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.
Thursday, April 2, 2009
FHA Short Sales
Read more!
Tuesday, March 10, 2009
What is a realistic price to the bank? Do they counteroffer?
Typically the banks are looking for a percentage of the BPO value as the realistic price. Fine if the BPO is in line, not so great when you get a bad BPO returned.
As a buyer agent I would think about this especially if the home your buyer is interested in is priced way under market value. If you have an investor that wants to steal a deal as it were and ride it out hoping for positive results then I think that is okay coming in low. But if you have a buyer that would like to occupy and the list price is way off the market value it is best to consider getting the offer in line. I suggest an offer around 92-95% of market value has a better chance of being accepted. The reason is that at a 95% offer and after most concessions and commissions it will bring the NET to the bank in the 86-88% range and that should work well. But even as I post this these numbers a sliding down a bit.
So if your buyer/occupant wants to test the waters with a low offer that is their option. If I were their buyer agent I would like to know they would come up as needed to seal the deal based on any sticking points. After all we are not in the business of writing offers for the mere practice of it.
Often a doesn’t typically counter back the offers on price the way you would think. If the offer is unrealistic they just deny it more often than not. This is another area where the competence of the listing agent or negotiator is important. A decent negotiator/listing agent after getting a ‘no’ will push back trying to get something everyone can work with. At times this might mean escalating the issue past the loss mitigator currently working the file. Too many agents hear ‘No’, ask why to the initial loss mitigator only to hit a wall. They hit the wall because that loss mitigator often has no authority to go beyond the guidelines in front of them. I am seeing this start to change a little now for the better but not across the board yet.
In reference to something like a counter the bank(s) might come back with limitations to the initial offer. For example stating that the most in closing cost fees they will pay is 3%. So if your buyer asked for 3% concessions any additional fees above that the bank is stating they don’t want to pay. This one is scary because if the listing agent doesn’t read that letter correctly and truly understand what they are asking you could go all the way through closing to find out the amount to the bank was wrong based on their paying more than agreed in the approval letter.
Typical counters from the first:
• Commissions (of course)(but don't do it)
• Total closing costs including the seller concession request
• Amount they will give to the 2nd lien, if one exists
• Paying property taxes
• Paying outstanding HOA fees or for resale documents
• Paying recording or other miscellaneous settlement company fees.
Typical counters from the second:
• How much they will accept to release the lien
---Often more than the 1st will pay
• Commissions again
---This one is just stupid to me as is does not affect their bottom line as any reduction in commissions would be paid to the 1st.
In response to these counters the money needed to meet whatever is finally negotiated can come from a few areas
• The buyer
---Increasing the sales price
---Reducing closing cost concession requests
• The seller
---Bringing money to the table to make of the difference
---Selecting to sign a promissory note as needed to appease one or both of the banks. Not typically an attractive options to the seller and sometimes not something the bank might want (strange, I know).
• The Realtors - But hopefully you do not allow this to be an option!
As a buyer agent I would think about this especially if the home your buyer is interested in is priced way under market value. If you have an investor that wants to steal a deal as it were and ride it out hoping for positive results then I think that is okay coming in low. But if you have a buyer that would like to occupy and the list price is way off the market value it is best to consider getting the offer in line. I suggest an offer around 92-95% of market value has a better chance of being accepted. The reason is that at a 95% offer and after most concessions and commissions it will bring the NET to the bank in the 86-88% range and that should work well. But even as I post this these numbers a sliding down a bit.
So if your buyer/occupant wants to test the waters with a low offer that is their option. If I were their buyer agent I would like to know they would come up as needed to seal the deal based on any sticking points. After all we are not in the business of writing offers for the mere practice of it.
Often a doesn’t typically counter back the offers on price the way you would think. If the offer is unrealistic they just deny it more often than not. This is another area where the competence of the listing agent or negotiator is important. A decent negotiator/listing agent after getting a ‘no’ will push back trying to get something everyone can work with. At times this might mean escalating the issue past the loss mitigator currently working the file. Too many agents hear ‘No’, ask why to the initial loss mitigator only to hit a wall. They hit the wall because that loss mitigator often has no authority to go beyond the guidelines in front of them. I am seeing this start to change a little now for the better but not across the board yet.
In reference to something like a counter the bank(s) might come back with limitations to the initial offer. For example stating that the most in closing cost fees they will pay is 3%. So if your buyer asked for 3% concessions any additional fees above that the bank is stating they don’t want to pay. This one is scary because if the listing agent doesn’t read that letter correctly and truly understand what they are asking you could go all the way through closing to find out the amount to the bank was wrong based on their paying more than agreed in the approval letter.
Typical counters from the first:
• Commissions (of course)(but don't do it)
• Total closing costs including the seller concession request
• Amount they will give to the 2nd lien, if one exists
• Paying property taxes
• Paying outstanding HOA fees or for resale documents
• Paying recording or other miscellaneous settlement company fees.
Typical counters from the second:
• How much they will accept to release the lien
---Often more than the 1st will pay
• Commissions again
---This one is just stupid to me as is does not affect their bottom line as any reduction in commissions would be paid to the 1st.
In response to these counters the money needed to meet whatever is finally negotiated can come from a few areas
• The buyer
---Increasing the sales price
---Reducing closing cost concession requests
• The seller
---Bringing money to the table to make of the difference
---Selecting to sign a promissory note as needed to appease one or both of the banks. Not typically an attractive options to the seller and sometimes not something the bank might want (strange, I know).
• The Realtors - But hopefully you do not allow this to be an option!
Read more!
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!
Monday, March 2, 2009
Fannie Mae - No Negotiation of Preforeclosure Sales Commission
Great news shared from our state association today that affects all of us across the U.S. negotiating short sales with Fannie Mae.
Here is the article (abbreviated) sent out to us from VAR (Virginia Association of Realtors). We heard about this 2 weeks ago but seeing it 'in print' as it were is very comforting.
Fannie has now announced that effective March 1, 2009, the approval and closing of short sales will not be conditioned on the willingness of the listing firm to alter its fee arrangement with the borrower, as long as the total commission does not exceed 6%. The official guideline is set out below.
No Negotiation of Preforeclosure Sales Commission
Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in the aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.
Here is a link to the new Fannie Mae guidelines (18 KB PDF download) and the page at eFannieMae.com which shared this news.
Here is the article (abbreviated) sent out to us from VAR (Virginia Association of Realtors). We heard about this 2 weeks ago but seeing it 'in print' as it were is very comforting.
Fannie has now announced that effective March 1, 2009, the approval and closing of short sales will not be conditioned on the willingness of the listing firm to alter its fee arrangement with the borrower, as long as the total commission does not exceed 6%. The official guideline is set out below.
No Negotiation of Preforeclosure Sales Commission
Servicing Guide, Part VII, Section 504.02: Contacting Selected Borrowers
Effective March 1, 2009, closing of preforeclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in the aggregate. Servicers are reminded that they must continue to obtain any approvals that may be required by interested third parties in connection with preforeclosure sales.
Here is a link to the new Fannie Mae guidelines (18 KB PDF download) and the page at eFannieMae.com which shared this news.
Read more!
Sunday, March 1, 2009
Submitting a Winning HUD-1!
The most important tool in your negotiating arsenal is your HUD-1. Some agents send in a Net Sheet that is 'estimating' the numbers and the dollars the bank will get. There are some problems with this in my opinion.
If you submit a Net Sheet or a loosely calculated estimate of what the bank will net with your short sale it could become an embarrassing situation when the bank approves this after some long negotiations only to find out the number was wrong and low. If you plan on doing short sales on a regular basis then you need a good relationship with a reliable attorney/closing company to pull your title and get you the most accurate HUD-1 from the start.
Here are the keys to a winning HUD-1 for submission to the bank.
- Make certain taxes and fees that may be due are calculated out months down the road to a date you think it will actually close. Often this date is 3 or 4 months out from the creation of the HUD.
- Have the title search run to find any additional liens. Too often a client has told me there were no liens and we find one anyway. Add this to the HUD and estimate the cost to close it 3 or 4 months down the road when the sale might close.
- Include HOA/Condo fees and find out if your client is also behind on these. If they are find out how far behind and again add additional months as needed to match your estimated close date.
- Separate HUD's for a 1st Lien Holder and the 2nd Lien Holder if two loans with separate banks. The HUD to the first shows a larger payoff to the 2nd, while the HUD to the 2nd shows a low offer to them (the 2nd). Both banks will almost always say push the other way. The 1st will say they don't want the 2nd to get that much and the 1st will ask for more. Preparing the separate HUDs sets you up for success and meeting in the middle.
- Get your attorney/title company paid. Know from the start that many banks won't pay recording fees and overnight fees, things of that nature. Suggest from the start that your attorney roll their fees together (where allowed) into their settlement/closing fee on line #1101.
- Also you need to know that it is very hard to get the banks pay for home warranties or inspections. So if they need to be paid either the buyer or the seller will need to pay for these so try to keep them off of the seller side of the HUD if you can.
I hope this will help you get that much closer to easier negotiations. As always if you have questions or concerns talk with YOUR broker. If you are your broker then, umm . . . ? :-)
If you submit a Net Sheet or a loosely calculated estimate of what the bank will net with your short sale it could become an embarrassing situation when the bank approves this after some long negotiations only to find out the number was wrong and low. If you plan on doing short sales on a regular basis then you need a good relationship with a reliable attorney/closing company to pull your title and get you the most accurate HUD-1 from the start.
Here are the keys to a winning HUD-1 for submission to the bank.
- Make certain taxes and fees that may be due are calculated out months down the road to a date you think it will actually close. Often this date is 3 or 4 months out from the creation of the HUD.
- Have the title search run to find any additional liens. Too often a client has told me there were no liens and we find one anyway. Add this to the HUD and estimate the cost to close it 3 or 4 months down the road when the sale might close.
- Include HOA/Condo fees and find out if your client is also behind on these. If they are find out how far behind and again add additional months as needed to match your estimated close date.
- Separate HUD's for a 1st Lien Holder and the 2nd Lien Holder if two loans with separate banks. The HUD to the first shows a larger payoff to the 2nd, while the HUD to the 2nd shows a low offer to them (the 2nd). Both banks will almost always say push the other way. The 1st will say they don't want the 2nd to get that much and the 1st will ask for more. Preparing the separate HUDs sets you up for success and meeting in the middle.
- Get your attorney/title company paid. Know from the start that many banks won't pay recording fees and overnight fees, things of that nature. Suggest from the start that your attorney roll their fees together (where allowed) into their settlement/closing fee on line #1101.
- Also you need to know that it is very hard to get the banks pay for home warranties or inspections. So if they need to be paid either the buyer or the seller will need to pay for these so try to keep them off of the seller side of the HUD if you can.
I hope this will help you get that much closer to easier negotiations. As always if you have questions or concerns talk with YOUR broker. If you are your broker then, umm . . . ? :-)
Read more!
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
Negotiate your Contract
I know it can be hard when you are trying to get an offer an the clock is ticking loudly behind you with a pending auction date. Don't let your sense of urgency override your responsibility to your seller.
I see so many Realtors uncomfortable with advising the seller to counter the offer made by the buyer on their short sale listing. In the end it is your seller's choice but don't scare them away from the process of negotiating the price and/or terms of the offer. Remember that a lower offer approved by the seller's bank may potentially mean a larger exposure to the balance of the debt if that same bank decides to come after the owner for the balance at a later date.
I see so many Realtors uncomfortable with advising the seller to counter the offer made by the buyer on their short sale listing. In the end it is your seller's choice but don't scare them away from the process of negotiating the price and/or terms of the offer. Remember that a lower offer approved by the seller's bank may potentially mean a larger exposure to the balance of the debt if that same bank decides to come after the owner for the balance at a later date.
Read more!
Know your local contract!
Even without the existence of short sales it is important as Realtors to know our contract well if we are going to do a good job. Not that I can give it more importance due to short sales but not knowing your contract can put everyone in a bad place. Short sales take longer giving more opportunity for a loosely negotiated contact to give way to some very big problems.
We recently had a long and very drawn out negotiation with Countrywide (1st) and Wachovia (2nd). Actually both banks were fine to deal with, very professional during the transaction and giving us approval to close. As we got closer to closing and per our local contract we kept pushing the buyer agent for the release of the financing and appraisal contingencies. We were in a tough spot because our only course of action if they say no or keep delaying it is to void the offer, which we did not want to do for obvious reasons.
The morning of closing we get an 'email' from the buyer agent stating the buyer is unable to come to closing and the offer is void. < < insert cold sweats and panic heart rate here > > But because we know our contract and my exceptional negotiator, Jacqueline, properly documented the agreed closing date each time it was moved or delayed we were okay. You see our local contract automatically removes all contingencies at midnight prior to the closing date. So her having documented and having all parties sign and acknowledge the date we were able to protect our client. If we were lazy about all of it and left it as a verbal then we would have been in a bad spot for our seller. Long story even longer after about a week delay from the original date the buyer did come to the table and sign the papers to purchase. << Thanks to Jacqueline for doing a great job and saving a $360k sale but more importantly helping our seller avoid foreclosure! >>
Know your contract, document everything as needed and never take bad news as the end. There is always an answer if you stay calm and think it through. Okay sometimes things just crap out on you. But more often than not difficult and seemingly impossible situations can be overcome by stepping back and thinking it through.
Best of luck!
We recently had a long and very drawn out negotiation with Countrywide (1st) and Wachovia (2nd). Actually both banks were fine to deal with, very professional during the transaction and giving us approval to close. As we got closer to closing and per our local contract we kept pushing the buyer agent for the release of the financing and appraisal contingencies. We were in a tough spot because our only course of action if they say no or keep delaying it is to void the offer, which we did not want to do for obvious reasons.
The morning of closing we get an 'email' from the buyer agent stating the buyer is unable to come to closing and the offer is void. < < insert cold sweats and panic heart rate here > > But because we know our contract and my exceptional negotiator, Jacqueline, properly documented the agreed closing date each time it was moved or delayed we were okay. You see our local contract automatically removes all contingencies at midnight prior to the closing date. So her having documented and having all parties sign and acknowledge the date we were able to protect our client. If we were lazy about all of it and left it as a verbal then we would have been in a bad spot for our seller. Long story even longer after about a week delay from the original date the buyer did come to the table and sign the papers to purchase. << Thanks to Jacqueline for doing a great job and saving a $360k sale but more importantly helping our seller avoid foreclosure! >>
Know your contract, document everything as needed and never take bad news as the end. There is always an answer if you stay calm and think it through. Okay sometimes things just crap out on you. But more often than not difficult and seemingly impossible situations can be overcome by stepping back and thinking it through.
Best of luck!
Read more!
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!
Friday, January 30, 2009
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.
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.
Read more!
Monday, January 19, 2009
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'.
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  |
Read more!
Sunday, January 18, 2009
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.
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.
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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! :)
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! :)
Read more!
Saturday, January 17, 2009
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 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. :)
Read more!
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