The New Wild West of Real Estate...Negotiating a Short Sale ( Part 6) The End Game!

By
Real Estate Broker/Owner with Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate

*This is the Conclusion of a 6 Part Series on Short Sales.  Click here to read the Entire Series.

cowboy with bucking broncoPerhaps the most daunting element in a short sale may be the period AFTER you have secured an offer.  You may be in one of two stages:  the Pre-Foreclosure Stage in which payments are being made but are late and it is increasingly difficult to keep your head above water or in the Redemption Stage which in the State of Michigan is normally 6 months not withstanding some special circumstances.  (Contact our office if you need information about situations in which the redemption period may be shortened)

After you have an offer which is acceptable to both parties, the purchase agreement must now be presented to the bank.  You will need to give formal notification/permission to the bank to allow them to communicate with your real estate agent.

In addition, you will be requested to provide documentation of the circumstances which have created the financial hardship.  This may include things like:  a letter from you explaining the situation as you see it, bank statements, tax statements, your credit report etc.  If you are negotiating a Short Sale on more than one mortgage, these steps may be duplicated by each lender.

Since there are few regulations that govern the process of negotiating a Short Sale (unlike the Collection Process in which there are some consumer rights) each lender develops it's own methodology for dealing with this situation.  Some are more efficient than others. The time required to negotiate a Short Sale can range from a couple of days to several months!

Your file may be handled by an individual, a team or a committee.  You will eventually be assigned an individual who is handling your case number.  Keep in mind that he/she may have literally hundreds of files that they are handling at any one time.  Be prepared to be persistent if you need to communicate with them.  I have come to believe that they really do NOT like to answer their phones...probably because the news they are likely to hear is usually not good. It is in your best interest to be polite.  Shouting and rudeness may only succeed in thrusting your file to the bottom of a large pile of files!  Keep accurate notes of your conversations.  They may not remember what they told you the last time you were fortunate enough to get through to a Live Person!

If done properly, Short Sale can assist in a faster sale of your home if it has been priced appropriately.  Our office has successfully sold and negotiated a number of Short Sales and our Client Specialist are available to give you an evaluation and discuss the specific parameters which may be appropriate for you.  In addition to the information supplied by you AND the completed purchase agreement, your agent will be required to provide a complete statement of ALL the proceeds which will be secured by the sale.  This statement will detail all liens and encumbrances against the property including taxes as outlined in the terms of the purchase agreement.

You will be notified if your offer is accepted, rejected or modified.  A modification of your accepted offer (by acceptance I am referring to the agreement between you and the potential buyer) will set in motion another round of negotiations with the buyer to come to a resolution with any NEW issues raised by the bank's counter-offer. 

Due to the fact that the bank will be making the final decision anyway and because time is of the essence, it's probably better to simply forward offers as they are received rather than wasting time negotiating on a deal for which you will not have final authority to make a binding decision.  If you are adamant about your refusal to continue paying on a home that you no longer own, make sure your agent includes wording in your contract which will protect you from agreeing to this.  Be advised that this will NOT necessarily preclude the bank from going after you for any balance owed even if you choose to default and go into Foreclosure.

To end on a Positive note a Successfully Negotiated Short Sale CAN wipe out Most if not ALL of the Debt that you have incurred through the purchase of a home.  At Audu Real Estate we have successfully negotiated a "Payment of the Debt in FULL' when we have closed on Short Sales.  This can prevent  the scenario in which the Lender tries to collect money on the balance owed on the loan after the home has been Sold. 

Our hope is that you have found the information contained in this series beneficial and helpful.  We encourage our clients to obtain counsel from qualified professionals in other disciplines such as Accountant, Lawyers and Mortgage Specialist to assist in a comprehensive and accurate evaluation of their situation

The fact is that today, Short Sales are an unpleasant reality in EVERY  Price Range.  There are very few communities that have not been affected over the past 24 - 36 months.  If you would like a private consultation to discuss your options or to obtain a comprehensive evaluation of your home, please contact us.

Copyright 2007 Audu Real Estate  All Rights Reserved

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Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!
Dealing with the banks has been a very daunting task.  Please share any experiences or successes that you have had in facilitating this type of a negotiation with the bank.  Thanks.
Jul 17, 2007 12:15 PM #1
Rainmaker
1,142,060
Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Lola, This has been an excellent series. I actually made the decision about a month ago to not take on anymore short sale listings. The banks have been really difficult to deal with. I think they are just understaffed and not prepared for the onslaught. I spent 6 months on my last one only to end up loosing it to foreclosure. I had submitted 3 offers during the listing but the bank would take so long to get back with us that the buyers couldn't wait any longer. I'm talking 90+ days!! Very frustrating.
Jul 18, 2007 12:15 PM #2
Rainer
234,048
Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL
SFR, SRES, CNC

Hello Lola:  I am actually in my first Looooooooooooooong short sale.  We have been pending a sale for 3 months!  This is all new to me and i've never had formal training.  The Attorney for the seller has been sharing information with me about how things are all backed up due to so many foreclosures.  I have an appointment tomorrow with the appraisal company sent by the lender.  My client, (seller) seems to think i'm doing a fantabulous job and keeps praising me!  duh???? 

Your series is the MOST i've learned on this long short sale.  I must agree with Bryant..... don't think i want to do this anymore.  Thanks for your very timely reports.

Jul 18, 2007 12:57 PM #3
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Hi Bryant,

I can certainly appreciate and understand your acquired distaste for this type of negotiation.  Anyone who goes through the experience tends to not want to do it again...at least not right away!  Right now our local board has about 10% of ALLListings in Short Sales or Foreclosures, so being conversant and knowledgable about the process has become a necessary tool in the real estate agent's kit.  Every time you go into the process, you never know how things will turn out. 

I've submitted an offer in which the bank would have netted within $2,000 of EVERYTHING owed on the property and they turned it down!  Amazing but TRUE.  I wonder how much the Loan Mitigation Specialists are being paid to handle this task and how much the banks are loosing because they do not have the systems in place to properly evaluate the losses they are occurring because of inaction and poorly trained staff.

Jul 18, 2007 01:30 PM #4
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Hi Diane,  I feel your pain. :)  Bryant's comment about negotiating for several months with multiple offers only to have the bank allow the home to go into foreclosure is unsettling.  I would encourage you to be persistent.  It is also important to keep an eye on when the redemption period expires because they are VERY FIRM on the date.  At the stroke of midnight, if it is not Sold, the bank gets the home back in their hands. 

While they do not want to own houses, they cut their losses somewhat if the home has mortgage insurance and they will get something back on the re-sale.  The other benefit is that the "bad debt" is wiped off their book in terms of their ability to loan money again which is a primary objective from a banking perspective. 

So, these are some things to keep in mind regarding if a Short Sale is worth the marketing effort.  Perhaps getting Millions of homes back will jump start some more proactive systems and processes by the lending industry.

Jul 18, 2007 01:38 PM #5
Rainmaker
453,651
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904
Lola this is very true and it may alter how we need to do business inthe future, as many more creative loans come due. These are challenging and changing times. The road ahead may be bumpier than before, but eventually it will all smooth out.  It is not bus8iness as usual when dealing with short sales for sure.
Jul 19, 2007 12:04 AM #6
Rainmaker
707,379
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Lola, as a general rule bankers are stupid. They do not "think outside the box" like we are forced to do. It will serve them right if they are shut down by banking regulators for insufficient capital. Every REO is "charged" against the bank's capital. When capital is reduced to a certain point the bank is bankrupt.

Your experience with the bank that turned down the offer within $2,000 of full satisfaction should be communicated to the banking regulators for that lending institution and the mortgage insurer also.

These jerks need to be held accountable.

Title companies report that the average foreclosure costs $14,000. A $2,000 loss and no REO should have been the correct decision for that lender.

If I owned stock in that institution or had an account there I would consider a lawsuit against them for mis-management and waste of assets.

Bill Roberts

Jul 19, 2007 03:21 AM #7
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Hi Allison,

You're right about the fact that as more of these "creative financing" deals come due or adjust, the situation may get worse before it gets better.  Hopefully, this will finally result in the focus being placed an acknowledging excess and unwise judgements and move on to resolving as many of these situations as efficiently as possible.

Jul 19, 2007 04:56 AM #8
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Hi Bill, Thanks for your comment.  By virtue of the fact that we will all be significantly impacted by the demise of more banks, we all, in a sense, already "own stock" in this situation.  I found the average loss of $14,000 to be an interesting number.  If you could provide a link to that information, I would like to include it in the post. 

You're right in your observation that there has been a tremendous amount of waste and mismanagement and hopefully, we will become better at creating systems that can effectively address these issues.

Jul 19, 2007 06:52 AM #9
Rainmaker
707,379
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Hi Lola, I got that number from a short sale seminar put on by Stewart Title. I'm not sure where they got the "fact."

Bill Roberts

Jul 19, 2007 08:18 AM #10
Rainmaker
281,679
Mike Mitchell
Real Living Kee Realty - Saint Clair Shores, MI
REALTOR (R)
Lola... what a great series of posts. I have not participated in a short sale negotiation yet, but I am seeing more and more listings that are subject to short sale approval. Thanks for all the helpful advice!
Jul 19, 2007 02:56 PM #11
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!
Hi Bill, Thanks for following up with source of your earlier comment.  I'm going to ask around to see if I can get some numbers from our title folks out here in Michigan.  I am SURE the banks know what these numbers are...in terms of average losses...and it would be an important piece of knowledge for real estate agents involved in negotiations of this sort.
Jul 20, 2007 03:39 AM #12
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!
Hi Mike, Thanks for stopping by and commenting.  You've been fortunate not to have to deal with this so far.  However, in the event that you may need to do so in the future, I hope this series serves as a source of information and is a helpful reference.  Every situation will be different because there are so many types of circumstances and details that effect the process, but knowledge of the basics is always useful.
Jul 20, 2007 03:43 AM #13
Rainer
103,100
Angie Vandenbergh
Crye-Leike, Realtors - Memphis, TN
A Crye-Leike Blogger

Just in case you didn't know... this post was featured in the Active Rain Week in Review 7/15/07-7/22/07, written by Toby Boyce. Congratulations!

Jul 22, 2007 11:47 PM #14
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!
Hi Angie,  Thanks so much for letting me know about the Active Rain Week in Review Feature!  I wasn't on-line yesterday and did not know, so I appreciate the heads up.
Jul 23, 2007 12:44 AM #15
Rainmaker
1,172,170
Joe Manausa
Joe Manausa Real Estate - Tallahassee, FL
Tallahassee Real Estate
Excellent post Lola, very informative. We are starting to see these in great volume now, so your piece was not only informative, it was timely!
Jul 30, 2007 11:26 PM #16
Rainmaker
387,816
Lola Audu
Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI
Audu Real Estate~Grand Rapids, MI ~Welcome Home!
Hi Joe, Thanks for your comment.  These types of sales are becoming increasingly common throughout the country. It's important that we help our clients to understand how the process is likely to proceed.
Jul 31, 2007 03:43 AM #17
Rainer
25,882
Marie Avery
Marie Avery/RE/MAX Alliance Group - Bradenton, FL
Bradenton Real Estate
Great information. Thank you. I'm still learning alot as the wave of short sale situations seems to be coming ashore quickly. (Can you tell I'm in Florida?)
Sep 09, 2007 05:44 AM #18
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