Every few days I get stories from the Curry Boy's in Florida and others about Short Sales......we all have tales to tell so here is another.
I am so sick of the incompetence and arrogance of people in the banking industry. It seems like the incompetence never ends.
We have a short sale closing this week. The underwriter for the buyer's lender demanded a change to the short sale approval letter. The short sale approval letter for the first said they would release the lien after they were paid. The payoff amount factored in paying of the 2nd mortgage. But, it didn't state exactly what was to be paid to the 2nd.
So, the underwriter said they wouldn't approve the loan until the short sale approval letter was changed. We called up the short sale lender. They said they wouldn't make the change. The buyer's lender said the deal was dead. The problem is that how the short sale approval was written makes no difference to them.
That's why you order title insurance! Most title companies have millions of dollars in reserves to solve title problems. The title policy states and guarantees the title, no matter what the short sale approval letter says. Apparently this underwriter thought their job duties required them to do the title company's job.
We finally called the CEO of the buyer's lender in California. We told them they were out of line. Why can't we just start making unrealistic demands. What if we demanded, "We want to make sure all funds brought by the buyer to closing have never been laundered or used in the drug trade. We also want the money to be backed by gold." Come on, we all know it's a fiat currency!
I almost thought of putting the following into the MLS private remarks for all our short sales. "Please withhold buyer offers from XYZ Loans, as they do not understand short sales and refused to approve a loan for an approved short sale." I am forced to deal with incompetence and power trips on the short sale end of transactions. I sure am not going to put up with it when I'm the customer.
Question from agent: "I've been working on a file with BofA. [Countrywide] first and HSBC second. HSBC responded immediately several months ago wanting $7500. BofA responded with a counteroffer a few days ago wanting $5k more from the buyer, $3k to the HOA lien, and 0, nothing for HSBC. HSBC insists on $7500.Sellers live elsewhere and do not want to pay anything. What do you suggest beyond contacting the negotiators which I've already done? The first is not Fannie, Freddie, FHA or VA and, despite no payments since 10/09, it has no lis pendens [nod]. So, now what?" Diane Butler
My Response : The good news is that HSBC responded fast. You simply need to negotiate them down.
Here are a few general rules with 1st and 2nd mortgage negotiations.
Rule #1: Most first's will pay the 2nd 10% of the total amount owed. So, get the 2nd to give you a payoff. Then ask the first to allow the 2nd to get paid 10% of their total.
Rule #2: Fannie and Freddie will only allow $3,000 to the 2nds. It doesn't matter how little or much they are owed.
This loan is probably sliced and diced, and their rules vary all over the place. Here is what I would do from here.
First, get HSBC down, unless they are asking for 10%. Then, escalate the file at BOA. You will probably have to escalate both files.
The first not paying the 2nd is stupid. The negotiator may think they are smart because they hard negotiate hard. Good for them. They are actually stupid, because they are losing money.
Send them the example below about another stupid lender that negotiated to hard and lost $50,000. Here is the story. We met some buyers at one of our Sold-In-A-Week sales in March of this year. They told us they were buying a house in Gainesville at 1740 NW 113th Drive for $275,000.
We had a house for sale two doors down from the house they had put an offer in on. The house they were looking to buy was a short sale. They mentioned that the short sale had drug out for months. Something about 3 mortgages and the junior mortgages were hard to work with. We talked to them a couple months later to see if they would consider our listing. They wanted to wait it out for the other house.
I noticed this house when I was looking for comps. From the MLS history it appears they walked around August 2009. The price was recently dropped to $229,900 and the house went back under contract. That's a big loss for the short sale lender.
I talked to the agent with the listing. The first mortgage was RBC, owed $337,500. The 2nd was BOA, owed 70k. The house was selling for $272,000. She submits the short sale offer to both companies. RBC gives her an approval in a month. BOA never gave her an answer.
Here is the problem. BOA has no incentive to put time into this short sale file when they are only getting $1,000. Most 2nds will get a minimum of $3,000, and often 10% of whatever they are owed. RBC was greedy and wouldn't offer enough money to BOA. As a result, they lost $50,000. Was that a smart business decision?
She should have gotten RBC to give BOA $3,000 to $7,000. She should have escalated the file at both banks. That's probably what it would have taken to get an approval.
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* LEARN ABOUT THE 2009 TAX CREDIT THAT IS AVAILABLE TO 1ST TIME BUYERS AND HOW IT WORKS (THIS IS A FANTASTIC THING FOR BUYERS)
* HOW TO OBTAIN THE LOWEST INTEREST RATE (DOES 4% SOUND GOOD?)
* LOCATING THE BEST DEALS IN THE BEST AREAS
* 5 HUGE MISTAKES BUYERS MAKE EVERYDAY AND HOW TO AVOID THEM
* BUYING FORECLOSURES AND BANK OWNED HOMES
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Donate new, unwrapped toys to your local U.S. Marine Corps Reserve Unit, or drop them off at a local business that has volunteered to collect them.
Step2
Order new toys online at eToys.com, which will deliver them to Toys for Tots.
Step3
Contribute your time and services to the cause by coordinating collection sites at your workplace or a nearby warehouse or providing transportation services or media exposure.
Step4
Donate money by sending a check to Marine Toys for Tots Foundation, P.O. Box 1947, Marine Corps Base, Quantico, VA 22134.
Year-Round
Step1
Sponsor or initiate fund-raising events such as walkathons, golf tournaments and car washes that are held throughout the year.
Step2
Purchase Toys for Tots phone cards or the series of Charleston Mint limited-edition ornaments. (See the Related Site "Toys for Tots - How You Can Help.")
Step3
Look for discounts and rebates that benefit both you and Toys for Tots.
Volunteer at a local soup kitchen. You will find this to be more rewarding than you think. Most cities, even smaller ones, have at least one place for those less fortunate to get a hot meal. It will only take you a few hours to help out other people.
Step2
Ask your boss if you can place a donation box in your building. You can mix it up and spread out the help to different charities. Perhaps you could do a toy drive around Christmas time, or ask for donations of winter apparel in the fall. Clothing and food would be good year round items to collect.
Step3
Don't toss out your old clothes! Give them to a local church to hand out to those who are in need. Your area may also have a St. Vincent thrift shop or other store that donates to charity. Women's shelters are also generally in need of clothing. Victims of domestic abuse often show up at the shelter with only the clothing on their back. If you want to be certain your clothes will be put to good use, give them to someone you know that could use them, but may not be able to afford them.
Step4
Ring the bell for the Salvation Army. It won't cost you anything and you'll meet lots of people. Help our Veterans sell poppies for a day or two. Offer to sell Lyons Club mints. You get the picture.
Step5
Make a donation to your local food shelter. If you have food that you probably won't use, do not toss it out, give it to someone that needs it. Creamed corn may not be on your table, but many would welcome it. Food is very scarce for many people.
Step6
Offer your services as a tutor or volunteer assistant at your school during special events. If your kids go to the school it's an added bonus, more time with them never gets old.
Step7
If your a deer hunter, donate a deer to Project Venison. The food is distributed to food shelters. There are many different programs out there, just check around.
Step8
Be a mentor to a child, KINSHIP. This is a wonderful program. The rewards are incredible. Your local Boys and Girls club could also use your help. Step9In many areas, the Boy Scouts accept donated aluminum cans. In your area other groups may be collecting the cans, but the idea remains the same.
Remember to always pay it forward freely........never expect something back. That's what it means to GIVE.
These are just a few ideas of how you can contribute for free to help others in need.
The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221) is another tool at your disposal to jump off the fence and get into the real estate market.
When you combine the tax credit with today's low interest rates, wide selection of for-sale inventory, and affordable home prices, many of the pieces are in place for you to buy now. But tax credits can be confusing. To help you understand how the credit works and why it would help, here are the details.
1. Buyers have until July 2009 to make a purchase that qualifies.
The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It's worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if you wait to buy in the first half of 2009 you can take the credit on your 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.
2. Buyers don't really have to be "first-timers."
The tax credit is actually available to any individual or household that hasn't owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.
3. Even if buyers exceed the income limit, they can benefit from the credit.
The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so you can get 10 percent of the home price credited against your tax liability, up to a maximum $7,500. Sounds like a great deal. But what if you make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it's a primary residence and is in the United States.
4. Think of it as an interest-free loan.
The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.
5. You don't have to be authorized before making a home purchase.
There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise.
6. New-home construction qualifies.
For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.
If you have any additional qestions feel free to call me at 614-523-1000 or 614-212-1026
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