Real Estate Investing

The attorney at my officer earlier this week was an absolute font of short sale knowledge, though often he said he didn’t know.  Short sales really are the wild west… every one is different.  Every seller has a different situation, every lender will address a short sale differently.

What does this mean to you?  It means that the agent who has the listing may not be qualified to deal with a short sale.  It means if you’re the seller that the buyer may not be qualified to buy a short sale.  But how do you know?

It’s fairly straightforward to know if the buyer is qualified to purchase a short sale with one simple question (beyond the obvious “Can they buy?”):

• Does the buyer really give a hoot about the house?

If the answer is no, then they are qualified because buying a short-sale can be a long, harrowing process that could take months - even a year.  If the buyer has to be moved by X date, then they need to find another house.  Real buyers should be patient, qualified to buy, and patient.

But is the Realtor qualified to sell the house?  Again, some questions asked in advance can let you quickly know if you should waste your time on the short sale experience:

• What is a short sale?  (Captain Obvious strikes again, but you’d be surprised at how many agents really DON’T know)
• How many loans are there against the house?
• Have you submitted a short sale package?
• How is the lender and seller planning to address all the outstanding loans?

If the agent can answer these questions, then clearly they are clued in as to what the process will be like.  That’s an agent who really does have experience and is qualified to handle the transaction.

If you’re in financial trouble and can’t make your mortgage payment, foreclosure may not be your only option.  Before you get to the point of foreclosure, try talking with your lender about the possibility of a short sale.

First, what is a short sale?  It’s when the home is worth less than what is owed through a loan (or loans) so even if you sold it, you’d come up short the payoff.  In certain situations, lenders may be willing to waive that difference. But they won’t gladly discharge the amount … you’ll have to prove you’re deserving.

The attorney that spoke at my office today told about one family who was trying to get qualified for a short-sale.  They had to produce two years of tax returns, bank statements for the past six months, and a personal loss and profit statement - along with the ever-important hardship letter.  The couple was turned down because four months prior, the family had taken a trip to Disney World and spent $4,000.  The lender felt if they could afford a vacation to Disney, then surely they could afford to make a house payment.

So what is hardship?  Read my post from late September to get a fairly long list of what qualifies.

A short sale is not a fast, easy fix.  It’s a long daunting process in which the seller must be patient.  As the speaker said today, “Short Sales are the Wild West.”  I prefer having a sheriff in town, but sometimes you have no choice.  Good luck.

Although short sales have become fairly commonplace in the last year, lenders have parameters that must be met to qualify to sell a home “short” of the payoff amount.  Parameters that *most* banks require, that is.  Some still don’t pay attention.  In a very illuminating post by Pacita Dimacali, an East Bay, North CA real estate agent in Alameda, one specific lender gets a pretty powerful dressing down.  She also writes on ActiveRain what conditions are defined as “hardship”:

HARDSHIP conditions include, but are not limited to:

Unemployment
Reduced income
Divorce
Separation
Medical bills
Too much debt
Death of spouse
Mortgage payment increases
Business failure
Job relocation
Illness
Damage to property
Military service
Incarceration

A friend of mine qualifies at least four of the 14 items listed here, but also deals with this bank that’s mentioned as being one of the worst for short-sales.  I think she’s bound for foreclosure before they ever get the paperwork done for a short-sale.  I hate that she’ll go through this, but she is not alone - there are a lot of people who sympathize with her position. In fact one commenter wrote (regarding the bank),

I know many say had our all-wise government just let the banks go ahead and fail it would have caused world-wide disaster. Well, I wish they had stayed out of it and let the chips fall where they may. No one comes to my aid or yours if we make bad decisions. As for the world-wide disaster, I think the banks are causing it themselves right now.

They do not care. That’s all. The top brass got their bonuses and that’s all that really mattered.

Read the entire article along with the comments.  Very very enlightening and I’m all about informing the consumer!