Today I was talking to a fellow that called me to find out about how a Short Sale works.  I realized after talking with him for nearly an hour that there are a lot of people (real estate agents) that give out conflicting and incorrect information.  I don’t believe that it’s intentional in any way, but scary for the person that needs to be informed correctly regarding this very important subject.

Some of the topics that were of interest and concern to him….

The loan modification he was offered was not going to help him enough per month on his payment and he was going to have to keep all of the principal balance.  The payments he was currently making were taking nearly 3/4 of his pay per month.  So, he had basically depleted his savings and was now having to look for a new place to rent for a while, but found he was lacking the money it was going to take for deposit and first month’s rent to move…not to mention moving costs.

I assured him that as long as we had the home listed for sale, and it was able to be shown to clients, his lender  would not be ask him to leave the home even if he was not making his payments.  As I explained, it’s like an ordinary sale in most ways.  The main factor in a Short Sale is that the “bank” is really now the seller and as real estate agents now negotiate with the bank instead of him.

For some people, doing as little damage to their credit is very important.  So I would say to those of you that fit this category…if your able, stay current on all of your financial obligations.  If your like most of us that are facing mortgage payments that are increasing at the speed of light and it’s just not possible to make those payments, don’t.  But get your home listed for Short Sale as soon as possible and stay current on as many of your financial obligations as you can.

One last little tip, if you live in a home that has an HOA (Home Owners Association) do what ever you can to not let those get behind.  HOA’s hold quite a bit of power, and will slap a lien on the property in a heart beat!  And that lien will have to be paid before the sale of the home.

Hope this information is useful, as always, please email us if you have any questions!

This is for our clients…you have been wonderful to work with! Thanks for letting us share.

Like most of our clients, the ***** family were no longer able to make their mortgage payments. Their home had a sale date set in less than two weeks from them contacting us. It was a little complicated, they were also going through a chapter 7 and the lender had gone to court to get a “relief from stay” allowing the lender to foreclose even though they were protected by chapter 7.

We put the home up for sale immediately and within a few days had several very good offers. The first lender, AHMSI, American Home Mortgage (servicing company for Option One Mortgage) was quick to respond and postponed the sale date.

Three weeks into the negotiations we get a call from Ryan at AHMSI. Ryan requests the second lien holder, in this case, Bank of America accept $1000 to release their lien. Then the sale would be approved.

Unfortunately Bank of America has implemented new criteria for short sale acceptance. The criteria states that Bank of America will accept no less than a 10% payoff of a debt balance being charged off as collectible. Well, you can see the issues with this request. I was able to discuss in detail the chapter 7, and the demand from the primary mortgage holder with a Ms. Kelly, (has the pull to say yes).

Getting to Ms. Kelly and getting the approval for acceptance of $1000 took a little over 2 weeks. So, from the time we took the listing till this point has been about 45 days. Not bad for getting both approvals under the circumstances.

One thing happened along the way, we lost the buyer to the lengthy process, oh and the other few we had as back-up were still around but placed new “lower” offers to meet the declining value of the area.

From this point I will just insert the chain of emails for all to read.

Hello Ryan,
I am sending a new offer on the property. Escrow is completing the HUD with all of the required changes resulting from our last conversation/offer. I did not send in an updated HUD on that offer due to the buyer backing out. The issue with this property has been the second lien holder, BofA as I explained to Mr. Kellty. They were not willing to release for $1000, which is your policy. We have remedied that. When I called in today, to find out if you had received this new offer I was told it was too low and I would need to counter, With a sale date set for tomorrow I don’t have time to get back to the buyers agent. This home has been discharged in a Chapter 7, we have interest in the property. When I spoke to Mr. Kelly he told me he would work with us to help the ****** family avoid foreclosure. Could I request that you order an interior BPO on this home? The offer that we are providing to you today is in line with recent sales as you will see. The property must be able to appraise for the lender to fund, according to all information, this offer is at the high end.

Hi Ryan,
I am Kim’s partner. We received your email this morning and we understand a business decision.
You mentioned that you had an appraisal done. When was the appraisal completed? The declines in this market are staggering. We are seeing declines of over 6% per month in Rancho Cucamonga.
I would be remiss in not fighting for our clients best interest. We have reviewed the recent listings both “Active” and “Closed” in this gated community. There are no recent sales and 7 active listings in this very small gated community. The average days on market is 46.8 and of the 7, 7 are distressed properties i.e. Bank owned, short sales, or pending Trustee’s.
In today’s climate of declining sales, another home on the market is a “coal on the fire.”
Rancho Cucamonga, while a lovely city, is suffering from a tremendous volume of distress properties. There are currently 761 Homes on the market. 378 are marked as “Distress” sales in MLS. That is over 50% of the homes in Rancho Cucamonga. And that is assuming that the Agent remembered to check the “Distress” category of the listing. My thoughts is that there are many more.
According to Commonwealth Title, The International Title agency, there were 408 Notices of Default and Trustee Sales filed for Rancho Cucamonga from 08/08/2008 – 09/08/2008. That is staggering and this is your competition for resale when you enter the market with another Foreclosure.
These figures, while staggering are simply a sign of the times and according to a Department of Economic Studies at UCLA recent study, they reported that Southern California has a minimum of 2 more years of decline.
Again, we appreciate your companies decision, however, with these staggering declines, your client is more than likely to suffer a great loss over the next 6 months as this property is not sold at Foreclosure and is placed back on the market in 2 months at a lower price than currently listed.
Thank you again for your consideration.
Best,
Kris Darney
714-615-7605

Ryan discussed an appraisal with me that was done at the onset of the filing of the Chapter 7. This would be at minimum a 4 month gap to time of request for the BPO. A few years ago this would not have been so significant. …but this is the Inland Empire….October 2008. Prices are declining monthly!
I’m not sure how a servicing company is paid. It would seem by this transaction that it’s not based on retention. This is one of the most disgusting business practices I’ve ever experienced! The servicing company has most likely spent more money on foreclosure costs than this home will eventually sell for by the time it’s back on market in about 3 months.

Just a quick vent session and I will get back to the wacky world of Short Sales! I’m not a genius, but as I listen to CNN discussing the bank crisis…..I have to ask myself this question: Who are these people that are making the call at our lenders to foreclose rather than accept fair market value?  What type of rigid interview process and criteria were they put through to have the power to ultimately affect our economy, families that are trying to salvage their dignity: while moving their family to who knows where not to mention their own Bottom Line?

Each day is a new experience working with lenders, some very good and some not so good.  Kris and I work very hard for our clients.  It’s important to them as well as our community to avoid more foreclosures in our neighborhoods.

Today I was checking in on one of our Short Sales for a family that was unable to keep their home of 13 plus years due to life circumstances and a serious increase in monthly mortgage payments.

After daily faxes and calls to the lender, I was told the offer was finally received.

To be professional and disguise my real feelings here, we will refer to the person I spoke to at the bank as the “The Guy”.
I was very calm, and simply asked if I could speak to the negotiator for the file. “The Guy” felt compelled to ignore my request and continue to waste both of our time.
“The Guy” completed his bad grammar with the broken sentence with “Oh, you have to counter that offer if you want to speak to the negotiator”.

I took a deep breath…and asked politely about the sale date set for tomorrow, October 1?
“The Guy”
responded that he was not a negotiator and could not help me with that. Again…I asked if I could speak to the negotiator?
“The Guy” reading from the script on the back of his hand told me that I have to counter the offer, it is too low, and it will take up to 72 hours for the bank to recognize the new offer…so I should call in a few days….!

Trying to talk to the “The Guy” at the bank was useless! 

I tried to dummy it up and explained that the offer was actually higher than the recent home sales for the same size homes in the area.  I asked him if there had been a bpo ordered, anything to understand why the offer was deemed too low…?

“The Guy” told me this is how they do business and if I wanted my offer to be considered I must counter with a higher offer.

So, can you see the circle here???? I appeased him and said sure, I’ll counter, but can you hold the sale for a few weeks and allow for the new offer to be reviewed? 

“The Guy”
Answer: A swift ” You have to counter this offer, it is too low”
I said, ok….will you hold the sale? 
“The Guy”
“I’m not a negotiator, you would have to talk to a negotiator for that”.

Getting a little frustrated about now….still asking to speak to the negotiator….!

“The Guy”
“you can’t talk to the negotiator, your offer is too low, it’s been rejected”. “You have to counter this offer, it is too low”  

My last few words to
“The Guy” before I hung up…Sure, I will counter, are you going to put a stay on the sale? 

Can you guess what he said?

“The Guy” “Mam, you have to counter this offer, it is too low”

Ok I’m feeling more frustrated now than when I started this!  I faxed a nice note to the negotiator, and the negotiators supervisor. We will see what happens tomorrow, hope to avoid such an unnecessary foreclosure.

Bottom line…CNN…Housing Crisis…Change…Federal Bank Takeovers…

This is an internal issue with most of our lenders, no matter the Politics involved, we have idiots at most of these banks calling the shots. It’s not just the families that are loosing their homes to foreclosure that are being affected. It’s every last one of us that live here in America. Somewhere down the line maybe a genius will step up and STOP allowing these banks to run themselves into the ground, then have the government come to the rescue.

It’s all about the bottom line….or is it?

Foreclosure notices fell nearly 90% in California with the implementation of state bill 1137 on September 8th. I found a great chart that shows the huge decline in Notice of Defaults and Trustee Sales here in the state of Ca. Here’s the staggering fact! We went from 3k to 4k notices PER Day to just a few hundred PER day…

This is only temporary…

NOD is the first stage of foreclosure after a borrower misses three to four mortgage payments. Notice of Trustee Sale is the second stage of foreclosure that gives the borrower notice their home will be sold at Trustee sale shortly thereafter. Timeline for NTS comes about 120-150 days following the NOD or about 8-10 months after the borrower misses their first payment, depending on the efficiency of the lender. From NTS the home is sold at Trustee Sale in about 14-days or so.

As you can see from the chart below, the week following Sept 6th when the new law was enacted NOD and NTS activity falls off of a cliff, down 90% from the week prior. (data in partnership with Foreclosure Radar)

Notice the day before the law went into effect, the banks sent out two times the number of notices…hmmm. We see data anomalies like this all of the time, especially around end-of-quarter…BANKS!!!

This new law requires the foreclosing entity to perform significant due-diligence ahead of sending out foreclosure notices in the future. What this does, however, is simply postpone the problem a month or so if your looking at this from the lenders point of view.

Now, if you’re a homeowner that’s facing foreclosure….look at it as that extra time you need to figure out how you are going to avoid immanent foreclosure. If loan modification is not an option, it’s time to learn about Short Sales. Banks doing business here in California are being forced to find alternatives to foreclosure.

That is a very good thing for all of us.
Short Sales are becoming more accepted, major lenders have Streamlined the process…can you believe it! Our last Short Sale with Countrywide was a total of 3 weeks from taking the listing to getting approval from their new Short Sale department. Amazing, the lender that used to turn down offers, now has added employees to staff this “Special devision”.

Ok, back to the chart:

This will have a positive effect on the September monthly foreclosure numbers when they are reported the second week of October by Realty Trac and other data providers. Remember, CA makes up roughly 40% of all US foreclosure activity. However, it will make for a dramatic rise in the November numbers once they get caught up and in compliance.
Banks and servicers are doing all they can to quickly comply with the law and resume sending NOD’s and NTS’. These notices are required by law before their take back their collateral so rest assured, they did not want to stop sending these out and being on record. When they begin to stream out again we will know in real time.

Kris and I live in the “Inland Empire”; one of the hardest hit areas of the country. Being Real Estate Agents, our decision to become Short Sale experts was an easy one. Our lives are touched daily with calls from people that are loosing their homes. Using everything we’ve learned during our training and experiences that we deal with daily….trying to help people that truly want to avoid foreclosure…however, nothing to date has hit me like this news.

As of 9/1/2008 Bank of America has implemented new criteria for short sale acceptance. The criteria states that Bank of America will accept no less than a 10% payoff of a debt balance being charged off as collectible. The criteria also states that Realtor commissions shall not exceed 4%.
Here’s proof BofA is sticking to the new criteria…
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What’s going on in America? The state of California passed a bill that becomes effective on or around September 8th SB1137 ordering all lenders doing business here in California to find alternatives to foreclosure
sb-1137-became-effective-july-8th-as-an-urgency-measure1

Bank of America beat the law makers here in California by 8 days! Their new criteria became effective September 1, 2008.

A piece of information that we’ve learned over the past year; when dealing with mortgage lenders that hold the first lien on a property…most if not all, allow only 3% of the sales price to go to subordinates, some cap at a maximum pay-off of $1000. Way to go BofA, do you share this decision making information with shareholder? The shareholders that will soon feel sharp declines in stock prices…due to this stupid “un-thought” process

I’ve found some fuel to add to this fire that BofA has started and will most likely let burn ’till it hurts many.

Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn’t refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey’s 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages to sell or get a new loan as their financing costs rise, said Jay Brinkmann, MBA’s chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime ARMs were 36 percent, he said.

“People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can’t sell and they can’t afford the higher payments,” Brinkmann said in an interview. The unadjusted rate for new foreclosures was 1.08 percent, also a record, he said.

Foreclosures started on prime mortgages rose to 0.67 percent from 0.54 percent and the foreclosure inventory increased to 1.42 percent from 1.22 percent, the report said. The share of seriously delinquent prime mortgages was 2.35 percent, up from 1.99 percent.

Existing home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent, according to the National Association of Realtors in Chicago.

Sales of previously owned homes rose 3.1 percent in July to an annualized pace of 5 million, boosted by foreclosures that accounted for about a third of all transactions, the National Association of Realtors said in an Aug. 25 report.

Some content from Bloomberg.com

I was really hoping that I had a nightmare last night, but after opening my emails this morning….It really happened! Yesterday was a perplexing day in our world of Short Sales.
The call we received from a family in the midst of a Chapter 7 Bankruptcy was not uncommon. A sale date set for the home less than 2 weeks away. We have been blessed in getting offers quickly and stopping trustee sale dates just days before the sale.
This Short Sale started out like all others….daily calls to the lender. AHMSI is the first mortgage holder, previously Option One. It took us about 7 days to have the trustee sale canceled. Although this came with conditions, typical items that lenders cover on short sales were declined as well as a huge cut in the Realtor commissions; they would only pay a total of 4%. Remember, the home was going to come back to them at foreclosure….according to the United States Bankruptcy Courts. The cost associated to take a home back at foreclosure is near $70,000 plus…!
Ok, no matter, we just want to make sure this property does not end up as a foreclosure. Next steps were to talk to the second mortgage holder, Bank of America. Their process seemed like it would be a no brainer. They actually have a recording that gives step by step instructions, and a timeline of what to expect and when. Anyone watch Twilight Zone? Remember the episode where everyone on the planet looked like a mutant pig…except one beautiful woman? They ended up sending her to another planet because she was so “different”…
Take that and imagine the entire team of home retention of Bank Of America, and I’m not talking about the beautiful woman! Get this, after days of talking to drones I finally made it to the supervisor of Home Retention, Veronica Vira. Get this…I asked her if she could help us with getting the lien released on this property as we had an offer that was accepted by the first lien holder, who by the way was going to offer a $1000 to BofA. Veronica proceeds to tell me this loan has already been charged off due to the bankruptcy. Once again, I explained that the owners of the home are trying to avoid a foreclosure and we had an offer to SELL the home, and just needed BofA to release the lien. Are you ready for this??? Veronica says and I quote “We are not going to release the lien for a $1000; do you know how much is owed on this”? Perplexed…I reminded her that she had just told me that the debt had been charged off, and with accepting this $1000 BofA was actually going to net more than if they charged it off….right????
End of conversation with Veronica, she held fast on BofA’s policy. Today via fax we received a lovely letter declining to accept the $1000 offer from AHMSI. (I have posted the letter for all to see, minus the client information of course).
What a very sad and unacceptable scenario of how lenders are “Pretending to Do Business”
I have to believe that these “temporary” employees are not accountable to higher management. From my experience dealing with Short Sale lenders over the past year, most negotiators handling these files do not hang around long enough to learn the process…if there is a process in place. I’m guessing they are paid hourly, with no incentive, or repercussion regarding their workload and the ultimate outcome of Short Sale versus Foreclosure….
There are real casualties here; the family that is going to suffer a foreclosure for years and our economy. Not accepting fair market value offers, choosing to spend the money to let the property be foreclosed on is beyond frustrating! These same idiots are now going to have to pay a Realtor to get the home ready for sale and pay them commissions….and I guarantee that the sale price 6 months from now when the home goes back to market will be LESS than the offer that was declined.
Oh, and we are not giving up that easy, we will work our way up the food chain at Bank of America. Someone has got to have a brain…..
State Bill 1137 is just around the corner, the one that is trying to help California put a stop or at least slow down foreclosures…only time will tell.

“Twilight Zone….” They need to go to the planet where people are like them!
bofadecline