclosure?

Short Sale or Bankruptcy, which fits your client?

Obviously as a real estate agent a short sale is better for your bottom line, but is it best for your client?  Well a lot of times, YES.

Let’s look at the options:

Bankruptcy

Bankruptcy can take 2 routes, Chapter 13 and Chapter 7. 

Chapter 13 is the reorganization of debt.  In most cases the bankruptcy trustee will divide all the debtors missed payments on all accounts by up to 60 months to create a monthly payment for the debtor.  That payment must be made on top of the minimum monthly payments for all accounts plus a 10% premium to the bankruptcy trustee.  So as you can see Ch 13 bankruptcies rarely succeed.  Actually barely more than 10% succeed.  If the debtor couldn’t make their original payments it is unlikely they can make those payments plus a bankruptcy payment plus 10%.

Chapter 7 is a liquidation of assets and debts.  If a homeowner has unsecured debts such as personal loans and credit cards that if eliminated would free up enough money to pay for their home, it is possible to eliminate those debts in Ch 7 and keep the home.   But this is not the norm.  Also if the mortgage debt is eliminated in the bankruptcy, the bank will still need to foreclose on the property to take it back and liquidate it to recover as much money as possible.  So now the homeowner has a Bankruptcy and a Foreclosure on their credit.  Bankruptcies are often used to buy more time for the homeowner but have long reaching consequences that are rarely worth the few months extra.

Now if the home and its mortgage debt are the major financial hurtle that the homeowner faces, then selling it, even in a short sale, is far better than a bankruptcy or foreclosure.  It is true that a short sale will negatively affect their credit but not for nearly as long as a bankruptcy or foreclosure.  If the homeowner is facing foreclosure then their credit has already been damaged.  The only decision at this point is how bad is it going to get.  Bankruptcy can affect their credit for up to 10 years and foreclosure for up to 7 years.  A short sale will cause a point drop on the credit report.  But it is not a stigmatism that is attached to the credit report for years to come.  It is a sudden drop in score.  Then the seller can begin to rebuild their score right away.  Most short sales are reported as “settled for less than full payoff” on the credit report for that one account.  Bankruptcy and Foreclosure show up as entries in the public record section all by themselves.

Obviously neither you nor I can profess to be experts in Bankruptcy, only bankruptcy attorneys can claim that.  Notice is said “claim” that.  Unfortunately it is all too common to see a homeowner go to a bankruptcy attorney for advice and be told to file bankruptcy.  There are some attorneys who would never advice against it; it’s their business to file bankruptcies. 

I always ask two simple questions to a homeowner that is considering bankruptcy.

1. Is your mortgage payment too high or are there other bills that are preventing you from affording your mortgage?
2. If you no longer had your mortgage payments would you still be considering bankruptcy or could you afford your other bills and a reasonable rent?

These questions will put the homeowner on the right path to determining for themselves what they should do.

On final note; 

If you have a closing coming up and the seller files bankruptcy you are dead in the water until either that bankruptcy is dismissed discharged or the property is removed either by the trustee or a release from the automatic stay.  Always know what your clients are thinking.  You don’t want that to pop up on you at the last minute.

See you all next week.

Enjoy, and as always Visit the Ask The Expert Page to leave your questions.

Short Sale Tip of The Week 5-27-09 "Early"

Posted on 20. May, 2009 by ctlms in Short Sale, foreclosure

What to focus on when working with a seller in foreclosure

As you begin working with a seller that is in foreclosure, the most important thing that anyone must concentrate on is filling the seller’s NEEDS! Times are a lot different than they were a year and a half ago, and now sellers in foreclosure don’t care who you are or how many properties you’ve sold, listed, etc. They only care about what you can do for them NOW! You have to understand that every seller has different needs; whether it is finding an apartment in a certain school district so their kids can go to school with their friends, finding a rental house that takes pets, or just relocating to a different state. Your job as a real estate professional is to identify that right up front!

 Now don’t get this confused with what a seller in foreclosure WANTS! Wants are totally different then needs. Wants are things that these sellers do not need in order to live, they are things they desire to have. For example: if a seller is married and has 1 child and requests a 4 bedroom house to move into, that is a want! They can live perfectly fine in a 2 or 3 bedroom house. Your job will be to let them know immediately that if you are going help them then they will have to be practical on what their needs are so you can “realistically” fill those needs.

A great tip to keep in mind: When you are looking at different ways to fill their needs, make sure you know the basics of the foreclosure laws and time-lines in your state. Reason being is that if a seller wants to sell a property in a “short” state (a state whose foreclosure process is less than 60 days), then you will have to know how much time you have to work with (you can go to www.CTLMS.com for foreclosure laws and time-lines for your state).  After you understand the foreclosure time-lines and laws of your state then you can proceed in filling your seller’s needs.

And so with that, make sure that your seller’s needs are your number one priority! If they aren’t, not only will the seller recognize that immediately, but you’ll lose them in the blink of an eye!

Visit the Ask The Expert Page to leave your questions. 

Short Sale Tip of The Week 5-20-09

Posted on 19. May, 2009 by ctlms in Short Sale, foreclosure

The #1 Factor to Successfully Completing a Real Estate Short Sale.

One of the most important factors of completing a short sale successfully is Managing Seller and Buyer Expectations. What I mean by that is you need to immediately let them know how long the short sale process can take, that there are absolutely no guarantees that your short sale will be successful, and finally that you will keep them updated on the process throughout the short sale negotiation. It is crucial to be transparent and let them know what you can and can’t do for them.  This is extremely important on so many levels! It not only aids in building rapport with the seller, but it is also necessary when setting accurate expectations so if the short sale is unsuccessful for whatever reason, your seller and buyer understands why.

As a real estate agent your goal is to list their property and get the highest and best offer that the market will bear, given the time restraints of the sellers situation, so let them know that. Let them know the good and the bad. Make sure you know the state’s foreclosure laws and time-line, how long the short sale process can take, and finally the potential of their property being taken back by the foreclosing lender if you can’t find a buyer or the bank doesn’t accept the short sale offer.

In addition to being explicitly clear on what you are looking to do with regards to their property, you’ll also need to explain what they can expect once you start working on their property.  Explain the entire process of a short sale and what they can expect if there is one lender, or two, or more.  For example: When I am working on a short sale my typical short sale takes between 2 to 4 months, sometimes longer depending on the foreclosing lender. So when you meet with the seller tell them right up front the typical time it will take from the day an offer comes in to when the package is submitted to the time the property closes. Also let them know that there are no guarantees the foreclosing lender(s) will accept the offer and finally, manage their expectation by giving them access to our online short sale management tool (www.CTLMS.com), which gives them real time updates on the short sale negotiations.  This one tool alone greatly reduces the sellers anxiety and gives the piece of mind of knowing that there are prople on thier side working diligently for them

The most important factor in successfully negotiating a short sale is managing seller and buyer expectations. Always keep in mind that your sellers are turning to you to get their properties sold and they do not need any other added stress in their lives. The best thing you can do is be transparent, tell them the good and the bad, and finally keep them updated on your progress

Visit the Ask The Expert Page to leave your questions.