By Tom Branch, on July 19th, 2010 
Where Short Sales are concerned, the REALTOR®’s role is crucial. Proper pricing is always important, but it’s even more important with a Short Sale, because the foreclosure clock is ticking.
If the house goes on the market at too high a price, valuable marketing time is lost. The majority of showings occur in the first few weeks of being on the market, so you want to make sure the house is priced properly when it goes on.
Once an offer is accepted and a contract executed, that’s when the real work starts for the REALTOR®. The first step of course is completing the paperwork and gathering all the necessary documents.
Sending a complete Short Sale package in to the bank on the first pass is important. Otherwise the package just sits there until someone decides to let the REALTOR® know what’s missing. This could be days. This could be weeks. Sometimes the bank won’t call at all. They will just let the file sit until the REALTOR® calls and asks for a status update. The bank will not process any part of the package until they receive the entire package. Again, the foreclosure clock is working against us so we can’t afford to waste any time.
Once the bank receives the entire Short Sale package, it will go to a pre-processing department where the information will be verified. Next, the file will be assigned to a negotiator who should contact the REALTOR® with an update. If it took longer than 30 days to for the package to make it into a negotiator’s hands, sometimes they will require updated documents – pay stubs, bank statements, etc. They always want to work with the most current information. Then it’s time to review the offer contract and the other documentation provided by the buyer. If everything checks out, the bank will forward the package to their investor for approval.
The investor will either approve or deny the Short Sale. If it’s denied strictly based on the numbers, the negotiator will typically submit a counter offer back to the listing agent. If the bank needs a higher price for the house, the listing agent has to go back to the buyer’s agent and negotiate that. Sometimes buyers walk away at this point; other times they will bring their price up to meet the bank’s counter offer.
The sales price of the property is usually the biggest reason that a Short Sale will be denied. However, after reviewing the borrower’s financial information, the lender may determine that the borrower can repay the note or has the means to pay off the shortage.
We’ve seen a huge increase in “strategic foreclosures” where borrowers have decided to walk away despite having the means to pay the note. They have decided that they are so upside down that it’s financially better to walk away than to suffer the huge loss of keeping the property. Some of these homeowners attempt a Short Sale to avoid the negative credit impact of a foreclosure
Once everything is negotiated and all terms are agreed upon, the Short Sale can move forward.
By Tom Branch, on July 11th, 2010 
We’re pleased to announce that, “Avoiding Foreclosure – The Field Guide to Short Sales” is now available in Kindle format at Amazon.com. The book is also available in paperback and PDF formats at fieldguidetoshortsales.com.
Regardless of the reasons used to explain the current housing crisis in the United States, the cold reality is that more homeowners are in financial distress than at any other time in the history of residential real estate, according to the Distressed Property Institute.
Hence, real estate Short Sales. If you’re not familiar with them, you soon will be. In this book, you’ll travel the journey with a few of our actual clients and explore the Short Sale process through the eyes of sellers, buyers, investors, and lenders.
Short Sales are reshaping the way lenders liquidate homes in default. Historically, these homes and their owners would simply be foreclosed upon. Today, Short Sales are a viable alternative where everybody wins!
Source: Amazon.com
By Tom Branch, on June 27th, 2010 
3 Bedrooms | 2 Baths | 1-Car Garage | .83 Acre Lot | 2198 SF
Homes For Sale – Palmer, TX – Texas Historical Home on .83 acres. The Harkey-Payne Home was originally a four-room house with south and east porches, this home was built about 1870 by carpenter and blacksmith D. H. Harkey. Original hardwoods and exposed bead boards. Lots of updating completed including windows, water heater, recent plumbing, sewer lines, gas lines, completely rewired, HVAC units, fresh paint, etc. Updated island kitchen with recent stainless appliances.
Click here for current status, pricing, and photos.
Source: NTREIS | Photo Credit – Tom Branch
By Tom Branch, on June 23rd, 2010 
I’ve been trying to finish up two short sales with a conventional lender. I listed them in late October and executed contracts the first week of December.
Each property had about $85k remaining on the mortgage. Property values have plummeted in this particular part of town and the vacant homes in the area are vandalized, further driving down values. The BPOs came in at $29k on each of them and we had cash contracts at $28,800.
With the holidays, we got the files into the lender in January. By the middle of February, we find out that both files were declined when the lender could not contact the seller. I checked and both the email address and phone number were correct.
The second pass through was somewhat better and at least we got the files processed. The bank does their BPOs and all looks well. Last week we finally get a response on the first file. While the lender is good to go, the PMI company wants the seller to hold a $20,000 note for 6 years. In 75-plus short sales I’ve never seen anyone ask for more than $5,000 from a seller and only had to get a seller to carry a note once. The seller really did not want a foreclosure and offered them $5,000. It took less than four hours for it to be declined.
By allowing the property to go into foreclosure they cost themselves about $20k which is not recoverable. The lender will take back the property and evict the tenants. Once vacant, the properties will be vandalized within days. What’s worth $29k today will be worth $19k so the lender will lose another $10k.
If they had moved forward with the short sale, the PMI company would have recovered $5k from the seller, the lender would have come out $10k better, and the neighborhood would be that much closer to stabilizing.
The original note was $87,500 and the PMI was likely 25% or $21,875. The seller has been paying the premium for 5 years. It appears the PMI company wants come out even or ahead on this sale.
Are PMI companies the new short sale train wreck?
By Tom Branch, on June 19th, 2010 
3 Bedrooms | 2 Baths | 1373 SF
Homes For Sale – Garland, TX – Great investment opportunity! Corner home on large lot with mature trees, covered back porch, and wood fence. One living area with faux paint, crown molding and cozy electric fireplace. Second living has a vintage wood burning stove. Large dining area overlooks grassy back yard. Gas stove and newer dishwasher in the kitchen with red brick accents.
Click here for current statusm pricing, and photos.
Source: NTREIS | Photo Credit – Tom Branch
By Tom Branch, on June 11th, 2010 
It may seem counterintuitive for a lender to go along with a Short Sale since they are legally entitled to pursue the full balance of the loan. Yet, more and more lenders are approving Short Sales.
Lenders are painfully aware of just how bad the current mortgage crisis and resulting foreclosures are. They know the disturbing reality is that a large number of distressed borrowers will helps the lender look good on paper since the house never gets listed as an actual foreclosure. Second, while the lender is taking a loss, the loss is far less than it would be in a foreclosure situation.
On a recent industry call with a major lender, they disclosed that the average recovery in a Short Sale is 60 cents on the dollar. Now before you get all excited that you can buy a property for 60 cents on the dollar, let us explain how they arrive at that number.
Let’s assume that a borrower owes $200,000 on a property. The market value is set at $150,000 by the appraisal or Broker Price Opinion and the property sells for $140,000, which is 94 percent of market value. The closing costs come to $14,000, leaving the lender a net of $126,000. $126,000 is 63 percent of the $200,000 loan balance.
With a foreclosure, the lender only recovers about 30 cents on the dollar. Which would you choose? The numbers make this a no-brainer.
The other issue with foreclosures is the impact they have on neighborhoods. If a neighborhood experiences a number of foreclosures, the property values in that neighborhood drop as well. Why is this important to the lender? They may be holding other mortgages in the same neighborhood, and a foreclosure drives down the value of those houses as well. They’re poisoning their own portfolio!
Bottom line is if the numbers work for the lender, they are very likely to approve a Short Sale. It’s the lesser of two evils when compared with foreclosure.
By Tom Branch, on June 11th, 2010 
5 Bedrooms | 2.1 Baths | 2-Car Garage | 2444 SF
Homes For Sale – Springtown, TX. Custom country living on acreage with easy access to the city. Gourmet kitchen with concrete countertops overlooks family room with fireplace. Downstairs master suite with jetted tub, separate shower, and large walk-in closet. Extensive updating including hardwood floors, bathroom tile, and designer paints. 5th bedroom could be second master or another living area. Mud room connects garage and main house. Back yard is perfect for entertaining.
Click here for current status, pricing, details and photos.
Source: NTREIS | Photo Credit – Tom Branch
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