Central Florida Short Sales: May 2010

One of the keys to having a successful Short Sale is pricing. Now there are folks that say pricing doesn't matter because the seller is receiving no funds anyway. Well....they're worng. Tell that to the seller who has to pay taxes on the "short".

It is imperative that the Short Sale property is priced right. When I say "priced right" I mean as close to market value as possible at a price that will get the property under contract quickly.

One of the problems I see in my market is that many Short Sales are priced way to low. Pricing low may generate a lot of activity but these deals, more than likely, will not close. You have to be able to justify the purchase price to the lender.

Pricing a short sale should be just like pricing any other property. You are looking for a price that will sell the property in a reasonable amount of time and at a reasonable price. The fact that the property is a short sale, requiring 3^rd party approval, is nothing more than a negative market condition.

If the true market value of the property, if not a distressed sale, is $200,000, then what you should be doing is taking this figure and making an "adjustment" for the "negative market condition (short sale)". Depending on your market it could be a 10% to 20% downward adjustment. Let's say that your market is showing you that short sales are selling for 20% below a normal sale of similar properties. That means that this property should sell for $160,000. So maybe you price at $165,000 or $169,000 depending on your area's sales price to list price ratio. Reduce as necessary.

Now you have a property that is priced right AND you have a very good chance of getting the Lender to agree to the short sale. The higher the price the easier it is for the Lender to make a decision. What say you?

Property:

3 bedroom 2.5 bath townhouse in Kissimmee Florida.

Hardship:

Investor owned property. Loss of income.

1st Mortgage with Citi Mortgage for 92,000. Agreed to accept $55,200 or 60% of the balance owed.

2nd Mortgage with Chase in the amount of $62,400. Agreed to accept $3,000 to release the lien and an additional $12,000 to release liabilty.

Seller contributed $1,700 to closing and $12,000 to the 2nd.

The transaction took 90 days from contract to closing.

Challenges:

Getting a squating tenant out on day of closing. I finally had to go over and put on the "ugly face" to make it happen.

Hi Folks. We had one of our members over at www.ShortSaleSuperStars.com post an article wanting to know if it was normal for Short Sale Agents to submit "offers" on their Short Sale listings just to get the ball rolling. The idea of course is to start negotiations with the lender by submitting an offer that may not be real, or it could just be a very low offer from an investor and, then substituting a real contract once a legitimate Buyer is found. In theory, this speeds up the process.

She used this Internet ad that she found as an example:

"WHY WOULD I USE YOU TO HELP ME RATHER THAN MY RELATIVE THAT ALSO HAS A REAL ESTATE LICENSE?

• Most banks will not stop the foreclosure process and start the short sale process until you have an offer on your home. We start the process by making an offer on your home. The key to a successful short sale is the BPO or Appraisal. The bank will determine what it will accept based on this number. Our team includes an appraiser and an experienced BPO agent that will provide the bank with this information and get the deal done." END OF AD
  

My opinion is:

There are many companies out there that do this. My opinion is that if you are a licensed agent then this may very well be illegal according to your State's licensing laws. If you are a REALTOR(R) then it is also my opinion that this is against the CoE. While this practice may work it is not one I condone. Why not just price the property right and get a valid offer from a legit buyer? Then get the deal approved and closed. We don't need to play games.

What say you?

Hi Folks. If you deal with Short Sales you know they can be very frustrating. And of course Bank of America has always been one of the worse to deal with. At least until Equator.com came along. Now, at least from my experiences, Bank of America Short Sales are becoming much easier. In fact I have closed on two in the last 10 days where I NEVER spoke to a person. The transactions were started on Equator.com and were completed in less than 60 days. All automated. I LOVED it!!

Then....I have this one. My last remaining "old" Bank of America Short Sale that is NOT in the Equator system. I started with Buyer #1 way back in May 2009.  Now here we are in May 2010 and we are on Buyer #4. They have been under contract since August 2009!! How's that for hanging in there? Anyway, after battling with Bank of America we finally received an approval in for our Short Sale request in mid-April. All was well with the world.

Fast forward to last week. The Buyer's lender, who also happens to be Bank of America, did their appraisal. It came back 15% below the contract price that was approved by Bank of America on the Short Sale. This price by the way was already increased at bank of America's request based on  the BPO that was done for the Short Sale.

So......as the good little Short Sale Broker that I am, I put together my argument and sent it over to Bank of America with the recent appraisal and asked for a price reduction and an extension on the Short Sale approval. Now we wait. My instinct tells me we will get Bank of America to reduce the price and we will get this transaction closed. It's not the first time I've had to fight this exact battle with Bank of America.

Short Sales require persistency. As a Florida Short Sale Broker I just keep pushing until the job is completed. I sure will be happy the day this file is closed and off my desk. Hopefully this will be my last looooong Short Sale. But I doubt it.

The life of a Short Sale Real Estate Broker in Florida can be very entertaining AND very frustrating. Here's an outline of some of my interesting "thingies" this week. You can decide which ones were entertaining and which ones were frustrating. Come on. It'll be fun. Or not.

• Had an agent want to claim a deposit for her Seller because my Buyer did not accept the counter offfer!

• Bank of America says the Short Sale is valued at $67,500. Bank of America, on the Buyer side, says it's worth $60,000.

• Sun Trust, after 8 months, finally responded to our Short Sale request. They want 15% more for the property and gave us 24 hours to sort it out or the file will be closed.

• An executive from Capital One called because he saw on the Internet (www.ShortSaleSuperStars.com) that I had a Capital One Short Sale and he wanted to know if I needed any help with the file!

• Had two Shorts Sale approved with Bank of America through Equator.com. Both were approved in less than 45 days and I NEVER spoke to a human. Automated all the way. LOVED IT!!

We (as in me) have successfully handled Short Sales with.....

• Bank of America
  
• Wells Fargo
  
• Chase
  
• PNC Bank
  
• US Bank
  
• Orange Bank
• Citi Mortgage
• Wachovia
• Green Tree
• Fifth Third Bank
• GMAC
• HomeEq
• Capital One
• Sun Trust

So..........

Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.

Want to find out more? www.CentralFloridaShortSales.com

***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

Copyright © 2010 http://www.brokerbryant.com/ | All Rights Reserved

Hi folks. I've been having a discussion over at www.ShortSaleSuperStars.com on whether or not having the Buyer of a Short Sale pay off part of a junior lien "outside of closing" without disclosing to the 1st lien holder and without placing the payment as a P.O.C. (paid out of closing) item on the HUD is Mortgage Fraud and/or a violation of RESPA.

The article is presenting a scenario where the 1st lender does not agree to pay the 2nd $7,000 from the sale. They only agree to pay $3,000. So to skirt around this the agent suggest having the buyer pay the additional $4,000 needed to remove the 2nd lien outside of closing. It's my opinion, that this $4,000 is compensation to the seller for the purchase of the property. This fact, that is pertinent to the sale, is being withheld from the 1st lender. Therefore, in my opinion, it is both Mortgage Fraud and a violation of RESPA.

The definition of Mortgage Fraud as per the FBI is: "material misstatement, misrepresentation, or omission of information relied upon by an underwriter or lender to fund, purchase or insure a loan. ".

Also, a Title company that does this without placing these funds on the HUD could very well be breaking the law. Title Companies exist to protect lenders and borrowers. The lien is a title issue and therefore the monies needed to "clear title" need to be shown on the HUD.

THE HUD-1 MUST STATE, WITH COMPLETE ACCURACY, THE FULL FINANCIAL ACCOUNTING OF THE TRANSACTION. Read the rest of the article here.

Not disclosing this $4,000 payment to the first lien holder is fraud. If it weren't ....then disclosing it would not be an issue. Would it?

Now having said all of that I know these types of transactions happen every day. The chance of being caught and prosecuted are probably slim to none. BUT.....it's still fraudulent and it's still wrong. Of course I am NOT an Attorney and this is just my opinion.

Here's some more great info:

HUD promulgates regulations to enforce RESPA, known as Regulation X (24 C.F.R. section 3500, et seq.). Regulation X includes the requirement that settlement statements be prepared in the form of the HUD-1. The regs include line-by-line instructions and rules as to how the HUD-1 is to be completed. The following is from the "General Instructions" (24 C.F.R section 3500, Appendix A):

"The settlement agent shall complete the HUD-1 to itemize all charges imposed upon the Borrower and the Seller by the Lender and all sales commissions, whether to be paid at settlement or outside of settlement, and any other charges which either the Borrower or the Seller will pay for at settlement. Charges to be paid outside of settlement, including cases where a non-settlement agent (i.e., attorneys, title companies, escrow agents, real estate agents or brokers) holds the Borrower's deposit against the sales price (earnest money) and applies the entire deposit towards the charge for the settlement service it is rendering, shall be included on the HUD-1 but marked `P.O.C.' for "Paid Outside of Closing" (settlement) and shall not be included in computing totals. P.O.C. items should not be placed in the Borrower or Seller columns, but rather on the appropriate line next to the columns."

The "P.O.C." requirement is also set forth in the upper part of the first page of the HUD-1 form.

Above info was taken from this article

So what do you think? Fraud? RESPA Violation? Or neither?

Do NOT be foreclosed on! Avoid foreclosure. Short Sales DO close.

Want to find out more? www.CentralFloridaShortSales.com

***I am NOT an Attorney nor do I play one on TV. Click the button below for my Bio.

Copyright © 2010 http://www.brokerbryant.com/ | All Rights Reserved