Friday, January 28, 2011

New Short Sale Rules to Consider in 2011

"The year of the Short Sale"




With one out of five borrowers underwater on their home and an estimated 1.5 million foreclosures scheduled for 2011, the opportunity for short sales will be better than ever. Banks usually see a 20-30% better execution price on a short sale versus an REO sale. With the foreclosure volume and current and pending REO inventories, servicers will be pressed to do more short sales in 2011.



I have done a lot of research into how Banks will be handling short sales this year. It is no secret that when short sales first hit the market there was not a lot of knowledge from REALTORS, homeowners or Banks on how to effectively handle a short sale. Learning has been through trial and error. Each bank has different guidelines and these are changing constantly. In this environment it is critical to know what type of deal to take, and how to properly put a short sale package together.



The good news is lenders are making an effort to minimize the time it takes to close the transaction but in return they will be tightening up their guidelines and will expect all of us to abide those rules if we want to be successful.



Here are some rules to consider this year:



Some of the major Banks including Bank of America, Wells Fargo, Chase and Wachovia will be implementing the following:



· There will be no postponements of Trustee Sales and NO extensions of closings on Short Sale approvals past the approval date. They all want to clean out their inventory as quickly as possible.



· Banks have put systems in place to speed up the short sale approvals. Wachovia has cut their paperwork to 13 pages and will send a representative with the agent to meet the seller and will provide an approval within 14 days. They are also paying a 6% commission. (I have a transaction with Wachovia right now and it has been moving faster than most.)



· Do not call them the “lender” – they were the lender when they made the loan but once the homeowner went into default, they became “Debt Settlement Companies” on the loan. This adds a new perspective to the homeowner that feels that they can stay in the property forever without paying.



· They are not paying attorney fees to attorneys that the borrower has hired to fight the foreclosure. If it shows up on the HUD it will be removed.



· They are not paying third party negotiator fees.



· These companies are willing to work with REALTORS who truly have their client and the bank’s best interest in mind.



· They are paying extra attention to offers that are two low.




With these guidelines in place it is important to make sure that we have the following before submitting a short sale:



A) A qualified seller



B) A listing history



C) A qualified and committed buyer



D) A complete short sale package with all applicable documents



E) A solid proposal (HUD)



I believe that short sales are going to be massive this year and with the Banks finally tightening up and creating better systems and incentives, short sales are going to close much faster.



REALTORS, what is in your business plan this year? What are you doing to create a system that will allow you to build your short sale business? How often are you out there prospecting and how do you know if you are taking the listings that are going to be successful and not a waste of your time?



Call us today and let us show you a system that works to help you expand your business and effectively and efficiently close short sale transactions.



(Quote) If you want to get somewhere you have to know where you want to go and how to get there. Then never, never, never give up."

Norman Vincent Peale




LOTUS REALTY GROUP


PROFESSIONAL SHORT SALE NEGOTIATORS


At Lotus Realty Group, helping people ethically succeed is at the forefront of who we are...


Call today to find out how Lotus Realty Group can assist you in closing your short sale transactions or go to WWW.LotusRealtyGroup.com

Thursday, January 20, 2011

Bank of America Short Sales and Equator


I have heard mixed reviews from REALTORS who have tried to negotiate a short sale on their own with Bank of America. Last year when Bank of America introduced their new system for processing short sales, Equator, it was their intention to stream line the short sale process. However, due to the lack of staff training it appeared that we were all flying blind trying to figure this system out. That being said, all great things happen over a period of time and that is what I see has happened with Bank of America.



I have found this lender and the Equator system to be effective, efficient and less time consuming than the old system where you had to fax over a short sale package and you were not sure whether it was received on the other end and whether all the pages went through. YES, that is how the other lenders are still doing it but it is my hope that more lenders will adopt the Equator system. I know GMAC is now using Equator. As we move forward in 2011, there are going to be massive amounts of short sales being submitted. It is my belief that the other lenders should follow Bank of America and GMAC’s lead to become more effective and efficient in getting these closed.



Here are some common complaints:



A) My paperwork seems to get lost when I submit Bank of Americas requests:



When Bank of America assigns a task through Equator they give you a time frame to get that task done. It has been my experience that if I am clear on what the bank is asking for and I am able to collect the right documents and get them uploaded into the system in the time frame that they gave me, my paperwork gets to the right person.



B) Inaccurate Broker Price Opinions:



Bank of America and most other lenders want to see the property listed for 120 days. We typically like to create a listing history for the lender so we have our data to back up the offer we bring to the table. We do a detailed comparative market analysis of the property with 3 active, pending and sold listings, a list of repairs and other detrimental factors that would decrease chances of getting what the bank wants to net. This will help to dispute whatever the BPO agent comes up with. Let’s face it, we all know BPO agents spend 5 minutes taking a few pictures and doing a 2 minute walk through and base their opinion on that. Get used to it, it is not going to change, but if we approach a short sale the right way we will be able to get the negotiator to see our point of view.



C) Unresponsive negotiators:



It is my opinion that there is no reason why you cannot communicate with the negotiator. There are many different avenues you can go through to get the negotiators to respond. Call customer care, email, phone and if all else fails, file a complaint. It is your tenacity that is going to get them to respond. They have hundreds of these on their desk; it is your job to keep it in front of them.



D) Unexpected closed files:



This is very simple to me. Do not submit a package unless it is 100% complete with a fair proposal and all documents attached and make sure you are submitting the documents in the time frame that the Equator system gives you. If you do not submit a complete package there is a good chance that the negotiator on the other end will close out the file or shred what you have sent.



E) Buyers walking:



The process with Bank of America only starts when you have a buyer. If your buyer walks away then you start again. A letter will be sent to your client declining the short sale. Set expectations with the buyers. Make sure you give them a realistic time frame.



I understand the complaints and frustrations REALTORS have in this regard. I personally accept that every short sale is different and every lender and negotiator is different. I know what the lenders are looking for and I stay within those parameters as best as I can and ONLY take the deals that make sense.



Tip of the week:



Bank of America will only cover property taxes for up to 2 years. This does include penalties and interest. If you have a homeowner who is over two years behind, you will want to set expectation with the buyer and structure the offer to cover it.



(Quote :) The leader has to be practical and a realist yet must talk the language of the visionary and the idealist.

~Eric Hoffer



LOTUS REALTY GROUP



PROFESSIONAL SHORT SALE NEGOTIATORS

At Lotus Realty GROUP, helping people ethically succeed is at the forefront of who we are...


Call today to find out how Lotus Realty Group can assist you in closing your short sale transactions or go to WWW.LotusRealtyGroup.com

Thursday, January 6, 2011

Chase Bank 2nds

One of the key points we look for when we advise upside-down owners is whether they have multiple loans. This is because if a foreclosure by Trustee Sale occurs, generally it will be the first loan that forecloses and that action would wipe out the second lender's security levaing them a right to sue the borrower for any deficiency. However, under California law, when both loans are owned by the same lender, a "merger" of interest occurs. The foreclosure by one is treated as the foreclosure of both and in California neither would have any deficiency recourse against the borrower.



One area we have seen often is lenders breaking the merger by selling off the second loan after a default occurs. Although there has not been much action by these second lenders to pursue a deficiency, we have raised the defense that the buyer of such a loan really had nothing to lose since there was no real value in the security for the loan and therefore they should not be able to sue the borrower for any unpaid amount on the second loan following a foreclosure by the first. We expect to see a lot of such lawsuits over the next few years brought by collection companies and others who may pay pennies on the dollar and then sue for the full dollar.



Today we encountered a change to that typical sell-off strategy. In this case, Chase held both the first and second loans and was demanding recourse which the borrower could not pay. The borrower had some leverage because of the merger and had some defenses if Chase sold the second to another creditor. But Chase flipped this on its head. Instead, Chase assigned the first loan to Bank of America which immediately filed a Notice of Default to start foreclosure, a foreclosure which will wipe out the security for the Chase second loan. The assignment broke the merger but it did not create a defense against Chase filing a lawsuit on the second because Chase already owned the second loan.



We already know that Chase more than any other lender is playing hardball in the short sale and foreclosure process. This unique strategy change is no doubt intended to improve their odds of recovering from a borrower that may have some assets.... assets that Chase would have learned about through the Short Sale Hardship application. This approach, coupled with Chase's common unwillingness to approve short sales, suggests that they view the short sale process not as loss mitigation but rather as a means of gathering information on the borrower that they can use to sue the borrower and get more money. In our initial discussions of this strategy, we think there are a number of other defenses to such a strategy that seeks to run around the established legal policy that a lender must look to its security first.



If you or your clients are dealing with Chase loans in a short sale, be wary especially where two loans are involved. Let us know what your experiences are so together we can develop the best response to not only defeat this strategy but to convince Chase to cooperate with the short sale.



The information presented in this Article is not to be taken as legal advice. Every person's situation is different. If you are upside-down on your loan(s), especially if you're facing a lender lawsuit, get competent legal advise in your State immediately so that you can determine your best options.
 
Cari Drolet
Lotus Realty Group
Founder/Ceo
Professional Short Sale Negotiators for home owners and Realtors
858-764-7300

Tuesday, January 4, 2011

expensive-unexpected-things-happen-to-home: Personal Finance News from Yahoo! Finance

expensive-unexpected-things-happen-to-home: Personal Finance News from Yahoo! Finance

finance.yahoo.com

Personal Finance, real-estate
 

Please take time to read this. Remember...in a market where homeowners are experiencing job loss and facing foreclosure, the amount of money it would take to maintain and prevent these potential issues is not available to them. The upside of that is if you are negotiating a short sale, these damages and costs of repairs will be important facts and data that will help you  build a case to the short sale lender. You can explain the detrimental factors involved that will steer a buyer away from the property. This will help you negotiate a realistic value vs the unrealistic value the short sale lender typically has in mind.
 
Cari Drolet
Founder/Ceo
Lotus Realty Group

Monday, January 3, 2011

Full Discharge of Indebtedness on First Trust Deeds

LOTUS REALTY GROUP....


I am sure most of you are aware of the law that was passed effective January 1, 2011 which states the following:



(a) No judgment shall be rendered for any deficiency under a note secured by a first deed of trust or first mortgage for a dwelling of not more than four units, in any case where the trustor or mortgagor sells the dwelling for less than the remaining amount of indebtedness due at the time of the sale with the written consent of the holder of the first deed of trust or first mortgage. Written consent of the holder of the first deed of trust or first mortgage to that sale shall obligate that holder to accept the sale proceeds as full payment and to fully discharge the remaining amount of the indebtedness on the first deed of trust or mortgage.




(b) If the trustor or mortgagor commits either fraud with respect to the sale of, or with respect to the real property that secures the first deed of trust or first mortgage, this section shall not limit the ability of the holder of the first trust deed or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.



(c) This shall not apply if the trustor or mortgagor is a corporation or political subdivision of the state.



Does this apply to Second Trust Deeds?



The answer is Simply NO.



Does this include investment properties?



It appears to include investment property when dealing with quote, a dwelling of not more than 4 units. There is no reference in this statute to owner occupied property.



What incentive does a homeowner have to do a short sale?


I have been asked this question a lot and the answer is still the same. A foreclosure will impact a homeowner’s credit far more and for far longer than a short sale. Furthermore, a home owner who is foreclosed on will not be eligible for a Fanny Mae or Freddie Mac backed loan for 5 years. This increases to 7 years if it is an investment property and it stays on their credit report for the same amount of time. With the right credit recovery program you can help turn your client back into a home buyer again in 18-24 months. Granted, you will get the angry homeowner who does not care anymore but I believe with the right delivery, you can help your client see the value in a short sale. Foreclosure is much more damaging to our economy which is already in dire need of repair. I also believe a short sale shows good faith and integrity to the lenders instead of the homeowner just walking away. However, the homeowner should always seek the advice of an attorney and CPA before making the ultimate decision to Short Sale or Foreclose.



How can we ensure that our client is released from full liability?


We will always encounter situations where laws and guidelines are not being followed properly. With the volume the lenders have on their plates in regards to short sales and foreclosures, there is no guarantee that there will not be a mistake made along the way due to the negligence of one or more of the parties and the homeowner could suffer the consequences. Here are some helpful tips moving forward:



1. Read the TERM SHEET (Approval) thoroughly.



2. The verbiage you are looking for is still the same “Released from liability of the NOTE” and any deficiency following the short sale.



3. If the term sheet only states the borrower is released from liability of the lien, then understand that this is not the same as a release from liability under the note and from a deficiency after the short sale.



4. Please recommend to the homeowner to have the term sheet reviewed by an attorney and CPA before the homeowner accepts or rejects the term sheet.



This is just an extra precaution that will give you and your client a peace of mind



Please note that Lotus Realty Group does not give legal advice. Please seek advice from an attorney and CPA before providing this information to your clients.

Again, I would like to extend my gratitude to all of our REALTOR clients who have allowed Lotus Realty Group to expedite and close your short sale transactions and assist you in growing your business. It is my belief that this will be a massive year for short sales and I look forward to working with all of you in 2011.


To your success!!!!

(Quote) A promise is a cloud; fulfillment is rain. ~Arabian Proverb


LOTUS REALTY GROUP


PROFESSIONAL SHORT SALE NEGOTIATORS



At Lotus Realty GROUP, helping people ethically succeed is at the forefront of who we are...

Call today to find out how Lotus Realty Group can assist you in closing your short sale transactions or go to WWW.LotusRealtyGroup.com