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Sponsored By: Kathy Kosciewicz Owner, Stager

Webinar: Short Sale Basics – Answering Frequently Asked Questions. Tuesday, June 5 LIVE 10:00am – 11:00am. Discussion will be held on: How much settlement help should you expect the short sale lender to repair? What about repairs? When should the buyer do the inspections?

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Sponsored By: Kathy Kosciewicz Owner, Stager

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  1. Webinar: Short Sale Basics – Answering Frequently Asked Questions Tuesday, June 5 LIVE 10:00am – 11:00am • Discussion will be held on: • How much settlement help should you expect the short sale lender to repair? • What about repairs? • When should the buyer do the inspections? • How long will the short sale process take? Sponsored By: Kathy Kosciewicz Owner, Stager

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  3. SHORT SALES: Frequently Asked Questions “Top 20 FAQ for Sanity in the Crazy Short Sale World!”

  4. PRESENTED TO YOU BY: Bill Garrett INTRODUCTION: • Paralegal at Delaware real estate law firm • Full-time short sale negotiator • Challenging, time-consuming but very rewarding • Difficult time for a homeowner • Employment, marital & medical difficulties • Creditor pressure • Rewarding to help homeowner find blue sky • Jigsaw puzzle • Thanksgiving Dinner

  5. 1. How should I price the listing? • Goldilocks • Homeowner resistance • But it’s a short sale??!! • Poor condition in great neighborhood • Goldilocks still has the answer

  6. 2. How large should the buyer’s deposit be? • SS lender not interested in amount of the buyer’s deposit • Buyer: Deposit as little as possible • Seller: The more the better

  7. 3. Do we need bank approval to list the property? • General rule: Don’t need bank approval • Trend: Banks trying to exert more control over process

  8. 4. Do we need an offer to begin the short sale process? • Open SS file now • Title search • Review mortgages to determine options • Banks trying to get some greater control of process • General Rule: Need an offer to begin the SS process with lender • Exceptions: • FHA can start before there’s an offer. • HAFA/HAMP may allow SS process to begin with lender before there’s an offer but often problematic as get stuck in the wrong department • New Bank of America process

  9. 5. What about multiple offers for the property? • General Rule: Submit one offer at time • A SS contract is like any other contract – with SS contingency • Market for “back up” offers

  10. 6. How much settlement help should we expect the short sale lender to allow? • Higher the offer, the more likely the settlement help • Usual cap is 3% but no guarantee • FHA seller: Cap of 1% of buyer’s loan amount

  11. 7. What about repairs? • General rule – “As is” transaction • Bank usually will not pay for repairs • No harm in asking but don’t plan on getting bank help • Use property problems (estimates, photos, etc.) to challenge valuation

  12. 8. When should the buyer do the inspections? • Early in the deal? • Risk out-of-pocket funds if the SS is not approved • Become aware of problems early (avoids long and wasted waiting period) • Can consider restructuring deal if there are problems with property • After the SS is approved? • Minimize risk of out-of pocket funds • If discover problems, no recourse other than walking from deal • Wasted time • Stuck with offer amount

  13. 9. How long will the short sale process take? • No two deals are the same • MANY variables • 6-12 weeks for the SS approval • Could be longer. • Could be shorter • Who knows? • Buyer’s own timetable

  14. 10. Will the short sale be approved? • Never certain • Success = Patient Buyer + Reasonable Offer + Cooperative Seller

  15. 11. Will the lender waive the deficiency? • Cannot guarantee but always try • Some loan types (e.g. FHA and VA ) and SS programs (HAFA) have a deficiency waiver • Negotiated resolution options: • Cash contribution from seller • Promissory note

  16. 12. Will the homeowner owe income taxes on the amount of a waived deficiency? • Don’t give tax advice -- talk to a tax professional • General rule – forgiven debt treated as income • Mortgage Debt Forgiveness Act (Expires 12/31/12) • See www.irs.gov • Not taxable if funds used to purchase or improve house • Taxable if funds used for debt consolidation or Bermuda trip • Taxable if used for second home or investment property

  17. 13. What are the credit consequences of a short sale? • Don’t give definitive credit advice • Many variables considered behind the curtain • FC/DIL/SS are scored similarly but may have different long term impact • Discuss possible impact with a lender or credit counselor

  18. 14. How does a foreclosure action impact a short sale? • Frequently have SS and FC run on parallel tracks • FC and SS depts. are separate with minimal coordination • It’s race – pending FC usually not a bar to a successful SS • Sheriff sale date is IMPORTANT

  19. 15. Should the frustrated homeowner just walk away and let the property sell at foreclosure auction? • Understandable attitude • Mistaken understanding about impact of FC route. • IF a FC: • Deficiency will be larger • Deficiency judgment risks

  20. 16. Is the short sale process getting easier? • Less time wandering the swamp • Still a maze of 800 numbers • Fewer lost documents • New lender programs and “efficiencies” --- Still more hype than reality • Signs of improvement but still challenging, especially for a buyer • Bank still holds the Aces

  21. 17. Should the homeowner continue to make payments? • Never tell homeowner to stop make payment • Adverse impact to credit • Triggers foreclosure process • Some loans require a seller to be delinquent at settlement • Delinquency does not harm SS prospects and may help

  22. 18. How will the SS lender view the homeowner’s other assets? • No two situations the same • SS lender will review all financial info • Retirement and tax-deferred accounts not usually a target for the SS lender

  23. 19. How does a bankruptcy impact a short sale? • We don’t give BK advice • BK can interfere with SS – often kills the SS • Can get property excluded from BK, or wait until the BK is discharged • SS negotiator preference to have homeowner file BK after SS

  24. 20. Should I use a third-party negotiator rather than try to negotiate the short sale myself? • Conserve your time for profitable activities of buying & selling • Minimize liability concerns – e.g. deficiency waiver • SS world constantly changing • Multiple lenders • Multiple loan types • Multiple short sale programs. • Ever-changing forms, procedures, and rules • Risk of “too good to be true” – be wary of large pre-payments.

  25. Do You Have Any Questions?Concerns?Thoughts?

  26. THANK YOU FOR CONNECTING!www.wardtaylor.comContact Information:Short Sale Specialist/ParalegalWard & Taylor, LLCBGarrett@wardtaylor.com(302) 225-2404 – Direct phone(302) 225-1216 – Direct faxAll images were gathered from google.com/images*

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