WHAT THE LENDERS WON'T TELL YOU ABOUT YOUR SHORT SALE!

I saw this excellent article about short sales - I had to share.

WHAT THE LENDERS WON'T TELL YOU ABOUT YOUR SHORT SALE!

FELIX SANTIAGO 07/28/2009

Not a day goes by that I don't hear the same question from an agent, "Why would the bank do that to my short sale?" It's really quite simple...BECAUSE THEY CAN!

I could write a book about everything the lenders won't tell you about the short sale process. However, it would be worthless the moment it is published. The business changes every day, every hour, every minute. The lenders, investors, collections agencies, government agencies and everyone involved in this mess are still trying to figure out what happened, let alone what is happening right now.

ANYONE THAT TELLS YOU THEY KNOW THE SECRETS OF DOING SHORT SALES, RUN FROM THEM AS FAST AS YOU CAN! AND HERE ARE THE REASONS WHY...

1) The lenders still are not sure that what they are doing is right FOR THEM. They are constantly changing their short sale and loss mitigation process to figure out what will make the most return on the loss. It will change at the whim of those assigned to review the pipeline disaster that is their loss mitigation. And, time and time again, the changes usually are not for the best. They only further complicate the process. The banks are in the business to lend money. The whole loss mitigation and short sale business is still a blur to them. Think about how absurd this business is...they will forgive $300,000 on the property without blinking, but will kill a short sale for the remaining $5,000.

2) The property is ONLY A WIDGET! The lender will never see or visit the home. The only one that cares about how the home looks is the homeowner. The lenders and their investors DO NOT CARE ABOUT THE FEELINGS OF THE BORROWERS/HOMEOWNERS. They have NO emotional attachment to the property. However, they want to assure that the borrower absolutely HAS an emotional attachment. Remember, those lovely photos in the appraisal are only seen by an underwriter that initially approved the loan. The actual lender does not care for photos and will never see them. THE PROPERTY IS SIMPLY A WIDGET.

3) Lenders and investors make secret deals for billions of dollars every day behind your back! Many agents remain shortsighted on the housing industry, altogether. They only want to see and believe that their real estate transaction is the only way the lender can move the property. In fact, this is not by any means the principal manner of unloading their inventory. REO's, performing and non-performing notes account for the majority of their swaps. However, those sales are never recorded in public records. Most of them are sold for pennies on the dollar.

4) The housing crisis is NOWHERE NEAR A BOTTOM! The biggest reason for this is the tremendous amount of inventory. And I'm not simply talking about the inventory in the lender's hands. I'm talking about inventory yet to be taken back. There are millions of homeowners living in their homes for free. I have clients going on 2 and 3 years without a mortgage payment. The lenders and their investors are simply overwhelmed by this crisis and they would rather see someone in the property taking care of it. Once they foreclose, they are responsible for all the bills on the house. Only 30% of the lender inventory is even available for sale. Nearly three times the current inventory is pending foreclosure. And unless everyone behind on their payments gets back to work and starts paying their mortgage, the crisis will not be going away any time soon.

5) Prepare Your Clients for the Long Haul! I ask all my new short sale clients, "are you in a hurry?" If they are, our firm is not a good fit for them. Please note that there is a difference between working quickly and efficiently and being in a hurry. The lenders are in no hurry to process your short sale file. Plus, if the homeowner is basically living for free in the home, what hurry is there to move out and start paying rent? The process provides them a good opportunity to stabilize themselves financially. And always remind them: A HOUSE DOES NOT A HOME MAKE! Home is your family and friends, not brick and mortar. Home will go wherever they go. The lender, on the other hand, will take every opportunity to attach an emotional response to that building, even if it is unsalable collateral. Don't let your clients fall in to that trap.

6) Every Lender Has Issues! As I mentioned in Part 1 of this post, never assume that the lenders have their short sale process down to a science. It's a work in progress for them. This is still their worst nightmare and they are just hoping it will go away when they wake up. They still think this housing mess will end tomorrow. Their loss mitigation staff is a temporary solution to the problem and there is a heavy turnover of employees along with a huge backlog of files. The same underwriter that approved your loan was offered a job as a so-called "negotiator." And, he/she is still working with the same mentality... "the bank is in control!" Unfortunately, you have to let them believe that. REMEMBER, YOU HAVE THE BUYERS FOR THEIR HUGE MESS!

7) Make a Buck Not a Friend! We've all heard the saying, "the squeaky wheel gets the oil." With the current state of the loss mitigation industry you need to be as squeaky as possible. You need to be noticed; otherwise, your short sale file will be delayed time and time again. One of the worst culprits right now is Countrywide/Bank of America (and that's a whole other post or two). They are a real mess and overwhelmed with files. Turn-time on newly received faxes is taking at least ten days, and that's assuming they find your fax. Send your fax two or three times if necessary! Yes, that may only add to the backlog of faxes, but if it means they will find YOUR fax and YOUR file nearly two weeks later you've accomplished your goal. If you are calling and don't like the answer or attitude of the short sale representative, hang up and call again! Trust me, the answer will change every time you phone.

8) The BPO Is EVERYTHING...For Now! It amazes me that lenders depend on a half-assed appraisal called the BPO (Broker Price Opinion) to make their biggest investment decision on your file. To put it bluntly, your BPO can be sabotaged by any green-eyed, angry broker with an attitude. Always be sure to meet with the evaluator at the property if at all possible. And, be sure he/she receives a copy of your contract. The lender certainly didn't provide them a copy. You already have a good idea for what the property should sell. Be sure you convey your thoughts and opinion to that person. Remember, the BPO is simply a range in value. The negotiator or bank representative will usually try to trap you with the highest value in the range. Let them know that you will NOT pay the top of the price range.

9) Tough Love...Credit Means NOTHING! I'm still amazed how many borrowers ask me how badly their credit will be impacted by a short sale. The answer...SIGNIFICANTLY! Your short sale client should not be worried about how his/her credit will be impacted by their current financial and housing situation. It should be the last thing on their minds. I'm astounded that there is always some expert trying to put foreclosure vs short sale into tidy perspective for someone that is finding themselves in the worst financial crisis of their lives. There is really no difference. A 450 score or a 500 score is still a lousy score. For the most part your client must be in a foreclosure status with the lender before they will even consider a short sale. And, whoever tells you different is flat out lying. Credit reporting agencies and the lenders that use them have been telling us for years that our credit rating is the most important thing in our lives. They've spent millions of dollars on campaigns to remind us of that. This has simply been a scare tactic and it has worked magnificently...until now. I've seen clients scrape and borrow money, or completely eat away at all their retirement savings just to keep up with a worthless investment property. All because they fear how it will affect their credit rating, even at the expense of really important matters like food, utilities, and medical necessities. Your credit will always bounce back. Plus, the lenders will need all those who are suffering from this crisis back into the fold in a few years when they are ready to really lend again and we are ready to borrow.