Residential Real Estate in SW Washington State

Residential Real Estate Services with Passion, Integrity, Knowledge

Short Sale Documentation

by

Perhaps the most significant part of handling short sale listings is gathering the appropriate documention from the Seller. While each lender / loan type tends to have slightly different requirements, overall the list is similar and must be presented to the Lender at the time short sale negotiations are begun.

Short sale documentation almost always includes at least:

  1. Authorization from the Seller(s) allowing the negotiator to contact lender(s) on their behalf.
  2. Hardship letter. This letter, written by the Seller, describes exactly why the Seller is in need of a short sale and why the lender should consider their request. Not a time for sugar coating, the letter should be heartfelt (I actually like handwritten letters the best).
  3. Financial Documents (duration varies by lender)
  • Pay Stubs (two months)
  • Bank Statements (last three months)
  • Tax Returns (last two years)
  • Financial worksheets (income and expense report for the past three months, and projecting forward for the next three months, or if self-employed, a profit & loss statement will be needed)

As a short sale listing agent, I like to have this documentation in my file at the time a listing is begun. Waiting to gather this all-important short sale document until an offer is received typically delays submission to the bank and the beginning of negotiation services.

For help listing your home and a more comprehensive list of the short sale documentation needed, be sure to consult with your lender, your attorney, and, of course, your trust real estate brokers.

 

A Great Lender Helps From Start to Finish, Especially in a Short Sale

by

business meeting

One of the very first steps in the home buying process is determining how a Buyer will pay for their new home. Not only must a Buyer determine much they can afford, but how an offer must be structured–whether closing costs must be paid by a Seller, gift funds will be used for a down payment, how much of a down payment will be paid, and so on.

Having a great lender as part of the Buying team is critical, but especially so with short sale purchases.

It can be difficult for a lender to help a Buyer determine exactly how much they might need to close the sale. A good faith estimate on the front end of a short sale might not be appropriate; interest rates, dates of closing, and other terms may change before lender approval occurs several months later.

Will the Buyer have sufficient funds to close? Will they have sufficient reserves; will they be comfortable with their payment?

A GREAT lender prepares an estimate of costs at the beginning, then meets periodically with the Buyer throughout the process, updating them on the changes and making sure they understand the numbers. They help the transaction succeed – from start to finish.

Working with an agent experienced in both listing and assisting buyers with short sales … and considering their recommendations for a great short sale lender will ensure success and confidence as a buyer proceeds through the process.

Mediation?–Yes, You’re Entitled!!

by

debateYesterday I posted information about what to do as soon as you fall behind in your mortgage payments. As a second step in the foreclosure process in Washington State, the Foreclosure Fairness Act stipulates that if your loan is through one of the big banks, after receiving notice that a Notice of Default has been filed, you’re entitled to have your situation formally addressed through Mediation. The purpose of Mediation is to determine whether there is any alternative to bank foreclosure of your property.

Ideally, the outcome of mediation might allow you to restructure your loan, save your home, or agree to sell it as a short sale. In fact, a decision maker for the bank is required to be present at the Mediation meeting – at least by phone. Of course, if no agreement is reached, the ultimate outcome might be to allow your home to proceed through Foreclosure.

This mediation step is a bit more complex than the informal meeting to which you are entitled right away (see yesterday’s post). Mediation must be requested by an attorney or housing counselor within 30 days of the bank or Trustee filing of the Notice of Default and must be held within 45 days of the referral to Mediation by the attorney. You’ll also be required to pay your half ($200) of the cost of Mediation hearing ($400).

Prior to Mediation meeting, both you, as the owner-occupant, and the bank will need to assemble a list of documents – yours will include financial documents such as tax returns, pay stubs, and so on. It’s an extensive list, but not difficult. Since you will be working with an attorney or counselor, they’ll assist you in determining exactly what documents you’ll need.

Note that the Foreclosure Fairness Act took place on July 22, 2011. If you received a Notice of Default prior to that date and foreclosure of your home has not yet been completed by the bank, you are also entitled to Mediation. You’ll want to contact an attorney experienced in the Foreclosure Fairness Act as soon as possible! Doing so can delay a scheduled auction!

As usual, you should also contact your Realtor© so that you are fully aware of your options and for the name of an attorney that is experienced in Foreclosure work.

Just Open the Mail!

by

reading mailIn Washington State, folks that get behind on their house payments have options as described in the Foreclosure Fairness Act. The Act prescribes a series of steps to which a homeowner is entitled prior to any auction of their home.

One of the first steps a lender must take for a home in Washington is to send a letter to the homeowner describing their options – the first of which is the right to request an informal meeting with the lender before a Notice of Default is filed.

But here’s the thing … the homeowner has to make the request within 30 days from the date of the options letter.

  • So … open every piece of mail that comes from your lender.
  • Read it carefully and then  exercise your option to meet with the lender to discuss the situation.
  • Do it by phone and ask insist that they confirm your request in writing.
  • Follow up with a letter to them in writing — maybe even registered mail so that you have a record of your request.
  • Keep copies of anything and everything you send and notes about every conversation you have with them.
  • Get the names of the people with whom you talk … and write down the phone numbers and dates you make any calls.

and finally …

Engage an attorney to represent you at the meeting. Talk everything through with him/her … and with your real estate agent so that you know what your options truly are.

But first … Just Open the Mail!

Fix the Housing Market = Fix the Economy

by

I know … I’m often considered naive in my “political” opinions. Probably rightly so most of the time. After all, I’m just a hard-workin’ self-employed real estate broker out here in south King County, home of the working folks. Most of us go to work every day doing whatever it is that needs to be done and worrying about how to make our next house payment.

Like many folks, I’ve watched my house values erode drastically over the last couple of years. Perceptually, that fall in value seems to be speeding up .. or perhaps it’s just that now we’re all aware of what buyers truly are willing to pay for things. I’ve also watched, from the sidelines, interest rates fall drastically.

More disheartening, however, … at least to those of us who are self-employed … is that we don’t qualify to refinance our home, or for any of the nifty loan modifications, and wouldn’t even if our homes hadn’t lost value. Most of us write off everything we can on our income taxes making our bottom lines pretty skinny. But that bottom line is what is used by banks to determine our income — thus one step in our eligibility for a mortgage refinance, or even a loan modification. Our W2 income simply doesn’t support our true day-to-day ability to pay the bills. (Another one of my witticisms … “gee whiz, if my income is good enough for the IRS, it oughta be good enough for the bank!”)

So … for the last few weeks, I’ve been spouting my opinion about how to fix the economy. Here it is. Have at it:

Take ALL of the mortgages that are current and unilaterally lower their interest rate to the current market rate. Okay, I’ll even go so far as to say … lower them to the current market rate plus 1%. Period. No requalifying. (Afterall, I’m talking about “current in payments.”) Without regard to the current value of the home. Just give us all a ‘buy’ and get this over with. Make it effective, say, on December 1st.

No more messing around with “loan modifications,” and all that bank nonsense. Just get it done. Drop everyone’s payments down to today’s rates. Just do it. Get it behind us. Make house payments affordable for those folks who still own them.

Heck, maybe even take a good hard look at the reason folks are behind in their payments (I’m willing to bet one major reason is because their interest rates are sky high.) And perhaps give them a ‘buy’ as well. Forget about that pending foreclosure/auction for six months and see if they can make it at a lower interest rate. Write off all the past dues and late fees. Get it over with. Yes, I know this is a whammo for the investors that bought the loans for the banks. But so is letting this housing mess go on and on and on. It’s bringing everything else down, and there’s no sign of stopping. Fix the Housing Market, Fix the Economy!

I believe that stabilizing housing is far more important than jobs creation. Home ownership will always be an American dream. Let’s stop the nonsense and keep folks in their houses.

Interestingly enough, Moody’s had a proposal published just a couple of days ago in DSNews that was surprising similar … hmmmmmm (do you think someone is actually listening to my far fetched ideas?)

Fix the Housing Market, Fix the Economy. That’s my opinion and I’m sticking to it.

Facing a Foreclosure or Short Sale?

by

Image thanks to Jeff Turner/FlickerThe Washington State attorney general’s office recently released three videos that explain your rights and options should you be facing a foreclosure or short sale of your home.

As an active Realtor®, I frequently receive phone calls from people that are already behind on their payments, or feel as though they will soon be in trouble with their mortgage. Sometimes, the call is from someone that is trying to get out from under a home that has lost significant value and is now worth far less than what they owe. Each of these types of calls requires a knowledgeable response and action. Sometimes the best response is to refer the person to an attorney. Most often, however, it’s a chance to help educate the caller as to the possible options based on their personal situation.

The three videos provided by Rob McKenna (Washington State Attorney General) and his staff explain some of the options available and the impact of these options on the consumer who may be facing a foreclosure or short sale of their home.

Each of the videos is moderated by Annie Fitzsimmons, the legal counsel for Washington Realtors. They are easy to understand and just a few minutes long. If you are facing a foreclosure or short sale, I urge you to take the time to view these videos, then give me a call if you have any questions or if you would like to discuss them.

In Part One, Mr. McKenna provides an overview of the options that are available:

In Part Two, Marc Cote, a Certified HUD Housing Counselor, discussses what will happen when you meet with a HUD Housing Counselor, what you need to be prepared for the meeting, and the options available when working with a HUD Counselor:

Part Three, presented by Rob Dickson, Lawyer and Short Sale Negotiator, discusses the short sale process, along with some of the difficulties that are faced when negotiating a short sale.

Obviously, at this moment many of us that are homeowners are facing significant loss of value in our homes and sometimes it takes just the smallest event to trigger an inability to make mortgage payments. Should that happen to you, please contact me at 206.300.8421 or gabrielle@gabriellenemes.com just to talk … and take advantage of the resources outlined in these videos.

Dear Bank — Can I buy my own short sale house?

by

Dear Bank President:

See here’s the thing. Like much, if not MOST, of the country, the value of my house has dropped substantially. So has my income, but I’m STILL WORKING! Of course my income is now only about 2/3rds of what it was when I bought my house because I had to take a cut in pay to keep my job.

But I’m STILL WORKING and I’ve never missed a payment. I’ve now built up all of my credit cards to their limit and raided almost 100% of my 401k so that I can make my mortgage payments, yet I’ve NEVER missed a payment.

But the ratio between my mortgage and my house value is laughable. I’m so far upside down, I might just as well keep tunneling. Maybe I’ll end up in China like my Momma used to say.

And my friend, the very educated and talented REALTOR, says that the best way for me to get out from under this mess is to short sell my house because, like my income, it’s only worth about 2/3rds of what I paid for it five years ago. I even consulted with that real estate attorney who says maybe I should just let the house go back to the bank.

But, you see, I’m a responsible person. I make a commitment and I stick to it. Again, let me stress, I’ve NEVER MISSED A PAYMENT! It won’t be long now though. I just can’t continue to make payments at that fantastic 6.8% interest rate I had five years ago.

Here’s my proposal: My income supports a purchase that’s 2/3rds less than the current mortgage on my house. And interest rates have dropped below 5%. I CAN AFFORD THAT! And I can save you thousands of dollars and all of us can come out of this without egg on our faces and tons of embarrassment if you’d allow me to just buy back my own short sale property. Well, technically we shouldn’t have to go all the way through the short sale process. That’s messy, lengthy, expensive, and totally unnecessary!

So let’s do this: You process your own unbiased and fully researched Broker Price Opinion and I’ll pay for the appraisal. And then we’ll agree that the value of my house is 2/3rds of what it was. And then you’ll rewrite my mortgage/loan for that number at the current interest rate of less than 5%.

You’ll save money. You’ll not have yet another house sitting in your “bad loans” portfolio. And I’ll get to stay in my house and continue to maintain it, thus saving my neighborhood from further decline and dropping my house value even more. And my credit score will stay reasonable since we won’t have to go through all that “miss a payment or two or three so we’ll look at your short sale offer” business. My kids will continue to grow up in the same house at the same schools with the same friends in the same neighborhood, thus continuing to contribute to their sense of security. (We need these future secure workers to pay for their own houses and cars someday, thus helping to ensure your bank’s longevity.) We’ll all be winners.

How about it, Mr/Ms Bank President? Doesn’t that make loads more sense?

Sincerely,

Struggling Homeowner
i.e., Your Next Foreclosure Client

What is a Deed-in-Lieu?

by

No foreclosure!

A Deed-in-Lieu of Foreclosure is a process where the lender agrees to take the deed to your home rather than pursue a foreclosure action against you for nonpayment of your loan. This option is easiest where there is only one mortgage, and where there are no other liens.

Depending on your lender, a payment might be offered to the holder of a second mortgage or home equity loan, but that lienholder must also agree. Further, if you have yet additional liens against your home, such as tax or utility liens, your bank will likely not even consider this option. Your bank wants your home with “marketable title” … i.e., a clean and clear title without other encumbrances.

While this seems as though it might be an easy and logical solution, what’s important to remember here is that a bank isn’t in the business of owning real estate. They don’t want your home, especially if there’s no equity to be gained in taking it.

While definitely a generalization, there’s certainly truth to the statement that where banks readily accept Deeds-In-Lieu is where a home has equity in the current market and can be quickly liquidated at a profit to the bank. Great if you’re behind in your payments and absolutely must leave the loan obligation and there’s equity in the house. However, if there IS equity, why not try to refinance or pursue a loan modification first?

It’s also important to know that some banks won’t even consider a Deed-In-Lieu of Foreclosure unless you’ve already been rejected for a Loan Modification and/or were also unsuccessful selling your home as a Short Sale.

The information presented on this Site should not be construed as legal or financial advice. You are advised to seek consultation with a qualified Attorney and Accountant. ©Gabrielle Nemes, 2010

Sometimes a Short Sale is Just NOT the Right Answer!

by

I like to consider myself a resource for sellers who are considering their options. Should they pursue a short sale? Should they just walk away? Should they just try to hang on no matter what?

Recently I had an opportunity to meet with a wonderful couple that were truly truly trying to do “the right thing,” as they phrased it. We met for a couple of hours while they showed me around their home.

Their pride was obvious. This house was their baby. They’d improved and lovingly planted almost every inch of the yard … and the inside was eat off the floor clean. Every room was polished and tidy. They were devasted that life had taken an unfortunate turn and they just couldn’t figure out how to hang on any longer.

After talking through the options, I sent them to talk to the other necessary experts — the attorney and the accountant.

Yesterday the husband called me back with an apologetic voice: “The attorney said that it would make absolutely no difference whether we let the bank just have the house, or short sale it. We’ve decided to just walk away.” He was distraught, thinking he’d “wasted my time!”

Heavens. Sometimes a short sale is just NOT the right answer. I reassured him that I was so happy to have met him and his family and wished them well.

Is a Loan Modification for Me?

by

A number of considerations should be made when you are either in trouble already with your current mortgage, or anticipate that you might be soon.

One excellent option might be a loan modification, which is designed to reduce the amount of your mortgage payment to no more than 31% of your gross income.

Unfortunately as of this time, it appears that most loan modifications are unsuccessful, with something less than 5% of all applicants successfully completing the loan modification program being reported by some analysts.

However, don’t be deterred! Perhaps you’ll be able to complete  a loan modification and be able to remain in your home. According to some reports, the biggest issue with unsuccessful loan modifications is that homeowners do not adequately complete the necessary application, or do not provide sufficient documentation as required by the lender. Of course, there are also reports that lenders don’t recognize that a homeowner has completely required with all requirements. In any event, it doesn’t appear to be an easy or guaranteed process.

The first step is to determine whether or not your lender will change your existing loan to more favorably meet your financial requirements. This process is formally termed “loan modification.” Under the terms of the federal program, HAMP (Home Affordability Modification Program), essentially lenders are encouraged to offer loan modifications to homeowners that are either already behind in their payments or who face the prospect of soon being so.  

Be sure to contact your lender and ask for their loan modification package. You should receive, at a minimum, a list of exactly what they require, and how to proceed and apply.

The information presented on this Site should not be construed as legal or financial advice. You are advised to seek consultation with a qualified Attorney and Accountant. ©Gabrielle Nemes, 2010