Here We Go Again!



We have been successfully processing short sales for over 5 years. In the vast majority of cases the lenders have been willing to accept what the properties are worth, or in most cases 10 to 15% less than what they are worth, in exchange for a relatively quick sale.  I often tell sellers that the lenders don’t do this out of the goodness of their hearts, it is a business decision for them. Studies have shown that lenders lose at least 30% less on a short sale than they would in a foreclosure. In most cases the lenders pay a local Realtor $50 to drive buy and tell them what the property is worth and they base what they will accept on this BPO (Brokers Price Opinion).  Occasionally we have seen cases where the property may be in very poor condition on the inside and the BPO based on a drive by comes back very high and the lender wants more than the property is worth. Although this has always occurred it was the exception rather than the rule.

In late December of last year, we noticed an unusually large number of short sale offers being counter-offered at $50,000+ ABOVE the highest offer from buyers.  The Realtors told us “they are crazy, it will never sell for anywhere near that”. We had one case where the buyer offered $110,000, the lender verbally countered at $125,000 which the buyer accepted and the lender then said make it $140,000.  After weeks of agents being frustrated with us for being unable to make the lenders see the logical value, we believe we have found the root cause of the problem.

Apparently, FNMAE has recently started to counter offers based on what is owed, rather than on what the property is currently worth. Can you imagine buying a stock for $1,000 and when it falls to $500 calling the stock broker and saying:  I don’t care what it’s worth!  I paid $1,000 and I want $1,000 for it and include your commission in the sales price!  How can FNMAE possibly hope that the properties will sell? 

Here’s where the plot thickens. FNMAE’s apparently wants to foreclose on properties so they can re-list them on their Home Path website at very inflated prices, waive the appraisal, and generate new loans above market value.   So they will offer a new buyer a great incentive of saving $400 on an appraisal so they will not find out that they are paying $50,000 more than the house is worth.

This is what made us say HERE WE GO AGAIN. Isn’t this the same kind of thinking that caused the melt down in the first place?

What can you do?  Go to our website www.shortmyproperty.com and click the articles tab.   There are articles about this situation as well as a petition to put a stop to it. One thing you can do is to advise buyers to avoid Homepath properties.  We recently attended a real estate convention and we were pleased to see that agents who did not necessarily know why the prices were so high made comment like I would never let one of my buyers go there to buy. The prices are ridiculous.

If the properties don’t sell for inflated prices and the lenders get stuck holding more REO’s they will be motivated to go back to a system of selling them before foreclosure which is more honest and makes sense for all parties including buyers, sellers, and agents.

Until this situation passes there is some good news.  Not all loans are FNMAE and not all FNMAE loans are ending up on Homepath.  Selling and processing short sales has always been and will probably always be like hitting a moving target.  Let’s not let any temporary speed bump dissuade us from reaching out to homeowners that need our help as much as ever!


What if? What is Possible?

Happy New Year!

Instead of a brand new blog this month I am re-posting an old one as I believe that it applies now more than ever!!!

What if this time you read it and took action? Would you be in a better situation this time next year? What is possible?

What if? Posted : June 7, 2011 1:45 PM | Posted By: Jim & Pam Sullivan Related Categories: I recently played a “what if” game with the realtors in our weekly mastermind group. It went something like this… What if there were tens of thousands, possible hundreds of thousands of homeowners in your market that desperately needed your help.

What if you had 27 proven methods to find these people that would not cost you anything but your time.

What if you had an expert that had successfully completed over 500 hundred similar transactions and this person was willing to talk with your homeowners, explain the entire process and help you get the listing.

What if you had a company that would take care of all of the burdensome paperwork and time consuming negotiations to get the deal closed.

What if you still received all of your commissions and these deals were actually easier to find and close than normal equity transactions.

What would you do?

If you are a homeowner reading this and you owe more than your home is worth let’s play the same game.

What if you were behind in payments and you could continue to live in the property for another 4 to 6 months.

What if you could get rid of a property that is no longer an asset and has now turned into a liability and have the deficiency forgiven.

What if in addition to living free you could actually get $3,000 at the closing and go rent a property for much less than you have been paying on your mortgage.

What if you had a company that would help you accomplish all of this with no monthly charges and no fees to you at closing.

What would you do?

Frankly it amazes me that every realtor is not taking 10 short sale listing a month. It surprises me that any homeowner would continue to struggle making payments or support a liability when they don’t have to.

Whether you are a Realtor or a homeowner what if you called us today and let us help!!!

Loan Modification or a Short Sale, Which is best?

I was on our weekly conference call this morning and an agent asked “ I spoke with a homeowner who said they are trying to do a loan modification. Should I try to convince them to do a short sale instead ? Which is better?

It has been our experience that short sales have a MUCH higher success rate. Some studies have shown that the government HAMP loan modification program has a success rate of less than 3%. Our success rate with getting short sale approvals is better than 95%. So from an odds of success perspective it would seem that short sales are better.

It is however important to consider not just the odds but to heavily weigh the seller’s objectives. If the seller is looking for a long term solution a short sale can be a more permanent solution. Most loan mods are temporary reductions in payments and still leave the owner owing more than the home is worth. If the homeowners objective is to stay in the home for another year or two or three and/or the homeowner believes that the market will come back up to where he/she has equity than a loan mod may be the way to go.

If I were an agent speaking with a homeowner who is in the process of doing a loan modification. I would do the following:

Ask enough questions to determine the owner’s objectives. If a loan mod still seems to make sense encourage them to keep trying.

Advise them as to the distinct possibility and odds that they may be turned down.

Keep in touch with them on a regular basis so if they do not get the loan mod you will be there to assist with the short sale.

As always never attempt to give legal advice and always encourage them to check with their lawyers and accountants to see what makes the most sense for them.

First Pluto now Mars

Pluto is no longer a planet and it appears that MARS is no longer a law worth enforcing at least not against Realtors.

The FTC recently announced that it will Not Enforce Provisions of the MARS Rules Against Real Estate Professionals Helping Consumers obtain Short Sales.

The flood of short sales has in our experience been a Tsunami that first hit the coasts and has now spread inland across virtually every part of the county. The first reaction of many people and agencies is to panic and in a sincere attempt to help the public over legislate with new rules and/or over interpret existing regulations.

While there will always be scam artists who try to take advantage of situations like these the vast majority of professionals including Realtors are sincerely try to help people make the best of a bad situation. Apparently the FTC has realized that MARS was a law that actually hurt consumers by trying to limit what Realtors and other professionals could do to help them.

The litnus test for all of us involved in short sales should always be the question "what is the best way to help my client?".

The way we do short sales is a win for all parties.

The seller wins by avoiding foreclosure and we are often able to get their deficiency forgiven and even get them money at the closing.

The Realtor wins by being freed up to do what they do best and still collect their full commissions.

The Buyers win by gettting some great deals.

The lenders win by not having to take back more REO's.

One of my favorite quotes is "life is not about avoiding the storms it's about learning to dance in the rain". Wherever you go in this country it's raining short sales and it is unlikely to let up any time soon. Let's all continue to work together to do everything we can to help each other make it through the storm!

Don’t cross the yellow line

It often surprises me how many people live in a constant state of fear. They are so afraid of what may go wrong that that they fail to take any action.

One example of this is the new MARS regulations. We have received numerous calls from Realtors with questions like, Can I still do short sales? Can you still do short sales? What happens if I get a big fine?

We have checked with our attorneys and they tell us that the vast majority of the language in MARS applies to loan modifications. The part that does apply to short sales simply requires disclose. You must disclose the total costs to the seller. If you advise the seller to stop making payments, something we NEVER do, you must disclose to them in writing all of the possible consequences.

One of the reasons that we have chosen to not do loan modifications is the dismal success rate. When you attempt to do something that has a success rate of less than 2% you have to charge a big upfront fee to stay in business. When you charge thousands of dollars up front and fail 98% of the time you have lots of unhappy customers. Unhappy customers are the ones that file complaints and sue.

In 4 years in business,having facilitated hundreds of short sales neither our company nor any of our Realtors have had a single complaint filed against them. When you succeed 95% of the time you have happy customers. Happy customers don‘t file complaints and sue.The seller hires Nationwide not the Realtor so in the unlikely event of a complaint the realtor has transferred nearly all of the potentail liability to Nationwide.

Is there any guarantee that when you attempt to help a seller with a short sale or when you attempt to do anything that something will not go wrong? That someone will not misconstrue your intentions and sue you? Of course not! When you get out of bed in the morning you increase your chances of misfortune. You also increase you opportunity to help people and to prosper in the process.

One of our best Realtor clients, Robert Rogers in Georgia offered a great analogy. He said that if you cross the yellow line and drive on the wrong side of the road you are going to get hurt. If you are so afraid that you might accidently touch the yellow line that you drive 5 miles per hour you are never going to get anywhere. So… When it comes to helping your short sale clients all you can do is give your all, put their best interests first and be 100% honest with them. Stay on the right side of the road and don’t be afraid to step on the gas. Or better yet, Let us drive!

HAFA Loosens Guidelines

More great news on HAFA:

No longer any income qualifications. No more owner Occupant requirement. Homeowner must have lived in the property some time in the last year..so...

As long as the property is or was owner occupied,was purchased prior to 2009 and it is not an FHA loan the seller should qualify for HAFA.

FHA now has an approval to participate program which offers quick approvals on a price that are normally good for up to 90 days and it is OK to switch buyers..

Great script for Homeowners on the fence as to whether to do a short sale..

Mr. and Mrs. seller there is a program avaialable now that may guarentee you no deficiency and $3,000 at closing. Do you think your home will go up in value enough in the next year so that it is no longer a short sale? Do you think the HAFA program will be available? No one knows how long it will last. Do you want to take advantage of a great program now or take your chances in the future?