Short Sale Excel Spreadsheet

I found this a few months back and while it is not perfect for today's short sale environment it is still pretty cool and with some minor tweaks you will find the cover letters alone a nice resource.

For $97, well worth the cover letter alone and really all I used this for initially it is pretty cool. You enter some data about your short sale on the 'Input' page and it populates the data into other cover letters, etcetera in the excel workbook. For obvious reasons the owner has password protected the file. At times I find I need to edit the letter(s) and there is a way to do that to.

First if you are interested you can view his YouTube sale video and then purchase this for yourself. Just go to ShortSaleDemo.com

If you find like I do that you need to edit/tweak the letters after they are created just print the file to a PDF file and then use NitroPDF to edit the PDF file directly. If you need NitroPDF it's about $80-100 depending on where you get it. Try buying NitroPDF here.

Sample Approval Letters

Here are a few links to some sample short sale approval letters we've had. They might make interesting reading you haven't seen any before. If you have seen a few of these then it's all old school.

Make certain you read and re-read the approval letters when they come in to you. Are they removing the Lien AND the debt or just the lien? Is the date they have on the letter the latest date they will allow for closing or is it in fact the date they want the money into their hands? That last one could really cause a problem if you are not keeping a close eye on things. Check out some of these sample letters and get a feel for what might be coming your way.

It would be important to note at this point that most of the banks will not change the general text/wording of their letters. The response I hear often is 'The lawyers have reviewed and approved this wording and we are not allow to add to or take away from it'.

Sample Short Sale Approval Letters
BB& T Sample	Bank of America Sample	Countrywide Sample
HSBC Sample	National City Bank Sample	Saxon Mortgage Services Sample

Buyer Agents, Interviewing the Listing Agent

There was a time when you could easily avoid short sales and in some areas you still can. But what do you do when the home your buyer really wants is a short sale? Or they've written on and lost multiple offers on REO properties? Short sales are a great opportunity for your buyer if they have some time. Typically there is not a lot of competition and very often the home shows better then the competing REO. So what questions should a buyer agent ask the listing agent?

Before writing an offer you really need to get a feel for the competence of the listing agent to get this sale to close.

Property specific questions:
-How many loans are there?
-If two, are they with the same or different lenders?
-If two is the second one a HELOC? HELOCs fight much harder to get a bigger chunk back, often 20%. That 20% can be a deal breaker at times if your listing agent is a poor negotiator and the 1st lender doesn't want to provide it to the 2nd.
-Has this agent closed any previous short sales with the bank(s) in question?
-Have any other offers been received that may have started the process already? Remember many banks will not start the short sale negotiation until an offer to purchase is in hand.
-How far behind are they with their payments? You will need to be familiar with your states foreclosure process and laws to better understand how their timeline may
-Has the NOD (Notice of Default) been filed yet?
-If they are 3 or more months behind with an NOD has the bank agreed or implied they will hold off the foreclosure if an offer is received? Many agents won't have this answer initially but if they call to the bank they can get a feel for it.

Agent Specific Questions:
-Have they closed previous short sales?
-If yes, what is their closing rate/percentage? How many have they put under contract and how many of those have gone to closing?
-Do they negotiate their own deals or use a third party negotiator? I have mixed feeling on using a third party but either way you want to know who is negotiating it.
-If you have experience and wish to ask if they would allow you to negotiate the deal.
-How successful are they are at keeping your full commission as listed in the MLS?
-How often will they update you?
-What is their follow up frequency with the bank? If they tell you they submit and wait to hear back when the bank is done pass on this one.
-Do they place the home 'Under Contract' in the MLS or leave it active to generate additional offers? This may vary between markets but in ours the buyer and seller are ratified when they sign off on the deal. And based on that the home comes off of the market. The banks approving the deal is only a contingency. I know if I were the buyer agent I would not want my buyer writing on a home that the seller will still be shopping for offers on.
-Hell, why not ask them for the most recent buyer agents they have closed short sales with and call them for some feedback.
-If they receive multiple offers do they send them all to the bank or just one? Again consult YOUR broker but I know when I speak with negotiators from the banks about this they laugh. They say when multiple offers come over they often know the Realtor has no idea what they are doing. The statement I heard was 'It's not also my job to pick the offer. That's what the Seller and Realtor are supposed to be doing.' One negotiator stated when she gets multiple offers she pushes that file to the side and to the bottom. She said she also knows from experience that agent will most likely give up all of the commission to get the deal to close. So I say again, check with your broker about how there should be handled in your area.

I know this is a huge list of questions. You may not need to ask them all but make certain you have the comfort that this listing agent has a handle on the process and can help get this to close.

Mortgage Debt Relief Act

Quiet down out there! Just typing the title to this post I could almost hear the clamoring of questions. What the heck is it? How does this apply to my seller? Why is reading through the bail out documentation almost easier to understand? I won't bother to try and say it better. I'm going to direct you right to the source on this one.

For the best details jump on over the the IRS web site. The page is located at http://www.irs.gov/individuals/article/0,,id=179414,00.html and has links to forms and publications to help clear up any questions you might have.

Remember to send your clients to a CPA with questions. If they plan on using the 'tax professional' sitting in their local Giant Supermarket they will end up with some bad information but some really great fruit! :)

How to Influence the BPO Value

The critical nature of the BPO and its value to the success of your short sale cannot be overlooked. The BPO can make or break your deal. Knowing this we need to do what we can to 'help' that value come within a range acceptable for your short sale to be approved. This all asumes that you priced the home reasonably to start.

What I am going to suggest is not unethical or improper by any means. In my humble opinion it all falls under your fiduciary responsibilities to your client, the owner of the home (not the bank).

Any short sale offer you send over should contain a one page document signed by your owner giving signed permission for the Interior BPO AND noting you as the interior contact to gain access. If you don't have one of these already just take a standard 3rd Party Authorization form that you used to allow the bank to speak with you about your client's loan. Edit that to be your new 'Interior BPO Access' form.

When you get the call from the BPO agent be there when they arrive for the Interior BPO. Bring your comparables that support your price, if repairs are needed then bring quotes and information on those repairs. Detail anything you might feel would help the agent. Remember to be polite and almost casual about it all. You know 'oh, I forgot but I gathered a copy of the comparables we used when taking the current offer, I thought they might be helpful to you'. Some agents may be offended and ignore your offering. But many will be thankful for the details hopefully bring the BPO value in range of where you need it to be.

Many of us have done hundreds if not thousands of BPOs ourselves in the last year alone. Bring this knowledge into play when thinking about the BPO value. Knowing the systems these companies use and the software we are aware that many of these systems throw out warning messages when the final suggested value is not in range with the current active list price for the subject property. Knowing this our standard practice after ratifying an offer is we change the list price in the MLS to be slightly under our contract price. We also know that many agents are just cranking out these BPOs and it's their main form of income. Often when the error message pops up too many won't go back to find new comparables. Often the easiest thing for them to due is adjust their final BPO values they entered to fall in line with the list price. So if your offer price is below your list price by anything significant this can be a big problem for you. So after we have an offer and if it is below our list price we adjust the price in the MLS to match or be slightly lower than the offer price.

Caution, due this properly and in writing. I always bring a Listing Addendum with me to every short sale contract signing. I will have them sign this BEFORE the contract. If ever asked I can state comfortably that we changed the price prior to ratifying the offer.

As always check your local regulations and speak with your broker about this practice. Remember my Disclaimer. :)

What's the Magic Number When it Comes to the BPOs

There is a lot to consider related to the BPO (Broker Price Opinion) and how it can slow your deal, get your deal approved or send you crying to your mother because it ruins your deal. One of the most confusing parts of the BPO dance is how your offer price and the BPO compare to each other.

What value of the BPO can my offer be to still get an approval from the lender? This depends on a lot of factors but in general if your offer is at least 90% of the BPO value it should get approved without problems.

Did I read that right because I had deals at that value range that were denied? Remember one very important thing about negotiating, okay two. First know who you are negotiating with and what their real ability is to approve your deal. But most important is to remember when negotiating 'NO' just means you didn't ask for what you wanted the right way or to the right person.

So how do I change that 'NO' to a 'Hell Yes'? Escalate your offer to a higher power. Do it professionally, politely and detail your numbers. What is often most important is 1) What is the value of the home (BPO $), 2) What is the Offer Price, 3) What is the amount owed on the loan to the bank and 4) What are they getting from this offer?

How do should I escalate my offer? Check back soon for my post on Escalating your Short Sale offer. Once it is here you'll see 'Escalation' in the Topic Search at the top-left of the page.

The Lender Sent a Letter to My Client!

Often during negotiations the issue of commissions comes up. Far too many Realtors fold under the pressure. Why would you allow the bank to keep your money when you are working so hard? I've heard of agents standing up to the lender on commissions only to have the lender send a denial letter to their clients claiming it was denied due to the Realtor not reducing their commission.

We'll talk later about us all getting in a bus and driving to this loss mitigator's office but for now let's talk about this potential event. I suggest, as I did in another post, that if you hit a sticking point on commission that you get everything else in the offer approved. From here you can try a few different approaches.

The first option happens after the loss mitigator approves everything except your commission. At this point and prior to the approval lender being sent out you could ask for a supervisor and plead your case. I have had success with this approach on many occasions. Speaking with the supervisor/senior loss mitigator I'll explain that our team being involved increased the banks bottom line by much more than the 1 or 2% they are trying to capture from me. I detail our experience and the fact that if another Realtor had sold this they would have lost much more to their bottom line. You could add details that fit your situation and beliefs for your value to the transaction. But believe it or not this works very often.

The second option. I did this only once and it worked very well but has not been done enough to say it is a sure fire plan. First always set your seller's expectations that they should be trying to save some money in case it is needed to fully satisfy the lender's approval requirements. That would also encompass a shortage in commissions. But knowing the bank might try some dirty little approach like this let your seller know that if the bank does challenge the total commissions that either the seller can pay the difference or you can play hardball with the bank.

If your seller's know the game plan and options then great. If a loss mitigator suggests they will send a letter to your seller tell them you understand. Explain that you have educated your seller on the potential outcome and that in fact, you would like the loss mitigator to send you the letter first and you will even sign it to acknowledge the letter prior to it going to your seller. This completely caught her off guard and turned things around right away. Initially she stated some money is better than none. I responded as you might guess stating that was not in fact true. As a professional I understand at times it is important to cut my losses. I explained while I would hate to see my seller void the offer due to this issue if they do not have the money to pay me and you will not then unfortunately it may fail and go to foreclosure. We got off of the phone, she called back in two hours with a full approval.

Now talk with your broker about this last approach and if this causes any potential fiduciary issues on your end. By setting all of my seller's expectations and knowing what they were comfortable with (AND having them sign off on that) I felt very comfortable with this approach.

For another option read the article 'What Happened to My Commission Check?'

By the way, if they deny it and send a letter like this to your seller, I would suggest you escalate the short sale immediately. The fact remains that the bank wants the most money and if your offer is close to Fair Market Value and will truly net the bank more than a foreclosure a senior loss mitigator will see this and get the approval done.

Tagging All of Your Documents

The smartest thing you can do prior to submitting your short sale package is to tag every page with the loan number, owners name(s) and property address. But who wants to hand write this on 100+ pages? Don't worry there is an easier way. For about $100 you can purchase
Nitro PDF Professional.
This program is great and for the money it is the best thing out there. You could buy this or buy Adobe Professional for about 6-times the price.

This software let's you insert, delete, reorganize and even edit your PDF files. Better yet it allows you to insert header/footer text. We use this feature to insert the Loan Number, Owner Name(s) and Property Address into each and every page in about 1 minute. For reference we insert ours as a footer that is .2 from the bottom and .15 from the left. We find this location is typically free of other type allowing for a clean insert that is easy to read.

Good luck!

Your Stacking Order Matters

When putting your offer together it is very important that you put a clean and detailed package together. This includes a good cover letter, a defined stacking order for your documents as well as properly tagging each and every sheet in your package with the Loan Number, Owner Name(s) and Property Address. Of course you need to have ALL of the required documents as well. Don't even think of sending most of the documents with a note that the 'others' will follow later.

I suggest creating one of your cover letters to define the stacking order you used when sending over your package. This will make it much easier for the loss mitigation person to locate what they need quickly.

Here is a sample order you may wish to follow.

• Fax Cover Letter
• A copy of this Stacking Order Printed onto One Page for Reference.

Borrower’s Financials

• Client Information Summary Page
• Hardship Letter
• Financial Statement
• Copies of last 2 months Pay Stubs or letter of explanation
• Copies of last 2 months Bank Statement or letter of explanation>
• Copies of last 2 Year Federal Tax Returns or letter of explanation
• Authorization & Release Form

Property Information

• CMA or BPO - Create your own to send along with the initial package.
• Cost of Repairs (if needed)
• Residential listing agreement
• HUD-1
• Purchase Agreement
• MLS Listing

As I mentioned prior I suggest faxing the package and if you don't wish to shell out hundreds of dollars for Adobe Professional check out
Nitro PDF Professional it's what we use currently and it's affordable and easy to use. But make sure you read through the manual a bit because it does a lot more than you might be aware of initially.

Simplify Your Short Sale Faxing!

This is a short post on getting your offers over to the banks. Often the short sale package can have more pages than you are able to fax comfortably using a standard fax machine. Some of our recent packages have had 150+ pages. We have been using an efax service with great success.

Simplify Your Short Sale Faxing. The reason we like this is it lets us send it over and more often than not it goes over the first time. Imagine sending these pages through your company fax or home fax. You would have to stay and monitor the fax while it went through and it could take up to an hour. If it is also your office/home line then forget that option all together.

A couple of quick suggestions when faxing. Always call the fax number just prior to faxing and make certain the line picks up. Many of the efax services will charge you for large, failed faxes due to the amount of resources used to continually re-send the fax. The second suggestion due to how busy the short sale departments are is to try and fax during off hours so you can get through easier.

Currently we use MetroFax because of the cost and fee structure. It is the best one out there that we could find and has been very reliable. Check them out at MetroFax.com

Tax Implications and IRS Form 982

I am not a tax expert so what follows below is only for informational purposes and should be used as a starting point to further investigate the potential tax savings involved. It is absolutely worth your seller's time and money to consult with an expert in these matters as it could save them thousands of dollars.

Is there a way to avoid paying that tax? Possibly. IRS form 982 says, “Generally, the amount by which you benefit from the discharge of indebtedness is included in your gross income. However, under certain circumstances described in section 108, you may exclude the amount of discharged indebtedness from your gross income”. The specific instructions are contained in section 108 of the Internal Revenue Code.

One of the “circumstances” they are referring to is that if you are insolvent before you conduct a short sale then you may be able to “exclude” the forgiven indebtedness (the amount the lender forgave on the loan) from being added to your gross income for that year. Here are some questions you will need to ask an expert:

• Can I avoid paying taxes on the forgiven debt if I was insolvent at the time of the short sale?
• Do I have to file bankruptcy to be considered insolvent?
• If you already used a short sale and paid taxes can you file an amended return and get a refund?
• Does your real estate agent understand any of this?
• Do you have to surrender your property in bankruptcy to be eligible for relief?
• Does a form 982 have to be filed in order to be eligible for tax relief?

These are just a few of the questions that should be asked. But, it may very well be worth it. You can find Form 982 on the IRS web site located at www.irs.gov/pub/irs-pdf/f982.pdf

Tax Implications of Doing a Short Sale

Okay first remember my Disclaimer then read on. :)

IRS IMPLICATIONS OF DOING A SHORT SALE
Many homeowners do not realize that they may be in store for a large tax bill from the IRS after the short sale of their home. Every situation is different and you should absolutely have them contact an accountant or tax advisor before conducting a short sale to determine their potential liability.

After the sale of their home any deficiency, any amount the bank is short, they will have to write-off on their end. To do that properly they will submit a 1099-C to the seller for the balance owed that they were unable to pay back. The IRS may look at this as additional taxable income.

What are the odds that they will have that kind of money laying around after just going through a short sale on their home? Sellers should be very careful regarding the tax obligations BEFORE considering a short sale, deed-in-lieu-of-foreclosure or foreclosure.

The IRS will use the tax basis on their property to determine their tax obligations so you might want to be able to figure this amount out.

See our article on IRS Form 982. The form is used to request a "reduction in tax attributes" due to insolvency. This may allow them to avoid having to pay taxes on the debt relief they experienced doing the short sale. Definitely worth talking to a tax attorney or accountant about!

Hardship Letter Guidelines

The hardship letter is important but don't get too caught up on this. Hardship may be as simple as a divorce to as complicated as you might be able to imagine. I do suggest the letter be handwritten and legible. It MUST be signed by all parties on the loan and experiencing the hardship.

Hardship Letter Guidelines
Remember to state the following items in a HANDWRITTEN hardship letter:

Hardships – What are the hardships (current and past). For example – unemployed, car accident, medical problems (personal or family), etc. Have the seller go into a little detail about each hardship. The following are the most important messages to get across to the Lender:

• Why they will not be able to be current again on the loan.
• That there is not enough income to make these payments.
• Think Cause and Effect here.

Your Assets – Explain that there are no assets with which to continue paying. "

Any signed exemptions of documents – If they do not have bank statements, pay stubs or tax returns, they will need to explain the reason in more detail in their letter as to “why” they can not provide those documents. (i.e. They’ve been unemployed for 6 months and have not been able to find work)

Note- realize that if you don’t have tax returns, then the bank will ask for Extension-Fillings. So, if they don’t have Extension-Fillings either, explain why in this letter. (i.e. “I haven’t worked in over 2 years and so I haven’t filed taxes nor extensions”, or “I haven’t filed my tax returns for the past 2 years and I failed to file extensions as well).

Bankruptcy – They could also mention “I don’t want to have to file bankruptcy”.

Sample Hardship Letter - Should be about 1 page, no need for 2 or 3 but do not have them submit a short 'note' about their hardship.

[*Remember, the SELLER must write their own Hardship Letter to the Lender(s) and preferably handwritten]

To Whom It May Concern:

I have been unable to make my payments on my house, and I am now facing foreclosure. My inability to keep up with the monthly payments is the result of (loss of job, illness, accident, death or disability of a wage earner – describe in detail what the hardship is)

In spite of my current financial difficulties, I expect that it will only get (better / worse). I am not in a position to continue making my mortgage payments. This was not at all what I intended but I have come to the conclusion that this is my only option.

Your help and consideration in this matter are very much appreciated.
{Signature} {Date}
{Printed Name}