Bank of America has assumed a leading role in processing Short Sales. It is well known in the real estate industry that BofA was the first bank to start tracking Short Sales on-line in the Equator platform, making the transaction more transparent and shortening the time it takes to process.

This morning, BofA held their third webinar related to Short Sales. The title of today's webinar was 10 Tips to a Successful Short Sale. Here's are the ten tips offered by the webinar:

1. Agent Short Sale Education & Training

2. Setting Realistic Expectations for Both Buyers & Sellers

3. Get Outside Liens Released As Quckly As Possible (2nd liens, HOA etc.)

4. Work to Sell Property @ Fair Market Value.

5. Fully Execute Purcahse Contract Before Submission.

6. Negotiate Escrow Fees in Advance & Submit Complete HUD.

7. Check all Documents Prior to Submission to Equator. Illegible documents will be rejected.

8. Complete Tasks in Equator in a Timely Manner. Counter not answered on time will be automatically rejected.

9. Agree on Counter Offers Before Accepting.

10. Identify Potential/Common Causes for Delay

Here's hoping other banks follow BofA's example!!!

Here's a link to the entire recorded webinar: http://video.webexlivestream.com/events/webx001/35673/eFrame.jsp?mei=35673&cf=webx001&;

Last year I predicted that Palo Alto will see more short sales in the future. Well, the future is now so what is happening? There are currently 2 short sales on the market, 5 in escrow, and 6 closed in the last year. This isn't a huge number, but certainly more than we saw in the early part of the century. There's a lot of chatter in the media about how the government is giving banks and homeowners incentives for short sales, and how banks save money by allowing short sales, but does that help the typical Palo Alto underwater seller?

Here is what I have learned in the last year. It may not be the whole picture, as this world of what happens at the banks, hedge funds, and mortgage insurance companies is not transparent--but I have been involved in short sales and have studied them a lot.

Here are the points covered by BofA Representatiives during the July 28th, 2010 Webinar::

• For the most part HAFA Short Sales require same type of documentation: Hardship Letter, Financials, Last 2 Years of Tax Returns, Last 2 Months Bank Statements, Last 2 Check Stubs etc.
• 2nd & 3rd lien pay-offs are limited to $6,000 or 6% of unpaid balance.
• Under the HAFA program, homeowners receive $3,000 for relocation expenses at close of escrow. Each servicer receives $1,500 as an additional incentive.
• HAFA is designed for homewoners who did not qualify under the HAMP (Loan Modification) Program.
• Short Sales under HAFA eliminate the possibility of Deficiency Judgments (amount "forgiven" or not paid to lenders).
• Home must be owner-occupied. BofA does offer other Short Sale programs for investors.
• While a Standard Short Sale in progress can be converted to a HAFA Short Sale, when possible it is recommended that the HAFA Short Sale be approved in advance by the bank.
• The homewoner will select the Short Sale Broker/Agent, not the bank.
• BofA HAFA Short Sales are now being initiated/tracked in the Equator website. This change has significantly improved agent/negotiator communication & has made process faster & more transparent.
• Under HAFA, the initial listing period will be 120 days. If the home does not sell, an extension could be granted or a Deed in Lieu would be considered by the lender.
• Under the HAFA guiduelines, after a Short Sale Offer is received by the bank, the goal is to provide an answer in 10 days or less.

For more information on the HAFA program, visit http://makinghomeaffordable.gov/hafa.html

You can also e-mail me your questions @ reoprorealty@gmail.com

Re-blogged by 1 agent

• I posted this blog on some public websites and ws surprised at how many people were unaware of this option for distressed homeowners that is quick, clean, and relatively hassle free.

An Interesting Alternative to Foreclosure: A Deed in Lieu of Foreclosure (edit/delete)

I think this is a good option for banks and homeowners. Wouldn't you enjoy not having to kick someone out of their home?

Ran into an issue this week - wanted to see if anyone else has ran into it and what happened.

Had buyers, we found the home, knew that it was a short sale, made an offer and it was accepted. During the offer to acceptance, we found out that an investment group had successfully negotiated a short sale and that they would be closing on May 19th, 2010. They would be the ones selling the property to us. Thought okay, we got a good price on a good home, works for the buyers. Buyers had been approved for a FHA loan. We found out all the details several days later, when the listing Realtor called the buyer's mortgage company. What happened was that everyone we have talked to has stated that they can not close the loan until 90 days after the investment group has closed. Most all of the lenders said that even though FHA has waived the 90 day rule at this time, it doesn't apply in cases where investors have bought a short sale property. One lender has said that they would close it, but their debt to income ratios are much lower and the buyers didn't qualify.

My question is: with the number of short sales out there, has anyone else ran into an issue where they have the buyer and the property is now owned by an investor. And if so, have you had financing issues and how did you get around it. In our situation, it appears next to impossible. We have been told that we could go conventional with either 10% or 20% (depending which lender), but the buyers don't have that kind of money. Are we now going to end up with a surplus of investor owned homes that they can't sell for 3 months due to financing restrictions.

I’m curious how other agents see short sales and REOs mixing.

If you are an REO agent and are assigned a listing, you are happy. If you then find out that one of your associates in your brokerage has had it listed as a short sale within the past 6 months, your happiness might turn into a sense of loss. You need to tell your seller that the property has been listed with your brokerage and let them decide if there is a conflict of interest. In fact, the seller probably is already aware that the property was previously listed with your brokerage, in which case they may not have assigned it to you at all depending on their policies.

Do you, REO agents, consider this scenario potentially damaging to your business? One reason I was motivated to build my own brokerage was I could control what listings we handled and avoid sellers in distress since potentially we have a better chance of selling their home as an REO listing than selling their over-priced, underwater short sale home. When I worked at a franchise brokerage I had to turn down pre-listing bpos because another agent in my office currently had the properties listed. This happened a few times and I decided that it was up to me to solve the problem by leaving.

Now, the whole game is changing and short sales are becoming part of the mix with management companies that previously only managed REOs. I have heard some short sale agents claim that they get REO listings by being the short sale agent for the owner in default but I have yet to see any proof to back up this claim. Usually the short sale agent gets a call from the REO agent instructing them to remove their short sale listing from the MLS because the property has a new owner. These are uncharted waters so my question is:
Will a short sale assigned by a management company be more likely to be kept by a listing agent if it fails to sell and becomes an REO?

Connecticut Senator Christopher Dodd, Chairman of the Banking Committee introduced his own Financial Reform Bill recent however, it didn’t have bipartisan support and died on arrival however, the White House bill that is likely to be brought to the floor on Monday has a very similar outline.

What specifically got my attention was the $50 billion fund, that will be raised out of fees charged to banks. This fund is suppose to be used to liquidate failing banks. Now, it doesn’t say anything in particular about using that money to liquidate bank nonperforming assets in the form of short sale however, follow me down the rabbit hole for a while.

This is an election year and, the last thing a politician wants is to be seen as is someone who is pro business and, pro Wall street, however the financial crisis has gotten worse than anyone will admit and therefore, the government realized their folly with the philosophy, “everyone gets to stay in their home.” So, now….here we are, elections in November, the Country is PISSED OFF at incumbent politicians and the banking crisis is worsening due to the enormous debt and weakening dollar so, what can a politician do?

They find an enemy, in this case, big banks and they find a victim, in this case, defaulting homeowners. Now, regardless of how you feel personally about who is really responsible for this calamity, let me assure you, the media is going to spin this as if it’s all the banks fault so, just a bit further down the rabbit hole, come on……you know reading my blog is like watching a naughty movie on your company laptop, you may not ever say you do it but, we know, oh trust me, we know.

Ok, I digress.

What these politicians need to do is get rid of these toxic assets on these bank portfolios now, under a capitalist system, the banks would be left to deal with the problem on their own however, that isn’t the reality of the situation. So, these politicians in control of these banks tell them that they need to do more short sales however, the banks say, we can’t take the loss.

Well, the Government can’t give them a direct bail out because, it’s not popular at the moment so, the Government decides to charge the banks fee which is essentially tax payer money anyways because the bank is Government owned. The Government then “banks” these fees at the Fed and makes the fees available to banks they determine need to liquidate some non performing assets. So, in essence, it’s a Government bailout with taxpayer dollars however, it’s hidden in the guise of bank fees.

So, how did I make the stretch that these fees would be used to create an influx of short sales? Well, I can’t tell you my source but, let’s just say, no politician in their right mind wants to be charged with kicking homeowners out of their home, no matter if the homeowner can afford the home or not. This is especially true with Progressive politicians because, keep in mind, they are following the Franklin Roosevelt 2^nd Bill of Rights that says everyone gets a home.

Ok, now that I took you on a trip to Wonderland, let’s come back to reality.

America’s debt spending is weakening our dollar in foreign markets. This is why we are seeing gold prices rise. This is important to understand because, we don’t want to end up like Greece in the next 24-36 months, if not sooner. A continued weakening dollar, increased fuel prices, lower home prices, lack of real job growth, more defaults, more upside down homeowners, a tightening credit market, lack of industrial production in the country, higher taxes for everyone and we are gearing up for a perfect storm for hyper inflation.

The Government has to do something, right?

I got an idea.......JUST STOP DEBT SPENDING!

Hamp and Hafa ProgramsI've reviewed much of the Hamp and Hafa Programs and honestly, it seems tough to use it if the homeowner has a 2nd lien(2nd Mtg) on the home, or has already moved out, or is unemployed.

These 3 very REAL reasons occur in a majority of the short sales I've witnessed or have been involved with. Nonetheless, I’ve posted this information because there are those that MAY benefit and I wouldn’t throw any program out the door without reviewing the specifics of your sellers NEEDS!!

Now, little about "Hamp", this program is for loan modifications and generally involves the maximum payment of 31% of the sellers total income before taxes to be paid towards your loan. Once these numbers are established, proof of ability must be supported and then there is a 3 month test period to see how able the owner is to pay, dosnt work if unemployed, and it dosnt work in many cases. But, again, I would’nt throw anything away without review against their particular needs.

If the Loan modification fails or if an application to skip the loan modification is requested and accepted, then you can move right into a Hafa short sale program.

HAFA:The Good:

1-Homeowners will be released of all responsibility with a satisfaction of lien from the lender.(This is excellent,(many short sales may still hold owners liable for the deficient amount that the lender lost)

2-There is a "pre-aproved" short sale Listing along with the Minimum sales value. (Saves time, easier for buyers to buy!!!-The pre-aprovals are done in 10 days-YAY

3-Homeowners are given $3000.00 towards relocation from the lender at closing.( An excellent aide to families moving to their new home)

4-If the homeowner had attempted a Hamp Modification, then all the same docs and info will be used, no repetitive docs.-( This saves time!)

HAFA: The Bad:

1-The property can't be sold to a relative, friend or anyone with a close relationship to the seller.Must be an ARMS LENGHTH transaction, therefor a 90 day period must occer before an investor may re-sell.

2- The buyer may not re-sell the property for less than 90 days after closing. Nor can they rent the home back to the previous owner.

3-The difference between the remaining amount of principal you owe and the amount they receive from the sale must be reported to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The amount paid to you for moving expenses ($3000) may also be reported as income. It is suggested that they contact the IRS or their tax preparer to determine if you may have any tax liability.I understand the 1099 will be issued.

4-If you have a real estate license you can’t earn a commission by listing your own property

5- The seller must also be able to deliver marketable title free of any other Jr. liens. They will allow up to three percent (6%) of the unpaid principal balance of each subordinate lien, in order of priority, not to exceed $6,000 in aggregate for all subordinate liens, to be deducted from the sale proceeds to pay subordinate lien holders to release their liens. They require each subordinate lien holder to release you from personal liability for the loans in order for the sale to qualify for this program.

6-The seller must live "IN" and maintain the property, HOA dues and or maintenance fee's. The seller will, in most cases be making payments up to a total of 31% of his gross monthly income

In the end, these programs may help some people… but it’s going to take a savvy realtor to help make it happen!!

Regards!!-- HOPE THIS IS HELPFULL!!!!!

Rose Mencia, Broker

Sundance Realty South Florida, Inc., 1926 Hollywood Blvd. suite 212, Hollywood, Fl. 33020 cell: 786-208--6804

Here are the basic eligibility requirements.

* The property is owner occupied.

*The mortgage loan is a first lien mortgage and originated on or before 1/1/2009.

*The mortgage is delinquent or default is reasonably forseeable.

*The current unpaid principal balanceequal to or less than $729,750.

*The borrower's total monthly mortgage payment exceeds 31% of his or her gross monthly income.

The lender must evaluate and offer a HAMP mod to borrower before consideration to HAFA options.

Do you know about the HAMP and HAFA regulations? Are You Aware this takes effect on April 5, 2010?

In response to an outcry for Uncle Sam to step in and provide uniform procedures for helping homeowners stay in their homes. This is how the HAFA, Home Affordable Foreclosure Alternatives Program, was born. HAFA is part of the HAMP, Home Affordable Modification Program. This provides incentives in connection with a short sale or a deed-in-lieu of foreclosure used to avoid foreclosure on a loan eligible for a modification under HAMP.
HAFA:
* Complements HAMP and provides a viable alternative for borrowers who are HAMP eligible but unable to keep their homes.
*Uses borrowers financial and hardship info previously collected for a mod.
*Allows borrowers to receive a pre-approved short sale prior to listing.
*Prohibits lenders from reducing real estate commission ( 6% )
*Requires borrowers to be fully released from future liability for the first mortgage ( no deficiency judgement is allowed).
*Uses set standard processes, documents and timeframe deadlines.
* Provides financial incentives: $1500 for borrower relocation assistance; $1000 for lender to cover admin and processing cost and up to $1000 for investors for allowing a total of up to $3000 in short sale proceeds to be distributed to subordinate lienholders.
The program begins on April 5, 2010 and ends on December 31, 2012.

You need to know who is eligible.

Are you ready?

Short Sale Flipping isn’t Fraud…….right? WRONG!

I have argued, for several years now that in my opinion Short Sale Flipping Schemes that use Option Contracts without full disclosure to all parties involved, including the selling bank is fraud however, we still have many agents out there that just don’t get it.

Quote from John Doe Realtor # 1

“Jesse you have been ill informed and need to watch out what type of horrible , fear mongering advice you are putting out on a public board.

Quote from John Doe Realtor # 2

“Real Estate Day trading is not illegal. While you may wish to make it so, wishing and hoping won't change the law. Please cite some code somewhere that supports your statement”

Quote from John Doe Realtor # 3

“Jesse you are obviously an intelligent man but a bit misguided”

This is just a few examples of what has come my way however, it hasn’t changed my opinion and, now I have a recent ruling by a Magistrate in Connecticut to support my opinion. To read the entire article yourself, follow this link, http://nationalmortgageprofessional.com/news16047/connecticut-real-estate-agent-admits-defrauding-bank-short-sale-scheme

In a nut shell, like many short sale investor flips I have seen, the selling Realtor doesn’t disclose to the selling bank that they are planning on selling the property for a profit and the Selling Realtor doesn’t disclose that the offer they are sending into the bank isn’t the best offer they received on the property. This is Mortgage FRAUD and now I have precedent to agree with me.

Quote from the National Mortgage Professional.com article….

“According to court documents and statements made in court, McElaney worked with Sergio Natera, also a real estate agent, to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On Dec. 5, 2007, McElaney, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, McElaney and Natera subsequently directed communications to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management LLC, an entity that Natera controlled. The bank agreed to a short sale of the property for the lower price, and released its mortgages on the property. On June 9, 2008, Natera, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property, and Natera and McElaney retained the difference in the two sale prices.

McElaney is scheduled to be sentenced by United States District Judge Janet C. Hall on May 10, 2010, at which time she faces a maximum term of imprisonment of 30 years, a fine of up to $1 million, and an order of restitution. Natera pleaded guilty to one count of bank fraud on Feb. 11, 2010. He awaits sentencing”

If you are in a Short Sale Flip Transaction and you aren’t disclosing to the selling bank that you plan on re-selling this home for a profit, you are opening yourself to risk that could be argued as fraud and your insurance doesn’t protect against that