Short Sale or Loan Modification
It’s fairly common knowledge that one of the problems plaguing short sales is the buyers who walk away before the approval letter is obtained. Who can blame them? They put in their offer in June, and it is already October and still they do not have an approval. Blame it on the banks, blame it on the buyer’s agent, or blame it on the listing agent. It does not matter who is at fault; the buyer is now irritated and has moved on—no doubt soured on buying real estate, in general.
Another problem that plagues the short sale market is the sellers who decide at the eleventh hour that they want to consider a loan modification. Let’s get real here (please pardon my candor). Most loan modifications are not successful; there are plenty of statistics to back that up. Those individuals who successfully complete the modification process are generally not very pleased with what they have been offered. They grudgingly accept, and several months later they are delinquent again.
Many times, the seller, the buyer and the agents are knee deep in the short sale negotiation process and the sellers get a phone call (either from the lender or from some extremely gifted salesperson) and the sellers are suddenly sold on the loan modification. Look in the mirror and look at your finances, Mr. and Mrs. Seller. If you have lost your job and do not have much income to speak of, it is unlikely that you will be approved for a loan modification. And, if anyone guarantees they can obtain a modification for you, do not pay them—pay me, as I have a lovely bridge in Brooklyn that I would be happy to sell you instead.
If you do not want your short sale deal to go kaput, then you need to sit with your sellers and discuss loan modification. You need to be absolutely certain that they are ready to move forward with the short sale.
Also, it’s a good idea to review the hard facts about loan modification scams. These loan modification scams are all around us. Here are a few things that you should share with the sellers.
Sellers need to stay away from all of the following:
- any company/person asking for a fee in advance to work with your lender to modify, refinance or reinstate your mortgage
- a company/person who guarantees they can stop a foreclosure or get your loan modified
- a company/person who advises a seller to stop paying the mortgage company and pay them instead
- a company that pressures you to sign over the deed to the home or sign any paperwork that hasn’t been read or is not understood
- a company that claims to offer “government-approved” or “official government” loan modifications
- a company/person who asks for personal financial information online or over the phone
Remind sellers that they can call their lender directly if they want to learn more about the loan modification. The bottom line is this: short sales are long enough transactions already. So, if you are taking a short sale listing, you will want to be absolutely certain that the seller is really ready to sell. The clock is ticking and you probably do not want the deal to fall through at the last minute.