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As a Realtor Why a Seller Might Want to Accept a Second Short Sale Offer as Back-Up? The seller wants the bank to accept the short sale. www.Mckissock.com Banks usually accept short sale offers that are near market value. www.McKissock.com 1-800-328-2008 As a Realtor Why a Seller Might Want to Accept a Second Short Sale Offer as Back-Up? The reasons to accept a second short sale offer in back-up and to submit that offer are: The second buyer is mightwww.Mckissock.com be more qualified to buy than the first buyer. The first buyer might not be 100% committed to buying the short sale. The first buyer's price might be too low. The seller might not have to make a seller contribution with a higher sales price. The seller might reduce the deficiency, if the 2nd offer price is higher. The seller's tax liability could be reduced with a higher offer. www.McKissock.com 1-800-328-2008 As a Realtor What is a Short Sale Addendum? You want to use a short sale addendum with your offer to purchase, Many state REALTOR® associations endorse the short sale addendum but not all of them do. If not create your own. www.Mckissock.com Release of funds, Repairs, Able to submit other offers, the seller's bank may demand to see all the offers , extra costs not outlined, the Seller can accept higher offer, seek legal advice www.McKissock.com 1-800-328-2008 As an Investor who found a short sale. Execute a Purchase and Sale Immediately list these properties for sale on the Multiple Listing Service to attract a buyer while you are working the short sale. You make an offer to the bankwww.Mckissock.com as THE BUYER. Your offer must be 10% to 20% less than what a retail customer is willing to pay. www.McKissock.com 1-800-328-2008 As a Realtor Investor If you do not get an end buyer, you won’t be able to finalize your offer to purchase from the bank. You will lose the short sale. The time to locate a buyer that converts to a cash closing takes about 90 days. You want to identify the downsides of each deal. www.Mckissock.com Then only if the seller is motivated and easy to work with do you start working with them. You could find a financial partner www.McKissock.com 1-800-328-2008 As a Realtor Investor Know your product and exit strategy An investor won’t buy a $3 million dollar luxury home as it won’t provide positive cash flow if leased. You can’t sell a $73,000 fixer upper to an end user as there is no bank www.Mckissock.com financing All opportunities you are reviewing are calculated by L.T.V. (loan to value). If you find a short sale property that is worth $200,000 your goal is to purchase at 50% L.T.V. or half the value. If the lender’s loan is 200K, it will have to forgive half it’s balance. www.McKissock.com 1-800-328-2008 Feedback Question 15. The seller of the property agreed to a commission of 6% to be split with the two agents in the transaction. When the transaction closed the Buyers agent only received 2% commission. Who should she seek damages from? A Her Broker www.Mckissock.com B Seller C The bank D Sellers agent www.McKissock.com 1-800-328-2008 Feedback Question 15. The seller of the property agreed to a commission of 6% to be split with the two agents in the transaction. When the transaction closed the Buyers agent only received 2% commission. Who should she seek damages from? A Her Broker www.Mckissock.com B Seller C The bank D Sellers agent www.McKissock.com 1-800-328-2008 As a Realtor Investor Mail Mortgage Brokers Divorces www.Mckissock.com LEAD GENERATION Lis Pendens Other Realtors Expired MLS www.McKissock.com We Buy Houses sign 1-800-328-2008 As a Realtor Investor The most common default list is called a Notice of Default List. Because the lenders have already filed a foreclosure notice – Lis Pendens- at the courthouse, this information is in public records. You could find this information by going to the courthouse. 50% feel it is a www.Mckissock.com better use of time to buy the default list from a list company. 50% feel the data is freshest if they retrieve it themselves Review properties by the price. More expensive properties usually mean more profit and less risk. There is also a Pre-N.O.D. A very large list because so many people are 30, 60, or 90 days behind on payments. They have not received a foreclosure notice yet. www.McKissock.com 1-800-328-2008 As a Realtor Investor If you have access to MLS search terms, first look where the term short sale appears. It might be under "status modifier" or it might be contained in the marketing comments. www.Mckissock.com Look for the following terms: Subject to bank approval. Pre-foreclosure Give the bank time to respond. Preapproved by bank. Notice of Default Possible auction www.McKissock.com 1-800-328-2008 As a Realtor Investor As an investor you are looking for attractive properties that families want to live in. Esp. those over leveraged with multiple mortgages. Fixer upper houses that we will www.Mckissock.com resell to an investor. Usually the homeowner must be in default a minimum of 60 days (two payments) to be able to begin the negotiations with the bank. www.McKissock.com 1-800-328-2008 As a Realtor Investor Many times you can negotiate large discounts on the second mortgage. Then bring the first mortgage out of foreclosure. Then rent the property. www.Mckissock.com NEVER lease the property back to the homeowner. Never lease back to the current owner as the court system would be extremely lenient with him www.McKissock.com 1-800-328-2008 Feedback Question 16. Generally a homeowner needs to be ________ days in arrears before negotiations with the banks can begin. A 45 B 90 C 60 D 120 www.McKissock.com www.Mckissock.com 1-800-328-2008 Feedback Question 16. Generally a homeowner needs to be ________ days in arrears before negotiations with the banks can begin. A 45 B 90 C 60 D 120 www.McKissock.com www.Mckissock.com 1-800-328-2008 As a Realtor Before you take the listing or work with Buyers its important to know why Buyers might not want to buy a Short Sale: Some of the reasons why Buyers might not want to buy a Short Sale: www.Mckissock.com Seller Paid Too Much. The home sold for $450,000 a few years ago and is now for sale at $325,000. The Buyer imagines they are getting $125,000 of equity. It usually means the current owner paid too much and there is no equity in the house www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Seller Borrowed Too Much. www.Mckissock.com Banks over lent money in on 1st, 2nd mortgages and HELOC’s over the last several years. www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Length of Time to Close. www.Mckissock.com It could take anywhere from two weeks to two months to get a response on a purchase offer from a lender. In addition, if two lenders are involved because there are two loans secured to the property, it could take longer to negotiate with the second lender. www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Lenders Can Change Conditions. www.Mckissock.com Some lenders reserve the right to renegotiate the terms of the short sale at the last minute. If the market changes, new laws pass or new information crosses the lender's desk, the lender can attempt to change the terms of the contract. Lenders generally have lawyers at their disposal, and ordinary buyers do not. www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Lenders Discount Commission. Usually only lenders who have sold loans to Fannie Mae or Freddie Mac www.Mckissock.com are paying traditional real estate commissions to real estate agents. The others usually want a discount. The agents end up doing two to three times the work of a conventional transaction – for less than usual commission. If the Seller agreed to pay your agent a certain percentage under a buyer broker agreement, you/ your Broker could be liable for the difference between what the lender will pay and what your contract stipulates, if the Buyers agent refuses to waive the difference. www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Higher Buyer Closing Costs. www.Mckissock.com Lenders rarely will pay for any extras, like a seller would be willing to do, if you/ your Buyer wants any of those extras, you will pay for them yourself. Lenders might refuse to pay for standard seller closing costs such as transfer taxes, etc. Specific inspections you will probably pay outof-pocket. www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Lose Control of Transaction. www.Mckissock.com If you need to close escrow by a specific date it will be difficult. A short sale closing process takes an indefinite amount of time. The seller's lender takes whatever time he wants. If you/ the Buyer are trying to close escrow at the sale of your current home, it might not happen. www.McKissock.com 1-800-328-2008 Poll Question 17. Barbara Ann was acting as a Realtor Investor. She knew she was getting the short sale property far below market and she planned to rent it. She had been working with the owner and they wanted to rent the home instead of moving. This would be smart move for Investor Realtor Barbara Ann as she wouldn’t have to make any repairs, clean up or have thewww.Mckissock.com property vacant. A TRUE B FALSE www.McKissock.com 1-800-328-2008 Poll Question 17. Barbara Ann was acting as a Realtor Investor. She knew she was getting the short sale property far below market and she planned to rent it. She had been working with the owner and they wanted to rent the home instead of moving. This would be smart move for Investor Realtor Barbara Ann as she wouldn’t have to make any repairs, clean up or have thewww.Mckissock.com property vacant. A TRUE B FALSE www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Little Seller Motivation. www.Mckissock.com When the seller discovers that the short sale effect on credit is close to that of a foreclosure, the seller often stops cooperating. Although sellers may qualify to buy another home in 2 years after a short sale versus 5 (with restrictions) on a foreclosure, some have no intention of ever buying another home again. www.McKissock.com 1-800-328-2008 As a Realtor Some of the reasons why Buyers might not want to buy a Short Sale: Excessive Repairs. www.Mckissock.com Your end buyer will not be able to get a lender to loan on any property when the repairs exceed 5% of the appraisal. www.McKissock.com 1-800-328-2008 As a Realtor & Investor DEALS YOU DON’T WANT The seller will not sign all the documents you present. The loan requires a short sale to create www.Mckissock.com equity and the seller/debtor wants cash Spouse involved but not willing to sign disclosure package Seller is angry or not trusting House requires many repairs and you plan to sell it to a person who wants to live in it www.McKissock.com 1-800-328-2008 Feedback Question 18. Short sales sound like a great opportunity. However many homeowners stop taking care of the house perhaps months before the foreclosure starts. If the repairs exceed the appraisal by _____ percent the bank generally won’t lend on them. A 2 www.Mckissock.com B 10 C 5 D 20 www.McKissock.com 1-800-328-2008 Feedback Question 18. Short sales sound like a great opportunity. However many homeowners stop taking care of the house perhaps months before the foreclosure starts. If the repairs exceed the appraisal by _____ percent the bank generally won’t lend on them. A 2 www.Mckissock.com B 10 C 5 D 20 www.McKissock.com 1-800-328-2008 As a Realtor & Investor DEALS YOU DON’T WANT The interior B.P.O. is complete, came in way to high, and you have no compelling reason to convince the lender to do www.Mckissock.com another one Seller is currently in Chapter 13, 7, or 11 business bankruptcy Seller demands their attorney be involved through every detail The subject property is below the median price range and you want to sell it to an end user www.McKissock.com 1-800-328-2008 As a Realtor & Investor DEALS YOU DON’T WANT Short Sale is in a townhouse or condominium www.Mckissock.com You determine there is no way to generate a 10% or greater margin The mortgage is with an undesirable lender known for time-consuming challenges www.McKissock.com 1-800-328-2008 As a Realtor & Investor SHORT SALE HOME RUNS A single family house $200,000 above your median (most common price) range www.Mckissock.com A property that needs minimal repairs that will garner a low Brokers Price Opinion A property with a mortgage that has seasoned a minimum of 12 months since it was written www.McKissock.com 1-800-328-2008 As a Realtor & Investor SHORT SALE HOME RUNS The same property with multiple mortgages and preferably a 30% second or third mortgage combination www.Mckissock.com These subordinating mortgages (seconds, thirds, etc.) are institutional and not privately held Seasoned neighborhood without new construction near or around your prospective short sale deal www.McKissock.com 1-800-328-2008 As a Realtor & Investor SHORT SALE HOME RUNS Any property that is superior to competitive listings in the eyes of a buyer, i.e. bigger lot, in law apt., bigger rooms, garage great room, views, pool, www.Mckissock.com square footage, building materials and upgrades such as crown moldings, granite, etc. A property with an appealing location Downtown, lakefront, high-rise, riverfront www.McKissock.com 1-800-328-2008 Feedback Question 19. When a Realtor Investor is considering a Great Opportunity which of the items below would NOT be a great thing. A B C A single family house $200,000 above your median (most common price) range www.Mckissock.com A property in a new neighborhood, that attracts lots of buyers A property with a mortgage that has seasoned a minimum of 12 months since it was written www.McKissock.com 1-800-328-2008 Feedback Question 19. When a Realtor Investor is considering a Great Opportunity which of the items below would NOT be a great thing. A B C A single family house $200,000 above your median (most common price) range www.Mckissock.com A property in a new neighborhood, that attracts lots of buyers A property with a mortgage that has seasoned a minimum of 12 months since it was written www.McKissock.com 1-800-328-2008 CHAPTER 3 DEALING WITH THE HOMEOWNER www.Mckissock.com As a Realtor www.McKissock.com As a Investor 1-800-328-2008 As a Realtor & Investor At the onset dealing with people in Short Sale situations is usually trouble. Many are in denial or many are just begging www.Mckissock.com for any kind of hope or lifeline they can get. Not the time for any false hope, by the time they contact you or you find them it is nearly always too late www.McKissock.com 1-800-328-2008 As a Realtor & Investor Lenders seldom modify the loan on property for the homeowner. They could offer a mortgage work out plan called a forbearance of mortgage modification. www.Mckissock.com The owner has to prove income etc.. 85% of these fail. www.McKissock.com 1-800-328-2008 As a Realtor & Investor The Owner doesn’t realize that once he stopped paying his mortgage many costs and fees were added to the past due amount. $1000’s of dollars in late fees, penalties and legal fees have www.Mckissock.com all been added to the 3 missing payments. At 3 months they seldom will find the funds to pay it back. www.McKissock.com 1-800-328-2008 Poll Question 20. Generally if a homeowner starts the short sale before 3 months he can avoid late fees, attorney fees, bank fees. A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 Poll Question 20. Generally if a homeowner starts the short sale before 3 months he can avoid late fees, attorney fees, bank fees. A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 As a Realtor At this point many owners expect some money for their house. You have to tell them it is illegal for them to receive a penny. Why should a home owner walk away with nothing? Closure www.Mckissock.com Dignity “Yes, I sold my house”, not “I lost my house to foreclosure”. Possibly a smaller loan deficiency sale. As mentioned previously; Deficiency refers to the loss or deficient amount owed that is incurred once the house goes to fore-closure and gets resold as a bank-owned www.McKissock.com 1-800-328-2008 www.Mckissock.com www.McKissock.com 1-800-328-2008 As a Realtor As previously discussed, as a Realtor attempting to get the listing you will have three choices: Take the listing – Negotiate with the bank Take the listing – The Owner negotiates with the bank Offer a list of Short Salewww.Mckissock.com experts to the Owner Some states require or expect the Listing agent to be the negotiator with the bank. With sole compensation being the commission. The Seller might also expect the Listing Agent to be the guide through the forest- With sole compensation being the commission. www.McKissock.com 1-800-328-2008 As a Realtor Another alternative would be the Listing Agent submits a list of known 3rd parties who provide usually highly skilled negotiation services for the Seller with the lender. www.Mckissock.com Occasionally the Seller will handle the Doc Package, Lender etc www.McKissock.com 1-800-328-2008 As a Realtor As previously discussed, the Listing Agent has much liability. It is imperative the agent follow State and Federal laws to the letter. Identify contingent statuswww.Mckissock.com (when it is approved by the Lender) Short Sale Addendum MLS disclaimers Many more www.McKissock.com 1-800-328-2008 As a Realtor Investor At the introduction process you will disclose to the seller that your intentions are to create a discount so you can quickly www.Mckissock.com resell the property for a profit. www.McKissock.com 1-800-328-2008 Feedback Question 21. Fannie Mae has stated that they will lend to a homeowner with in 2 years on a foreclosure situation and 7 years on a short sale situation A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 Feedback Question 21. Fannie Mae has stated that they will lend to a homeowner with in 2 years on a foreclosure situation and 7 years on a short sale situation A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 As a Realtor Inform the Owner if you can’t find a buyer to sell the property, it will probably go to foreclosure and the seller will lose the house. www.Mckissock.com Once the owner completely understands the severity of the situation you need to share the upcoming challenges. They must be willing to comply with the requests for documentation you will need. www.McKissock.com 1-800-328-2008 Many owners are despondent and don’t want to cooperate. As a Realtor Some of the paperwork will need to be signed more than once. There is a long timeline to close. At the closing you must completely www.Mckissock.com disclose the final negotiated loan balances to the homeowner. The homeowner has to sign off. If the owner moved out of state, you send the proper documentation down to a notary where he now lives and gets the homeowner to sign the documents. www.McKissock.com 1-800-328-2008 As a Realtor Investor Before you spend serious time on a short sale property perhaps a quick title search at the courthouse. In some states you can request an O & E, www.Mckissock.com which stands for Owner and Encumbrances. A formal title search will ultimately be done. www.McKissock.com 1-800-328-2008 As a Realtor Investor You must have a P&S agreement and all other docs before you do any work on the sellers behalf. You must let the seller know there is no guarantee as to the outcome. Because you make no guarantees you must have sellers sign extensive www.Mckissock.com disclosures. Your work should net the lender more than if the property were to go to foreclosure and become an REO Real Estate Owned. An REO property is now in full repossession by the lender. www.McKissock.com 1-800-328-2008 As a Realtor Investor You will have the Seller sign a Purchase and Sale Agreement naming you as the Buyer You will get a listing agreement Appropriate Short Sale Addendum www.Mckissock.com Many investors have specialized documents due to the exit strategy as well as hold harmless clauses. Your paperwork needs to be recorded on the title with the city to ensure no other investors get involved. You need to drop the price on MLS by X amount every 2 weeks. Good for you and the bank likes to see it. www.McKissock.com 1-800-328-2008 Feedback Question 22. Investor Realtor Gissele has found a short sale opportunity. She informed the seller that she was doing this make a profit. As a Realtor she was hesitant to sign a Purchase & Sale agreement naming herself as Buyer. Gisele was smart to do this because: A She wants to sell it to someone else B www.Mckissock.com She doesn’t want the bank to know she is an Investor Realtor C She doesn’t want the buyer to know she is going to make money on the house. D Investor Realtor Giselle was in error and should sign the P&S agreement www.McKissock.com 1-800-328-2008 Feedback Question 22. Investor Realtor Gissele has found a short sale opportunity. She informed the seller that she was doing this make a profit. As a Realtor she was hesitant to sign a Purchase & Sale agreement naming herself as Buyer. Gisele was smart to do this because: A She wants to sell it to someone else B www.Mckissock.com She doesn’t want the bank to know she is an Investor Realtor C She doesn’t want the buyer to know she is going to make money on the house. D Investor Realtor Giselle was in error and should sign the P&S agreement www.McKissock.com 1-800-328-2008 CHAPTER 4 THE SHORT SALE DOCUMENT PACKAGE www.Mckissock.com As a Realtor www.McKissock.com As a Investor 1-800-328-2008 As a Realtor & Investor SELLERS & BUYERS AGENT The area of negotiations is where all the profits lie. Your challenge is to get the www.Mckissock.com lender to take the least amount of money possible. As a Listing Agent your only fiduciary responsibility would be to try to decrease the deficiency www.McKissock.com 1-800-328-2008 Collecting the short sale package determine strategy Contacting the collections department Step 1 Step 3 File assignment period www.McKissock.com Step 2 Actual mitigation www.Mckissock.com Step 4 Pre-mitigation Step 5 The closing Step 6 Step 7 Fighting for equity (profit) 1-800-328-2008 As a Realtor Listing agreement Executed purchase offer www.Mckissock.com Buyer's pre-approval letter and copy of earnest money check Seller's short sale package If the package is incomplete, the short sale process will be delayed. In this event, the bank might even shred the package. www.McKissock.com 1-800-328-2008 As a Realtor THE PLAYERS Collection Department www.Mckissock.com Does not process short sales. This department provides necessary supporting documentation information, needed to close your short sale. www.McKissock.com 1-800-328-2008 Feedback Question 23. As a listing agent your fiduciary responsibility is to guide and assist the seller in all the processes necessary to execute the short sale. A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 Feedback Question 23. As a listing agent your fiduciary responsibility is to guide and assist the seller in all the processes necessary to execute the short sale. A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 As a Realtor THE PLAYERS Loss Mitigation Department www.Mckissock.com It’s the Loss Mitigators in this department that actually process the file. You will be speaking to upper level management such as team leaders, supervisors, and managers as you encounter impasse areas during your short sale. www.McKissock.com 1-800-328-2008 As a Realtor THE PLAYERS Delegated Authority www.Mckissock.com All lenders have a predetermined amount they will accept as a discount. It’s always a percentage of the broker’s price opinion and generally ranges from 60 - 92%. So because FHA has a delegated authority of 82% of a B.P.O. on a deal that has a $100,000 B.P.O., for example, they would accept $82,000 as a short sale even if the existing loan balance was 100% of the B.P.O. or $100,000! www.McKissock.com 1-800-328-2008 As a Realtor It is ill-prudent to submit a short sale package and start making offers. In today’s world of Loss Mitigation, it takes a minimum of 30 days for the package you submit to even be assigned to a mitigator. Occasionally www.Mckissock.com there are exceptions. Some banks may have a mitigator assigned in as little as five business days, not 30. If they have a B.P.O. and your offer is too low the mitigator will turn down your offer. Usually the mitigator doesn’t even bother to tell you your offer was declined. www.McKissock.com 1-800-328-2008 As a Realtor Investor DOCUMENT PACKAGE The lender needs the Debtor’s financials to determine if they are www.Mckissock.com eligible for a short sale. Another component of the short sale package is the supporting documentation that explains why the lender should consider this house as a bank asset that has lost significant value www.McKissock.com 1-800-328-2008 Feedback Question 24. Realtor Investor Jim turned in a short sale package to the Loss Mit department. Jim was confident the offer and package was all in order. To his surprise the bank had done a BPO the previous week. Should Jim have expected this? A YES www.Mckissock.com B NO www.McKissock.com 1-800-328-2008 Feedback Question 24. Realtor Investor Jim turned in a short sale package to the Loss Mit department. Jim was confident the offer and package was all in order. To his surprise the bank had done a BPO the previous week. Should Jim have expected this? A YES www.Mckissock.com B NO www.McKissock.com 1-800-328-2008 As a Realtor Investor THE FILE ASSIGNMENT PERIOD. The file assignment period is the number of days it takes for the Document package to be assigned to a loss mitigator. The amount of www.Mckissock.com time varies. It can be 3 days, or it can be 30 to 60 days. You will need this time as this is when the property is placed on MLS, and reducing the price every 2 weeks to find a buyer. Nearly always the file must be 60 to 90 days in arrears, and moved from Active Collections to Loss Mitigation before it is even considered for a short sale. www.McKissock.com 1-800-328-2008 As a Realtor Investor THE FILE ASSIGNMENT PERIOD. The file assignment period is the number of days it takes for the Document package to be assigned to a loss mitigator. The amount of www.Mckissock.com time varies. It can be 3 days, or it can be 30 to 60 days. You will need this time as this is when the property is placed on MLS, and reducing the price every 2 weeks to find a buyer. Nearly always the file must be 60 to 90 days in arrears, and moved from Active Collections to Loss Mitigation before it is even considered for a short sale. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Make a Short Sale Offer With a Strong Earnest Money Deposit Many first-time home buyerswww.Mckissock.com put down an earnest money deposit of $1,000, but an amount between 1% and 3% of the sales price shows serious commitment. The minimum down payment for FHA loans is 3.5% of the purchase price, and the earnest money is part of that down payment. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED The Bank needs a Reasonable Amount of Time for Short Sale Approval www.Mckissock.com Although it is possible to receive short sale approval within 3 to 4 weeks, many banks take at least 6 to 8 weeks. It could take longer depending on your margin, the BPO or the lender. You or your buyer needs to agree to wait 120 days. And they need to act immediately should approval happen earlier. NOTE: If you ask for approval in 30 days, your offer could get tossed out the window. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Let the Seller/ Lender Know You Will Wait For Short Sale Approval www.Mckissock.com The biggest problem short sale listing agents face is the fact that buyers will walk away. Some buyers write offers on dozens of homes, hoping to take the first offer that is accepted. those homes. No short sale listing agent wants to work on a transaction for several months only to realize the buyer whose offer was accepted has disappeared. www.McKissock.com 1-800-328-2008 Poll Question 25. The Minimum amount down for an FHA loan is: A 5% B 3% C 7% D 3.5% www.McKissock.com www.Mckissock.com 1-800-328-2008 Poll Question 25. The Minimum amount down for an FHA loan is: A 5% B 3% C 7% D 3.5% www.McKissock.com www.Mckissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Agree to Pay a Seller Fee Another mistake some buyers make is to ask the seller to pay fees that arewww.Mckissock.com usually paid for by the buyer. If there are certain closing costs that the seller typically pays, the bank will most likely pay those fees. However, if you agree to pay part of those fees, even if the bank receives an offer identical to yours, your offer will probably be accepted. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Provide a Persuasive Preapproval Letter A lender pre-approval letter, which specifies www.Mckissock.com the buyer is actually pre-approved -- run through underwriting. Is a very solid statement and one few buyers submit. A serious concern on the short sale seller's mind is whether the buyer is financially capable of closing the transaction. When you make a short sale offer, you want those documents that show strength. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Shorten Your Inspection Period In California, standard purchase contracts give the buyer 17 days to conductwww.Mckissock.com inspections. In Connecticut it is 14. That means the home is off the market while the buyer does due diligence, and the sale is not considered solid until that contingency period has been removed. If you can do your home inspections within 3to 17 days, your offer will hold be much more valuable. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Agree to Put Your Deposit Into a Trust Account www.Mckissock.com Depending on the state some real estate contracts call for the earnest money deposit to be placed into a trust, escrow etc. upon short sale approval. Sellers like buyers committed to the transaction. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Check the Comparable Sales Some short sale listings are deliberately www.Mckissock.com priced under priced to create action. Seldom does the home sell at that price. Many banks will approve a short sale that is priced between 5% and 10% under market. www.McKissock.com 1-800-328-2008 Feedback Question 26. When presenting an offer to the bank specifying a time or date to close must be done to ensure the lender takes action on your offer. A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 Feedback Question 26. When presenting an offer to the bank specifying a time or date to close must be done to ensure the lender takes action on your offer. A TRUE B FALSE www.McKissock.com www.Mckissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Talk To the Short Sale Listing Agent Before Making an Offer Your Buyers offer may need www.Mckissock.com to be priced higher than list price if the agent has already received a number of offers. If the seller has already accepted an offer, you may be wasting your time trying to buy that home. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller SECRETS TO GET YOUR OFFER ACCEPTED Don't Ask the Seller to Pay for Special Reports or Make Repairs www.Mckissock.com Any inspection you ask the seller to pay for will lower the bank's bottom line on the HUD-1. The lowest offers are rarely accepted. The time to negotiate major repairs is not at offer inception. Do not ask for seller-paid pest inspections, roof certifications or home warranty plans. Buy the home in "as is" condition. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller Getting a Seller to Accept More Than One Short Sale Offer You have nothing to lose by submitting an offer on an active short sale www.Mckissock.com contingent listing. That's because some buyers write many offers on other homes, even though that practice is frowned upon by lawyers and may result in legal ramifications. When another offer gets accepted for these types of buyers, the buyers then withdraw their outstanding contingent offers. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller Getting a Seller to Accept More Than One Short Sale Offer If the first buyer walks away, the agent will then generally notify the buyer's agent whose buyer is in back-up position. But it doesn't mean a buyer in www.Mckissock.com this position will necessarily be any closer to short sale approval. Many banks make sellers start over when a new buyer enters the process. A seller is not obligated to accept a back-up offer for a short sale. If the seller is unwilling to accept a back-up offer, you cannot force the seller to sign yours. www.McKissock.com 1-800-328-2008 Feedback Question 27. Even though the listing agent set a low price for the short sale property it is best to check the _____________ to ensure you are going to make an offer the lender will probably accept. A Lis Pendens B Comp Sales C MLS Price D None of the above www.McKissock.com www.Mckissock.com 1-800-328-2008 Feedback Question 27. Even though the listing agent set a low price for the short sale property it is best to check the _____________ to ensure you are going to make an offer the lender will probably accept. A Lis Pendens B Comp Sales C MLS Price D None of the above www.McKissock.com www.Mckissock.com 1-800-328-2008 As a Realtor To combat multiple offers the listing agent needs to explain to the first buyer's agent that a higher offer will be sent to the bank. The listing agent should ask the buyers agentwww.Mckissock.com if the buyer wants earnest money etc to be held in escrow for another 30 to 90 days while the bank contemplates accepting a higher offer. Usually most first-place buyers who have submitted a lower offer will retract their offer when they realize their offer will most likely be passed by. www.McKissock.com 1-800-328-2008 As a Realtor Be careful when submitting a short sale purchase offer above market value. The bank might accept the offer but chances are the new lenders appraiser www.Mckissock.com will come in with a lower appraisal. In that event, the listing agent will need to renegotiate with the short sale bank, and the short sale bank might not be willing to lower the price. Your buyer could wait a long time to discover the buyers loan was declined because of a low appraisal. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller Can a Seller Send a Second Short Sale Offer to the Bank? Some short sale listing agents advise their sellers to send only one short sale offer at a time to the bank. But what happens if the seller receives a higher offer, like the offer you propose to submit? www.Mckissock.com To answer this, you must read the purchase contract, specifically the short sale addendum. In California, the Short Sale addendum allows the seller to continue marketing the property and to send competing offers to the bank. The seller probably cannot force the first buyer to cancel the contract, there are ways to put pressure on the buyer to cancel. www.McKissock.com 1-800-328-2008 Feedback Question 28. Chad & Jeremy want to purchase a short sale house. Buyer’s agent Dino finds out there is already an offer submitted should buyers agent Dino submit a 2nd offer or wait until the property is available? A YES www.Mckissock.com B NO www.McKissock.com 1-800-328-2008 Feedback Question 28. Chad & Jeremy want to purchase a short sale house. Buyer’s agent Dino finds out there is already an offer submitted should buyers agent Dino submit a 2nd offer or wait until the property is available? A YES www.Mckissock.com B NO www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller Can a Seller Send a Second Short Sale Offer to the Bank? After the listing agent explains to the first buyer's agent that a higher offer will be sent to the bank, generally the listing agent will ask the buyer's www.Mckissock.com agent if the buyer wants to sit in escrow for another 30 to 90 days while the bank contemplates accepting a higher offer. In that situation, most firstplace buyers who have submitted a lower offer will bow out when they realize their offer will most likely be passed by. www.McKissock.com 1-800-328-2008 As a Realtor for Buyer / Seller Can a Seller Send a Second Short Sale Offer to the Bank? Be careful when submitting a short sale purchase offer above market value. If your offer is too high, evenwww.Mckissock.com if the bank accepts the short sale, odds are your bank's appraiser will come in with a lower appraisal. In that event, the listing agent will need to renegotiate with the short sale bank, and the short sale bank might not be willing to lower the price. It's risky to offer too much, and you could wait weeks or months only to discover your loan was denied due to a low appraisal. www.McKissock.com 1-800-328-2008 CHAPTER 6 LENDER NEGOTIATIONS INCLUDING BPO www.Mckissock.com As a Realtor www.McKissock.com As a Investor 1-800-328-2008 Following is a typical short sale process at the bank: 1 Bank acknowledges receipt of the file. This can take 10 days to a month. www.McKissock.com 2 3 4 5 6 7 8 www.Mckissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 A negotiator is assigned. This can take 30 to 60 days. www.Mckissock.com www.McKissock.com 1-800-328-2008 Feedback Question 29. When making your short sale offer making a high offer price to get accepted is also bad because: A Higher deficiency for the seller B Banks don’t like to see BPO agents be www.Mckissock.com exact on a short sale C The comparable sales prices will change in 60-90 days D Chances are the appraisal won’t come in as high as the offer. www.McKissock.com 1-800-328-2008 Feedback Question 29. When making your short sale offer making a high offer price to get accepted is also bad because: A Higher deficiency for the seller B Banks don’t like to see BPO agents be www.Mckissock.com exact on a short sale C The comparable sales prices will change in 60-90 days D Chances are the appraisal won’t come in as high as the offer. www.McKissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 A BPO is ordered. The bank could refuse to share the results of www.Mckissock.com the BPO. www.McKissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 A second negotiator may be assigned. Possible another 30 days. www.Mckissock.com www.McKissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 The file is sent for review or to the PSA. Possible 2 weeks to 30 www.Mckissock.com days. www.McKissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 The bank may then request that all parties sign an Arm'sLength www.Mckissock.com Affidavit. www.McKissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 The bank issues a short sale approval letter. www.Mckissock.com www.McKissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 The buyer cancels. www.Mckissock.com www.McKissock.com 1-800-328-2008 Following is a typical short sale process at the bank: 1 2 3 4 5 6 7 8 The buyer cancels. It is quite common for yourwww.Mckissock.com buyer to walk out of the deal. Buyers get angry and annoyed because the short sale process can be so lengthy. They might cancel and not even call you Some short sales get approval in 6 to 8 weeks. Others take 90 to 120 days, on average. NOTE: Occasionally the listing agent has some idea of when approval will come when the file is sent for final review. At that point, buyers may want to start the loan process so they've got a head start in case the bank gives 2 weeks to close. www.McKissock.com 1-800-328-2008 A typical short sale package will request these items. Be prepared to gather and submit: 1. Financial Statement - to qualify the debtor for the short sale 2. Hardship Letter - the reason for default by the debtor Get the actual form from the lender requiring it. 3. Two Recent Pay Stubs - Income verification 4. Checking Statement - Verification of spending www.Mckissock.com 5. Deposit Receipts - Verify money deposited 6. Bank Statements - Complete banking snapshot 7. Last two year’s tax returns - Total income verification These items expire every 30 days, and if they have, you’ll find your package getting ignored for non-compliance. If the debtor is not working and can’t produce pay stubs have them write a letter explaining this. The letter must be signed by the debtor. www.McKissock.com 1-800-328-2008 Again, you do not have to purchase a short sale with cash. You can finance the deal but your financing has to be pre-approved. This means that you have to get a pre-approval letter from the bank. A pre-approval letter is not a pre-qualification letter. A pre-approval letter is a letter from the underwriter that states that you are approved for a mortgage up to a certain amount. They have reviewed the purchase and sale agreement and the only contingency is clear title. They are ready to give you the money as you have submitted all supporting www.Mckissock.com documents (proof of employment, income tax statements, financial information) to the lender. The lender is ready to close on the property. Usually, a lender will only loan you 80 percent of the amount of the purchase. You should also present the short sale lender with proof of your down payment. This should be a bank statement reflecting the amount of the down payment in your bank account. www.McKissock.com 1-800-328-2008 Your financial information In order to make the short sale fly with the lender, you are going to have to show www.Mckissock.com proof that you are able to close on the property in 30 days. This proof entails either bank statements that reflect enough cash in the account or a preapproval letter from a _________? www.McKissock.com 1-800-328-2008 The actual loss mitigation process can take only a few days. The snags and hold ups happen while waiting on the results of the new B.P.O. At this point, you will probably have a new B.P.O. that will support your updated offer. Your updated offer will be about 20% lower than the retail price for your end buyer. This is your purchase price, as you are the buyer, with a real offer to actually purchase the house. www.Mckissock.com It is NOT a straw buyer, or fake contract with the Seller. It is your plan to close the purchase of the property, however, our offer to the homeowner is contingent on the acceptable short sale we receive from the bank. This way if the market doesn’t bear a buyer we are not caught in the middle being forced to close. www.McKissock.com 1-800-328-2008