Email ElizabethHow 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.
Not Every Person in Sacramento Has a Sense of Humor
The subject of monkeys came up this morning during a conversation with my husband. Well, actually he brought up the subject of monkeys, which made me ask if knows that Germany seized Justin Bieber’s monkey. I only mention Justin Bieber because a) I spotted a photo of his tiny capuchin monkey in the paper and b) who likes Justin Bieber? My husband says Justin Bieber is like Hamburger Helper. Just add pre-teens, stir and voila: instant concert sensation!
You can probably see why my husband and I get along so well. We make each other laugh. I try to bring a little humor to my client’s lives as well. Sacramento real estate is a subject many of us can chuckle about. I believe everybody has room in his or her daily routine to laugh now and then. Plus, laughter relieves stress, and it makes you feel better about the world and your place in it. Even the most horrible situation, like, say, a short sale, can be made a bit more plausible if you can find a humorous aspect to it.
Every once in a while, I run across a person who doesn’t seem to possess a sense of humor. This means I have to be careful what I say and realize if my jokes fall flat, that the jokes are probably not appreciated and, in fact, could be inappropriate for the situation. A Sacramento real estate agent has a duty to be professional. Take a former client whom I asked to appear in a photograph with me. When I asked if he minded if a reporter from the newspaper shot his photo as we listed his home, he was all for the publicity. He added: I’ll remember to shave.
I wrote back: And pants, don’t forget to wear pants.
Well, he didn’t see the humor in that. That’s probably because I didn’t catch the fact that he wasn’t trying to be funny when he said I’ll remember to shave. I thought he was joking with me. He wasn’t joking. He was being serious. He actually meant that he might have to leave himself a note because it’s possible he would forget. Maybe he had to tie a string around his finger before bedtime? Because, maybe he doesn’t look in the mirror in the morning, or maybe he doesn’t stroke his face to discover something weird is growing there. Perhaps he is fearful that an electric razor will suddenly jump from his chin and race across the top of his head? I have no idea how he struggles with this.
You just don’t know about people. That’s why it’s good to take stock upfront and make sure a person enjoys your sense of humor before you lay it on them.
Photo: by Van Newland at Pecan Street Fair, Austin 2013
Fannie Mae Lip Service and Its Bad Press
We used to call them hypocrites but now we call them corporations or politicians because those are more polite words. Those words don’t necessarily expose the underbelly. For example, you know what lip service means, right? It means the lips are moving but the words that are coming out of those lips are meaningless. Some real estate agents would say that Fannie Mae is pretty good at giving lip service. But when it comes to being an advocate for home buyers, there is little actual support or action to back up some of Fannie Mae’s statements.
My mother used to say: forget what people say and look at what they do.
Fannie Mae has been under attack by all sides lately. Much of the criticism has had to do with the fact that in many situations Fannie Mae will over-estimate the value of a home, in particular, short sale homes. The theory is Fannie Mae over-estimates the value so it doesn’t have to deny the short sale, which might be its actual goal. If the value is too high to receive an offer or even appraise, then Fannie Mae can be assured that the short sale won’t happen and the home will go to foreclosure. When the home goes to foreclosure, it pops into Fannie Mae’s REO inventory, and Fannie Mae now has the opportunity to provide its own over-market financing, which can result in shoving more unsuspecting homeowners underwater the day the escrow closes. Don’t you love lip service?
Whenever I spot a home for sale in Sacramento that is offered with HomePath financing, the sales price is almost always 10% to 20% above market value. The beauty of HomePath financing is there is no appraisal to dispute the value. Home buyers can get suckered because they don’t know the value.
Well, now Fannie Mae has implemented a new procedure for short sales, most likely in response to the uproar from agents across the country. This new procedure now involves obtaining 2 appraisals on the short sale home. Fannie Mae hires its own Fannie Mae appraiser, the guy with the rose-colored glasses, and an independent real estate agent to do a BPO. Except the independent agent who does the BPO probably isn’t paid enough to do all of that work and completes the BPO in hopes that Fannie Mae will someday hire that agent as its own REO agent. Everybody has an agenda.
This way, regardless of what happens to the sales price, Fannie Mae can say it was proactive. It’s better than a poke in the eye with a stick, but it still seems like it might be lip service to me.
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