Every day I see ads on TV and the newspaper promising solutions to save people from foreclosure by negotiating a mortgage modification or short sale.  Many of these companies have professional sounding names, slick websites and made grand promises. It almost sounds too good to be true! 
After your initial information many ask for negotiation fees to be paid up front.  I'm also seeing marketing from real estate brokers who are requiring sellers to pay money up front for these services.  My understanding is that licensing through the Arizona State Banking Department is required in order to negotiate financing on behalf of another party.  There is absolutely no reason or requirement to pay any fees for someone to negotiate a loan modification and I hate to see people who can't afford to pay these fees get taken advantage of.  Simply go to www.MakingHomeAffordable.gov and you'll find information to help you determine if you would qualify for a mortgage modification.

I get so frustrated when financially distressed homeowners get caught up in these scams and pay their hard earned money to folks who pocket the funds and then the property still goes to foreclosure!  There are a few requirements that are necessary for a loan modification:  the homeowner must have income that can be verified, they must qualify for that payment (it's almost the same as when they originally applied for and qualified for the original loan), and must be able to AFFORD the new payment.  Homeowners can pursue a loan modification and a short sale at the same time.  There is ALOT of financial information required for both these processes and if you are filling out one set of financial documents, it's just as easy to fill out both!  If the loan modification isn't approved, or the new payment offered isn't affordable, the short sale can be pursued instead. 

One business model for short sales involves a professional looking company who offers to solve all your financial problems, including a loan modification and/or a short sale.  They make an offer to purchase your home with a short sale, and then go to the mortgage company for approval of that short sale amount.  Once they receive approval they list the home for sale and attempt to find a buyer who will subsequently purchase the property at a higher price.  When the date of closing occurs the investor closes the short sale with the lender, and then resells the property (or flips it) to the new buyer, pocketing the difference as profit.  Our office has been approached by several of these companies, asking us to list the property for sale.  We have declined these listings because I believe it's WRONG.  Taxpayers are funding this bailout of major banks and lenders.  If the property will sell on the open market to a second buyer at a higher price, then I believe it's morally wrong to participate in a "flipped" sale where the investor pockets the difference.  If the home is truly being sold short of the loan balance, and at market value, then there isn't room for profit for the investor between the short sale and subsequent sale.  While this practice might not be labeled fraudulent at this point, if you really look at this practice from an arms length position, in my opinion it's wrong for private investors to profit from a short sale where taxpayer money is being used to pay the difference between a loan balance and market value.  I believe it is wrong in the same way as it is wrong for the CEO's of these failing banks to pocket enormous paychecks and bonuses.  I've spoken to some of these business people who insist this practice isn't wrong because they are fulling disclosing the fact that the property is being resold to the mortgage company approving the short sale.  Just as it might have been "legal" for home repair contractors to greatly inflate repair prices for necessary repairs following Hurricane Katrina, I still believe it was morally wrong.

I'm proud to be part of an organization that is truly making a difference in people's lives.  That's the Distressed Property Institute.  There are currently over 8000 Realtors in the US who have spent their money and their time to take the intensive training courses to become certified as a Certified Distressed Property Experts.  These Realtors don't charge fees upfront to homesellers, and they are negotiating hundreds of short sales on a weekly basis.  The Institute continues to provide support on a weekly basis as short sale practices change and they've developed a complete system to give homeowners the best chance possible to successfully avoid foreclosure.  If you or someone you know is having difficulty making their payments, or owes more on their property than it's current market value, recommend that they find a Realtor who is a CPDE.  Consumers can access the Institutes' website at www.cdpe.com to locate a CDPE near them.