Short sales that are FHA insured. If you have not had one yet you will soon. These are handled a bit differently and I feel the process has been a good one over all. There is a system in place and it must be followed.
A few highlights . . .
- There are required documents, use them (see links below).
Submission of Form HUD-90036 and the subsequent approval supplied on form HUD-90045 are required prior to listing the home for sale. Form HUD-90036 is completed and signed by the seller and submitted to HUD through the lender servicing the loan.
- For the first 30 days of marketing, mortgagees may only approve offers that will result in a minimum net sale proceeds of 88% of the "as-is" appraised Fair Market Value (FMV).
- During the next 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 86% of the "as-is" appraised FMV.
- For the duration of the marketing period (60 days), mortgagees may only approve offers that will result in minimum net sale proceeds of 84% of the "as-is" appraised FMV.
-HUD will not allow a buyer to inflate the purchase price to cover seller concessions requested.
- $1000 potential seller gift if they contract and close within 90-days of listing.
HUD's Information Page oh FHA Short Sales (PFS - Pre-Foreclosures Sales)
http://www.hud.gov/offices/hsg/sfh/nsc/faqpfs.cfm
HUD Forms
Mortgagee Letter 2008-43 (MS Word doc file)
Hud 90035 Information Sheet
Hud 90036 Application to Participate
Hud 90038 Homeownership Counseling
Hud 90041 Request for Variance
Hud 90045 Approval to Participate
Hud 90051 Sales Contract Review
Hud 90052 Closing Worksheet
And an FYI - All HUD Forms are listed and can be downloaded here!
Overall they system is defined and workable. I like it because the lender MUST follow the HUD requirements and that reduces some of the bulls@#t that some of them seem to like to stir up sometimes.
Showing posts with label Listing Short Sales. Show all posts
Showing posts with label Listing Short Sales. Show all posts
Thursday, April 2, 2009
FHA Short Sales
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Sunday, March 8, 2009
So Who is My Client? The Bank or Home Owner?
For many of us we know the answer to the question who is our client during a short sale. But honestly it is a good question to answer for those who have not stopped to ask the same question.
Simply put the home owner and not the bank is your client during a short sale listing. All things being equal the only difference is the need to get the banks approval for the agreed sales price. Will they accept a lower payoff to release the lien? You will most likely see this noted in other posts but remember this as you stay tuned into your fiduciary responsibilities.
Simply put the home owner and not the bank is your client during a short sale listing. All things being equal the only difference is the need to get the banks approval for the agreed sales price. Will they accept a lower payoff to release the lien? You will most likely see this noted in other posts but remember this as you stay tuned into your fiduciary responsibilities.
Read more!
Sunday, March 1, 2009
But the Bank Told Me . . .
The bank negotiators job is to make certain the short sale offer fits their general guidelines for acceptance AND to get as much money as possible for the bank. Just as you are setting expectations for your seller and the buyer agent in your transaction the Bank Negotiator has some tactics as well.
Whether it is at the start of one of your submissions or during it you might hear a negotiator tell you something like 'and remember we won't accept short sales with over X% commission'. They might make a statement about the seller needing to pay 'X-dollars' for the short sale to be reviewed. Don't waiver from your path, send the offer over as you have it without the seller bringing money and without reducing your commission to match their "requirement". If they contact you after stating you need to make changes to the offer to match those requirements I strongly suggest that you do what you can do to get it reviewed as is. Use your negotiating skills and if needed escalate the offer to someone else.
If your offer is strong enough and close to Fair Market Value (FMV) then there is no solid rationale for the bank not approving your offer. The issue here is YOU believing and understanding this.
I guess what I want you to take from this post is that you work for your seller and not the bank. So don't make the mistake of letting the bank 'tell' you anything that could mean money out of your client's pocket.
Whether it is at the start of one of your submissions or during it you might hear a negotiator tell you something like 'and remember we won't accept short sales with over X% commission'. They might make a statement about the seller needing to pay 'X-dollars' for the short sale to be reviewed. Don't waiver from your path, send the offer over as you have it without the seller bringing money and without reducing your commission to match their "requirement". If they contact you after stating you need to make changes to the offer to match those requirements I strongly suggest that you do what you can do to get it reviewed as is. Use your negotiating skills and if needed escalate the offer to someone else.
If your offer is strong enough and close to Fair Market Value (FMV) then there is no solid rationale for the bank not approving your offer. The issue here is YOU believing and understanding this.
I guess what I want you to take from this post is that you work for your seller and not the bank. So don't make the mistake of letting the bank 'tell' you anything that could mean money out of your client's pocket.
Read more!
Saturday, February 21, 2009
Submitting Authorization Forms versus your Short Sale Package
If you are newer to short sales all of this may seem overwhelming. So I'd like to share some basic information you will need to know when working with short sales. This post talks about fax numbers and knowing the difference between the numbers some banks have.
You will learn quickly that tracking numbers down and getting things to the right locations can be a challenge at the start. You need to know that many, not all, but many banks have separate fax numbers for where you send the authorization form versus where you send the actual short sale package. So knowing this you want to make sure to ask very specific questions to the banks when gathering this information. Ask if the authorization form you need to send in goes to the same number as the short sale package.
Do yourself a favor and make sure to start collecting information on each bank and negotiator you work with. This is a great resource as your business grows.
You will learn quickly that tracking numbers down and getting things to the right locations can be a challenge at the start. You need to know that many, not all, but many banks have separate fax numbers for where you send the authorization form versus where you send the actual short sale package. So knowing this you want to make sure to ask very specific questions to the banks when gathering this information. Ask if the authorization form you need to send in goes to the same number as the short sale package.
Do yourself a favor and make sure to start collecting information on each bank and negotiator you work with. This is a great resource as your business grows.
Read more!
Friday, February 13, 2009
Pricing Your Short Sale to Sell
It will be important to have a good understanding of pricing strategies to be successful with your short sales. The price will need to be competitive with the market to generate an offer but not so low that the bank will say no to the offer during review.
An additional concern your client should have about pricing is that the lower the price is that they accept and do get approved the larger their exposure is on the potential deficiency balance the bank may try to come after later. If on the other hand the bank chooses to write of the debt and 1099 your client then the exposure to the seller would be to potentially a larger total tax implication. So you have quite a balancing act to pay attention to here.
Before I go further remember you along with your seller set the pricing and strategy NOT THE BANK! I've heard agents make comments like 'well the bank told me to price at X-dollars'. Please remember you, not the bank, are the local professional. You, not the bank, are familiar with what is going on in your local market. Your fiduciary responsibilities are with your seller and not the bank(s) needing to approve the final offer.
The rest of this is all just my opinion / experience to date. What works today may not work tomorrow or may not be the best approach for your market so make sure to network with your area Short Sale Realtors and see what's working best.
BPO Value - 90%
From our closings and speaking with Short Sale Realtors across the country the general observation is that if you can get an offer price at 90% of the BPO value that the deal should get approved. That doesn't mean a number under that won't fly but it can be a nice reference point if you are just starting in all of this.
Setting your price
Use your knowledge here. Price to sell not sit on the market. Depending on your seller's situation and foreclosure timeline your approach will be different.
Price Changes
Don't play around here because you need to sell and I would suggest a price adjustment every 2 weeks until you find an offer you can work with. Set a strategy with your seller from the start.
An additional concern your client should have about pricing is that the lower the price is that they accept and do get approved the larger their exposure is on the potential deficiency balance the bank may try to come after later. If on the other hand the bank chooses to write of the debt and 1099 your client then the exposure to the seller would be to potentially a larger total tax implication. So you have quite a balancing act to pay attention to here.
Before I go further remember you along with your seller set the pricing and strategy NOT THE BANK! I've heard agents make comments like 'well the bank told me to price at X-dollars'. Please remember you, not the bank, are the local professional. You, not the bank, are familiar with what is going on in your local market. Your fiduciary responsibilities are with your seller and not the bank(s) needing to approve the final offer.
The rest of this is all just my opinion / experience to date. What works today may not work tomorrow or may not be the best approach for your market so make sure to network with your area Short Sale Realtors and see what's working best.
BPO Value - 90%
From our closings and speaking with Short Sale Realtors across the country the general observation is that if you can get an offer price at 90% of the BPO value that the deal should get approved. That doesn't mean a number under that won't fly but it can be a nice reference point if you are just starting in all of this.
Setting your price
Use your knowledge here. Price to sell not sit on the market. Depending on your seller's situation and foreclosure timeline your approach will be different.
Price Changes
Don't play around here because you need to sell and I would suggest a price adjustment every 2 weeks until you find an offer you can work with. Set a strategy with your seller from the start.
Read more!
Thursday, January 1, 2009
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:
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}
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Sunday, December 28, 2008
Setting Expectations
The key for success when listing short sales is 'Setting Expectations"! This goes for everyone involved. At the start it begins with setting your client's expectations. Once you have an offer it continues with setting the expectations for the buyer agent and buyer. If you neglect to get their expectations in line at the start you are going to have problems for sure.
Setting the Seller's Expectations
After you have interviewed the sellers and if they qualify for a short sale set them at ease first. Remember they are not sleeping at night, they wake up in a panic, often they have stopped checking their mail and answering their phone. Some that we have interviewed were afraid they would return home one day and all of their belongings will be in the street. Here is where you step up as their Realtor and let them know you are here to help. Tell them the first thing you want them to do tonight is to have a good nights sleep. Assure them you know what you are doing and while there are no guarantees that they are in good hands.
Have them commit to opening all mail and communicating with you. Explain the foreclosure process for your state. For a list of foreclosure laws and procedures by state click this link. Once you know how late they are you can fit that into your states procedures and let them know where they are today and how that effects their short sale timeline.
If they no longer wish to speak with the bank that is their right. Have them sign a document stating that and that they wish the bank to direct all phone calls to you. Send this to the bank with your 3rd party authorization form.
Explain the time involved. Typically 3 months to close after ratifying a contract on a home with one loan. It could take up to 4 months for a home having 2 loans with different lenders.
As you gain more knowledge and experience you wil come up with some of your own details to cover in order to properly set their expectations. I would suggest putting everything in writing so it can be reviewed and signed off on by the sellers.
Setting the Buyer Agent and Buyer's Expectations
This is a big one. When you are speaking with a buyer agent they are listening closely to you and trying to assess your ability to get this sale to closing. Just like you they don't want to go through a 3-4 month ordeal to end up with no sale. Tell them how often you will update them and know that it is not acceptable to only update them every 3 or 4 weeks. I suggest a weekly update via email if acceptable to them. I know it seems silly to update them only to say you have no new updates but the buyer agent is sitting blind and these light touches via email or phone will keep them confident and they can do the same for their buyer. As you handle more listings you may wish to work a better system to manage your time if you do not have an assistant. Possibly a web site or page where you update the status for the agents to check on directly.
Ask the buyer agent in a respectful manner if they have written on any short sales? Find out what expectations they have set for their buyers. Our local contract has a short sale addendum allowing for all parties to agree how long the buyer will wait for the bank to send a written approval. I suggest all parties agree to at lease 3 months to be safe. If the buyer only wants 1 month I would suggest they are not motivated enough to stay with the sale and you might want to consider your options. For example, if they will only wait 1 month but you want to use this contract as a vehicle to start the process with the banks then go forward. I would also suggest in this case that all parties agree to keep the home ACTIVE for sale. Consult your broker with how to do this. In my area we would just add an addendum to the contract to cover this.
If you set every ones expectations from the start and manage them along the way it gives you more time to work on the negotiations and get to close quicker.
Setting the Seller's Expectations
After you have interviewed the sellers and if they qualify for a short sale set them at ease first. Remember they are not sleeping at night, they wake up in a panic, often they have stopped checking their mail and answering their phone. Some that we have interviewed were afraid they would return home one day and all of their belongings will be in the street. Here is where you step up as their Realtor and let them know you are here to help. Tell them the first thing you want them to do tonight is to have a good nights sleep. Assure them you know what you are doing and while there are no guarantees that they are in good hands.
Have them commit to opening all mail and communicating with you. Explain the foreclosure process for your state. For a list of foreclosure laws and procedures by state click this link. Once you know how late they are you can fit that into your states procedures and let them know where they are today and how that effects their short sale timeline.
If they no longer wish to speak with the bank that is their right. Have them sign a document stating that and that they wish the bank to direct all phone calls to you. Send this to the bank with your 3rd party authorization form.
Explain the time involved. Typically 3 months to close after ratifying a contract on a home with one loan. It could take up to 4 months for a home having 2 loans with different lenders.
As you gain more knowledge and experience you wil come up with some of your own details to cover in order to properly set their expectations. I would suggest putting everything in writing so it can be reviewed and signed off on by the sellers.
Setting the Buyer Agent and Buyer's Expectations
This is a big one. When you are speaking with a buyer agent they are listening closely to you and trying to assess your ability to get this sale to closing. Just like you they don't want to go through a 3-4 month ordeal to end up with no sale. Tell them how often you will update them and know that it is not acceptable to only update them every 3 or 4 weeks. I suggest a weekly update via email if acceptable to them. I know it seems silly to update them only to say you have no new updates but the buyer agent is sitting blind and these light touches via email or phone will keep them confident and they can do the same for their buyer. As you handle more listings you may wish to work a better system to manage your time if you do not have an assistant. Possibly a web site or page where you update the status for the agents to check on directly.
Ask the buyer agent in a respectful manner if they have written on any short sales? Find out what expectations they have set for their buyers. Our local contract has a short sale addendum allowing for all parties to agree how long the buyer will wait for the bank to send a written approval. I suggest all parties agree to at lease 3 months to be safe. If the buyer only wants 1 month I would suggest they are not motivated enough to stay with the sale and you might want to consider your options. For example, if they will only wait 1 month but you want to use this contract as a vehicle to start the process with the banks then go forward. I would also suggest in this case that all parties agree to keep the home ACTIVE for sale. Consult your broker with how to do this. In my area we would just add an addendum to the contract to cover this.
If you set every ones expectations from the start and manage them along the way it gives you more time to work on the negotiations and get to close quicker.
Read more!
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