New Short Sale Rules to Consider in 2011

By Cari Droulet

Lotus Realty Group-

With one out of five borrowers underwater on their home and an estimated 1.5 million foreclosures scheduled for 2011, the opportunity for short sales will be better than ever. Banks usually see a 20-30% better execution price on a short sale versus an REO sale. With the foreclosure volume and current and pending REO inventories, servicers will be pressed to do more short sales in 2011.

I have done a lot of research into how Banks will be handling short sales this year. It is no secret that when short sales first hit the market there was not a lot of knowledge from REALTORS, homeowners or Banks on how to effectively handle a short sale. Learning has been through trial and error. Each bank has different guidelines and these are changing constantly. In this environment it is critical to know what type of deal to take, and how to properly put a short sale package together.

The good news is lenders are making an effort to minimize the time it takes to close the transaction but in return they will be tightening up their guidelines and will expect all of us to abide those rules if we want to be successful. 

Here are some rules to consider this year:

Some of the major Banks including Bank of America, Wells Fargo, Chase and Wachovia will be implementing the following:

·        There will be no postponements of Trustee Sales and NO extensions of closings on Short Sale approvals past the approval date. They all want to clean out their inventory as quickly as possible.

·        Banks have put systems in place to speed up the short sale approvals.  Wachovia has cut their paperwork to 13 pages and will send a representative with the agent to meet the seller and will provide an approval within 14 days. They are also paying a 6% commission.  (I have a transaction with Wachovia right now and it has been moving faster than most.)

·        Do not call them the “lender” – they were the lender when they made the loan but once the homeowner went into default, they became “Debt Settlement Companies” on the loan. This adds a new perspective to the homeowner that feels that they can stay in the property forever without paying.

·        They are not paying attorney fees to attorneys that the borrower has hired to fight the foreclosure. If it shows up on the HUD it will be removed.

·        They are not paying third party negotiator fees.

·        These companies are willing to work with REALTORS who truly have their client and the bank’s best interest in mind.

·        They are paying extra attention to offers that are two low.

With these guidelines in place it is important to make sure that we have the following before submitting a short sale:

A)  A qualified seller

B)   A listing history

C)  A qualified and committed buyer

D)  A complete short sale package with all applicable documents

E)   A solid proposal (HUD)

I believe that short sales are going to be massive this year and with the Banks finally tightening up and creating better systems and incentives, short sales are going to close much faster.

REALTORS, what is in your business plan this year? What are you doing to create a system that will allow you to build your short sale business? How often are you out there prospecting and how do you know if you are taking the listings that are going to be successful and not a waste of your time?

Call us today and let us show you a system that works to help you expand your business and effectively and efficiently close short sale transactions.

 PROFESSIONAL SHORT SALE NEGOTIATORS 

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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Cari Drolet - Founder
Lotus Realty Group

Certified Distressed Property Expert

400 S. Sierra Ave. Ste. 102
Solana Beach, CA 92075
(858) 764-7300 P.
(858) 755-7544 F.
(760) 707-3072 C.
Cari@LotusRealtyGroup.com
www.LotusRealtyGroup.com

Full Discharge of Indebtedness On First Trust Deeds

Here's another great stolen post from my friend Cari Drolet at the Lotus Realty Group. Call her if you'd like help getting your short sales closed in 2011.

Full Discharge of Indebtedness On First Trust Deeds

I am sure most of you are aware of the law that was passed effective January 1, 2011 which states the following:

(a)   No judgment shall be rendered for any deficiency under a note secured by a first deed of trust or first mortgage for a dwelling of not more than four units, in any case where the trustor or mortgagor sells the dwelling for less than the remaining amount of indebtedness due at the time of the sale with the written consent of the holder of the first deed of trust or first mortgage. Written consent of the holder of the first deed of trust or first mortgage to that sale shall obligate that holder to accept the sale proceeds as full payment and to fully discharge the remaining amount of the indebtedness on the first deed of trust or mortgage.

(b)   If the trustor or mortgagor commits either fraud with respect to the sale of, or with respect to the real property that secures the first deed of trust or first mortgage, this section shall not limit the ability of the holder of the first trust deed or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.

(c)    This shall not apply if the trustor or mortgagor is a corporation or political subdivision of the state.

Does this apply to Second Trust Deeds?

The answer is Simply NO.

Does this include investment properties?

It appears to include investment property when dealing with quote, a dwelling of not more than 4 units. There is no reference in this statute to owner occupied property.

What incentive does a homeowner have to do a short sale?

I have been asked this question a lot and the answer is still the same. A foreclosure will impact a homeowner’s credit far more and for far longer than a short sale. Furthermore, a home owner who is foreclosed on will not be eligible for a Fanny Mae or Freddie Mac backed loan for 5 years. This increases to 7 years if it is an investment property and it stays on their credit report for the same amount of time. With the right credit recovery program you can help turn your client back into a home buyer again in 18-24 months. Granted, you will get the angry homeowner who does not care anymore but I believe with the right delivery, you can help your client see the value in a short sale. Foreclosure is much more damaging to our economy which is already in dire need of repair. I also believe a short sale shows good faith and integrity to the lenders instead of the homeowner just walking away. However, the homeowner should always seek the advice of an attorney and CPA before making the ultimate decision to Short Sale or Foreclose.

How can we ensure that our client is released from full liability?

We will always encounter situations where laws and guidelines are not being followed properly. With the volume the lenders have on their plates in regards to short sales and foreclosures, there is no guarantee that there will not be a mistake made along the way due to the negligence of one or more of the parties and the homeowner could suffer the consequences. Here are some helpful tips moving forward:

1.      Read the TERM SHEET (Approval) thoroughly.

2.      The verbiage you are looking for is still the same “Released from liability of the NOTE” and any deficiency following the short sale.

3.      If the term sheet only states the borrower is released from liability of the lien, then understand that this is not the same as a release from liability under the note and from a deficiency after the short sale. 

4. Please recommend to the homeowner to have the term sheet reviewed by an attorney and CPA before the homeowner accepts or rejects the term sheet.

This is just an extra precaution that will give you and your client a peace of mind

Please note that Lotus Realty Group does not give legal advice. Please seek advice from an attorney and CPA before providing this information to your clients.

Again, I would like to extend my gratitude to all of our REALTOR clients who have allowed Lotus Realty Group to expedite and close your short sale transactions and assist you in growing your business. It is my belief that this will be a massive year for short sales and I look forward to working with all of you in 2011.

 To your success!!!!

 (Quote) A promise is a cloud; fulfillment is rain.  ~Arabian Proverb

PROFESSIONAL SHORT SALE NEGOTIATORS 

 At Lotus Realty GROUP, helping people ethically succeed is at the forefront of who we are...

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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Cari Drolet - Founder
Lotus Realty Group

Certified Distressed Property Expert

400 S. Sierra Ave. Ste. 102
Solana Beach, CA 92075
(858) 764-7300 P.
(858) 755-7544 F.
(760) 707-3072 C. Cari@LotusRealtyGroup.com www.LotusRealtyGroup.com

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