That’s right; we are here for you, right from the first phone call all the way through closing. Let’ start at the very beginning. What does “closing”, “settlement” or “closing escrow” mean?
Closing or settlement is a term used for the point in time at which the title to the property is transferred to the buyer and is the final step in executing a real estate transaction
We all know buying a house is one of the most important decisions you will make in your lifetime. It is a very exciting yet possibly overwhelming experience. We find that the more you know about the process the more confident and relaxed you will be.
Once the seller accepts your sales contract, the countdown to closing begins. Timing is crucial to make sure all of the requirements for a successful closing are in order.
A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens fill amounts, and whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt.
We work with some amazing and knowledgeable listing agents on short sales in Florida. However, there are occurrences where we have a file where the buyer’s agent is not familiar with the short sale process.
Short sale listings are very different from listings where the seller has equity. When an offer is received on the listing and the seller agrees to the price, it does not mean that the lender will accept the price.
When we receive the offer on a new file we like to talk to the buyer agent and explain how the short sale process works. It is important for them to understand the process for buying a short sale for their clients.
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As I have mentioned in a few past posts, there have been many changes taking place with Short Sales that have been creating quite a lot of buzz.
Today I want to share some of these new concerns specifically pertaining to dealing with servicers instead of banks, specifically Nationstar and their recent requirements for Short Sales.
We’ve noticed that a large portion of our short sales are no longer serviced by banks, but by other entities such as Ocwen, Greentree and Nationstar Mortgage. There are so many bad mortgages that these 3 companies are taking over the servicing of the loans.
The main reason for concern is that these servicers are not banks and this means they do not fall under the control of the OCC (Office of the Comptroller of the Currency) and the Federal Reserve, which gives them the ability to create their own rules.
Nationstar Mortgage has also been the talk of our office as they have recently changed some of their requirements which are causing a stir in the processing of short sales. Here are the most recent changes and requirements:
Last week we attended a Lunch & Learn on short sales with Wells Fargo. This was an opportunity for us to learn more about navigating a short sale with Wells Fargo Home Mortgage specifically the portfolio loans.
The short sale manager educated us on benefits of a short sale, HAFA options & eligibility, process for a successful short sale, checklist of documents required, timeline for review, and common obstacles.
What are the benefits of a short sale?
Alternative to foreclosure with a more planned and graceful exit; credit report says “settled for less than owed,” investor pays for closing costs and possible incentives.
Usually the home is in better condition than buying a foreclosed property. Investor may pay some closing costs.
Occupied and maintained properties, stabilizing neighborhoods, preventing vandalism.
What is the process for a short sale with Wells Fargo?
We have been reviewing recent activity in the home short sale market as we are wont to do and found a couple of surprises.
The most glaring was the number of multiple listing service (MLS) detail that burdened the buyer with paying commission to the listing agent, short sale negotiation fees to a 3rd party, or even the seller’s attorney fees. Here are some examples of what we found:
“Buyer agrees to pay listing agent a bonus commission of $2,000 at closing.”
“Buyer to pay $2,500 at closing to 3rd party short sale negotiators.”
“Seller’s attorney will attempt to collect a fee of $2,500 from short sale lender at closing. If lender should refuse to pay any amount of said fee, Buyer shall be responsible for the difference between $2,500 and the amount paid by the lender.”
My first thought was that such detail would discourage buyers from looking at these properties, which would be a reasonable presumption if there were a proven, no-cost, no-obligation-if-it-doesn’t-close short sale solution (which there is of course!) currently in the marketplace.
Curious, I put the question to our database of successful real estate professionals and to a short sale-focused online forum. Responses were quick but thoughtful.
If so, you might not have been able to take advantage of the historically low mortgage interest rates that exist in our market right now.
Most traditional home loan programs require an appraisal, which your lender uses to determine the value of your home and to determine whether that value makes it a safe bet for them to loan you money. Very basically, if your home is worth less than you owe on it is essentially impossible to refinance your current loan.
This is of course a common problem here in Southwest Florida.
If you are currently in a FHA home loan and in this situation, there is a program that may help you take advantage of today’s great mortgage intersest rates.
It is called the FHA Streamline Refinance.
Just last week, we closed one of these loans for a couple who owed $240,000 on a FHA loan and who were paying about 5.5% interest on that loan.
Their home’s value was recently assessed by the property appraiser at $190,000 ($50,000 less than what they owed!), which in most cases would have made it impossible for them to refinance their home loan. Through the FHA Streamline Refinance program, these “under water” clients were able to refinance at a fixed rate of 3.75% over 30 years, which reduced their monthly payment of principal and interest from $1,363 to $1,109.49 – a savings of over $250 per month!
The FHA Streamline Refinance is a unique special provision. For starters, your existing loan must be a FHA loan.
According to mortgage expert Jay Beckingham, a loan officer at American Eagle Mortgage Company in Ft. Myers, Florida, FHA wants its borrowers to be able to take advantage of today’s low rates. The program therefore requires NO APPRAISAL, instead using the property’s purchase price as a baseline. The program does require that you pay your own closing costs; but the long-term savings are nonetheless clear and significant.
In the example above, those clients will save over $3,000 over the next 12 months.
Because we wanted to learn more about this program, we invited Jay to speak to us about it. Here is what Jay had to say –
If we can help you in anyway, please be sure to contact us online, or give us call at (239) 985-4142.
The tangibles are easy. Most lenders or short sale servicers require the same core set of documents and financials. So let’s start with the intangibles, the things every potential short seller must have in order to succeed.
Is my credit worthiness better off after a short sale than a foreclosure?
Or more bluntly, is the negative effect on my credit worthiness better than or worse than the cost of maintaining the payments and costs associated with owning the real property?
In the worst case scenario – where the lender retains the right to pursue me for any deficiency amounts – how might that affect my other assets?
What will be the tax consequences from the short sale and will those be any different than a foreclosure if I walk away?
The successful short seller in Florida will understand, will be committed, will be patient and will have proper expectations. To expand a bit on those intangibles, everyone pursuing a short sale must understand the issues as described above. With that understanding, the property owner should be able to decide whether the short sale is the right course of action for them. Once they have vetted the issues and made the decision to pursue the short sale, the successful short seller will be committed to the process and to participating fully in that process. This includes being quick to communicate and to provide the required documentation; and to updating expiring documents on a monthly basis.
The maxim that “patience is a virtue” is truest in short sales. Most short sales in Florida that fail are derailed by someone’s – seller’s, buyer’s, realtors’, settlement agent’s, lender’s – impatience. Given what we know about short sales – that they can take time to complete, can be frustrating, and that most of the things that cause the most consternation are outside of our control – patience should come easy. But alas, emotion gets the better of some and they are not able to stay patient.
This is the death knell of short sales. Along those same lines, the successful short seller will have proper expectations about both the process and the outcome. On the one hand, one should expect to have to provide a wealth of documentation and to do so on a regular – monthly at least – basis. On the other hand, one should also have reconciled the possible worst case scenario as it relates to their short sale approval. For example, a seller should know the standard operating procedures of their lender(s) and should be committed to the process and the outcome even if that outcome is the worst case scenario. With emotions in check and these intangibles “in hand”, the short seller will succeed.
Now to the tangibles, which most every lender or servicer will demand. You will need at least the following documents (in addition to the real estate contract and related documents):
If you are considering a short sale, the effect of such an occurrence may not be the most pressing issue. It could be that unemployment, curtailment of income and other market forces have already wreaked havoc on your credit score.
Nonetheless, or if you are considering a short sale for more strategic reasons, it is important to understand that a short sale will affect your credit worthiness.
This is a very frequent question, and its analysis is a bit complex because “cost” is such a broad term. Later in the eBook, we will look at Promissory Note requirements, cash contributions and association dues as potential “costs” of completing a Naples short sale. For this section, let’s simplify things a bit and look at standard transaction or closing costs and what you should expect to pay (or not pay).
With regard to ordinary closing costs, a short sale should cost you very little. Here’s why. In a short sale, the lender will agree to absorb many of the ordinary closing costs that are customarily the seller’s responsibility. In our experience with Florida short sales, lenders will usually agree to absorb at least the following closing costs:
In a nutshell, the lender’s right to pursue you for the deficiency after a short sale stems from your obligation to the lender under the Note. If you remember, when you took out your home loan (whether to refinance or to purchase), among the hundreds of pages were two very important documents:
NOT LEGAL ADVICE: This information is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Every effort has been made to assure that this information is up-to-date as of the date of publication. It is not intended to be a full and exhaustive explanation of the law in any area. This information is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel.
Winged Foot Tite, LLC is not associated with the government, and our [short sale orchestration] service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.