Real Estate Blog - HELP ME...I've fallen...

Home : Blogs : Karen Monsour,REALTOR® Broward,Palm Beach,Miami/Dade! 954-464-4194 anytime! : www.KarenMonsour.com

HELP ME...I've fallen...

This is the message from many customer's trying to get out of their mortgage debacle.

This blog is to post a question to those of you professionals who read and write on here. I would be interested in knowing the following:

Please define/explain the following terms if you understand and know the definitions:

1. What is a Pre-short Sale?

2. What is a Short Sale?

3. What is a Pre-Foreclosure?

4. What is a true Foreclosure?

Also, at what point are you evicted?

NOW REALIZE, I know some of these answer's, at least I think I do, however, these questions are posed to me every day and I would like to hear expert definitions to improve my explanations of the above.

Those of you who specialize and can give me better explanations please do tell me.

Those of you who have comment's may also add your 2 cents.

Thank you in advance for any information.

http://www.KarenMonsour.com, cell 954-464-4194

Posted by Karen Monsour,REALTOR® Broward,Palm Beach,Miami/Dade! 954-464-4194 anytime! on 02/27/2008 08:15 PM

Comments (34)

short sales, foreclosures, karen monsour, real estate

34 Comments on HELP ME...I've fallen...

FEB

2008

I'm anxious to hear the answers. I've never heard of some of these terms.

That would depend on the state in which the property is located.

HI Karen ~ While we are at it I would like to know what to do with someone who is in a declining area and owes more than their house will appraise for...and has a rate ready to adjust....I have been stumped many times with this one! Thanks for putting this out there!

DeAndrea,

Hopefully we will get some good answers. I know how I understand these terms, however I would like expert to define these to help me give better answer's to my customers.

Thanks for posting and let's see what happens here.

Ken,

I posted this b/c I was recently told by another agent handling a short sale in Florida that the decision as to whether or not the bank would accept the offer was coming from another state. The person making that decision has do idea re: location, CMA, recent sales in the Florida area. So I am waiting for some good answers...stay tuned, I hope I get some.

Thanks for posting.

Mary,

Geeze, that's a tough one...doesn't sound good...maybe someone here has the answer!

Thanks for posting...we will see...

This is what I understand (I'm in Virginia):

Pre-short sale - Never heard of that. Perhaps this is someone contemplating a short sale? I'm not sure how a pre short sale is even possible?

Short sale - Seller owes more than the property is worth, puts it on the market, disclosing the contract will need third party approval.

Pre foreclosure - Whenever I see this term used, it is usually a short sale or a marketing term designed to generate interest in the property. If the owner is upside down and cannot cover the mortgage balance with the proceeds from the sale, it's a short sale and requires lender approval. If the owner is already in default and going to foreclosure, but can still sell and cover the mortgage balance with the proceeds, well, I'm not sure why anyone would advertise the fact, so what is the purpose? A pre foreclosure generally refers to a short sale.

Foreclosure is a REO, which is real estate owned by the bank.

Banks evict occupants (owners or renters) once they have acquired the property. How long this takes depends on the bank, the lawyers and the court. Legally, owners and renters have no right to reside in the property the day the bank owns it.

1. What is a Pre-short Sale? many lenders insist you list the home for sale at what is owed on it for a certain period of time before they will consider a short sale.

2. What is a Short Sale? Selling the home short of what is owed on it. The bank agrees to release the lien despite the fact that you aren't paying all thats owed, and they don't go after you for the rest.

3. What is a Pre-Foreclosure? Pre-Foreclosure is also known as Forbearance, it merely means they have begun the foreclosure process. Usually after being 60 days late.

4. What is a true Foreclosure? Foreclosure simply means they placed the title in a Trusteeship after going before a judge, and it's to be sold at public auction. In Washington, if the auction doesn't bring the minimum they require, then the bank will take title. Until then, it's titled to the Trustee.

Susan,

Thank you for your definitions, I'm anxious to see what the other's say. I think (JMO) a pre-short sale is when the owner's tell you they can no longer pay the mortgage payment after the current month...not sure though...waiting for some answer's.

Another question. Why would the bank want to evict a rentor, why wouldn't they take advantage of the cash flow? Don't they legally have to allow them to live there until the lease agreement expires?

Michael,

Thanks for your info...do you know the answer to my reply to Susan as above? Or at least this portion?

Another question. Why would the bank want to evict a rentor, why wouldn't they take advantage of the cash flow? Don't they legally have to allow them to live there until the lease agreement expires?

Some banks evict them because many investors don't want to be bound by the existing contract the renter had with the previous owner, so it's easier to sell empty. Also, the previous owner may not have properly set aside the security deposits, so there are no funds securing those tenants damages. Better to start over.

The bank has no interest in being a landlord, for one thing, is not set up to manage property and has no lease with the renter, anyway. The renter's relationship is with the former owner. It seems most of them have their hands full as it is without worrying about renters. In Virginia, anyway, no, in the event of a foreclosure, the bank has no obligation to the tenant. This is not true in every state and at least in a couple of counties in Maryland, for example, whether or not rental tenants can be evicted is determined by the timing of certain events.

I really appreciate the definition of pre-foreclosure because I see it continually used in the event of a short sale and the definition above makes a lot more sense. I'm glad to know what the definition really is!

I assume your referring to pre-short sale? Usually when you ask a lender to approve a short sell they will say "well, is it on the market, have you tried to sell it for full value" and surprisingly many haven't.

So lenders may insist they at least try for 45-90 days before they will go short. Sometimes theres not enough time to accommodate that, and it's repo'd. But most of the time after a few week of it sitting there, they will aprove it for short sale.

Michael,

I see. Very interesting. I have to say though, some of the home's I've shown after the eviction still have food on the tables, roaches, fruit flies everywhere, still have content's...some of which I can't describe due to the fact that it would make most people sick in their stomach.

Another question: Wouldn't it behoove the banks to have someone come in and "clean-up" these foreclosures so they show better? Wouldn't they get better offers?

Susan,

That is the purpose of this blog...to get some really good answer's and information here. I have many customer's who are confused as to the difference of short sale vs. pre-foreclosure...perhaps we will get some great answer's on here.

Typically they won't spend a dime on the property. There would be no end to it if they did. First you clean it, then it needs paint, then the plumbings leaking, and the roof. To them, it's just throwing good money after bad.

Buyers at auction often buy these homes sight unseen and pay bare minimum, so theres no reason to give them more than bare minimum in return. Usually they (buyers) remodel them anyway.

Michael,

I see. I have heard of the 45-90 day "try to sell it on your own first" portion of your comment...

Thanks.

Michael,

Investor's do buy sight unseen, however, the customer's looking for a good deal aren't ready to see or smell some of the properties post eviction...me either on occasion...

A home approved for a short sale, is already in pre-foreclosure (forbearance), so thats likely the cause of the confusion. They're not going to approve a home for short sale thats 30 days late for instance!

Michael,

So short sale = pre-foreclosure? Is that correct? Just want to be sure I understand.

Well, I was referring to Trustee sales, if your referring to short-sales that have been abandoned by the owner, that unique. At that point it would fall on the Realtor to clean it up in order to procure a sale and commission.

Trust me, banks don't pay cleaning crews to go around and clean abandoned homes. Many things banks do don't make sense from a common sense approach. One could ask, why don't they simply refi it at a better rate with better terms and let the people try to keep the house? Why sell it at auction for 50-70% of it's value? Only the banking Gods know that, not I?

Pre-foreclosure is the window of opportunity for a short sell. If it's being sold short, it's definitely in pre-foreclosure. Being in pre-foreclosure does not however guarantee you that a short sale will be approved.

Michael,

You bring up a very good point, why DON'T the listing agent's do something to help procure a sale for their customers...or why don't they suggest a little tidying up?

I also wonder the same. Why not offer a refi or work with the customer to refi with the rates as low as they are right now...that would certainly make sense...instead...they just have a lot more short sales and foreclosures...doesn't make any sense to me either.

Michael,

You are so right about "Pre-foreclosure is the window of opportunity for a short sell. If it's being sold short, it's definitely in pre-foreclosure. Being in pre-foreclosure does not however guarantee you that a short sale will be approved." that comment.

I recently had a customer offer exactly what the bank counter to another offer (those buyer's walked) and they still haven't approved my customer's offer of the amount they requested...go figure.

Banks live and die by their rules. They won't refi a client that in pre-foreclosure with those great rates because their FICO doesn't qualify for that rate. Those great rates you hear so much about are for people with scores of around 720-780, pre-foreclosure clients are likely hitting in the low 500's.

There is no one person that approves sale prices at the bank, they go before a board. If you offer less than it's already approved (reconciled) for sale at, then its a longer process. They have to do a second Reconciliation.

Michael,

I see, and this board meet's how often? I've heard only once a month. No wonder the situation is so bad.

WOW!

Well, they don't meet everyday, thats for sure. It's likely gotten more frequent lately, but it's likely once a month, or every two weeks.

Also, keep in mind that moneys not free, there are underwriters that are taking a beating, and they have a bit of say in it. Often they prefer to send it to the auction, and I have seen them get a better price at auction than offered at a short sale. Bear in mind, the sap at auction hasn't seen it, your client has seen it, and wants to inspect it. Sometimes it's smarter to sell it the man with cash thats hasn't seen it, than wait to see if your clients still wants it after inspection and can get a loan in 30 days.

Michael,

What you say is true, however, perhaps if they met more often they wouldn't be in this mess and loosing so much money. Wouldn't it make more sense to meet more often and wouldn't it be saving money...don't they (the banks) loose their credibility with Fannie or Freddie (one of them, not sure which one)?

FEB

2008

Karen. Those are some great questions to ask. I have hesitated getting back into short sales. I still am going to for a bit longer.

Jeff,

I do not like dealing with short sales either, however, people who normally couldn't afford to purchase a home are hoping to snag the "deal of a lifetime" The only problem is that it's taking month's and month's to get any answer.

Karen I think that is what I hate the most. The waiting then the home still goes into foreclosure, Uggggg, Banks.

I'd chime in but it seems like Michael has it under control here!

Shortsales and REOs are not easy business. Its a different world in Real Estate!

Jeff,

I know right. My broker told me to enter in to all my listing remarks..."this is NOT a short sale" in South Florida...agent's have stopped showing short sales...they just want good old fashioned sales!

Chad,

No one is in control of my blog except me...please do give us you opinions in your words...

This blog does not allow anonymous comments