Massachusetts Real Estate News » Massachusetts short sale Realtor

Beware of The Short Sale Investor|Short Sale Fraud

Bill Gassett — Tue, 17 Aug 2010 11:29:06 +0000

Any Realtor that regularly works with short sales is bound to come across a proposition from a potential buyer who happens to be a short sale investor.

As a home owner you may have also at one time or another noticed some signs around town that say something like “we buy houses” or “stop foreclosure” or “We buy homes for cash FAST”

If you are selling a Massachusetts home and it happens to be a short sale let me give you some words of wisdom – make sure you or your Realtor does their due diligence when deciding whether or not to work with an investor.

A short sale investor has one goal in mind and that is to buy your short sale at the lowest number they possibly can. Seems reasonable enough. An investor obviously needs to buy the home on the cheap because more than likely they are going to turn around and flip it to someone else making a handsome profit. As a Massachusetts home owner trying to short sell your home you may be thinking why should you care as long as you find a buyer?

The answer is real simple. One of the biggest reasons why many short sales never reach the closing table is because the seller accepts an offer that is too far under market value and the lender rejects the contract denying the short sale.

When you are short selling your home what you need to understand is that the lender is going to verify the market value of the property prior to giving short sale approval. The lender will send out either an appraiser or ask an independent Realtor to do what is called a BPO (broker price opinion).

The contract price that you have accepted from the short sale investor needs to be within a reasonable proximity to appraised market value or the short sale will be rejected. From an investors perspective they could care less because they have your home tied up and there is no risk to them if the transaction does not happen. They get their deposit monies back if the lender does not accept their offer. A short sale investor knows this and will put offers on many short sales hoping something eventually sticks.

Just by putting a few of these deals together they can make quite a bit of money. Guess at who’s expense though? Trust me their pitch is going to be how they are going to be helping you get out of a desperate situation. You will be more desperate when it does not happen because you will be that much closer to FORECLOSURE.

Your home will be off the market tied up for months with this investor while you wait for the banks reply. When it finally does come and the answer is no way Jose you will be starting from scratch and the foreclosure will more than likely be right around the corner. This scenario happens all across the country on a regular basis with short sales.

If your Realtor is naive to how short sales work, you could easily get caught in a situation you are really going to regret. I tell people all the time in the short sale articles I write that it is critical to work with a Realtor that has a strong track record of closing short sales.

There are also situations where the investor buyer is the referral source to the listing agent. The listing agent may be given an incentive from the investor buyer to take on a short sale in return for receiving the re-sale listing after the investor buys the short sale home. In essence the Realtor lists the house again when the home is being “flipped”. For performing the transaction for the investor the Realtor is promised they will handle more of these transactions in the future. The problem with this arrangement is very simple.

Any Realtor who signs a contract with a seller to sell their home is working for that seller! It is the Realtors fiduciary responsibility to get the seller the best terms and conditions. How can a Realtor do this when there is an inherent conflict of interest? THEY CAN’T. This is a short sale scam!!

Financial ramifications of an accepted low ball short sale offer

Going back a few years ago it was not uncommon for many lenders to completely forgive a seller of their short fall. So for example if the seller was $50,000 short the lender would wipe out the debt and the seller would be free and clear. The game and the playing field has changed quite a bit in 2010.

It is much more routine for a lender to require a seller to pay back a portion of their short fall in order to close the property. An agreement to pay back a portion of the debt will become part of the approval letter. Typically the owner will be asked to sign a note where they agree to pay back a certain amount over “X” amount of time.

The reason why this becomes important when dealing with a short sale investor is because if they do manage to get the lender to approve the short sale you will more than likely be on the hook for a larger portion of debt than if you held out for something closer to market value.

Short sale investor/mortgage fraud

One of the other short sale scams that takes place is when there is fraud committed against the lender by efforts of both the Realtor and short sale investor. A simple example would be a short sale that is listed for $175,000. A Real Estate agent receives an offer from a couple that wants to buy the home for $160,000.

Instead of submitting the offer to the lender, the agent calls up an investor friend and has them submit an offer for $140,000. The agent does not let the lender or seller know about the $160,000 offer but instead submits the investors offer of $140,000.

The investors offer of $140,000 gets accepted and the investor turns around and sells the property to the couple who was willing to pay $160,000. Folks this is what is known as MORTGAGE FRAUD! The other term for this practice is known as “flopping”. Someone caught doing this will find themselves in Federal Court.

Many of the larger lenders now are requiring a full appraisal before a resale can take place. They are also requiring short-sale buyers sign statements affirming the transactions are arms length, with no hidden buyer-seller relationships, and that there are no agreements to resell the property in place.

Firms such as Bank of America and others have language in their short sale approval letters that prohibit the flipping of a property and after closing they will audit transactions to identify “flips” or “flops”.

Other measures have been put in place by the Treasury Department to prevent short sale fraud by requiring that the buyer and seller have no hidden relationship and banning a re-sale to take place in under 90 days.

Let me be clear on this issue. If the bank knows up front that a flip is going to be taking place it is NOT mortgage fraud.

There is nothing wrong with an investor making money. Being in business and making a profit is what most people strive for. Non-disclosure is a completely different story! A Realtor however, does not get off the hook quite so easily if they have not performed their fiduciary duty to get their client the best terms and conditions in the sale. Realtors that get involved with these kinds of transactions walk a fine line with getting themselves into a situation where they are clearly not working in the best interest of their client.

If you find yourself in a position that you are going to need to do a Massachusetts short sale it is highly advisable that you work with a short sale specialist who is knowledgeable, honorable and someone you can trust! There are numerous Realtors that have begun to take short sale listings that have no experience what so ever completing a short sale transaction.

I would encourage you to do your home work when selecting a Realtor to work with in a short sale transaction. The last thing you need is to be stuck with a block head agent that does not know what they are doing!

Many agents do not know the 1st thing about short sales and try to learn on the fly. When you are facing foreclosure the last thing you want is to be stuck working with an agent that doesn’t know about short sale procedures!

If you are needing to complete a short sale of your home or condo in Ashland, Bellingham, Framingham, Franklin, Grafton, Holliston, Hopedale, Medway, Mendon, Milford, Hopkinton, 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 over the last three 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!

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 knows what they are doing! I have referred short sales to other Realtors all around the country.

When To Do a Short Sale Home Inspection

Bill Gassett — Tue, 13 Jul 2010 11:35:14 +0000

In most Real Estate transactions there is a buyers agent representing a buyer and a sellers agent representing the seller. In a traditional purchase, the home inspection is generally done within the 1st week or two after a contract has been executed by both the buyer and seller.

This is know as a “home inspection contingency” and allows the buyer and their home inspector the opportunity to carefully look over the home for any potential structural or mechanical defects.

If the buyer does not like the results they generally can exercise their right not to move forward with the purchase of the property.

When to do a home inspection for a short sale property can sometimes be a bone of contention depending on which side you are representing in the transaction.

Buyers of course do not want to spend money on home inspections when they do not know for sure whether their short sale offer is going to get approved or not. In many short sale offers I receive, the buyers agent will ask in the offer to let the buyer do their home inspection after the short sale approval letter comes from the lender.

As a Massachusetts short sale listing agent however, I need to protect my clients best interests. Allowing a buyer to wait until after the lender’s approval to do a home inspection would give the buyer the ability to walk away far too late in the transaction and could force the seller into a foreclosure sale because they would not have enough time to find another buyer.

In addition most short sales are “as is” transactions. The reason the seller is doing a short sale to begin with is that they do not have enough money to continue paying the mortgage. Buyer’s need to understand going in that the home inspection is not going to be an opportunity for them to present a laundry list of repairs they want the seller to remedy.

Lastly, the buyer is not going to be able to negotiate any costs of repairs if the home inspection was completed after lender’s approval. When the lender or lenders approves a short sale it is based on a definite dollar amount they will be realizing at the closing and they do not allow for further negotiations.

If the home inspection is done up front in a short sale it could be possible to negotiate a credit prior to the offer being submitted to the lender.

For all these reasons it makes sense that the home inspection is done prior to short sale approval!

As the number of Massachusetts short sales has grown so has the number of unqualified Realtors who have started to represent home sellers. If you are a Massachusetts home seller and need to do a short sale it is of the utmost importance to realize that not every Realtor is qualified to represent a short sale!!

Many consumers make extremely poor choices by working with agents that don’t have a lick of experience with getting short sales approved. Picking a good Massachusetts short sale Realtor is critical to your success.

There are many errors I see constantly by agents who are representing sellers in short sales throughout the Metrowest area. If you are considering doing a short sale I would highly recommend reading some of the short sale articles I have written below. The articles cover some of the considerations as well as mistakes you want to avoid when trying to successfully complete a short sale.

As a home seller you need to remember that tons of short sales across the country do not get approved and end up in foreclosure. Sometimes this is due to the Realtor not properly handling the sale. There are also debt removal and tax consequences discussed below that you will want to be familiar with.

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!

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.

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About the author: The above Real Estate information on when to do a short sale home inspection 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!

Need a Massachusetts Short Sale Realtor? Don’t Pick a Short Sale Buffoon!

Bill Gassett — Wed, 24 Mar 2010 11:55:46 +0000

One of the biggest mistakes I see being made over and over again by those that need to short sell their Massachusetts home is picking the wrong Real Estate agent to work with.

Don’t make this mistake and turn into Realtor road kill!

The are an abundance of Realtors that are listing short sales and don’t know the 1st thing about what they are doing! Who suffers the most from this? YOU…the seller!!

When you need to do a short sale on your home it is not like selling your home in a traditional fashion. The Realtor you choose to work with can have far reaching consequences for you. If you don’t get the short sale right you are more than likely going to end up in FORECLOSURE. The very thing that you are trying to avoid at all costs can often times be the direct result of a Realtor that has no business representing you.

Working as a Massachusetts Realtor, I constantly see things being done that just make me furious when it comes to short sales. Below are some examples of things that Real Estate agents are doing that very well could spoil any chance of getting a short sale approval:

Presenting Multiple Unsigned Offers to the Bank

This is by far one of my biggest pet peeves. When you are doing a short sale you DO NOT send multiple unsigned offers to a lender. Inexperienced Realtors who don’t work with shorts sales routinely make this mistake. A short sale is NOT a foreclosure and should not be treated as such. As the seller you still own the property and still make all the decisions with your home.

As the home owner of record, you see the process all the way through to the closing just like any other transaction. The lenders function is to approve or not the contract you are providing them.

When you don’t sign a contract you don’t have a buyer! Lets say your home is on the market and you get 3 offers. They all look pretty decent and your Realtor submits all of them to the bank unsigned. If you have done any research on short sales you probably know that they can take quite a long time for approval. As crazy as it sounds, there are some cases where short sales are taking between 6 months to a year to get approved. On average the time for approval is around 4 months.

How many buyers do you think get frustrated and walk after a few months of waiting? The answer is A LOT!! When you don’t have a signed contract there is no consequences for a buyer walking. It is say la vie and you have just wasted an enormous amount of time. Enough time that perhaps the foreclosure proceedings could be at your door step!

When I am representing a seller in a short sale it is a REQUIREMENT that the buyers waits for at least 90 days for short sale approval.

When you have multiple offers, it is just like any other transaction. You pick one offer and go with it. As a seller you should be picking the offer that has the greatest chance of getting approved. Along with the price and all the rest of the terms, you need to know the buyer is committed to your home and is willing to see the short sale process to conclusion. In addition, the bank is looking to work with an offer that makes sense. Their function is not to become the judge and jury for a Real Estate transaction.

Having a Seller Sign an Offer That Has No Chance of Being Approved

This is problem #2 and one that I also run into quite a bit. This is just the opposite of submitting all the offers to the bank unsigned. While this has happened recently while I was working as a buyers agent, I am going to relay a story about a buyer who is not my client but called me for advice because he has read a number of short sale articles I have written.

This gentleman was interested in purchasing a short sale in the Boston area that was listed for a little over $400,000. He told me he did his research and felt the home was worth close to the asking price. He met the listing agent at an open house, liked the property and thought about it for a few days. He called back a few days later and told the agent he wanted to make an offer for $400,000.

The agent told him “I am sorry but someone put in an offer yesterday and the owner accepted it”. The buyer asked the agent what the offer was that the seller accepted. She told him $300,000! On so many levels this Realtor is a complete moron. As anyone in the business knows, it is a violation of the code of ethics to reveal what a seller has accepted for an offer on a property. Beyond the fact that the Realtor does not follow the code of ethics, this short sale is more than likely going to be flat out rejected by the lender.

This guy told me that the seller said to his agent “the 1st offer is almost always the best so I think we should take it”. The home was on the market for ONE DAY! A Realtor that knows what they were doing would have told the seller he can not accept this offer because it will not be approved by the bank.

When lenders are evaluating whether to approve a short sale or not one of the steps they take is to send out an appraiser to verify the value of the home. The accepted sale price needs to be within the ball park of the market value. In the above scenario what you can expect is a SHORT SALE rejection.

It is such a shame because this buyer wanted the home and was willing to pay 100,000 more than what was accepted.

If this Realtor had done their job there would be one less seller that may not end up in foreclosure. Sadly, there will probably be another short sale that will never make it to the closing table because of pure stupidity. This is not some random story. This kind of thing goes on all the time in Real Estate.

Don’t let the joke be on you! Do your research on selecting a short sale agent to work with. They should have experience closing short sales and have a complete understanding of the process.

Thinking of selling a short sale home or condo 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.

Get in touch I would love to interview for the chance to represent your best interests. I am successfully completing short sales throughout the entire Metrowest area. So far, knock on wood, I have a 100% success rate for short sale approval.

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

Massachusetts Short Sales

Picking a Massachusetts Short Sale Realtor

Ethics in a Short Sale

If you are not in 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!

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About the author: The above Real Estate information on Massachusetts short sale Realtors 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!

Stop Making Mortgage Payments During a Short Sale?

Bill Gassett — Thu, 18 Feb 2010 02:20:43 +0000

The question of whether a home owner should stop making mortgage payments during a short sale is a popular topic for sure!

There are a lot of myths floating around when it comes to successfully doing a Real Estate short sale. One of the more prominent untruths is the fact that you need to be in default with your lender in order to do a short sale.

On numerous occasions both online and around the water cooler in the office, I have heard other Realtors telling their clients that they need to be behind in their mortgage payments in order to complete a short sale. This is flat out WRONG and could have negative consequences for the seller if they listen to that advice.

One of the most difficult questions a client or customer can ask me is whether or not they should stop making mortgage payments. While I am well versed in short sales, a lawyer I am not and therefore should not be handing out legal advice. When I am asked this question more often than not I will have them speak with the lawyer I work with on all of my short sales.

If you are thinking you may need to do a short sale here are some things to consider regarding whether or not it makes sense for you to make mortgage payments or not:

Reasons to Stop Making Your Mortgage Payments During a Short Sale

Although you do not need to be in default in order to do a short sale most lenders will act quicker on a file that is delinquent. It makes perfect sense. Why would a bank give priority to someone who is current on their loan?

Some sellers just don’t have a choice, as financial hardship has forced them to put all their money towards essentials such a food and heat.

The money being put toward the mortgage could be going towards building savings to be able to pay future rent and other living expenses instead.

Lenders may be less inclined to go after a seller if they are not making mortgage payments. It is obviously difficult to get blood out of a stone and some banks may not want to expend the energy chasing down a deficiency.

Biggest Drawbacks of Going Into Default

There will be an impact to your credit score. Whether you go through a short sale or let the home go to foreclosure there will be an impact on your credit. Every circumstance is different but speaking in generalities your credit score could take a whack of around 200-300 points in a foreclosure.

A short sale has the potential to be around the same, although I have seen in quite a few circumstances where the drop was closer to 150 -180 points.

You will not be able to buy another home for two years. For a Fannie Mae backed loan you will more than likely not be able to get a loan for two years.

End up in foreclosure. If you are not making payments during the short sale process and the bank rejects the sale you could end up losing the home to foreclosure. This obviously would be the case anyways if you did not have the ability to pay the mortgage.

The case for making mortgage payments during a short sale

If you can financially afford to make your mortgage payments in a short sale, you may want to for the following reasons:

You more than likely will be able to get an FHA loan if you were not late on any of your mortgage payments. According to Fannie Mae guidelines issued in August of 2008, you are also supposed to be able to get a conventional loan if you do not have to pay back the lender the “short fall” and did not become delinquent during the short sale. While this is supposed to be the case most lenders say otherwise.

Making your payments does help protect your credit to some extent although the lender can still report your short sale which will effect your FICO score. This is recognized as Credit Score Factor Code #22.

If the home does not sell or the bank rejects the short sale you will still be current and not in jeopardy of losing the home.

If you have not fallen behind in your mortgage payments it may make the whole process easier to cope with emotionally. There are many that get worked up from the fact that they are failing to payback an obligation they signed up for.

For a complete understanding of the process from both a buyers and sellers perspective see Massachusetts Short Sales. A short sale is a great way to stop a Massachusetts foreclosure!

Are you needing to short sale a home or condo in Ashland, Bellingham, Framingham, Franklin, Grafton, Holliston, Hopedale, Hopkinton, Medway, Mendon, Milford, Southboro, Westboro, Natick, Northboro, Northbridge, Whitinsville, Upton, Uxbridge, Shrewsbury, 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 area. So far, knock on wood, I have a 100% success rate for short sale approval. If you are not in the Metrowest 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.

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About the author: The above Real Estate information on stop paying your mortgage during a short sale 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!

Picking a Massachusetts Short Sale Realtor

Bill Gassett — Tue, 16 Feb 2010 12:08:04 +0000

Over the years there have been plenty of times I have seen consumers make poor choices in picking a Realtor to represent them in the sale of their home.

If the Real Estate market is booming making a bad selection can be less of an issue. Going back to the beginning of the decade all you had to do as a Realtor was put a sign in the yard and put it in the multiple listing service (MLS) and your chances of success were pretty good. Obviously not the case in June of 2011!

In a challenging Real Estate environment like we have been facing over the last few years, the agent you select can have a profound effect on the outcome of your home selling efforts.

Short Sales are a huge buzz-word in the Real Estate industry right now given how tough the market is and how many people are upside down on their mortgages. If you are not familiar with the term, a short sale is when the home owners mortgage company agrees to take less than what is owed on the property.

Short sales have become more common as Real Estate values in most areas of Massachusetts have dropped over the last five plus years. There are plenty of folks that need to sell their home because they can no longer afford to make mortgage payments. The short sale is a better alternative than letting the bank foreclosure. Most banks do not want to own property and the short sale allows them to avoid an expensive foreclosure proceeding. It is a win-win for both parties.

Some of the more common reasons for financial hardship include the loss of a job, reduction in pay, or a business failure. These are legitimate reasons a bank would allow a short sale to be approved.

With more and more short sales hitting the market, one of the things that has become absolutely mind boggling to me is how people go about choosing a Realtor to work with on a short sale transaction. Many consumers do not realize that selling a home via the short sale route is very different than a standard Real Estate sale! You can not just hire any Massachusetts Realtor when you need to do a short sale. The Realtor you choose should have experience handling this type of transaction.

Remember as a seller you are not that far away from a potential foreclosure so picking the wrong Realtor would be a very big mistake!

There are many Realtors that just don’t seem to care and take the ” I will figure out how to do this later” mentality. Is it any wonder that the success rate nationally for a successful short sale is very low? Some of the things I see Realtors doing is just atrocious. One of the more common errors I see is a listing agent submitting multiple offers to the lender for approval without the seller signing one of them. In essence there is no legal contract and the buyers are free to walk at any time.

Given the lengthy time for a short sale approval, a seller should be looking to lock up the best qualified buyer that has the greatest chance in getting to the closing table. On the short sale contract, I am always asking for the buyer to wait a minimum of 90 days to get short sale approval.

Like any other Real Estate transaction there should be money held in escrow from the buyer that offers the seller protection if the buyer decides to walk. Without a mechanism to hold a buyer in the deal the contract is pointless. For a complete explanation see Massachusetts Short Sale.

Make sure you ask the Real Estate agent you are thinking of hiring about their experience and their track record with bringing a short sale to a successful conclusion. If you are asking questions you feel the Realtor should know the answers to and they are making a face like this, I would suggest trying someone else:)

Related short sale Real Estate articles: