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Mike Sher

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What is a Short Sale

11-04-08
Mike Sher

A Short Sale may assist a homeowner prior to the Foreclosure process.

If the proceeds from the sale of a house fall short of the owner's existing mortgage balance, a lender may agree to accept the proceeds of a short sale in lieu of the total obligation due on the mortgage.

By accepting a short sale, a lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes.

Opinions differ in the real estate industry, but most experts suggest that you should let the lender involved know as soon as possible of a potential short sale. Others say you should wait until you have an offer because the bank will not consider your request until then.

If a lender is approached before the property is listed, they may want to get a broker's price opinion (BPO) or even an appraisal to see what the property is worth before a list price is set. One way to help ensure that the bank's estimate of value is realistic is to offer comps of recent sales, both traditional residential and foreclosed residential, if available.

If a short sale is being negotiated once an offer is received on a home that is listed, you will have to provide hard numbers to show that the amount of money a bank will realize on the short sale is better than the amount it may recover from foreclosing on the property and selling the property as an real estate owned property (REO).

When you have a written purchase agreement, your request may have a better chance of having the bank's asset manager or loss mitigation department review your proposal for a short sale.

Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. That's why it's critical that buyers and their representative understand and accept that time frame before they make an offer.

Check with a real estate professional to determine whether your home and circumstances will qualify for a short sale. The final decision is up to the lender.
If you have any further question, please mike@mikerealtor.com and we will gladly assist you. Content from Real Estate One
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A Short Sale Hud Headache

09-09-08
Mike Sher

A Short Sale Hud Headache

I have a home that I am doing as Short Sale on. The home has been on the market for 2+ years with 3 other realtors. My sellers could not wait any longer, they had to leave. The home was in an area that the seller felt had a raising crime rate, tons foreclosures and boarded up homes. My Seller just did not feel comfortable with what was happening in the area so he purchased another home for him, his son and pregnant wife.

Well we got an offer on his past house and all was going well. Chase, the 2nd loan was very willing to do a short sale. The first loan was with La Salle, when we got the offer and then later was purchased by Bank of America. La Salle was very easy to work with but Bank of America denied us because it was a FHA loan, HUD's guidelines state if the borrower buys another home in the area then he shall be denied for a short sale.

I was super surprised about that. I told the mitigation rep that the offer I had was above the BPO price. I also told him that their was no way Bank Of America could sell this home for what we had in hand. I explained that it took us 3 years to get this offer and that winter was coming and that if we did not sell soon, we would have a hard time selling when we have a foot of snow outside.

Well, they just said no. They said that BOA works with HUD and this was HUD's guidelines.

The only thing I can think of is to wait for Sheriff Sale and see if I can negotiation with the REO dept during redemption. Any other ideas?

Mike Sher

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"Short Sales" The Realtor Cure for the Common Foreclosure!!

09-06-08
Mike Sher

"Short Sales" The Realtor Cure for the Common Foreclosure!!

Now that the word "Foreclosure" is as common, as other less desirable words like "Cancer", "Teen Pregnancy" and "Child Neglect", it is time for us as a society to except it, take reasonability and fight it. Like all plagues; social and medical; at the beginning many ignore both the subject and those who are infected. But, in time the issue becomes so unavoidable that main stream society can not run, hide or avoid the problem. The foreclosure epidemic is NOW unavoidable. Everyone knows someone who is in, or will be in, foreclosure. Many, who might be reading this blog today, are themselves a casualty of a foreclosure.

So, what to do? How can I, a lonely Realtor help. SHORT SALES are the cure!! I know they are not easy to do. I also know that we realtors have to work harder on these transactions and will get paid less. The job is thankless with ungrateful parties on all sides of the sale. But, like most great acts, they are positive before popular. We as realtors are stopping foreclosures one short sale at a time.

The Benefits:

  1. The seller avoids a foreclosure.
  2. A home is spared abandonment.
  3. The buyer gets a great house at a good price.
  4. The bank gets more money, quickly while minimizing legal and non performing losses.
  5. The bank does not have to seize, manager, maintain and resell the asset. This will cost banks and later the tax payers billions of dollars!
  6. The neighborhood is spared another boarded up, pad locked, eyesore foreclosure on the street.
  7. Competing home sellers are spared the stigma of another foreclosed home that certainly will be "Fire Sale" which drops properties values of the entire area.
  8. Owners who are trying to refi out of an ARM will appraisal higher by being spared another foreclosure sale down the street.
  9. The realtors who could not sell the home because it "was upside down" now has a sellable product

The Negatives:

  1. The courts get less money with fewer foreclosures.
  2. Law firms that do foreclosure work, will make less money.
  3. Companies that board up and winterize homes will make less money.
  4. Foreclosure auctioneers will make less money.
  5. Collection companies who are hired by the banks will make less money.
  6. Criminals who conduct business in vacant homes will make less money.
  7. Scrap yards that except stolen copper will make less money

After evaluating the Benefits vs. Negatives, I think the Treatment is worth the Cure!! The more short sales we do today, the less foreclosure we will have tomorrow.

Lets get to work!!

Mike Sher

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Notice to all parties when working with a Short Sale

08-28-08
Mike Sher

This is a document that I give to buyer's agent prior to the buyer writing an offer. I find that it helps set a positive tone to the Short Sale Process. Many times a Short Sale deal falls apart because the buyer's agent and/or buyer becomes frustrated and quits before we get the approval. I find that this letter helps avoid that problem.

Mike Sher

When Working with Short Sales

Dear Agent,

A quick note to accompany the Short Sale Addendum to Purchase Agreement:

** Write the following in the Purchase Agreement: "This offer to purchase is contingent on lender's short sale approval" **

This is a Pre-Foreclosure sale. Which means this is a win/win for everyone:

The Buyer: gets a great home at Foreclosure pricing without the hassle of de-winterizing, and turning on the utilities. The buyer gets seller disclosures and a warranty deed at closing.

The Bank: avoids the cost, liabilities of foreclosing on a house; and, though they sell it for less than the debt, they avoid additional expenses and they receive their funds within 24 hours after closing.

The Seller: avoids a foreclosure on his record and is able to offer a great home below the market value price.

Michigan: The economy gets to avoid another foreclosure which has plagued our local economy for so long.

The real cost for all parties is patience. Please understand that it may take up to 45 days or more for the offer to be accepted by the lender. It can be a lengthy process, navigating through the necessary departments. Please keep this in mind, be patient, and ask your buyers to be patient. Set your Purchase Agreement dates accordingly. Timeline as follows:

  1. Buyer signs the Short Sale Addendum that was included with the Seller Disclosures faxed to you from my office. Offer MUST have a mortgage pre-approval, or verification of funds for a cash sale, for offer to be considered.
  2. Seller signs offer, assuming the offer is reasonable for lender to consider.
  3. The property is considered "Pending", contingent on lender approval. We will continue to market the property for back-up offers only.
  4. Listing Agent submits offer with preliminary HUD, pre-approval (or fund verification), along with all required seller documents to the appropriate department(s).
  5. Listing agent will keep in contact with Department and will report to buyer's agent if bank counters, declines or accepts offer (remember: this process may be lengthy).
  6. Once Lender(s) and Buyer agree with terms, a Short Sale Acceptance Letter will be sent (faxed) from the lender to the listing agent affirming and spelling out the terms and conditions of the short sale. All parties (Buyer, Buyer's Broker, Listing Broker and Seller) must agree to the terms of the short sale.
  7. If Buyer conducts a private property inspection, it is strongly suggested that they do so with in 7 days of seller acceptance. It is understood that the sale is "AS IS", with no repairs or price changes agreed to by seller or lender. Buyer's sole recourse is to call the sale null and void if there is dissatisfaction with the property inspection.

Thank you in advance for your patience and cooperation, I'm looking forward to working with you and putting this sale together!

___________________________

Listing Agent

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