Question
Does a homeowner have to be behind in payment to start a short sale?
Answer
No, they don’t need to be behind, but they should have a valid hardship and be able to show that they will soon start missing payments if the short sale is not approved within a set timeframe. For example if they know they will miss payments in March once their loan adjusts and the bank is not willing to approve a loan modification to keep their rate from adjusting.
Question
Hello is it true that once you open Escrow you have to create a fake offer in order to get the BPO this is what escrow is telling me on 4 properties I just got listed for short sale?
Answer
In some cases the answer would be yes, you will need an offer before the lender will order the BPO. We usually submit the file without an offer if we do not yet have one and in some cases they will assume an offer is in the packet and move forward with the BPO. In other cases, we tell the lender the offer will be faxed to them once we get the estimated HUD from escrow but that we think they had better order the BPO because “we have a good offer and don’t think this buyer will wait around for more than a couple weeks”.
It is not good to submit fake offers, but, if you have an investor that will make an offer on any property you list, take advantage of that.
Question
You mention in your seminars that we can negotiate down to 80% LTV on the first and the second should be happy with any thing, and Helocs any where from 25 to 35 cents on a dollar. Now is that off the BPO or appraisal done by the bank or is that off original loan amount?
Answer
Those are ‘general rules’ and not gospel at every bank. The loss severities are based off of the ORIGINAL LOAN AMOUNT. For example, an original first loan of $400K would see $320K as an acceptable loss (20% Loss Severity). With the new or current value, the bank will want to see an offer within 5%-15% of
the current market value, depending on the lender.
Question
I am dealing with a short sale w/ Beneficial Bank of CA. Client signed all documents including Do Not Call. I was in negotiations w/ the lender (Beneficial) during that time lender was persistent on a deed in lieu. I proposed the deed in lieu to borrower and she rejected it because of the unknown 1099 amount she
would get hit with.
Today I found out that for the PAST 2 WEEKS, the loss mitigator at beneficial has been in direct contact with the borrower and negotiated a deed in lieu without my knowledge.
Question: Is it legal for a lender to contact a borrower that is represented by a
broker and has the signed the Do Not Call which was submitted to Beneficial?
Answer
It is illegal for them to contact the client, but in this case where the client allowed and accepted the continued calls; it is very likely that the homeowner will not complain. I would ask to speak with the AVP or SVP for the department. Tell them call may be recorded (and actually record it) and ask them if they are allowed to contact a client who has notified them in writing not to contact them. Don’t refer to which client, just ask them straight up on a recorded call to see how they respond (remember, you must notify them, per California law, that the call may be recorded) and how they would justify calling a client.
There is not much you can do, unless the client is pissed off at the bank. So, since you are not the client, it is hard to reverse anything.
Question
Can a bank or should a bank send over a counter offer in the middle of escrow? This was a short sale, two weeks from closing.
Answer
If you had an approval letter and then they changed the approval prior to the approval expiring or the file closing, that is real bad on their part. Now it becomes a matter of getting to the ‘right’ party to get it resolved quick.
Question
Does the seller have to be behind on payments to qualify for a short sale? My sellers have not missed a payment yet or been late, but they can’t keep it up for long.
Answer
No, they don’t have to miss a payment. I am Lee’s partner and I just closed one last month (Dec 07) that never missed a payment. I had to prove to the lender that 1. The offer is close to full market value. 2. The seller has a valid hardship that can not be fixed any time soon and the property will end up in foreclosure within the next year if they don’t sell now. Good luck. The number one reason agents fail is because they talk to the wrong idiot at the bank and they don’t follow up, they wait for the bank to respond. They won’t
respond if you wait patiently. Your file will not move unless you push it.
Question
Could you please clarify when a home is eligible for a short sale. Does it have to be a primary residence? or can an investment property qualify?
Answer
Any property is eligible for a short sale. When the value is less than what is owed and the borrower can’t make the payments or must sell for other reasons, the bank will look at whatever options they have. Usually their options are only 1 – accept a short sale, 2 – allow it to go to foreclosure and hope it sells for enough or 3 – sell it as an REO after the auction if it did not sell. Even commercial properties can be short sold.
