Playing Hide and Seek with Lenders
Working an effective short sale can seem impossible if your Seller is not providing you with accurate information. The very first thing I require from all Sellers is a ‘complete’ Seller Information Sheet. My Seller Information Sheet is customized to specifically catch every pertinent fact about the Seller and the house.
Below are several things that I need in order to review the deal and determine my exit strategy as an Investor and/or Realtor.
1. Seller(s) name, phone number, email address.
2. Property Address.
3. Their estimated value and how they came up with that figure.
4. Their asking price and how they can up with that figure.
5. Is the property listed or has it ever been listed?
6. Is the home vacant or occupied by the Seller or a Tenant?
7. If Tenant occupied, I request the terms of the lease, rent amount and security deposit.
8. Information about the house – beds, baths, square feet, lot size/location, garage, construction – brick/stucco, pool – operative or not, date purchased and amount owed.
9. Lenders/liens on the property, amount owed, adjustable or fixed, interest rate, monthly payment and does it include taxes and insurance.
10. Is there a Homeowners Association and if so how much? Yearly, Quarterly, Monthly. Are they current or behind and how much in arrears.
11. Name of the Homeowners Association.
12. If they pay their own taxes, how much is it and are they current or behind?
13. What type of mortgage do they have on their home? FHA, VA, Conventional 80/20 loan?
14. Will they sell the house for what they owe? If yes and it is upside down, then it has to be a short sale. If no, then after all the debt is paid off including closing costs, how much do they want in their pocket? Once they give me that amount, I ask them if that is the best they can do? Believe it or not, they drop it even more.
15. What are they going to do if they can’t sell the house?
16. Do they own any other houses?
17. I will also need to know what the values are on the home. I use my MLS, ReiFax, Zillow and Trulia for sold comps. When looking at the values, you should only go back 90 days.
Only after I have all this information am I properly equipped to structure a successful and profitable deal. You skip these questions and you are asking for trouble down the road that will kill your deal, maybe even at the closing table. If your Seller is not willing to provide you with the above information, then they are not as motivated as you thought. Most of my Sellers initially tell me that they are working on a loan modification or they have hired an attorney to represent them in the foreclosure action. Understanding what the Sellers want will assist you in making your deal happen. When they are attempting a loan modification, I ask they what they want from the bank. Is it a reduction of the principal or a change in their monthly payment? I will walk them thru why a loan modification may or may not work for them. If they have an attorney involved, I ask “What is the attorney doing for you? Are they doing a forensic exam to dispute the paperwork or are they stalling to either get a loan modification or get you more time in the home?” Understanding their expectations of the attorney will help you construct your deal.
Many loans have been sold off multiple times which may require you to do some investigation as to who is holding the loan that we are attempting to short sale. I am currently working a deal wherein the Sellers had two loans on the property. Both were with Countrywide and then bought by Bank of America. The short sale lenders that we deal with are typically the servicers on the loan, so many times we are not dealing directly with the investors of the money. Many people don’t understand this practice. The money was loaned by a group of investors, which could be REITs or Trusts. Then they give the money to the banks, who are servicers for their money, who in turn loan the money to the Sellers. The first loan on this deal went back to Bank of America who has no knowledge that there is a second on the property as the servicers don’t pull title work. And if you are not pulling title work well in advance of closing your deals, then you can expect some harsh last minute surprises. Please be proactive on this, I want to see you closing deals, not losing deals! The second loan was given to Litton Loans but is no longer active and was given to a collection agency. That is where the trail goes cold. I have sent an authorization to the collection agency and they are going to research who has the loan.
Do you remember when 60 minutes had busted the banks for Robo signing of documents? If not, you need to google www.60minutesovertime.com and look up Robo signing. Mortgage Electronic Registration Systems, Inc. (MERS) is an American privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. When a lender assigns their rights to MERS, no information is given to the public as to who now owns the loan. However, you are able to find out who is the servicer just by going to www.mersinc.org and click on “information for homeowner” and then “my mortgage info.” Then click the “online” link and you have several options to locate which lender is servicing the loan. I would recommend that you put in the MIN number which you can find on the front page of the mortgage or use the sellers name, social security number and zip code of property. With the help of MERS I was able to find that the second mortgage is with Ocwen.
In a worst case scenario, if it’s not a MERS loan and the seller has been out of the property for over a year, you can have them submit a new change of address with the post office which only lasts for 1 year. That way, all communication from the unknown party(ies) will come to them again.
Again, you must always, always have title work pulled first thing on your short sale deals. This tells you upfront if you are going to have any challenges with additional liens. The title company will conduct a search going back 40 years to expose any liens or encumbrances. They also conduct a name search. The name search will pull up any outstanding credit card judgments, civil judgments (child support liens) or any other liens. On my particular deal, there was a child support lien. Although the names were similar, in this case, the lien did not belong to my Seller. If it did, I would have had to also short sale that lien.
The best advice that I can give you on any deal is to have your team player ready that will work with you and do whatever is necessary to close this deal. In this case, it is my Title Company. I would also recommend having a relationship with more than one Title Company, as their rules and regulations change.
I look forward to providing you with future tips so stay tuned or join me at my next boot camp.
Happy Negotiating!
Kimberlee Frank
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5 Short Sale Negotiating Tips from Kimberlee Frank
TIPS WHEN DEALING WITH SHORT SALE SELLERS
– How do you know it is a short sale deal?
- When they are willing to sell the house for what they owe.
- When the house is upside down and you can’t pay as much as they owe on it.
- When they are too far behind on their payments that you can’t make it up and keep it as a rental or subject to deal.
- When the monthly payment amount is more than you can get for rent.
- When the house is trashed and the cost to rehab it is too high for the return investment.
For more information check out Kimberlee Frank’s ‘Short Sale Negotiating’ Course‘.
New Laws for Freddie Mac Short Sales
I have been doing short sales for a long time and I have watched the industry change regarding Trusts, Options and Arm’s Length Affidavits. Recently, I read that effective January 1, 2012 Freddie Mac is not allowing flipping on short sales and is looking to hold all parties liable if they are aware of reselling the property for a higher price.
The funniest thing is they call it “flopping” which I believe was a typo from a secretary that just carried on and on throughout their paperwork. In addition, they don’t specify the time line in which you can resell the property for property. The purpose of the Arm’s Length Affidavit has always been that the seller is not getting the discount for their benefit and staying in the house. “Make sure you read your Arm’s Length Affidavits and check your sellers loans at www.freddiemac.com/mymortgage to see if it is a Freddie Mac Loan.
Bank of America approximately 2 years ago had placed a requirement on the new buyer that they were to hold the property for 30 days before being able to sell the property again. GMAC and Wells Fargo has placed a requirement on the new buyer to hold the property for 90 days before reselling the property. Remember, it is the investor underneath the mortgage companies guidelines not always the mortgage company. However, I have found that the mortgage companies are starting to adapt these requirements in their own company policies.
When BOA included the 30 day hold provision in a payoff letter, I argued the fact that they are trying to put a deed restriction on the property. However, they never put that wording in the deed so how in the world would anyone ie. the new second buyer know that there was a requirement of the first buyer to hold the property for a time period. They wouldn’t but the first buyer does know and has signed an Arm’s Length Affidavit stating the terms for the purchase.
I have always taken the stand that the Banks/Mortgage companies are the ones who send out their bpo agents/appraisers to advise the companies the value of the properties. So even as an investor if you made an offer at $100,000 because that is your MAO “Maximum Allowable Offer”, they had determined based on market value provided by their eyes and ears (bpo agents/appraisers) how much they would be willing to sell the property for.
Therefore, if an investor got a good deal and all your paperwork submitted to the short sale lender says you intend to resell the property for profit then you are “ok”. Until, these Arm’s Length Affidavits are adding additional wording.
NOW, the Arm’s Length Affidavit forms that they are having everyone sign ie: Seller, Buyer, and Realtors all state the following on Freddie Mac deals even before January 1, 2012:
1. Each signatory to this Affidavit expressly acknowledges that the Lender is relying upon the representations made herein as consideration for discounting the payoff on the Loan(s) which is secured by a deed of trust or mortgage encumbering the property.
2. Each signatory to this Affidavit expressly acknowledges that any misrepresentation made by him or her may subject him or her to civil liability.
I/We declare under penalty of perjury under the laws of the State of whatever that all statements made in this Affidavit are true and correct.
Additionally, I/we fully understand that it is a federal crime punishable by fine or imprisonment, or both, to knowingly and willfully make any false statements concerning any of the above facts as applicable under the provisions of Title 18, United States Code, Section 1001, et seq.
I have also seen certain wording in the Arm’s Length Affidavits that you are NOT aware of another contract whether it is verbal or written to sell the property for a higher price.
I am just saying be careful when you are acting as an Investor and a Realtor as the big bad Banks are looking to blame someone for their mistakes. Don’t stop buying real estate, learn the changes that the Banks/Mortgage Companies “INVESTORS – ie Freddie Mac” are starting to require so you don’t get to the Title Company and sign something that you didn’t understand that can hurt you later. You just hold the property for the time frame necessary to make a profit!
Happy Negotiating!
God Bless,
Kimberlee Frank
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Fighting over Credit Card Lien Releases on Short Sales
Working on short sales is always exhilarating when you receive updated title work which shows there are additional liens against the property. Many Realtors, Investors and Short Sale Negotiators aren’t knowledgeable or prepared to fight the fight against Credit Card Liens on short sales.
I recommend that the first thing you do when working a short sale is to order a title commitment which will do a search to see if there are any liens on the property. Are you aware that the title companies also do a name search for your Seller and Buyer? When a name search is done against the Seller, any outstanding judgments or liens show up on title. In addition, the title company is to order a lien search against the property for water, sewer, and code violations which cost approximately $140.
Due to the cost, this additional lien search is done right before closing. I always recommend that the Realtor or the Investor make a personal call to the water, sewer and code violation departments as soon as they start negotiating their short sale. By making the personal call, you can minimize some costs versus have the title company search for you. Some counties provide this information online. However, don’t depend on your inexperience of checking liens on the property, I would highly recommend that you contact the County Department and talk to a live person for confirmation.
After a name search is run on the Seller, if there are any outstanding credit card judgments they will have to be paid off at closing in order to give clear title to the Buyer. Unfortunately when dealing with credit card judgments, you have to deal with attorneys that represent the credit card companies. Many attorneys are not aware of how a short sale is done. They are only driven to get the Seller to pay money for a full satisfaction or get 50% of the balance for a partial release which allows the Seller to sell the house but still be responsible for the difference.
Right now I am fighting this battle. I have a property wherein the Seller purchased the property with a Chase Mortgage in her own name. She transferred the property into the Trust as she had attended too many seminars and assumed this was the right way to do it. Unfortunately, when she did she didn’t include the marital status of all parties on the Deed so we had to chase the previous seller to clear up title by signing an Affidavit stating their marital status. NOTE: To all investors who are preparing their own paperwork, make sure that all parties have the marital status of all parties. The property was originally homesteaded so it pulled in the husband as having an interest pursuant to the guidelines of the title company. The homestead exempt was lifted and placed on another property now making this an investment property.
However, because she was married at the time of the purchase, the title company’s underwriter will not insure the property unless all liens are released. This also included the liens against the husband, even though his name is not on title.
In addition to short-saleing the 1st lien, I have 6 additional liens to negotiate partial releases which would release the liens against the property but the seller and the husband would still be responsible for the difference. LISTEN TO THIS: The short sale lender is Chase and is awarding the Seller $30,000 as an incentive to do a short sale!!! Since their loan was taken out in 2007, I believe that this loan has all the mistakes as cited in the www.60minutesovertime.com Robo signing incident. The short sale lender normally does not allow the Seller to contribute any funds towards lien releases except this lender is allowing the sum of $500 per lien release to be paid out of the incentive just to get the deal done. The short sale was approved for February 25, 2013 and the short sale lender will not give us an extension until we provide them with a Letter of Direction from the Seller stating that each lien holder would receive $500.00 paid from Seller’s $30,000 incentive and copies of each of letter stating that the liens will accept the $500.00.
I am dealing with Citibank (credit card) that is in 3rd position as a lien holder that is owed approximately $32,000. I have spoken twice to the attorney to get them to accept $500. They have denied it twice even though I showed them that Chase is taking a discount of $600,000 and the other liens are accepting the $500, which their liens are much higher than Citibank. So what do you do???
The attorney that I have been dealing with claims he has submitted this information to his client, Citibank, and that they want $15,000 to settle. I have explained that is not going to happen because the short sale lender is dictating how much they can receive. The attorney stated to me that this is their only chance to get paid as they know that the husband can file bankruptcy and then they get $-0-. I have a letter from a bankruptcy attorney for the husband stating that he, in fact, was going to file bankruptcy but … if I informed the attorney of this fact, then they would not settle for less. I informed the attorney that I don’t want a full satisfaction, where it totally releases the liability of the husband, but instead I want a partial release. I am getting nowhere with this attorney. I asked for a supervisor and will fight the good fight with him to see if I can get him to get it released. However, my experiences with attorneys are that because they are debt collectors they don’t understand the short sale guidelines, so they will not settle. I have even asked for a release for $500 and a payment plan for the difference and the attorney’s answer was “No.” So … what do you do? I went straight to the credit card company’s main office asking for their legal department. I have done this plenty of other times with other credit cards. I know if I can speak with someone in the legal department at the main office of Citibank who has the authority to accept the $500 and explain the situation, they will advise their attorney to accept the lien release and may even, if need be, accept a payment arrangement. The last call I made like this to Target’s legal department on another deal, we did a 3 way right then and there and we got it approved.
My other options are that the buyer pays some money towards the debt, the Realtors contribute and the title company reduces their fees so they can also contribute. This is my last choice because this is a flip. If this was a listing where I was acting as the realtor, then the buyer would be my first choice, since the buyer will benefit from the purchase of the home.
Moral of the Story: Don’t give up on any lien releases! You need to do is talk to the right person which is always the Plaintiff (credit card company) and tell them the situation. You always have to go around the attorney and go directly to their client. Many times the attorneys, because it doesn’t meet their guidelines or it doesn’t make any common sense to them to accept $500, will not even send it to their clients as their job is to get as much as they can or just deny the offer and still get paid from their client.
Just to let you know some numbers on the deal, the buyer is purchasing it for $160,000, it needs about $30,000 in repairs and in the end the property will sell for high $350,000. These are projections and just because there is a huge profit doesn’t mean that I shouldn’t continue to fight the good fight. You may say, “with all that profit, why not just give ‘em what they want and pay off the liens and you will still make money?” I don’t leave any money on the table. If there’s room to negotiate for a larger profit, then I will fight the good fight!
I hope this article helps all you Short Sale Investors, Realtors or Negotiators out there as I never give up on a deal! Remember the most important thing is to get title work as soon as you start the file and ask for an update in 60 days when you know you are getting near a closing date. This way, you will not be fighting a fight when a foreclosure sale date is in the near future. I always say “all crazy deals make me wanna smoke, drink and swear” and I don’t do any of those things. Well….gotta go have a cigarette!
Happy Negotiating!
Kimberlee Frank
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