Ross Kilburn, www.SeattleShortSales.com

This article was originally published in the Seattle Short Sales, Inc., blog on March 7, 2012.

A revision of Senate Bill 6337 (companion to House Bill 2718) was passed last month. The aim of the bill is to protect homeowners who short-sale their homes from being pursued by their lender for the deficiency.

The deficiency is the shortfall owed to the lender after a home is sold short. For example, if a homeowner owes $200,000 on their mortgage but, following the short sale, can pay the lender back $120,000 on the loan, the difference - $80,000 - is the deficiency.

This bill sounds great in theory. But, for the majority of homeowners who process their short sale here through Seattle Short Sales, Inc., this bill will make no difference at all.

Why? Because the majority of our approvals - in fact 93% of all short sale approvals we negotiated last month - already come with a clear wording that waives the homeowner of ever having to pay back the deficiency. Our homeowners already have the protection that this bill would offer.

The new bill applies only to short sales for which the lender has issued a Form 1099 to the borrower: the homeowner to whom the debt was forgiven. Lenders are required to issue a 1099 any time that they forgive a debt of over $600. This means that the borrower must declare the forgiven debt, and they may have to pay tax on it as if it were income. It also means that the lender may write off the bad debt as a loss, which means that they may get a tax break on that loss.

So, really, what Bill 6337 does is prevent a lender from both writing off the bad debt as a loss, and also pursuing the borrower to pay back that debt. They must choose one option or the other. (Which - really - should be the case for whenever a 1099 is issued, not only in the case of short sale deficiencies).

And that seems only fair.

But, as we pointed out, 90% or more of our recent approval letters already specify that the lender will not pursue the deficiency. Here are some sample stats showing how our track record of obtaining deficiency waivers with short sale approvals has increased over the past two years:

(A quick point here, in case you were wondering why we’ve only shown stats for a few months over the past two years: We could not afford the time to go through all of the hundreds of short sale approvals we have negotiated over that time period. So we used the March 2010 and March 2011 stats, which we had already gone through for our blog post on deficiency waivers. And then, starting last July, we changed our file-naming system so that whether the deficiency was waived (“Debt Settled”) or not waived (“Lien Release” only) is in the file title, so we selected the two months at the beginning of that period as well as the last two months. You can review our complete short sale approval letter database here).

So two years ago, back when the majority of short sale approvals did not explicitly waive the deficiency, this bill might have made a difference. But now that lenders have realized that short sales are in their best interests, too, and are willing to write into their approval letters that they will waive the homeowner of ever having to repay the deficiency… well, Bill 6337 won’t do anything. They have already said they will not pursue the deficiency.

For the minority of our short sale approval letters where the lender does not explicitly waive the deficiency… well, even then, Bill 6337 will not change much. According to the wording of the bill, the lender is only prevented from pursuing the deficiency if they have issued a 1099. But if they don’t issue that 1099, again, the bill won’t prevent them from chasing borrowers up for that deficiency down the road - or to selling that loan on to debt collectors.

The take-away here is that the protection for homeowners who are considering a short sale is that Bill 6337 will not likely protect you. Your security lies in the wording of your original approval letter. Make sure that the negotiators who are working on your behalf work towards clear and unambiguous wording about waiving the deficiency balance - and then you will know that your future is safe, Bill 6337 or not.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

This article was originally published in the Seattle Short Sales, Inc., blog on February 28 2012.

Learn how to get your BECU short sale approved in this BECU Short Sale Case Study.

BECU Short Sale Case Study:

Property Location: Everett, WA - Snohomish County

1st Lender: BECU

Hardship:
“We would like to explain our current financial situation and request the approval of a short sale of our property.

“Due to our recent divorce, as well as my ex-husband’s job loss last year, we are unable to meet our financial obligations on our mortgage. Neither of us can afford to keep the property on our own, between car payments, credit card bills, student loans ($60,000 worth) and medical bills.

“We have lived in our home since May 2008 and have, until recently, been on time in making our mortgage payments. We had every intention of living here for many years. We fully intended to make everything work, unfortunately, it just didn’t work out. Due to our financial hardship and the declining economy we can no longer meet this obligation. We are actively pursuing a short sale because we want to get as much money for the property as possible, and to avoid foreclosure.

“We have enclosed documents for the past 2 months to illustrate our financial situation. We live paycheck to paycheck and have no savings. All of our money goes to bills and food with very little left over for any extras.

“We are embarrassed that we are in this current situation and would like to avoid further financial difficulties by continuing negative credit and mounting financial obligations. We want to short sale our home and settle our debts.”

Sales Price: $56,500

1st Loan Balance: $168,620

1st Deficiency Balance: $121,862

1st Settlement: Deficiency waived!

Timeline:
The homeowners contracted a real estate agent and listed their home for sale on March 8, 2011. The home was listed for sale for $79,700.

On March 17, the Listing Agent passed the file to a Seattle Short Sales, Inc., case manager. The case manager reviewed the file, and on March 18 requested that the Listing Agent provide some financial documents which were missing. These were provided on March 29. On April 4, the Seattle Short Sales, Inc., case manager submitted to the file as “complete, waiting for buyer” to BECU, the lender.

On July 29, a signed offer to purchase the home for $56,500 was received. On August 2, the Listing Agent sent the purchase offer, along with updated financial documents, to the Seattle Short Sales, Inc., case manager.

The lender, BECU, undertook a BPO (Broker’s Price Opinion) which, they indicated, came in higher than the purchase offer. On September 14, BECU indicated that the sellers would have to contribute $20,000 to close the sale. The sellers responded that they did not have the money to do that, and that they also could not afford any type of monthly payment. The BECU negotiator said that she would take that information into account, and be in touch the following week.

On September 29, BECU issued an approval letter for the short sale, for closing by November 15, with explicit wording waiving the sellers of having to repay the deficiency: “BECU will receive no less than $46,758.36 at closing. We are waiving the deficiency.”

Result:
The homeowners, a divorcing couple, were able to sell the home that neither of them could afford on their own. They paid off only 28% of their mortgage (paying their lender $46,758 of the total $168,620 owing) - a discount of $121,862 - and were waived of ever having to repay this deficiency balance. Both homeowners were able to move forward with their new lives, knowing that their old house debt would never come back to haunt them.

To download a copy of the short sale approval letter, click here: http://seattleshortsales.com/LiteratureRetrieve.aspx?ID=93640

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

This article was originally published in the Seattle Short Sales, Inc., blog on February 26 2012.

According to a news clip from CNN (click Play below, of view here), summarizing information provided by the National Association of Realtors and by Zillow, home prices in Seattle could drop by nearly 7% more in 2012.

Home prices in the USA are the lowest they have been in a decade. Currently, the median home price nationwide is $154,700, less than half of what it was in 2007. Housing prices are expected to drop across the country by a further 3.7% this year.

But the report goes on to break out home prices by region. Some cities, such as Washington, Los Angeles and Phoenix, have already passed through the worst of the foreclosure crisis and are even expected to show small gains in home prices this year.

However, many regions have not yet seen the worst, and are expected to show price drops that are worse than the national average for the coming year. Seattle, not having been hit as hard by the crisis so far, fits in this category.

The prediction is for home prices in Seattle to drop by another 6.9% over 2012 - a rate nearly twice that of the national predicted price drop. The only two cities with more dire forecasts than Seattle are Atlanta (8.5% drop) and Chicago (7.6% drop).

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

This article was originally published in the Seattle Short Sales, Inc., blog on February 9 2012.

Learn how to get your Chase short sale approved in this Chase Short Sale Case Study.

Chase Short Sale Case Study:

Property Location: Everett, WA - Snohomish County

1st Lender: Chase

Hardship:
“When we purchased our home in 2007, we were excited to have our very first home, and though it needed a little work we were certain that it was a sound investment in our future. We quickly acquired credit for several projects to add value to the home. Immediately there were plumbing and electrical issues that the previous owner had glossed over and that required attention in order to live in the home comfortably.

“We added a large shed for storage and a privacy fence, both of which we built ourselves. In early 2008, we had a high-quality siding installed, not only to improve the appearance of our home but the energy efficiency as well. These improvements were very costly, but we were confident that we would recoup our costs because of the strong market values in our areas.

“In April 2008, the waiting period for refinance on our loan was up, and we were looking forward to the prospect of a refinance that would allow us to use the equity we had earned, to consolidate the extensive credit card debt that we had incurred over the last two years. Imagine our disappointment and distress when we realized that the value of our home had actually decreased.

“Somewhat frantic, we were relieved that Chase offered options for modifications of loans for homeowners in our situation. We completed our first modification in early 2008, but were disappointed in the results. We then hired a lawyer who specializes in loan modifications in April 2009, and for the last 19 months have been anxiously awaiting help. We recently received the offer for our new loan, and are still unable to meet the new terms.

“During this same time frame we have had several expensive health care issues. We do not have health insurance and in late 2008, my husband required emergency dental care that has resulted in over $13,000 of debt. In late 2009, he was also diagnosed with an untreatable genetic condition which causes extreme chronic back pain. The care and treatment of this condition has caused us to deplete our minimal savings. The monthly bills for his pain medications are in excess of $500. In addition to the added costs, his daily pain makes working difficult, and he has been forced to cut back his hours, decreasing his income.

“Over the past two years we have struggled to keep our heads financially above water. We are now unable to keep up with the mortgage and our medical debts as well as the maintenance of our home. We have struggled for so long, and do not wish to end in foreclosure. Please help us to sell the home and settle our accounts.”

Sales Price: $60,000

1st Loan Balance: $192,684

1st Loan Arrears: $7,465

1st Deficiency Balance: $152,374

1st Settlement: HAFA transaction - Deficiency waived!

Timeline:
The home was listed for sale on March 3, 2011. On May 19, the Listing Agent passed the file to a Seattle Short Sales, Inc., case manager. The case manager assembled all of the necessary financial and legal documents, and on June 7 sent a package to the Listing Agent, indicating “File Complete, Waiting for Buyer,” and also forwarded documents to Chase, the lender.

On July 26, Chase requested additional documents, including the listing agreement, hardship letter, and financial documents, as well as ordered the BPO (broker’s price opinion), which they indicated would be valid for 120 days. The Seattle Short Sales, Inc., case manager checked with the Listing Agent about the listing price. It had not been lowered since the home was listed, more than four months before, so she instructed the Listing Agent to lower the list price in order to try to obtain an offer.

On August 1, the Seattle Short Sales, Inc., obtained the forms for the sellers to apply for HAFA. These were completes, and submitted to the lender on August 9. On August 26, Chase approved the seller’s participation in HAFA. All parties awaited a buyer. On August 31, the list price was lowered to $75,000.

On October 19, the Chase negotiator suggested lowering the price again, indicating that if the home did not sell by December 22, participation in HAFA would expire, and the file would have to be reassembled as a traditional short sale.

On October 31, a signed offer to purchase the home for $60,000 was received. On November 3, the offer and HUD was faxed to the lender. On November 10, the Seattle Short Sales, Inc., case manager asked Chase for an update; they responded requesting that the documents be re-sent.

On November 18, the Seattle Short Sales, Inc., case manager followed up with Chase again. Chase confirmed that the offer had been received and was in a queue to be assigned to a negotiator, noted that the BPO had expired and they would have to order a new one, and indicated that the file would have to be reviewed again for HAFA.

On November 28, Chase assigned a negotiator to the case, and the Seattle Short Sales, Inc., case manager left a voicemail making contact with her. On December 2, Chase indicated that the case was with a document processor, and that a negotiator would be assigned shortly, and that the would review the offer within 20 business days. The latest BPO was completed, but Chase would not share the value.

The negotiator was assigned on December 8, and the Seattle Short Sales, Inc., case manager left a voicemail to make contact with him and to request an update. On December 15, the negotiator requested updated financial documents and an updated listing agreement, which the case manager requested from the Listing Agent. These documents were provided by the Seattle Short Sales, Inc., case manager on December 27.

On January 5, the new HAFA documents signed by the seller were received, and forwarded to Chase. On January 12, the Chase negotiator returned documents, indicating that closing must be before March 15, and reducing the escrow and attorney’s fees. The Seattle Short Sales, Inc., case manager revised and resubmitted the documents accordingly. On January 18, the Chase negotiator requested that two other fees be revised on the HUD, which the case manager changed and resubmitted that same day. The Chase negotiator submitted the file to the investor for a final decision.

On January 27, the negotiator indicated that the file would be approved, and on January 30 a final letter approving the short sale, and the seller’s participation in HAFA, was issued.

Result:
The homeowners were able to short sale the home that they could no longer afford to make payments on. They paid off $47,775 to the lender - out of a total balance owing on the loan of $200,149 - which is less than one quarter of the total funds owed. Since the short sale was processed as a HAFA transaction, they were waived of ever having to pay back the $152,374 discount, and were able to get a clean start in life.

To download a copy of the short sale approval letter, click here: http://seattleshortsales.com/LiteratureRetrieve.aspx?ID=99747

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/

This article was originally published in the Seattle Short Sales, Inc., blog on January 30 2012.

As reported today in The HousingWire, home prices are now a full one third lower than their peak in 2006.

Home prices continued to slide through 2011, dropping 3.9% by the end of the third quarter of 2011, relative to one year earlier.

The Case-Shiller Indexes released today predict that home prices will continue to fall another 1% this year before bottoming out. According to this index, prices are expected to then rise 3.8% in 2013.

However, Yale University Professor Robert Shiller, in an interview with Yahoo!Finance published today, treats these predictions with caution. He notes the challenges that economists face in making accurate predictions when there are not previous similar examples to study and learn from.

According to Shiller, today’s low interest rates probably don’t matter much in determining home prices. What seems to influence prices more is momentum. “So if it's been going up it will continue going up and if it's been going down it will continue going down,” Shiller says. “By that model, which is the most successful forecasting model for home prices, prices will keep going down.”

What seems clear is that the end to the price slide is probably not quite in sight. Shiller also notes that it is difficult to determine what, exactly, is appropriate pricing for housing today, given that we are heading from a period where homes were overpriced. “I don't know exactly where the middle is but it's not like we're overpriced anymore. Now the question is whether we'll overshoot, which is a common thing that happens after bubble burst.

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/