Loss Mitigation Specialist · Jacksonville, FL · Member since 2008 · 49 posts · 0 votes
I'm buying SFR in pre foreclosure and asking the lender(s) for short sale.The owner selling as FSBO to me. Lender on 1st.(Chase) wants the owner list the property with RE Agent even the owner has an offer on it from his FSBO marketing. House is upside down, vacant and owner moved out of state. I have Authorization from the Owner for releasing mortgage information.
Any suggestions?
Do we have to just send the whole package with an offer to the lender or we have to hire an agent to be a part of it?
Thank you for any suggestions. :wink:
House is in North Florida Jacksonville suburbs.
Real Estate Investor · Champions Gate, FL · Member since 2008 · 37 posts · 1 vote
17y
When I run into this situation, I first let the mitigator know that there is negative equity in the home therefore no proceeds with which to pay a realtor commission and since the seller has no money, no realtor wants to list the property. Next, with the number of houses on the MLS and the numbers of days on MLS, the foreclosure sale would likely occur before the house could get sold and closed. When that happens, the bank gets another house back. Is that what they really want? Usually my offer will net the lender more money and in a shorter time than by the lender completing the foreclosure, securing the property, and then selling it many months from now. I then ask if the listing agreement is needed just to complete the package or is there another reason?
The simple answer is to have a Realtor you know list the property and immediately change the status to pending. It can then be included in the short sale package.
Augie Byllott wrote: I first let the mitigator know that there is negative equity in the home therefore no proceeds with which to pay a realtor commission and since the seller has no money, no realtor wants to list the property.
Where do you find a loss mitigator idiotic enough to believe this?
Real Estate Investor · Champions Gate, FL · Member since 2008 · 37 posts · 1 vote
17y
If the seller is upside down and in pre foreclosure, then:
a) they have no equity in the home
b) the bank has first rights to the loan
The realtor would have to be paid above that. If the person is in foreclosure, then they probably are not looking to pay a realtor to lose their home.
The reason you are communicating this to the mitigator is because if the bank is willing to give a discount on the home, then they will also need to build in the commission on top of that, so the deal becomes less impressive to the buyer. This is why you would want to bring this to their attention.
You're basically saying... if it's listed with a realtor, you're going to have to give me a 6% greater discount than you are already giving me cause I (the investor) am not going to pay for the realtor. Secondly, maybe a realtor would list it, but really the seller is getting hurt? Who will pay the realtor? The seller certainly can't take it out of the equity, so it's either the seller, out of their pocket or the buyer... or they don't get paid.
Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
17y
Augie,
The large servicing companies are processing hundreds of thousands of these files every month. I think they understand that the seller has negative equity and that a realtor commission usually is needed to be paid.
The poster's original question was whether it is "necessary" to list or not. Most servicing companies have a requirement that the property is listed for sale publicly prior to reviewing offers. Some stand by this rule strongly, while others aren't as strict.
The reason they do it is to make sure that they are getting as much money as they can for the property. Almost all of these companies are afraid of being taken advantage of. Right or wrong, they view the realtor (and the associated commission) as a cost of doing business to make sure that they get as much for the property as possible.
Loss Mitigation Specialist · Jacksonville, FL · Member since 2008 · 49 posts · 0 votes
17y
Very well. I'll put it this way. First lender on this deal is Chase. Any experience to deal with Chase? Do they usually request to list property in FL before any offer will come to them?
The second is HomeQ.
Seller called Chase and they wanted him to first list the property with Realtor, but I thought we will just send the whole package with an offer and then if they want to get Realtor involved we get it listed?
Good or bad approach?
Real Estate Investor · Champions Gate, FL · Member since 2008 · 37 posts · 1 vote
17y
The best short sale strategy is to request a short sale package from the lender. This is done by calling the lender, getting a fax number and faxing a copy of your Authorization to Release Information (signed by the borrower(s)). Then you will have their specific requirements for the short sale package. Every lender has their own requirements, some are more flexible than others. The same goes for loss mitigators, some are easier to deal with than others. If shorting a second only, usually a phone call and offer is acceptable because seconds are usually more flexible..
If the lender requires a listing agreement then get one. The reason is because they won't usually work an incomplete package.
Loss Mitigation Specialist · Jacksonville, FL · Member since 2008 · 49 posts · 0 votes
17y
Owned:
1st.Chase $168K
2nd. HomeQ 38K
Missed 4 payments,
no other liens,
comps sold for average $180K now.
house needs only paint and clean.
4/2, 1,700sq.ft. build in 2003
house is vacant.
Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
17y
Is this for a personal residence or strictly for investment?
I ask only because most owner occupants will pay more than a pure investor and tend to "fall in love" with a property instead of focusing on the deal.
Either way, the process is the same. After submitting your packet, you will find that Chase will either require a listing, or they won't (I'm guessing they will).
After they have your offer in hand, they will submit the file for a compliance check which can take ten business days or more. They will then order a broker price opinion. This will be conducted by a real estate agent (usually). More importantly, it will be conducted by a real estate agent that is willing to spend a few hours doing analysis and taking pictures of property for something like $50. A lot of good agents have started out with this kind of work, but so have a bunch of duds. I mention this because this is a critical piece of the deal.
You need to be present at the broker price opinion. The bank does not trust the investor. They rely on some agent that will work for $50 to go and tell them what their property is worth. You need to ensure that the agent does their job and does not rely on comparable sales from 6 months ago that are way high.
You will need to coach the BPO agent and provide them with anything you can come up with. Examples are:
-comparable sales they might be missing
-lis pendens that aren't actual MLS listings yet
-abandoned homes that haven't been listed of foreclosed
-video
-newspaper clippings that talk about more crime, unemployment, gang activity, homelessness, etc...
Basically, you need to paint the home in a manner so that the bank realizes how badly they need to sell the property.
Otherwise, most realtors naturally revert to being eternal optimists. Your job is to ground them.
The bpo is the main indicator that most investors will use to make their decision.
There is one final thing that makes a big difference that I forgot to mention and that is PMI. If the borrower has PMI, you will run into some significant road blocks.
Loss Mitigation Specialist · Jacksonville, FL · Member since 2008 · 49 posts · 0 votes
17y
Good advice,
I will follow up with it.
My intent is to short sale it and sell to the end buyer.
This is my first short sale where I will work on it alone.
I did some coordinating, but I never did it all alone.
Did you have any formula how low can be initial offer to the first lender as far as % of the BPO?
Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes
17y
I have rarely had the lender accept less than 10% of the BPO or appraisal value. Most want an offer very close to bpo, or they will let asset management handle the sale of the property.
Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes
17y
It all depends on the area. In MI, it seems the lenders are accepting any reasonable offer on properties listed as a short sale. The market is so messed up that nobody can seem to come up with an accurate value on anything these days....
Property Manager · Portland, OR · Member since 2008 · 212 posts · 14 votes
17y
Ok, I've read all your responses and I have to respectfully disagree with anybody who thinks that a short sale has to be listed. I have closed 4 in the last 2 months...none were listed when I found them...and i kept it that way.
The only person that will request a listing agreement is the call screener...and if you give them the wrong answer...you might as well hang up, call back and get another screener on the phone...and that goes for any question they ask you.
Nobody can force the seller to list the property...and furthermore why complicate the situation...bring in a realtor and you can't change your offer at will...you have to fill out new paperwork signed by the seller to re-negotiate...extensions have to be signed...nightmare.
You won't even get to a loss mitigator if you don't get past the call screener first...the negotiator won't be asking you questions like "is it listed?" because they don't care and they rely on the screeners to take care of that...if they have an offer in front of them...on any type of paperwork...then they get a BPO/Appraisal and give you an answer...accept, reject, or tell you to raise your offer.
Remember this...they will want to make you think they are in the drivers seat...and trust me, you have a lot of leverage over them....just get past the call screeners.
Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes
17y
I am glad that you have had success with not having to list some of your short sales you have worked on. It sounds like you have a talent for the negotiating. You are right that some lenders do not require listing agreements to fulfill the requirements of a "complete package" but there are some lenders who do. With those lenders, without a listing agreement in the “complete package†you aren’t getting assigned to a loss mitigator or negotiator until you do. The lender cannot “force†the seller to list the property, but they can refuse to accept a short pay on the note if that is one of their policies.
Property Manager · Portland, OR · Member since 2008 · 212 posts · 14 votes
17y
Hi David,
Two were Countrywide. Two were Litton.
Countrywide's process is a pain..they have their stupid value finders that tell them how much the property is worth...if you aren't within their range with your offer then they won't even order an appraisal. What is worse, they swear up and down that when they use these "value finders" that they aren't using comparable sales..so they won't let you submit comparable sales to back up your offer...but how can they possibly determine a value without comparable sales...then, they order appraisals and not BPO's...appraisals have a section in them that lists comparables...they are full of it.
But..I digress...so ya a few were Countrywide...one actually let me order my own BPO to challenge the appraisal they got..which of course the got back in September and were stuck on the value even in December. I challenged and got it lowered.
Furthermore...Countrywide somehow didn't even send these properties into default...no NOD was posted and the borrowers hadn't made payments in 6 months.
Property Manager · Portland, OR · Member since 2008 · 212 posts · 14 votes
17y
Summerhomes,
True, I suppose they could refuse thousands of dollars because the property wasn't listed...but if it is a true cash offer...if you are persistant then they absolutely cannot refuse to negotiate a short.
And I'll bet that there is no official policy that the property must be listed...it is all in how you present your case to them.
Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes
17y
I would never use the word “absolutely†when dealing with lenders. I would lose that bet everytime! LOL
I see them refuse 10’s of thousand of dollars all the time. It drives me nuts. But that is why we in my office just have to mutter “can’t fix stupid.†And they don’t seem to care if it is a cash offer or not most of the time, as the transaction is not up to them, only the approval of the amount. In an REO transaction, different story. A cash offer is much more powerful as the lender is now the one in charge of the transaction and will have monetary interest in whether or not the deal closes. I am just not seeing that in loss mitigation. They just want to see if it meets or exceeds their valuation of market value, and if all of the paper work is complete so they can check their little boxes on the check list and pass it down the line. I suppose since I am a Realtor I have never had to try to negotiate around their requirement of having a Listing Agreement. I just provide them one and everyone is happy. Some lenders have as part of the requirements of their “complete short pay package†that you send in a listing agreement. If you are successful in negotiating around this, I believe you. Like I said earlier, it sounds like you have a talent for the negotiating. Good job.
Oh, and I talked to a guy at Country Wide last week and he confirmed my worst suspicion…that he is using Zillow and Trulia to get his “value!†Scary.
In my experience, if you don't include a listing agreement with the SS submission package, you can include a letter signed by the borrower explaining how he secured a buyer.
Real Estate Consultant · Member since 2008 · 792 posts · 30 votes
17y
In retrospect, I think I was quick to say that most lenders "require" listings, because I've never tried it from the investor side. I never said it couldn't be done, I just thought some lenders wouldn't play ball.
If CW will do a deal without a listing agreement, then I would guess that just about all of them would too. However, as Mitch implied, it seems as if they certainly will not accept the proposition casually.