September 19, 2015

How Difficult is your Short Sale?

Filed under: Florida,Short Sale

Me: I tried calling at 5pm and again at 6:30pm and thought it would be best to send you a detailed email that you can digest at your own pace. I have completed the research on the property and it is not good. On a scale of 1 to 10 with 1 being a simple transaction and 10 being the most difficult, i would assign your file an 8.5.

The HOA, second mortgage, and first mortgage (in that order) have all filed for foreclosure. The first of the three cases to reach summary judgment and auction/sale will result in you no longer owning the property and the termination of the listing. This means you have very little time.

It is most doubtful that the payoff on your first mortgage with Ocwen is $189k. The balance may have been listed as that amount on a statement, credit report, or alleged in the foreclosure complaint, but the payoff is not the balance. If payments have not been made on the property then the lender force places insurance at a cost of 3-4 times the actual policy, advances escrows for property taxes, charges late fees, interest, court filing fees, attorney fees, etc. I would guess your actual payoff could be more than $50k higher than the $189k. This means the first would have to be shorted even if the purchase price on the first was $265,000 or higher.

Next is the second mortgage. It is a line of credit. These are typically looked at like credit card debts and there is a good chance that BB&T will reject the short sale because Ocwen will only allow them a small payment ($6,000 to $12,000 depending on loan type). My guess is that they will require a promissory note or contribution from you and/or your ex – neither of these are good.

The HOA is in foreclosure. The amount of the past dues appears to be $3,800. The first mortgage will only allow a payment of one years worth of the dues which is $2,268. Unfortunately, the amount the HOA will require because it is in foreclosure will probably be closer to $8,000.

We also have a judgment attached to title from Citibank for $4,700. This is a lien on the property and you will not be able to sell the property without this being satisfied or by some other legal means. The first mortgage will not allow the judgment creditor any money.

Then, we have a bankruptcy filed by ex-husband in May. It appears there are entries in the docket after the suggestion of bankruptcy – i don’t know if this means the cases have stalled or they are all still proceeding at this stage. Either way, the property is still tied up in the bankruptcy estate and either a dismissal or trustee’s consent to abandonment of asset would be required to short sell. This is not an easy task and can be very time consuming.

I appreciate the referral and talking with you on the phone today. I have closed transactions with all of the problems listed above but it is a lot of extra work. On our phone call today i did not sense a strong motivation to get this closed (as a short sale) and so based on all of this information I am going to respectfully pass on the transaction.

Her: I appreciate you taking my call and the research and information that you passed along about the property, I’m glad that you emailed the details as I’m certain that my ears would have fallen off, as I had no idea the matter this complicated!! Nor that ex filed for bankruptcy.

I regret any misunderstanding that I wouldn’t be interested in a short sale; I was hopeful that there could be a better outcome, or creative options, but clearly, that is not the case. I plan to receive guidance as it relates to the bankruptcy side, so that I can plan that angle as necessary.

Paul; respectfully, your hesitation is understandable as there are challenges with the legal side of the property, along with the length of time for resolution, however, I’d consider myself fortunate to match your experience in the world of short sales.

I invite you to look at the house in person for you to access the possibility for moving forward with me. Obviously, I’d like a bit of help sorting out the path of least resistance to make the best of these real estate issues to where both parties are equally represented. Thanks kindly for your help thus far and ask you reconsider, or perhaps an offer of a referral to another broker.

Me: There were some redeeming attributes. For one, the standard incentive on a short sale is $3,000 typically paid to the seller who resides in the house; however, the incentive changed for certain loan types. if you type into Google ‘fannie mae loan lookup’ and then do the same with ‘freddie mac loan lookup’, enter your details and see if you have a match. if you do NOT have a match with Fannie or Freddie then there is a very good chance you would be eligible for the new incentive which started 2-15-15 of this year and is $10,000. $10k can be life changing to many of my sellers.

The fact that you mention ‘I plan to receive guidance as it relates to the bankruptcy side, so that I can plan that angle as necessary’ evens the field with BB&T because that could be used as leverage. if they insist on a promissory note but believe that you and ex will bankrupt then there is a very good chance they would accept the $6,000 they are offered from Ocwen as a full settlement.

All of the negatives i listed in that email can be countered and overcome, but having been doing this for seven years i can tell you the main reason for short sales not closing 9 times out of 10 is because the seller gives up. For this reason, the most important consideration in accepting an assignment is to gauge the seller’s motivation. We got off on the wrong approach/strategy to the short sale (by looking at it is an equity sale) and we did not discuss the other primary motivators for doing a short sale – namely, that the transaction is contingent uppn the first, second, and HOA all agreeing to the transaction as a full settlement. Florida is a deficiency judgment state and lenders can foreclose and then ask the court to grant a deficiency decree which can be used to levy a bank account or garnish wages.  Closing the short sale would mean that we have estoppel letters from all three agreeing to waive any deficiency.

I suppose what i am saying is that i am on board as much as you and ex would be on board. You’d have to talk to your ex and let him know that you found an agent who will condition the short sale as being a full settlement and make sure that he is on board with completing all paperwork timely. if that is the case then let me know and i’ll come to see you at the property.

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