Does The Foreclosure Moratorium Affect Short Sales?

 You more than likely have heard that many banks nationwide are placing a moratorium on foreclosures while they and the government work out the legal issues in judicial states*. I have had a lot of inquiries in regards to short sales. The number one concern REALTORS have is does this affect short sales and how does it affect those that are currently in the negotiation process with the banks?

Of course when the moratorium was announced this was one of my concerns as well.  I have done a lot of research and made a lot of phone calls to all the banks that we work with (Chase, Bank of America, GMAC, Wells Fargo, CITI Group, Wachovia and other banks) that may be participating in the foreclosure moratorium and the answer is NO.

Foreclosures and short sales are two different processes used by a bank to complete a similar outcome.   However, since the short sale is initiated by the home owner and NOT the bank and does not involve a legal process, short sales will not be affected.  In fact, due to the frustration that the moratorium places on those who want to be out of their home quickly, we may see more short sales on the market. 

This moratorium is not surprising. The banks are overwhelmed with the high volume of transactions and will continue to be unless they have the systems in place and properly trained employees ready to handle this volume. What is more disappointing is knowing that many homes could have been saved if the paperwork was read thoroughly and processed accordingly . This is not okay. This only frightens homeowners and stops them from reaching out for help. Who can they trust? Maybe some of these homeowners could have been processed as a short sale if they had the right real estate professional to guide them.

 * California is a non- judicial state however to date, Bank of America is the only lender that has extended its foreclosure moratorium to California, where the vast majority of foreclosures are conducted without a court order.

How can I do my part as a Real Estate professional?

I believe short sales are still the best alternative to avoid foreclosure for homeowners that simply cannot qualify for a loan modification. Here are some tips that will help you moving forward:

a)      Arm yourself with the most up to date short sale information so that you are able to give informed answers to questions that a homeowner in pre-foreclosure might have. Homeowners need someone to tell them what to do. They need to know all the options available to them.

b)     Gain their trust. LISTEN to them. Offer them some hope. Offer to help them find a rental and get them enrolled in a credit recovery program at the end of the transaction. This will make them feel that you truly have their best interest in mind and are here to help them achieve their goals.

c)      Have them talk to a Real Estate attorney and a CPA to understand the tax ramifications and possibility of a deficiency judgment. 

d)     Make sure your client has been thoroughly pre-qualified and have all your documents collected and paperwork completed with no holes.

e)      Actively list the property creating a listing history to support the value of the offer.

f)       Submit a complete package and follow up tenaciously.

It is our job to ensure proper procedure has been followed and all paperwork is true and complete. Whoever is on the other end at the bank may not be looking as deeply into your transaction as you are and therefore not giving you a fair chance to negotiate the transaction, so the goal is to know your transaction inside and out and educate the person receiving it at the bank.

I believe if we can do our part and help as many people as we can in their time of need we will persevere under any set of circumstances.

(Quote) "All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership." --John Kenneth Galbraith

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PROFESSIONAL SHORT SALE NEGOTIATORS 

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Call today to find out how Lotus Realty Group can assist you in closing your short sale transactions or go to WWW.LotusRealtyGroup.com

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