| Louisville realtors, investors and
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| | short sale. Remember, when I list the
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| debtors facing foreclosure ask me from
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| | property, the owner/debtor is my client
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| time to time how short sales work.
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| | (not customer). This means I must always
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| Consider this a primer.I recently
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| | act in his best interest. The lender is
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| brokered the sale of a house for $85,000
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| | not my client and I owe it no such duty.
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| to an investor. The house appraised for
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| | In a normal sale the seller and buyer
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| $120,000, giving the investor substantial
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| | have greatly divergent interests: the
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| immediate equity. The lender took a
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| | seller wants to sell at the highest
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| $60,000 loss. The owner/seller was forced
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| | possible price, and the buyer wants to
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| to sell his house, for which he received
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| | buy at the lowest. In a short sale there
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| not one red cent, and had to move into
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| | is no such contest between the parties:
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| rental. How is it that all parties walked
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| | the seller wants to sell at any price the
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| away from the closing table satisfied?!In
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| | lender will accept, and will generally
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| the beginning...
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| | agree to any price offered, contingent
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| When a home owner owes his lender more
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| | upon the lender's acceptance. So in a
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| than he has borrowed, he's said to be
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| | short sale, the lender takes on the
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| "upside down on his mortgage". This can
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| | mantle of "seller" vis-a-vi the buyer and
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| come about in many ways, the principal
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| | these are really the parties who
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| amongst them occurring when he simply
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| | negotiate the contract. Now get your head
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| stops making mortgage payments, often
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| | around this one: as listing agent in a
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| because he is in serious financial
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| | short sale I am often in the peculiar
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| difficulty. If his mortgage payment is
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| | position of actively attempting to
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| $1,000 per month, and he stops paying, or
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| | negotiate for the sale at the lowest
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| pays intermittently, the fines, interest
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| | possible price acceptable to the buyer!
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| and principle can rack up pretty quickly.
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| | (But always with the caveat that this is
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| And if the owner can't pay the mortgage,
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| | in the seller's best interest, and does
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| chances are he hasn't been able to make
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| | not jeopardize the sale). This anomaly
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| necessary repairs to his home. This
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| | has many ramifications for the way I
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| situation is almost invariably
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| | conduct and negotiate these
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| accompanied by despondency, which again
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| | transactions.Price, Terms and Timing
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| leads to neglect of the house.Stir into
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| | Price: So how much will the lender lop
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| the mix bankruptcy, and perhaps divorce,
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| | off that price? I've generally found that
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| and you'll understand it's not surprising
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| | as the day of auction approaches, lenders
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| to find the homes of these owner/debtors
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| | become more malleable. Pretty
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| are often seriously degradated. That
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| | inefficient, because they loose a lot of
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| leaky roof is probably the last of the
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| | time and money that way. I supplied the
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| owner's problems.The "F" word
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| | lender of The Willows property with
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| Foreclosure. It's not a happy prospect
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| | objective material indicating that the
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| for the lender or the borrower. Lenders
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| | drive-by BPO was inaccurate, given the
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| have different tolerances for late
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| | condition of the house. The lender then
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| payments. However by the time the debtor
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| | had an internal BPO done. That was key to
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| is late for the fourth consecutive month
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| | getting this particular deal done. I also
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| the vast majority of lenders begin
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| | sent off photos and comps of my own. In
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| foreclosure proceedings. In Kentucky the
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| | some cases I've sent the lenders well
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| foreclosure sale of the home by public
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| | over 100 photos. Pictures speak louder
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| auction takes generally anywhere from 6
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| | than words, and it's critical, when the
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| months to a year from the time the
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| | property is damaged, that the lender
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| foreclosure procedures began. It can take
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| | understand the shape it's in . Remember -
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| longer - I saw one artful debtor drag on
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| | the BPO realtor may be doing up to 50
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| the foreclosure proceedings for more that
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| | BPOs a week - he could care less about
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| 20 months! Her mortgage payment was
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| | this one deal. But as listing agent I
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| $1,300 a month. After 20 months that
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| | need to keep the lender informed of all
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| became a significant debt compounded by
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| | issues that coincide with my client's
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| late fees, interest, legal costs, and the
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| | best interests. The second Willows BPO
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| potential cost of selling the property at
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| | came back at $100,000, and the lender
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| a public foreclosure sale. To say nothing
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| | initially tried to obtain that figure.
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| of the continuing, moment by moment
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| | Ultimately, with the foreclosure sale due
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| deterioration of the property. By the
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| | to occur the next day, it reduced that
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| time she moved out the bank had written
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| | amount to 80% of the $100,000 plus $5,000
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| off in excess of $80,000.The lender's and
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| | to pay off non-mortgage related liens. At
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| borrower's conflicting interests.
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| | 4.50 pm the lender agreed to stop the
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| Capitalism is a wonderfully contrived
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| | foreclosure sale scheduled for 11.00 am
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| system. It hands not only the
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| | next morning.But hey, it ain't over 'til
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| power-barons a potent array of weapons
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| | the fat lady sings! Because the loss on
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| with which to fight, but also the poor
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| | this loan was $60,000, and because the
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| and destitute. Though the battlefield is
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| | lender had authority to settle up to
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| nowhere near even, double digit interest
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| | $30,000 only, we had to wait for final
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| thrust too deeply down an indigent
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| | word from the mortgage insurance company,
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| debtor's throat may precipitate his
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| | which we eventually obtained, but not
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| "nuclear" retaliatory option - Chapter 7
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| | without many hours additional work.As you
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| bankruptcy. And so these two,
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| | see, the price of The Willows property
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| symbiotically entwined, are locked in an
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| | was determined by the lender looking at
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| elegant dance, teetering between
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| | the bottom line - how much net it would
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| dividends and disaster, profit and
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| | receive. And in order to get this number,
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| poverty. One serious mis-step, and the
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| | all lenders in short sales request a
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| band stops playing.Thus, from years of
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| | "fake HUD-1" or a "net sheet" submitted
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| bitter experience, lenders have learned
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| | simultaneously with the offer. In a
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| that it's often better (cheaper) to
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| | normal real estate transaction the HUD-1
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| attempt to gain the cooperation of the
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| | is drawn up at the end of the
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| owner and have him agree to voluntarily
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| | transaction, after agreement is reached.
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| sell and vacate his home, rather than
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| | - in a short sale the title search is
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| evict him under foreclosure. Lenders also
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| | performed immediately upon listing, even
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| understand that the chance of ever
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| | before there's an offer, so that the
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| recovering the money owed to them by the
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| | figures can be applied to the net sheet
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| debtor is slim. But many debtors choose
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| | as soon as needed.Terms: The most common
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| not to sell because, around the time they
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| | terms distinguishing these deals are that
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| realize they will never catch up on their
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| | the lender often requires terms such as
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| payments, they often have another "Ah
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| | "sold as is" and "proof of finance or
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| Ha!" flash of insight: that if they stop
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| | funds required with offer", and to
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| paying their mortgage and just wait for
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| | protect the seller, the realtor should
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| the foreclosure axe to fall (or better
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| | insert terminology indicating seller's
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| yet, engage in a hatfull of tricks to
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| | acceptance is subject to release from all
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| keep that axe at bay) they can live "rent
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| | liability for debt. None of this is
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| free" for at least 6 months. So now the
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| | carved in stone, and I've negotiated
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| debtor turns from borrower to squatter,
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| | repairs and other concessions from
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| perceiving it to be in his best interest
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| | lenders. Each case is unique. Paper will
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| to prevent the foreclosure for as long as
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| | suffer any indignity - write the
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| possible. And if the house, the lender's
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| | offer!Timing: The REO, Foreclosure and
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| "security", should fall apart in the
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| | Bankruptcy departments often appear to be
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| meantime, so be it.The solution
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| | understaffed and overwhelmed, so don't
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| The lender is in a position to offer the
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| | expect instant responses. Some will take
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| borrower a very important concession for
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| | weeks to reply. Make sure the buyer and
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| his cooperation: to write off the entire
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| | seller understand this. But once a deal
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| debt if the borrower finds a buyer to buy
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| | is struck, the lender will often expect
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| the house at a price and terms acceptable
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| | an unreasonably quick closing, and will
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| to the lender, within the time stipulated
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| | attempt to penalize you with days
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| by the lender. This is the essence of a
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| | interest for closing after a certain
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| short sale. Lenders set their own
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| | date. This all goes back to the net sheet
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| guidelines for what they will accept.
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| | calculations; because you have informed
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| They may say they need to get fair market
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| | the lender how much it will receive by a
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| price, but will in fact often be prepared
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| | certain date, it then attempts to hold
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| to sell for much less. They do not want
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| | the line at that date, even though they
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| to chance selling this house at auction
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| | are generally very slow to respond. The
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| and risk receiving a very low price. Or
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| | Willows lender, after having not
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| worse yet, receive a bid so low that the
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| | responded to multiple contacts, gave us
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| property does not meet their reserve
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| | just 2 days within which to close!
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| price, and they end up owning the
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| | Fortunately we well prepared, but it was
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| property. In this case the property is
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| | very close.Closing Note
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| administered by the lender's REO (real
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| | The tax consequences of short sales fall
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| estate owned) department, which will then
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| | outside the scope of this article. If you
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| list the property with a realtor. And the
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| | want info on how to handle competing
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| cycle begins again......The Lender
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| | offers, dual limited agency within this
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| initially said The Willows house was
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| | environment, or need a copy of the net
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| worth $120,000, and wanted it sold at
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| | sheet I use, you may contact me.Update
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| about that price. It got the $120,000
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| | Here's a new twist. A couple of weeks
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| figure from someone it had hired to do a
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| | ago I submitted a $235,000 offer to a
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| BPO. BPO is short for "Broker's Price
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| | lender on a short sale, (Seller owes
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| Opinion." It is similar to a CMA
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| | about $275,000) which the lender
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| (Comparative Market Analysis) and serves
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| | ultimately accepted. However, in it's
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| the same purpose: to arrive at a fair
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| | acceptance letter, at the very bottom of
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| market value for a property. Most are
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| | the sheet, the lender stipulated that it
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| done as a "drive-by," meaning that the
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| | retained its right of recourse against
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| "driver" (usually a realtor, maybe an
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| | the seller/borrower (my client)! And this
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| appraiser) drives by the outside of the
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| | despite seemingly contrary language in
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| property, takes one to three photos and
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| | the main body of the letter. I explained
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| leaves. He then completes the lender's
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| | to the lender that the ONLY reason my
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| BPO form on-line and e-mails it with the
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| | client had agreed to the short sale (and
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| picture. Sometimes an "internal" is
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| | not to jerk the lender around in the
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| requested, in which case the realtor goes
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| | bankruptcy proceedings) was because he
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| into the property, takes about 3 internal
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| | expected to obtain a complete release
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| and 3 external photos and sends these
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| | from all liability at closing. After a
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| through to the lender with the completed
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| | weeks or so of wrangling, attorneys etc,
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| BPO form.When the debtor had realized he
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| | the lender "saw the light" and agreed to
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| would not be able to save his house in
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| | the release.CMA
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| The Willows, he contacted me to see if I
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| | Though the information provided is
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| could help. He did not want a foreclosure
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| | considered reliable, it is not complete,
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| on his credit report, which would have
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| | nor warranted accurate. Always consult
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| prevented him from getting a conventional
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| | your broker or an attorney.My name is
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| mortgage for three years. Even with a
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| | Neil Blumberg, real estate broker and
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| Chapter 7 bankruptcy, the wait period is
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| | recovering attorney (South Africa),
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| only 2 years from dismissal. He also
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| | currently residing in Louisville,
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| wanted to have his debt forgiven. I was
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| | Kentucky. I specialize in the arcane art
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| able to accomplish both these goals,
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| | of creative finance, and assist my
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| saving him about sixty thousand
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| | clients buy and sell homes and investment
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| dollars.The short sale process
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| | residential and commercial real estate.
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| As a Realtor, the first thing I did was
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| | Member of various real estate
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| explain to my client all his theoretical
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| | organizations including Real Estate
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| options, including deed in-lieu of
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| | Exchangers, recent service on the Greater
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| foreclosure, loan renegotiation and
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| | Louisville Association of Realtors Forms
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| others. He settled on short sale. I
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| | Committee and am currently Chair of the
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| listed The Willows property, and had him
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| | Louisville Chapter of the Real Estate
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| sign an authorization for me to contact
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| | Cyberspace Society.
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| the lender to see if it would agree to a
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