Short Sales Can Be “SHHHHORT!!”

I know that many of you believe that short sales can’t be short; however, on this deal, the time frame from beginning to end was approximately 35 days. The Seller had lived in the property for years and the foreclosure action had been going on for approximately 4 years. During the 4 year period, the seller attempted to do a loan modification and had never attempted a short sale. There was a Foreclosure Auction Sale date scheduled for December 15, 2015. We had to act quickly as there were two loans on the home.

We pulled title work and found out that the $80,000 second mortgage was discharged as so many second mortgages were, due to the Banks being fined for all the fraudulent things they had done to the Sellers.   This was a great break for the Seller, as now we only had to deal with one Lender with having a court date so soon.

The property was built in 1950 and was wood framed. The house had 2 Bedrooms, 1 Bath, 1 car garage, and 792 square feet in Madeira Beach, Florida. The home just needed some cosmetic repairs in the eyes of the Short Sale Lender. However, to the Buyer, there was approximately $20,000 needed to update the home to a “2015” buyer’s expectations. The property was listed in late October, 2015, and an offer of $100,000 was submitted to Ocwen for review. After we submitted a complete short sale package to the Lender, which consists of a Purchase Agreement, Proof of Funds Letter, HUD Settlement Statement, Authorization to Release Information, Listing Agreement, MLS Detailed Sheet, Financial Statement from the Seller, 3 months of Bank Statements, Letter of Employment, and Tax Returns, we found out that Ocwen had sold the Loan to Caliber Home Loans. Normally it takes the new Lender at least 2 weeks to 30 days to get the loan into their system so we could submit a package. We contacted the new lender and submitted a complete short sale package to them on October 27, 2015.

The new Short Sale Lender ordered a value on the home, which is called a Broker Price Opinion or an Appraisal.   The Appraisal was on November 10, 2015 and we provided to the Appraiser a list of repairs, but no comparables, as there were none that justified the low offer of $100,000. This Appraiser was very persistent that he was very familiar with the neighborhood as he too lived in Madeira Beach and had been appraising for years. We spoke to the Lender on November 18, 2015, regarding the offer and the value on the property. The Negotiator informed us that the offer was way too low and that they would not take anything less than $165,000 for the property.

At this point in the negotiations, we had to counter the buyer to bring their highest and best offer, provide us with contractor estimates to justify the repair costs along with 3 sold comparables. This loan was in foreclosure for 4 years so the short sale lender was not willing to postpone the sale date and the Seller couldn’t hire an attorney to request a postponement in order to fight the value. The Seller was very familiar with the short sale process, the dispute process for value, and knew the legal process. The Buyer did not counter any higher as the Seller would not accept an offer for less than the $165,000 price that the Short Sale Lender stated they would accept.

The likelihood of us getting a Foreclosure Sale Auction postponed just to do a short sale was very slim due to the fact that the house had been in foreclosure for 4 years. At this point, knowing all the facts of the condition of the home, the comparables that were much higher in the area and how long the foreclosure action had been going on, the property would now have to be listed for the $165,000. Only a cash buyer would be accepted, as we did not want the Seller to lose the house at foreclosure, so there was no time for a mortgage buyer.

We increased the listing price on November 20th, 2015, and gave the buyer stipulations, such as, inspection period was only 3 days and closing needed to be before December 4, 2015. I am also working with a Title Company who will NOT close a short sale with a sale date less than 30 days away from closing and requires that if we close during that 30 day period, that an attorney would need to be hired to make sure that the Foreclosure Auction Sale would be postponed. I know you think this is a weird request from the Title Company; however, Short Sale Lenders don’t always dismiss the foreclosure action even though they closed on a short sale with a buyer. This has happened before on files that this title company had closed. So … make sure you know the rules and regulations of your Title Company, as it could cost you an additional $1,200 to order an attorney if the Seller could not afford one. However, to be a great negotiator, when you close on a short sale, you need to make sure that the Attorney representing the Short Sale Lender in the foreclosure action does dismiss the foreclosure action. You should always fax the Final HUD Settlement Statement and Proof of Wire to the Attorney and YOU request that they dismiss the foreclosure action and make sure that they follow up with their client (Short Sale Lender) to get it dismissed.

This property ended up being a direct sale to an individual who was purchasing the home as a vacation property, as there was no spread for the Investor buyer based on the value that the Short Sale Lender placed on the home.

On November 22, 2015, we received a Cash Offer from a Realtor that was representing the Buyer who complied with all of our terms and conditions and we closed on December 2, 2015. The foreclosure action was dismissed on December 14, 2015. I only received commission on this deal; however, I did save a Seller from going into foreclosure and they also received $3,000 relocation money. It was quick cash in my pocket for a deal that blew through my office in a quick 35 days.

What’s the message in this article? If you are an Investor only and your Seller needs to sell to a Buyer other than you, the only way that you could make any money on this deal is if you were a Realtor and received commission. So … You may strongly consider becoming a Realtor so you can benefit from multiple income streams. In addition, Short Sales can be Short! I just gave you the proof in the pudding, now take a bite and get back on the phone and call some leads!

Please keep sending me your questions and topics that you would like to hear about, so I can be sure to keep feeding you with the information that you need in order to move confidently through 2016 and bring your Real Estate Dreams to Life!

Happy Negotiating!

Kimberlee Frank