SHORT SALES - DO YOU REALLY WANT TO KNOW?
I recently attended a full day seminar on Short Sales, thinking this was the 'new wave' in real estate. I've got to tell you I cam away very disapointed if this is the direction the market is headed. To sum it up, they are a lot of work, will take at least twice as long as a normal transaction and ther is no guarantee that the deal will happen (is there ever?) or what your commission will be at the end of the day.
I really hope we can avoid this dierection, both for the sakes of the poor souls going through the drama in their lives and for us as REALTORS - let us do what we do - sell houses!
Anyway, look the notes over, and if they can help you, then so be it Let me through in a disclaimer though, these are notes from a seminar, they are not researched facts. Is it possible I either heard wrong or wrote wrong or even copied my notes wrong? Yes to all of the above. So, if you need a definitive answer, please look for one elsewhere.
SHORT SALES:
THE LEAST YOU NEED TO KNOW
•q "RISKY" ALTERNATIVES TO THE SHORT SALE:
Become an "Equity Purchaser," aka "Shark." One who is a Non-Owner occupied "equity investor," buying a sellers equity at a DEEP DISCOUNT, to bring loan current. The EP is often deeded onto title. Seller's often remain in the property as co-owners, or rent back from the EP. The plus for the seller is no damage to credit, with a place to live, without moving.
Beware of the "Foreclosure Consultant," who charges a separate fee (not a commission) for a "Rescue Plan" Consultation, and does not have any agency with bank, buyer, or seller. This means no fiduciary responsibility. "Consultants" often do not hold real estate licenses. Both Equity Purchasers and Foreclosure Consultants invite Civil Code Violations CC 2945 and 2945.11, which protect distressed sellers from fraud by the above.
Be aware of the: "Soldiers and Sailors Act" by Congress, which provides protection with an Automatic Stay of Foreclosure, for military.
•q A "SHORT SALE" IS DEFINED BY: "ALL liens of record PLUS costs of sale, EXCEEDING CURRENT MARKET VALUE." Said to be "Upside- Down" in payment.
Simply put: Seller owe's more than what they can sell for.
This includes, but not limited to: Tax Liens, Mechanics Liens, 1st TD, 2 TD, 3TD et al., Unpaid Judgments and Small Claims, and Unpaid HOA Dues. (Many people who do not pay their mortgage are also not paying many other bills, which may be secured by real property. For example: Home Equity Lines of Credit (HELOC's), Mechanics Liens, and Boat Notes).
•q BANKS DO NOT INITIATE SHORT SALES. SELLERS & AGENTS DO:
The above Beneficiaries (aka "Bennies") are always negotiated with by the seller, or assisted by the agent. Lien holders rarely agree to 6% listings. Commissions can range from 1-5%, depending a number of factors.
•q "VALUE OF A SHORT SALE VS. THE COST OF FORECLOSURE" ANALYSIS:
This is performed by the bank. Banks take up to 45 days to perform this analysis, only after a Short Sale Package is submitted. All lien holders must weigh options before committing to a Short Sale, IN LIEU OF A FORECLOSURE. By foreclosing, lien holders assume all the risks by taking back the property:
•q RISKS INCLUDE:
Exposure to vandalism by the seller, deferred maintenance costs, cost of actual foreclosure process, the months of unpaid mortgage, (at least 4 months!). Also, the cost spent marketing the REO (Real Estate Owned), and commissions paid to future agents.
•q A four-month process is typical from Notice of Default (90 Days/ 3 Moths), to a Notice of Trustee's Sale (21Days/3 weeks), and is sold at auction by Trustee's Sale on day 22 if no resolution is reached, AND NO BK IS FILED.
•q Many sellers will file chapter 7 Bankruptcy, forcing a "Stay of Foreclosure." Some sellers do this simply to buy time sufficient to close a current escrow, and then just cancel the BK application. This is known as "Stopping the Clock" of the four month process. Once a bankruptcy is accepted, a bank IS NOT ALLOWED to offer a Short Sale to the seller, and will be sold at a BANKRUPTCY SALE.
•q The bank then hires attorneys to file for a "Relief of Stay" which allows them to continue foreclosing even though you are in BK.
•q However, courts are reluctant to approve this, and prefer a BANKRUPTCY SALE in order to pay off more creditors than a NON-JUDICIAL FORECLOSURE would, provided there is more equity over and above paying off the lien holders. Other "Non-Secured" creditors may be able to be paid off.
Example: If 450k is owed on the home, and the home can sell for 600k, the courts know the bank will "under price it" to recapture just the loan and costs- but not a penny more, especially in a declining or even a flat market. Banks want to "cut their losses." Courts want to realize the MAXIMUM RETURN, where Banks want only the note value and costs.
(In a rising market, banks are willing to price REO's along side the competition, going with the upward trend).
•q WHAT TO ASK A SELLER:
It is very much like a traditional listing except for the "sense of urgency," caused by deadlines and a sense of doom by the seller. Ask the seller: Did the seller disclose All Liens and encumbrances? Are there Late Payments, Notice of Default, or Notice of Trustee's Sale? Determine with a net sheet if there is enough equity to pay all liens AND costs at a "marketable" price? If NO: You have a potential Short Sale.
•q Many sellers are out of touch with who their current lender actually is. The loan is sold many times in the secondary mortgage market.
•q On counter offers and the MLS, be sure to write in: "subject to lenders approval," or if you are the buyers agent, GET COMMISSION AUTHORIZATION IN WRITING from bank.
•q Banks prefer NON-DELINQUENT sellers (Not easy to get SS accepted), with payments current, and good credit, because they leverage and threat with "derogatory credit reporting." They want to "milk" the seller as long as possible, staving off the NOD process. It's very difficult to have banks agree/ negotiate on a SS with Non-Delinquent sellers.
•q They have to miss payments first; Or otherwise seller will request forbearance or restructuring.
•q DELINQUENT Sellers have much less to lose, as their credit is already damaged by "Mortgage Lates," and are in "arrears." They are typically IN DENIAL as well.
•q LENDERS HAVE TO BE "SOLD" ON THE IDEA OF A SHORT SALE:
FHA Does not do Short Sales. FreddieMAC does not accept SS, but is known to renegotiate loan terms, or created a window of forbearance. Conventional Lender's may do the same, but typically foreclose. Much depends on "The Market." This is best negotiated before delinquency.
Many Lenders will not respond at all.
"Private Money," such as a Second Trust Deed, will be the most resistant to agree to a SS, and almost always prefer to foreclose. They feel their investment is secured by the deed.
In our current cycle, persuading 2nd's will be key, as many loans are 90-110% financed.
EXAMPLE:
(500K 1st/ 100K 2nd = Owe 600k) Property can sell for 520, leaving 2nd with "0" after commissions. 2nd does not agree to SS. Seller or Agent approaches 1st with 450k (50k less to 1st @500k) and 50k to the second... Both agree to Short Sell in a declining market. The 2nd can easily stall a short sale by refusing to cooperate.
*ALL LIEN HOLDERS MUST AGREE TO A SHORT SALE. THIS MEANS A LOSS OF CAPITAL TO ALL THE LIEN HOLDERS. It is used for lien holders to "cut their losses," usually only in a "flat or declining market." Otherwise FORCLOSURE IS PREFERRED.
•q IMPORTANT:
"Anti-Deficiency Law" states that a lender CANNOT go after personal assets if foreclosing on a "PURCHASE MONEY" loan.
•q A BIG "HOWEVER"...
Foreclosures on "REFINANCED MONEY," 2ND TRUST DEEDS, AND MECHANICS LIENS ARE NOT SUBJECT TO THIS LAW, AND CAN GO AFTER PERSONAL ASSETS! So, lien holders like to know this and use it to threaten and motivate the seller to make payments. (Phone calls and letters).
*Even if it is an original "Purchase Money Loan," 2nd Trust Deeds MAY STILL GO AFTER
PERSONAL ASSETS! However, JUDICIAL FORECLOSURE to obtain a DEFICIENCY JUDGMENT is a costly option, and takes a long time.
The MOST difficult option to get Short Sale Approval is when the seller voluntarily stops paying. Seller walks away, or disappears.
•q OBTAIN CLARITY ON HOW THE BANK WILL REPORT THE SALE
TO THE CREDIT BUREAU'S:
Anything less than "Paid In Full" IS DEROGATORY, and will damage credit scores greatly.
This is within the control of the seller and/or agent, assuming the bank will cooperate.
Lenders will "1099" (report to the IRS) the seller in the amount of ANY deficiency (unpaid principal), and the seller WILL BE taxed. A deficiency judgment is treated as "income" by the IRS, and is taxed accordingly.
Example: Shortfall of $50,000? IRS expects $12,500 as income tax, based on a 25% Income Tax bracket. Often the seller will sue the assisting agent for not disclosing this, of course.
•q BANKS TAKE UP TO 45 DAYS TO CONSIDER SHORT SALE:
And ONLY after receipt of a Short Sale Package. For this reason, prepare all parties involved for a longer escrow. Banks vary on their "consideration time." Contact lien holders for negotiation ASAP, at the time of the listing, and before you have a buyer. The banks need the time to weigh options: Lenders analysis of marketability in a SS, vs. the expected return or expense of foreclosure.
•q OBTAIN WRITTEN AUTHORIZATION FROM SELLER
This is needed for the access and release of information from lender about the seller and loan information. They will deny you information without written approval from seller. You will also need the loan number, zip code of Payment Notice is sent, and seller's SS #, to communicate with the Lender. Ask for a "Delinquency Dept," and for any known short sale procedures, current loan status, and ask the bank if they have filed for foreclosure, as the seller may claim to be unaware, or "with-held."
•q NEED TO JUSTIFY SS TO BANK AND/ OR SELLER:
Show comps that demonstrate the inability of the subject property to sell and still cover debts. Show declining market trend. If trend is increasing, there is little motivation by the bank.
To the seller, justification may be made on NOT having a short sale on the estimate of FUTURE INCOME. If they are expecting a return of income, it may actually be in their best interest to request forbearance or restructure. Have seller demonstrate future income to bank.
•q RE/ DEFICIENCY JUDGMENTS:
Occurs when "NON-Purchase Money" lien holders (ex. a Refi, a Mechanics Lien by a sub-contractor) files for a "JUDICIAL FORECLOSURE." Lien holders who have remained unpaid (IN PART OR IN FULL) after a traditional bank NON-JUDICIAL FORCLOSURE (AND NO BK WAS FILED) will file this.
DEF. JUDGMENTS are equal to the shortfall amount of the unpaid lien, PLUS the Lien Holder's costs, fees, and penalties. Remember: Only if there is a recorded lien, can you file for a deficiency judgment.
This amount WILL BE SENT TO COLLECTIONS.
•q SHORT SALE PACKAGE TO INCLUDE;
MARKET ANALYSIS (& APPRAISAL IF POSSIBLE)
LISTING AGREEMENT
HARDSHIP LETTER
SELLER'S FINANCIAL STATEMENT & 2 YEARS TAX RETURNS
PROOF OF CURRENT INCOME & MOST RECENT PAY STUBS
PAST 4 MONTHS BANK STATEMENTS
ESTIMATED NET SHEET
•q BE SURE TO CONTACT ALL OTHER LIEN HOLDERS TO NEGOTIATE SHORT SALE. THIS MUST BE DONE SEPARATELY WITH EACH LIEN HOLDER.
•q SOME TYPICAL SHORT SALES "CONDITIONS":
CLOSING DATE MUST BE FIRM
SALES PRICE MUST BE FIRM
BUYER MUST BE FIRM- NO ASSIGNMENT
AMOUNT OF PROCEEDS TO LENDER MUST BE FIRM
SALE "AS IS" MUST BE FIRM- NO REPAIRS PAID BY LENDER
THERE MAY BE CONTRIBUTION REQUIRED FROM SELLER
ZERO PROCEEDS MAY BE PAID TO SELLER
ZERO PROCEEDS TO BE PAID TO ANY ENTITY NOT DISCLOSED ON ESTIMATE
SELLER CANNOT ASSUME DEBTS OR COSTS OUTSIDE OF ESCROW
ONLY WIRE TRANSFER OF FUNDS ACCEPTED AT CLOSING
ANY REFUNDS AFTER CLOSING WILL GO TO THE LENDER
LENDER TO APPROVE FINAL HUD (NOT ESTIMATE!) PRIOR TO RECORDING
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The market has changed and so have I. I am now in my 4th year of successfully working with banks and Asset Managers in the preservation and sale of REO Properties throughout the Inland Empire, CA
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This is really very helpful stuff, John. We are running in to a lot of people who are upside down in this market and this will help us to help them better.
John, thank you so much for sharing your notes with us. This is very useful information.
Good Stuff John! I think you have a new blogging home at AR! Darn! And I even thought of inviting you to the site a few months ago..Now that doesn't do either of us any good..does it? Actions speak louder than words says my dad..lol
Scott
We're starting to see more short sales in Las Vegas. The listing agents on our team are responsible for getting the docs in the 'Short Sale Package' at the time of the listing, but then we have a Listing Manager and Escrow Manager to work with the banks from there.
I specialize in short sales here in NC. Thus far, I have been successful in getting 100% of them approved. Many of them even have junior lien holders. Although, I am experiencing a huge challenge on one of the short sales I am working on this month!
John, you have listed some excellent pointers for the short sale process. It is time consuming, but very rewarding in the fact that you are not only getting paid, but are also helping someone facing foreclosure. With short sales, time must be on your side. Often, I hear from customers who are facing foreclosures, but will not tell you until a week prior to the foreclosure hearing date or sale. Unfortunately, there is little I can do for them at this point.
John, this information is so "Just in time" for me. I just listed a property that will be a candidate for a short sale. Before I called the lender I decided to take a crash course and I so came across your post. Thank you!
I didn't read your entire posting, but your notes suggest the FHA does not do short sales. That is incorrect. Typically, an FHA loan servicer will accept net proceeds from 82% to 87% of the subject property's as-is, fair market value.
Preforeclosure Short Sale workout criteria can vary from lender to lender, and loan type from loan type. Not every foreclosure scenario indicates short sale. Much time can be saved by prequalifying the short sale candidate.
Lots of good information ,Good notes ,Great post !!
Great information and love the photo! :)
I like your photo, who was your photographer....did he photoshop it? :)
Good post. Lot of legal that seems to be aimed at the CA market. What was the name of seminar and who was the instrutor.
John: Thanks for forwarding this to me. It is GREAT information! Especially since I am again in the middle of the process.
I have not been a very 'social networked' with this blog article and I apologize. thank everyone for all of the kind words.
Jaclyn I agree, it can be a big problem when a seller holds back such important information. I believe they are in denial that something like this could happen to them.
Silvia - Glad to hear that this crash course helped - please come back and share your experience with us as it unfolds.
David - Very interesting about FHA. I do not claim to be an expert on short sales - I am still trying to do my first one - these are just the notes from a full day class given at my board -
Phyllis & Robert Thanks for the vote on the photo. I was asked to take it down when one of my articles was recently featured on the front page of Localism - I was reminded that it was inappropriate for the consumer side of my work - and of course they were right
Deja - Yes the seminar was in California from a California Title Officer for California real estate and the audience was 100% California Realtors, so I guess it was geared towards California - not real sure what is different for other states. At this point I do not know who the instructor was or even which Title company hosted the event - sorry, but it has been a few months since I attended the training, and what I posted was 100% of my notes.
Marchel - Since you are in the middle of the process, you should keep us informed as your story unfolds.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
www.JohnOcchi.com
I recently got a short sale accepted - they are more work - but it is a good nitch to creat buyers in a slow market. Everyone loves a deal - so if a buyer can get a house under market they are always happy! What is also nice is that if you are good at short sales you can double end your deals!
When you started your blog it sounded as if you did not know much about short sales prior to your class - you took great notes and must have had a great teacher!
Nice Post!
In my area, I am known as the short sale specialist. I receive calls almost daily in regards to helping resolve customer's home dilemmas. Especially, since there has been a significant influx of mortgage fraud, and foreclosures throughout the country. I have built a solid reputation on delivering results. Thus far I hold a 100% short sale approval rating for all the short sales I have conducted! I am very proud of this as it is Hard Work. I have been told "No" more times than I can count. However, with the help of the Lord, I always seem to pull enough teeth to transform that "No" into "Yes."
Of course, I had to pay for my education within this specialty. It does take a special real estate professional to conduct these and to be successful. I see agents in my area who attempt to help a client with a short sale, but can not get an approval for some reason or another. In the end, they get frustrated with the lender's many rules or they simply run out of time. Many of them now refer their short sale clients to me, and in the end, I offer a very nice referral fee to them on behalf of my BIC.
The role as a short sale specialist can be rewarding emotionally and also financially. However: It requires a lot of negotiations, organization, and tons of research---especially if you have to prove your point to the Vice President of a company or an Investor, or the Supervisor of the Loss Mitigation Dept. that they are indeed better off accepting the Offer on the Table. Last month, I was told "No" Three Times. Heck, I was even laughed at by the mortgage company. However, in the end I prevailed, my client's short sale was approved, the buyers were happy, the mortgage company was happy and I gained another successful transaction regarding short sales. Now, I did prepare an 18 page report to prove my case. You can best believe that without it, the short sale would not have been approved.
This is a rewarding specialty. But, it does require a lot of manpower hours---especially if you want to stay in control of the deal. The time frame can vary from a short sale approval of 30-90 days. It is just very bank specific. Some banks have shorter time frames, others don't. Also, some banks want to see the home listed for a certain time-frame before conducting a short sale.
Additionally, there are loads of paperwork to complete and manage. My short sale client's file average roughly 75pages. This includes every detail needed to execute, represent, and complete the process and transaction. I have established a system for myself and my team that allows us to process files efficiently and as accurately as possible.
Rochelle,
You are absolutely correct - the buyer is definitely pulled out of the market until the offer is resolved - typically 4 to 6 weeks. That is why foreclosures and short sales are more typically pursued by investors. the retail buyer is always looking for "the deal", but often is not obtainable without removing their personal needs from the equation.
IK suppose it is like any other wholesale / retail formula. The consumer would love to buy for the price of the store. They can if they go through the trouble of setting themselves up as a business - even if it is a shell, they can buy wholesale with the proper credentials. Once established as a business, they get to buy directly from the manufacturers and distributors of retail goods...the only problem is they have to buy minimum quantities - typically 6 of something.
So yes, the deals are out there, but you have to be willing to play by the rules of the game for what you want to acquire as a 'deal'.
Now have a blessed day.
John Occhi, Hemet REALTOR
Real Estate - Hemet CA
Thank you all for you comments. I am a Mortgage Broker, who has until recently focused on first time home buyers and purchases. I now am involved with a Foreclosure Assistance Program, and I find all of this info very helpful. Are there any recommendations for more resources on the subject? Thanks again. A quality post.
Cheers,
Rebecca Brillhart
FL Licensed Mortage Broker
YES - thank you for sharing your notes. I feel this is my niche and am working on how to market it. THis is near and dear to my heart, I am just not sure how to get the word out and how to find the people who need me.
Rhonda and everyone else who has responded - thank you very much for your kind words and insights. I have beenworking in this field for the better part of a year now and am finding ithat it is a lot of hard work - but it is so worthwiheio if you can help a grateful homeowner (not all are so grateful)
Now have a blessed day,
John Occhi, Hemet REALTOR
Thanks for the info, this answers alot of questions. Yes I agree with you, I sure hope this isn't the way things are headed.
Linda Reynolds - not sure about your market, but from what I read Florida is in the same boat California is - hoping the market does not head in this directin is no longer a hoppe but a reality here in California. I originally worte that article late last summer, although it was not published until December. My thoughts is the "Sellers Marrket Train" has left the station and the Foreclsure Shuttle is now in the station.
Now Have a Blessed Day<
John Occhi, Hemet CA REALTOR
Mission Grove Realty
I have just made some minor changes to this blog - including changing up the groups - adding more appropriate groups - so I hope this article is found by everyone looking for some good solid information on the topic of short sales.
Now Have a Blessed Day
John Occhi, Hemet CA REALTOR
Mission Grove Realty
Good information. With the way the market is going, we will soon all become experts in this arena.
In Orange County, it is no longer the future, the future of short sales and foreclosures is here. Jaclyn, and John, you're absolutely right about needing a system for getting short sales approved. Otherwise, it can be a very time consuming and frustrating process. Keeping the buyers involved while waiting for bank approval is a challenge. I use an addendum at the beginning, making them aware that it could take months to get an approval to their offer.
There are several companies now offering to process short sales for a fee, or a referral fee. Is anyone using one of those companies? If you do a lot of short sales, it really requires an extra person on your team to handle the processing.
Thanks for the great post. Keep the information coming.
Valerie Van de Zilver - You are right about it requiring an additional set of ears and hands to handle the short sale process. I am looking to expand my team right now to include a loss mitigator.
Now Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist
Think of it this way, if you don't work the short sales you may not have anything to work.
Robert Huntsinger - I guess you cold say I was ahead of the curve on that. I had started researching the market back the end of last year, and really resisted., Then my wife got real sick and I was gone for about 2 months and when I came back it was a hole new world on the horizon. I knew what I had done in the past would not be working for what I was looking at, so I jumped right in front of that run-a-way train to position myself in my local market - and now I probably have a better grip on this segment than just about anyone else in my market.
Now Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist
Ava Vanderbilt - Congrats - they are time consuming, stressful and yet so rewarding...and double ending is always nice.
Are you a member on AR? Please drop me a line and tell me more of what you are doing?
Thanks,
Now Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist
Thanks for your comments. I recently showed a short sale listing and was not aware the commission could be much different than listed! I will be sure to get written authorization before I ever submit an offer!
Evelyn Broxterman - I don't think it has much to do with what you agree on with the other agent so much as it has to do with what the bank will allow. What is customary is to split the commission in half. The best way to get more commission is to have the sellers agent write the original contract up for a higher commission - 7% or 8%. No matter what, the bank is going to grind the commission down, just like every other area they can grind. So why not start with a higher number?
Now Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist
Lots of good infromation, thank you for posting it. I attend the foreclosure sales that my Parish (County, for everyone not living in Louisiana) Civil Sheriff's Office puts on. I first came across the defination of a short sale through contacts made at these sales. I have been looking for more information since. We are dealing with a market affected by Katrina in my local area, price spikes after the storm, and current homeowners who bought at that time are now upside down, as well as investors who bought multiple properties, and contractors who overbuilt "custom" homes. We have over a 3 year inventory of homes above 400K. The national market is not helping either, and because of the increasing number of foreclosures appearing, short sales are looking more and more like a viable option. The time and effort seem a little intimidating, but I have plans on getting my feet wet here very soon. Thank you again for providing the information.
Marc Pellettiere, Realtor, Covington, LA www.sttammanyhomesandland.com
Lots of good infromation, thank you for posting it. I attend the foreclosure sales that my Parish (County, for everyone not living in Louisiana) Civil Sheriff's Office puts on. I first came across the defination of a short sale through contacts made at these sales. I have been looking for more information since. We are dealing with a market affected by Katrina in my local area, price spikes after the storm, and current homeowners who bought at that time are now upside down, as well as investors who bought multiple properties, and contractors who overbuilt "custom" homes. We have over a 3 year inventory of homes above 400K. The national market is not helping either, and because of the increasing number of foreclosures appearing, short sales are looking more and more like a viable option. The time and effort seem a little intimidating, but I have plans on getting my feet wet here very soon. Thank you again for providing the information.
Marc Pellettiere, Realtor, Covington, LA www.sttammanyhomesandland.com
Marc,
Thanks for stopping in - you may want to look around the rest of my blog, as I now have over 40 articles on the topic - written for both the investor and the homeowner.
I saw a segment on the news last night about Katrina and 2 years later - my heart continues to go out to you guys down there and for having the courage to stay. I am sure you will be rewarded when it is all said in done - with both treasures here on earth as well as in Heaven. God Bless
Now Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist
Thank you , I will definately keep looking around. I still have much to learn.
New Orleans is still a mess. There are homes that have never been gutted. I do my best to stay out of the city, unless I am going to a Saint's game. :) We have more of a rural community North of Lake Ponchartrain, though our population increased dramatically as a direct result of Katrina. I own 2.6 acres about 50 miles North of New Orleans and had over 50 trees down on my property alone. I was also without electricty for 31 days. Luckily though my house made it fine. The population base of Orleans Parish in the first quarter of '07 was still under 50% of pre-Katrina. You are correct, many people left and have not returned. A good portion of the knowledge I have on foreclosures comes from the Orleans Parish Civil Sheriff hosting seminars on the expected record number of foreclosures in the next several years. He stated that pre-Katrina 70% of the population in Orleans Parish were leasing their homes, and for the City to recover, these properties need to be repaired. This is killing the tax base. Half the houses are empty. Many have been gutted, but are skeletons just sitting in the sun. There are so many properties for sale. In St Tammany Parish, where I live and work, this year was the largest delinquent property tax sale in their history. Part of the problem is Insurance too. Rates have doubled and in some cases almost tripled, making it so that homeowners have to downsize, because they cannot afford their current notes along with double the insurance rates. I could rant about this for days. Politicians, crime, The Road Home Program. FEMA trailers. Welfare. Illegal Immigration. New Orleans is a long way from being allright. Also I do not want to forget about the Mississippi Gulf Coast. They took a hit as well. Sorry about such a long post, but the real estate market here is a little nuts.
Thank You, Marc Pellettiere. Realtor, LA www.sttammanyhomesandland.com
Marc Pellettiere - don't apologize for the length of what you have to say - say it. Perhaps you should do a whole series on the condition of the condition.
The hardest part is that America has a short term memory, we go from one headline to another and Katrina is now 2+ years old and all but forgotten by most, I am sure. I am ashamed to admit but I for one had not thought about you guys much this summer - being caught up in the economics of our times...I think most of us figure you have gotten it under control by now...perhaps you should share more.
God Bless,
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
This is an excellent post & some great comments as well. Thanks!
Bobby Johnson - Thanks for the kind words - I am not the carpetbagger looking to make a quick buck but here for the long haul, working my own neighborhood.
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Cape Coral Real Estate - (239) 218-2229 Susan Milner - Thank you for the kind words. I hope you will read and enjoy the rest of my articles on Short Sales
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
John, how funny these notes are almost 1 year old and they still hold true to the life of a short sale. Not many changes if any. I think short sales are here for a while longer and hopefully the process will be changing for the better soon. The lenders should have some better process that they can come up with that is universal. My 2 cents.
Rosemary Brooks -Mother & Daughter (866)-750-8282 - If they are universal, then anyone will be able to do what you and I do...so I don't mind the struggles, it is what makes us elite.
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
John - you are right about that. No pain, no gain is the way I know it anyway! And the other is only the strong survive.... I just think more people could be helped if the lenders would "please" get it together that they do have to deal with the short sale, so they may as well make it where we don't have to pull all our hair out!! smile
Hi John - I really appreciated the information you provided. I am working with several realtors right now in educating them on the short sale process. You are correct, short sales do take more effort by the agent to close the deal, however in AZ we are struggling with the decline in the market and right now one deal is better than none.
I wanted to address your notes on the commissions. I have an affiliation with a real estate company here and the broker has stated time and time again that the lender/mortgage holder can NOT determine the commissions. That is an agreement between the seller and their agent at the time the listing contract is signed. I really just want agents to be aware that if you put a co-broke of 3% on your MLS listing the co-broke still gets that amount, they do not have to take a cut and if you were the buyers agent would you want to? In my experience the lenders I have dealt with have not had a problem with the commissions.
Thanks for the information though it is great to get different perspectives on what is going on with the short sale market around the country.
Here in South Florida, in a Short Sale Disclosure, we will indicate that the seller's agent's commission will be variable, split 50/50, with the buyers agent and that the lender may negotiate a lower commission percentage. Buyer's agent would accept this with buyers offer. This is also noted on the MLS. This will make everything clear upfront and will eliminate confusion later on.
Rosemary Brooks -Mother & Daughter (866)-750-8282 - I agree, there are things the lenders can do so they do not appear to be shooting themselves in their own foot. A little more flexibility on closing the deal would be nice, for starters.
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Lynn Pineda - Realtor Coral Springs Florida - we do pretty much the same in California, except I like to offer a little bit more to the buyers agent, just the same way I advise my regular listing clients to offer 7 or 8% - it offers an incentive to shoe my listing first.
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Karen Hubbard - First let me welcome yo to ActiveRain - I hope to see more of your blogs in the near future. This is a great way to build your business.
You are right, the lender cannot determine the commission, but like any transaction, every detail is negotiable. They are negotiating looking at how the net sheet changes with each aspect and thier opinion is that if they are taking less that what they are due, so is everyone else. So, will I let a deal go because the bank will only approve it with a 5% commission, and I hold firm at 6% and let it go to foreclosure, because that is MY commission...I think not.
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
John, I absolutely agree... It's very disappointing to have a front row seat and have to watch the direction the market is going. However, I've been able to close all of my shorts (so far), and the extra effort is worth it in my opinion. Great post with wonderful tips! Thanks.
Vincent Martinez - ALL??? That's amazing. Maybe you should be a professional Loss Mitigator. I know some people who will pay dearly for that? I guess the question is, at what percentage of FMV are you trying to close them - 85? or higher...or under 80%. What I find is most investors will only close between 65 -78% of FMV.
Have a Blessed Day,
by John Occhi, Hemet REALTOR®
Mission Grove Realty
Good post on short sales, I to have been to the recent rash of short sales and foreclosure training out there. I just am finding it difficult to get any in risk sellers to grab the rope when I put it out there for them.
Take care!
RJH
We negotiate hundreds of short sales, and some of your examples, we see Realtors practice then wonder why the short sale was turned down. Your example of offering a lender 1st 450k and junior 50k when the 1st is shorted 50k is rediculous. The 1st mortgage always controls the shots, and the junior must decide if they want to play or not. The key is to know how to ....
We can't give away all of our secrets, but we would be happy to handle these nightmares for you. WE do not charge any fees to you or split commissions, you keep what the bank approves
Short Sales Corp or call us 1-888-772-8772
John
Short sales can be some of the most rewarding niches out there. I know enough about you to know you are detailed in what you do. That is the single most common area that I see where everyone complains about the bank not being willing to play ball because of the low ball offer, etc, and often times its that the 12 items (or whatever the # was that is requested) were not provided. It is not a piece meal process, hence a major reason for so many difficulties.
We need to make time to compare some notes one of these days. Though I live in Corona, I'm on the east coast a lot lately, but I'd like to make some time to meet.
Short Sales Corp - I can appreciate your expertise in this market. If you notice this was published back in December 2006 from notes I took in August 2006. This is the information that was presented to me and about 75 other REALTORS at the Temecula board when I was in that market. It is not what I teach of believe today, but yet there is a lot of good information here.
I have very few secrets that I wont share. Most people who read what I publish will not initiate what they read anyway, so why should it bother me. If I can help someone do better then there has to be some sort of heavenly reward for that and that is good enough for me...besides, I have referrals from 3 different states right now, so what is there to complain about.
The key is the public believes that I have some knowledge and they are willing to trust me before they ever meet me or talk to me on the phone.
Good luck with your business model, I wish you the best.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
Bill Nazur - Bill, I believe the biggest reason why short sales fail is just as you said, the REALTORS do not put together a complete package the first time. Also, they take the fist NO as gospel then go back to their clients and shrug their shoulders and say, well I tried, but I'm sorry your house is going to auction.
Let me know when you are in town, I'd love to get together with you as well.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
Concerned Mortgage holder - First let me say that I extend by sympathy to you for the current situation you find yourself in. It is truly unfortunate and a black eye on America that we can continue to subsidize housing for illegal aliens and yet throw our own citizens - many whose heritage spans generations in this country, are being tossed to the street as a result of Wall Street greed and government conspiracy.
You have an excellent idea that I know I have presented similiar version of here in my blog. If you want to get the word out I have 2 suggestions.
1)Write your congressman and every congressman in your state as well as your Senators.
2) Blog about it every chance you get - don't just cut and paste, but create new content every time you leave a comment on someones blog, so that Google will pick up on it. I would use a few key words like you city and state and even your banks name. This way Google will find your comments and index them appropriately.
OK, I have another idea too
3) Create your own blog and encourage others to comment on your articles. Write several different articles on the topic - always adding fresh content. don't worry about being repetitive - just don't use the exact same content over and over again, but continue to write on the topic and let people and Google know what is n your mind.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
PS - Please feel free to contact me directly if I can ever be of assistance.
John,
I am smack dab in the middle of one as I searched out your blog. I find the information helpful and reassures me that I am hitting all the key points in putting together my package. Very good content. I guess we all better get used to this. I think we are in survival mode here.
Very good content, helpfull for many real estate in this market.
Mary,
The good thing about an open forum like this is it does allow us all to express our opinions. I have no idea what part of the country you live in, but in Southern California it is feeling more and more like a part of Mexico rather that the United States - so sorry to say that I am not a left wing bleeding heart liberal. My question is: What part of illegal don't you (or they) understand?
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
pretty good stuff here... I do disagree with a few items and see that a lot with different training... one says one thing and another says something else???
One thing that I know for sure and doubt many are aware of is that banks do in-fact initiate short sales... I work for a loss mitigation company as well and they are contacted my the bank to help work with the home owners and if financially they can not keep the home they want us to list and sell the home...
Mark
www.MarkRyanGroup.com
Mark,
I have to agree to disagree with some of the information - realize that I posted this almost a year ago and the actual class was probably in August 2006 - putting me way ahead of the learning curve for people who are now getting started with Short Sales. I have written numerous articles on the topic and always willing to revise a strategy to keep it current with the times.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
John,
I know where you are coming from... my wife and I are also in the mortgage industry and could see this coming for some time now... I started learning more on short sales about a year ago as well. What were you saying you agree to disagree with?
Mark
Mark,
Some of the strategies have evolved. I have written several other posts that are in direct contradiction to what is written here - for example, you can check out Short Sales: A Revised Strategy: Commission or Short Sales: A Revised Strategy: List Price - both of which I posted this week. There are others s well, about 50 article s in total - you can see everything I have written on Short Sales by following this link.
Now Have a Blessed Day,
John Occhi, Hemet CA REALTOR
Mission Grove Realty
Mary Jo,
John does have some great info... I use an addendum that states inspection/appraisal date references start at written bank approval and are for buyer information only and no repairs will be made. GFD? earnest money? That would be specific to the contract you use assuming you made no alterations to that contract, ie: deposited upon bank approval, etc.
I see no problem with asking the listing agent what is owed... does not really matter however...If the listing agent knows what they are going they should provide you with guidance anyway...
If your sales are in escrow then you should be fine... once you get lender approval I just don't see them falling out. Could happen so I would not drag out the process but most likely you will be fine.
Mark
John, thanks for the notes...very detailed.
John,
Thanks for the info. This is good stuff. I was curious what would happen in the following situations.
Let's say if an owner had spent lots of money on equipment appliances. It is valued at about $15k which includes refrig, stove, oven, dishwasher. They want these items to be excluded from the sale as "personal" items which can be sold separately. How would the bank deal with this situation?
Good Info
Thanks
JB from Cornerstone Mortgage
Negotiating a short sale. You have my sorrow. What a nightmare. I won't even show one anymore.
John... I enjoyed reading your post and my question to you is can the buyer choose his Title Co at closing? Thanks
Lucy,
I will jump in here with an answer for you... Unless the seller/bank is paying for the title policy (owners and mortgage) then by RESPA law the buyer always has the right to choose the title company. Most REO properties will say you have to use X title company... but check the addendum and it will also say that they are providing a owners policy of title insurance.
Hope this helps...
Mark
John - you certainly do have a blog here. This is a great post, I haven't had to do a short sale yet. Lots of comments and it wasn't even featured - probably should have been!
I have a seller in the short sale process. We're waiting on the bank as many many many people are.
My client is barely and I mean barely keeping up his mortgage payments. Should he throw in the towel at doing that ? - It's paycheck to paycheck for him, if one paycheck didn't happen for him for one reason or another, then he honestly wouldn't have his mortgage payment. -- But going from what I hear, perhaps he shouldn't be paying that bank anymore to further show them the realistic downward spiral he is honestly in.
Should he stop paying mortgage ? Will it hurt him credit wise anymore then the S.S. will after all said and done anyway ?
Currently we have a contract on the home, but waiting on bank to make decisions.
p.s. I am in NJ and things are really wierd in NJ.
I mean weird as in everything, not just real estate market.. hahahaha
REALTORS - Here is some good news for you!!! We have an awesome program in place for the Realtors that are out in the field working hard everyday to make a living and there are no costs invloved for you or the homeowners, we have taken the sting out of your Short Sale Deal Processing. You bring us the listing and we do all of the processing for your plus we Guarantee a definite no bars held (3%) Commission for just being the Agent and it doesn't stop there we also Guarantee and Additional (3%) Commission for bringing the End-Buyer to the closing table as well. Zachary (6%) Commisssion is Guaranteed. Our turn around time for our Short Sales are (35 - 50)Days depending upon the Bank/Lender.
THE STATES LISTED BELOW---WE DO NOT PROCESS SHORT SALES:
Alabama
Colorado
Idaho
Indiana
Kansas
Kentucky
Maine
Michigan
Minnesota
Missouri
North Dakota
New Mexico
Oregon
Rhode Island
South Dakota
Tennessee
Vermont
Wisconsin
Wyoming
REALTORS - all other STATES WE DO PROCESS Short Sales!!!
I hope this information is helpful for you and that it will benefit you greatly because we do all the work for you and you go out & get the listings because (1) Short Sale per month can bring an extra $100,000 + Per Year!!! You can contact me direct @ 1-888-474-6781 Ext. 137.
wow, a lot of mis information you recieved. I don't even know where to begin...
http://activerain.com/blogs/short_sale_expert
REALTORS - Here is some GOOD NEWS for you!!! We have an awesome program in place for the Realtors that are out in the field working hard everyday to make a living and we work directly with your homeowners for you & we have taken the sting out of your Short Sale Deal Processing. You bring us the listing and we do all of the processing for your plus we Guarantee a definite no bars held (3%) Commission for just being the Listing Agent and it doesn't stop there we also Guarantee you an Additional (3%) Commission for acting as the "Seller Agent" by bringing the End-Buyer to the closing table as well. The (6%) Commission is Guaranteed. Our turn around time for our Short Sales are just (45 - 60)Days depending upon the Bank/Lender. Let us help you move even more properties
and make even more Commission in the market place. "THE TIME IS NOW"!!!!
REALTORS - We Now Process In All The Other STATES - "WE DO PROCESS" All Short Sales!!!
I hope this information is helpful for you and that it will benefit you greatly because we do all the work for you and you simply go out & get the listings because (1) Short Sale per month can bring you an extra $100,000 + Per Year!!! You can contact me direct @ 1-866-872-1981 Ext. 213.
Got to stay on top of those lenders, and patience is a MUST!! I can't stand all of those seminar short sale folks. There are so many variables, and the lenders are constantly changing things around. Got to just get your feet wet and jump in there!!
Mike Linkenauger
Jacksonville Florida Homes, Luxury Real Estate in Jacksonville FL
Man if you were disapointed and wrote all them notes I'd hate to it when you're excited. Thanks though this is all good stuff. I do a lot of shot sales and can always use some more education.