Barwick Ranch Estates, Delray, FL 33445

This successful short sale closed recently in Barwick Ranch Estates in Delray Beach. The seller needed to move for a new job in the legal profession. The buyer bought a great home with an FHA loan for significantly less then the price a few years ago.  Both seller and buyer were extremely happy to move on with their lives.

This successful short sale for $198,000 was one of the easier ones. The seller’s were ultra cooperative with paperwork and showings and were very excited to sell their property.  The home was kept clutter free and showed well to potential buyers.

When seller’s take the time to educate themselves about what a short sale is all about, it makes the whole process smoother.  The major hiccup we experienced in this deal was the timing of the closing in conjunction with the buyer’s move from Texas.  Banks can be tricky on a closing timeline since they don’t really follow any but their own.  After going through the whole process of a short sale, closing times can really be difficult to match up when the buyer is selling another property or moving from another state.

This short sale just closed last week.  There were two loans on the property and the seller was never late on either payment.  The bank moved in a responsive manner to get the property sold and the seller was a pleasure to work with.  When seller’s are motivated and comply with all the needed paperwork, continue to maintain the property, do not remove appliances, plus keep the utilities on, it makes short sales much easier to close. The seller was happy to get the ‘property noose’ off his neck, the buyer was happy to get a great deal on a clean property, and the bank was happy because they lost less money then a foreclosure.

MAKING HOME AFFORDABLE PROGRAM - New details released on the Obama Administration’s MHA program

Short sales are complex transactions involving careful coordination and close cooperation among a number of parties — servicers, appraisers, borrowers, purchasers, real estate brokers, title agencies, and often mortgage insurance companies and junior lien holders. A short sale usually provides a better outcome for borrowers, investors and communities, but because of the complexity and time involved, servicers have often opted to pursue foreclosure instead, even where a short sale would have provided a substantially better outcome for everyone involved. The Making Home Affordable (MHA) Program provided additional details yesterday on its plan to stabilize the US housing market and prevent avoidable foreclosures, and it is good news for short sales. The foreclosure alternatives for borrowers eligible for MHA include:
- A Short Sales/Deeds-In-Lieu Program to Facilitate Foreclosure Alternatives
- Incentives for servicers to pursue alternatives to foreclosures
- Borrower incentives to cover relocation expenses to homes that are affordable
- Streamlined process combining short sales and deed-in-lieu transactions
The Foreclosure Alternatives program will provide incentives for servicers and borrowers to pursue short sales in cases where a borrower is eligible for a MHA modification but unable to complete the modification process. It provides a standard process flow, minimum performance timeframes, and standard documentation, and offers financial incentives to servicers and borrowers. Fourteen servicers, including the five largest, have now signed contracts and begun modifications and refinancings under MHA, and including both these servicers and Fannie Mae or Freddie Mac, more than 75 percent of all loans in the country are now covered by the MHA program.

Further details on short sales and the MHA
When a borrower meets the eligibility requirements for a Home Affordable Modification (HAMP) but does not qualify for a modification or cannot maintain payments during the trial period or modification, the MHA) Program recommends a short sale to avoid the foreclosure process. This helps the borrower sell a property for less than the amount owed, helps the lender avoid the costs of foreclosure, and helps you get properties at bargain basement prices. I’m going to deviate from the usual format today by posting all the details straight from a US Treasury Department News Release:

How The Home Affordable Short Sale/DIL Program Works:

- Borrower Eligibility. Borrowers will be eligible for the Foreclosure Alternative Program if they meet the minimum eligibility criteria for a Home Affordable Modification but did not qualify for a modification or were unable to sustain payments under a trial period plan or a modification. Prior to proceeding to foreclosure, participating servicers must evaluate each eligible borrower to determine if a short sale is appropriate. Considerations in the determination include property condition and value, average marketing time in the community where the property is located, the condition of the title including the presence of junior liens and a determination that the net sales proceeds are expected to exceed the investor’s recovery through foreclosure Incentive Payments.

- Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.

- Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses.

- Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.

- Standardized Documentation: The program will publish streamlined and standardized documentation, including a Short Sale Agreement and an Offer Acceptance Letter. These documents will outline specific marketing terms, describe the rights and responsibilities of all parties and establish clear timeframes for performance. Creating one standard set of documents that the industry can use is expected to minimize the complexity of these transactions and significantly increase use of the short sale option.

- Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions. The price may be determined based on either: (1) an appraisal performed in accordance with USPAP and/or (2) one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.

- Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process, however no foreclosure sale can take place during the marketing period specified in the Short Sale Agreement as long as the borrower is acting in good faith to sell the property. There will be a maximum marketing period of 1 year for the property, provided any longer period not otherwise delay foreclosure sale, to ensure diligence by servicers and borrowers in moving as quickly as possible to complete the short sale and deed-in-lieu process.

- Selling Commissions and Fees: Reasonable and customary real estate commissions and selling costs that may be deducted from the sales price will be specified in the Short Sale Agreement. The Servicer will agree not to negotiate a lower sales commission after an offer has been received.

- Fees and Charges: Servicers may not charge borrowers fees for participation in the Foreclosure Alternative Program.

- Property Eligibility: Any junior liens, mortgages or other debts against the property must be cleared for the property to be sold as a short sale or deeded to the servicer. The servicer can proceed with a short sale or deed-in-lieu if there is a reasonable belief that all liens on the property can be cleared.

- Program Expiration: Eligible borrowers will be accepted until December 31, 2012. Program payments will be made upon successful completion of a short sale or DIL.

- Deed-in-Lieu: At the servicer’s option, the Short Sale Agreement may include a condition that the borrower agrees to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time specified in the Agreement or any extension thereof. In this case the borrower would have 30 days to vacate the property and would be entitled to $1,500 to assist with relocation expenses, in addition to any other funds the servicer may provide to the borrower.

This home was purchased in 2005 for $202,000.  The seller had two loans to negotiate, with the 2nd proving to be a bit of a sticking point.  After losing 2 potential buyers to time constraints, the 3rd lucky buyer ended up purchasing the home for $150,000 with 4% seller concessions thrown in.  Many times in short sales we are seeing the 2nd loans become the sticking points for closing deals.  Typically, the 1st offer (buyer) on a short sale needs to have quite a bit of patience if there is more than one lender involved (or if that lender’s name is Countrywide).

MILLION DOLLAR SHORT SALE

MILLION DOLLAR SHORT SALE - 10747 VERSAILLES BLVD

This short sale success story began late last summer when the owners moved out of a home that had over $1,600,000 in loans on the property in the Versailles community in Wellington.   The only way for them to sell in this real estate market was to work with their banks to negoatiate a short sale. 

The property had a first and second loan that required a lot of finesse and negotiating to seal the deal. Second loans can be very tricky to deal with in a short sale and have been known to blow up deals if they are not happy.  Typically they are wiped out in a foreclosure and receive very little in a short sale.  However, something is better then nothing.

We just closed this deal last week for $630,000….a million dollar short sale.  A lot of real estate agents claim to be experts in short sales….we close short sales at PalmBeachShortSales.com.

Below is an article in the Palm Beach Post that I wrote for the paper on short payoffs. The Post publishes my articles in the Saturday Florida Home Section of the paper.

Tips From The Home Team:

Need A Quick Sale? Explore Short Payoffs

Palm Beach Post

Saturday, March 07, 2009

It’s important to know the differences between a short sale and a short payoff.

With a short sale, the lender agrees to sell the property for an amount less than is owed on the home.

The seller must demonstrate a verifiable hardship and usually does not have to come up with any money to sell the home.

A short payoff is when the lender agrees to sell the property for an amount less than is owed, but the seller must pay back some portion of the “shorted” amount over time in the form of a promissory note or unsecured line of credit.

For sellers, short payoffs allow them to get out of homes in which they owe more than the home is worth.

There is less impact on credit scores than a foreclosure, and promissory notes, which typically have very low interest rates, usually are not secured by other assets.

In addition, lenders rarely go after sellers for deficiency judgments once a short payoff agreement is made.

This is good news. Banks are beginning to ‘get it’ and make the short sale process easier. Pre approved short sales could be one of the keys to solving the real estate oversupply crisis if the banks are realistic in how they do it. 

Fannie Mae has launched pilot projects in Phoenix and Orlando intended to reduce foreclosures by pre-approving short sales, agreeing on a price and the loss it will take prior to a deal even being made. It is hoped the program will improve the popularity of short sales among real estate agents.

Property professionals initially had welcomed short sales but soon found the process to be a frustrating one–due to squabbling about the sale price and slow approval times by the mortgage companies–that often ended with no sale at all. Property professionals initially had welcomed short sales but soon found the process to be a frustrating one–due to squabbling about the sale price and slow approval times by the mortgage companies–that often ended with no sale at all.

Fannie Mae’s pilot will focus on homes that are listed at less than the mortgage balance and carry a Fannie Mae-backed loan serviced by Countrywide Financial Corp.
If it proves successful, the concept could be expanded to other geographical areas and additional lenders. There are concerns, in the meantime, about the program’s success, with real estate agents noting that property prices could decline before the pre-approval is issued.