Helping Sellers Survive the Foreclosure Roller Coaster Ride
Going through a Foreclosure action and losing your home is a very stressful situation for anyone. Until you walk in those shoes yourself, it’s hard for an Investor or Realtor to understand what a Seller is facing in their day to day life. I would like to share how a Seller feels during this process so that you can really begin to understand the Seller’s experience. It IS a scary roller coaster ride and you can help deter them from crashing and burning at the end!
Owning a home has always been the American Dream. Sellers become very emotionally attached to that “dream home.” They work their tails off, save as much money as they can, and make the big purchase. Unfortunately, the adjustable rate mortgage was introduced to our economy which allowed Sellers to purchase the home of their dreams with little money down, interest only payments with the Sellers knowing that in 3 to 5 years they will have to refinance their home to a fixed 30 year mortgage in order to keep it. When the housing market crashed, it affected everyone drastically.
Many people found themselves without a job ie. realtors, mortgage brokers, developers, contractors and many more people in different occupations. Can you image if you had a 700+ credit score and then suddenly you weren’t able to make your payments on your home, car, credit cards, and purchase food or clothing for your family? This is such a humbling experience that many Sellers don’t survive. Everything they have worked for their entire life is gone! This situation has crushed many dreams and is still occurring daily.
First off, the Seller should not have purchased a home with an adjustable mortgage rate and counted on the economy to increase the equity in the home enough to be able to re-finance. However, with the persuasion of the mortgage broker, spouse, friends and maybe family, the Seller thought “It will be alright I can do this!” Now that everything is crumbling down around the Seller, their pride is stopping them from taking the correct step and doing a short sale. The Seller receives multiple telephone calls a day from a debt collector whether it is for the mortgage payment, car payment, credit card payment, etc. The Seller (male) is starting to have family issues as it was his job to earn income to support the family. A Seller (female) may also be in the same position as in this economy it takes two incomes to raise a family, send their kids to college and to pay all the bills.
Many Sellers lose faith in their religion as they don’t know who else to blame for the fact that they are losing their home. In reality, it is the economy’s fault and no one else to take the blame. It’s just life. This is hard for Sellers to realize. In addition, Sellers start having health issues, they argue more often, drink more, kick the dog, beat the kids and their safe and stable family life turns into CHAOS. This is nothing to scoff at, laugh about or take lightly. Foreclosure destroys families and lives. Many Sellers end up in divorce, kids start failing in school or they totally move out. The family quits going to church. The family unit and the individuals literally fall apart. Sellers need our help to understand the entire short sale process and how it can truly benefit them…..especially the fact that it is FREE, and they are in control of their destiny versus walking away or staying in the house and still letting it go to foreclosure.
When you contact Sellers, you need to be aware that they are expecting someone who wants money from them. They are barely scraping by and now we say we want to buy their home. Where will they go? You need to remember that these Sellers are on a roller coaster ride from “heck” and don’t know how to get off or aren’t even sure that they want off, because they are not informed about all of their options.
I always teach that you, the Investor or Realtor, will have to help the Sellers understand the process, meet with them a couple of times and, more than likely, will have to counsel them during their stressful situation. I like to set their expectation right from the beginning which is “doing a short sale allows you to control the bank’s outcome.” What I mean by that is in my contract it states “This offer is subject to the underlying lenders taking a discount acceptable to the Sellers and the Buyers.” This way, if at the end of the short sale, the short sale lender wants money from the Sellers or the deficiency judgment is not waived, the Sellers can back out of the deal! And by the way, if you’ve taken my course, your Sellers will not pay any money and their deficiency judgments should be waived. This alone makes a Seller feel warm and fuzzy and in full control. As for you, well, this statement may not make you feel warm and fuzzy. I only work on transactions that will be a win for the Seller, win for the buyer, win for the bank, and win for the Realtor. Using this motto will help you excel in your business. I provide excellent service and teach my student to do the same; therefore, we all have high referral rates and you should, too!
So, the next time you are dealing with a Seller who still owes you paperwork in order to do the short sale, please recall this article and remember what kind of day are they going through. How can you help them provide what is needed to process the short sale? Is it, I will come to your house and we do it together? Should I email it to you and do you have enough ink in your printer to print it out or should I overnight it to you with a return label self addressed and paid? We are here to provide a service……so provide an excellent service to them. I provide excellent service; therefore, I have an excellent referral rate. J
I know as an Investor and Realtor it is a struggle to deal with Sellers and short sales. However, if you are willing to do what it takes to get the deal done by truly helping the Sellers, then you will not only make money, you will also help a Seller from owing a deficiency judgment for 25 years and maybe help stabilize their family again. The Banks are going to go after these Sellers and we must approach this with a mindset that “enough is enough!” Help the Seller out and explain the short sale process and remember, they need you more than you need them. However, without your help and persistence they would not have made it through this ugly time. Feel proud of helping the Sellers re-build their world, save their family and move on with the next chapter in their life. I am proud of you!!!
Happy Negotiating!
Kimberlee Frank
Happy Valentine’s Day – The Facts about Loan Modifications
Happy Valentine’s Day Everyone the facts about loan modifications!!
Today is a great day to tell anyone and everyone you see and know Happy Valentine’s Day. Many of the Sellers that are upside down on their home are stressed out and don’t know what to do. First off, I want all Sellers to know that when they got a loan from the bank their money was given to the bank from an investor. This investor could be a trust, reit, or maybe the government. The bank guaranteed the investor or group of investors a set interest rate. Many Sellers are attempting a loan modification hoping to keep their house. I always ask my Sellers if could wave my wand what do you want from the bank. Most of them will answer that they want the bank to reduce their balance on their loan or they want a certain amount for their monthly payment. Here are some facts I want to share this Valentine’s Day with the Sellers:
1. During a loan modification the bank is still continuing with the foreclosure.
2. I have not spoken with a Seller yet that got a reduction in the value of their home on a homesteaded property and I have done over 500 short sales.
3. The monthly payment the Seller wants makes no sense. They are not considering how much their taxes and insurance is on the property nor are they considering the interest that will be charged for the loan amount. Example: Seller owes $300,00,000 on the loan at 4% for 30 years is $1,432.25 – Yearly Taxes are $3,000 per year $250.00 a month – Insurance is $1,500 per year – $125.00 per month – Total monthly payment NOT INCLUDING HOA (homeowners association dues) would be $1,807.25. Many Sellers want a lower payment than this amount because they can’t afford it.
4. I have only seen the bank take the monthly payments that they are behind plus interest, late fees and attorney fees and add it to the end of the mortgage and/or change it to a 40 year mortgage. Which would make their monthly payment $1,253.82 on the loan plus taxes and insurance would be $1,628.82.
So on Valentine’s Day I just want to let all the Sellers going through this difficult time that your home is where your heart is and may God Bless you during this difficult time.
So should a Seller do a short sale? First you need a good negotiator working on your file. Benefits of a short sale:
1. The Forgiveness of Debt Act which expires on December 31, 2013 allows Sellers who own their properties as homestead to waive the tax ramifications should the bank forgive the debt. Up to 1 Million Dollars for a Single Individual and $2 Million Dollars for a married couple.
2. The Bank will report the short sale on their credit report as being settled for less.
3. The Sellers may receive some money to relocate.
4. The Sellers may not have to pay a cash contribution or a promissory note. Again this depends on your negotiator/realtor.
5. The Bank will not go after the Seller for the difference if you get a full satisfaction otherwise they have the right to collect on the Seller for up to 25 years.
6. The stress is gone and they have relocated into a bigger and better home most of the time.
I would recommend on this Valentine’s Day that a Seller give their family and themselves the gift of decision. Please read my Special Report on Foreclosure which talks about all your options. www.FreeFactsAboutForeclosure.com
Again your home is where your HEART IS and your family will go wherever you go.
May this Valentine’s Day you find peace.
Kimberlee Frank – Broker
www.SellFastRealty.com
Short Sales are Sailing
Many Investors and Realtors avoid short sales like the plague. They are definitely missing the boat! My business specializes primarily in short sales and I have seen an increase in the number of approvals we are getting.
The time line for a short sale varies from 90 to 120 days if you submit the lender a “complete” short sale package. Since short sales are dominating the market, the Lenders are creating more streamlined processes to conduct smoother short sales. If you do short sales, then I am quite sure you have heard of the online system called “Equator.” Equator allows all of the short sale paperwork to be processed electronically through one common venue, versus traditional and random faxes and emails. Having a file processed online avoids the common objection from the short sale lender of “We didn’t receive the documents.” Effective January 1, 2013, the newest lender that has started to use Equator is Chase. The following lenders and servicers are presently using Equator: 1) Bank of America, 2) Chase, 3) Wells Fargo, 4) GMAC, 5) Nationstar, 6) ASC, 7) Carrington Mortgage, and 8) Homeward Residential Services.
The Equator System assigns applicable tasks to each party (Agent, Negotiator, Closer, etc) including a deadline in which to complete each task. I like the fact that the lenders can no longer say “Oh, we never got that paperwork.” However, I don’t like the fact that they are tracking our information. Nationstar has taken the collection of Buyer’s information to a whole new level. They require all Buyers to fill out a loan application even though they most likely will not be using Nationstar as a lender. This application has been mandatory and this has not been waived on any of my files. If you are a Buyer on any property, you are required to provide your name, address, telephone number, DOB, SS#, assets, employment history and more. This is regardless if you are purchasing for investment or personal use and if you are getting a mortgage or paying cash.
I believe that the lenders are collecting data against all Buyers and will soon share with each other how many deals each Buyer has purchased. I had one student inform me that once he purchased over 10 properties from Bank of America, he was no longer allowed to purchase any more in his name, his wife’s name or company name. Therefore in the future, when all lenders work as a team, they will share all of this information and limit the amount of deals that an Investor can purchase. Wells Fargo started using a system called CoreLogic approximately 2 years ago which allows them to simultaneously check to see who was applying for a mortgage at the same time they were conducting a short sale. This caused Investors a hardship even though they fully disclosed to Wells Fargo their intention to buy, resell and/or fix the property, if they used my paperwork. Many short sales were not approved at that time and many Investors had no idea WHY? Some of the lenders frown on the fact that Investors are purchasing the property and would rather sell the house to a homeowner.
You would think that the lenders, since they are funded by Investors, would understand how we Investors work. We don’t buy properties at full value, as we are not going to live in the home. This is a business and we can’t make the Seller’s problem our problem by paying full value. It is the Investors, like us, that are helping the lenders get money and not go under.
Now is the time to purchase short sales and if you haven’t started you have 10 years to ride the wave, so do it now! Align yourself with a good Mentor and take flight just like many Investors around the world.
Happy Sailing,
Kimberlee Frank
WARNING! Short Sale Lender has Mandated Deed Restrictions on Deed for Closing!
The Short Sale lenders are getting crazier and crazier. That is why you need to stay current with the short sale changes. Approximately 3 years ago, Bank of America was the first short sale lender to start requesting that the new buyer of the property consent to not resell the property for less than 30 days. This statement was included in their short sale approval letter. This statement alone caused a lot of challenges to investors who were still looking to close back to back on transactions. A few short sale lenders thereafter, such as GMAC and Wells Fargo, started adding 60 to 90 day resale clauses on their Arm’s Length Affidavits, but not their short sale approval letters.
Recently, I was in the process of purchasing a property where I needed to get an extension on the short sale approval letter. The reason was that the Homeowner Association advised us that, pursuant to their by-laws, their 35% ownership of investment properties had been reached and only homeowner occupants can purchase the property. The servicer for the lender was Seterus. I received a brand new approval letter for the same exact buyer as before, but with a few different statements:
1. The purchaser cannot resell the property within 30 days of the short sale settlement date. The purchaser cannot resell the property for greater than 120 percent of the short sale price within 90 days of the short sale settlement date.
2. The deed conveying the property to the purchaser should be amended, in compliance with applicable state law, to include the following provision: “Grantee herein is prohibited from conveying captioned property for any sales price for a period of 30 days from the date of this deed. After this 30 day period, Grantee is further prohibited from conveying the property for a sales price greater than $88,800.00 until 90 days from the date of this deed. These restrictions shall run with the land are not personal to the Grantee.”
WOW! Now the short sale lenders are really placing a deed restriction on the property, as it is being included with the recorded deed because previously the purchaser or seller would have to sign a document either a short sale approval letter and/or arms length affidavit acknowledging this agreement. This allowed many investors to do two closings using two different title companies and literally ignoring the deed restriction thinking that no one would know about the deed restriction since nothing was filed in public records. Well, the game is over ladies and gents, if you played that game, which I never recommended. Some of the lenders are now requiring it on the deed which also controls your profit. This particular loan was an FHA loan.
Am I saying that all lenders are going to follow suit with these new restrictions? I would assume a few will jump on board, such as Bank of America, Wells Fargo and GMAC. You will need to be sure on your short sale deals that you know how long you will have to hold the property and make sure you have enough profit there to hold it. Please take the time to read every lender document thoroughly and if there is wording that you would like removed, ask them to remove it. I can’t guarantee you that they will, as they did not do so on my transaction, but you won’t know if you don’t ask.
What this really means is that you will need to buy at the right price and hold for the right number of days in order to profit BIG in the short sale arena! However, there are ways around getting your buyer in at the time of closing, which I will share in my next article. Until then … read your paperwork!!
Kimberlee Frank
