Email Elizabeth
Elizabeth Weintraub
Three Sellers Approved for Three Sacramento Short Sales
You know that expression: when it rains, it pours? Often, these little bits of wisdom extracted from life and handed down over the years from generation to generation are based in some kind of truth. Yesterday was one of those days. This Sacramento real estate agent received short sale approval letters on three different short sales in the Sacramento Valley.
As usual, something was wrong with each file. Things are rarely perfect in the business of Sacramento short sales. Agents who expect perfection are those you find hunched over hugging their knees in the corner, rocking back and forth and singing to themselves.
In one file, the lender reduced our commission. This file is a HAFA short sale. Our listing agreement was signed way before the short sale approval agreement arrived. The bank told me that its investor only pays a reduced amount, and that they’ve always handled their HAFA short sales in that manner. They’ve always done it because no other short sale agent challenged the bank — that’s how they get away with it. If they don’t authorize the rightful commission, the Treasury Department won’t pay them; we’ll see how they like that.
The bank can ignore the MHA handbook and the CAR explanation of HAFA rules, but they can’t ignore Laurie Maggiano, the Director of Policy for the U.S. Treasury. They coughed up the commission.
In another file, we need a final court document to close. We’ve been trying to get this court document since October. The case was settled two years ago. The sellers’ lawyer keeps saying it’s coming and she will get it, but it’s not coming and she doesn’t have it. The clerks at the court are taking their sweet time, too. Now that we have the approval letter, the clock is ticking. We might have to call the court every single day until we get the letter. Persistence is my middle name. Hey, I close more Sacramento short sales than any agent I know.
And in the third, Bank of America took so long to get us the HELOC short sale approval letter that we’ve had one short sale approval letter and one extension already from Seterus. Usually, Bank of America is pretty fast. Especially since they use Equator. I am busy today trying to figure out what took them so long with this particular file so we never repeat it again. Seterus refused to issue a third letter until we received the approval from Bank of America, and who can blame them? Not me.
Overall, yesterday was a great day. Three short sale approval letters in one day, and 3 more files headed for closing. Three more Sacramento short sales are over. More happy, happy sellers and buyers!
Pricing a Home in Sacramento Ahead of the Curve
Pricing a home in Sacramento ahead of the curve is the strategy a few select Sacramento real estate agents are offering to today’s sellers. It means pricing a home where you think the market is heading and not where the market is now. This strategy doesn’t work so well if the home is difficult to sell or is unique. It works well in areas of high demand where buyers are lined up the minute a home goes on the market — in places like Natomas, Elk Grove and Lincoln.
In Elk Grove today, you can pretty much walk the line of buyers with an order pad and pen, asking each what they will pay for this home in Elk Grove advertised at $185,000. Guy first in line might say $200,000. Tear off a ticket and write $200,000 on it. Woman behind him will smirk and promise she’ll pay $220,000. Tear off a ticket and write $225,000 on it. Couple behind both of them will trump those offers and, my goodness, they’ll pay $250,000. And so it goes. Throw your pad and pen in the air. Nobody has any regard as to whether the home will appraise when push comes to shove. They’re just thinking about their mortgage payment.
Why? Because every $10,000 increment at 3.5% interest equates to an additional $45 per month. If the home would appraise, a buyer could increase an offer by $50,000 and pay only an additional $225, less than, say, an HOA fee. Buyers don’t know how real estate works. They don’t understand that an appraiser will need to find solid comparable sales to justify a price that is $50,000 higher than any other home near it. And if they do understand, they are hoping that when the appraisal comes in less, the seller will lower her price.
A price ahead of the curve might be $225,000. Because in 30 to 45 days, there might be comparable sales at that price. Of course, you won’t get a ton of buyers. You probably won’t get multiple offers. None of that excitement. But you might get 2 offers, and one of those will be an offer you can take. All you need is that one offer from one committed and qualified buyer at a price that will close escrow. If you need more information on pricing a home in Sacramento, call Elizabeth Weintraub at 916.233.6759.
How Banks Goof Up When Pricing Sacramento Short Sales
As a general rule, short sale banks don’t take condition of the home into consideration when pricing Sacramento short sales. I don’t know why, either, because it doesn’t make a lot of sense. You can try to sell a home that suffers from deferred maintenance and maybe it needs a new roof or HVAC system, repairs that could cost upwards of $10,000, and yet the bank won’t consider deducting those costs as an adjustment to market value.
To a short sale bank, all homes in Sacramento are exactly the same when they are similar in age, square footage and layout. In fact, to a short sale bank, even a two-story home is the same as a one-story home. These facts are also a reason why banks are not in the real estate business, because they don’t really understand the real estate business. The bank doesn’t care if the home down the street sold for $20,000 more than your home is worth because that home has a brand new pool, and your home does not. The bank will think you should be able to sell your home for the same price.
This is also one of the reasons why the banking system got into such trouble and hot water in the first place. You would think that a requisite to lending hundreds of thousands of dollars would be a basic understanding of real estate principles, but I haven’t seen that to be the case.
Valuation problems have always been a stickler in a short sale. I know that when I list a short sale that needs work or repairs, it will be difficult to get the bank onboard to sell it. It doesn’t mean it won’t sell or that eventually some poor fool won’t stumble along and pay more than the home is worth, because sooner or later, anything will sell. If it doesn’t rot first. Banks are in no rush. This Sacramento short sale agent can wait as long as they can wait, maybe longer. I will continue to fight for my sellers.
This morning a bank out of Chicago sent an email and asked me to send all offers we receive to the bank. They’ve got to be kidding. No, on second thought, they probably are not. But that doesn’t mean they are getting all offers. That’s between the seller, the buyer and the agents involved. Once we receive an offer that is acceptable to all parties, you can betcha, we’ll send it to the bank.
Two Unexpected Reasons to do a HAFA Short Sale in Sacramento
HAFA short sales started out on the wrong foot, but over the years, they have improved. Take a Bank of America HAFA short sale. I would have said last year, please, please take it, take it and shove it where the sun doesn’t shine. They were absolutely horrible because Bank of America hired third party negotiators, none of which seemed to have a clue, and these transactions dragged on for months after agonizing months.
But now they are much better. They are so good that some lenders forgot that they do them. Who was it? Oh, yes, Nationstar told me the other day that HAFA short sales expired last December. Hello? No, they have been extended. The HAFA program has been extended to December 31, 2013. The HARP program has been extended to 2015. I would be not be astonished to see HAFA extended even further as well.
When HAFA short sales first began, homeowners wanted to do them because they gave the homeowner a release of liability without a fight. Nowadays, that reason falls to the bottom of the list because sellers are protected under California Civil Code 580. Also, homeowners were eager to do the HAFA because they would get a $3,000 relocation incentive. Today, the homeowner must occupy the home to get that incentive, and many sellers have already moved out.
So why would you want to do a HAFA short sale? For 2 really good reasons. The first is if a Notice of Default has not been filed, your credit report is supposed to reflect Paid in Full. Not Paid in Full for Less Than Agreed but Paid in Full. That’s a huge reason in itself. Notice, I didn’t say you had to be current on your mortgage, you just don’t want the Notice of Default to be filed, which means you started your short sale early enough to get that approval letter before the bank records the Notice of Default. You were proactive. You didn’t wait until the last minute and call up an agent to plead for a postponement of auction. You were smarter than that.
The second reason has to do with whether you have a hard-money loan in a junior position. Those hard-money second loans can be the downfall of your short sale if they are not handled correctly. The lenders know they have recourse through foreclosure so why would they do a short sale? Because for some, money in the hand is worth twice that in the bush. And a HAFA short sale will give them more money than any other kind of short sale. Whereas in an ordinary short sale, those lenders might receive only 6% of the unpaid principal balance, in a HAFA, the first lender can authorize payment of up to $8,500. If the principal balance is, say, $20,000, it comes down to $1,200 vs. $8,500 = no short sale vs. short sale, yes.
If you’re wondering what kind of short sale is right for you, call your Sacramento short sale agent, Elizabeth Weintraub. I’ll be happy to help you to sort through your options and negotiate that short sale for you. All fees are paid from the proceeds of sale, so why not hire the best short sale agent you can find? Call Elizabeth at 916 233 6759.
Is That Sacramento Short Sale Really a Short Sale?
Home buyers in Sacramento need to be very careful when they attempt to buy a Sacramento short sale. Buyers need to differentiate between the short sales that will close and the short sales that sport a sign in the yard but are not really a short sale. Not every short sale that is offered for sale as a short sale is actually a short sale. That’s been a problem since Day 1 back in 2005, and it continues to plague us even now.
Because short sales have become such a hot commodity, many real estate agents have taken a few hours training and decided that they are now “short-sale certified,” which in their minds makes them a short sale expert, even if they have never closed a short sale. Not every real estate agent is faring well in this Sacramento seller’s market, especially if they don’t have any listings. Listings tend to rule. So, some agents are jumping on the short sale bandwagon and throwing homes on the market in desperation without any knowledge of whether these homes are likely to be approved as a short sale. They figure they took a class, so the transaction will close, and by the time you, the unsuspecting home buyer finds this out, you will have waited 3 to 6 months for nothing.
There are also a group of agents who used to sell REOs for the banks who have switched over to cold-calling sellers from the lists the banks provide to them. Banks give the agents a list of homeowners who are delinquent and underwater. Then they turn the agents loose on these unsuspecting homeowners to try to hammer these people into trying to do a short sale. If an agent calls a homeowner out of the blue and pushes that homeowner to list with her as a short sale, that homeowner might want to explore other options and find her own Sacramento short sale agent. She might not want to choose an agent working with the bank, or an agent who has no experience.
You may ask: how can you tell if a short sale will close? There are many ways; here, I will give you an actual, “real world” example. A few days ago a woman called me to ask about a short sale in the Pocket. She wanted to buy it. I pulled up the listing in MLS and then ran the listing agent’s ID number for the past 6 months to see what kind of activity and closings the listing agent has done. Turns out this particular Sacramento short sale agent had closed one short sale in that period of time. That was a red flag.
The next thing I did was look at the listing itself. The photos were horrible and very dark. The property was obviously vacant. That makes it unlikely that the short sale would be a HAFA because there would be no incentive to the sellers. I looked at when the present owners bought the property. They had refinanced it since then and pulled out cash. That’s a bad sign for a short sale. Not only that, but there were two loans, and the second loan was National City.
That means that PNC is the lender because PNC took over National City loans. It’s a hard-money second, and PNC knows that if the home goes to foreclosure, it can personally pursue the seller for the full amount of its unpaid balance. There is no incentive for PNC to grant this short sale. Now, PNC might elect to do it if the seller paid down part of its loan, but since the sellers have already abandoned the property, it is very unlikely that they would be willing to pay down the loan balance just to do a short sale. When they moved out, the sentiment was probably that it was OK if the home went to foreclosure.
I’ve worked with PNC a lot, and I know what it demands when there is a hard-money second. Since this is not a HAFA, PNC is also very unlikely to take 6% of the unpaid balance, which is probably what the first would offer it.
In short, this short sale is not a short sale. It’s not going to close. I would bet my 39-year career on it going to foreclosure. There are just too many things against it.
You can ask your agent to look up this kind of information for you before you put in an offer on a short sale. Remember, your first red flag is whether the listing agent has sold very many short sales.
