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Maybe Your Roseville Home is Worth More?
Of my four closings yesterday, two of those homes were regular transactions and not short sales. I hope this is a trend that continues. Fewer short sales, more equity sales. Because for the past 7 years, most of my business in the Sacramento four-county area has been short sales. That’s why they call me a Sacramento short sale agent. But before short sales, I enjoyed a long career selling regular homes. People tend to forget about that. But I don’t because my job is to help sellers sell their home, regardless of what it is.
One of those closings was a home in Roseville. It was owned by a spunky 82-year-old woman whom everybody adored. I mean everybody: the title company, the escrow officer, the buyer, the buyer’s agent, and especially me. This woman is incredible. Funny, sweet and smart. I could not believe that her family dumped her at the last minute. The home was hers alone, but a while ago her family members decided to join her in title. I’m not sure exactly why but I’m betting they felt she had equity, and they wanted a piece of it. When she told them she was interested in selling, they convinced her that she would have to do a short sale. If she was to short sale, they wanted to bail because they did not want to participate in a short sale. No money to them and nothing but a hassle.
See, the thing is a short sale lender will want everybody to participate in the short sale process, even if the parties are not on the mortgage. If they are on title, they need to fill out all of the paperwork, just like the mortgagors, and apply for the short sale. This seller’s family members were so sure she had to sell as a short sale that they deeded the home back to her and recorded that deed! I always check out title before I take a listing. Three decades ago I used to work at First American Title. This seller definitely had clear title to the home. A home with equity!
She was also very shocked when I told her she did not have to do a short sale. She had plenty of equity. This Roseville seller had enough equity to sell her home for top dollar, pay a commission, all of her closing costs and back taxes, and still have a lot of money leftover. Do you know how good that feels as a real estate agent to share with a seller that kind of good news? Or, as a seller to hear it? To find out that instead of a short sale, you can protect your credit and stash, say, $20,000 in the bank. When you’re on a fixed income, $20,000 could be a year’s income or more.
It beats the alternative. I had to inform a Land Park seller last year that her Land Park home had slipped into short sale territory and that she needed to sell as a short sale. We tried to sell as an equity sale but it hadn’t been working. She exploded to the point that I had to cancel the listing. Just blew up at me. I always try to tell people the hard truth but not everybody can handle an agent who is direct. Some prefer agents who sugar-coat, beat around the bush, and that’s not me. Eventually, that Land Park seller put her home back on the market as a short sale with another agent. That was too bad. Because I would have done a good job for her. You can trust that I will always try to do what is best for the seller.
But before jumping to the conclusion that your home is underwater, you should ask a real estate agent for her opinion of value. You might be pleasantly surprised. Some of us do a bang-up job at pricing a home and figuring out market value.
How Mortgage Insurance Sneaks Into a Short Sale
Think you don’t have mortgage insurance? Think again. Mortgage insurance is one of the biggest problems plaguing short sales in Sacramento and across the country these days. If your home is underwater, you can have mortgage insurance and not know it. At any time, your mortgage lender can plop private mortgage insurance on your home without your knowledge nor your permission. How do they get away with it? Your lender can pay for this coverage out of its own pocket. That’s why the lender doesn’t need your permission. Because you’re not paying for mortgage insurance. Not out of pocket, anyway. You pay for it in other ways.
Doesn’t it strike you a bit odd that there is a marketplace for this kind of insurance? You might scratch your head and wonder: how are they making money? Well, part of the way they make money is for the mortgage lender to buy an interest in the private mortgage insurance company. I know it kinda sounds like they are in bed with the mortgage insurance company, and you know what? They are. And it’s perfectly legal. Isn’t this like the coolest investment idea ever? Not! But it’s going on, and it’s happening right under your nose, and probably it’s happening to your own house. As a Sacramento short sale agent, I see this more often than not.
Say you’ve got House A in Sacramento that is worth $100,000, but it has a mortgage that is serviced and owned by Big Fat Bank. That mortgage balance is, say, $300,000. Big Fat Bank doesn’t want to tell its investors that much of the assets listed on Big Fat Bank’s asset sheet are worth 30 to 50 cents on the dollar. Because that would make Big Fat Bank’s stock worth less. If Bank Fat Bank isn’t worth what Big Fat Bank says it is, then investors might take their dollars out of Big Fat Bank and Big Fat Bank might collapse.
So, Big Fat Bank buys an interest in, say, Itsy Bitsy Mortgage Insurance. It asks Itsy Bitsy Mortgage Insurance to write an insurance policy on House A, insuring a portion of that $300,000 in the event of loss. Big Fat Bank writes off the insurance premiums it pays to Itsby Bitsy Mortgage Insurance, and part of those insurance premiums are rebated to Big Fat Bank. Not only that, but when House A goes belly up, Itsby Bitsy makes money even though it must pay out to Big Fat Bank. And Big Fat Bank makes money.
Everybody is happy.
Unless the seller of House A is trying to do a short sale. Then, not only must Big Fat Bank approve the short sale, but so must Itsy Bitsy Mortgage Insurance. Suddenly, there is another player in the short sale, another layer to the process, and Itsy Bitsy Mortgage Insurance might not approve the short sale. Or, Itsby Bitsy might demand a payoff from the seller of House A or from another party to the short sale. Aren’t you glad you chose Itsy Bitsy? Oh, wait. You didn’t.
But even if Itsby Bitsy Mortgage Insurance has to pay Big Fat Bank, due to a loss suffered by Big Fat Bank in a short sale, Itsby Bitsy still makes money and so does Big Fat Bank. Hey, this is America.
