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Today’s Short Sale Tip

On HAFA short sales, the borrower may not use the relocation assistance for the release of a subordinate lien against the property as stated in the HAFA handbook. Either the 2nd lien will participate or they won’t, but have that conversation at the time you submit the file with the 2nd lender to avoid surprises! And if the 2nd lender tries to require more, push back and fight for the amount the 1st lien is offering the 2nd.

Today’s short sale tip

Bank of America has a number of changes this coming weekend for their process. If you have a short sale in Equator, make sure you have completed the task “Submit Short Sale Offer,” uploaded the “Short Sale Offer,” and uploaded “Supporting documents” or your file may be closed out. There are now 5 documents that need to be submitted to initiate a short sale: Contract with the Buyers acknowledgement, HUD-1, 4506-T, Bank of America’s Short Sale addendum, and Bank of America’s 3rd party authorization. If you have not yet uploaded their authorization letter, complete and upload it this week as to not experience any communication delays. Their “new” system supposedly will provide an approval in 20 days! However, BofA is limiting counter offer responses to 3 days and only 2 counter offers total. So make it count! Upload comps for BPO disputes and upload statements or invoices for liens, dues owed, outstanding utility bills in the library if you are asking for them to be paid by BofA at closing. Any BofA short sale listings not currently under contract, I suggest you have the Buyers Acknowledgment as an attachment in MLS.

Today’s Short Sale Tip

Here a story that might help you avoid an otherwise sticky situation.  A listing agent client of mine includes the following standard language under “additional terms” on short sale contracts  – “Contingent upon approval of sellers’ lender”. While this is very much the truth, the potential issues is technically, this could be interpreted as the contract going to closing even if the seller does not wish to accept the terms of the lender approval. What my client has decided to do is to clarify this additional term to state: “Contingent upon approval of seller’s lender and acceptance of lender approval terms by seller”. This covers the seller in the event the lender approves but with unacceptable terms or contingencies. You might like to consider doing something similar.

Short Sale Facilitation – A Better Business Model

There are no “shortage” of business models developed to support successful short sale facilitation but each seems to have shortcomings. At The Service Firm, we believe we’ve built a better business model that empowers us to achieve extraordinary results on behalf of our clients.  We’d love to share our approach with you and encourage your feedback and questions.

Agent Negotiator Approach

Traditionally, there have been several key strategies to dealing with short sales. The first and probably still the most common is the agent model in which the agent handles all aspects  of the transaction including negotiations with the lender. This approach has yielded fairly poor results and contributed to the burnout of more than a few agents. The average approval rate for agent negotiated short sales is estimated to be between 15% and 30%. The reason for the difficulty with this approach is the short sale is a complex transaction, requiring a lot of time, effort and expertise. The agent is constantly torn between managing the short sale and paying attention to their core business: representing buyers and seller.

Short Sale Factory Approach

The next approach is working with a national  or regional short sale negotiation firm. Across the board, we have seen this fail due to the lack of relationship, inconsistent communication and dismal results of these type firms. Short sale negotiation does not necessarily lend itself to economies of scale and taking a “short sale mill” approach has not proven to be very successful. A lot of the success or failure in short sales is tied to the ability and experience of the negotiator and this is very difficult to grow in a factory scenario. Typically, this approach assumes entry-level staff will be trained to handle per a set of best practices. This is essentially the same approach the lenders take and we all know how well it is working from the other side.

Attorney or Title Company Approach

In other cases, agents are partnering with attorneys or title companies. With attorneys, fees are typically high and usually charged  up-front to the sellers. Let’s face it, in most cases the sellers are basing the decision to short sale on a financial hardship and don’t have the funds to hire an attorney. Additionally, attorneys are representing the sellers which means they may advise their clients to adopt strategies that may not benefit all parties in moving the short sale towards a successful close.  In the case of title companies, many are offering “free” short sale negotiation in exchange for referral of title business. In addition to being a flagrant RESPA (legal compliance) violation, this approach usually delivers on the old adage “you get what you pay for”. The only way title companies can promise to “negotiate for free” is by cutting corners and trying to minimize any incremental overhead required to negotiate short sales.

The Winning Approach

The most successful approach has been for a real estate team to have a full-time dedicated professional handling the facilitation of all short sale related activities. This approach has worked well for many teams but not many agents are part of a team big enough to justify this approach. For these agents, The Service Firm offers an excellent alternative. The Service Firm partners with agents to act as an extension of the agent’s team, addressing all aspects of short sale facilitation.

This emulates the successful in-house expertise approach without the overhead costs and management headaches. The Service Firm also maintains a transactional representation relationship fighting for contract price, approval with limited conditions and full commissions. The Service Firm employs a “buyer pays” model that is contingent upon a successful close and never charges sellers or reduces Realtor commissions.

What short sale strategy has worked best for you?

Today’s Short Sale Tip

When initiating a short sale through Equator for a Bank of America first lien that may be eligible for HAFA or their COOP programs, make sure you initiate the file with NO offer on the property. Otherwise, Bank of America will automatically make your file ineligible for those programs and force you to go traditional, which does not guarantee waiver of deficiency or offer relocation assistance.

 

Today’s Short Sale Tip

If you have a short sale seller that is considering withdrawing their listing so they can take part of the HARP 2.0 program, make sure you know the bullet points of the program so you can best guide them. Many will not even be preliminarily eligible. Here are some of the highlights and a link to get more info: Must be a Fannie or Freddie backed loan. You can use lookup tools on Fannie or Freddie’s websites; must be current on your mortgage payments (with no more than 1 time late in last six months, current on 11 of 12 payments); loan originated prior to June 1, 2009; if unemployed will not be eligible as income verification is required; no credit score requirements; up to conforming loan limits. Find more details at http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx

 

Today’s Short Sale Tip

If you are disputing the BPO value on a short sale, include with your CMA a Crime Index report in the subject property’s zip code, a Crime Mapper from your local sheriff’s office website, and search for Sexual Predators/Offenders within a few miles radius of your subject property. I assure you this will have an impact on the value dispute and you will certainly get the attention of the person reviewing and making the decision!

Today’s Short Sale Tip

So excited to share with you this  awesome listing tool for short sale listings. This simple tool demonstrates to sellers their negative equity position and future amount owed- using their assumptions, and compares it to if they short sale now and purchase a home in 2 years. It assumes an interest only payment to keep it simple, but does a great job showing that even with some appreciation over XX years, they may still be in a negative equity position as a loan owner due to current values. This can help set aside the emotional aspects towards the home and help your potential seller make a business decision based on projected appreciation. Take a test drive- you will love it! www.theservicefirm.com

 

Today’s Short Sale Tip

If you have a potential short sale listing and need to encourage the seller, share this: The Mortgage Forgiveness Debt Relief Act of 2007 sunsets on December 31, 2012. Also slated to end the end of 2012 is the HAFA short sale program which gives $3000 in relocation assistance to our sellers and waives deficiency. I can accompany you on a listing presentation to discuss Short Sales, programs, incentives, and help build trust with your sellers. With these HUGE incentives, 2012 is the year of the Short Sale!

 

Today’s Short Sale Tip

If you take on a short sale listing that is an FHA loan, please note there is specific language that has to be added to the listing agreement and initialed by the seller. Typically the lender also has required language on the contract regarding “approval of short sale by (lender) required prior to closing.” Also make sure on your FHA short sales to max seller contributions to buyers closing costs to 1% if the buyer is obtaining an FHA-insured mortgage.

 

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