In 2011, there are to be NO postponements of Trustee Sales and NO extensions of closings on Short Sale Approvals past the approval date.   The goal is to clean out the inventory of homes to be sold as short sales, as quickly as possible and put into place new procedures have been put in place to speed up the approvals.  Wachovia has cut down paperwork to 13 pages and a representative will meet with real estate agents to provide an approval within 14 days.  There will also be a set paid commission of 6%.

In addition:

• For clarification, the banks consider themselves NOT the lender because once the borrower goes into default, they become the “Debt Settlement Companies” on the loan.  This adds a new perspective for the seller who thinks they can stay in the property forever without paying.
• They will NOT pay attorney fees (to attorneys who have been hired by the borrower to fight the foreclosure).  If it shows up on the HUD, it will be removed and will become  the borrower’s responsibility.
• They will NOT pay a 3rd party negotiator fee if it is in addition to a commission already being paid to the Listing Agent.
• All three companies are willing to work with REALTORS who truly have their client and the investor’s best interest in mind.  They do have issues when the same agent/broker is on both sides of the transaction or, if the submitted offer is ridiculously low-balled and has not been countered for “Best and Final”.

More Information About Short Sales
Short Sale Process – Steps in a Short Sale Process - California Short Sales – Wells Fargo Short Sale Process

SHORT SALE FEES: Florida Sellers be aware that it is unlawful for anyone other than a Florida admitted attorney to charge a fee in order to process a short sale. Real estate professionals and/or title companies are NOT permitted to charge any additional fees relating to the short sale and/or its’ processing. Only standard commissions and/or fees are deemed permitted.*

702.07  Power of courts and judges to set aside foreclosure decrees at any time before sale.–The circuit courts of this state, and the judges thereof at chambers, shall have jurisdiction, power, and authority to rescind, vacate, and set aside a decree of foreclosure of a mortgage of property at any time before the sale thereof has been actually made pursuant to the terms of such decree, and to dismiss the foreclosure proceeding upon the payment of all court costs.

For detailed short sale and foreclosure laws in Florida state, please see the following.

• Florida real estate information

http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Index&Title_Request=XL#TitleXL

More Information About Short Sales
Short Sale Process – Steps in a Short Sale Process – Wachovia Short Sale Package – California Short Sales

*Source

DEFICIENCY: Nevada, unlike California, is a deficiency state. Meaning even AFTER the bank forecloses the bank can still go after the remaining debt against a seller. Do not confuse this with a 2nd lienholders right to sue when they have been rendered a “sold-out junior lienholder” as described in the FORECLOSURE / ONE ACTION blog.

On July 15, 2011 FTC DECLARED:

• Real estate brokers can conduct short sales and can collect advance fees if they follow their own state guidelines.
• Real estate brokers do not have to make several disclosures required by Mortgage assistance Relief Services (MARS).
• It is especially important that MARS not inadvertently discourage real estate professionals from helping consumers with these types of transactions.

For detailed short sale and foreclosure laws in Nevada state, please see the following.

• Nevada short sale information

http://www.ftc.gov/opa/2011/07/mars.shtm

• Foreclosure Options

http://foreclosurehelp.nv.gov/ForeclosureOptions.htm

• Nevada Foreclosure Information

http://www.hud.gov/local/nv/homeownership/forclosurewkbk.pdf

• Junior (Seconds) Lien Holders Right To Sue After Short Sale & Foreclosure

http://www.leg.state.nv.us/Session/76th2011/Bills/AB/AB273_EN.pdf

More Information About Short Sales
Short Sale Process – Steps in a Short Sale Process – Wachovia Short Sale Package – California Short Sales

According to a survey conducted by the National Association of Realtors® (www.realtor.org), the short sale process is broken, leaving many homeowners locked in foreclosure proceedings, despite the promises of lenders to improve the process.

The California Association of Realtors® (CAR) reports that more than 50% of short-sales in the Central Valley area of California were described as being “difficult” or “extremely difficult,” by realtors in the area. The “onerous” procedures are one of the main obstacles that struggling homeowners deal with when trying to get out from their under undervalued, over-financed homes.

According to distressed housing market data, short sales in California have decreased only slightly from last year – from 21 percent to 19 percent (June, 2010 – June 2011). However, that figure may be due to the number of failures in the short sale process more than any improvement in the financial outlook.

What is a Short Sale?

A short sale (also called a short-pay transaction) is an agreement between the homeowner and the lender to sell a given property for less than what is owed, forgiving the balance. Although it is not a requirement to be in foreclosure to conduct a short sale, they are mainly conducted in order to avoid foreclosure, and the homeowner must prove financial hardship.

Short sale procedures in California vary by individual case, but generally follow this process, as defined by CAR Model MLS Rules. A real estate agent or attorney can be helpful here:

• The homeowner contacts the lender to begin the process. This is usually a letter explaining the hardship of the homeowner and the reasons for initiating discussions into a short sale. Each lender has specific and unique requirements so the process may differ slightly from another lender.

• The homeowner (seller) signs a release of personal information concerning the property and loan to interested parties, usually the buyer or an escrow agency.

• A settlement statement is drafted and is reviewed by the lender, listing the proposed sale price, the loan balance after the sale, along with an itemized list of expenses, including closing costs, agent commissions, etc.

• The seller drafts a letter of hardship. This ‘hardship letter’ is a detailed summary of all financial challenges the seller is facing. This is validated by supporting documents, such as bank statements, paystubs, investments and other financial records.

• The broker will report to the lender the price that he or she believes the house may sell for, considering comparable market value, house condition, etc.

• A purchase agreement is drafted, the lender reviews it and agrees to the figures or will send back for revision.

• If the lender approves, the sale can follow through to closure.

Potential Tax Implications

According to the Mortgage Forgiveness Debt Relief Act and Debt Cancellation, the amount of the loan that was forgiven by the lender is generally not taxable under certain conditions. The lender will issue a 1099C, as this allows the lender to write off the loss. California passed a similar bill that added to the seller’s tax burden, but is no longer in effect. Your tax accountant or CPA will help you determine factors that will influence your tax liability.

More Information About Short Sales:
Short Sale Process – Steps in a Short Sale Process – Wachovia Short Sale Package – Pros and Cons of Short Sale

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All short sales have a generic process in place but will vary with each lender.

Here is a typical timeline when working with a lender’s loss mitigation department:

1) As the seller, give authorization to your real estate agent to speak on your behalf. (Allow 48 hours to acknowledgment by the lender)

2) Fax in a short sale package and allow 72 hours for acknowledgment from the lender. Due to the number of incoming short sale cases, many loss mitigators have their hands full. Make sure to keep an extra copy of your short sale package in case you need to mail in a copy or fax it again (paperwork can get lost, even after the lender has received it)

3) A loss mitigator will be assigned to the short sale account within 7 to 10 business days.

4) Once the loss mitigator has been assigned, they will take about 30 to 45 days to review your short sale case.

To expedite the short sale process make sure you do the following steps:

1) Make sure your short sale package is very thorough. You will need to include all necessary documents as requested by the bank, such as bank statements, contract, net sheet and hardship letter. Make sure you send everything at once so that papers are not lost.

2) Make sure you get the correct number to the right department. Write down the phone number of your contact for follow up and the name of the negotiator’s first and last name. Ask for specific spelling if you have to. If you can get an email address, utilize it! Sending emails is a great way to remain in contact with the loss mitigator without getting lost in the pile of paperwork.

Tips for Submitting Short Sales Packages to Lenders:

1) When sending a short sale package, break up the faxes up into sections of no more than 10 pages. If you have 40 page to send, you will need to send 4 faxes (10 pages per fax). Send the financials in one fax, the contract in another. Try to keep the sections together. In addition, write the account number at the top of every faxed page you send. (Source)

2) Persistence pays off. If you haven’t received paperwork from your lender, request it over and over again until you get something. When in doubt, ask for a supervisor.

3) You will typically need to wait a couple of weeks before you know if an offer has been declined or accepted. You will have to wait long periods, sometimes as long as 2 months!

4) Buyer’s offer is to reflect current market conditions and come in under fair market price. For a short sale offer to succeed, it must meet the investor requirements or otherwise be denied. If the short sale offer also has too many concessions from the seller, the short sale may fail.

5) Remove impediments that could slow the progress on short sales such as the appraiser having difficulty accessing the interior of the property. It will take longer to complete the necessary evaluation process for the lender.

6) Don’t move out of the property prior to completion of the short sale. The bank may consider the property abandoned.

There are pros and cons to short sales, but given the right situation, the benefits can be great to the seller and buyer.

Here is a list of lender phone numbers to get a hold of their loss mitigation departments.

Chase Short Sale
Phone: (800) 548-7912
Loss Mitigation Department Phone: (877) 838-1882 ext 52195. You will be redirected to (866) 665-7629.
Business Hours:
11AM-8PM Monday-Thursday
8AM-12PM Friday

Countrywide Short Sale
Loss Mitigation Department Phone: (800) 262-4218

Citimortgage Short Sale
Loss Mitigation Department Phone: (301) 696-5096 or 301-696-4267

GMAC Short Sale
Loss Mitigation Department Phone: (800) 850-4622

HSBC Mortgage Short Sale
Loss Mitigation Department Phone: (888) 648-3124

Ocwen Short Sale
Loss Mitigation Department Phone: (800) 746-2936

Wachovia Short Sale
Loss Mitigation Department Phone: (866) 642-8608

Washington Mutual Short Sale
Loss Mitigation Department Phone: (866) 926-8931 or (888) 453-3102 or (800) 478-0036 or (800) 254-3677

Wells Fargo Short Sale
Loss Mitigation Department Phone: (877) 216-8448 or (866) 261-5642 or (800) 766-0987 or (800) 678-7986.
Business Hours:
8AM-9PM Monday-Friday
9AM-2PM Saturday

More Information About Short Sales
Short Sale Process – Steps in a Short Sale Process – Wachovia Short Sale Package – California Short Sales – Sample Bank Short Sale Approvals

Many involved in the process can agree that there is NO logic in the short sale process and NO one time-line to be followed (a contributing factor as to why many short sales fail). In fact, the typical home selling/buying process is completely thrown out the window leaving everyone except the bank insecure in the future of the deal.

It’s important for buyers of short sales to remember that submitting an offer to the bank with a response deadline, even an offer with the listing price offered, doesn’t guarantee a speedy response from the bank or lender. There are no deadlines once an offer is submitted.

Recently, the Obama administration created a modification to the existing mortgage foreclosure program to streamline the short sale process to assist lenders, real estate professionals and homeowners to close short sales. Unfortunately the new guidelines fall short to accomplishing their intended goal and participants in short sales grow frustrated due to the long delay period which accumulates interest, taxes, insurance, maintenance and expenses.

In short sales, the purchase price is less than the amount needed to pay off the outstanding mortgage. The lender must agree to waiving the deficiency or negotiate with the borrower a settlement amount.

The Obama administration has attempted to address short sale concerns:

1) Borrowers with 2nd home mortgages or investment properties are eliminated from the program.
**Borrowers are excluded which represent a large portion of those affected by the foreclosure crisis. It’s estimated that more than 50 percent of loans in foreclosure have 2nd mortgages.

2) The short sale seller must apply and qualify for the mortgage modification program.
**This requirement creates more red tape for a home sale that doesn’t require a modification to the mortgage.

3) $1,000 “incentive” for a lender to participate in the short sale.
**A $1,000 benefit to a lender is a marginal benefit in their books.

In short, the administration must provide positive and proactive procedures to hasten banks to close on short sales and thus, avoid more foreclosures entering the market.

More Information About Short Sales
Short Sale Process – Steps in a Short Sale Process
Wachovia Short Sale Package – California Short Sales

Before starting the short sale process, make sure to look over the basics:

What is a short sale?

A short sale is when a borrower finds that their property is now worth less than what is owed on the mortgage. When approved, the lender or bank will move forward with the short sale by accepting less than what is due on the mortgage(s).

Why is it an option?

Foreclosures carry a hefty price tag for banks and lenders to process. Including documents, attorney and many other fees, most of the time a short sale is a cheaper option for the bank to settle the issue. Banks can face fees upwards of $50,000 to $60,000 when foreclosing on a property.

How does the short sale process work?

Many lenders have a short sale package that must be filled out and completed in order for the short sale to be approved. Additional documents could include:

Once the short sale package has been delivered to the bank or lender, a negotiator is assigned to your file and will be your contact going forward.

Points to Remember:

-Don’t expect to close immediately after finding a buyer. It make 60 days or longer to close or get a response from the lender.
-Lenders are overwhelmed with short sale requests and may not have the staff to help you quickly. Be persistent so that you are not forgotten!
-Consult with an attorney and real estate agent on the short sale process. They will be able to help your specific needs.

More Information About Short Sales
Short Sale Process – Steps in a Short Sale Process – Wachovia Short Sale Package – California Short Sales – Sample Bank Short Sale Approvals

The Pros:
• The Seller and Lender can avoid foreclosure on the property
• The Buyer can possibly buy the property below market value and have a chance at getting a good deal.
• The condition of the home is better than a foreclosure/bank owned property
• Property hasn’t suffered vandalism due to the homeowner still occupying the property

The Cons:
• The bank may not approve the short sale while taking their time to turn down the offer. It may be over a month when a response is heard and it’s not good.
• A bank can usually take 1-2 months to answer the buyer’s offer.
• A bank may bump one buyer out for a better offer
• The property is sold “as-is” with no repairs included.
• The Seller may end up owing federal income taxes on the short sale due to the amount forgiven by the lender
• Make sure the seller has experience with short sales. The complexities of this type of real estate transaction can screw things up for the seller.
• Buyers should keep looking at properties since they don’t know if the one they made an offer on, will be approved by the bank.
• The property must be in actual default for the lender to approve a short sale. Make sure the seller has gone into default.

More Information About Short Sales
Short Sale Process – Steps in a Short Sale Process
Wachovia Short Sale Package – California Short Sales

Selling a home in this type of environment needs a different approach. If you do intend to sell your home as a short sale, this market is a bit more rough. If you need to sell your home for less than what is owed, here are some tips:

Document your financial hardship
You are required to have a detailed list of your accounting for your financial condition which includes bank accounts, investment account, a credit report, letter documenting your situation, and credit report. The bank will also request to appropriate professionals if you give authorization.

Set the Stage
A home should still be “presented” even if it is being sold for less than the ideal amount. The home will be competing with other homes, so unless a home buyer is very much in love with your home, you won’t have much negotiating room if your home doesn’t look that well. Make the buyer want to make an offer and wait out the long drawn out process due to the great condition of the house.

Competitive Pricing
There is actually quite a bit of activity happening in the real estate market right now, so it serves you best to have a good understanding of the real estate market in your neighborhood to get a good idea on proper pricing. Pricing a home competitively will get several bids and will sometimes yield an above listing price. Proper pricing is critical to succeed in this market. Be prepared to make adjustments quickly to reflect what is happening in the current market. Emotional attachment to the home will not and should not apply to pricing the home as most buyers in this market are looking at the bottom line.

But remember that short sales can take 90 days for an approval as loss mitigation departments at the mortgage companies are very overwhelmed with many other short sale applicants. It’s best to pick a selling agent who has great communication skills and can work with your bank or lender.

It can be awful, but everyone in the process will be anxious (the seller who wants to sell, the willing buyer). The bank really has the reigns on the time line of the short sale and everyone only has the choice to work at their speed. If you only have 1 lender involved the process can be quick but with 2 lenders, you can almost be sure that the work to close will be more complicating for the seller’s agent and seller. At times there are “stand offs” on the amount that each lender has agreed to lose.

You can try to “push” the lender to hurry up on the short sale, but most of the times it will do nothing. Since all the mortgage servicers are bombarded with orders, they are working on them as fast they come in. Do your homework though, and double-check if there is PMI (private mortgage insurance) when doing a short sale as this will typically move the process along slower.

More Information About Short Sales
Short Sales Process – Steps in a Short Sale Process – Wachovia Short Sale Package – California Short Sales – Sample Bank Short Sale Approvals