My property is in rough shape and needs work. Can I still do a Short Sale? Signed, Dan
You're in luck, Dan. You can still do a short sale. It's a fact that lenders are more motivated to do a short sale on a property that needs repairs than on a property that doesn’t. Most lenders understand that the risk of loss goes up when they foreclose on a property that needs lots of work. Here is an easy way to get a discount approved for a short sale.
Show your lender that a lot of repair work is needed to bring the property back up to a marketable condition so it can be sold. Lenders are simply not set up to get any repair work done. They are in the loan business, not the repair or handyman business. It really doesn’t matter the type of house or condition, all mortgages can be discounted.
The very best types of properties to perform short sales on are houses that are in rough shape and need repair work because the bank will often allow a bigger discount for it. If you have a property that is in rough shape and needs work, do not leave it to be foreclosed. We are here to help. Just send Ashish a friendly email or contact him through our website or Facebook page.
Working to convince a bank to approve a short sale is what I do every day. I work with lenders on a daily basis. I understand the importance of starting the process in a way that is likely to succeed with the lender’s loss mitigation department. I am always prepared and I maintain a high level of professionalism during the whole process because I understand how critical it is to get a short sale approved.
The Lender wants a great file. I understand that I only have one opportunity to impress the lender with a professionally prepared file and this is exactly what they will get. This initial step often proves to be determinant on the lender’s decisiveness to approve your file. As much as lenders may not like to acquire properties through foreclosure, they will not just approve any short sale.
When I submit your short sale file for approval, I will come up with a strategy that will have the lender feeling positive about approving the short sale. Remember, your short sale file will be reviewed by a human being just like you and me. Someone that can’t help but understand and feel the problems other people have to face in life. I will help you outline the events that caused you to fall behind on your mortgage so that the loss mitigation representative handling your file will look for ways to give us approval.
The right agent can make the difference between success and failure on your short sale. You risk losing a lot when your agent doesn't understand short sales. The short sale can be denied and the home foreclosed. Then you have to wait five years to buy another house. Or the lender may ask you to repay the loss.
Here are the questions I would ask an agent before hiring them.
Question #1: How many short sales have you listed and sold in the past 6 months? This is important because you want an agent who is up to date on all the potential issues. They should understand the short sale process from start to finish.
Question #2: In the past, what lenders have you negotiated short sales with? It is helpful when the agent you are interviewing has already done short sales with your lender. You know that they will already be familiar with your lender’s policies and procedures. At a minimum, you should look for an agent with experience with Bank of America, Wells Fargo, and Chase. These are the most common short sale lenders.
Question #3: What can you tell me about my lender and how they work? A knowledgeable and experienced agent will usually know the specifics about your lender. They will be able to tell you what to expect in the process. They will know upfront if the lender is likely to ask for a promissory note or deficiency.
Question #4: What is your track record for success and failure on short sales you have handled in the past? Look at the agent’s track record. If they are hard working and diligent, then they will have a strong track record. That is good news for you.
We have seen many instances where a short sale that should have been approved was denied. If your short sale realtor doesn't know what they are doing, then you might get stuck with a promissory note that you don't deserve.
Here is a good example of this happening. A real estate agent had a short sale with one of the largest lenders in America. The short sale negotiator said that they would not approve the short sale unless the seller came to closing with 50k cash. The sellers said no way.
Fortunately, the agent knew that Fannie Mae owned their loan. The good news for the seller is that Fannie Mae does not ask for promissory notes or pursue deficiencies. (There are a couple exceptions, but they didn't apply here.) If those are Fannie Mae's Guidelines, then why would the short sale negotiator require the seller to bring 50k to closing?
Turns out the negotiator was not following Fannie Mae's Short Sale Guidelines. The agent contacted Fannie Mae directly. Within 72 hours a supervisor called from the short sale department. This time they were singing a different tune.
The sale was approved and the promissory note waived. The seller got to walk away owing zero. Why do things like these happen? Because, in our opinion, there is little oversight over the short sale process. Nothing happens when a short sale gets rejected and sells for less as a bank owned property. No, don't kid yourself, this happens a lot.
These short sale negotiators develop an adversarial mindset. They probably even get paid bonuses based on how much money they squeeze out of short sale sellers. This causes their ego to get in the way of what is best for the owner of the loan. If you are thinking about short selling your home, make sure your agent knows how to research who the owner of your loan is. That info will allow them to negotiate from a position of power. And it will help you avoid a deficiency or promissory note.
Short Sales are a situation that can often cause emotional turmoil as well as financial. It’s amazing how quick people are to judge others, but times may be changing when it comes to today’s financial situations. We’re all affected by tough times. We all have seen local businesses close, people we know losing jobs they've had for years, and seen how the cost of living increases while the income we’re making doesn't seem to be keeping the same pace.
Most of us don’t speak the legal language and personally I’m thankful that most of us also don’t operate like some lenders. It’s hard to understand why a lender will jump at doing a Short Sale on a home as opposed to working with someone who’s done everything in their power to make right the situation they've ended up in, being overdue with the lender.
Many lenders somehow find it more logical to do a Short Sale than to work with the original owner and re-finance or negotiate terms that make it more reasonable for the owner to make regular payments again. Placing the overdue amounts at the end of your loan and putting you back on track seems more logical to you and I than taking a Short Sale. But then again, when does our logic seem to match the logic of most lenders?
What we have noticed though is that while we are all together in this financial mess of our economy we also seem to be more sympathetic and understanding about the situations of others. Friends and neighbors aren't so quick to judge those who suddenly have a “Foreclosure” or “Short Sale” sign on their front lawn. People have become more sympathetic to those in their community who have been hit hard by hard times. There is no longer a scarlet letter worn by those who have hit hard times and find themselves having to give up their home via a Short Sale.
There is no shame in Short Sales. In most cases, the homeowners have approached their lender in every possible way, using every possible means to keep their home. Most lenders turn down every option other than literally snapping your fingers and coming up with all of the money owed instantly, no matter what the situation may be. These lenders should bear all of the shame for creating situations that don’t allow for a good, honest homeowner to maintain their dream.
A Short Sale is an option that is taken to help keep your dignity, sell your home, and have a fresh start. Many take this choice hoping to do less harm to their credit rating. Many times friends and neighbors will not only understand your situation but will respect that you’ve remained dignified through a terrible crisis in your life. Each of us understands that we are almost all only a paycheck away from being on the streets in today’s economy. As we work together to make things better, one of the things we notice is that there truly is a lot less judging and finger pointing going on in life and a whole lot more understanding and help. The fingers are pointing to the lenders now instead.
We are here to help you understand and get through making the choices you need to make regarding a Short Sale of your home. We have the knowledge and training behind us to make your transition as smooth as possible. Most of all we will treat you with respect and help you not only make the experience understandable, but bearable. We can give you information that will give you hope and show you that the future may have a better picture ahead and even another home some day with our help. There is no shame in taking the option of a Short Sale and we are here to show you.
No matter what the circumstances are when you’re selling your home, you want to get top dollar for it. For the potential owner, it’s like their birthday, Christmas, or Chanukkah. So, why not GIFT WRAP your home for them? As silly as that seems, that’s exactly what you are doing when you are putting your home up for sale. You are presenting a large gift to the potential owners and one of the first things to attract their attention is the packaging. You want them to take their first look and say, “That’s the one I want” even before they step inside your home.
When you’re sitting at a holiday get together or at a birthday party, the first package that catches your eye is the package that’s wrapped perfectly. The one gift that looks well cared for and beautiful on the outside. From the condition of the wrapping, you just know that whatever is inside has to be something special if the person took that amount of time in wrapping it so perfectly.
The same goes in the opposite direction also. If someone stops at the last minute and literally just leaves the gift in the bag from the store they bought it from and slaps a bow on it, your first thought isn’t “wow that’s got to be a great gift” but instead, you probably barely glance in that direction. It could be a great gift, but the presentation says that the gift giver didn’t put a whole lot of time, effort and thought into it so chances are whatever they bought didn’t have a whole lot of thought put in it either.
Your home is much like that birthday gift or special holiday gift. The “wrapping” is the curb appeal. If someone is driving by, and they see this beautifully wrapped home, one with perfect lighting placed in just the right spots, clean driveways and sidewalks, trimmed bushes and freshly painted trim they’re going to take a second look. However, driving by the house that is just sitting in a plain bag with a bow, trim peeling, overgrown, untrimmed bushes and landscape with no appealing lighting on to help them see the entire area is going to cause the potential buyer to literally not even give the house a second look as they drive by.
The inside of the house could be immaculate and have every amenity imaginable but because it wasn’t “wrapped” in beautiful gift wrap with a sparkling bow and attention grabbing beauty, it will either be passed by or if out of desperation they do look further they’re going to offer a lot less simply based on the shabby packaging.
Curb appeal is the beauty a potential buyer sees from the outside before they ever even begin to approach the inside. It's what makes them say, “We should really take a look at this one!” Make your house be the package that jumps out among the other gifts. Make those potential buyers drive by and say “We have to open that package! Anyone who took the time to make it look so perfect has to have good taste. It can only get better from here!”
That is how important curb appeal is in selling your home. Make your home shine from the outside in and give them the feeling that with a beautiful bow and perfectly matched paper, this is the gift they want to open!
A homeowner recently asked us why they should short sale versus just walking away and letting their lender foreclose on the home. We gave them the normal answer: “It’s much better for your credit.”
That was the first thing that popped into our heads. But, I knew there are more benefits to a home owner than simply better credit. So I put together the entire list and here they are:
1. The upside down debt is erased in most cases. If you are selling because of a financial hardship, then the upside down debt will be automatically erased in most cases. Is your loan is owned or insured by the following agencies: Fannie Mae, Freddie Mac, FHA, and or VA? If you are short selling because of a financial hardship, their policies state that your debt will be erased.
2. You are eligible to buy another home much sooner compared to a foreclosure. The most common loan program, Fannie Mae, stipulates that you can buy another home under their program in two years. FHA, a popular low down payment loan program stipulates that you can qualify for an FHA loan within three years.
3. No Cost To You. That is right. A short sale costs you nothing. All of the expenses are paid for by your lender. That includes the title insurance, any county taxes or fees on the sale, attorney fees, and the Real Estate Agent. If the lender foreclosed on the house and then tried to sell it, they would have to pay all the costs. So why not pay the costs with a short sale?
4. Your credit suffers less damage. Most people think that a short sale will be the kiss of death to their credit. That is the one big advantage of a short sale over a foreclosure. Upon completion of the short sale, your credit score will drop between 50 and 100 points; however, it will rebound fairly quickly. The other benefit is that you will have less debt since a lot of debt hurts your credit score. You will have a lower debt to income ratio, which will boost your credit. In a couple of years, your credit will be back to normal and you can buy another home. In addition, anything and everything bad on your credit can be fixed through the dispute process.
5. You can often rent a comparable house for less than your former mortgage payment. In one example, a homeowner in foreclosure found a larger home. It even had a fenced backyard for their kid and a garage. Their prior mortgage payment was $1,500. They rented the nicer, bigger house for $850 a month.
6. You avoid the humiliation of a foreclosure.
7. You don’t have to pay rent during the short sale process. A short sale can take up to 6 or 9 months. Not all of them do. But, some do. If you aren't concerned about your credit, then you can stop making your mortgage payments during the short sale. You can use the savings for the deposit on a rental.
"I own a condo that I purchased in 2007, pre-construction for $375,000. My mortgage balance is $337,000. I have been trying to sell my unit for upwards of two years with no success.
I have been unable to refinance because my unit is worth much less than the balance on my mortgage. I have been denied a loan modification. I must move by this summer and do not want to make a penny on the sale. I just want to be rid of this property.
I have been advised that I would not get approved for a short sale because I do not have a financial hardship. However, I am not sure this is correct. I am seeking advice as to what my options are. –Chad, Los Angeles
If you are moving for a job transfer then, then you have a legitimate hardship. I do know this. If you move in six months and stop making the payments, then something will need to be done. The bank will either approve a short sale or foreclose on your property. You could try to rent the unit out and write a check every month to cover the payments. But, then you would be limping along for years until the market improved and you can sell.
But, what if things get worse? What if a tenant trashes your condo and you can’t afford the repair bill? No one wants to rent a trashed condo. You would have a hard time covering the payments then and even risk a foreclosure. I would start the short sale process today. There is a good chance that your lender would approve a short sale today.
If not, then you could convince them to approve it later, after you have moved. Some short sale negotiators are easy to work with and will approve the short sale. Others might play hardball and want a promissory note from you. It’s all negotiations. The sooner you start the negotiations, the sooner you can move on with your life.
It is very helpful in loan modification negotiations to know the fair market value of your home. You can use the value to convince your lender to accept an offer. As an experienced Short Sale Realtor, I can help you determine the value of your home. And here’s how I do that.
First, I will look at all of the homes similar to yours that have sold in the last six months. I will pick out the three homes that are most similar to yours.
Now homes have very similar features such as the number of bedrooms and bathrooms. I also prefer to use bank-owned and short-sale properties. Although it is true that bank-owned properties usually sell for less than non-bank-owned homes, your lender will sell the house as a bank-owned property if they deny your loan modification or short sale and choose foreclose.
I may use the comparable sales closest to how they will be selling the property. After I pick out the three closest comparable sales, then I do a Comparable Market Analysis.
First, I make adjustments to the other sales. For example, if a home has 10 percent more living space, then I might adjust it’s comparable value by five to eight percent.
After I make all the adjustments, I average the sales price of the three similar homes. That gives me the fair market value of the home. This process is very similar to what appraisers do, but it is not an appraisal; rather, it is called a Broker’s Price Opinion.
The short version is BPO. Is it a good valuation of your home? Well, the banks think so. In fact, they use another Realtor’s opinion of the value to determine if they should approve or deny a short sale. ---
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