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How to Choose a Short Sale Realtor

Don’t take it lightly – Choosing the right real estate agent for a short sale transaction is a very important decision! If you are pursuing a short sale, selecting the right agent is even more critical than a traditional real estate transaction. Short sales require specific knowledge and expertise that not all real estate agents possess. In a short sale transaction your real estate agent is responsible for providing all of the correct required documentation and negotiating with your lender(s) on your behalf for the best possible outcome.

Short Sales began to be relevant in Colorado in 2005 – The market began to change in Colorado in 2005. We were among the first states to experience an increasingly large number of homeowners who were in trouble on their mortgages and could not sell the property for what they owed. The most experienced among realtors who really specialize in short sales began to learn the process at that time. It was a difficult process very different from conventional real estate transactions, and most realtors didn’t want to have anything to do with it. Many were wise enough to realize they were not cut out for the tedious aspects of dealing with the banks, potential lien situations, and buyers who did not understand why they had to wait several months on an approval to close. New language had to be developed specific to short sales because of the unique qualities of the short sale transaction to make sure everyone was informed and protected properly.

There is no substitute for real experience – Don’t’ be overly impressed by great websites for marketing to capture your interest and certifications that can be obtained online or by spending a few hours in a classroom. Some realtors are very good at marketing but when it comes down to it may not have the real experience required to obtain the best possible outcome for the homeowner in a short sale transaction. Most of the realtors portraying themselves as short sale experts just decided to jump on the bandwagon in the last 2 or 3 years because there was not enough “normal” real estate business to sustain them. They went to a class for a few hours to learn the basics, added a designation to their business card and website, and they are mixing a few short sales in with their regular real estate business. There are realtors who have been specializing in the short sale and foreclosure prevention aspect of real estate since the time it became an issue in our market and have successfully closed numerous short sale transaction with all of the major lenders and many of the smaller ones. These realtors know exactly what to expect from each lender, what specific forms they require, how they operate depending on whether they are the first or second lien holder, what additional documents are required for each type of loan and short sale program, and the process and anticipated deadlines for each one. HUD guidelines for an FHA short sale (called a pre-foreclosure sale) is different than that of a conventional loan. The Making Home Affordable Foreclosure Alternative (HAFA) program is different than Bank of America’s Coop short sale program, or a standard short sale. Truly seasoned short sale agents know that how one deals with liens on the property, overdue HOA payments or water/sewer bills varies with each type of program, investor, and servicer. Is there mortgage insurance involved? That complicates the process exponentially. Has there been a partial claim previously on the FHA loan you now need to short sale? Do you qualify for HAFA or one of the other pre-approval programs or do you need an offer on the property before you can submit the short sale package?

A truly experienced short sale realtor will be able to answer all of these questions and whatever else you throw at them. If you are interviewing a potential short sale realtor and they cannot provide quick and confident answers to these type questions, end the conversation and move on. Your financial future, credit rating, and future liability for thousands of dollars if the deficiency isn’t properly dealt with in the negotiation process is way too important to put it in the hands of someone who is taking on a short sale they don’t really have the experience to handle properly, with their fingers crossed behind their back, hoping to make a commission if they are successful. You cannot afford to be the guinea pig that the inexperienced agent is learning on. Everyone has to learn somehow but an agent who lacks the proper experience should be operating under the oversight of an experienced short sale specialist realtor or not at all.

Here Are a Few Things To Ask About When Interviewing a Potential Short Sale Realtor:

Testimonials or References – An experienced short sale realtor should be able to provide several testimonials or references from happy past short sale clients. A realtor who cannot provide this either has not done enough short sales or has not done a good enough job to have satisfied clients willing to provide a testimonial or reference for them.

Liabilities and Concerns – Ask a potential short sale realtor what liabilities and concerns they see for your particular situation. Every situation is unique but the agent should be able to speak to those issues and how they may or may not pertain to you.

Up Front Fees – It is illegal in Colorado to charge an upfront fee for a short sale transaction. This should be a major red flag. A realtor should be paid the same way on a short sale transaction as any other real estate transaction, with a commission for the real estate transaction at a successful closing of the short sale. That’s why we call it a success fee. The good news here for a homeowner in a short sale is the fact that the realtor’s commission is paid by their lender and not out of the pocket of distressed homeowner who likely is already having financial difficulties. This is one of the many benefits to the homeowner in a short sale.

Guarantees – Be leery of any agent who guarantees specific results for your short sale. While a good short sale realtor who knows what they are doing can achieve a high percentage of success, the short sale process is much too complicated with many variables out of any one individual’s control to guarantee anything.

Legal and Tax Implications – Realtors are not attorneys or tax advisors, however an experienced short sale realtor should be keeping up on the basics in all areas that are affected by short sales and foreclosures, and be able to discuss the generalities of these issues giving you an idea of what to expect as well as guidance for where to get the official answers to your questions.

Experience – Ask how long they have been doing short sales and more importantly, how many short sales have they successfully closed? Out of the short sales they have taken on, what is the percentage that they were able to actually close successfully?

About Me

I closed my first short sale in November 2004 and have been specializing in short sale transactions for over 8 years. In that time I have successfully closed over 200 short sales. When I transacted my first several short sales I had the guidance of a title closer who had previous experience with short sales and a seasoned realtor who had been through a similar foreclosure market with extensive short sale experience. Yes I had to learn too, but it wasn’t flying by the seat of my pants at the poor homeowner’s expense. The most frustrating thing to me in all the years I have been working to assist struggling homeowners to avoid foreclosure is the fact that 7 out of 10 still go to foreclosure auction without any outside assistance or intervention. It is so unnecessary and so financially destructive to the lives of people I most likely could have helped avoid the devastation. Please feel free to contact me any time for a free consultation about your particular situation. We can do that over the phone or in person, whatever you prefer. The main thing is that you not wait to begin the process of exploring your options now. Don’t wait and hope. You don’t have to make a decision now, but it is imperative that you take action now. It won’t cost you a thing to take action now but it may cost you dearly to wait.

 

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Posted by on February 10, 2013 in Avoid Foreclosue, Short Sales

 

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2013 HAFA Short Sale Overhaul – Increased Incentives

Supplemental Directive 12-07 initiated a number of changes to the HAFA (Home Affordable Foreclosure Alternatives) short sale program, which will take effect Feb. 1, 2013.  HAFA was instituted in 2009 by the U.S. Treasury Department. Along with several changes discussed in previous posts on this subject, the purpose is to further streamline the short sale approval process.

More and more distressed homeowners struggling to pay their mortgage payments are discovering the opportunity to avoid foreclosure by choosing a short sale. If qualified for the HAFA program, the homeowner can avoid any deficiency judgment, continue to live in the property through the entire process until closing, and receive $3,000 at closing for relocation assistance.

One important aspect of this program is the fact that the government will add to the money that the primary lien holder allows a subordinate lien holder to receive from the transaction at closing. With this revision the government contribution to a subordinate lien holder is increased to $5,000, and the total amount that a subordinate lien holder can receive is increased to $8,500. This provides more of an incentive for a second mortgage company which would otherwise get zero in the case of a foreclosure, to receive $8,500 for participating in the approval of a short sale.

Additionally, the waiting period for a buyer of a short sale property to resell the property is reduced from 90 to 30 days. This will help a short sale realtor find a buyer for the property, as the 30 day waiting period is more attractive to investors.

With the implementation of these new guidelines a good short sale specialist realtor who knows what they are doing should be able to assist a distressed homeowner to avoid foreclosure, walk away with some cash in their pocket, and without any concern about being chased down for the deficiency judgment after the closing. Considering the fact that here in Colorado the bank has 6 years after a foreclosure to collect on their losses, this is a great opportunity for a struggling homeowner who is under water on their property.

 

 

 

 
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Posted by on January 28, 2013 in HAFA, Short Sales

 

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2013 HAFA Short Sale Overhaul – Hardship Affidavit

Supplemental Directive 12-07

Treatment of the Hardship Affidavit is another significant change to the HAFA (Home Affordable Foreclosure Alternatives) Short Sale Program, administered by Laurie Maggiano’s office of the US Treasury Department. As mentioned in prior posts related to this topic, the average time for short sale approval has been reduced from 14 months to 4 months since the original version of HAFA was introduced. Revisions like this one are designed to reduce approval times even more.

Affidavit of Hardship Before and After:

Before Feb 1, 2013 – the Hardship Affidavit had to be completed prior to Short Sale Approval.
After Feb 1, 2013 – a Pre-determined Hardship is adequate for approval and the Hardship
Affidavit can be signed at the Closing.

Requirements: If a Borrower is 90 days or more delinquent on their mortgage and have a FICO score below 620 it is a Pre-determined Hardship. They can obtain short sale approval and the Hardship Affidavit can be completed at closing. If a borrower does not meet these requirements they must complete the Hardship Affidavit before applying for a HAFA Short Sale.

*A Borrower does not have to be delinquent to have a hardship.

The Hardship Affidavit is a three Page form
Find these forms at www.hmpadmin.com/

Seller must explain:

1. Nature of Hardship (reduction in income, increased expenses, increased debt obligations, unemployment, depleted cash reserves, etc.) and explanation
2. Desire to keep or sell property
3. Whether property is owner or tenant occupied
4. How many properties owned
5. Have they declared bankruptcy
6. If there has been a HAMP modification on the mortgage, permanent or trial

Buyer and Seller must affirm 6 points:

1. Sale is Arm’s Length Transaction
2. All agreements, understandings, contracts or offer relating to sale have been disclosed to the servicer
3. Unless disclosed to the servicer, no agreement exists that seller will remain in the property as a tenant or later obtain title to property
4. Neither party will receive funds or commissions from the sale except relocation assistance as recorded on HUD-1
5. All amounts paid to anyone in connection with the short sale are reflected on the HUD-1
6. Anyone receiving relocation assistance is required to vacate the property as a condition of the sale. Seller also affirms that recipient of assistance occupies the property as a principle residence

With this new change after Feb 1, 2013, upon receipt of a request for a HAFA short sale a Servicer can either issue an SSN or accept the purchase contract and issue an acknowledgement of the short sale. In cases where there is a pre-determined hardship this will save time for the step of having the Hardship Affidavit completed by the borrowers, received, uploaded, reviewed and acknowledged by the servicer, before the next steps in the approval process can go forward. For more info about your eligibility for this and other great programs to avoid foreclosure and potentially even receive $3,000 or more in relocation benefits at the closing, contact us or another experienced Short Sale Realtor who specializes in Short Sales and Foreclosure Avoidance.

More examples of revisions designed to reduce Short Sale Approval times will be discussed in future posts. Post 4 of 5 on this subject

 

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HAFA Overhaul 2013 – Reduced Number of Forms

The US Treasury Department’s original purpose initiating the HAFA (Home Affordable Foreclosure Alternative) Program was to develop guidelines for a single Short Sale Program for lenders, investors, and their servicers to use in assisting Borrowers with a Hardship to Avoid Foreclosure. One of the objectives was to provide a template for a True Preapproved Short Sale. The idea was to reduce the time for a new offer on a Short Sale listed property to be approved, thus reducing the likelihood of having the Buyers get tired of waiting on the approval process and walking from the transaction prior to Short Sale approval.

Prior to HAFA the average time for Short Sale Approval among lenders was 14 months. Now, after the implementation of HAFA the average time for approval is 4 months. Once these new changes are implemented on Feb. 1, 2013, the time for the Short Sale Approval process should improve even more.

One element of the HAFA overhaul is a reduced number of forms:

Old Forms (Before Feb 1, 2013)

  • SSA – Short Sale Agreement
  • RASS – Request for Approval of Short Sale
  • Alt. RASS – Alternative Request for Approval of Short Sale
  • DIL – Deed-in-Lieu Agreement

New forms

  • SSN-Short Sale Notice
  • ARSS-Acknowledgement for Request of Short Sale

*Find these forms at www.hmpadmin.com/

NOTE: Until Feb 1, 2013 use old forms

For example, the new Short Sale Notice form no longer requires the Borrower to sign and return the acknowledgement form before the process can move forward. They estimate this one change will save 2 or 3 weeks in the process. The old process required a notice explaining the terms of the Short Sale program to be sent to the Borrower. After review the borrower had to sign acknowledging they received the information and agreeing to the terms. Then it had to be delivered to the servicer. The document needed to be uploaded by the servicer and then however long it takes for someone to get around to reviewing the signed document. All this before the next step in the process could be done. Under the new revised guidelines, the borrower can sign the acknowledgement at closing eliminating 2 – 3 weeks for the previous process.

More examples of revisions designed to reduce Short Sale Approval times will be discussed in future Posts. Post 3 of 5 on this subject.

 

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GSE’s now agree to implement HAFA

Originally when the HAFA program was initiated by the Obama administration via the U.S. Treasury Department, the  GSE’s (Fannie Mae and Freddie Mac) refused to participate. This seemed a little strange to most of us involved in the Short Sale industry since the GSE’s are considered by most to be quasi government organizations and pretty much controlled by the government. Not to mention they control over 50 % of all mortgage activity. They have now agreed to implement HAFA with some revisions and compromises by the Treasury Department to simplify the process, but keeping the following important elements:

  1. Release of Borrower Liability – A borrower who is approved for a Short Sale under the HAFA program will not owe the amount of the loan(s) which is not recovered by the sale of the home. The borrower, therefore, will not be saddled with a Deficiencey judgement which could be collected by the investor after closing. This is a Huge benefit to Distressed Homeowners since there is an automatic Deficiency and potential Deficiency Judgement on any property which goes to Foreclosure Auction for less than the full amount owed on the property. In Colorado the investor has up to 6 years after Foreclosure Auction to pursue collection. One Very good reason to attempt a Short Sale rather than just let the property go to Foreclosure Auction.
  2. No dual tracking – The Servicer on the mortgage is not allowed to begin a Short Sale process and then Foreclose on the property in the middle of the process.
  3. One point of contact – The Servicing company on the mortgage must assign a single point of contact for the file so there is one person who is familiar with the file and can answer questions, give updates, and potentially assist in getting things moving forward when a log jam or problem occurs.
  4. Caps on subordinate lien payoffs – Having a cap on the amount a subordinate lien holder can receive from the transaction helps prevent situations where the Short Sale process cannot move forward to approval because of an unreasonable 2nd or 3rd lien holder insisting on getting more from the transaction than the first position lien holder is willing to allow. In many cases the junior lien holders would get zero if the property went to Foreclosure auction so it is a better situation for them to agree to the Short Sale plus the Treasury Department adds an incentive for them to play ball.
  5. Simplified documentation – The GSE’s insisted on a more simplified process with less documentation required. For example some documents required a signature from the borrower to acknowledge that they understand the terms of the process before the process could continue to the next step. This was an unnecessary step which could be incorporated later in the process and was easily holding things up for an additional 2 or 3 weeks.

I will go into more detail about this in a future post on this subject. Post 2 of 5 on this subject.

 

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Assessed value of Colorado property declines

According to the Denver Post http://www.denverpost.com/legislature/ci_16908034?source=rss
assessed value of Colorado Properties declined in 2010 for the first time since real estate troubles in the 1980’s, and residential properties are expected to plummet another 10.4% in 2011. In the 80’s the oil bust and the savings-and-loan collapse were blamed for the decline in real estate values. As we enter the second decade in the 21st century, the culprits are “The sustained high level of foreclosures, economic downturn and tight mortgage financing market have put downward pressure on home prices throughout Colorado” the Report said. As we work our way through the difficulties associated with high unemployment, lethargic economy, and declines in real estate values, more and more families are finding themselves in trouble on their mortgages. Many distressed homeowners find that they are not able to make the mortgage payment which they once qualified for, either because of job loss, curtailment of income, high debt, or medical issues. To boot, their property is no longer worth as much as they owe, making it difficult to even sell just to get out from under it. In some of these situations, depending on their particular scenario, the homeowner may be able to qualify for a loan modification we all continue to hear so much about. Unfortunately, according to most of the professionals who are attempting to help people obtain a modification or workout program so they can stay in their home, it is a very small percentage of borrowers who are getting the permanent solution they are looking for approved by their lenders. For the rest, a Short Sale is a much better alternative to at least avoid Foreclosure and the aftermath of life after Foreclosure. That is where we come in. As a Certified Distressed Property Expert, my first consultation with a Distressed Homeowner is designed to help them determine if their situation may qualify them for a loan modification or one of the other alternatives to stay in their home. If we agree they should try to keep their home, I have experienced professionals who will give them the best possibility of keeping their home, by assisting the homeowner in compiling all of the critical information and documentation necessary, as well as negotiating on their behalf with the lender(s). In the event that they are not able to keep the property, my team and I have a proven system and track record to successfully sell the property for what it is worth in today’s real estate market, and negotiate the short pay with their lender. A Short Pay involves the mortgage lender(s) on the property agreeing to accept less than the full principal balance of the loan, the net proceeds from the Short sale, and release the lien on the property so it can be sold to avoid foreclosure.

Read more: Assessed value of Colorado property declines – The Denver Posthttp://www.denverpost.com/legislature/ci_16908034?source=rss#ixzz199DACYoA
Read The Denver Post’s Terms of Use of its content: http://www.denverpost.com/termsofuse

 
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Posted by on December 26, 2010 in Short Sales

 

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Short Sales Get Boost From New Obama Treasury Guidelines

As the banks are realizing they are better off with reduced losses via a Short Sale as opposed to the greater losses with a Foreclosure resulting in REO (bank owned) properties, the government is actually coming up with programs to provide incentives for them to approve Short Sales. 

In this article http://tinyurl.com/yfssm4o written by Richard D. Vetstein which I found on the Shortsaleman’s Twitter site you will find some good information and links regarding the Home Affordable Foreclosure Alternatives Program.

While it is encouraging to see the government taking steps to to incentivize lenders in this direction, the lenders will not be required to participate in the program. Making stipulations such as a maximum of 10 days for the lenders to approve a short sale would be a great improvement over the 60 – 90 days or more many of us have been experiencing in the past. However, that could be a two edged sword as lenders who are overwhelmed in their loss mitigation departments may be reluctant to sign up for participation if they fear they will not be able to comply with these type of rules, or it could lead to some files being denied simply to meet the deadline.

It will be interesting to see how it all plays out. Bringing some conformity to the process would sure be a breath of fresh air to those of us in the thick of the short sale processes as we continue to help as many distressed property owners avoid foreclosure as possible. At the very least both the lenders and government are making it very clear, they would prefer a short sale over a foreclosure resulting in more bank owned properties, and everyone in the process will be better off for it, especially the borrowers in distress.

 
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Posted by on January 1, 2010 in Short Sales

 

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