Boy Versus Short Sale

In the business of short sales when you finally get a bank that makes a solid effort to effectivly handle a file you feel like telling the world.

We have a GMAC short sale insured by FHA.  We have found lately that Bank of America and Wells Fargo have been so SLOW on their FHA files that I am almost falling out of my seat to see an Approval To Participate (ATP) letter from GMAC 36 days after sumitting our offer.  

If you are not in the Biz you might think that is still a long time but several of our B of A short sales (FHA) have taken months to get the ATP and then another month to get the actual approval letter.

Thank you GMAC for doing a decent job.  If more servicers/lenders would work this efficiently we could have closed nearly double our numbers last year in Spokane, Washington.

As most of you know, my lovely wife Jessica Side (EvoReal) and I work together on short sale listings.  She will likely not toot her own horn so I have to for her.  She closed more short sale transactions in 2011 than any other agent in the Spokane WA Multiple Listing Service.

That however is not the point of this post.  This post is about a Wells Fargo FHA short sale she has been working on for over a year now.  This property is located in the Spokane Valley on N. Willow Street.

(If you want details on the listing check out her website www.EvoReal.com.  It is a featured listing)

This property has been approved already and the buyers walked away for inspection.  This most recent story is about our negotiator who kept pending our file because she wanted agent initials on contract changes or Spokane instead of Spokane Valley to match her loan file.  Basically by the time Jessica made all the changes and we got it back over to Wells Fargo, Talondah (If you have worked with her you know what I am talking about) could not read the contract and so she gave Jessica three days to re-draft the documents, and get original signatures and initials from the buyer, seller and selling agent as well as herself.  Well as many of you know three days is just not enough.  

Result:  File Closed

We couldn't lose another buyer.  They had been reasonably paitient signing the same document three times but things were getting thin.

Now what do we do?  Talondah won't acknowlege our emails requesting the re-open of the file and it was not right to make everyone wait another two or three weeks for it to get re-assigned.

Then she came to mind.  My Wells Fargo Obi Wan Kenobi.  Jamillah.  

I sent her an email, with the newly revised contracts and an appeal to get the file assigned ASAP so we did nto lose another buyer.  She got the email on Monday 3/26.   We had our assigned negotiator assigned today 3/28.

Sometimes it really is who you know.  Thanks Obi Wan.

My primary business is negotiating short sales for homeowners in Washington State.  I primarily negotiate in Spokane County but always have a handful of short sales in process in the Seattle area too.  Even though my business is short sales, when I sit down with a potential client I always make sure they have exhausted all of their options specifically around the desire, if they have any, to keep their house.  Though the statistics are overwhelming that most borrowers attempting to modify their loan will be declined, it is my belief that if you want to stay in your home, you should at least try.  

How you try will determine your likelihood at failure or success with the loan modification.

This is why I developed the Do-It-Yourself Loan Modification Kit.  Since I don’t negotiate loan modifications anymore (We decided to focus only on short sales) I created this free resource for our clients to help them look into loan modification.  Like I said before, if you want to try and save your home through a loan modification, I think you should do it.  Just don’t go in unarmed and make sure you follow these guidelines to increase your success.

For a free download of the Do-It-Yourself Loan Modification Kit, visit our website at: www.AllianceShortSales.com

It has happened a day late and millions of dollars short, but Bank of America is now letting the substitution of buyers in the short sale process without starting the whole process over again.  You would think a bank the size of B of A would have figured this out years ago.

Here is an example what the old policy did to us.

Two weeks ago we had a buyer walk and found a new buyer within days.  B of A still closed out the file and believe it or not, actually had our seller call back in to discuss options such as short sale, deed in lieu and HAFA even though two weeks earlier they had just completed the same conversation.  We scratch our head but do what they say in order to get the file moving forward again with a new buyer.

This policy change will be a great help for all of us.

However, be forewarned short sales policy changes like this do not come without resistance from associates and corporate caveats that most real estate professionals will never realize until it is too late.

There are limitations to the back up offer scenario.  The bottom line, you better have a backup offer when the first buyer walks.  As soon as you notify B of A that they first buyer is not interested you have 14 days to upload the back up offer to the system.  If you go past 14 days they close the file and make you start over like usual.

There are two lessons here:

First, every agent should be marketing for backup offers from the beginning.  Too many real estate professionals don't take the time to get a back up buyer.  It will save your short sale more often than not.

Second, don't send the flag up the pole that you lost a buyer until you have a new one.  Short sales take forever anyway; let B of A work the process internally while you bust your back side getting another buyer.

This policy change is going to cut our B of A processing of short sales down simply because we don't have to start at square one so many times on each file.

If you are not familiar with the Equator system, check out my YouTube channel.  I have a couple intro videos that will be helpful.  www.youtube.com/allianceshortsales

Matt Side
Alliance Short Sales
www.AllianceShortSales.com

Follow Me on Twitter:  http://twitter.com/MattSide
Follow Me on YouTube:  http://youtube.com/allianceshortsales

Based in Spokane, Washington Alliance Short Sales offers short sale services in multiple states around the U.S.  Alliance negotiates short sale real estate transactions with lenders on behalf of agents without charging a fee to the agent or the seller.  Because their fees are paid at closing out of the net proceeds to the lender, Alliance creates a beneficial outcome for all parties involved.  For additional information about how you can work with Alliance Short Sales, please visit our website at www.AllianceShortSales.com.

Fannie Mae strikes again.

We have been working a short sale with IndyMac bank since February 2, 2011 to start the negotiation process.  More than enough time to process a short sale approval and close before a foreclosure auction of April 8, 2011.

Unless Fannie Mae is the investor on the loan it seems.  The file was done and only waiting for the approval from the MI (Mortgage Insurance) company in order to get the approval and close.  IndyMac started asking for the postponement two weeks ago.

Bottom line, Fannie Mae said no.  We won't postpone the file.  Worst part of the story, the property reverted back to the lender for $3000 more than the buyer's offer that was on the table.

This post is not simply a place to vent my frustration.  The reality is that we need to do something about this.  If you have any other similar experiences especially with Fannie Mae please post a comment to this post.  I will be having a meeting with one of our congress women during the next recess to express to her the brokenness of the system.  The more we can have people of power understand the problem the more likely we will be able to change it.

Matt Side
Alliance Short Sales
www.AllianceShortSales.com

www.SpokaneShortSales.com

Follow Me on Twitter:  http://twitter.com/MattSide
Follow Me on YouTube:  http://youtube.com/allianceshortsales

Based in Spokane, Washington Alliance Short Sales offers short sale services in multiple states around the U.S.  With a current network of agents located in Washington, California, Idaho, Nevada, Arizona, Florida, Tennessee, Georgia, Ohio, and Virginia, Alliance negotiates short sale real estate transactions with lenders on behalf of agents without charging a fee to the agent or the seller.  Because their fees are paid at closing out of the net proceeds to the lender, Alliance creates a beneficial outcome for all parties involved.  For additional information about how you can work with Alliance Short Sales, please visit our website at www.AllianceShortSales.com. Spokane Short Sales Dot Com

I am sure you have seen the Legal Bulletin 188 put out by the NW MLS.  My broker forwarded it to me this morning and I am sure yours forwarded the same to you.

The email addresses two items of which I wanted to make an immediate response so all of the real estate agents that work with us at Alliance Short Sales can be set at ease regarding our compliance with both state and federal regulations.

Let me start with the state regulations. 

You may not have taken the time to read the "Short Sales - Guidance for Licensees" bulletin released on 12/10/2010 by the Department of Financial Institutions (DFI) and the Department of Licensing (DOL).  I am not going to exegete the document for you in this email.  What I want to simply do in this email is to draw out a couple of key points. 

Summarized in the NW MLS legal bulletin, "DOL and DFI further state that real estate brokers may not charge any fee for providing short sale negotiation services in addition to the normal and customary real estate commission. Of course, this would prevent a real estate broker from charging a separate fee for short sale negotiation services, just like a broker's limited license to practice law."

Everyone's first question after reading this statement is understandably, "How can Alliance Short Sales continue to offer third party negotiation services?"  As real estate brokers, we can not.

So who can negotiate short sales?  According to the DFI and DOL bulletin, "The Department of Licensing ("DOL") and the Department of Financial Institutions ("DFI") require that a person have either a mortgage loan originator license, a real estate license, or be an attorney licensed to practice law in Washington, to negotiate short sales."

Since the real estate broker provision does not allow for additional fees Alliance must fall into a category described in page 3 of the DFI bulletin.  

"Entities engaging in short sale negotiations for compensation must obtain a license under the CLA [Consumer Loan Act] or the MBPA [Mortgage Broker Practices Act], and the individuals who conduct loan modification activities on behalf of such entities must obtain a mortgage loan originator license under one of those two acts."

Fortunately, for Alliance Short Sales, I was a designated mortgage broker.  I actually I only sent my license back to DFI in December of 2007.  I contacted DFI regarding this needed licensing two weeks ago when I first saw the bulletin.  They told me that in order to reinstate my mortgage broker's license I simply needed to submit specific documentation for review.  The submission of final documentation will go out to DFI on Tuesday of next week.  According to the DFI web site it is approximately a two week turn around from submission for approval.

In closing let me address the MARS compliance.  Our MARS disclosures will be similar to those provided by the NW MLS but specifying a fee charged for our services as a mortgage broker.  For those agents who are currently working with us on active files I will be sending those to you next week.  I will also have a release document for your brokers since we are the MARS company and you are not.  It is recommended that you have some record of our compliance to limit your own liability.

Sorry for the long post but I felt it important to let everyone know where Alliance Short Sales stands with these changes.  Let me know if you have any questions.

Have a Happy New Year!!!

This article is a continuation of one I posted several months ago with some updated information.  To read the original article visit:

http://6fd70e2.activerain.com/post/1576094/fannie-mae-no-longer-postponing-foreclosure-auctions-bad-news-for-short-sales

We just had another Fannie Mae approved short sale go to foreclosure after FNMA approved it.  The buyer was even done with inspections and appraisals.  We only needed a few days for the file to exit final underwriting.  Fannie wouldn't do it.  They took it back at foreclosure.  We were working with Metlife aka First Horizon/First Tennessee to request a rescission of the foreclosure auction due to the circumstances.   After pushing and pushing, Fannie Mae contacted me directly.  They said I was welcome to return their call but Metlife was correct, they were NOT reversing the sale.

I just got off the phone with a rep at Metlife that I worked with ages ago.  I called him and said, "I know this is not your file but I need help, why won't they postpone these sales?"

He said it was a new directive that came out from Fannie Mae on August 1, 2010.  If the buyer can not close before auction they won't postpone the sale.  They will just take it to auction.  Since he has no motivation to lie to me as this was not his file, I tend to believe him.  Coincidentally this was the same date that Fannie started to participate in HAFA.  Hmmmmmm

Lesson:  Buyers must close on Fannie files before the foreclosure auction.  If you are getting close to an auction date get everything done for the buyer you can before the approval comes.  They may want to even finish inspections or appraisals a head of time.  I can not tell you how disappointing it is to watch your commission checks simply disappear overnight.

Hopefully this helps some of you out there avoid the same pain we just went through.

Matt Side
Alliance Short Sales
www.AllianceShortSales.com

Follow Me on Twitter:  http://twitter.com/MattSide
Follow Me on YouTube:  http://youtube.com/allianceshortsales

Based in Spokane, Washington Alliance Short Sales offers short sale services in multiple states around the U.S.  With a current network of agents located in Washington, California, Idaho, Nevada, Arizona, Florida, Tennessee, Georgia, Ohio, and Virginia, Alliance negotiates short sale real estate transactions with lenders on behalf of agents without charging a fee to the agent or the seller.  Because their fees are paid at closing out of the net proceeds to the lender, Alliance creates a beneficial outcome for all parties involved.  For additional information about how you can work with Alliance Short Sales, please visit our website at www.AllianceShortSales.com.

HAFA has been around for months now.  However, its adoption by lenders seems to be moving at a glacial pace.  The banks have done their best to put up any and every roadblock they can.   One of their favorites has been, "This is a Fannie Mae (or Freddie Mac) loan, and as such, is not eligible for HAFA."

The good news is that recently, both Freddie Mac and Fannie Mae announced that they will participate in the HAFA program.  In essence, they copied and pasted the program guidelines into their own guidelines. 

Why they did not participate from the beginning is a mystery to me.  There must have been a guy somewhere over at Fannie Mae, twiddling his thumbs in a cubical, waiting for his retirement date to roll around, and in order to satisfy the board of directors that he was, indeed, doing something useful with his remaining time, accepted the job of copying and pasting from the Treasury Department's HAFA guidelines.

My guess is that in order to distance themselves from the recent scrutiny concerning the plagiarism that seems to be an issue with the Colorado gubernatorial race, the guy's boss told the short timer to make up something new, to change a few words here and there just to be on the safe side, and to please burn up as much time doing the job as was humanly possible.  (Freddie Mac did pretty much the same thing but with a female writer.  There's certainly no need to bore you with those details.)

To give credit where credit is due, the short timer at Fannie Mae actually did come up with at least one new idea.  If a homeowner has to move over 100 miles away for a job, the "owner-occupied" stipulation can be waived.  Great idea.  Original too. 

So there you have it.  Beginning August 1, 2010, the banks now have fewer roadblocks to detour real estate professionals when we try to participate in HAFA-at least for the time being.  I'm sure they will think of others soon, but for now, some progress is better than no progress.

Oh, and if you think I am giddy with anticipation about how great Fannie and Freddie's participation will actually be, think again.  I have about as much faith in them as I do in the HAFA program, itself. 

If you would like a bit more insight into HAFA's biggest problems, take a look at a few of my videos on the subject.

http://www.youtube.com/user/AllianceShortSales#p/u/33/axFOBBuB8ck

http://www.youtube.com/user/AllianceShortSales#p/u/32/d5wAwc3uXTY

http://www.youtube.com/user/AllianceShortSales#p/u/22/_VdIe9dpOZU

This last one is my favorite. :)

Much success in your short sale processing.

"Help!  Get me out from under this house!"

More and more sellers want to escape from their high payments-even sellers who can afford those high payments. Those sellers are pursuing what banks call a "Strategic Default."

The term, Strategic Default, might be new to you, but we are hearing it more and more from the lenders with whom we work, and we are seeing more and more on our clients' files.

Strategic Default means that a borrower or seller, who wants to get out from under their real estate debt, makes a conscious decision to fail to repay their loan-they default, but they are strategic about it. 

They have an investment property or a house they live in, and that property's value has decreased so much that they currently own more than the property is worth.  When that is the case, the homeowner's thinking sometimes goes like this, "I don't want to be here anymore.  I don't want to live in a house for which I owe $100,000 more than it is worth.  Forget it!  I'm done!  I'm going to see if the bank will approve a short sale for me so I can move on with my life."

The difference between a strategic default situation and a non-strategic default is that the borrower can actually afford to make the payments in a strategic default, so the "hardship" piece of the short sale transaction is really weak, even nonexistent.  Even though the owner doesn't really have a hardship, he wants to let the house go back to the bank, get out from under the high payments, and call it good.  However, he doesn't want to destroy his credit in the process so he pursues a short sale. 

So what do the banks think about strategic defaults?  Well, they will do them but with a couple of conditions.  If your client shows you his financial worksheet, tax returns, and pay stubs--and you see that he is paying his mortgage payments, is still able to pay all his bills, and has money left over at the end of the month-that client is not going to fall into the category of a normal short sale client.  That client should expect the lender to treat his file as a strategic default. 

In the case of a strategic default the seller should expect one of two requirements from the lender (or a combination of the two):

1.  A promissory note.  The bank is going to say, "This guy has enough money to pay this loan.  We'll let him sell the house and get out from under the house part of it, but we are going to collect on the rest of our money. So, we want him to sign a promissory note."  The promissory note could be for a large portion of the banks loss, if not for the entire amount of the deficiency.  Often a portion is forgiven which can still work out to the benefit of the seller.

2.  Cash at closing.  The bank could insist on a contribution from your seller at the closing table to increase the net payoff to the bank above and beyond the amount of the purchase contract.

If you are going to represent someone as their realtor in a strategic default, you need to get him to acknowledge his understanding of the process and the requirements the bank is likely to impose.

When you are doing a quick review of your seller's situation, and you are looking at his financials, have the seller agree at that time stating that he understands he must accept a promissory note if the bank requires it, or that he will, within reason, have to contribute cash at closing. 

Believe me, if your seller won't agree to those conditions at the beginning of the process, he certainly won't agree to them at the end! 

The bank might just open up that escape hatch in the form of a strategic default, but make sure your client has indicated that he understands the hatch comes with a catch!

I made a prediction in late April that we would have buyers bail out of short sale transactions as the tax credit neared its end, and that has certainly proven to be true.  May has been a really interesting month for many real estate agents selling short sales.  Our office alone has had seven approved short sales in which the buyers were either gone when the approval came through or couldn't close the deal.  Several of those seven, last-minute defections were because of the tax credit. 

If you've got buyers on your short sales who were under contract before April 30, I'm sure you've already positioned them to understand that if they needed the tax credit to close, they should not have put an offer in on a short sale property.  At this late date, it's a dicey proposition at the very least.  Agents can't guarantee anything when it comes to time frames for a short sale.  Short sales are notorious for going longer than anyone expects them to.  So, putting your buyer's eggs in that basket was not at all a sure thing.

So, I'm sure none of the buyers you have right now need or want that tax credit...right?

Well, let me let you in a little secret.  They all want it!  They absolutely do.  Whether or not they have to have it--and I hope, at this point, that they actually don't need it to close-8,000 bucks is 8,000 bucks.  Even to Bill Gates, that's not chump change.  Well maybe to Bill Gates it is, but not to the majority of us.

The reality is that this is the last week of May.  Most buyers are looking at the calendar and saying, "Hey, if I don't get an approval by the end of this week, I'm out $8,000!"  They might not need that money to close, but no one wants to kiss that kind of money goodbye without, at least, exhausting all their options.

So your buyer wants that tax credit, and time is ticking, and your buyer is thinking of shopping around for another house, etc...  Here's a tip:  If the buyer is serious about getting the $8,000, have them (or you) call in a favor to their loan officer, and tell that bank guy or gal, "I know we don't have an approved short sale yet, but I really need you to start processing and underwriting this loan so all we have left to do is the appraisal."  (This is assuming that your buyer does not want to pay for the appraisal prior to approval, but that might be a reasonable trade off in some situations.)

Here's the deal--30 days is what a buyer's bank usually needs to process the entire loan.  That lender as you well know--especially those of you who listened to our conference call concerning lenders--realize that the lenders look at a short sale transaction and say, "Until we have an approval letter, this isn't really even a full contract, so I'm going to do nothing.  I won't even collect documentation and verify that their information is what it says it is.  I'll pre-qualify the buyer and that is about it.  I'm not going to do anything else."

The truth is that a short sale approval might come through in mid-June. If the bank and the buyer have been moving the loan forward, you might be able to close the deal in two weeks, get it funded, and have the buyer still get their $8,000!

If you are the buyer's agent, seriously consider making that call on your buyer's behalf.  Ask the lender to process and underwrite the loan and get back to you with the only remaining condition being a satisfactory appraisal.  So that if the approval of the short sale comes through at the last minute, they've already looked at title; and they've already done all their underwriting and verification.  If an appraisal is, then, the only condition, you can most likely get a quick appraisal, and get docs out in a week!  You could slam that thing through and get it done-and get your buyer $8,000 she might otherwise not have gotten.

You're going to have to pull in a favor because loan officers don't want to work for free and that's the way they'll look at this.  They'll say, "This short sale isn't even approved.  I'll be working for free on this."  True enough.  But if you have good relationship with them, and you really appeal to their better nature, hopefully, they will be able to process the loan file and you can do a rush deal and get that thing closed by June 30, 2010 and save the day with a "Hail Mary" pass!  Everyone wants to be a hero, even loan officers.  Why not try to get a deserving buyer $8,000?  The government is giving money away, we might as well see if we can help the buyers get it. 

Matt Side

Alliance Short Sales

www.AllianceShortSales.com

Follow Me on Twitter:  http://twitter.com/MattSide

Follow Me on YouTube:  http://youtube.com/allianceshortsales

P.S. - Here is a tip if the bank makes a counter offer on your short sale:

If a bank is countering your short sale on price by $5,000, and your buyer qualifies for that $8,000 tax credit, don't dink around with that counteroffer!  Recommend that your buyer accept it!  If you do dink around, the chances that your transaction will go beyond the government's tax-credit time limit skyrockets!  Even though that buyer wouldn't come out of the deal with an extra $8,000, they would still be $3,000 ahead.  So, make sure that buyer is really thinking about what the offer is from the bank.

If the counter is over $8,000, your buyer might want to forget it UNLESS the property is a great deal even with that higher counter-especially if they get $8,000 of that back from the government.

Countering the banks counter can add months to the short sale process so consider your options carefully.  Countering the bank will likely eliminate any chance of closing by tax credit time.

Good Luck!

Matt Side

Based in Spokane, Washington Alliance Short Sales offers short sale services in multiple states around the U.S.  With a current network of agents located in Washington, California, Idaho, Nevada, Arizona, Florida, Tennessee, Georgia, Ohio, and Virginia, Alliance negotiates short sale real estate transactions with lenders on behalf of agents without charging a fee to the agent or the seller.  Because their fees are paid at closing out of the net proceeds to the lender, Alliance creates a beneficial outcome for all parties involved.  For additional information about how you can work with Alliance Short Sales, please visit our website at www.AllianceShortSales.com.