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The Seller’s Hardship in a Short Sale
I can often spot a Sacramento buyer’s agent who is new to short sales. They are the guys who start firing off questions the minute they get this short sale agent on the phone. It’s like they are reading from some list of questions to ask a short sale agent, and maybe they are. There is a lot of goofy information online, written by people who are not short sale agents. You can’t blame buyer’s agents for thinking that it’s true because, after all, it’s online, man, it’s on the Internet, it must be true. A smart reader would consider the source before absorbing the data. Sometimes, it’s just an opinion and not fact. And sometimes, it’s a stupid opinion at that.
My absolute favorite question to get from a buyer’s agent is: What is the seller’s hardship? Even if I gave them that information — which I won’t — they wouldn’t know what to do with it. It’s like asking who is the lender; they don’t know what that means, either. They might hear it’s Bank of America and then cringe, because years ago Bank of America had received pretty bad press. However, nowadays, Bank of America short sales are, for the most part, pretty straight forward. So, unless that agent has closed a bunch of short sales herself, she would most likely be clueless about what’s involved or what she could expect to gain from obtaining that knowledge.
It’s none of the buyer’s business what kind of hardship the seller is enduring. That’s personal and private information. Any sensitive information shared by a seller with this Sacramento short sale agent remains confidential. In fact, it’s my fiduciary relationship with the seller that prevents me from disclosing information, apart from ethical reasons. The only thing a buyer or her agent needs to know about my short sales is whether I believe the short sale will close. They don’t get to see the hardship letter.
I’m not disclosing even if there is a hardship in a short sale because not every short sale requires a hardship. Some of my Bank of America Cooperative Short Sales have no hardship whatsoever but they close. If a buyer’s agent wants to know whether a Notice of Default has been filed, the agent can find that information in the property data available online to agents, right alongside the number of loans and identity of the original lenders.
A buyer’s agent is not squeezing the sellers’ personal and confidential information out of this Sacramento short sale agent.
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.
