Pacita Dimacali - e-PRO, SRES, CDPE, MBA East Bay, North CA real estate

It's been discussed, blogged, taught...and it doesn't hurt to revisit it again.

If it appears that the only available option to the seller is to sell the property as a short sale, it is extremely helpful to prepare him on what to expect: what is a short sale, how to qualify for a short sale, what is the process, timelines, how to prepare his property for sale, and forms he needs to complete.

The seller is already in distress and will not be in the best frame of mind. So it helps when a listing agent walks him through the various pieces of information we need to submit to the lenders, and why it is important to provide a complete short sale package.

What constitutes a short sale package?

• Letter of Authorization - signed by the seller that authorizes the lender to convey information to the lisitng agent or the agent's designate reagrding the loan
  
• Loan Information - signed by the seller that provides the name of the lender, contact numbers, address, loan number, balance of the loan, and if a notice of default was already filed. A separate form is required for each lender
• Loan payment coupon --- one for each lender, showing most current mortgage statement or current balance
• Hardship letter -- the more detailed the better. Indicate the reason(s) for the default, when the hardship started
• Seller's personal financials -- this will take time, but this is necessary to provide background info on the seller's finances, current obligations, and ability to meet those obligations. Required are:
  • Financial statement showing income and expenses --- include everything that seller pays for (household expenses for food, utilities, car payments, insurance, child care if applicable, etc) and sources of income (salary, etc)
  • Two months' most recent statements for all bank accounts and brokerage accounts EXCEPT information on retirement accounts
  • Two months most recent pay stubs or other forms signifying sources of income
  • Two years most recent income tax returns

INCLUDE Property information

• Listing Agreement showing the proposed listing price
• CMA of recent sales in the neighborhood. If there's a chart showing the declining prices, include that witn your CMA to justify the price
• Summary of repairs. If inspections were done that can validate a lower price, such as pest report that shows a high $$ estimate for repairs, include the estimate
• Copy of the MLS posting to show how it appears on the MLS. if you have it posted on other sites, include the list and the links, and copies of the posts, provide those too, to show how aggressively you're marketing the property.
• Your own BPO (broker's price opinion) --- don't wait for a BPO done by someone else. Position yourself as the subject matter expert. It's your listing, after all. Submit your version. It will be good for comparison when the lenders order the BP

When to submit the short sale package?

Although most lenders say they won't open a file until there is an offer, lenders differ in their policies. I've submitted packages BEFORE receiving an offer, and received the name/number of someone I can follow up with. The seller can also call the lender(s) and provide the short sale package once contact is made.

What to include when an offer is received

Most lenders will want the best and highest offer, and may only want to see the top two offers. Be sure to include:

• Complete offer with all the necessary signatures
• Preapproval letter for the buyer
• Proof that the buyer can complete the transaction
• HUD statement showing buyer and seller estimates

Remember that most lenders will approve a short sale only as a last resort to foreclosure for one or more of the following reasons:

• Borrower’s insolvency
  
• The proposed purchase price is more than the lender would be able to sell the property after foreclosing on the loan
• The value of the property has decreased to an amount that is below the loan balance due to local and national economic conditions
• The property was refinanced at a higher value based on an inflated property appraisal report
• The property is in such a physical condition that it is not financially feasible for the lender to put it into a marketable condition.

And throughout this process, do everything you can to market the property. The objective is to get the best possible offer to make it possible for the lender to accept the offer and approve the short sale. Keep the distressed property owner infomed. Brace him for a long wait.

Short Sale packages may be different from bank to bank, negotiator to negotiator. Having completed short sale seminars, listed and sold short sales, worked with two separate short sale negotiation companies, it appeared evident that

HARDSHIP conditions include, but are not limited to:

• Unemployment
• Reduced income
• Divorce
• Separation
• Medical bills
• Too much debt
• Death of spouse
• Mortgage payment increases
• Business failure
• Job relocation
• Illness
• Damage to property
• Military service
• Incarceration

BANK OF AMERICA --- difficult if not impossible

Bank of America is getting, or probably already has the reputation of being one of the slowest and most difficult banks to deal with when it comes to short sales. On Active Rain alone, there have been enough angst and anguish documented about this challenge. Realty Times says:

Bank of America had been among the least cooperative of all banks in agreeing to short sale payoff terms, according to industry critics....

Now the bank has adopted what spokesman Terry Francisco told Realty Times is "a less arbitrary, more rational" policy. "What we're saying (to short sale proposals) is -- give us an opportunity to participate and gain at least some of the savings" that will go to the first lien holder -- the primary lender on the property -- by avoiding the high expenses and losses of a foreclosure, according to Francisco...

But not all short sale market experts are convinced that's the case. Raffi Tal, CEO of Los Angeles-based I-Short Sale, Inc., one of the largest players in the field, says Bank of America's new policy "will still jeopardize" many short sales that involve its second liens.

In spite of constant follow ups that included an email to the CEO, we didn't get a response for two months. But they can't wait a few days for us gather the new information they requested without threatening that they will close the file?

It is incredulous that after having submitted a package in June, they didn't open the file until September, and then they requeted new documentation since the seller's financials (bank statements, pay stubs) are now outdated information. Then the negotiator gives unreasonable deadlines. Two or three times, the negotiator writes or calls Friday morning, and then expects a response by 3 pm that same day or they will close the file.

My seller is in severe financial straits. She bought a condo for members of her family, who, by a series of extremely bad luck, died one after the other within the two years immediately after she bought it.

DEATH AND FUNERALS --- not a hardship

We explained in a hardship letter that not only can't the seller rent out the condo (HOA rules), but she also had to pay for four funerals in a row.

To which the BOA negotiator named Delaney said "the funeral expense isn't a long term hardship and shouldn't be the reason why the customer can no longer afford to pay the mortgage." Geez! The funeral expenses which average to $6,000 each, or $24,000 total, were charged on a credit card that the seller is still paying for.

Too stunned to think. Looking for compassion and understanding from this loan negotiator. No wonder the sculpture in front of the former Bank of America headquarters in San Francisco is known as the banker's heart --- it's black, cold and hard as stone!

Is bankruptcy the only way out?

If someone files for bankruptcy, are her assets protected? Or if the lenders foreclose, is she still subject to a judgment against her by the non-purchase money lien holder?

In 2006, a woman bought a condo for $450K for members of her property to use. It turned into a hellish experience shortly after.

Tragedy struck in the two years that she's owned it, when one by one, four members of the extended family died, leaving no one to maintain the condo.

She can't afford to keep the condo, and she can't rent it out because current condo rules prohibit non-owner occupancy (since the rental quota is full).

The one time she tried to rent it out, the Homeowners Association slapped her with hefty fines and legal fees.

Help! She came to me for help and I listed the property as a short sale

There are two loans, both with Bank of America. BOA will agree to the short sale, but won't pay HOA fees and dues and fines.

After extensive marketing, we produced a buyer and a back-up buyer

Will HOA negotiate?

HOA produced document signed by owner a year ago where the owner agreed to pay $9K to settle the fines/fees, out of escrow after she sells --- but she thought she could sell the condo and have money left to pay.

HOA not inclined to negotiate, and instead filed a notice to foreclose

HOA attorney says even if they don't foreclose, the HOA can go after owner's personal assets including her checking and saving accounts, garnish her wages, and file a lien against her current home (not the condo).

Condo buyer willing to pay some, but not all of the condo HOA fees, but HOA won't agree to reduced fees.

HOA will pursue condo owner --- whether it's the bank or a new buyer

Market values have plummeted and this condo is worth only about $315K, more than a $100K loss.

But since this is going to be a short sale, the seller won't have any money to pay HOA.

Is she better off filing for bankruptcy? She says she will just let the banks and the HOA foreclose. I suggested that she see an attorney to represent her and protect her interests. She's not convinced that she will be subjected to any kind of judgment.

Straight from the NAR: A call to action!

From Money Morning, Associate Editor bob Blandeburgo writes, "Home Sales Will Struggle to Rebound Without Tax Credit Extension "

If you haven't seen this yet, please watch it now. Tell your friends, your associates, your congressmen. Send this to as many people as you can!





Tell Congress: Extend and Expand the Homebuyer Tax Credit

We have all seen first-hand the positive impact the first-time homebuyer tax credit is having on the real estate market recovery. As the expiration date for this successful program looms, we ALL need to make sure that Congress hears from us about the positive impact this program has had and ask them to extend it, and expand it, so that we can continue to see our markets fully recover.

What's At Stake:
The $8,000 first-time homebuyer tax credit expires December 1st. The usefulness of the credit diminishes daily if the credit is not extended well before that date. A homebuyer is eligible for the tax credit only if the home is “purchased” before December 1st. Buyers have to find a house, complete a contract, satisfy any contingencies, secure financing and go to closing by November 30th.

Without Congressional action NOW, the market may freeze again – possibly as soon as October

Here's the link that you can share, embed in your blogs, email to your associates. GO!

http://takeaction.realtoractioncenter.com/campaign/hbtc/w6n58ek4yj3ne86b?

Last Sunday, I had just one appointment to show property to a family, and ended up with THREE NEW LEADS!

CHANCE MEETING #1 During my open houses, I always give a ton of information --- copies of the local magazine, local map, school district map, latest Realty Times newsletter, list of open houses that day, etc. So when I was previewing an open house, a woman and her husband stopped me to say they met me at my own open house weeks ago. After chatting for a while, I told them about a property that may meet their needs. Since it was vacant, we were able to look at it right away, and saw another house afterwards. YEAH!

CHANCE MEETING #2 Just as I opened the door to a vacant REO, a woman and her mother stopped and asked if they can see the house too. Normally, I'd lock the door behind me (but it was a warm day, and I wanted to let in fresh air). With my client's permission, I allowed them to come in for a peek. I gave them as much information as I could, handed them my card, and told them that if they want to see the house later, I will be happy to show it to them.

Today, I received a call from the husband of the younger woman. His wife really liked the house, and wanted him to see it. After showing him the house, he wanted to know what his monthly payments would be. So I whipped out my iphone with Fidelity Agent, and lickety split, I gave him estimates if he bought a house for $750K, $725K and $700K. I followed up with an email later. He said he likes the quality of information I provided. YEAH!

CHANCE MEETING #3 As I was locking up a house I just showed, a couple came up and asked if they can see it too. I told them that I am finshing up with my clients but that I would be happy to show it to them at another time. I did give them some information about the house to pique their interest. Later that afternoon, they called me up to show them the house where I met them.

After meeting with them, and determining what they were looking for, I offered to show them other possibilities in the development. Later, I asked why they called me. They said they liked that I stopped long enough to give them information, and that "you were very sincere." I emailed them with additional information --- and they're deciding which house they would like to go after. YEAH!

What this tells me is that it helps to be nice and helpful, even for a very short time, and to hand out that business card and print copies of Realty Times as a handout during open houses.

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