Help your client avoid foreclosure!

I recently attended a seminar sponsored by the REBAC (Real Estate Buyer's Agent Council) of NAR (National Association of Realtors) titled 'FORECLOSURE OPPORTUNITIES FOR BUYER-CLIENTS." This course is approved as an elective for the ABR (Accredited Buyer Representative). Although geared to present us with opportunities for our buyer clients, I was hoping to get information that could be used on listings. From the first day I started in real estate I have been focused on listings. I was fortunate that my team, the other 6 real estate agents at my round table, were also focused on listings! As each assignment was doled out to the teams we always turned the question around and looked at it from the listing side. Especially when the instructor went out of her way to impress on all that if you get involved in a pre-foreclosure transaction involving a unlisted property you could easily get caught in a situation of implied agency!We all understood how that was very likely to happen. Just think about it... you ask the seller for information about their mortgage balance, other possible liens or judgements against the title of the house, property disclosure ( a law in our great state of NJ). Most of these questions are exactly the same questions a real estate agent would ask their seller clients. We all agreed that we would list the house before introducing any perspective buyer. Okay, so now you have a listing that is in pre-foreclosure. If you have a buyer to introduce, don't be afraid to do so. A distinctive feature of short sales is that the real estate agent is typically compensated by means of a fee negotiated with the lender, not by the seller or buyer.  So go ahead, write up a Contract of Sale, make sure that it si subject to lenders approval of a short sale. make sure you also add a Hold harmless clause. You also want to request that the lender agree to mark the loan as "paid as agreed". Be sure to council both parties that this could take time. If time is of the essence,  then this might not be the right property for this buyer. Now what to do next? First, get the seller to sign a release authorizing their lender to disclose information to you regarding their existing mortgage, do this on all mortgages against the title. Now you will know what the seller owes the lender. Nest step is determine if the seller owes more than the  market current market value. Let's assume this is the scenario. Now you call the lender and ask to speak to the LMS (Loss Mitigation Specialist-the person who is responsible for determining if a workout-plan is possible) and ask that they please send you their short sale package. Don't ask if they would consider a short sale, assume they will. What is a short sale?A short sale occurs when the lender decides that it is in their best interests to sell the property for less than the mortgage balance owed on it. Do recommend that your sellers and buyers involved in a short sale get legal council, a attorney could really be helpful down the road. Once you have the short sale package from the lender you need to take a very careful look at the lenders list of requirements to consider the short sale. If it's possible to comply with most of the requirements then put the package together ( get the lawyers to help too) and send it off the the LMS. At this time it is important for the buyers to do some due-diligence. A short sale can be a high risk endeavor because of unknown baggage. It's time for the buyer to have title searches done to determine if there are any other liens or judgements against the title of the property in addition to the sellers mortgage(s). The good news is lenders are not eager to initiate foreclosure, they do not want to maintain an inventory of foreclosed properties. Banks are in the business of lending money, not owning real estate. As you and the seller and the buyer and the lawyers are preparing all the documents required for the lender to decide on the short sale, the lender will be ordering an appraisal to determine the current value of the property. When all the information and documentation is ready the lender will review the package and make their decision. I have had this go a number of ways, either agreeing to the short sale, refusing the short sale or asking for more money, in essence a counter-offer. The lender will base their decision on the current value of the house and if the seller is walking away with any equity. The lender will be looking for current market value and if there should be any equity the seller will have to roll that into the sale. You have a good chance that the short sale will be approved if all the figures are in order. Remember, this process takes time! The good news is that you can help the seller avoid a foreclosure and at the same time get a buyer happily involved in home ownership at a good price! More to come in future blogs about other alternatives to foreclosure.