Coaching
Is there a foreclosure date in the works for one of your listings?
How to check whether a foreclosure is in the works
Last week I wrote a blog post about the time frame for short sale approvals being tough to predict. In fact, I said that not even Nostradamus could make that prediction. That being said, there is one component of a distressed property transaction that can be predicted with absolute certainty. And… that’s the date of the Trustee’s Sale (a.k.a. foreclosure sale).*
In the state of California, when a Notice of Trustee’s Sale is recorded, this usually means that the Trustee’s Sale will occur in 21 days. The specific sale date is mentioned in the Notice. That date can be seen as an absolute.
When you are negotiating or processing a short sale, it is important to be mindful of the date of the Trustee’s Sale. Sometimes the mortgage lender may be willing to postpone this date in order to review (or continue to review) the property for short sale approval. Whatever the case, if you are not keeping track of the date, then the subject property might be a subject REO listing for one of your colleagues.
There are several ways to keep track of those foreclosure dates.
First, when you take a short sale listing, ask the seller how many mortgage payments s/he has missed. If the answer is ‘none’, ask him or her to alert you if and when s/he begins to miss payments. When sellers begin to miss payments, things start to happen.
Second, order a property profile or preliminary title report from a local title company. This report will include a list or any liens recorded against the property. A review of this document will let you know whether the foreclosure process has begun. In short sales, you are working against the clock (which stops on the foreclosure sale date), and it’s best to know when the clock may stop ticking!
Another way to gauge the foreclosure sale time frame is to ask the mortgage lender. Give the mortgage lender a call and ask whether foreclosure proceedings have begun and whether a sale date has been scheduled for the property. Note that frequently when you contact your mortgage lender you may be calling another state (or country). So, while you may fully understand the foreclosure laws and lingo for your state, the individual on the other end of the phone may be using different vocabulary to discuss the very same thing.
I once contacted a lender and asked whether a Notice of Default had been recorded against a specific property. I realized after a little while that the woman on the other end of the phone had no idea what I was talking about BUT she did tell me that foreclosure proceedings had begun on a specific date (which was akin to the very same thing).
Lastly, make sure to keep all of the information you collect in one place (your communication log)—including the names of the individuals that you speak with, any emails that they may send, and all of the details they can provide. Recently, the postponement of a Trustee’s Sale for one of my files was denied by Fannie Mae. But, because I kept extremely good records, I was able to use a copy of a Bank of America employee’s single sentence email to convince Bank of America and Fannie Mae to postpone the sale—15 minutes before the sale was set to occur! It took time and energy, but I was pleased to be able to get the job done.
Keeping accurate records and familiarizing yourself with local foreclosure laws and time frames will really help you to be more successful in your short sale negotiations.
*Please note that foreclosure laws differ from state to state. If you are unfamiliar with the foreclosure laws and time frames in your state, consult your local Realtor® Board or an attorney. And… there is always Google.
Coaching
Disputing a property’s value in a short sale: turn a no into a go
During a short sale, there may be various obstacles, with misaligned property values ranking near the top, but it doesn’t have to be a dealbreaker!
It’s about getting your way
Were you on the debate team in high school? Were you really effective at convincing your parent or guardian to let you do things that you shouldn’t have been doing? How are your objection-handling skills? Can you flip a no into a go?
When working on short sales, there is one aspect of the process that may require those excellent negotiation or debate skills: disputing the property value. In a short sale, the short sale lender sends an appraiser or broker to the property and this individual conducts a Broker Price Opinion or an appraisal, using special forms provided by the short sale lender.
After this individual completes the Broker Price Opinion or the appraisal, he or she will return it to the short sale lender. Shortly thereafter, the short sale lender will be ready to talk about the purchase price. Will the lender accept the offer on the table or is the lender looking for more? If the lender is seeking an offer for a lot more than the one on the table, mentally prepare for the fact that you will need to conduct a value dispute.
Value Dispute Process
While each of the different short sale lenders (including Fannie Mae) has their own policies and procedures for value dispute, all these procedures have some things in common. Follow the steps below in order to conduct an effective value dispute.
- Inquire about forms. Ask your short sale lender if there are specific forms that you need to complete in order to conduct a value dispute. Obtain those forms if necessary.
- Gather information. Your goal is to convince the lender to accept the buyer’s offer, so you need to demonstrate that your offer is in line with the value of the property. Collect data that proves this point, such as reports from the MLS, Trulia, Zillow, or your local title company.
- Take photos. If there are parts of the property that are substandard and possibly were not revealed to the lender by the individual conducting the BPO, take photos of those items. Perhaps the kitchen has no flooring, or there is a 40-year old roof. Take photos to demonstrate these defects.
- Obtain bids. For any defects on the property, obtain a minimum of two bids from licensed contractors. For example, obtain two bids from roofers or structural engineers if necessary
- Write a report. Think back to high school English class if necessary. Write a short essay that references your information, photos, and bids, and explains how these items support your buyer’s value. This is not something that you whip up in five minutes. Spend time preparing a compelling appeal.
It is entirely possible that some lenders will not be particularly open-minded when it comes to valuation dispute. However, more times than not, an effective value dispute leads to short sale approval.
Coaching
Short sale standoffs: how to avoid getting hit
The short sale process can feel a lot like a wild west standoff, but there are ways to come out victorious, so let’s talk about those methods:
What is a short sale standoff?
If you are a short sale listing agent, a short sale processor, or a short sale negotiator then you probably already know about the short sale standoff. That’s when you are processing a short sale with more than one lien holder and neither will agree to the terms offered by the other. Or… better yet, each one will not move any further in the short sale process until they see the short sale approval letter from the other lien holder.
Scenario #1 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they will proceed with the short sale, and they will offer Bank 2 a certain amount to release their lien. You call Bank 2 and tell them the good news. Unfortunately, the folks at Bank 2 want more money. If Bank 1 and Bank 2 do not agree, then you are in a standoff.
Scenario #2 – You are processing a short sale with two different mortgage-servicing companies. Bank 1 employees tell you that they cannot generate your approval letter until you present them with the approval letter from Bank 2. Bank 2 employees tell you the exact same thing. Clearly, in this situation, you are in a standoff.
How to Avoid the Standoff
If you are in the middle of a standoff, then you are likely very frustrated. You’ve gotten pretty far in the short sale process and you are likely receiving lots of pressure from all of the parties to the transaction. And, the lenders are not helping much by creating the standoff.
Here are some ideas for how to get out of the situation:
- Go back to the first lien holder and ask them if they are willing to give the second lien holder more money.
- Go to the second lien holder and tell them that the first lien holder has insisted on a maximum amount and see if they will budge.
- If no one will budge, find out why. Is this a Fannie Mae or Freddie Mac loan? If so, they have a maximum that they allow the second. And, if you alert the second of that information, they may become more compliant.
- Worst case: someone will have to pay the difference. Depending on the laws in your state, it could be the buyer, the seller, or the agents (yuck). No matter what, make sure that this contribution is disclosed to all parties and appears on the short sale settlement statement at closing.
- In Scenario #2, someone’s got to give in. Try explaining to both sides where you are and see if one will agree to generate their approval letter. If not, follow the tips provided in this Agent Genius article and take your complaint to the streets.
One thing about short sales is that the problems that arise can be difficult to resolve merely because of the number of parties involved—and all from remote locations. Imagine how much easier this would be if all parties sat at the same table and broke bread? If we all sat at the same table, then we wouldn’t need armor in order to avoid the flying bullets from the short sale standoff.
Coaching
Short sale approval letters don’t arrive in the blink of an eye
Short sale approval letters may look like they’ve been obtained simply by experts, but it takes time and doesn’t just happen with luck.
Short sale approval: getting prepared, making it happen
People always ask me how it is that I obtain short sale approval letters with such ease. The truth is, that while I have more short sale processing and negotiating experience than most agents and brokers, I don’t just blink my eyes like Jeannie and make those short sale approval letters appear. I often sweat it, just like everyone else.
Despite the fact that I do not have magical powers, I do have something else on my side—education. One of the most important things than can lead to short sale success for any and all agents is education.
Experience dictates that agents that learn about the short sale process
have increased short sale closings.
Short sale education opportunities abound
There are many ways to become educated about the short sale process and make getting short sale approval letters look easy to obtain. These include:
- Classes at your local board of Realtors®
- Free short sale webinars and workshops
- The short sale or foreclosure specialist designations
As the distressed property arena grows and changes, it is important to always stay abreast of policy changes that may impact how you do your job and how you process any short sale that lands on your plate.
The most important thing to do is to read, read, read. Follow short sale specialists and those who blog about short sales on AGBeat, Google+, facebook, and twitter. Set up a Google Alert for the term ‘short sale’ and you will receive Google’s top short sale picks daily in your email inbox. Visit mortgagor websites to read up on their specific policies and procedures.
Don’t take on too much
And, when you get a call from a prospective short sale seller, make sure that you don’t bit off more than you can chew. Agents in most of America right now are clamoring for listings since we are in the midst of a listing shortage. But, if you are going to take on a short sale, be sure that it is a deal that you can close. And, if you have your doubts, why not partner up with a local agent that can mentor your and assist you in getting the job done? After all, half a commission check is better than none!
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Mike
July 20, 2010 at 5:24 pm
The Washington Post has a good online tool to track the sale date of area foreclosure sales. One thing to keep in mind is that MANY will be postponed. Twice I have gone to the actual sale at the Corthouse, about 4 months ago 43 properties were to be on the block, 5 made it to the sale. The previous time, maybe a year ago, 15 out of 33 made it to the sale.