Virginia Short Sale Specialist / Realtor - Certified Distrssed Property Expert (CDPE)

Short Sale and Deed in Lieu

Time to time I'll provide some helpful reports regarding short sales.  Contrary to what you may have heard, lenders actually want to avoid foreclosure wherever possible. That’s why they’re accepting more short sale and deed-in-lieu transactions everyday in an effort to eliminate unnecessary foreclosures. This is great news for homeowners facing financial distress.

To help you understand more about these two options, here's a free report.

Download Short-Sale-and-Deed-In-Lieu-Report. 

Simon Hahn - Keller Williams Realty

Virginia, Maryland, Washington DC short sale specialist

703-662-1466

 
 

Wells Fargo Short Sale Unplugged

I attended a great seminar on Wells Fargo short sale process taught by the actual VP of Loss Mitigation Department, Gwen Oberg.  She flew in to Baltimore from Charlotte an hour before the seminar and had to fly out an hour after the seminar. I have been very impressed with Wells Fargo's commitment to short sale process in 2009.  Notice I didn't say 2008.  I have been involved in about 9 Wells Fargo short sales to date and I must say that I like working with them.

Here's some interesting facts about Wells Fargo.  In 2008 Feb, they only had 4 negotiators working on short sales.  No wonder why it was hell working with Wells Fargo in the past.  Today, they have over 300 negotiators.  In 2008, they had over 400% increase in short sale applications every month!

Since the seminar was attended by mostly agents new to short sale, she went over basic information.   What people need to understand is that short sales are case by case.  There can be 8 parties involved in a short sale.

• Investor
• Bank negotiator
• PMI company
• Junior Lien Holder
• Homeowner
• Homeowner's agent
• Buyer
• Buyer's agent

Wells Fargo has over 6,000 investors.  Each investor has their own guidelines.  Imagine that.  I just did a Wells Fargo short sale involving one of the smaller investors.  I did notice the difference between this short sale and my other Wells Fargo short sales.  She also shared some information on why the response time is slow for some transactions.  I'm not sure if she wanted to go on record so I won't mention it. 

If you have Wells Fargo mortgage and you are in financial distress, contact Wells Fargo and a real estate agent.  If you don't have an agent experienced in Wells Fargo short sale, you can certainly contact me. :)  If you don't live in VA, MD or DC, I can help you find an experience agent for you.  

If you contact Wells Fargo before putting it on the market, they will actually do a BPO/appraisal and tell you what to list it for.   How easy is that?  That saves few weeks to the process and you can actually get the short sale fully approved as little as 3 weeks.   I have one listing where Wells Fargo gave me the list price. Basically any contract that's close to the list price should be approved.   Click here for my approved Wells Fargo short sale listing. 

Couple more things.  Wachovia short sale process will be officially merging with Wells Fargo system this week.  Wachovia is another excellent bank in terms of short sales.  Lastly, Wells Fargo will launch their new web initiative in November that'll allow all parties involved in short sale to log in and check status and documents.  That would be sweet. 

Anyway, I hope you gained an insight or two.  If you have any questions concerning short sales, feel free to email me or call me.  I get emails and calls all across US every day.  The more you ask and share, the more I learn as well.  

 

Certified Home Rescue Expert in Virginia

I had an opportunity to attend Jerry Boutcher's training called "The Truth About Short Sales".  In doing so, I earned Certified Home Rescue Expert designation. Jerry is the founder of Home Rescue Institute.  Actually our class of 50 agents were the very first set of real estates agents getting this designation. 

Early this year I became CDPE (Certified Distressed Property Expert).  CDPE designation has helped me understand the short sale process.  Certified Home Rescue Expert has helped to better counsel home owners and learn an effective short sale system.  I can't get into details here but this system solves most of the common issues why short sales fail.  I'll go in details later but I was blown away at the brilliance of the system.  I'll be slowing implementing this systems in the coming weeks with my future short sales. 

Basically, his systems requires the buyers to do the home inspection and appraisal all upfront.  Once the buyers spend money, of course they will be more emotionally invested in the property.  By doing home inspection and appraisal, the buyer will know whether the home is worth waiting for.  This takes the guessing work out and prevents buyers from submitting offers on multiple properties.  To explain his system in detail, I would have to blog another few hours.  I'll stop here but I will add more posts later.  If you are a real estate professional or negotiator, you need to look into this system and take the next class offered. I highly recommend this designation for professionals serious about short sales. 

Simon Hahn

Certified Home Rescue Expert by Home Rescue Institute

Certified Distressed Property Expert

Virginia Certified Home Rescue Expert, Virginia Certified Distressed Property Expert

Short Sales in Brambleton (Ashburn), VA in Loudoun County

I just published my Brambleton, VA 2009 Q2 summary.  Brambleton is a popular subdivision in Loudoun County.  Out of 35 resales for Q2, 10 or 28.6% were short sales.  In 2008 Q2, short sales only made up 16.1% of all resales.  The number of short sales doubled in one year.  I expect short sales to continue to make headlines in real estate.  This is typically for many of the suburbs outside of the beltway.  There are some neighborhoods in Sterling and Centreville where over 1/2 of all listings are short sales.  If you are a home buyer, you can't ignore short sales anymore.  Just yesterday, I had a conversation with an agent who said that only 16% of short sale succeed and that short sale are a waste of time.  I was shocked to hear it.  I think these days,  probably more than 2/3 of all short sales succeed in Northern Virginia.  I'll do a case study soon to see if this true.  Don't ingnore short sales.  It's a great opportunity for buyers.

Click here to see the whole report.  If you or someone you know is thinking about doing a short sale or buy a short sale, please email us or call us at 703-401-0571.

Simon Hahn Group - Keller Wiliams Realty

Certified Distressed Property Expert

703-401-0571

Short Sale Myths

Here's a good article on short sale myths titled "The Truth Behind 7 Short-Sales Myths" by Alex Charfen, CEO and Co-Founder of Distressed Property Expert.   It's a good read for people interested in short sales.

Here's the 7 myths and you can read the entire article here.

Myth No. 1: Short sales are impossible and never get approved.

Myth No. 2: Banks aren't accepting short sales but instead waiting for a bailout.

Myth No. 3: Homeowners must be behind on their mortgage in order to negotiate a short sale.

Myth No. 4: Homebuyers aren't interested in short sales.

Myth No. 5: Homeowners don't want to list their homes as short sales because of embarrassment.

Myth No. 6: Banks would rather foreclose than handle a short sale.

Myth No. 7: There isn't enough time to negotiate a short sale before foreclosure.

SunTrust Short Sale Process

This is the short sale process for SunTrust as of 4/10/09.  This content is from SunTrust's short sale flyer for realtors.  I did 1.5 SunTrust short sale last year.  The half was I did the work but didn't list the home.  I'll be listing a SunTrust short sale in Manassas Park City shortly.  SunTrust is one of the easier banks for doing a short sale in my opinion.  I hope you find this information useful. If your bank is SunTrust and you are considering a short sale, call me at 703-401-0571 or email me.

Contact Information:

Loss Mitigation Fax: 804.675.7399

Loss Mitigation: 1.800.634.7928 x58791

HOW TO GET STARTED (SHORT SALE PACKAGE requirements)

1.  The homeowner must call SunTrust Mortgage Short Sale Team at 800.443.1032 Option 3.  The Short Sale Phone Team will review the mortgagor’s financial information and completes short sale counseling.

2.  The mortgagor and his/her real estate agent then assemble a Short Sale Package that contains:

 

From the mortgagor:

·   Last two (2) years tax return

·   Two (2) most recent bank statements

·   Third party authorization form (to speak with real estate agent, attorney, or 3^rd party)

·   Completed financial form

·   Two (2) most recent pay stubs

 

From the real estate agent:

·   Arm’s Length Transaction document

·   HUD-1

·   Listing agreement

·   Fully, executed purchase agreement

 

3. The mortgagor (or designated third party) faxes his/her financial information to (telephone number).  The real estate agent faxes the complete the Short Sale package to 804.675.7399, Attn: Setup

 

DOCUMENTS REQUIRED TO BEGIN AN APPLICATION

 

From the mortgagor:

·   Fully executed listing agreement

·   Signed and dated financial worksheet listing all monthly expenses

·   Signed and dated hardship letter (an explanation of why the homeowner is unable to pay the mortgage)

·   Letter authorizing the real estate access to information on the account (must be dated and include the last 4 digits of mortgagor’s Social Security Number and signature, the full account number and property address

 

SHORT SALE APPROVAL PROCESS

 

1. Once all documentation is received (please refer to the “Short Sale Package” requirements), the short sale team completes a property valuation (appraisal or BPO per investor requirements).

2.  The short sale file is then assigned to a negotiator on the short sale team who will review the file including the documentation and the offer.

3.  If there is any missing documentations or request for more information, the short sale negotiator will contact the designated party or mortgagor.

4. Once all the required documentation and information is received and in order (refer to “Short Sale Package” requirements), the short sale negotiator recommends approval to the investor and/or insurer.  If the short sale offer is acceptable, the negotiator drafts and sends an approval letter to the borrower(s) and/or designated third party.  The short sale negotiator then works closely with the real estate, title company, and the mortgagor to establish a final settlement date.  The short sale approval is good for up to 45 days.

 

ADDITIONAL INFORMATION

·   Short sale approval is good for up to 45 days.  If closing does not occur within 45 days, the entire Short Sale package may need to be resubmitted with updated information, or the approval process may need to start over.

·   The real estate agent or STM mortgagor/designated third party should direct their inquiries 1.800.443.1032, Option 3.  The Loss Mitigation Team will answer their questions regarding the status of the account.  The call will be forwarded to the short sale negotiator as appropriate.

·   Real estate agents are generally allowed 5% to 6% commission based on investor rules.  If dual agency applies, the maximum commission is 5%.  Some investors operated on a reduced commission structure and the actual commission schedule can be confirmed during the introduction call.

·   The short sale must be an “arm’s-length” transaction.  The property may not be sold to anyone the seller has a close personal or business relationship with, including family, friends, or neighbors.

·   During the discussion with the short sale negotiator, the following will be addressed:

          -Commission

          -Fees and costs

          -Pricing of the property

          -Timeline

          -Borrower Contribution

·    In some cases investors and/or Private Mortgage Insurance (PMI) companies require mortgagor to make cash contribution or sign an unsecured note for some or all of the difference between the net proceeds from the sale and the total amount due.  This is communicated as part of the response on a short sale offer.

Short Sale Document Checklist for Sellers

What documents do sellers need to prepare for a short sale?  Most banks will require the following:

Hardship Letter

Financial Worksheet (Income / Expense worksheet)

Two months most recent mortgage statements (all mortgages)

Two months checking account statements (all borrowers if separate)

Two months saving account statements (all borrowers if separate)

Two months other account statements (all borrowers if separate)

Last two paycheck stubs (all borrowers)

Two years tax returns

Additional documents:

Any documents that will support the seller's financial hardship should be submitted.  It can be Notice of Default, Death Certificate, Proof of Disability, Insurance Claims, Banktruptcy Discharge letter, etc..

Here's a sample hardship letter and a sample financial worksheet.

Email me if you need a sample harship letter and/or financial worksheet.

Seller Liability Question

I received an alarming email from a realtor today.  He was working on his very first short sale.  Here's the email.

------

I am currently working on one and have gotten the approval, but the bank is asking that the seller pay the remaining deficiency. I thought a short sale was a forgiveness of the debt. They sent a document stating "release of lien only".

The mortgage company is xxxxxxxxxx.
Can you please give me some advise.

-----

I cringed when I read this email.  Having done short sales since 2007, I knew this guy was in trouble. Being the nice guy I am, I referred the agent to an attorney who could help him.  I knew the steps I would take but I didn't give him specific advice since I might get blamed.  

One thing the sellers need to keep in mind is that not all short sales qualify for Mortgage Debt Relief Act of 2007 and seller's don't always walk scot free.  I have seen advertisements that claim that sellers will have no liability with short sales.  Well if it sounds too good to be true, it probably is. Here's what the sellers had to bring to short sale closings in some of my recent short sale transactions. 

1. Wells Fargo Short Sale

Seller had to bring $1,000 to closing.

2. Countrywide Short Sale

Seller had to bring around $300 to closing.

3. Chase Short Sale 

Seller had to bring $666.83 to closing

4. Countrywide Short Sale

Seller had to bring $700 to closing.

Fortunately none of these short sales involved promissory note or deficiency judgment.  In cases with big second trust (HELOC), many banks will ask for 5k to 20k at closing or ask the sellers to sign a promissory note.  The goal of short sale is to minimize the liability for the sellers but it doesn't always mean zero liability.  When doing a short sale, choose your agent wisely.  Make sure they have done at least two (preferably at least six).  For added layer of protection, attorneys should handle the negotiations with the banks.   

Let me know if you have any short sales questions.

Simon Hahn - Certified Distressed Property Expert (Short Sale)

Keller Williams Realty

703-401-0571 (Direct)

Reasons Short Sales Fail

Introduction

Thanks to an early start in short sales, I was able to experience the many pitfalls that helped me be a better short sale Realtor today.  I hope this sheds some insight for Realtors listings short sales and buyers looking to purchase short sales.  When hiring an agent to do a short sale, I would look for ones that have done at least 1/2 dozen or so short sales.  I don't think one or two is enough to get a good grasp of all the curve balls that a short sale transaction can throw at you.  Better prepared you are, the better chances of succeeding in short sales. 

Unpredictable Issues

These are issues beyond the control of the agent or the buyer.  It happens and there's not much you can do about it.

1. Seller files bankruptcy.  

I'm speaking from personal experience with this one.  It has happened to me twice.  Once I already had the short sale approved for a $900,000 property in 2007 but the seller filed bankruptcy.  Depending on how this is done, the short sale may still go through but certainly it'll delays the process.

2. Loan gets sold

Again, I'm speaking from experience.  I was doing a short sale with first and second trust both with First Horizon.  MetLife bought First Horizon last year.   MetLife took over the first trust and another bank purchased the second.  Of course the bank don't tell you this right away.  In fact, there was a period of few weeks where they didn't respond at all.  Again, there's nothing you can do.

3. Negotiator quits or gets reassigned

This doesn't necessarily have to stop a short sale but it does delay the process.  In the past when short sales could take 6 to 8 months, change in negotiator could have killed the deal.  Virginia is a non-judicial state so the home can foreclose faster in Virginia than other judicial state. 

4. Short sale does not meet investor or lender policy.

Some banks/investors refuse to sign off on a short sale unless the seller agrees to certain terms.  Most second trust take anywhere between $1,000 to $5,000 and approve the short sale.  Certain banks/investors insist they collect certain percentage or require the seller to agree to deficiency judgment.  Again, I'm speaking from experience.  Agent who work with a lot of short sales will tell you also that certain banks as a second trust can be much tougher than other banks.

5. Seller doesn't really want to do a short sale

I heard someone mention that some sellers list their homes as short sales but are not really interested in completing a short sale.   Some are in it for the free rent.  Of course the longer they can postpone the foreclosure, more benefit they get.  Many banks will postpone the foreclosure if there is a contract.  I liked to believe that no one will take advantage of banks in this manner but there are some very smart people who know how to milk the system.

Another experience I had was that the seller refused to go forward with the short sale because bank required the seller to agree to either promissory note or deficiency judgment.  Keep in mind that not all short sales qualify for debt forgiveness.

Preventable Issues

1. Buyers can't see the property

I just dealt with this.  I wanted to show a townhouse in Fairfax for over 2 weeks.  However, the tenant refused to cooperate.  Finally, this past weekend I was able to show it and we wrote a contract.   I also have been turned away from the seller living at the property simply because they didn't want to show it.  I can't help but to think of reason #5 when this happens.

2. Home priced too high or low

Who want to see an overpriced short sale?  The reason why a buyer waits 1 to 3 months is the reward of getting a home at a foreclosure price.  On the other side, there are homes priced way too low.  Which bank will take a short sale offer if they can net more by foreclosing on it and selling it on their own?   There is an actual pricing strategy.  It'll take too long to discuss it but you can email me .  Without mentioning any names but there is one short sale in my neighborhood that is priced 100k higher than other short sale listings.

3. Missing short sale package

Please make sure all the documents required by the lender are sent and verified.  Even if all the documents have been sent, banks are notorious for losing paper works.  Sometimes you have to send the package multiple times.  

4. Missed too many payments

Once I got a call from a guy in California who found me through my blog on short sale.  He wanted to do a short sale for his townhouse in Reston.  He was already 10 months behind.  I was surprised that it didn't foreclose.  I politely declined to take this case.  If you are missing payment, contact me ASAP.  Short sale process should start as soon as you are experiencing  financial hardship or expect a financial hardship.   I'll blog about it later on this issue.

5. Buyer can't qualify for a loan

Last month I wrote an offer on a home in Bristow.  My buyer wrote a backup offer.  The original buyer backed out due to financing issue which mad .  If you have a first time buyer doing 100% financing, I would say you should probably wait for another offer.

If the buyer is buying in cash, you probably should ask for proof of funds.

6. Other unknown liens

This is a true story.  I wanted to write an offer on an "approved" short sale in Centreville.  I call the agent and he told me to ask the buyer if the buyer can pay the $20,000 lien on the property! I forget whether it was a tax lien or some other lien.  I knew that this property was a good deal even if the buyer had to pay $20,000 extra but who's going to do that?  Plus, undisclosed transaction outside of HUD is illegal.  A simple preventive measure is to do a title search right away.

7. Funds Not Actually in Escrow

I got this from a training that I attended.  The lender may call the title company or broker to very the buyer's deposit is actually in escrow.

Conclusion

Short sales can be tricky.  There are things we can do increase the changes of pushing the short sales through.  Anyone who says that he/she has 100% success with short sales (more than 10 opportunity) is probably lying.  There is no official statistics but I have heard that only about 16% to 18% short sales went through in 2008.  I believe this number will grow as banks cooperate more with short sales and Realtors are better trained to deal with short sales.  I may have missed few other reasons so please feel free to share you thoughts. 

Will I Have Any Tax Liability After a Short Sale?

 

Do I have to pay any tax after a short sale?  This is probably the most common question that I get when homeowners ask me about short sales.  The second most popular question is "Do I have to miss payments in order to do a short sale?"  I blogged about this question earlier so click here for the answer.

Let me start off by making a disclosure by saying that I'm not a CPA so consult your CPA for advice.  All I'm going to do is highlight the major points of The Mortgage Forgiveness Debt Relief Act and Debt Cancellation enacted on 12/20/07 effective from 1/1/07 to 1/1/10. 

Upon successful short sale, banks are required to send you 1099-C for the amount forgiven.  Several agents have told me that some banks don't even send the homeowners anything.  Here's a comment posted on my blog by a Realtor addressing this issue.

We've been doing short sales for a number of years and have seen more changes from lenders during the past 6 months or so than we have for the past six years.  I remember my first short sale with Countrywide.  Made the initial contact with the seller, conducted the short sale and close all in 29 days.  Ahh, "the good 'ole days".

Historically, few of our clients ever received a 1099 or any note or judgment from Countrywide, unless agreed as part of the short sale negotiations.  

You shouldn't rely on this but that's what I have been hearing from agents.  I attend monthly short sale discussion group so I get the most current updates.  Remember, by law the banks are required to send 1099-C.  I guess some banks are too busy.  

The basic criteria under The Mortgage Debt Relief Act of 2007 are:

1.  Debt must have been debt incurred to acquire a principle residence.  Debt from a second (non acquisition) mortgage or HELOC is not eligible.

-Some homeowners used HELOC to finance their cars, vacations, etc..   But if the homeowner acquired HELOC at settlement, then the homeowner qualifies. 

2.  Canceled debt up to $2,000,000 (married) or $1,000,000 (single) is eligible

-That's a big mortgage!

3.  Canceled debt from investment property and second homes is not eligible. 

-According to a CPA, the homeowners must have lived in the property at least 2 of the last 5 years.  I have few people who are doing short sales on multiple properties and think that they won't owe anything.  Do you a person like that?  

My advice is to always talk to your CPA or tax adviser first before proceeding with a short sale.  You can email me with any questions.

Simon Hahn - Keller Williams Realty

Certified Distressed Property Expert

703-401-0571