Friday, March 25, 2011

Streamlined short sales.. Is it really happening??

REALTORS, financial institutions have worked hard to create a system that will help streamline the short sale process. I just spoke with a GMAC negotiator who says they have cut the time it would normally take for a short sale transaction by more than half. In the past an average short sale would take 4-6 months. Moving forward we will see closings within 2 months of submitting a short sale package. Bank of America, Wells Fargo and Wachovia are also creating programs to stream line the process. I have been reflecting on all of the short sale transactions we at Lotus Realty Group have closed in 2010 and the 1st quarter of this year and the progress we have made in our systems and organization as well. These improvements have enabled us to close deals more effectively and efficiently with the financial institutions. It has also allowed us to help REALTORS grow their businesses by expediting their short sales and freeing them up to do what they do best, PROSPECTING!!



Experience has taught me that no matter how streamlined the financial institutions are in processing short sales if we have not put the deal together properly with qualified party’s involved in the transaction we will be self-defeating and not get the results we desire.



I believe in helping homeowners in default who truly have a hardship and the only way to ensure that we are successful in doing so is to:



a) Take the right deal. (Pre-qualify, pre-qualify, pre-qualify)



b) Have an organized, structured system in place to ensure nothing falls through the cracks.



c) Have experience with the banks and know what they want.



d) Be tenacious and follow through.



e) Be a master negotiator.



f) Have a Real Estate attorney that can educate you and keep you abreast of the ever changing legal issues.



This has been a learning curve for all of us. Lender guidelines are constantly changing, market values are dropping rapidly and more and more homes are going into default not to mention all of the legal issues attached to short sales. I want all of us to be successful working together moving forward this year.



All short sales have obstacles to closing, some that are out of our control, but mostly ones we can control. For the last two years I have written newsletters to assist you in a market that has become inundated with short sales. An archive of these can be found on my website at WWW.LOTUSREALTYGROUP.COM.



Here is a recap of the top 10 obstacles to closing short sale transactions:



1. Home owner not being qualified and expectations not being properly set.



2. Non-cooperative clients.



3. Incomplete short sale package.



4. No listing history.



5. Low ball offers.



6. Homeowners not continuing to pay the HOA throughout the short sale (I would start telling clients to continue to make their payments if they can otherwise it turns into another lien we have to negotiate.)



7. Buyer’s lenders not cooperating and forcing us to file unnecessary extensions and putting us at risk of losing approvals.



8. Sellers not forwarding updated financials on a monthly basis for us to send to their lender.



9. Preliminary reports and statements of information not being reviewed for other liens attached to the property.



10. REALTORS…DON’T TAKE A LISTING THAT HAS A SALE DATE IN TWO WEEKS.



I believe if we can pay extra attention to these obstacles and do our best to handle these issues up front we will save time, money and be much more effective and efficient together and work in harmony with the financial institutions to steamline this process.







EXTRA TIPS FOR THE MONTH:


1. Some banks have their own short sale financial packets that they require to be filled out. I have had several homeowners frustrated because they feel they are filling paperwork out twice. It would be helpful to know who the banks are upfront. Once you know this call me and I will let you know what that particular bank will require. It will save a lot of time and effort on your seller’s part if we can get them the right paperwork from the beginning.


2. I know a lot of you are use to using electronic signatures. Most banks REQUIRE wet signatures. They ask for it at the end so let’s be ahead of the game and get them upfront.


Quote: An empowered organization is one which individuals have the knowledge, skill, desire, and opportunity to personally succeed in a way that leads to collective organizational success."


Stephan R. Covey

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.



LOTUS REALTY GROUP



PROFESSIONAL SHORT SALE NEGOTIATORS


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

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

Friday, March 18, 2011

Should my clients continue to make their mortgage payments in a Short Sale transaction?

I get this question asked to me a lot from REALTORS who are not sure how to answer a distressed homeowner on a listing appointment. There are occasionally the home owner’s that can continue to make their payments throughout the short sale process. Barely, but they can. Please keep in mind that you cannot advise your client either way but you can offer them advantages and disadvantages of making your payments and not making your payments. Everyone’s situation is different in a short sale and everyone has different goals and objectives. The other thing to understand is that short sales are designed for people that have a genuine hardship. I have negotiated short sales where the homeowner has never missed a payment, however, there has to be a genuine hardship.


Here are the advantages and disadvantages of making your payments and not making your payments in a short sale:



Advantages of making your payments:



A) The home does not go into foreclosure, giving you plenty of time to get the transaction done.


B) The homeowner will not receive any late payments reporting on their credit report.


C) It will be easier to find a place to rent when it is time to move.




Disadvantages of making your payments:



A) The homeowner will not receive any of this money back.


B) Homeowner may be denied for a short sale until he or she is late. (This is a requirement for FHA and the HAFA program) and certain lenders will not look at a short sale until a homeowner is behind.


C) The process may take longer.



Advantages of NOT making your payments:



A) Homeowner will qualify easier for a short sale when they are behind. This shows a severe hardship.


B) Homeowner can still live in the home while the short sale is being negotiated. I always let the homeowners know when it is time to move there will be an extra deposit most landlords will require due to the liability factor. If they choose to not make their payments, they should put some of that money away for their transition.



Disadvantages to NOT making your payments:



A) Once a homeowner misses three consecutive mortgage payments, the NOD is filed and the foreclosure process begins. (REALTORS, make sure you know the California foreclosure time lines)


B) Late payments will be reported on the homeowner’s credit report.


C) Thus, making it harder to find a rental.



It has been my experience that most homeowners in this market that are pursuing a short sale are looking for guidance. We need to be careful as REALTORS on the guidance that we give. If we give them truth and reality from all angles, homeowners will be able to make the best choice that fits their goals and objectives.




(Quote) Again and again, the impossible problem is solved when we see that the problem is only a tough decision waiting to be made.
Robert H. Schuller


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.


LOTUS REALTY GROUP


PROFESSIONAL SHORT SALE NEGOTIATORS



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

Thursday, March 3, 2011

How to approach HOA liens in a short sale

REALTORS, we are running into a lot of issues with HOA liens when negotiating a short sale. There are situations out of our control. Sometimes we may take on a listing and the homeowners have not made a payment in 12 months along with their mortgage payments and they are severely hardship stricken and they cannot come current or contribute to the payoff to get the deal closed. In that scenario, who do you suppose is going to be responsible for paying this? We first have to see if the lender or Debt Settlement Company is willing to contribute to the payoff. We can also try to negotiate with the HOA and or attorney’s office they may have passed it to in order to see if we can get a principal reduction or lien release. Lastly, depending upon what was negotiated with the lender and HOA, the balance will most likely come from the buyer and or agents to close.

We are seeing HOA liens in the amounts of $30,000. Most of that are legal, administrative and maintenance fees that have been attached to the delinquent HOA dues. The idea is to catch it while it is in the delinquent stages before it gets passed off to an attorney’s office and becomes an actual lien attached to the property. Another option after all of these previous steps I mentioned have been taken; is to get the balance down as much as possible and try to work it in to the offer if you can. Not a lot of buyers are willing to come out of pocket $30,000 for an HOA lien but working it into the offer may be an option. If this is the case you want to make sure you have a solid listing history on the property with comps to support whatever offer you send over with a letter of explanation in regards to the HOA balance. A lender is not going to pay that high of a balance either. If the lender is Bank of America, they most likely will not cover any of it. So we want to make sure that we are explaining to the lender our dilemma and why we have structured the offer the way we have. Put the ball in their court.



Here are some tips on things we can control:


1. Ask the homeowner if they are current. If they are not current find out the amount of the HOA and number of months they are behind to figure out an estimate of the balance owed. See if they are willing to come current or contribute to the payoff. Keep in mind that a short sale can take anywhere from 2-4 months plus and the amount owed will go up every month along with penalties and interest. If they can make a payment or contribute this will keep the delinquencies from turning into a lien attached to the property. Do not be afraid to ask the right questions. The homeowners need to understand what it is going to take to avoid foreclosure.

2. If the homeowner is current on the HOA; advise them to continue making payments if possible to avoid further delinquencies and the possibility of a lien being attached the property. Explain that this makes it difficult in a short sale transaction.


3. When you have a buyer’s agent submit an offer, use a counter to set expectation with the buyer explaining that there may be fees a lender will not cover and the buyer will be responsible to contribute to those fees to close the deal. The idea is to keep agents from contributing money out of their commissions. I am sure you all can agree this is a frustation, but not a necessary one in my opinion if we are working effectively and efficiently and setting proper expectations.


HOA liens are becoming harder and harder to remedy at the end when we are trying to close. Doing our diligence up front will help structure the deal right the first time and save us from these pitfalls in the end and ensure a smoother transaction.


Quote: "Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall."

— Stephen R. Covey

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.



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