Can I qualify for the 2012 Foreclosure Settlement?

I’ve been getting a lot of calls from current and past short sale clients in San Diego asking me how the new 26 Billion Dollar Foreclosure Settlement will affect them and how they might benefit from it. The banks currently involved in the settlement are:

• Bank of America

• Citigroup

• JPMorgan Chase

• Wells Fargo

• Ally Financial

Obviously, past clients we short sold property with will not need to bother to call their lenders about the program since the loans are already settled through the short sale. Currently, there are no settlements or retribution payments that I am aware of to borrowers who had to short sale their properties over the past 6 years. Either way, the debt on the short sold property is behind them and they are all rebuilding their credit and on the right path. While it may still sting a bit, they shouldn’t feel as if they’re missing out on anything. Modifications, even with principal reductions, that stem from this settlement have plenty of strings attached. They’re better off being removed from the debt completely.

Current or prospective clients interested, we are recommending they call their lender to see how they might get qualified for one of the modifications or principal reductions that are supposed to come with the new settlement. Modifications have been a major chore and an overall failure in the past… and I personally don’t expect much to change from that. I do hope, however, that banks start to put more people in ‘sustainable modifications’ as opposed to the band-aids we have been seeing over the past 6 years. It will be a much faster route to overall economic recovery… which will benefit us all.  First and only step however is to call your lender directly and find out what you need to do to qualify and if the investor that owns your loan is participating.

If you know anyone who is struggling and might be curious about this settlement feel free to have them contact me. I’m happy to go through what we currently know from our contacts at these 5 major banks and the best way to approach it.

About 40% of the short sales we work on, as a brokerage, are tenant occupied properties. The obvious question I get from our clients in these situations is:

“How do I keep my tenant happy during the short sale process?”

The goal is to keep the tenant in the property paying every month on time. Even if my clients are not making payments (most do not) they still own the property and have the right to collect rent during the short sale process. There are numerous strategies we suggest our clients use to keep their tenants happy during the short sale. Here are a few:

• Offer a few hundred dollars off rent in return for their cooperation in showing the property to buyers.

• We only show the property with 24 hour notice to the tenant.  Respect Their Privacy.

• If they have a year lease we can attempt to keep them in the property by selling to an investor.  Investor buyers love property that comes with a good tenant.  Everyone’s happy.

• If we cannot find an investor buyer, we can offer the tenant a months rent free or other monetary incentives to break the lease so the agree to move out upon close of the short sale.  Everything is IN WRITING.

• Always put ourselves in their shoes and treat them as we would want to be treated in this situation.  We need their cooperation to sell the home effectively.

As long as these principals are followed when approaching the tenant about the short sale, most tenants will be understanding and willing to help… especially if they are saving a few hundred dollars a month.  Don’t let a tenant or long term lease get in the way of short selling a home that is a bad investment and underwater asset.  Contact me for questions and to go over your specific situation so we can plan a strategy to get a short sale done the right way.

Short Sales are widely seen as complicated and difficult transactions that take forever and often times end in failure. This is not true and is a common misconception. As long as the Real Estate Company you hire is experienced and understands the system a short sale should be a simple process that you can set timelines and expectations for. We’ve done over 450 short sales to date and I’ve been able to break down the short sale process into 3 simple phases. I’ve also created a Video that outlines each phase and goes through the estimated timeline for each.

3 Simple Phases to the Short Sale Process and Timeline are as follows:

•  Phase 1: Marketing and Listing Period (30-45 days)

• I consider this the most important phase of the process because this is where we choose our buyer to work with.  It’s crucial to choose a buyer that is willing to commit to the deal and wait the necessary time to hear back on the approval of their short sale offer.

• Phase 2: Package Submittal and Bank Negotiation (60-70 days)

• Once we have an offer from our perfect buyer we submit the offer into the short sale lender along with the full short sale package.  See my video detailing the common items required for a short sale package.  During this phase the lender(s) review and process the documents and also order an appraisal on the property.  If the appraisal comes within a certain percentage of our offer they will stamp an approval on the short sale.

• Phase 3: Escrow (30-45 days)

• Once we have short sale approval from the lender(s) we can open up escrow.  During the escrow period we help the seller prepare disclosures for the buyer, along with additional paperwork needed.  This is also where the buyer gets their appraisal and home inspection done on the property.  Depending on the buyers financing (Cash, Conventional, FHA, VA) the escrow process can take anywhere from 30-45 days.

If you add those timelines up we get 4-5 months from start to finish.  Sometimes short sales can take 6-8 months or more.  Lots of things can happen to extend these timelines however much of it depends on the type of home, short sale lenders involved, and the borrower situation.  Contact me to discuss your specific situation and I can bring you through an estimated timeline  for how the short sale process will work for you.

After over 450 short sales completed in San Diego County, I’m trying to determine some of the most common questions I get from prospective clients.  One of the biggest questions and concerns I get from prospective clients is:

“What type of documents will my bank require in order to process a short sale”

In order to help answer this I created a short 5 minute video detailing the 8 most common documents needed by lenders to process a short sale.  I also go into more detail about each document and the most common questions/concerns regarding each.  They are the following:

1. Hardship Letter

2. Bank Statements – Two most recent

3. Pay Stubs – Two most recent

4. Tax Returns

5. Financial Statement

6. 3rd Party Authorization

7. Listing Agreement

8. HAFA Documents

Watch the entire short sale video here.  It’s important to understand that depending on who the lender is in the short sale, different or additional documents might be needed.  Every short sale is different, and here in San Diego we get to see a lot of different lenders out there.  Contact me and I can go through the list of documents your specific lender will require in order to process a short sale.