Short Sale and Bankruptcy

We have had some great success recently with our short sales and it appears that the major banks are really making an effort to help those who are struggling. So for those of you who are in debt up to your eyes, struggling with all of your payments and considering a short sale, please consult with your local professional agent first, and not a BK attorney. The reason I say that is because we just found out first hand what happens when a BK attorney gets involved right in the middle of an active short sale. The most important piece of info that I can share with you today, and that most BK attorneys fail to mention, is that when your BK filing gets to the court, effective immediately, you give up control of your entire life; including income, assets, property and anything else you have that you forgot about. The court appointed trustee will audit your life and becomes the ring leader and nothing can be done without their permission. Worse yet, the trustee has unlimited power and can actually take the short sale away from your favorite agent and give it to himself (if he is an agent) and/or his favorite agent. This is totally legal and common in California. The trustee works on commission so be warned, he will find every asset you have, even if you forgot about it or if it has been hidden. Anyway, be careful when making a decision regarding short selling your home and filing bankruptcy at the same time. For those of you in the Sacramento area, we refer all of our clients to local real estate attorney Kristy Hernandez. She is not only smart, honest, ethical and good at what she does, but she actually picks up her phone most days. I rarely do this, but she just helped two of our clients for "free", I want to give out her phone number for anyone who needs help or advice. Kristy Hernandez 916-728-1500, you do not have to mention our name, she will give you the same excellent service regardless!

Buying after a short sale or foreclosure

Our buyers just lost their dream home yesterday because of recent changes in the lending requirements for those with a short sale or foreclosure on their credit. All of us were devestated at the news, so below is a quick guide for those who are interested in buying a home again. For those with a short sale or foreclosure on your credit, you will need to wait 36 months from the actual settlement date, in order to buy. There are very few exceptions to this rule, as we found out yesterday. So for those of who are nearing the 3 year mark, as well as you first time home buyers, below is an informational guide and a mandatory "to avoid" list. First, get together with your local banker or loan officer and have them pull your credit. You will need to repair, pay off or settle any collections, late's or derogatory line items. Those will need to be settled for 30 days before starting a loan. Your credit score will need to be a minimum of 620 but settling debts and paying items off can and will eventually increase your credit score. Second, continue to pay all of your bills on time, while also putting every extra dollar you have, into the bank. USDA and VA have a $0 down loan, otherwise FHA is the next best option, requiring only 3.5% of the purchase price as down payment. Even better, that 3.5% can be borrowed from a family member should you not have it all. This money needs to be in an account and verified by the bank before the close of escrow, it is called seasoning. Last but not least, here is a very quick list of things not to do before you buy a home. It seems very simple I know, but as our clients found out yesterday, these are often overlooked and can be devestating to a purchase. 1. Don't buy with or establish any new credit 2. Don't change jobs 3. Don't buy a new car (seems like a joke, it is NOT) 4. Continue to pay your bills On Time 5. Be patient, short sales can take up to 120 to close. Happy house hunting all!

GreenTree and Golden 1 short sale success

Our first short sale success story with Green Tree (GT) and Golden One! The investor was Fannie Mae, so we were working with three of the five hardest agencies to work with; Freddie Mac and US Bank being the other two. So we lost our first two buyers due to appraisal and BPO conflicts. For those who do not know, GT/Fannie Mae are not real open to price negotiations, especially when their BPO comes back 10% higher than the listing price. We initiated a value dispute, escalated to management and made a lot of phone calls, all for naught as our dispute was denied within a week. It seems they had their minds made up already? Well luckily for us, a third buyer appeared on our doorstep and they were willing to pay the higher price. This pleased GT/Fannie Mae and allowed us to postpone the foreclosure date. Fannie Mae is a GSE and should be obligated to helping US homeowners, but we sadly announce on a regular basis that they are still actively foreclosing on a lot of homes. So we are happy to announce that we have helped another underwater home owner move on and hopefully start over again with a clean slate!

Short Sale success GMAC and Greentree

So as you can see from my last few posts, my team has had some recent short sale success with BofA, GMAC and Wells. Those banks, despite being the largest and the busiest, are actually helping people move on with their lives, by approving massive amounts of short sale requests. We have also had recent success with HSBC, Wachovia and Indymac, while avoiding banks like Greentree and US Bank, because of the scary things we read about them. We have had first hand experience with a US Bank short sale denial and can say that they are just not helping Americans. On the other hand, since we have never worked with Greentree, we are pleasantly surprised to report that we have just achieved short sale success with them and have learned a great deal in the process. For those who do not know, Greentree is a hybrid. They are like a collection agency with a bank charter, so they kinda make and follow their own rules. The key to beating them of course, is persistence and escalation. We started this short sale on Jan 12th at 10am, with the standard faxed authorization. GMAC and Greentree both had negotiators assigned quickly and the BPO's done within 45 days, however, after no response from either bank for over a week, we escalated to management for help. We found out that GMAC doesn't give you access to a manager and Greentree management calls go straight to voicemail, which is always full. Better yet, they are not allowed to respond to emails, so now what? Well my team spent some time doing their usual research to find an executive within each bank who would want to know about these useless delays. Well sure enough, once our emails were read by those executives, we had responses very quickly. Sad that it took an executive to make these files move, but it is a common approach in getting short sales approved. Anyway, both bank negotiators were not happy with us after that and still tried to delay the files a little longer, but we soon had very clean approvals on our desk and all of this within 94 days. Whoo Hoo! So Congrats to Dan and Melissa, they are already working on repairing their credit and moving on with their lives!

US Bank, do they deserve that name?

US Bank seems to be a great bank right? They have good rates and returns on their checking, savings and cd's, they do a lot of lending to California state employees and to those with great credit, they have very friendly staff and do seem to have a lot of locations here in the Sacramento area. However, let's peel back the onion and take a closer look at their practices when one of those good borrowers defaults on his home loan. So our client is a state employee who had his special project and OT income cut. Since the California budget is going to be in a deficit for a long time, his income issues are clearly not short-term. We got all of his income, asset and debt figures together, ran the numbers and saw that we had a viable short sale candidate. Not only was he struggling financially, but he was upside down on his home $100k, was short $1k per month on his debt to income ratio and only had 1 month of emergency funds available to him. Like many Americans he was literally living paycheck to paycheck. So we submitted the packages to both of his lenders (Citi and US Bank) and had an approval from Citi Bank within 45 days. Great news right? Nope, we got a request from the US Bank negotiator to provide more documentation on the income and debts, as they believed the home to be affordable to our client. Also, they were not even close to issuing us an approval because our seller was current on his payments. How can that be, he stopped making payments 4 months ago? Nope again, turns out that US Bank was deducting money from all of his checking, savings and misc. other accounts to pay the second mortgage on time. To be fair, many banks will do that to get their payments and I believe they can do it legally. OK, so here we are 4 months into negotiations and US Bank has officially denied our short sale request, 3 different times! They said they did not participate in the TARP bank bailout, so they owed us and our client nothing, were not being forced to help any homeowners by the US Gov't and would make every attempt to collect on the debt, no matter what. WOW! So their official explanation for denial number 1 was that the home is affordable for our seller. Their excuse/suggestion for denial number 2 was that our seller can afford the home and should get a tenant in the home to help offset the loss and to help him pay the monthly mortgage. Excuse number 3 was that he borrowed the money and needed to pay it back, period. Needless to say, our seller is more than angry at both US bank and our team for not helping him. The home is going to foreclosure in only 12 days and US Bank will get $0 instead of the $10k we offered them. Bad business decision in my opinion, but that's why I am not a bank executive, as they must know something I don't, right? So the question remains, as a member of that bank or as an investor in that institution, how many times are they going to say no to short sale requests and then make expensive attempts to collect from the sellers before it starts costing you (the member) money? They are going to or already have, increased the monthly fees on checking and savings accounts and ATM withdrawals, and/or increase their lending rates to members, all in an effort to recoup their short sale losses! Investors do your homework before jumping in and homeowners with US Bank equity line loans, keep up with your payments and if you are struggling, be sure to seek the advice of an attorney or very skilled short sale agent who can explain your options!

Short Sale success with Freddie Mac, BofA, BofA and UGI

As the title suggests, this was a loooong battle that included a lot of different moving parts. Yes, you read that correct, there was a BofA first servicing for Freddie Mac, a BofA home equity line and a mortgage insurance policy with UGI, against the BofA home equity loss. Wow my head hurts just writing that! OK, so the key to our success was perseverance. We continued to make calls and send emails to all necessary negotiators and managers on a regular basis and when they would not respond with the answer we needed, we escalated past them. This is a little more difficult because of Equator, but the twitter team is a great resource. This sale was started in January and finally closed April 30th, but before that it was denied in early March by Freddie Mac due to insufficient offer. We begged the buyer to raise their purchase price and they did, so we started over again and had an approval from Freddie Mac within 4 weeks. To our utter disgust, the insurance company (UGI) then denied it in early April, also due to insufficient offer. In their case it was not actually the offer, it was the amount of loss and lack of contribution from Freddie Mac. Since Freddie is that stubborn rich uncle we all love to hate, we avoided them and instead escalated to Sr. Management at BofA, demanding that they contact Sr. Management at UGI and negotiate an approval. When that did not happen, we simply sent an email to Sr. Management at BofA and cc'd Sr. Management at UGI, explaining that the two companies needed to come to a reasonable solution on the loss and issue an approval quickly. Since everyone involved could see each others email addresses, we revealed the wizard and eliminated all of the excuses they were making about not being able to reach a decision maker at UGI. In the end it worked because here we are 4 months later with a successful short sale, a happy client who avoided foreclosure and a happy new buyer. We are doing our part to help get this economy going again! Thank you Adam, you know who you are and congrats to Brad and Marti!

Short Sale success with BofA portfolio

Great news for those who are interested in short selling their homes with a BofA portfolio loan(s). They were actually very good to work with, no delays, no excuses, no missing documents and actually gave an approval in less than 45 days. We have a good team and generally get approvals in less than 70 days, but this was just flat out fast. So what you say, many banks do that, right? Nope, after the approval the title company sent their final documents to BofA showing that the property had a hidden second lien in the form of a Gov't sponsored down payment assistance loan. Even worse, the loan and accrued interest was over $9500 and our short sale price was only $120k, which creates an additional 8% loss for BofA. We thought the deal was dead for sure, but nope, only 7 days later the negotiator emailed us a revised approval with the second lien being paid in full. We were amazed to say the least!

So the sale has closed and we wanted to publicly thank the BofA portfolio group for their efforts. They are actually helping homeowners start over, which also helps turn the economy around. Our clients are now working on repairing their credit and getting all of their other debts paid off.

If you are struggling financially and are considering a short sale, make sure you educate yourself about the process and the credit ramifications, as some careers will not allow the damaged credit that a short sale creates. Start by calling your local real estate professional and ask as many questions as possible. Good luck all!

Time to invest in real estate again

Since many of us have lost a home, lost their job and see nothing but bad news all around, how can Warren Buffett announce today that now is the time to buy residential real estate? Well, considering he is one of the smartest and wealthiest investors in the World, let's take a look and see what he sees. First, the large builders (Pulte, Lennar, DR Horton) have all posted small gains this quarter; the pending home sales were up in January; mortgage purchase applications increased in January and best of all, mortgage interest rates are at record lows. In other words, Buffet sees long term value in residential real estate because of low prices, low interest rates, shortage of inventory and long term equity growth. He even suggests to finance the home purchase to really take advantage of these economic factors.

What if you are a cash buyer or investor? An even better opportunity presents itself here. First, tenants. There are a lot of Americans out of work or who have lost their home, but still need a place to live and will now become renters. Also, with your cash sitting in the bank it is not actually working for you but for the financial institution where it sits. They are lending it out to other institutions, people, businesses and earning a small income from it everyday. In return, they pay you a small monthly dividend or interest return. Buying residential real estate using that cash now allows you to become the bank. It ensures that you earn that daily/monthly income, while paying a small percentage or fee back to someone else, like a landscaper, plumber, etc. Yes there are risks, but a long term hold right now looks like a solid investment.

So based on this analysis, I would say that Warren is correct, again! So everyone waiting to buy a home or those with money sitting on the sidelines, earning no interest, call your local realtor and see what is available in your area. You might find a gem that could earn you good short term income, long term equity growth or both.

How much will my Short Sale cost?

So we have had a lot of inquiries recently regarding short sales, the costs, the tax consequences, etc. so we wanted to write a simple and quick tutorial for those who are considering it or even for those who already in contract on one.

In a traditional California sale, the seller (Mr. and Mrs. Smith) will be responsible for paying some closing costs, fees, commissions, etc. at the close of escrow. However, in a short sale transaction, the seller is actually a Bank/Investor like Bank of America, and they are the one's responsible for paying closing costs, fees, commissions, etc. In that scenario, Mr. and Mrs. Smith pay nothing, but lose their dream home and damage their credit. Bank of America takes a massive financial loss, but they send Mr. and Mrs. Smith a 1099 for that loss. The Smith's then become responsible for claiming the banks loss as income on their next years' tax returns. See your CPA for details as I am not a real CPA, I only play one on TV :-)

So bottom line, you will pay almost nothing to short sell your home, however there are some consequences to consider, like moving your family, the costs associated with moving, rent payments and of course, damaged credit. However, if you are a struggling home owner, who has a true financial hardship (job loss, death in family, job transfer, etc.) then you might be eligible for a short sale and it is an excellent start to getting back on your feet again!

USDA and first time home buyer success

Just closed another first time home buyer sale. This is an amazing time to buy, so renters and buyers, call your favorite local agent now! Our clients were able to trade their 800 sq. ft. apartment and it's $900 rent payment for a 1700 sq. ft. home with only a $1000 payment. They closed with a USDA loan. Yes I said USDA! It is an excellent and unknown loan, typically used for rural community growth, however it has 100% financing, low rates and doesn't have the red tape and delays that FHA loans have. Check with your local loan officer, both the buyer and home need to qualify for USDA approval, however it is well worth it.

Congratulations Boe and Holly on your new home!

Short Sale success with River City Bank and B of A

So the short sale negotiations with River City and B of A took 131 days, start to loan funding. Not typical, but expected due to the volume of short sales, foreclosures and loan modifications that B of A is dealing with. This is mainly due to their acquisition of Countrywide Home Loans, but that's another discussion for another day.

Luckily our buyer was very patient, but did get anxious after about 2 months of waiting and wanting to see more homes in anticipation of a short sale denial by B of A. Nope, to our surprise the BPO come back in line with our offer, River City paid much of the closing costs we asked for, plus most of the B of A loss request. Great news, here we go right? Nope, you sitting down? The real snag came near the end of the sale, when someone broke into the home via the side garage door, stole the light fixtures, the water heater and the pool equipment. It got worse from there, as the appraiser took it upon himself to play inspector and requested pool equipment, hot water and electrical repairs to the home before he would issue a clean appraisal. Our buyer was not FHA, VA or USDA, so there was no real need for him to make those requests, but once the lender saw them, it was trouble.

Anyway, so we got an electrician, pool guy (Thank you Mike from Nor Cal Pools) and plumber out there to repair everything. We sent the inspector, sorry, the appraiser (avoid AVK Appraisal Services) back out there and he gave it a clean bill of health.

Congrats Joe and Laura on your new home!

First time home buyer success!

Just closed our first internet buyer lead. She was a first time home buyer, all cash, great to work with and closed in only 17 days! The $100k home market in the Sacramento area is very competitive, but after only two weeks of searching we found her dream home. Congratulations Lori and Ron Hulsey!