Hi Troy: I am going to a closing next week and it will be my first short sale. I was able to sell the property at a reduced price and beat the foreclosure that probably would have taken place in July. Fortunately, I have a very good rapport with the sellers and they shared all their information with me so I could talk to the right people. It is a very stressful process; especially if you know the sellers and it is a sad situation. What I learned was to dedicate several hours several times a week and call, fax and e-mail to the top people in the lending institution. I do believe that mine worked because I was working with two banks. I researched who the CEO's were and started at the top. Believe it or not, I received phone calls and faxes with information directing me to the people in charge of the loan. I also learned that some people are just paper pushers and could care less about your sellers. I was told several times: "do you know how many files I have on my desk right now? I can't take the time to stop everything and work on yours. "I would then find their supervisor and talk to them. It is also important to know that I wrote a very good letter describing my sellers home, what happened to them and the need to get this approval for a short sale so that we could all go to a successful closing. Remember this: banks don't want to be in the real estate business. Especially not today.
The second mortgagee had to accept a much lower payout figure than what was owed. It was their only option or it would go to foreclosure and they would get nothing. I was some what frustrated by the bank that held the first mortgage since they could have cared less. They took six weeks before they would give me a payoff figure. After receiving the payoff I had to go back again to the second mortgagee and ask them to take even less than they originally agreed to. Again, what was their option? I did learn that once a foreclosure procedure has begun, there is a loss mitigation company who is handling things for the first mortgagee. They get nothing if the home goes to foreclosure. We as the realtor are also out too. So you must know that you can put in hours, days and weeks and not get a commission. It is important to look at the whole scenario and figure out if you have enough time left to get the short sale to a closing.
What sellers need to understand is that they have options before foreclosure. If they work with a realtor who is persistent and knows how to contact the right people who can give an approval for a short sale, then they can be saved from a foreclosure. President Bush signed into law H.R. 3648, The Mortgage Debt Relief Act of 2007, whereby in certain circumstances, a homeowner does not have to pay federal income tax on debt forgiven on a loan secured by a qualified principal residence via a short sale, foreclosure, deed in lieu, loan workout or refinance where the loan amount was reduced and forgiven in order for the homeowner to keep the property.
There is another hurdle you have to overcome and that is the buyer. Even though you tell them that you won't know an answer or a closing date for months they can get cold feet. Make sure that your contract contains wording that it is subject to third party approval and move the closing date out as late as possible. The best scenario is to have a cash buyer who doesn't have anything to sell.
It's all a learning experience. I'm still not sure that I want to do this again since it takes up so much of your time. In my case, the sellers are elderly and got into trouble due to medical bills. I had to help them since I recognized that they never should have been given a second mortgage. In fact if they were denied the second mortgage, they would still have their home.
I hope some of this helps. Feel free to ask me any questions.
Jeanmarie McSpedon, RE/MAX At Barnegat Bay
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