Massachusetts Real Estate News » Short Sales

Short Sale Negotiations|Seller Cash Contribution

Bill Gassett — Mon, 23 Jan 2012 12:47:00 +0000

Negotiation With Short Sale Lenders

In working in the short sale arena for the last five plus years, I have seen lenders do just about everything when it comes to negotiating short sales with home owners. There really is no “standard” in short sales. The way one short sale file at one particular lender is handled can be totally different on the next.

One of the biggest reasons for this is that every lender has different investors that actually own the loans. There could be more than twenty five different investors that have interests in loans at one lending institution. So for example just because Bank of America may have done something for a home owner in one circumstance does not mean they would do the same thing for another home owner in the exact same circumstance.

More often than not this is because one investor may not have the same needs or requirements as another investor.

There are basically three scenarios for a seller when completing a short sale. They are a:

Cash contribution to the lender at closing.
Signing a promissory note to pay back some portion of the short sale debt.
A combination of these two things.
A complete debt removal.

The biggest consideration for most home owners completing a short sale is debt removal. My goal of course in any short sale is to get the most favorable terms and conditions for the seller which is a complete debt removal. Going back five years ago getting complete short sale debt removal was a lot easier than it is today. Many lenders today want sellers to have some kind of “skin in the game” if they are going to grant a short sale.

In my experience the terms that most home owners get from short sale lenders is very favorable. Home owners are typically asked to bring a cash contribution or sign a note that basically amounts to pennies on the dollar compared to what they owe.

A typical scenario could be a home owner being substantially under water…..for argument sake let’s say $100,000. It would not be unusual for a lender to ask the seller to bring $5000 to the closing and letting the short sale take place. Another possibility if the seller does not have $5000 is to work out a promissory note. Maybe the lender asks for a$15,000 note to be paid back over the next five years at an attractive interest rate. As mentioned previously it could be a combination of these two options. These are just quick examples to give you an understanding of what happens in the short sale world on a daily basis.

There can be circumstances although not real often, where the lender will only accept a cash contribution in order to close. The short sale lender may have this requirement for one of the following reasons:

The seller has money in liquid accounts.
The seller has not been late with any mortgage payments.
The cash contribution is a requirement of waiving the deficiency (debt removal).
The seller has a good credit score and are current with other debt.
The residence is an investment property.

One of the most difficult parts of going through a short sale as a seller is the long wait involved from the time you get an offer from a buyer until the time you actually begin negotiations with the lender. Sometimes there can be months in between the two. As a seller it is easy to feel in the dark and helpless. There can be times where you will be in this waiting game wondering what the lender is going to require of you and then their request finally comes. They ask you for a cash contribution that you just don’t have.

I have an outstanding short sale attorney that works on behalf of the seller with all of my short sale transactions. In a circumstance where the lender asks for a cash contribution that the seller just can’t come up with the first course of action will be to try to work out an amicable compromise with the lender/investor. This would typically be one of the following:

Negotiate to get the cash contribution lowered to something the seller was able to bring to closing.
See if the seller can get the funds from a family member or borrow from them.
Try to get the lender to accept a promissory note instead.
Ask the buyer to pay the cash contribution if lender allowed this to occur.

In the vast majority of the short sales I have been involved in we have been able to work it out so a compromise was reached and everyone got what they wanted. Should sale negotiations can be difficult at times but if you know what your doing common ground can often be reached.

What would you need to do in the rare instance where a large cash contribution was required that the owner just did not have and the lender would not budge? If all else fails what you would need to do in the scenario above is to put the home back on the market and build in a cash contribution to the lender right into the transaction.

So for example you would add a cash contribution for the lender on behalf of the seller on line 104 of the buyer’s side of the HUD settlement statement. You would also place the same contribution on line 404 of the seller’s side of the HUD as a “Cash Contribution To The Lender”. The payoff amount would then go to the lender.

This is how short sale negotiations work with lenders. If you know what you are doing you can usually find common ground. Of course there are numerous things to look for in a short sale contract which I have covered in a number of articles I have written.

Other short sales articles worth a look:

If you are need to short sale your home or condominium in Ashland, Bellingham, Blackstone, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northboro, Northbridge, Shrewsbury, Southboro, Sutton, Wayland, Westboro, Whitinsville, Worcester, Upton and Uxbridge MA.

I am successfully completing short sales through out the Metrowest Massachusetts and Worcester County areas. So far, knock on wood, I have a 100% success rate for short sale approval! Short sales are specialized transactions that are critical to have the right Realtor representing you. Do not make the mistake of picking an agent that does not understand how to get to the closing table on a short sale. Nationally less than 30% of all short sales close!

If you are outside of the Metrowest Massachusetts area and need to do a short sale please feel free to contact me and I would be happy to refer you to a Realtor in your location that handles short sales and knows what they are doing! I have referred short sales to other Realtors all around the country.

___________________________________________________________

About the author: The above Real Estate information on Short sale negotiations – seller cash contributions was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service the following towns in Metrowest MA: Ashland, Bellingham, Blackstone, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northboro, Northbridge, Shrewsbury, Southboro, Sutton, Wayland, Westboro, Whitinsville, Worcester, Upton and Uxbridge MA.

Credit Scoring Impacts Short Sale vs Foreclosure

Bill Gassett — Tue, 11 Oct 2011 11:29:42 +0000

It is probably safe to assume that most consumers like to work with folks they know can be trusted. In Real Estate, like some other businesses there are those that can always be counted on for delivering great advice and others that only care about their own pocket book.

I always tell people some of the best Real Estate agents are those that don’t NEED to make a sale! It makes perfect sense because an agent that NEEDS business is far more likely to tell a buyer or seller something they want to hear rather than the truth.

Short sales unfortunately are a specialized Real Estate transaction where information is often times bandied about with no basis of fact. Many Realtors blindly go around telling people in financial distress that a short sale is better for their financial future because their credit score will not be impacted like going through a foreclosure.

Folks this could not be further from the truth! While there are certainly advantages of pursuing a short sale vs foreclosure, credit scoring is NOT one of them. There will be plenty of Realtors that will read this and argue with me telling me I am wrong.

As a Realtor who is tech savvy and social media connected you will see many of my articles in places such as Linkedin, Twitter and other Real Estate forums.

They will see some of my short sale articles and flat out tell me that I have incorrect information. When I mention the credit scoring impact of a short sale compared to a foreclosure is just about the same they scowl in disbelief. They will tell me I don’t know what I am talking about because they just learned differently at some short sale course their local Real Estate board was putting on. At this point I will be laughing because the people that teach these courses are usually Realtors that couldn’t make it in the business. They teach this nonsense because it is propaganda that helps get Realtors more business.

By now you are probably thinking how do I know the credit scoring impact is similar in these two financially stressful events. You have every right to be wondering! I know because I go right to the source. My FICO is the governing body for credit scoring including what happens in both a short sale and foreclosure.

Short sale vs foreclosure credit scoring impacts

Since I am often getting challenged on the credit scoring impacts by other Realtors and get asked all the time by my clients, I am going to share a very interesting study that was conducted by Fair Issac corporation.

The FICO study took various types of mortgage delinquencies on three credit bureau profiles of consumers that had scores of 680, 720 and 780, respectively. The study focused on consumers whose credit characteristics (e.g., utilization, delinquency history, age of file) were typical of the three score points considered. All of the consumers had an active currently-paid-as-agreed mortgage on file.

Results of this credit scoring study are shown below. The first chart shows the impact on the credit score for each stage of delinquency and the second shows how long it takes the score to fully “recover” after the fact including a short sale or foreclosure.

What you can easily see by this study is that there is a negligible difference in credit scoring when comparing a foreclosure or short sale. While it seems unfair, those that had a higher credit score to start will see a greater scoring drop. In addition, the higher starting score, the longer it takes for the score to fully recover.

While there is a minimal difference in scoring impact between moderate and severe delinquencies, there may be a significant difference in time required for the score to recover completely.

These statistics are right from the guys that make credit scoring. They are not opinions. This is actual data that was put together and sourced by FICO themselves.

Benefits of a short sale vs foreclosure

So what are the benefits of going through a short sale rather than letting a lender foreclose on your property? The biggest advantage is that you will be able to buy another home in the future a lot quicker than you would with a foreclosure. Generally speaking the turnaround time for getting another loan after completing a short sale is two to three years. In a foreclosure it is typically five to seven years. There are a number of circumstances that can affect the time frame including whether the loan is FHA, Fannie Mae or Freddie Mac. For a complete financing guide see buying a home after short sale or foreclosure.

One of the other big factors you need to consider is your employment status. There are a number of large companies that will not hire a new employee that has a foreclosure on their resume. While this may not seem fair with all the financial turmoil that has taken place over the last five years, employers look at a foreclosure as a black mark on your record. In other words when you short sale a property you are owing up to a financial commitment. In a foreclosure you are walking away and taking no responsibility for your debt.

The last reason why more and more will choose a short sale over a foreclosure is just the sheer embarrassment of going through a foreclosure proceeding. In some states an auction is held right on the front lawn of the property. Who wants to lose their home and then have salt rubbed in the wound by watching a bunch of buyers compete over it. This is an unsettling experience for most.

The goal of almost anyone that goes through a short sale or foreclosure will be to improve their financial stability moving forward. Of course improving the impact a short sale or foreclosure had on their credit scores will typically be one of the first areas that people look at once they are back on their feet. There are certain things you can do to help fix your finances after a short sale or foreclosure that are covered in this helpful article.

Unfortunately, sometimes people just don’t realize they have options and just lose their home to foreclosure. Many have never taken the time to do any research and just assume there are no alternatives. A short sale can be a great alternative for some home owners – best of luck if you are one of them!

If you are need to short sale your home or condo in Ashland, Bellingham, Framingham, Franklin, Grafton, Holden, Holliston, Hopedale, Hopkinton, Medway, Mendon, Millbury, Milford, Southboro, Westboro, Natick, Northboro, Northbridge, Whitinsville, Upton, Uxbridge, Shrewsbury, Sutton, or Worcester get in touch! I would love to interview for the chance to represent your short sale transaction.

I am successfully completing short sales through out the Metrowest Massachusetts and Worcester County areas. So far, knock on wood, I have a 100% success rate for short sale approval! Short sales are difficult transactions that are critical to have the right Realtor representing you. Do not make the mistake of picking a Real Estate agent that does not have experience closing short sale transactions.

If you are outside of the Metrowest/Worcester Massachusetts area and need to do a short sale please feel free to contact me and I would be happy to refer you to a Realtor in your location that handles short sales and knows what they are doing! I have referred short sales to other Realtors all around the country.

_________________________________________________________________

About the author: The above Real Estate information on Credit scoring impacts of short sale vs foreclosure was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Fixing Your Finances After Foreclosure or Short Sale

Bill Gassett — Mon, 15 Aug 2011 11:30:48 +0000

There are not many things that can negatively impact your credit score more than a foreclosure or short sale. In fact one of the more common untruths you will hear from many Realtors is that short sales don’t impact your credit scores like foreclosures do. This is absolutely WRONG!

If you fail to pay your mortgage during a short sale the credit score impact will be nearly identical to a foreclosure according to My FICO the governing body for credit scoring.

Being a Realtor myself for the last twenty five years it does not surprise me when I hear this misinformation being spewed in person or around the internet. Some Real Estate agents will paint a short sale as your ticket to the promised land and a foreclosure as a ticket to financial misery for the rest of your life.

They do this of course because they want you to list the property with them as a short sale. A true Real Estate professional should be going over all possible financial options with you and not just looking to put money in their wallet.

There are of course advantages to doing a short sale but a better credit score is not one of them unless you are able to complete a short sale without missing mortgage payments. The sad truth is that most but not all of the time a lender is not going to grant short sale approval unless you are behind in your mortgage payments. From a lender’s perspective if you are able to continue paying your mortgage why should they grant you a short sale?

The advantages of a short sale vs a foreclosure center around the time you will be able to purchase a home again in the future. You will be able to buy a home after completing a short sale much quicker than a foreclosure.

For a complete breakdown of how quickly you can get financing after both of these events see getting a mortgage after short sale or foreclosure. If you can show extenuating circumstances of why you had to do a short sale or lost your home to foreclosure you may be able to get a loan sooner. Some of the acceptable hardships that could factor into a lenders decision are divorce, loss of a job and unexpected medical expenses.

Another advantage of a short sale is how future employers, as well as other types of creditors look at you in the future. Having a foreclosure on your resume is not something an employer is going to look at favorably. In a short sale you have at least attempted to live up to your debt and not just walk away.

Owning a home again after a foreclosure/short sale

Work on increasing your credit score

One of the most important steps you can take to getting back into the home ownership arena after a foreclosure is to work on increasing your credit scores. This article provides some excellent tips on building back your credit score as quickly as possible. There is no doubt that building your credit score after a foreclosure or short sale is a difficult task. On average you can expect your score to drop between 150-200 points so you will have a lot of work to do!

Two or the most important things you can do to raise your score is to pay your bills on time and keep your credit card bills below the maximum levels.

Keep your employment stable

One of the things lenders look for with borrowers especially after a short sale or foreclosure is employment stability. Unless you have the opportunity to move into a position that offers a much higher pay you will be better off sticking with the job you have. The lender is going to want to see you are grounded with work and not changing jobs.

Rebuild your savings after foreclosure

Lenders are also going to want to see that you have squirreled away some money. Working on saving any extra money so that your nest egg is built back up becomes important. A six month reserve is a safe bet to show lenders that you have a fall back plan should you happen to become unemployed.

Owning a home again after short sale or foreclosure is certainly achievable is you work diligently towards getting your financial house in order!

8 Reasons Why You Will Not Buy My Short Sale Listing

Bill Gassett — Thu, 05 May 2011 11:41:18 +0000

One of the grossly misunderstood topics in Real Estate is the short sale transaction. There are a large number of Realtors who unfortunately do not possess the knowledge to properly educate their clients on what should be expected of them when trying to make a short sale purchase.

The problem is further exacerbated because there are an inordinate amount of Realtors who are now listing short sales who have no business doing so!

Having poor seller representation in a short sale is far worse than a traditional sale because the home owner is relying on this person to help them navigate out of a financially difficult time. Without a short sale approval the most likely outcome is a foreclosure which is the very thing a seller was trying to avoid by going the short sale route.

As the volume of short sales has grown so has the amount of Realtors who are looking to cash in. Money all too often gets in the way of sound decision making.

The code of ethics in Real Estate clearly states that you should not get involved in a type of Real Estate transaction in which you have no expertise.

This is the reason why there will be short sale lawsuits against Realtors! When I am representing a seller in a short sale and receive an offer from a buyer’s agent, most of the time the offer will have significant changes that need to be made in order to protect the seller’s interest.

Below are 8 reasons why you will more than likely NOT be buying one of my clients short sales if you don’t agree to modify your offer:

Low ball short sale offer ~ If you think a short sale is an automatic invitation to submit a ridiculous offer to the seller you might as well not even bother. The majority of the time you will see my short sales priced right at market value or even slightly below market.

The property is already a bargain to begin with. Both buyer’s and seller’s need to understand that once a short sale offer is submitted to the lender they will be sending out either an appraiser or Real Estate agent to do a broker price opinion (BPO). The contract price needs to be within reasonable proximity to market value or the offer will be rejected.

Inappropriate escrow funds ~ In Massachusetts the typical deposit when buying a home is $1000 at the offer and a balance of 5% upon signing a purchase and sale agreement, as we are a two contract state. These figures are of course negotiable but don’t expect you are going to be putting up two nickels the seller can rub together. The whole point of having escrow funds is to ensure a buyer does not walk away from the transaction. You need to have enough funds to prevent that from being easy to do.

Doing a home inspection after short sale approval ~ This is not in the slightest bit negotiable. A buyer will do their home inspection up front in the normal time frame for doing an inspection which is typically 7-10 days from the offer being accepted. Do you really think we are going to wait a significant amount of time to get short sale approval and then you are going to be able to walk because you don’t like the the fact there are no GFI plugs in the bathroom or the water heater is at the end of it’s life expectancy? Sorry friend it does not work that way.

If you are buying a short sale and are worrying about losing $400-500 you shouldn’t be looking at one. Additionally, if there are issues from a home inspection you can negotiate a possible credit. Once short sale approval comes the lender doesn’t want to hear about any problems.

As a buyer the other thing to consider is the fact that you would be out of the market for months when you could have discovered an issue that might cause you not to move forward without waiting all that time.

Leaving the purchase and sale signing date until after short sale approval ~ You are either going to purchase the home or you aren’t. We will not be waiting until after short sale approval to have a contract in place. Everything will be negotiated and agreed to up front.

Not getting a financing commitment right away ~ If you are going to purchase one of my short sale listings you will apply and get your financing before short sale approval. When the lender approves the short sale they will more than likely ask for a 30 day closing. We will NOT be waiting to find out if you are able to get financing that quickly or if at all!

Submitting an unrealistic closing date ~ Short sales should really be called “long sales” because most of the time they take longer to complete than a traditional sale. If you are buying a short sale you need to take this into consideration. If you are not committed to waiting then don’t get involved with a short sale. My short sales on average take about 90 days for short sale approval. The closing date should read “30 days from short sale approval”. You can not put an exact date when we don’t know when it will be!

Not agreeing to wait 90 days for short sale approval ~ The buyer we will be looking for is going to be committed to the property. If you think that you are going to find your self restless 5 weeks later because we don’t have an approval yet then a short sale is not right for you. Don’t forget you are purchasing a home that is probably a pretty decent value. It is worth the wait! It clearly would not be in the best interest of the seller if a buyer bailed on the transaction a month or two in and they had to start the process all over again.

Asking to take over the short sale because you are an investor ~ Sorry my friend if you are an investor please feel free to make a realistic offer but don’t think you are going to take over the negotiations with the lender. Don’t think you are going to make a low ball offer and the seller is going to accept it while you look for an end buyer to sell to and make a handsome profit. No I don’t think so! The seller hired me to complete the short sale. I don’t feel like defending myself in court on why I let an investor take over the obligations I was hired to perform.

Folks these are the kind of things that go on every day in short sales because seller’s do not do their home work in picking a short sale Realtor to work with. Don’t make that mistake. When you need to short sell your home do your research and hire a pro! These are all great reasons to reject short sale offers.

Who you work with to complete your short sale will have the greatest impact in helping you reach your financial goals. Completing a short sale remains a much better alternative than letting a property go to foreclosure for a number of reasons centered around credit and your ability to buy another property in the future.

I am successfully completing short sales through out the Metrowest Massachusetts area as well as parts of Worcester County. As of this writing in four years, knock on wood, I have a 100% success rate for short sale approval!

I work hand in hand with a local short sale Real Estate attorney who knows how to get short sales to the closing table!

If you are outside of the Metrowest Massachusetts area or even in another state and need to do a short sale please feel free to contact me and I will be happy to refer you to a Realtor in your location that handles short sales and knows what they are doing! I have referred short sales to numerous Realtors all around the country.

_________________________________________________________________

About the author: The above Real Estate information on 8 reasons why you will not buy my short sale listing was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Buying a Home After Short Sale or Foreclosure

Bill Gassett — Mon, 21 Mar 2011 11:43:23 +0000

As a Realtor who has been heavily involved closing Massachusetts short sales over the last five years, one of the questions that I get asked quite often from home sellers is how long will it take before I will be able to buy a home again.

The answer to this question does not have any clear cut and dry answer. There are quite a few variables involved when trying to figure out when someone will be able to purchase a home after a foreclosure or short sale.

Going through either a short sale or a foreclosure has the potential to seriously impact ones credit. Government entities Fannie Mae, Freddie Mac and FHA do not directly loan money to individuals but are the governing body that work with lenders to guarantee loans and free up money to provide mortgages.

Banks typically have the authority to lend to whoever they want but will generally follow the guidelines set forth by these entities. There are some lenders of course that will take greater risks with some borrowers than others.

Below are the general guidelines that FHA, Fannie Mae and Freddie Mac follow when considering a loan after a short sale or foreclosure:

Short sale with FHA Loan

Can purchase right away with no mortgage default
3 year wait if in default at the closing
Reduced wait if the borrower has re-established good credit and can show extenuating circumstances

Short Sale With Fannie Mae Loan

2 year wait if the borrower puts 20 % down
4 year wait if the borrower puts between 10% to 20% down
7 year wait if the borrower puts less than 10% down
2 year wait if the borrower can show extenuating circumstances and puts more than 10% down

Short Sale with Freddie Mac Loan

4 year wait before being able to get a loan
2 year wait if the borrower can show extenuating circumstances

Foreclosure with an FHA Loan

3 year wait before being able to get a loan
Reduced wait if the borrower can show extenuating circumstances and re-establishes good credit

Foreclosure with a Fannie Mae Loan

7 year wait from the completed foreclosure sale date
3 year wait if the borrower can show extenuating circumstances. Additional underwriting requirements apply for 4 years after a 3 year waiting period.
7 year wait for a 2nd home, cash out re-financing, or an investment property

Foreclosure with a Freddie Mac Loan

5 year wait from the completed foreclosure sale date
3 year wait if the borrower can show extenuating circumstances

** As a side note a deed in lieu of foreclosure follows the same guidelines as FHA’s foreclosure policy, the same as Fannie Mae and Freddie Macs short sale policy.

When analyzing the difference between completing a short sale or going through a foreclosure in regards to purchasing another property in the future it boils down to the waiting time which is more favorable in a short sale.

Credit Scoring After Short Sale and Foreclosure

The other question that I get from folks considering a short sale is how it will impact their credit. There is a lot of misleading information that come from Realtors, as well as online forums about the impact on credit scores. On many occasions you will hear that a short sale is far better for your credit than getting foreclosed on. This is incorrect! A credit score in a short sale or a foreclosure have the potential to be about the same. Maybe marginally better in a short sale.

According to Fair Issac (My FICO) a company that provides analytic, decision making, and credit scoring services for financial service companies a credit score will go down by 40 to 110 points after being 30 days late. Further, the scoring drop will increase to 70 to 135 points after 90 days late on a mortgage payment.

The average scoring drop in a short sale, foreclosure or deed in lieu is 85 to 160 points. You need to keep in mind that in both short sales and foreclosure it is possible that the credit score drop could be closer to 200-300 points.

Credit scoring factors vary from individual to individual. The scoring change is heavily dependent on where the credit score was before the negative event took place. Both a short sale and foreclosure are considered a loan that was not paid as agreed.

What happens to your credit score in each of these events could be different than someone else who goes through the same financial event. Unfortunately, most of the time the higher the credit score the greater the decrease from where you started.

When trying to decide whether a short sale is right for you don’t be fooled into making the decision under false hopes that your credit will not be impacted all that much. The biggest advantage in a short sale is the shortened time frame in which you will be able to purchase a home in the future.

One of the most important steps after going through either a short sale or foreclosure is to be conscious about trying to improve your credit standing. Here are some excellent tips on how to increase a credit score.

*** The above information for waiting periods before buying a home after completing a short sale and foreclosure was sourced by the Fannie Mae and Freddie Mac selling guides along with the FHA handbook.

Short Sale Realtor Mistakes

Bill Gassett — Wed, 16 Feb 2011 12:54:37 +0000

As a Realtor who has been successfully completing short sales over the last four years I get to see quite a bit of the inner workings of a short sale transaction.

In many of the articles I have written about short sales, I have expounded on how important it is for a seller to have a Realtor representing them that understands the process completely.

From a buyers perspective it is pretty easy to understand the frustrations of some short sale transactions most notably the extra time it usually takes to get one approved compared to a traditional sale.

The short sale completion time often is due to the particular lender involved and the complexity of the short sale. Things like the number of lien holders, liens against the property and private mortgage insurance can all be factors in whether a short sale will take extra time.

When a Realtor is the cause of a short sale not being approved there is no excuse! In fact this is why there will be short sale lawsuits against Realtors who are clueless.

I want to share my story from a buyer’s perspective on a short sale that I was interested in purchasing for myself and how things have unfolded over the last few weeks.

Unfortunately, I ran into an agent that doesn’t understand short sales! Believe me I would love to broadcast who this agent is just so anyone thinking of short selling their property would never consider using them. In all likelihood this agent will be the direct cause of why this owner gets foreclosed on. It is a short sale botch job beyond belief.

Without giving away too many details this property was not located in Massachusetts. For me it would have been a nice vacation spot where I could get away when needed.

Let me 1st start off my story by explaining to you that the property was listed as an approved short sale for $79,900. If you are not familiar with short sales the vast majority of them are NOT approved by the lender prior to a buyer making an offer on one. Usually a buyer makes an offer and you wait for the lender to either approve, counter or reject the offer.

The property I was interested in purchasing was marketed and advertised as an APPROVED short sale in MLS. Well guess what folks it was NOT an APPROVED short sale.

The Realtor marketing the property clearly was misrepresenting the property in order to make it more attractive to an interested buyer. A clear violation of the code of ethics! This fact alone could get a Realtor in deep #$%@ but I am only starting my sad story.

I got past the fact that the short sale was not approved and made an offer anyways. I should explain that this property is a condo and is located in a neighborhood where all the units are virtually identical aside from differences in updates, amenities, and whether it has a water view or not.

The last sold comparable property in the neighborhood closed 9 months ago for around $100,000. This becomes relevant because over the last 9 months property values have still been declining in this area.

At the moment there is a bank owned unit for $59,900 that is under agreement in better shape, a short sale that has been on the market for close to a year at $85,000 and another that was recently taken off the market for $75,000 that was also on for close to a year.

Clearly the value of the property is not the same as it was when the appraisal on this unit was done by the lender.

I made a very respectable offer on the property which my agent submitted to the listing agent. The listing agent told my agent that my offer would not fly and that the lender needed $84,200. Really??? I asked why it was being advertised at $79,900 and never got an answer.

The listing agent did submit the offer to the lender and used what is called a request for variance under the HAFA short sale program. The request for variance is used to get a lender to accept something less than what they are required to accept under the guidelines of the HAFA short sale program based on the appraisal they have.

This is what the listing agent wrote in the request: “I definitely don’t want to give this property away but I also don’t want the property to sit there for additional time where it can lose more value. There is currently one listing in this community that is listed in the 70′s and it’s a foreclosure with updates. The subject property is dated. The buyer is trying to use that as leverage and I have explained that the closed sales are what we are looking at.”

Writing this to the lender is wrong on so many levels! 1st of all a Realtor does not work for a lender in a short sale!! The listing agent works for the seller and should be doing everything possible to get the property SOLD. Does it sound like the Realtor is making a good case for my offer being something they should look at or I am just a dumb buyer who is trying to steal the property?

Needless to say my offer was rejected and the lender said they would not accept less than $84,200. The listing agent then raised the price in MLS to $84,200 after having been on the market for months as an approved short sale at $79,900. How damaging do you think that is for the seller!

Folks in a short sale the only consideration from a seller’s perspective is getting the property sold and the short sale debt removed.

The seller should not care if the property sells for X or Y as long as the debt is removed which they are granted under the HAFA program. It is painstakingly clear that the agent has probably never done a short sale before and does not know anything about short sale debt removal.

You may be thinking how do I even know the listing agent wrote this to the lender? This is where it gets even worse. The listing agent passed along to my agent private information that should have never been shared with anyone.

What was shared were the HUD docs and the FHA variance rejection letter which included the following information:

A date in which foreclosure proceedings could be commenced against the seller.
The minimum amount the lender would accept for the property.
The name and phone number of the short sale negotiator.
The name of the HUD officer who signed the rejection of my offer. I already Google his name and could contact him directly as well.

Besides completely botching everything you could possibly do from a short sale perspective and maintaining your fiduciary responsibility to the seller, the Realtor does not even understand appraisals 101.

The listing agent insists that only closed properties are data that the lender should be looking at. REALLY??? You have properties on the market that are not sold that are listed 20-25% under what the last unit sold for 9 months ago!! Please go back to Real Estate school. Ask an appraiser if they use current listings in their analysis….stop acting like the biggest dope going.

I am paying cash so it doesn’t matter but if I was getting a loan my lender would certainly take the fact that there are units on the market that haven’t sold sitting there at these prices.

Why do I bring the appraisal aspect up? The lender has an appraisal that is 9 months old for $90,000. If a new appraisal was ordered the lender more than likely would change their position. I would get my vacation spot, the listing and selling agent would get paid, the lender would not own another property and most importantly the seller would avoid foreclosure.

The listing agent won’t ask the lender to get a new appraisal. I have also asked if my attorney could speak to the negotiator directly. I have been rebuffed on all accounts. If the listing agent had submitted the current listings and made a good argument to the lender for my offer being accepted I would not even be writing this article.

Instead I am left thinking about what I should do. If you were in my shoes would you do any of the following:

Explain this situation to the listing agents broker of record and make clear that their agent is a walking lawsuit waiting to happen?
Try and call the negotiator directly and ask for a new appraisal?
Make a copy of this article and mail it to the seller?
All of the above?

The seller has a ready willing and able cash buyer who can close immediately. A foreclosure is a costly situation that the lender could avoid. This would be a win-win for all involved. A new appraisal would make this a simple transaction.

After going through it myself it is even more clear why every seller considering a short sale should be working with a PRO! If you are thinking of purchasing a short sale here are some short sale questions to ask the listing agent to see what the probability you will ever end up at the closing table. Nationally less than 30% of all short sales close! In many cases this can be traced back to a Realtor who has no idea what they were doing.

*** Update – after a few months I finally was able to convince the listing agent to get the lender to order a new appraisal. The appraisal was done and came inline with what I was offering. The lender accepted my offer and we closed. Without my knowledge of short sales this property probably never would have closed and the seller would have ended up in foreclosure. All because the Realtor lacked the proper understanding of how short sales work. The scary part is this agent advertise themselves as a short sale expert.

_________________________________________________________________

About the author: The above Real Estate information on short sale Realtor mistakes was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 25+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Lenders Choosing to Foreclose Instead of Short Sale Approval

Bill Gassett — Mon, 07 Feb 2011 13:08:14 +0000

Why would a lender foreclosure instead of approving a short sale?

As a Massachusetts Realtor who deals with short sale transactions on a daily basis, I have seen and learned quite a bit since I started getting involved with these types of transactions four years ago.

One thing that I am extremely proud of is the fact that every short sale that I have listed has received short sale approval from the lender. This is no small feat, as nationally the success rate for completing a successful short sale in less than 30%.

I certainly can not take all the credit as the attorney I work with does all of the grunt work with the lender. The short sale law firm I use does outstanding work. My job in a short sale is the same as with any home I am marketing….get it SOLD! This means finding a buyer who will pay something in the ball park of market value and be willing to wait the time it takes to get short sale approval which is typically longer than a regular transaction.

Of course part of getting a short sale to the closing table is knowing how to follow proper procedures. The are plenty of Realtors getting involved with short sales who are completely clueless but see it as a money making opportunity and are willing to put a seller’s financial future at risk for their own potential gain.

Here are a few mistakes that I see repeated over and over again by Real Estate agents that don’t know any better:

Realtors® submitting multiple unsigned offers to the lender.
Realtors® submitting low ball offers to the lender.
Realtors® allowing home inspection contingencies after short sale approval.
Realtors® allowing an investor to negotiate the short sale.

For a complete explanation of each of these issues and why you don’t want any of them to happen to you see short sale lawsuits against Realtors.

Then again there are some Realtors who do in fact understand the short sale game and how to successfully navigate the waters. Short sales that have more than one lien holder tend to be slightly more difficult to get done than ones where there is only one lender involved. When there are multiple lenders involved you need approval from both in order for the sale to take place.

While I have yet to have this happen (knock on wood) I know of other Realtors who seemingly have had a situation where a 2nd lien holder has chosen to foreclose instead of granting short sale approval.

The scenario goes like this…. a home is on the market for $300,000 and is being marketed as a short sale. There is a 1st mortgage on the property for $310,000 and a 2nd mortgage for $50,000. The seller has lost his job and can no longer afford to pay the mortgage so he chooses to short sell his property.

A buyer comes along and makes an offer for $290,000 which is accepted by the seller and sent to the 1st and 2nd lien holders. After a period of time the 1st lien holder orders an appraisal to verify market value and after doing their due diligence determines that $290,000 is well within the acceptable limits of market value. During the negotiation process the 2nd lien holder is offered $5000 in order to approve the short sale and allow the sale to take place.

The lender digs in their heals and says NO. They will not accept the short sale payoff of $5000. The Realtor involved says why not? They go on to argue with the lender that if you allow this to go to foreclosure you will get NOTHING as the home is worth far less than the $360,000 mortgage balance.

The lender does not bend and says we don’t care we are going to foreclose. Folks this is a real world scenario that happens everyday in the world of short sales.

What remains to be seen is whether or not the lender is going to get nothing. The answer is probably NO. More than likely one of the following scenarios will have taken place:

The 2nd lien holder has a loss sharing arrangement with the FDIC that will allow them to collect substantially more than the amount offered by the first lien holder under the short sale scenario.
Unbeknown to the homeowner, the second lien holder has bought insurance against the default. The lender will now collect on that insurance. Depending on the terms, this may not have been possible if they agreed to a short sale.
The homeowner’s loan with the lender was full recourse and they intend to pursue him for the deficiency and/or sell that right to a collection agency.
There are tax advantages to the lender that far outweigh the offer of $5000 that they received from the 1st lien holder.
Any or all of the above!

The above situation is why it is imperative to have a great short sale negotiator on your side. Of course there are times that it will be impossible to make the deal work but in many cases the skill of the negotiator can find a middle ground with the 2nd lien holder.

Click on the links below to see other important information related to completing a Massachusetts Short Sale:

If you are need to short sale your home or condo in Ashland, Bellingham, Framingham, Franklin, Grafton, Holliston, Hopedale, Hopkinton, Medway, Mendon, Milford, Southboro, Westboro, Natick, Northboro, Northbridge, Whitinsville, Upton, Uxbridge, Shrewsbury, Worcester, or Douglas Get in touch! I would love to interview for the chance to represent your best interests.

I am successfully completing short sales through out the Metrowest Massachusetts and Worcester County areas. So far, knock on wood, I have a 100% success rate for short sale approval!

_________________________________________________________________

About the author: The above Real Estate information on Lenders choosing foreclosure over short sale approval was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Short Sale Low Ball Offers

Bill Gassett — Mon, 10 Jan 2011 12:31:45 +0000

There is no question that short sales are like the wild West. Almost every single sale is different. Each lender and even the investors that hold the loan may have different procedures on how they want things done.

There are some folks that believe that because a home is a short sale it is an automatic invitation to make an unrealistic low ball offer. Even some Realtors who have not been educated on the dynamics of a short sale believe they are just like a bank owned property.

Part of the problem could be late night television where you see so called Real Estate guru’s telling you how to buy and sell Real Estate to become an instant millionaire. Fat chance!

The kind of garbage spewed on these late night shows could not be the further thing from the truth. While Short sales and REO’s are both considered distressed properties they are nothing alike.

If you are short selling your Massachusetts home this becomes a very important point. There is a strong likelihood that you will may receive an offer that should not be accepted.

The problem with a lot of short sale transactions is that Realtors are jumping in and representing sellers with no knowledge of the process. If the Realtor you have hired does not know how to guide you properly how can you expect to have any success?

If you are a Massachusetts home owner who is short selling a home what you really need to understand is that the lender is going to send a representative out to your home after it has gone under contract to do an appraisal or broker price opinion. The lender is doing this to find out what the fair market value is for the property. If the offer that you have accepted is not within the ball park of the actual value of the property your short sale is going to be REJECTED!

The worst part of this is that you probably will already have been waiting for months to find out if the short sale was going to be approved. If the buyer does not increase their offer to the banks counter proposal, the deal will be dead and you will have wasted an awful lot of precious time. Maybe time that you don’t have if the lender decides to start foreclosure proceedings.

This is where your Real Estate agent should have counseled you properly.
In a short sale your home should be priced aggressively in order to get
an offer as quickly as possible but not so much that it will be turned
down by the lender.

On a weekly basis I am seeing agents improperly handle short sales by either submitting low ball offers signed by the seller to the bank or collecting multiple unsigned offers and just submitting them all like some kind of free for all. This is NOT the way to handle a short sale!

An offer should be collected from someone who has a strong desire for the property and is willing to wait the time it takes for short sale approval. Generally speaking most short sales take three to six months to get approved. The buyer you work with should be educated on this fact.

The contract should be executed by both buyer and seller. I would also suggest some kind of clause that locks the buyer in for some amount of time to wait for short sale approval. On all my short sale contracts the buyer is required to wait for a minimum of 90 days or they would forfeit their escrow deposit which typically is 5% of the homes purchase price.

If you are going to short sell your Massachusetts home make sure you pick a Realtor with experience in getting these transactions completed! Accepting low ball short sale offers is just one of many mistakes you will want to avoid!

Click on the links below to see other important information related to a Massachusetts Short Sale:

Strategic foreclosure vs strategic short sale

Short Sale Debt Removal

Short sale tax consequences

If you are needing to complete a short sale of your home or condo in Ashland, Bellingham, Framingham, Franklin, Grafton, Holliston, Hopedale, Hopkinton, Medway, Mendon, Milford, Southboro, Westboro, Natick, Northboro, Northbridge, Whitinsville, Upton, Uxbridge, Shrewsbury, Worcester, or Douglas Get in touch! I would love to interview for the chance to represent your best interests.

I am successfully completing short sales through out the Metrowest Massachusetts area. So far, knock on wood, I have a 100% success rate for short sale approval!

_________________________________________________________________

About the author: The above Real Estate information on Massachusetts short sale low ball offers was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

Short Sale Lenders Lying to Mortgage Holders

Bill Gassett — Tue, 21 Dec 2010 13:15:09 +0000

Over the last few years while working with Massachusetts sellers looking to short sale their home I have encountered on a couple occasions folks that were deliberately lied to and told that a short sale was not possible.

Fortunately these particular home sellers were savvy enough to realize their short sale lender was lying to them. They had done a little research online and knew that losing their job was a legitimate short sale hardship and the fact that their home was under water made them perfect candidates.

They just happened to be speaking with someone in the collections department and not the loss mitigation department.

What home owners need to be completely aware of is who they are speaking with at the lending institution. The department that you reach will have a huge impact on what information you are relying on!

It should be crystal clear that lenders have three separate departments that handle borrowers who are in default with their loan. There is the loss mitigation department, the foreclosure department and the debt collections department.

The loss mitigation department is who you should be speaking with any questions related to short selling a home.

When you miss mortgage payments on your loan you may get a call from the collections department asking you to get current again. Make no mistake about it some of these people on the phone are ruthless and will say anything to you in order to get you to send them money.

You may even ask them about short selling your Massachusetts home and they will say you can’t. They don’t care because their goal is to get more money out of you.

If you are considering a short sale you DO NOT want to be speaking with anyone from this department!

What is sad is that there are probably lots of folks who have been told the same thing and just relied on the statement as being fact. Some of these poor sellers, having been told that a short sale is not possible, just let the bank take their home via a foreclosure.

Recently I met a seller who was attempting to do a loan modification and was told that in order to get the loan modification they would have to come up with the amount they were in default.

The amount was over $18,000 which they came up with by depleting their savings including retirement funds! Well guess what the lender after receiving the funds denied the loan mod. This unlucky home owner happened to be speaking with the collections department who duped them into giving them the funds. The lender receiving these funds should not have played any part what so ever in the owner getting approved for a loan modification.

They are now either left to short sale their home or face foreclosure. They wanted to stay in their home and were hoping the bank would restructure their loan in order to make that a possibility.

The take home message here is never to rely on anything your lender tells you. On many occasions the person you will be speaking with is nothing more than a glorified clerk. If you have ever called a lender you probably realize you never speak to the same person twice.

If you have run into financial difficulty and need to short sale your home talk with either a Real Estate attorney or a Realtor who has experience with short sale transactions.

Who you work with will have the greatest impact in helping your reach your financial goals. Completing a short sale remains a much better alternative than letting a property go to foreclosure for a number of reasons centered around credit and your ability to buy another property in the future.

I am successfully completing short sales through out the Metrowest Massachusetts area as well as parts of Worcester County. As of this writing in almost four years, knock on wood, I have a 100% success rate for short sale approval!

I work hand in hand with a local short sale Real Estate attorney who knows how to get short sales done!

Short Sale Lawsuits Will Realtors Be Next?

Bill Gassett — Mon, 29 Nov 2010 12:33:51 +0000

Avoiding short sale lawsuits

There is no question that in this economic down turn we have experienced over the last five years or so that short sales and foreclosures have become part of our everyday Real Estate landscape.

Every week there are countless new short sale listings that hit the market in Massachusetts. In many of these short sales the seller, not understanding there is a big difference between a traditional Real Estate transaction and a short sale hires any ole Realtor® they happen to come across to represent them.

On the other side of the coin, there are also plenty of Real Estate agents that see the growing number of short sales coming available for sale and realize there is a lot of money to be made.

The problem however, is that many of these agents are flying by the seat of their pants and have done nothing to educate themselves on the ins and outs of closing a short sale.

As a Realtor® who has been successfully closing short sales for almost five years, this is one of my biggest pet peeves! How anyone can look a desperate seller in the face and take on a listing to sell their home with no short sale expertise is just beyond me. It pisses me off when I see a new short sale listing hit the market and know the agent has no track record with this type of transaction.

There are many Realtors® that are putting the noose around their own neck. In desperate times people do desperate things. The end result is that on many occasions consumers get very poor advice that can cost them dearly.

Realtors® that do not have short sale expertise could really do themselves a favor by referring the business out to an agent that is qualified to get the job done.

You may be wondering why this has become such a passion of mine? The answer is simple. Short sales have become stigmatized because there are numerous Real Estate agents and buyers that have been involved in deals where the listing agent did not know what they were doing. The end result for a number of different reasons is a sale that didn’t happen. This leaves a bad taste in everyone’s mouth. Going forward it makes it harder for the agents that do know what they are doing to find buyers for the short sales they are marketing.

Below I am going to touch on all the things you should look out for in trying to successfully complete a short sale whether you are in Massachusetts or another state.

Properly pricing a short sale

When you are short selling your home there is a good chance that you are not able to afford the monthly mortgage payments any longer. You may be just scraping by and know that next month you won’t have enough to pay your lender. When you decide to short sell your home and are no longer paying your mortgage pricing the home properly becomes critical.

The last thing you want to do is either over price or under price the home. For obvious reasons if you over price you will more than likely not be able to procure a buyer in a timely fashion.

If you under price the home and receive a contract from a buyer, the lender is going to reject the short sale after reviewing the appraisal or broker price opinion that they order.

Both of these scenarios can leave you with nothing and that much closer to a foreclosure. A short sale should be aggressively priced such that you will find a buyer in a timely fashion but not so low the lender is going to reject the short sale contract.

The short sale contract

There are numerous Realtors® that are clue less when it comes to giving sellers advice on the short sale Real Estate contract. Lets get one thing straight right off the bat….. When a seller signs a Real Estate contract it is almost always legal and binding as to the terms and conditions in the agreement.

Here are 4 short sale contract issues you need to be aware of:

Realtors® submitting multiple unsigned offers to your lender
Realtors® submitting low ball offers to the lender
Realtors® allowing home inspection contingencies after short sale approval.
Realtors® allowing an investor to negotiate the short sale

When a Realtor® submits an unsigned offer to your lender YOU do not have a legal and binding contract. The buyer can walk at any point in time with no consequences to them! Does this benefit a seller in anyway? The answer is NO NO NO! The Realtor® you hire should be looking to lock up the most qualified buyer who stands the greatest chance of getting to the closing table.
If you sign a low ball offer you stand an equally strong chance that the lender is going to reject your offer and send it back. If you accept an offer that is no where near the market value do you really expect the buyer is going to agree to the price the lender wants? Not likely and again you will be back at square one after being off the market for an extended period of time.
Allowing home inspections after the short sale approval is another big mistake. Do you really want to have your home off the market for months, get a short sale approval from your lender and then find out the buyer wants to back out due to inspection items? Don’t let the blind lead the blind. There is no reason for letting a buyer have home inspections after short sale approval. I find most buyer’s agents think they are protecting their client by trying to save them from spending a few hundred dollars. WRONG – what the buyer’s agent is preventing is the buyer from negotiating a pricing discount if there were issues discovered. Lenders DO NOT negotiate home inspections issues after short sale approval.
Letting a buyer negotiate for a seller is clearly foolish. The investor only cares about the seller if they get the terms THEY want. An agent who lets an investor take over a short sale transaction is asking for a lawsuit. Realtors should not let investors negotiate a short sale!

Short sale negotiations

This is clearly an area where you will see most of the lawsuit’s against Realtors®. There are agents who are engaging lenders in the negotiations of short sale approval but don’t have the knowledge and understanding of either short sale debt release and/or short sale tax ramifications.

Who do you think will get sued if a seller receives a 1099-C or 1099-A at the end of the year or gets stuck with a deficiency judgment by their lender(s) at some later date in the future and they were not informed up front about it?

There are many Realtors® who have negotiated short sales that misrepresented to their client that the short sale approval letter removed the short sale deficiency when in fact it did not.

Realtors® are supposed to abide by the Real Estate Code of Ethics but clearly there are many who’s judgment is clouded by the almighty dollar.

The Code of Ethics clearly states:

Article 11 Realtors® are knowledgeable and competent in the fields of practice in which they engage or they get assistance from a knowledgeable professional, or disclose any lack of expertise to their client.

Article 13 Realtors® do not engage in the unauthorized practice of law.

Speaking of giving legal advice, there are Realtors® who are guilty of telling their client to stop paying the mortgage to complete a short sale. While this may be the proper advice in 9o-95% of most circumstances with short sales what if the sale falls into the 5-10% where stopping payment was not necessary?

Most major lenders may require payment stoppage but some of the smaller lenders do not have that guideline. Telling a seller to stop paying the mortgage could have serious consequences on their credit that could have been avoided. Again Realtors® should not be giving this kind of advice. It should come from a lawyer.

The take home message here is to make sure you do your home work when hiring a Realtor to represent you in your short sale!

I am successfully completing short sales through out the Metrowest Massachusetts area. As of this writing for almost four years, knock on wood, I have a 100% success rate for short sale approval! I work hand in hand with a local short sale Real Estate attorney who knows how to get short sales done! I will admit there is some luck involved in my success rate but the team I have put together does a stellar job.

If you are outside of the Metrowest Massachusetts area or even in another state and need to do a short sale please feel free to contact me and I would be happy to refer you to a Realtor in your location that handles short sales and has an understanding of the short sale process! I have referred numerous short sales to other Realtors all around the country.

_________________________________________________________________

About the author: The above Real Estate information on short sale lawsuits will Realtors® be next was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 24+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!