On May 4th we held a class, “Meet the Experts,” with two panel discussions on Short Sales and Bank Owned Properties. The short sale panelists were Larry Pollman, Homeway Realty; Jerry Marbury, Coldwell banker Residential Brokerage; and Oscar Chavez, Long Realty. The bank owned property panelists were Bob Zachmeier, Win3 Realty; Sue Gutierrez, Tucson REO; and Dave Kipling, Keller Williams Realty Tucson Territory. Many thanks to all our panelists for sharing their expertise. There were some unanswered questions which I have taken the liberty to answer here.
Q. Who pays normal title fees, etc. in a short sale?
A. Since the seller has no equity in the property and nets $0, closing costs are normally paid by the lender. In some cases the buyer will pay some or all to get the deal done.
Q. As a buyers agent on short sales, when you get a verbal but the status isn’t going to be changed from DAPS – how can you tell your client no other contracts will bump theirs out?
A. If the Arizona Association of REALTORS Short Sale Addendum to the purchase Contract is used all other offers are considered back-up offers. This means that they only come into play if the first agreement falls apart. However, is the lender is aware of a better offer, the lender will probably try and bump out the prior offer. Be direct with your clients and tell them that there is the possibility of the bump-out.
Q. As a listing agent, how do you handle multiple acceptable offers? Do you have primary and secondary offer?
A. A short sale is no different than a traditional sale as far as hanling offers is concerned. If the seller has accepted one offer, contingent on the lender’s approval of the short sale, the other offer(s) are treated as back-up offers (see answer to above question.)
Q. Short Sale: If you have agreed price from lender and an offer comes in lower but it is reasonable and the asset manager says ‘don’t even call me or present anything if it is not an agreed price’ can we contact anyone else to explain situation?
A. Try and have the short sale negotiator put you in touch with the supervisor. Circumstances change and speaking to a manager may get it done.
Q. The listing agent brings in a buyer represented by a buyer’s agent. The offer is presented to the bank. The bank does not approve the short sale but forecloseses and sells the property to the buyer anyway, cutting out the listing agent’s commission. Is the listing agent entitled to his/her commission?
A. The listing is an agreement between the seller and agent. Once the bank owns the property that original listing agreement is of no force and effect.
Q. How many of these sellers are also in bankruptcy? How does that change the scenario? Haven’t heard bankruptcy come up at all?
A. Bankruptcy puts a foreclosure or transaction at the mercy of the bankruptcy court. Everything is on hold until court decisions are made.
Q. I understand that lenders will require seller to disclose 401K and may want part or all of it. Do lenders want other assest sold. i.e. second car so that more cash is available?
A. If the second car is a free and clear Lamborgini they might but in the typical short sale situation…No.
Q. After S/S package has been sent to lenders, what should your next step be and when? Week later, 2 weeks later, 30 days later?
A. Once you have faxed the package to loss mitigation contact the negotiator within a few days to make sure they have everything they need. After that, contact them once a week for updates. Don’t wait to hear from them, they’re too busy.
Q. Short Sales. Mortage $275,000
Short Sale $200,000
Deficiency$75,000
Questions:
1. Income tax liability on $75,000
2. No further claim by lender since AZ is a anti-deficiency state?
3. Same for owner occupied loan or all investment property?
A. This is too complex a question to answer here. I refer you to Arizona REALTOR Magazine, February, 2009 issue, which can be found in the archives at http://www.aaronline.comThis is a comprehensive article on deficiency judgments. Combine that with info at http://www.irs.gov/individuals/article/0,,id=179414,00.htmland you will be able to discern your answer. Remember… refer your clients to legal and tax professionals for these answers.
Q. Do Lender #1 and Lender #2 talk to each other during the transaction?
A. Yes.
Q. What is a ‘hardship letter’ and to whom is it addressed?
A. It is a letter from the seller to the lender’s loss mitigation department expalining the reasons for not being able to make the payments.
Q. PMI
Who were ….. or are players?
How were they hurt?
How frequently are they involved in SS and REO?
What typically are their demands?
A. PMI stands for Private Mortgage Insurance on of the biggest of which is/was AIG. They were hurt because they insured the portion of the first position loan over 80%. Because property values have plummeted when a short sale occurs the lender makes a claim against their mortgage insurance policy. Since the insurer must cover all or a portion of the loss the insurer has the right to partake in the negotiation. Typically they want the seller to sign a note for some or all of the loss which is not a good idea for the seller.
Q. What do you do if a mortgage company is in trouble and been put out of business because of fraudulent practices? Where do you find out who now owns the mortgage?
A. Ownership of the loan may be difficult to determine. About half of all loans are now owned by Fannie Mae or Freddie Mac and you can check with them to see if one of them owns the loan. Regardless of who owns the loan the place to start is with the loan servicing company.
Q. How do you sign up to do BPO’s and become a regular contact for banks?
Should you shy away from companies that ask you to pay for training or special certifications?
A. You need to apply with as many lenders/asset managers as possible. Google REO properties or bank owned properties and fill out their applications. Many companies have more than enough agents on their lists and some legitimate ones are now charging a fee. I suggest you perform due diligence and ask lots of questions before putting up any serious money.
Q. On REO properties have you ever had problems recouping the costs incurred for utilities – trash, etc? What ‘systems’ do the banks use to communicate with listing agents – outside company or internal?
A. Some lenders are slow to pay and some don’t/haven’t paid. Make sure you have a written reimbursement agreement and follow the guidelines for submitting the bills carefully. All of the offers and negotiations are done through on-line systems, both in-house or through third party asset managers.