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Elizabeth Weintraub
The Vanishing Golden 1 Second Mortgage Loan in a Short Sale
That Golden1 short sale with a second mortgage? It can be like a case of now you see it, now you don’t. Second lenders in California are often fairly creative in how they deal with California Civil Code 580e. But these are generally hard-money loans we’re talking about. Hard-money loans can carry recourse, especially as second loans that could be wiped out in a foreclosure. This is the thing people don’t stop to think about because they’re often not made to realize the consequences of tapping a home equity line of credit or taking out a second mortgage.
Wouldn’t it be nice if homeowners would receive a disclosure upon refinancing that explained hard-money loans to them, and how they are changing a non-recourse loan into a recourse loan, like in big red letters? Something that said: Warning! By signing these loan documents, you are giving the bank the right to pursue you to the ends of the Earth to collect this debt in the event of default. You can be held personally responsible for this debt to the extent it exceeds your previous purchase-money mortgage.
But, no, they are entranced by low interest rates dangling in front of their faces. Not to mention, they probably need the money for something else. And they don’t think about this hard-money loan until they are facing a short sale or foreclosure. If the lender won’t play ball with them, they might need to pay it off in full or in part. Not every second lender is reasonable in a short sale. There are limits to how much a first lender will give them. If they’re like The Golden1, that amount might not be enough. So, The Golden1 might refuse to do the short sale unless the seller negotiates with them outside of escrow.
That’s because a seller cannot be made to contribute to a short sale in California, and some first lenders won’t allow a contribution by the seller to the second even if the seller offers it. Oh, you can have the buyer offer to pay a shortage but sometimes the first lender will refuse to let the buyer pay the difference between the amount The Golden1 demands and the amount offered by the first lender. Or, maybe the buyer’s own mortgage lender won’t let the buyer pay it.
The best way to negotiate with The Golden1 is before you even start your short sale. However, it is possible that the first lender will not object to a second loan suddenly disappearing from the HUD statement. You would think a bank would say: hey, wait a minute, buddy, if you’ve got money to pay off a second loan, we want that money. But not necessarily. Sometimes, the bank will just close escrow and not look sideways.
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Bank of America Cooperative Short Sales vs HAFA Short Sale
Don’t ask a third-party vendor for Bank of America whether a Cooperative Short Sale is better than a HAFA short sale. Because I’ll bet you dollars to doughnuts the vendor will pick the HAFA. Doesn’t matter whether it’s DTS, REDC, AMS, and so forth, all the acronym companies, they’re all the same. Call me silly, but that’s what I see happening, even though the HAFA is not necessarily the better option. It’s possible that Bank of America would push / promote HAFAs as well because there might be more money to the bank through a HAFA.
When I open a Cooperative Short Sale in Equator, the first thing that happens is my requests for a Cooperative are ignored. The third-party vendors pursue the HAFA. I send emails that say do NOT review this for HAFA because the seller wants to pursue a Cooperative Short Sale. Then, I ask the seller to call the customer service number and repeat over and over Cooperative, like a mantra. If the customer service rep says HAFA, the seller is counseled to say “No, Cooperative.” Yet, the bank opens a HAFA anyway. You’ve gotta ask yourself, why is that? I’ll tell you why I think they’re doing it, and it’s not because they’re stupid, although you may disagree. It’s because there is probably more money in it for the bank.
Is the HAFA better for the seller? Speaking strictly for a California short sale seller the answer might be no. Let’s make it clear I am talking about a streamlined Cooperative, a short sale in which Bank of America has delegated authority to approve without financials. I have a certain Cooperative approved, and Bank of America is telling the seller that in order to do the Cooperative without financials, the seller must be 90 days delinquent to satisfy this particular investor. But in a regular Cooperative short sale, the seller is better off with the Cooperative over the HAFA.
Especially if the seller qualifies for the HIN Cooperative Short Sale, because that minimum payment starts at $5,000 and can go up to $30,000. A HAFA short sale maximum payment is $3,000. However, you can combine the two types of short sales, when you get right down to it, if you’re willing to submit financials and tax returns, and I’m getting approval on one of those in a few weeks.
But if you’re not willing to hand over your sensitive personal information and you just want to do the Cooperative Short Sale without financials, the Cooperative beats HAFA in the PITA classification every time. Some types of Cooperative short sales pay $2,500. Even when you take into consideration the $500 difference vs the PITA, let me tell you, a Cooperative short sale wins hands down. In fact, the only thing worse than a Bank of America HAFA short sale is a Bank of America HAFA Fannie Mae or Bank of America HAFA Freddie Mac short sale — with Freddie Mac HAFA having the slight edge for winning the crawling-through-broken-glass-naked award because it doesn’t use the ARASS.
If you’re got a choice, pick the Bank of America Cooperative short sale. Your Sacramento short sale agent will thank you. Your mother will thank you. Your doctor will thank you. And you’ll sleep better at night.
The Perfect Sacramento Short Sale Buyer
Is there such a thing as the perfect Sacramento short sale buyer? At the risk of sounding like I was raised where I was: you betcha! A seller asked yesterday — how do I know which offer to pick? She asked if she should read every offer she receives or if she should leave it up to me, her Sacramento short sale agent. First, let me say that decision always lies directly with the seller — never with the agent — but I do offer suggestions, and I do guide my sellers to help them to make the right decision. And yes, making the right decision involves reading every offer.
The right decision is choosing the buyer who will perform. What does it mean to perform? It means the buyer who will pay what the bank wants and will close escrow. That premise may sound on the surface overly simplified but those two things are the qualifications of the perfect Sacramento short sale buyer. Of course, there are other things that come into play but performance and adaptability are the most important.
I’ll tell you what you don’t do as a Sacramento short sale buyer. You don’t let your buyer’s agent become combative with the the seller. Because that kind of behavior is just stupid and it backfires. If your agent is ticked off about something, your agent should keep those feelings to himself. Nobody needs to hear it. Earth to buyer’s agent, hello . . . Sacramento is in the middle of a super hot seller’s market right now. You also don’t disclose to the seller that your buyers trespassed, walked around the property without permission and peeked in the windows of an owner-occupied property.
I just closed a short sale in a gated community in the Pocket. This home was situated on 2 parcels along the river. We had received several offers when it came on the market, but the offer the sellers selected was from the buyer who agreed in advance to step up to the plate, if it was required. This particular buyer was represented by an agent who had closed other short sales. Because of that experience, the agent prepared the buyer for the unexpected. Sure enough, the unexpected happened. As anticipated, the buyer performed.
A seller might think she is choosing the buyer who loves her home as much as she did when she first laid eyes on it, and that could very well be true. It’s nice if a seller likes the buyer and knows the buyer appreciates and values the same things in her home. But as her Sacramento short sale agent, who must put the seller’s interests first and foremost, I’m looking for the buyer who will close.
What’s Wrong With the California Homeowner Bill of Rights
How will the California Homeowner Bill of Rights affect short sale sellers in Sacramento? Despite all of the hoopla over it, not much. Probably the most important aspect of the Bill of Rights as it relates to short sales is the stopping of dual tracking — but that only goes into place after short sale approval, not prior to short sale approval, which is when a homeowner needs it.
Dual tracking happens when a foreclosure has been initiated. This means a Notice of Default has been filed in the public records despite a homeowner’s good faith effort to find a solution. Here’s the way it works before and after the California Homeowner Bill of Rights:
- Homeowner falls behind and stops making mortgage payments.
- Homeowner pursues a short sale.
- Lender files for foreclosure.
- Trustee’s Auction date is set.
- Despite a pending offer for a short sale, home can go to foreclosure.
I can only begin to imagine the trepidation felt by homeowners facing an impending trustee’s auction. The problem is most banks will refuse to review a request to postpone a trustee’s auction until the auction date is 3 to 7 days away. It’s not as simple as asking the bank to permanently stop foreclosure action. Certainly not a month or more in advance. Nope, the banks make homeowners chew on their fingernails wondering if the homeowners will be tossed into the street almost all the way to the 11th hour. It’s as though they get some kind of perverse pleasure out of this type of torture. Why can’t a bank postpone a trustee’s auction when it’s 30 or 60 days away? Why make homeowners wait?
One of the services I provide as a Sacramento short sale agent is requesting the postponement of a trustee’s auction. This service, far as I am concerned, falls outside of the scope of selling real estate and dangles dangerously into the realm of practicing law. Sometimes I can’t sleep at night, worrying if a sale will get postponed. A bank is not required to postpone an auction. In fact, if the investor for that loan is Fannie Mae, you can bet your bottom dollar the auction won’t get postponed. That’s why some short sale agents refuse to work on Fannie Mae short sales.
If the California legislature really wanted to pass a Homeowner Bill of Rights, they’d stop dual tracking after a short sale is initiated and verified. Not after short sale approval. Because after the short sale is approved, there is little reason for the bank to initiate a Notice of Default.
A Real Estate License Won’t Help You to Buy a Home in Sacramento
Some people in California think it’s a good idea to get a real estate license just in case they ever want to buy a home in Sacramento. Because if you have a real estate license, then you can collect a commission, which is reflected as a percentage amount of the sales price. All commissions are negotiable and generally paid by the listing broker to the selling broker, so while you might think this could amount to a lot of money, it’s generally not by the time it reaches the buyer’s agent pocket. Not in the overall scheme of things.
Yet, almost one in every 35 people in California has a real estate license. It’s hard to turn around at a party in Sacramento and not spill the drink of a Sacramento real estate agent. Snort as you may, not every person who holds a real estate license should be holding a cocktail much less trying to earn a living from said license, but that doesn’t stop them from getting drunk and / or practicing real estate.
On top of this, we’ve also got the agents who want to represent themselves to buy a home in Sacramento. Especially agents from the Bay Area. You know what they say about that, right? A fool for a client. I look at my own situation. I’ve been in the real estate business for more than 35 years, so I’m not exactly a rookie. I like to think I know what I’m doing. But if I were buying a home out of my area, I would hire a local expert. The few thousand I would earn (and I use the word “earn” loosely) to represent myself is not worth the tens of thousands, perhaps hundreds of thousands, I could lose.
Besides, my expectations are very high. I’m a high maintenance client. I would not want to work for myself. Some people might call me a pain in the ass. I expect exceptional service. Nope, I’d much rather hire a buyer’s agent and make unreasonable demands of her. That’s part of the service an exceptional real estate agent provides — client management.
Something else you might not know. If you’re trying to buy a short sale in Sacramento as a licensed real estate agent representing yourself, it’s highly likely that the bank will not allow you to collect a commission. That’s because you generally can’t have your cake and eat it, too. Even if it is a red velvet cake with a cream cheese filling and butter cream icing.
