4 n www.reweekly.com n 07-16-09
Putting the short back in short sale By Steve Bergsman Inman News Service
Lately, homebuyers are seeing more and more short-sale opportunities, but it seems as if fewer purchases are actually being completed. The perception in this case is correct. The short-sale process has become a nightmare: it goes on forever, sometimes never coming to a satisfactory conclusion even after months of effort. All I can say is, "Hang in there, folks, help is on the way." According to industry sources, the playing field will soon begin to make more sense to buyers as servicers (the folks who actually handle your loan) will either move atrisk loans to special servicers that are experienced in this field and/or set parameters ahead of bids. "There are going to be a lot more short sales coming into the system," predicts Scott Thompson, a principal in Mortgage Resolution Services Inc. in Rancho Cordova, Calif. "Servicers have done a lousy job. They know it and are now looking to solve the problem." This is a necessity, Thompson adds, "as right now the queues are long and getting longer day by day." The short sale seems complicated -- mostly because it takes so darn long to accomplish -- but it's not. The basic short sale happens when the proceeds from the sale of a property are less than the balance owed on the loan (secured by the property being sold). The key in all of this is the lender accepting a price that is less than the amount owed on the property -- and the
lender would do that to avoid a foreclosure situation, which can be a lengthy and sometimes costly process. For buyers, a short sale is the chance to acquire a property at discount. More often than not, however, the process has been gummed up. The numbers I hear are: just one to three out of 10 applications get accepted; and while the process can take as little as 45 days, it has been taking on average 90 to 120 days with some wayward dealings going on for nine months. The principal difficulties in the process can be isolated to the agents (especially the listing agents!) and banks. Let's start with the latter first because things on this side of the process are changing. According to Thompson, a number of major servicers including Fannie Mae, JPMorgan Chase & Co., Citigroup Inc. and OneWest Bank Group (formerly IndyMac Bank) are putting systems in place to more easily identify which borrowers have attempted loan modification programs and failed or are well into the default process. Secondly, and this is a key point, they are going to give price certainty in the case of a short sale; the servicers will give price guidance, telling the agents a price range for the short sales. Finally, many of at-risk loans will shift over to a special servicer, an asset manager experienced in handling REO situations. "The special servicers will run a determination on these properties
as which should come to market, engage in an outreach effort to the homeowners so as to avoid foreclosure and if all else fails to bring the property to market with pricing guidance where the buyer will know that a deal won't fail because of price," says Thompson. The short sale is different from a common house acquisition, and, unfortunately, not enough agents have experience in this type of deal -- and many just don't get it right. Two things agents often get wrong are buyer education and packaging, says Speare Valasakos, a principal in The Frontline Group in San Diego. "Part of the challenge is, a lot of agents are not educating the buyers upfront as to what the process will be, so they go through it, get the buyer, get an offer, package and submit, and the buyer eventually gets nervous and by the time the sale is accepted they go away." Secondly, the seller's agent needs to be able to put together a proper package of documents to get the lender to look at the file. "A loss mitigator is dealing with hundreds of files, so if you don't have a complete package and it is not done professionally, it goes to the bottom of the stack," says Valasakos. "An inexperienced agent doesn't give the lender the tools to get a short sale completed." All that being said, here are some things that can be done to smooth the process: 1) Prequalify the listing agent. If the listing agent hasn't even started getting from the seller the key doc-
uments -- tax returns, bank statements, pay stubs, in short, the completion of the "hardship package" -- then the property should not be listed because the agent is nowhere near ready to close a deal. 2) When a property is found, demand a commitment from the seller. In lots of areas, such as California, there is a provision in regulations that allows the seller to continue marketing the property during the short-sale process. However, your agent should have written into the contract that you are the primary buyer and any other offers that come in are backup offers. 3) Many lenders don't look at a short sale unless there is a viable offer in hand. Every agent should have an arsenal of investor clients. If the agent representing the investors can't bring them to the table, she can then go to her investor base and say, "Would you make a fair offer on this property? That allows us to start the foreclosure process. We will give you a 72-hour clause to perform and then substitute a higher offer in there." 4) Broker price opinions are needed for sales, but since brokers doing the valuations are paid so little, they often do no more than a drive-by. However, if you can give the broker background on the property, list what repairs are needed and offer comparables, the valuation can be more accurate. "The agent," says Valasakos, "is the gatekeeper to getting the short sale accepted."
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ISSUE 39
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Renting tips: Know what to expext in your lease By Robert Griswold Inman News Service
Q: I have lived by myself in an apartment for the last 12 years. I am planning to get married in the fall and I am in the middle of a 12month lease where I am the only authorized tenant. The lease is actually quite favorable, as I renewed it last December when the landlord was offering a great incentive for lease renewals. My concern is that if my wife moves in with me, the landlord might consider me to be in violation of my lease and could renegotiate to the much higher rental rate
that new incoming tenants are now paying for a comparable apartment. What can I do to maintain my current favorable lease terms if my wife moves in with me? A: I could see some landlords taking the position that bringing in a new adult tenant who is not authorized in the lease could be grounds for a claim that you have violated the lease. However, a prudent landlord will look at this as a positive move in these tough economic times, as there will be two potential income earners that can help cover the rent. Of course, communication here
is essential and you should immediately contact your landlord and be upfront with him about your plans. Tell him that you would like to add your future wife to the lease and will have her complete a rental application as soon as possible. You might even see if he is willing to extend the current lease or sign a new lease at comparable terms for another 12 months. Good tenants are always a valuable commodity, and savvy landlords now more than ever should be willing to work with their longterm, problem-free tenants. You are an asset to the building and it is
unlikely that your landlord will seek to leverage the change in your family status to break your lease. If you still believe that your landlord will have reservations, then you might want to consider preparing a narrative or almost a brief resume of the qualifications of your wife as a prospective tenant. In other words, if she has a good tenant history then you could provide references or maybe she can get a reference letter from her current landlord.
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