Home : Blogs : Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc : Broker Bryant's Real Estate Ramblings

Short sales. It's not only up to the Lender.

The following is the reblogged post from Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc:

This is the third part of my series on short sales. As way of disclosure, I am NOT an expert on short sales, I am using this series as a way for me to think through the process and hopefully become better prepared to help some Sellers who may qualify for a short sale.
A short sale can be a very complicated transaction. Not only are we negotiating with the Lender but there is another entity who may be involved as well....the Private Mortgage Insurance (PMI) Company. Most Buyers, that did not put at least 20% down when they purchased their property, were required to purchase PMI for the benefit of the Lender.
PMI protects the Lender for loses usually up to 20% of the loan amount. So, they have a say so in whether or not a short sale is accepted.
I am in the process of negotiating a short sale right now where I am actually negotiating with the PMI Company instead of the Lender. This is a first for me but so far it seems to be going well. The lady I am dealing with has been very helpful and she is the one that is handling the negotiations with the Lender. Have you ever done this before?
I'm very anxious to see how this plays out. Brian Brady wrote a very good post about this a few months ago titled "A Realtor's guide to PMI and Short Sales". Give it quick read.
Anyway, the point of this post is to make you aware of the fact that a short sale is a lot more complicated than just getting the Lender to agree to a price. The Lender is looking at the bottom line. If the short sale does not NET them more than a foreclosure then it ain't happening.
When meeting with potential Sellers you need to find out if they have PMI. If they do, then do the math. Brian is better at that than I am so if you haven't already....go read his post.
OK that's it for today. These are my thoughts. What are yours?
Other posts in the series:
A "short sale" is an option NOT an entitlement!
Becoming a better "short sale" expert. A series by Broker Bryant.
Copyright © 2007 Broker Bryant Real Estate Ramblings | All Rights Reserved

Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 08/09/2008 08:06 AM

Comments (27)

short sale, poinciana florida

Originally posted at: Selling Poinciana One Property at a Time.: Short sales. It's not only up to the Lender.

27 Comments on Short sales. It's not only up to the Lender.

AUG

2008

Ineteresting. I haven't had a contact from a single home owner with PMI. So far, every single one has had 80/20 loans and no PMI.

Up until about 2003, most homes that we sold were financed with 80/15/5 or 80/10/10 loans. We also had a number of new homes that were sold with 5% down and financed PMI, but about 2003, things started to change, especially with the Alt-A instruments.

Bryant,

Thanks for the post. I was under the impression that a short sales netted the lender more than a foreclosure. With a foreclosure, there are the cost of the sheriff's sale, sizable fees to an asset management company and usually a higher rate of commission for Realtors, not to mention offers below the asking price which is supposedly based upon an appraisal.

Thanks for this series as it is very helpful to some of us who are in different markets where we don't have as many short sales. Things have changed since I did them in the early 1990's in California. I hadn't thought of the PMI side...great insight for us.

Ah ha! PMI! Very good post. I guess they would have something to say about the transaction. I agree with Lenn too, almost every loan I did dodged that expensive PMI.

I, also, haven't had many clients with PMI in several years, and never thought to address this. THank you for bringing it to my/our attention.

BB - I hope it works out for you. This was the 1st time I have heard of negotiating with the PMI company.

BB, I was looking for some good old fashion humor after reading my last post. Yes, I remember this post. You and others really are creating a lot of short sale experts. We probably should have a post every once in a while about market conditions, changes etc. What do we need to prepare for next? I know, the weekend. That sounded good but I am working both days. Take care. AJ

I just closed a dhort sale yesterday with 10% down - there had been no issues. But this is helpful info.

Thank you BB for the insight. We have helped negotiate several short sales but have not run into this issue yet but I'm sure it is out there lurking on the horizon as yours is not the first post I have read on this issue. I will bookmark this post for future refrence.

BB,

Back in 2003 I believe...I experienced my first short sale and that was when most people didn't even know what they were. I ended up negotiating myself with a bit of help from my broker at the time. I had no idea what I was doing and it was with a private investor. I didn't even know that it could be with an investor or a lender for that matter...after all the waiting which was only about 60 days...it closed and we got paid a XXXXX% commish. Those can be the most difficult ones in my opinion. PMI companies are even harder from what I see...I'm not sure if I'd rather deal with the bank or the latter.

I am glad I haven't had to deal much with them in my area. Short sales are not fun for anyone involved.

Lenn, Thus far every short sale I'm dealing with involves PMI. BUT it wasn't always purchased by the homeowner. In some cases the lenders bought their own policies because they saw this mess coming. Also, after the PMI company approves the file it may then have to go through Freddie Mac or Fannie Mae as well. Then once we finally get all of these aprrovals it's time to start working on the buyer side. I have 9 short sales that I'm working on right now. Needless to say I am spending a lot of time of the phones.

Randy you are fortunate that they are not common in your market. In mine if you aren't working short sales you aren't working.

Neal, I would guess you are getting quite e few short sale listings in your area. Are you working them?

Judy, You want to ask the lenders this right upfront. PMI can really slow the process up. Other than the extra time involved I haven't noticed any negatives. I think all we can do is learn as we go.

Hi Carol, Good for you!!

AJ have a good weekend my friend. I haven't had much of sense of hunmor this week. I need to work on that.

Bill, It did catch me off gaurd. Not that they were involved and had a say so but that I actaully got to speak with them.

William, They normally do. You'd think the lenders would be excited about getting these short sales done but they're not. I think it's just because they are overwhelmed. They are getting a lot better.

Hi Diane, I don't think that much has changed. We're still just asking th lien holder to take less noney. Of course now we are not just asking Mr Banker down by the hardware stoe :)

Donna, Just remeber whether the homeowner bought it or not it may still be there.

Hi Rebecca, Thanks for stopping by.

OMG! You know, the whole PMI issue never even entered my mind! So how many banks are collecting the PMI, and foreclosing too, without givng sellers the option of a short sale? I'm sure there have to be banks that are taking advantage of the sellers.

AUG

2008

Bryant - Just when you think you are up to speed on most of what you need to know to help your client, issues like this pop up. Thanks for sharing. I for one will be very happy to do a little less short sale business---nothing has made me feel less professional than these sales whether representing the seller or the buyer.

BB - what a great post - I have been so busy trying to keep everything moving I missed this series - certainly will be going back and reading it... great info - thanks for your continued education to all of us

Thanks for the information - I hadn't thought about PMI which is popular here. We're just now seeing short sales pop up; I know of only two in our entire MLS.

I've done a few BPOs for short sale transactions. The lenders love to nitpick at the details on these. Every lender is different though. But most are a pain in the neck even on the easy deals.

I'm just starting another short sale and my biggest concern is the lack of response from the lender. We'll do what we can starting on Monday.

AUG

2008

Bryant, I feel for you with the whole PMI thing. Imagine having to deal with two parties that collectively need to approve a decision based on numbers on a piece of paper. Good luck!

Thanks for the series. I havent dealt with a situation like this yet.

A lot of work...with little reward. I think what I object to the most, is the subjective nature of the lender with regard to compensation. Tough lumps, if the lender chooses not to pay you right? No other profession have such loose framework for getting paid for what you do than that of Realtor. Not my cup of tea. However, if it your cup of tea, will that be one lump or two?

Thanks, BB- our nightmare short sale didn't involve PMI, but knowing that it's likely there is a great heads-up.

BB - This was very useful information for someone whose short sale experience has always been on the buy side of things. I never even thought about PMI being an issue. Appreciate the eye-opening experience, and YOUR experience.

Jeff

AUG

2008

Bryant and Lenn- You are fortunate not to have run into this. Even with the 80/30, 90/10, 80/10/10 loans that the borrower did not have to have PMI when they bought the house, the lender can at any time put on their own PMI as long as they pay for it. During a short sale it can pop up on you! We had a seller who even sent in all her proof that she did not have PMI, but the lender sent her back that he did put it on when the market started going down. And so now they are in the mix. And yes, Bryant you must negotiate with the PMI company. It is easier when you can go direct to the PMI company and deal direct with them although if the servicer is handling the short sale they will want to shield that info because they want to be in control of working with the PMI. We asked for the acceptance letter, then got the PMI company name off of that, and we then went straight to them. We closed on the short sale with no deficiency and no note to our seller.

Katerina, Negotiating with PMI company was much easier than dealing with the lender. The lady I was dealing with had been doing this for a long time and she was very helpful. She LOVED talking about the process and actually kept me on the phone for about an hour one time explaining the entire process to me!!! That was awesome.

OCT

ugg boots nike sb ghd Hair Straighteners ugg boots uk nike dunks ghd Hair Straightener classic ugg boots nike dunk sb ghd straightener

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?