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The Short Sale Negotiator

September 14, 2010 By Leave a Comment
House heavy

Nothing like a good crisis to create a new opportunity. In the last couple of years the real estate industry has created may new cottage industries thanks to the increasing number of distressed properties and declining home values. Some legit, some not so on the up and up. Just recently we saw the invention of the loan modification specialists. Then came the the forensic loan audit.

House heavy

A Short Sale is an alternative to Foreclosure

A new set of guidelines and regulations were created to deal with these individuals and companies which were charging consumers huge fees in advance. When the venue was changed from pay in advance to pay for performance we haven’t heard too much of them anymore. Their business model was dependent upon advance fees. Pay for performance has a way of putting the kibosh on it and weeding out the non-producers.

Enter the Short Sale Negotiator

Maybe a more appropriate title would be “Son of Loan Modification” I mention this only in the natural course of events since distressed properties and consumers intent on loan mods have now come to realize that a short sale may become the best and only option. Especially when you have neglected to make your house payments for 18 consecutive months.

Actually to link short sale negotiators and loan modifiers together does a disservice to the short sale negotiators who do run legitimate businesses. These individuals and companies only get paid when the transaction closes. They do provide a service which does assist the listing agent in the negotiations with the lender. They are brought into the transaction by the listing agent for numerous reasons. The agent may not understand the complexities of a short sale, may think too much time and follow up is involved, or has failed to become certified in dealing with distressed properties. For whatever reason, they prefer not to get involved. Actually, I don’t have a problem with that at all. I’m sure some of these third party companies are very good at what they do.

The issue I have with this is that a select few of these listing agents expect the buyers agent to participate in the cost of compensating these “third party” providers.

It bothers me that some agents try to pass themselves off as being knowledgeable about how to transact a short sale. RE/MAX has taken the lead and has more qualified agents that deal with distressed properties than other companies. We have put together a special short sale website to assist homeowners with questions and have also spent the money to receive the proper training and education credentials required to specialize in this industry.

I think the worst rule in golf is when a player hits his ball in the middle of the fairway only to find it has come to rest in a divot, and from there it must be played. The player before was not penalized. He was in the middle of the fairway and was rewarded for his effort. The player that followed was penalized for his misfortune. By thinking I need to split the cost of your third party assistant in essence your asking me to play form your divot.

You want to use a short sale negotiator? Fine, go ahead. Just don’t ask the agent on the other side of the transaction to subsidize your side of the business. This is a decision you made. Pay for it yourself!

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Proposed Bill Could Ease the Burden of California Short Sellers

May 24, 2010 By Leave a Comment

Behind on your mortgage and receiving phone calls from your lender along with certified mail? Your mailbox may be inundated with offers to buy, offers to sell, offers to refinance, offers to wipe away some of your mortgage balance. You’re probably to the point of opening your mail over the trash can and possibly so confused that you are pursuing one possible outcome. That being “nothing“.

If you have been reading this blog or other real estate publications or just the newspaper (does anyone read the newspaper anymore?) you probably are aware that short sales are being marketed as a viable alternative to a foreclosure.

If a short sale is truly a panacea for homeowners in distress (think of a woodpile) then as with most woodpiles, things may not be as cut and dried as they seem. For instance, there may be snakes in the woodpile. Some homeowners are finding out there may be a lot of snakes in the woodpile which are taking shape in the form of taxes. Like most people, you are probably afraid of snakes.

In California when you purchase your home, you have what is known as a purchase money mortgage. Sounds simple; its the original loan you receive to obtain your residence and it affords you a protection known as an anti-deficiency, meaning the homeowners liability on the mortgage is limited to the property itself. As the video explains, once you refinance your property you may lose the protections you are entitled to under a purchase money mortgage. The California Association of Realtors is calling for passage of Senate Bill 1178. If passed this bill would afford additional protections to homeowners who have refinanced. Rather than summarize the proposed legislation, watch this short video. It provides a great explanation.

Full Disclosure?

When most people used a Home Equity loan, my guess is they understood the home became the collateral. Don’t pay and you can lose your house. You were provided with a 3 day right of rescission to think about it. My question is how many people understood the foreclosure ramifications when they chose to refinance their home? Was this a conversation you had with your lender?

The issue here is how to avoid your exposure to the snakes. The answer is to seek the guidance of the appropriate professional be it legal or tax.

For more information refer to the Mortgage Forgiveness and Debt Relief Act.

Filed Under: Foreclosure Tagged With: ,

Foreclosure, the New Economic Stimulus

March 25, 2010 By 1 Comment
The number of foreclosures continue to grow

I was reviewing some of the 675 Pasadena properties that are in some stage of the foreclosure process today. Some of the recent trends I have noticed indicate many more of the properties have passed the “pre-foreclosure” stage and have now entered the “auction” stage. Also many of the listings that show an upcoming auction have been postponed due to the following reason …”bankruptcy”.

After looking at all of this information the only thing that seems certain at this point is uncertainty.

The number of foreclosures continue to grow

The number of foreclosures continue to grow


There does not seem to be any logical process of how this situation is being handled. I have talked to homeowners who haven’t made a house payment in 7 months, but still have not received a ‘Notice of Default”. But what was really amazing was that I took a sample of about 30 properties in various zip codes throughout Pasadena that were listed with a firm auction date of about 30 days or less. Wouldn’t you think a foreclosure would be the last thing a homeowner would want? We have been hearing a lot of information about the “short sale” process and how a homeowner can avoid the devastating consequences of foreclosure and help preserve their credit score by selling their home for less than the balance owed with the banks approval.

However of these 30 properties, the issue I found most amazing is only 1 was listed for sale. What this tells me is if your home is in foreclosure and you have an auction date within 15 days you’re not too worried that it will be sold on the courthouse steps in Norwalk anytime soon. We keep hearing about a shadow inventory which refers to the banks holding onto these repossessed homes and have yet to release them for sale. We also keep hearing that this issue of foreclosures is not going to go away any time soon, and mounting foreclosures will be with us for the foreseeable future.

I have been seeing a few homes move from “auction” to “bank owned”, which to me seems puzzling. Why do some homes progress through the process while others do not? Could it be that a “non owner occupied” or investment property is moving through the system much faster than a home that is a “primary residence”. Investment properties are not subject to the new bureaucratic programs such as HAFA and HAMP.

Risk vs Reward

Apparently homeowners are not under any pressure to vacate the premises. Why go somewhere else where you would be expected to pay rent? If you can continue to live in your home and not make a payment for 12 to 18 months has this become the new defacto economic stimulus? As more homeowners realize there is no inherent risk of being evicted, has neglecting house payment’s become financial salvation?

A $500,000 mortgage at 6% is about $3000/month. Not making that monthly payment for 12 months is a $36,000 savings and assuming the selling price of the house was $500k you can throw in another $7500 in property taxes. When was the last time you added $43,500 in discretionary income to your bottom line? As Washington ponders the next unsuccessful program for homeowners in distress, wouldn’t it be much simpler to provide a restructuring of a 4% mortgage and then if a homeowner falls behind again the repo man cometh. It’s difficult to understand how we can have a selective housing/foreclosure program subject to the shortest straw.

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Bureaucracy Could be the Answer to Foreclosure

February 23, 2010 By Leave a Comment
foreclosure home

There seems to be no doubt that active government intervention may be forestalling the free market system in the housing market. Need a refresher, the $8000 first time homebuyer tax credit, the federal reserve buying mortgage backed securities, 90 day moratoriums on the foreclosure process, beginning to get the message? But wait, there’s more, Making Homes Affordable, extend and expand the homebuyer tax credit, loan modifications, Home Affordable Foreclosure Alternatives.foreclosure home

Pro or Con?

There seems to be agreement regarding the positive impact of the programs designed to assist and incentivise homebuyers. A stimulus if you will. Where consternation does seem to exist is the benefit being received by homeowner’s who are underwater on their home. I’m hesitant to use foreclosure because a “Notice of Default’ may not yet be filed, but there may be little doubt it will soon be on the way.

Numerous articles have appeared about the lack of success of loan modifications. Many of the qualifications required to successfully achieve a modification or the almost unheard of principal reduction, required financial verification that distressed homeowners simply cannot provide. Anecdotal information also suggests that financial institutions are being lenient with homeowner’s (principal residence) who are not making their house payment. Evidence indicates auction dates are being postponed to allow property owner’s every opportunity to meet their obligation. Investors on the other hand who are behind on payments are not enjoying the same benefits.

The Feds Step In

A new program being proposed would give homeowners more time to qualify for federal programs designed to avoid foreclosure. In other words after your application for a modification has been denied you would now have 30 days to respond and appeal. The bottom line is the lender could not proceed with a foreclosure. More T I M E for the property owner.

If lenders will now be required to provide written certification as to why an applicant was denied a modification, look for more information on this subject in the future. Someone (government bureaucrat) will develop written guidelines as to who and what qualifies. I think lenders will be demanding more guidance from the federal government because the last thing they want to do is have their approval or denial appear subjective.

Apparently the most successful program designed for homeowner’s in distress isn’t reduced monthly payments, but increased time. Twelve or more months of missed house payments can go a long way towards financial security.

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Lessons From The California Gold Rush

January 14, 2010 By 1 Comment
California Gold Rush

Back in 1849 when gold was discovered in California, the news spread quicker than fire in the Angeles forest. People from all over the country were packed and headed to California in search of finding the fortune that had alluded them for so long. In 1849, I don’t think we had Facebook or Twitter and social networking was a bar fight at the saloon. California Gold Rush

Could people in 1849 receive more reliable information than they do today, 160 years later? Was a text message delivered by carrier pigeon, a better source of communication than the same message delivered over the Verizon network?

The point attempting to be made is in this present day, information age, technology at your fingertips society; how can so many myths and misconceptions about short sales and foreclosures be so prevalent?

Many homeowners who find themselves in the unenviable position of owing more money on their home than it is worth worry about incurring additional debt in the sale process. Some homeowner’s will incorrectly assume that the bank will pursue a deficiency judgment against them, making them liable for the unpaid balance. Probably the biggest misconception is that foreclosure is inevitable and there are no alternatives, the house will be lost and the credit score destroyed in the process.

Suppose you found yourself in the position of missing your last 4 house payments as well as skipping the latest installment of the property taxes. Add to this the market value of your property has dropped $100,000 since you purchased it over three years ago. Perhaps you have suffered a financial hardship that has catapulted you into this situation that seems hopeless and unending.

This is where you need to look into the possibility of doing a short sale to sell your home.

While a short sale is not a panacea, its the closest thing we have to helping a homeowner in financial distress. Every day I see homes scheduled for auction as they progress through the foreclosure process and I wonder if the homeowner looked into the possibility of selling their home with the approval of their mortgage lender in the short sale process. Help is available, why aren’t more consumer’s finding it?

For whatever reason, some homeowner’s seem content to let the foreclosure process take its course. I think it’s due more to a lack of knowledge regarding the alternatives than it is just to accept what may seem inevitable.

Shhh, I Cannot Hear For The Noise

With all of the communication channels we have available today, you would think consumers would be aware of the choices they have and where to turn. However, just the opposite may be true. Perhaps we have become reluctant to leave another voice message on a prerecorded customer service phone line, knowing that the call will not be returned or that our request for assistance will ultimately be denied.

Maybe things haven’t changed that much after all in the last 160 years. People are still having to sift through a lot of sand to find that one lucky nugget.

Filed Under: Foreclosure Tagged With: ,