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Elizabeth Weintraub
The Short Sale Law of Averages
I think the law of averages says that for every three good things that happen, something else awful will happen. So, no matter what, I’m always ahead, right? Like receiving 3 short sale approval letters on a Monday (of all days) for 3 Sacramento short sales leaves room for something else to explode. I didn’t know if I would be able to pull two of those short sales out the fire. We had a huge disagreement between the second lenders and the first lenders. It was the usual disagreement: The first lender wanted to pay less and the second lender wanted more.
But in the end, they met in the middle. There was a bit of compromise. Negotiating a short sale is not always about power plays. It’s about give and take and options. It’s about having a Plan B and a Plan C. It’s about about patience and not letting personal feelings about anything enter the equation. Mr. Spock would have made a good short sale negotiator. James T. Kirk, not so much.
In the second short sale, it had been a long battle between two lenders as well. The bank originally wanted to give the seller many, many thousands of dollars. But the second lender refused to approve that scenario, and that was understandable. I don’t know if it’s because we wore them out with our incredible staying power or because of our luck that HAFA regulations had changed in June so we could give the second more money, but we finally brought both parties to an agreement.
Just as we’re patting ourselves on the back for a job well done, a short sale set to close this week blew up. All of a sudden the buyer backed out. Oh, he gave some lame excuse like they all do when they cancel but bottom line is he bolted. After 11 months of waiting for HAFA short sale approval from Bank of America. That makes little sense. We were so close to closing. This is like crawling across the desert without water to find a mirage.
See, agents often ask why I ask so many questions, why I insist on commitment, and this is why. Because we want buyers to close the short sale after we obtain short sale approval.
An Investor Can Do a HAFA Short Sale
This week I am working on listing several investor-owned short sales in Sacramento, one of which will be a HAFA short sale. People think that an investor — a non-owner occupant — can’t do a short sale, but an investor can do a short sale. An investor can even qualify for a government short sale program such as the HAFA short sale, or my very favorite streamlined type of short sale: the Bank of America Cooperative Short Sale. Unfortunately, though, the HAFA Supplemental from last June removes the seller’s incentive portion, the $3,000 cash for a short sale that typically goes to the seller, so there’s not much of a reason to do a HAFA short sale for an investor in California. You have to live in the property to get the $3,000. Which means the tenant gets the cash.
There is a big reason to do a HAFA from a bank’s point of view. The bank gets paid from the government to do a HAFA. You might think so what, the money is insignificant. What is it? $1500? Until you stop to consider that $1500 times 1,000 short sales is one and a half million dollars. Put another way: $1500 times 10,000 short sales is $15 million. You wonder why Bank of America is pushing the HAFA short sale? Besides the National Mortgage Settlement, there’s that $15 million multiplied over and over. You can’t get past the first stage in Equator until the seller talks with the bank about a HAFA.
But not every HAFA is a nightmare to do. Some you’d rather poke out your eyeballs, some not. Sometimes, it is necessary to do a HAFA because a regular short sale has too much scrutiny. The government continually changes how it handles its HAFA short sales. I am a CHS, a Certified HAFA Specialist. I paid attention in class. It used to be that the investor needed a definite hardship to do a HAFA, but that’s not necessarily true anymore. I suspect part of the HAFA process was overhauled because nobody was doing them. People were shunning the HAFAs because the restrictions were difficult to meet. But they’ve loosened up.
It used to be you had to live in the home, and now you don’t. It used to be that the mortgage payment had to exceed 31% of your gross monthly income, and now it doesn’t. It used to be that you had to show an extreme financial hardship, detailed in your hardship letter and documented by tax returns, and now you don’t. It used to be you couldn’t have large sums of cash in the bank and now it doesn’t matter. I had a client complete a Chase HAFA short sale, and he supplied bank statements that showed $80,000 in his savings account. It wasn’t an IRA or a retirement account, it was cash. His financials reflected disposable income. Yet, the government gave him $3,000 and Chase approved his short sale. Yes, a Chase Bank short sale with no hardship.
If you’re worried that you don’t have much of a hardship, and your lender is Chase Bank or Bank of America, you can probably do a HAFA short sale. Investor guidelines will dictate. You just gotta have the story. I find that Wells Fargo will do strategic short sales as well as long as the investor is delinquent. Although, as a Sacramento short sale agent, it is against the law for me to tell an investor or any seller to stop making a mortgage payment. I can’t give legal advice nor suggest a seller become delinquent. I am required to say if a seller stops making a mortgage payment, a seller could lose his or her home. But if you’re gonna lose the house anyway, what the hey.
Criteria for a Sacramento Short Sale Client
I can astonish myself at the words that come out of my mouth. This agent doesn’t mince words. I say exactly what I mean, and I pride myself on communication. People say I can take the most complicated situation and break it down into simple words that make sense to others. It’s a gift, I suppose. Not everybody can do this. It’s probably why I was chosen to work for the New York Times and write about home buying on About.com on the side, but my primary job and focus is selling Sacramento real estate. As such, I work with people I don’t know, known as people from the public, from the subdivisions of Sacramento. They call me out of the blue.
I prefer to work with those who are referred to me because I know at least one other person has verified their sanity. Otherwise, it’s turning out this year to be a 50 / 50 proposition. I try to weed out the crazy people from my life. I know that’s terrible because they need help, too, especially those who might have to do a short sale. It’s not nice to discriminate, and I feel bad about not working with those people because it’s probably not their fault that they’re nuts. They could have been born with this defect. I mean, who are we to judge? Yet, we do judge. It’s human nature.
Not only that, but everyone of us is a little bit nuts. Especially by comparison to each other. I don’t think anybody is 100% sane. Not even me, although I probably believe I’m more rational than most. I possess a lot of common sense, and let me tell you, common sense will take you a long way particularly if you have enough common sense to wear comfortable shoes. When asked to pick my favorite sense among our 5 senses, I’ll take common sense for 1000, Alex.
I listened to a woman scream yesterday. On a Saturday, not even a week day. It’s my fault for answering the phone. She wasn’t my client. She was the girlfriend of an underwater seller who was trying to become my client. She believed that as a Sacramento short sale agent, I should represent her boyfriend to the bank exactly like a lawyer would represent him. She didn’t believe he should have to talk to the bank. There is a part in the Bank of America short sale process in which the borrower needs to call the bank. I am not a lawyer. As a Sacramento short sale agent, I cannot fill out a borrower’s paperwork, and I cannot make that customer survey phone call to the bank.
Finally, I had to say that what we have here is a failure to communicate. I don’t even like Cool Hand Luke. Now, I realize many people today are distressed. It’s difficult to figure out what to do with an upside down house. By the time a seller calls me, he or she is probably at the end of his or her rope, running out of options. I try to be sensitive to my clients’ situations and attentive to their needs. But my policy is I represent people I like and respect. This couple did not end up being one of those.
Handling a Short Sale Counter Offer
When a short sale bank issues a counter offer, it’s not really a counter offer. Except that it is. It’s just not the type of counter offer that most Sacramento real estate agents recognize. Confused? A short sale counter offer arrives in different forms. Sometimes it looks like Buddha, and other times you’d swear it’s sporting a black cloak and wielding a scythe. It can be in writing or it can be verbal. The counter can be negotiable or non negotiable.
An agent in my office called yesterday about a Chase Bank short sale. I realize that my company has managers who answer these sorts of questions, and they do a bang-up job. But agents also get antsy and don’t always want to wait for a response. Imagine that. An impatient real estate agent! So, every so often, the brave ones call me. I don’t mind helping out a fellow Lyon agent now and then as long as they don’t make it a practice, although I wish they would email and not call.
The agent who called, a super sweet guy, was bent on explaining his entire short sale woes. As I’m listening to him, I’m watching phone calls come across my cellphone screen like a CNN scroll. I ponder whether I should send text messages to the unanswered phone calls and, if so, should I choose the response that says I’m at the dentist or is it better to simply say I’m busy, or don’t they already know that since I didn’t pick up my phone? Do I have to tell them I am awake? Is it any of their business what I am doing?
I like the prepared response choice that says I’m at the dentist because it sounds more respectable than to text my real GPS location, which is I’ve got my head stuck in the frozen dessert section at Safeway, fogging up the freezer. Finally, in my distractions and attempt to focus on my fellow agent’s question, I found myself needing to pull him in that direction as well. I cut to the Chase. Ooo, a pun. I interrupted him and said, “Phone messages are piling up while you are telling me your story, exactly what is your question?”
He wanted to know how Chase issues its short sale counter offers. It felt weird to him that the short sale agent would just call and tell him the price had changed and that the buyer had to pay some other miscellaneous fee. Maybe he expected the counter offer would be white-glove delivered on a silver plate with a juicy JPMorgan Chase insignia wax seal on the envelope. Nope, it’s verbal. Chase short sales are still old school. Documents are faxed to a central location and then lost, just like the old days at Bank of America.
Speaking of which, I received a counter from Bank of America yesterday on a Cooperative Short Sale. Most of the time a buyer’s agent never knows that a counter offer has been accepted unless he or she reads my short sale updates on my website. That’s because counters don’t often involve the buyer. The bank is simply approving or rejecting fees the seller must pay from the proceeds of sale to close. The bank authorizes the expenses of sale. The lower the fees, the higher the bank’s net. It is the seller who pays the fees, not the bank.
This was unusual because the accepted sales price exceeded the preapproved listed price of this Cooperative Short Sale. We had received a number of multiple offers on this short sale. We picked the best offer, which is not necessarily the highest offer. I imagined the buyer would be somewhat stunned to receive an addendum increasing the price and paying a few additional fees. But the bottom line is we want to close this short sale. The bank’s investor has guidelines.
Bank of America stresses that in a Cooperative Short Sale, the preapproved short sale price is precisely that: preapproved. It doesn’t say it will accept that list price. The bank’s investor calls the shots. The buyer, naturally, wanted to know if she could negotiate with the bank, and see, this is the thing. Will another buyer pay that price? In a heartbeat. I know this; it’s not speculation. So, the buyer accepted the Bank of America short sale counter, which is a good thing. Smart buyer, smart buyer’s agent. You know what we call a buyer who doesn’t want to accept a bank’s counter offer like this one? Let’s just say the term doesn’t have buyer attached to it.
Who Will Buy My Home in Sacramento?
It doesn’t matter where you live in Sacramento, there is a buyer for your home. Every Sacramento real estate agent knows this fact but sellers aren’t always certain. Home sellers often worry that their home will not sell. It’s their biggest fear. It’s even a bigger fear when that home needs to be sold as a short sale over a traditional sale, but every home in Sacramento has a buyer waiting somewhere to buy it. I guarantee it.
How can I be so overly confident? Because I’ve been in the real estate business for more years than I care to admit, and I’ve never yet found a home that somebody, somewhere would not buy. Never said to myself that I can’t sell this. It’s just not a possibility. That attitude does not exist.
Now, that’s not to say a home seller can’t help the process along because he or she absolutely can. There are small improvements that can be made to help sell. Often tiny things. Ask your agent. It helps to start by sitting or standing in each room and looking at it. Clear out the noise and the distractions. Focus on the room and the view to the room. Think about how it makes you feel. Is there anything irritating about it? Are there things you love about it? The secret? Get rid of the irritation and accentuate the love.
When I talk to sellers about listing a Sacramento home for sale, I ask why they bought it. I also want to know why they are selling. I might come across as a nosey real estate agent but that information helps me to do my job. For example, I had couple of sellers in Elk Grove tell me that they bought their home because they were standing in front of the door to the pool area in the family room doing a 360. As they spun, they grabbed each other in excitement because they could not believe that they could afford to buy this home. I asked them to show me the exact spot where they were spinning when this happened.
During the open house, I found myself talking to a young couple. This would be their first home. They definitely wanted to buy a pool home. I took their hands and said: Come with me. I positioned them in the spot where the present owners had stood on the day they decided to buy. I said to them, turning in a circle and holding out my arms: Can you believe that you can afford to buy this home? And I reaffirmed it. Yes, you can buy this home. It is true. Believe it.
And you know what? They bought it.
They bought it because the buyer for your home is a person just like you.
