Tag Archives: Short sales

Realtor Retirement Act – new short sale program

Friend Shoeless sends along this link to a discussion of the Administrations new short sale program that, unlike its first failed attempt, might actually work. Read the whole article, but here are some highlights:

Foreclosure Alternatives
The HAFA program simplifies and streamlines the use of short sale and DIL options by incorporating the following unique features:

Complements HAMP by providing viable alternatives for borrowers who
are HAMP eligible. In other words, borrowers who are eligible for HAMP but smart enough to realize it isn’t in their best interest.

Utilizes borrower financial and hardship information collected in conjunction with HAMP, eliminating the need for additional eligibility analysis.

Allows the borrower to receive pre-approved short sale terms prior to the property listing. Extremely important point, this turns short sales from the nightmare they are now into a smooth transaction. Short sale prices will improve as a result and transaction volume should go up.

Prohibits the servicer from requiring, as a condition of approving the short sale, a reduction in the real estate commission agreed upon in the listing agreement. Clearly a win by the NAR, the max commission is set at 6%. In many places in California 5% is pretty much max. Investors will be getting 1% less in California as agents will be sure to be smart enough to be asking for 6%. The listing agent will probably get that particular bonus right now with inventory so low there is no reason to up the selling office commission.

Requires that borrowers be fully released from future liability for the debt. A clear win for borrowers, especially in many of the recourse states or who refinanced in places like California which allows recourse on refinances. Borrowers will be much more likely to participate if they realize after the sale is done they are out from under their massive debt. Like the commission deal point this one comes at a cost to investors.

Provides financial incentives to borrowers, servicers, and investors. Borrowers get $1,500 for completing a short sale, Servicers get $1,000, investors only get money for settling junior liens, up to $1,000.

Right now we have a huge shadow inventory in Greenwich – houses that owe more than they’re worth, with owners just sitting on them because they’re unable to come up with the cash to provide clear title at closing and unable to realistically hope to sell them for what they paid for them. Fudrucker and I have been nosing through this slag heap, approaching individual owners with offers to see what we can negotiate with the lenders, but it’s a slow, laborious process and the inventory keeps growing. This program should help, a lot.

If you’re in that situation, ask your agent. Or, better yet, have her call Frankie or me (commercial plug). We have buyers, you’re a seller, it could be the beginning of a brief, but beautiful friendship. Best of all, and god bless the NAR, notice the provision in there that requires banks to pay a 6% commission, something unseen in these parts since Tommy Hilfiger was married to his first wife. Plenty of room for your agent and Fudrucker/Fontanski Discount Realty to feed at the trough.

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Foreclosures and short sales

I attended a packed meeting of realtors and lawyers this morning on the subject of mortgage foreclosures and short sales. A foreclosure, whether by auction of “strict”, where the borrower’s right of redemption is judicially extinguished, ends up with full title in the bank. A short sale happens when the owner sells to a buyer full title to the property, with the bank signing on for less than it’s owed. Either way, the borrower/owner loses his house, but what are you going to do?

There was talk of a mortgage mediation program, on which I’ll write later. Of interest for now is that mortgage foreclosures have doubled the past year, with no end in sight. And short sales? As Gene Marconi, chief counsel for the Connecticut Association of Realtors said, “I grew up in Torrington and cut my teeth on short sales. never, not once in my career, did I ever think I’d be here in Greenwich discussing short sales.” Well now he is. There are some interesting opportunities for buyers out there, and more coming each day.

And as an aside, before I receive any more angry comments deploring bottom feeders profiting on other’s misery, please read this Bloomberg article on cash-rich companies swallowing their weaker competitors whole. IBM, for instance, is bidding for Sun Microsystems.

March 18 (Bloomberg) — U.S. mergers and acquisitions may stage an unexpected recovery as International Business Machines Corp. and companies with cash prey on rivals struggling with depressed stock prices, bankers and lawyers said.

“Clearly this is the time to make an acquisition if you are a company that has the cash,” said Frank Aquila, a partner at Sullivan & Cromwell LLP in New York. “The best returns have come from acquisitions done during an economic downturn.”

It’s not nice, but if you’re solvent when much of the world isn’t, why not take advantage of your good fortune?

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Trouble paying your mortgage? Take a hike!

It’s not the fatal stigma it used to be, according to this NYT article. Short sales (bank takes title and waives any deficiency judgement), foreclosures, mortgage modification, whatever, in this day of new morality, stiffing the lender isn’t going to ruin your life forever. The affect on your afterlife is a matter best discussed with your priest or rabbi.

In an economic environment like this one, however, the consequences of giving up on your mortgage may not be as painful as they were a few years ago. Yes, it’s almost always preferable to negotiate a better deal on your existing mortgage than to walk away. But if you can’t work things out with your lender, you probably won’t be sued. You shouldn’t receive a major tax bill either. And the damage to your credit will not be permanent or insurmountable.

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Foreclosures, short sales

Right now, we don’t have too many active foreclosures pending in Greenwich – 15 or so, I believe. But we do have a lot of houses underwater in terms of what the owners owe and what their house is worth, and I suspect many of them will end up in foreclosure, soon.

I was called by an owner recently about a possible short sale of his property. I’ve got access to guys with money and to the banks and I can probably work something out for most situations where the owner is willing to walk away if he can get out from under his debt. I was familiar with the house, having seen it some years ago when it was last up for sale but most importantly I was familiar with the neighborhood and what’s selling. As a pretty rough, top of the head figure for what I could tell the money guys would move this house in any market, I came up with $1.1 million to $1.25 million. But it turns out there is a $3 million mortgage debt. I may try to do this deal, but I’d guess the bank won’t take that kind of haircut before it forecloses on the property and puts it up for sale itself, a process that could take two years. 30%? Maybe. Not this much.

But that also raised the question, who agreed to loan this much money on this house? At the height of the market it failed to sell for anywhere close to that amount and back then, I’d have estimated its value at, at best, $2.2 million. Yet two different appraisers (there are two loans) came out and told their lenders that this house was worth it. No wonder the banks are failing. And, I wonder, how many more houses do we have in town in this exact situation? My guess, judging from this one and a couple of other stories I’ve heard is, a lot.

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Buying from banks is a pain in the a..

So says this WSJ reporter and so say I. Best bet if you’re a seller in financial trouble may be to list your masterpiece, finished or unfinished, now, and try to get out from under. Once the bank’s involved, nothing gets done for a long time.

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