two loans on a short sale

What’s In It for Agents To Do a Sacramento Short Sale?

Sacramento Short Sale Agent Elizabeth WeintraubThere are days I ask myself why as a busy agent would I ever do another short sale, and then before I answer that question, I take it on. It’s not just me, the short sales in Sacramento, the few that still exist, are becoming more convoluted and complicated, if that’s possible after all these years. Nothing is a straight story anymore. There is no such thing as a simple hardship letter and automatic short sale approval. Nope, all of the short sales seem to involve years of delinquent dues, past due utility liens, judgments, court settlements, bankruptcies, horrific medical setbacks, in addition to having two or more mortgages to short sale, layered with mortgage insurance on top of Fannie Mae.

Not to mention, some of the buyers for these are no walk in the park, either. They’re probably VA buyers or obtaining CalHFA loans, and the properties probably require repairs, which could involve 203K loans and / or energy efficient mortgages. These additional complexities are more than most agents can handle or want to handle.

There are not very many Sacramento short sale agents in town who a) know how to handle these and b) are willing to handle these types of transactions. Why would any agent in her right mind do a short sale today when she can sell a regular sale and be done with it in 30 to 45 days? I’m sure that’s a question that some agents ask themselves. It’s a question I brought up to sellers last week as well, and I just put it out there on the table.

Now, I made them wonder. What was in it for me, the agent? Why would I agree to do their short sale when it’s so much more work and extremely time consuming? It’s not like I get paid more to do it because I don’t. I charge the same commission to do a short sale as a regular sale. I get paid the same. And I do tons more paperwork, all of which is contingent until the bank approves the sale. There is no transaction unless the bank approves it.

So what’s the deal? See, now I have you wondering, too.

The answer is somebody has to do it because otherwise sellers would have to pay a lawyer. And most sellers can’t afford to hire a lawyer. So, I handle the short sale for them at no out-of-pocket expense for them. All of my fees are paid from the proceeds of sale. It’s basically a free service for the seller. I know how to close these tricky little suckers, so what the hey. It’s a little bit like combining a public service with a business enterprise. A little pro bono work.

Then, yesterday, I received approval on 3 short sales that each had their own particular set of circumstances that would cause a normal agent to drink Draino. Because a normal agent would not have received approval on those short sales. I have a talent for it. What can I say?


The Sacramento Short Sales Nobody Wants

Short Sale 1 SacramentoIt’s not surprising that I often agree to tackle the Sacramento short sales that no other real estate agent in Sacramento wants to handle. That’s because I don’t discriminate. As long as the seller’s situation warrants a short sale and this agent can see that short sale closing, I will list it, sell it, negotiate it and close it. If I don’t believe the short sale will close, I don’t accept the listing. Keeps life simple.

But what I think will close and what another agent in Sacramento believes will close is often two different things. That’s because there are agents who will not touch a short sale in which the seller owes money to more than one lender. These agents do not want to work on a short sale with two loans or more. They’ve been burned once or twice by second lenders so they automatically assume all second lenders are reluctant to cooperate with a short sale or they want to blackball certain lenders, which is so wrong.

Every short sale is unique. Every short sale is different. What a second lender might do in one transaction could be the opposite in another. Any Sacramento short sale agent worth her salt knows that it’s a defeatist attitude to automatically wish for the worst.

I’m thinking the reason that agents might lose enthusiasm for a short sale is because they probably haven’t closed enough of them. According to Trendgraphix, I have closed more than $65 million in short sales, more than any other short sale agent in the Sacramento seven-county area over the past 8 years. I’ve learned a thing or two negotiating this volume of short sales. The most important is not to be overly judgmental and to deal with the facts at hand. If it’s a little bit extra work for me, so what? That’s what I’m paid to do.

Just closed a short sale last month in which well-meaning buyer’s agents predicted disaster. They didn’t want their buyers to make an offer on the home because they thought the roof needed too much work. You know what? The roof never came up, and it sold FHA. The home inspector did not find any problems, either. Agents also thought the home was priced too high, yet it sold for a little bit more than its original list price. Other agents complained that the short sale had two loans and would take too long to get approval, if the second lender agreed at all because some agents had a bad experience with that particular lender.

The facts are we accepted an offer on October 18th, and we closed escrow on December 23rd. We had short sale approval from both lenders before the end of November. Plus, the seller pocketed $3,000 through the HAFA short sale program at closing. Everybody was happy, except those naysayer buyer’s agents who did not go to escrow due to ignorance.

New Twist for Sacramento Short Sales With a Second Mortgage

Short sales with a second mortgageBefore I get started, let me say that I know agents in Sacramento who will refuse to work on short sales with a second mortgage. Yeah, that’s ridiculous. Sure, it’ s a little bit more work with two loans, and second mortgages on a short sale can throw a monkey wrench into negotiations if they are hard-money loans, but that’s the job of a Sacramento short sale agent, to make it work.

I used to believe that only a lawyer could negotiate certain types of Sacramento short sales but after doing them for almost 8 years, I don’t believe that anymore. In fact, many lawyers hire an assistant or clerk to actually process the short sale. There seems to be little hands-on involvement. Because of the volume I do, and my personal interaction, I hear new developments often before they become mainstream. That’s a benefit to hiring an experienced Sacramento short sale agent to do your short sale and not some recently licensed agent who sat through an online class or a lawyer who pawns off the work.

The new development with the second mortgages secured to underwater homes is some of them are vanishing. Yes, poof, gone. The seller no longer owes the debt. This is done without the seller’s approval, too. The bank simply releases the loan and forgives the debt.

At first I thought maybe they were releasing the loan but not reconveying the mortgage, as what happens in a bankruptcy before a short sale. In a bankruptcy, the debt is discharged and the seller is released from personal liability. However, the loan remains secured to the property in a bankruptcy and the seller remains in title. Some sellers end up filing a Chapter 7 thinking this will get rid of the house, and it doesn’t. Not only that, but some sellers might be better off just doing a short sale and forgetting about a Chapter 7, especially if their only debt is the house.

This is a good place to acknowledge that I have never heard a bankruptcy lawyer say to a qualifying client: don’t do a bankruptcy. That’s like asking a Sacramento real estate agent if you should sell your house or asking a hairdresser if you should cut your hair.

Why would a bank release a second mortgage? Partly due to the National Mortgage Settlement Act and a few other lawsuit settlements. You might wonder why do they care about hanging on to a worthless piece of paper that has no security anyway? So investors can question their assets? Yet, I’m still a bit amazed that banks are issuing reconveyances and letting sellers go.

In some cases, it might mean that the seller won’t even have to resort to a short sale if prices continue to go up. That’s pretty good news for Sacramento sellers. It also makes negotiating the short sale quite a bit easier when there’s only one lender. But it’s still not impossible to work on short sales with a second mortgage, and I do it all the time.


A Solution to the War Between Two Short Sale Banks

Short-sale-crooks-300x168You’ve got life easy if you’ve never had to talk to short sale banks. Be thankful for that. Man, I used to see myself as a person with little patience. That’s one of the reasons why I tried back in my 20’s to learn how to sew. I was under the impression that sewing a dress would teach me patience. You know, you’ve got to trace the pattern on the cloth, carefully cut it out and figure out how to attach the pieces without sewing them inside out or upside down.

My dress ended up in the trash can. It wasn’t disappointing to me. It was satisfaction.

However, over the years, I seem to have acquired patience. I have no idea where it came from. One day it wasn’t there and the next it was. I toyed with the thought that it’s possible aliens have taken over my mind or maybe the 1960s had some sort of long-lasting effects like those flashbacks that never materialized. Hard to say, but patience is absolutely required if a Sacramento real estate agent needs to negotiate a short sale.

The latest irritation that popped up this year, part of the aftermath from passing the Homeowner Bill of Rights, is when the first lender and the second lender refuse to see eye-to-eye about issuing short sale approval. I’m not issuing approval first, says the first lender, arms folded, you issue it. So, we try to reason with the second lender. I’m not issuing approval first, says the second lender, let the first lender go first. What reminds me of being back in grade school has been going on all year long. It’s enough to make an agent with less patience smack ’em.

I understand the reasoning. If the second issues approval, it shows the hand of how much it will accept from the first. Some second lenders would rather let the first make an offer of compensation. On the other hand, if the first issues approval, not only does it set the stage for compensation to the second, because it does not want to revise the approval, but it is also obligated to stop all foreclosure action. Yeah, that’s the real reason. Now the first can’t move forward with foreclosure, especially if it can’t come to an agreement on compensation to the second.

Short sale approval is the only part of the Homeowner Bill of Rights that protects a seller in the event of a short sale. Applying for a short sale offers zero protection, none. Protection is afforded only after the short sale approval.

One solution to get around this stalemate is to have one of the lenders issue approval for a short time period. The letter can contain a short expiration date, like 7 days to 10 days out. And, that’s exactly what happened in a West Sacramento short sale today.

There are always ways around a problem. If you’re looking for a patient Sacramento real estate agent who finds solutions, call Elizabeth Weintraub at 916 233 6759.

The Chicken or the Egg in a Sacramento Short Sale

sacramento short saleThe bickering that goes on between lenders in a Sacramento short sale remind me of kids. Maybe that’s because we don’t really grow up, we just get wider. Like, I don’t wanna eat it, YOU eat it. I know, let’s make Mikey eat it. Except Mikey is now all grown up, living in New York and earning a living hawking ads. But you know where I’m going with this, right? I’d like to talk about when we have two loans on a short sale. That’s when we run into what comes first: the chicken or the egg?

The first lender in this Sacramento short sale doesn’t want to issue approval until the second lender issues its approval letter. Of course, the second lender doesn’t want to issue its approval letter until the first lender issues its approval letter. And we can go around and around and around until we’re blue in the face, but nobody is gonna budge. They’ve got their positions staked out, and by golly, they’re not moving.

In California, I have to side with the first lender. Because it makes the most sense for the first lender to be reluctant, and I’ll tell you why in a minute. But first, let’s look at the second lender. The second lender is in a position of jack squat. The second lender, especially if it’s a purchase money loan, will get wiped out in a foreclosure and end up with nothing. It is in no position to negotiate. The only position it has is to disqualify the short sale and stop the short sale from going through, but that’s like cutting off your nose to spit your face. It’s just plain stupid. The second lender stands to receive funds, generously donated, I should point out, by the first lender. Otherwise, it would get nothing.

The first lender gives up certain rights upon short sale approval that the second lender does not. Those rights involve dual tracking. It’s the only part of the so-called dual tracking law that affects a short sale, unless you want to wait until 2018 when the law really takes affect. It says that when a lender issues a short sale approval letter, the lender must stop all foreclosure action and the lender can’t move forward on a Notice of Default or even file a Notice of Default. So, give the first lender a break. Issue the approval letter.

Sometimes, the only thing you can do if the banks won’t see reason is to hope the second lender elects to sell the note to somebody else so you can start over with a new lender. In fact, maybe you want to give them a list of lenders who buy these pretty much worthless scraps of paper — these no-equity seconds? Of course, this is presuming the second lender didn’t buy MI, which is another story for another day.

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