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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.
Should You Do a Loan Modification or a Sacramento Short Sale?
Many underwater sellers in Sacramento, by 2013, have most likely tried to do a loan modification or have successfully closed on a short sale. I suspect most of the extreme financial hardships have been resolved and the strategic short sales have been executed or denied by this late date, because many homes have been underwater in Sacramento since 2005-2006. That was the first wave. The next big decline happened in 2008.
Five to 9 years is a long time to struggle with an underwater home. Because of today’s marketplace in Sacramento, some of the borderline underwater homes are turning into equity sales. However, if your home value has fallen by 50% or more, I don’t see any hope for you. Can’t sugar coat this. You won’t regain that equity in my lifetime. There are basically 3 ways out and with few exceptions, only the short sale is the permanent solution.
You either do a HARP refinance (if your loan is Fannie Mae or Freddie Mac) a loan modification or a short sale. If you do a loan modification or a refinance (with the refinance really being a loan mod in disguise), the only thing that really makes sense is if the lender will reduce your principal balance, erase a good chunk of it. Because if not, you’re simply reaffirming a humongous debt that you’ll never ever repay unless you live in that house until you die. And even then, you’ll pay twice as much as you needed to pay. Most banks will NOT reduce a principal balance.
You might wonder why would banks give you a HARP refinance or a loan modification if it wasn’t a good deal for you? Because they don’t give a crap and they want to stop their own bleeding. Banks don’t really care about you. They care about their stockholders and whether the government will continue to sue them, and all sorts of others things, but not you.
You also can’t pursue a loan modification when you’re trying to do a short sale. I had an investor client start out to do an FHA short sale about 6 months ago. We were getting him preapproved for the ATP before going on the market. Mid-stream, ?he decided he wanted to do a full-blown loan modification, so we had to drop the short sale. Not only that, but he was advised not to do the loan modification because he did not live in the property, and FHA will not do a loan modification for a homeowner who does not reside in the home. I sent the homeowner the HUD guidelines, which clearly stated such, but he wanted a miracle and was hoping for something magical to happen. I understand that homeowners are confused and directionless at times.
His loan modification was denied, of course. But getting that denial did make it easier to get him the Approval to Participate in an FHA short sale. I am working with several other sellers who were granted loan modifications and are now waking up to the fact that they will never get out from being underwater. They will always owe all of that money! And some of them no longer can afford to pay the minimum or reduced payments under the loan modification.
The Rip Van Winkle loan modifiers in Sacramento are waking up. That loan modification is not a very good deal for you, is it?
If you’ve got a loan modification that is cause for concern and you want to dump that home so you can buy the same type of home again in two years and be done with this mess, call me. I can put an end to this suffering. I’ve been doing Sacramento short sales since 2006 and have closed hundreds. Last year, I sold $32 million. Call Elizabeth Weintraub at 916.233.6759.
Should a Sacramento Short Sale Agent Get Paid?
I received an obscure email yesterday from a person who was very upset because the writer realized a Sacramento short sale agent gets paid to do a short sale and, in his words, the seller gets nothing. At first, I could not believe my eyes, but as the words on the page popped out at me, I understood it was simply the frustration and anger of the person writing, and logic didn’t enter into it.
Because if pure logic entered into it, the writer would be upset with himself. He’s the one who, for better or worse, is saddled with an underwater home that he could no longer afford. Maybe it was bad timing, which is nobody’s fault, or maybe the person lost their job and can’t find another, which is also nobody’s fault. Or, maybe the person knew from the beginning the dangerous waters, hard to say, and it doesn’t really matter. What matters is where one is with the property now and what one intends to do about it. If a person doesn’t want to keep an underwater home, this homeowner faces two basic choices: short sale or foreclosure.
A Sacramento short sale agent really wants to help. It’s far easier to sell a home that is not a short sale, believe me.
For many homeowners, the short sale is the better solution:
- A short sale removes personal liability.
- Gives the sellers a clean break.
- Transfers ownership in a dignified manner.
- Relieves a seller of any further responsibility for the property.
- Provides a closure.
And yes, an agent who sells the home and negotiates a successful short sale earns a commission. All of the fees — to the listing and selling brokers, the listing agents, the selling agents, and the costs of sale — are paid from the proceeds of sale; there is no upfront or out-of-pocket expense to the seller.
Try hiring a lawyer to give legal advice for free. They won’t do it. Well, they might if you offer to buy a martini — dry, with a splash of vermouth and a couple of jalapeno-stuffed olives. However, agents don’t sell homes for free, either. A Sacramento short sale agent sells a home on a contingent basis. When finally the home is sold and the seller receives short sale approval, the agent gets paid for services upon closing. Sellers are not paying that agent in advance or writing a check.
Moreover, simply because the short sale agent is receiving a commission doesn’t mean a seller is getting the short end of the stick. If a seller wants to see the short end of the stick, stand back and let the home go to foreclosure. Don’t bother trying to buy another home in 2 years after a foreclosure, because it won’t happen. Every time a seller applies for credit for the next 7 years after a foreclosure, the seller will need to disclose the foreclosure and the credit will most likely be denied.
If a homeowner wants to stick it to the man, do a short sale. If a seller wants to do the bank a favor, then by all means, let the bank seize the home in a foreclosure. Sellers are very angry with the way some employees at short sale banks talk down to them and treat them. You wouldn’t believe some of the stories I hear from sellers. I bet most short sale agents and support staff who are involved with distressed sellers feel their pain; it’s hard not to.
However, to get angry with an agent because the agent is getting paid to perform a service is like getting mad that you get a paycheck when you go to work.
