Tom Hinz

Here's what we're seeing as we manage short sales for realtors, attorneys, and homeowners - 80% of the short sales are going to foreclosure because a) the realtors are not pricing them correctly and in line with what the true fair market value is, and b) they are not managing the BPO process with the lender correctly. If they were, more realtors would be closing short sales. No fault of the realtors other than they are not experienced enough in the nuts and bolts of how to push a short sale to closing. Today for example, I did a short sale workshop for Countrywide where they invited their top realtors to attend. We covered the essentials for how to use our model to get the deals closed.

As the process has evolved over the past 6 months, here's what we're finding...
the most critical part for getting short sales approved in a timely manner is to get a contract AS QUICKLY AS POSSIBLE. Which by the way - is the easiest part...our group has investor buyers with cash to buy up these properties, so the realtors don't have to spend a lot of time and money marketing the home in the hope they will get a price that will satisfy the sellers mortgage balance...it is not happening because the homes are too upside down. After the offer, contract, HUD1 and the rest of the short sale package are presented to the lender, we need the BPO ordered as quickly as possible - remember, the highest priority in a short sale is to get the homeowner out from under a mortgage they can't afford, so they can avoid foreclosure - regardless if we are asked by a investor buyer or whoever to help them negotiate the purchase. We get the BPO to be in line with the true FMV, and we build equity into the property through the negotiation. As long as we show that it is less costly for the lender to approve the short sale vs taking the home back in foreclosure, we will get the sale approved.

Is it worth the wait? Depends on the buyer - will they live in the home , or are they an investor.
An investor will wait most times - the non-investor will probably want a quicker answer because they are timing a move from their current home. We are seeing short sales accepted in as little as 2 weeks up to 4 months...depends on the lender and their case load...But, there are ways to making them move quicker based on the case we present...we need to create a sense of urgency based on the cost to the lender to not settle quicker.

The really neat thing that we are dealing with is the loss mitigation negotiator who offers us a loan modification as part of the negotiations...this works to our advantage if we have a homeowner/seller that really doesn't want to move, and could afford to stay if the payment was more affordable. Many times the lender will not approve an initial request for a workout/loan mod, but when they realize we are working on a short sale, they will offer a workout to do whatever is needed to keep the loan current. This presumes the homeowner can qualify...but we would know that from the financial balance sheet we provide as part of the short sale negotiations.
Hope this helps... - Fri Nov 14 2008, 14:25

Frank,
Working short sales is now averaging for me about 2-4 months. Much faster for junior lien holders...they want their money quick, and understand they will take a hit - so better to approve it fast so they don't get blamed for slowing things down. The delay I'm seeing is with the first mortgage lender. In some cases, loss mitigators are working on upwards of 100 files per day! This really impacts the most critical part of the short sale negotiation and approval - the BPO process. ASC for example is now saying up to 90 days before the BPO is ordered.
The tricky part is managing the buyers and sellers expectation during this. Once the lender has their legal folks send the first letter of foreclosure being initiated (usually after 90 days delinquent), the pressure gets hotter and service and communication to all parties is important to maintain...especially to you the buyer and the seller. Also -lenders don't like having offers pulled, then new ones submitted...it delays the process even further...for you, you can just walk away..for the short sale specialist (me) and buyer, things get tricky when a buyer pulls out. But I completely understand your reasons to do so. You have to understand going into this kind of transaction that it takes time and patience. Regards. - Thu Jan 17 2008, 20:12

I don't beleive there is legislation preventing collecting a deficiency judgment when doing Foreclosure by Advertisment. The advantage of this method vs. judicial is that is much faster and streamlined...a lot less hassle vs judicial foreclosure. BUT - judgments are allowed...seems to be more of a practice to not collect the judgment so the case can be closed out, and be done. Maybe a local attorney there can site legislation that confirms what Aaron says...here is a good site for explaining more details:
http://www.extension.umn.edu/distribution/businessmanagement… - Sat Jul 5 2008, 08:10

Thanks Aaron for clarifying the specific rules for Minnesota. Some states allow Judicial Foreclosure, Others Non-Judicial...in Minnesota, both are allowed. From my understanding of Minnesota's law, with a Foreclosure by Advertisment, any bid in excess of the amount owed the mortgagee at the sheriff's sale/auction is a surplus that MAY be reached by junior lien holders. If no such holders exist, the surplus must be returned to the mortgagor. Any SHORTAGE though is a deficiency that can be pursued. When the redemption period is twelve months, the mortgagee can obtain a deficiency judgment in the amount of the difference between the fair market value of the property and the amount remaining unpaid on the mortgage by initiating a lawsuit within 90 days following the foreclosure sale. I guess the point is, this is exactly why I ALWAYS get a total release and waiver in writing - I don't care what state the client is in or what the practice is...if the law allows a judgment, I need something in writing to protect the homeowner. - Wed Jul 2 2008, 22:38

I have a client in a similar situation - but he is actually an investor that got in over his head and has an ARM adjusting that will put him in a negative cash flow...he can't refi, and the lender won't do a loan modification.
I will be representing him to sell his home for less than he owes, and have the bank consider the lower sale price full payment for his outstanding mortgage...this is called a SHORT SALE.
The reason we are doing this is because if there are no other programs he can qualify for to refi into a fixed loan, and assuming he wants to preserve as much of his credit as possible without showing a foreclosure, lien judgment, or bankruptcy, a short sale is the beest option. When you get foreclosed on, the judgment for the amount you owe on your mortgage follows you ... i.e. garnished wages, lawsuit, etc...UNLESS you file for bankruptcy. If for example you owed $250K and the house sold at auction for $200K, there would be a judgment against you for the different of $50K. With a short sale, and depending on who your lender is and how your case is presented to the lender, the debt is forgiven once the short sale closes. And although you will have a ding on your credit due to possible missed payments, and reflecting the settlement via short sale, you can recover from that much easier and quicker vs showing a foreclosure or bankruptcy on your credit profile.

Go to the FAQ section of my website http://www.shortsaletosell.com for more information on short sales and how they work - or call me at: 732 822 6870 Good luck. Tom - Wed Jul 2 2008, 21:10

I will respectfully disagree with any realtor that says there is NO benefit in attempting to do it yourself - untrue...
And this kind of response s exactly why homeowners don't know which way to turn. First - it is a hard lesson in how to understand the loss mitigation process - and after you do one, the next will be easier because you learn from doing. Second - the success rate is HIGH - if you understand how to properly prepare a package and more importantly PRESENT it...this is not just about presenting a low ball offer to the lender as many realtors equate with short sales... Third - the deficiency judgement with many lenders will only occur if the home gets foreclosed...many lenders will not issue a judgment if you succeed in closing a shsort sale...and, we never assume that, make sure the lender provides this in writing as part of their contract addendum. Finally - "many" realtors do not understand or have the patience to properly prepare a homeowner for the short sale process, nor do they have the experience to successfully complete one. Sorry - that is just a fact...that is why folks like myself get called by realtors to help them...they just don't want to deal with it, and it does require an expertise that comes from doing. - Wed Apr 30 2008, 06:09

Total understand your position - of course I felt the same way about hiring a landscaper to cut my lawn every week...until I realized it was costing me more money to do it myself.

Yes, you could do it yourself, but without a good background in this, I will bet you don't get as good a settlement as if you retained the services of a short sale consultant. In any case, just view my prior posts. You will learn more from that on the real world of doing a short sale...the steps, the gotchas, etc.

Soon to be posted on my web, but just completed yesterday - $231K outstanding balance shorted to $117K, including a lien judgment waiver from the first & second mortgage company, and no income tax due.

Be sure to follow the steps and ALWAYS fax/email the entire package when the lender requests even just one missing document! You will save yourself a lot of grief. - Fri Apr 18 2008, 09:35

Yes you can but, you must do so with the house listed through a realtor. The lender does not like to see FSBO versions of short sale offers. Remembed to do this directly with the loss mitigation department with the lender vs. the collections department - they will not be very helpful with short sales. - Tue Mar 11 2008, 11:03

Foreclosure is always a risk if you miss payments...It is rare to have the process start so soon after missing only one payment, but it depends a lot on WHO your lender is, equally WHO is the actually investor behind the lender is, and which state you live in.

I've had better success with doing a short sale or loan modification when my client either keeps paying steadily on the loans, or stops all together. Many folks will write that the lender will only listen if you are missing payments or in default - this is simply untrue and inacccurate. While it is the typical scenario today, short sales have been around a long time and an option for many different scenarios.

Loan modification inquiries and short sales have a better chance of succeeding if you have a genuine hardship that causes the missed payment(s). I've had good success with my clients when I prep them ahead of missing the payment to try and work out a loan modification. This way we have a record trail of our pending payment issue, and have given notice. This makes the lender more receptive to discussing the modification once we miss the payment. But I must add, I do not have clients send in a payment afterwards until we have an answer from the lender on doing the modification or not, or depending on the hardship. As mentioned in my previous posts, if there is a medical hardship or job loss, and it is just a matter of time before payments will stop, it may be better to just stop so we can move forward with a short sale.

Another factor: if your credit has dings even with a decent income, getting a modification or deed in lieu (giving the deed back to the lender and walking away from the property) can be harder to get.
But it is not impossible, just takes more work and positioning in the presentation of your case.

When talking with the lender, you need to get past the collections department and into the los mitigation department to get a better chance for actionbable solutions from the lender. Staff in collections are paper pushers who don't give a rip about your circumstances...Whenever I work out modifications, deed in luie or short sales, it is with the loss mit department ONLY. They work better from the perspective of netting the best result (least loss) for the lender. This usually means concessions on the part of the lender. The collections folks only care about getting the loan current, and penalizing you if you don't. Eventually you get to loss mitigation, but my advice is always, skip to the chase and start talking with the loss mitigation department asap.
I suspect you are dealing with the collections department, but have you had discussions with the loss mitigation department? Have you prepared a full short sale package for the lender?

If so, keep in mind that everything will hinge on the BPO report. If the home as repair issues, make sure you request an interior BPO...by default, the lender will do a drive-by...that could hurt your chances for the short.

If you have specific questions, email me at: thinz@apexgroupus.com - Sat Feb 23 2008, 12:49

I'm working 18 cases this month alone, and on each required and received the authorization and POA...I absolutely will not represent a seller without it. The funny thing is most people who I've found who don't use them, don't even know what they are. If anyone here doesn't understand the process well enough, this is not the forum to try and convince why this is critical to the process. It is mission critical to have one point of contact with the lender during a short sale, and most times it will yield a better result if it is not the seller.
It comes down to credibility and trust...and yes I acknowledge that it is tough going for a seller to try and determine who is best to represent them. - Wed Feb 27 2008, 11:14

"When I am involved in these situations with my clients, the bank is not willing to give any information to anyone without having their borrower (the seller) on the phone - unless it is a spouse. This won't change in the near future," If this is something a short sale consultant is experiencing, they need to STUDY more on the subject..

Of course bank will and they do give information without the sellers involved. That is the reason for the Authorization and POA to be signed. This streamlines communications and negotiations between the lender and short sale consultant and keeps the sellers out of it. - Wed Feb 27 2008, 07:01

As professionals consulting with clients as "short sale specialists", I understand the reason for Michael's reply.
There are many steps involved BEFORE, DURING, and AFTER a short sale.
If a realtor claims to be a short sale specialist, you would expect the "obvious" steps in the process to be advised to the client early involving: deficiency judgements, preliminary title search, auction advantage, etc, etc.
These are just a few of the points that need to be reviewed with a client. THERE ARE MANY MORE that have not even been addressed here. I think the bottom-line is all responses are meant to enlighten the perception of what is happening with this case - and we can all learn from that right? - Wed Feb 27 2008, 05:01

I'd recommend talking with at least two real estate attorneys. You be surprised how many of them don't understand the in's and out's of the short sale process. They should be able to give an accurate answer on who can stay in the home during pre-foreclosure/forclosure for your state. But regarding short sales, ask specific questions and compare answers. - Tue Feb 26 2008, 18:01

Gary just reminded me of another point I wanted to address...if the homeowner deeds to mortgage over to you subject-to, that allows in most cases for the lender to call the note due immediately. This could also speed up the foreclosure (or deed-in-lieu) depending on your state. You have options though that could protect you better depending on how the deed is transferred, or documents you record in the county ahead of youyr sale... - Tue Feb 26 2008, 06:52

Unfortunately, you legally have no right to stay there. Your best best is to find other housing and get out of there so you are not stuck down the road. But, also see if the homeowner will sign the appropriate forms for you to represent yourself as an investor looking to buy the home via a short. The docs you will need to get signed are an authorization to release and limited power of attorney, and some other disclosure docs to protect you. This will enable you to control the negotiations if you are confortable and willing to do that. I never let a realtor do this on my behalf unless they've worked with me and understand my system. It is hard for them to seperate themselves from their commission to be objective and do what is right for all parties...there are exceptions, but that is not typical. If the homeowner already has a realtor handling the short, the way you are describing the progress has me concerned...Also, don't count on the lock-in rate for this home. Start looking for something else if that is the most important thing for you.

This home does not sound like it will be settled via a short anytime soon. On average, it is taking about 4 months for the lender to move on shorts, and especially to have an inside BPO ordered. If the home has some repair/damage issues, you should order an inside BPO. My experience with 2nd lenders is you need to build a credible case about why they will incur greater expense to not release the mortgage to enable the short to happen. Whoever is handling the negotiation is not doing a good job with this. Take the power plays and ego away, business is business and the bottom-line cost to the lender is what will matter. But they won't just hand it to you - you have to build the case just as if you were an attorney trying to convince a jury to give you the verdict you need.

If you need specific help, email me at thinz@apexgroupus.com - Tue Feb 26 2008, 05:55