RealTown's BlogTalk

The following group discussion has been shared by John Reilly, e-PRO.

Welcome to our Short Sale Group!

Posted at Short Sale Strategies by Catherine Myers on Aug 10, 2008 11:34:51 AM

Welcome! Thanks for joining our group to share information and to gain knowledge about the ever growing, and ever changing, short sale transaction niche.

We all know short sale has nothing to do with the time being short, and everything to do with long waits, endless hoops to jump thru and the stress of dealing with clients that are in many cases, in the worst financial position of their lives.

That is the reason for this group. Whether you want to ask if someone knows a tip or trick for dealing with a particular lender, or the best way to gain more listings - we're hoping this group will become a resource for all things short sales.

We welcome real estate agents - on the front lines, as well as we'd welcome attorneys, financial advisors and CPA's, etc who help us with our clients every day.

So jump in, anytime!
 

Catherine Myers, REALTOR
Alain Pinel Realtors
www.CCShortSales.com
Walnut Creek, CA
Serving the San Francisco East Bay Area

I am in Real Estate on Cape Cod, short sales have been in our market area for past 6 months.  biggest problem has been, Realtors not getting all of the infomration to the lender and having all the contacts in line, prior to listing the property.  Just saying this is a short sale need lender approval is not enough, make sure you contact the listing agent, if he has not contacted the lender or is just starting, this is going to be a problem.  As a Buyers Agent be demanding and expect results fromt the Listing Agent.

Tips on getting involved.  1.  If listing get all the mortgage information from owner, get written permission to contact lender on the owners behalf.  2.  Get an attorney involved who will be workign to clean up the title.  3.  In presenting your market analysis to lender, prepare a proposed HUD statement, so lender can see the bottom line.  4.  Do not discount listing or buyer agent fee's, again show what you expect out of the sale and what you expect that the buyer agent will be expecting.  5.  Get all your contact, mortgage lender information, phone, fax, and email information and ask them, what is their turn around on accepting or rejecting a deal.

Remember the lender really does not want to deal with foreclosure, so work on realistic values.

David Bisbee dbisbee@realtyexecutives.com

I'm really glad to join this group. Here in Connecticut I am just starting to deal with short sales as a way of helping my seller clients. Does anyone have experience dealing with Bank of America?  Apparently Connecticut is a state whereby if you go the short sale route, you still owe the difference of what is owed on the mortgage to the lender.  I have a seller who does not have the money to repay the bank.  The bank is willing to give him a preferential interest rate, but he just doesn't have the income to cover it.  Does anyone have any suggestions of what to do next?  We are short about $30,000.  The commission is being paid by his wife's employer as they have been transferred.  Thank you in advance. By the way, it is a home equity line of credit that will be short.

Hi Lonnie....

Your sellers are still responsible for the 30k they owe, as a line of credit it will be treated as debt (kind of like a credit card), they will have to either make arrangements with the bank to make payments or file for bankruptcy.   I live in AZ and many many people who are in short sale or foreclosure are in trouble because of lines of credit they took out when their house value shot through the roof, they SPENT it, they owe it PERIOD, the line of credit does not go away. This has nothing to do with what state you live in, its universal through the country, seconds and LOC's don't go away

Hope this helps,

Linda Newton

RE/MAX Achievers

Chandler Arizona

Everyone still owes the bank on a short sale, it's not unique to
Connecticut. I presume that someone discussed with the wife's employer, it
would not be in their best interest to let this sale fall thru. A
distracted employee cannot focus on their next job.
 

Just my thoughts, Thanks,
Pat Parker 305-773-6343

     The blanket statement "everyone still owes the bank on a short sale" is not at all accurate.  On a purchase money loan, where the original loan amount to buy the property is now more than the home is worth, and the buyer has gone into default, it is possible that the bank or lender may approve the sale of the home for less than the amount owed, provided the seller has completed the short sale requirements showing an irreconcilable hardship, proof of income and assets showing the hardship, and provided the seller receives zero proceeds from the sale.  Upon completion of the sale, the credit report for the seller will reflect "Amount paid in full for less than the amount owed."  This may cost the seller 40 to 80 points on a credit score, instead of 200 to 400 on a foreclosure. The seller is done with the bank, but should consult their tax preparer regarding any tax consequences.

     There is a difference between recourse and non-recourse financing.  If a seller has used his property like an ATM machine, leveraging during appreciation with cash out refinancing, all the money over and above the original purchase money loan taken out could have devastating consequences for the seller.  The seller may still be able to sell the property through a short sale, but all the money pulled out of the home after the original purchase that is "short" will most likely be considered ordinary income by the State and the IRS, and taxed accordingly.  In California where I am an agent, I have seen sellers in positions where they have pulled out 100's of thousands of dollars, and whether they sell through short sale or lose their home through foreclosure, will most likely be facing the music with Uncle Sam soon.

     There are advantages and disadvantages to short sales, and if we plan to be professionals and serve our clients properly, it would behoove us to become educated through certification programs so we know how to analyze the needs of each individual, and not guess about the consequences.  It has been estimated in my market area that by mid 2009, as much as 50% of all sales may be short sales.  I would hope that I am dealing with other professionals that are up to the task.

Greg Humphrey

REALTOR®, e-PRO, GRI

Twain Harte, CA

Mailto:Greg@GregHumphrey.com

I'm in Southern California, have a Short Sale listing with clients who had two loans. The Second was completely forgiven (and not issued a1099 as income, nor given a deficiency judgement). The remaining debt from the First loan (after accepted offer price, commissions, fees, etc.), will be issued to my clients...BUT, for a period of time, "due to the current market", they are able to be forgiven of that as well (completely) when handed over to their certified public accountant who knows the proper documentation to complete on their behalf.

Most situations, that I can see, that have a second or third lien, and will not forgive the debt, will most likely be issued a deficiency judgment of some kind, or the Short Sale will simply not obtain full approval from all parties, and will be forced into foreclosure.

Each and every case is different.

I am having issues with the buyers jumping out of the contract within 24 hours after getting the acceptance from the lender or lenders. I call the agent of the buyers regularly and say we are close to approving, are you sure your buyer's want the house and they all say "yes, the buyers really want this home"  than within 24 hours they back out. I'm suspecting they are making more than one offer and they just decide that it is not Really the house after all. Four times I've had this happen in a month.

Michele Van Horn REALTOR, ABR,CRS,GRI,PMN,SRES

Hi Every one,

this is all new to me, but I had taken 2 listings that I think may be a short sale. The 1st one the payments are still current but when he bought the home, the market was high, he is now loosig his job and is force to sell. The home is now worth 30K less than when he first bought it. He does have a first and 2nd, I have it listed for him to brake even with the bank but still to high for the area/market. How does this work? I think he still hasd to come up with the differance, right?

I suppose your biggest mistake here was not executing extensions for the validity of the offer. Due to the banks slow response to offers, which may in part be due to the offers not having all the documents to support it, by the time you get a counter offer or acceptance, the offer is no longer valid. Get everything in writing. If the bank informs you that they need a week, make it 1 1/2 weeks.

Hope this helps