Short Sales, Foreclosures, REOs and Auctions: Tools for Success in Today s Market

Transcription

1 Short Sales, Foreclosures, REOs and Auctions: Tools for Success in Today s Market Short Sales The Whole Story! Identifying the Short Sale Property 1 2 gather information and analyze a property and its loan obligations determine a seller s financial status tax ramifications of short sales derogatory credit ramifications of short sales broker authorization letter approach the loss mitigation department deeds in lieu of foreclosure principal residence charge-off hardship letter deed in lieu of foreclosure loss mitigation department estoppel affidavit Mortgage Forgiveness Debt Relief Act of Research and Analyze Value and Liens Referral to Tax/Legal Counsel Obtain a Property Profile. Qualify Seller s Financial Status Preparing the Competitive Market Analysis to Arrive at Short Sale Price The Mortgage Forgiveness Debt Relief Act of

2 Credit Reporting Taking the Short Sale Listing Types of Credit Us ed - 10% Broker Authorization Letter New Credit - 10% Length of Credit History - 15% A m ounts Owed - 30% P aym ent History - 35% 7 8 Approaching the Lender Deeds in Lieu of Foreclosure Borrower Rationale Liability of Lender for Junior Loan Loss Mitigation Department Contact Numbers estoppel affidavit 9 10 Case Study: Identifying Short Sale Property The real estate licensee contacted by an owner in financial distress will qualify seller obligations ( liens, judgements) income and assets Good practice to obtain legal and tax counsel Expect at minimum negative tax and credit consequences Marketing the Short Sale Listing be more effective in using the MLS to market and identify short sale properties Buyer Agent-develop the need-to-know answers to questions you should ask listing brokers when considering showing short sale listings understanding the time for lender approval issues inherent in short sale transactions

3 entry-only ( EO )listing pre-foreclosure listing scope of service Short Sales and the MLS Marketing Properties as Short Sales When They Aren t Multiple Listing Service Rules lender approval listing possible short sale time for lender approval Scope of Service of Listing Broker on Short Sales Time for Lender Approval Root of the Problem Lender Contraction Questions to Ask Listing Broker about Short Sales Lender Pricing Case Study: Marketing the Short Sale Listing The most likely course of action of buyers who find themselves in this predicament not buy the property find a new agent 17 Short Sale Contracts contractual issues involved time issues involving lender approval contractual issues in short sales including buyer deposits seller credit responding to counter offer material changes to purchase agreement lender Short Sale Approval Letter 18 3

4 Lender Short Sale Approval Letter Short Sale Addendum Release of seller liability Short-Sale Contingency Date 19 Understanding the Contractual Issues in Short Sales Binding Contract Conditional on Lender Approval Lender Rejection or Conditional Approval to Proposed Sale Lender Timely Response to Offers Lender s Right to Consider Subsequent Offers The Buyer s Right to Cancel 20 Standard Short Sale Contract Forms and Clauses Short Sale Approval Time Periods Other Clauses Special Contract Clauses Involving Short Sales Buyer Deposit Money Buyer Cooperation with Lender Seller Credit Ramifications Time for Submission for Approval Counter Offer Based on Lender Conditions Release of Seller Liability Material Changes Seller Permission to Release Information Buyer s Loan Ramifications Other Actions by Lender Lender Short Sale Approval Letter Case Study: Short Sale Contracts Date Regarding property located at many issues covered in a short sale purchase agreement which is the subject of a note secured by a (deed of trust/mortgage) wherein the borrowers are: and name of borrower name of borrower Lender hereby approves the purchase agreement on the property between: / name of buyer name of buyer and / name of seller name of seller SUBJECT TO THE FOLLOWING CONDITIONS: the Short Sales Addendum is beginning to arrive at parties total understanding the clause requires written approval from the lender delivered to the seller

5 Making the Sale with Loss Mitigation Departments Broker Price Opinion (BPO) documents needed to gain lender approval prepare Lender Short Sale Submission Package present Lender Short Sale Submission Package effectively arrive at a realistic value opinion mortgage fraud Lender Short Sale Submission Package preliminary HUD-1 consequences of mortgage fraud The Lender Short Sale Submission Package 1. Cover Letter Hardship Letter and Proof Borrower Financial Data Copy of Grant Deed Copy of Original Trust Deed or Mortgage, and Note Broker Authorization Letter Listing Agreement and Short Sale Addendum As-is Competitive Market Analysis Property Repair Estimate Purchase Agreement with Short Sale Addendums Preliminary HUD-1 Additional Issues in Short Sales Presenting the Submission Package to the Lender Arriving at the BPO Consequences of Mortgage Fraud Case Study: Making the Sale with Loss Mitigation Departments Include all indicated items in lender approval submission package plus a cover letter Faxed documents get lost get permission to overnight a hard copy of all the documents they appreciate your willingness to be diligent Overview of Foreclosures What is Foreclosure? Judicial Foreclosure Foreclosure by Power of Sale Strict Foreclosure

6 Explanation of Certain Terminology Alternatives to Foreclosure Deficiency Judgments Acceleration clauses Right of Redemption Refinance the Mortgage Sell the Mortgaged Property Deed in Lieu of Foreclosure Short Sale/pre-foreclosure Bankruptcy REO s! The Hidden Story Who to Contact? Asset Management Departments Listing Agreement additional listing, sales, marketing, property management, and accountability issues licensee liabilities involved in REO listings Other REO Issues assignment List Letter Occupancy Termination Agreement Master Listing Agreement Indemnification HUD-owned Houses The Master Listing Agreement REO Agent Responsibilities Listing, Marketing and Sale Activities Property Management Functions Licensee Accountability

7 Licensee Liabilities Cash Flow Indemnification Case Study: Who to Contact? Asset Management Departments analyze the master Listing Agreement prior to signing how much cash flow necessary to maintain the listing(s). liability of agent and lender/servicer if a prospective purchaser is injured result of debris on the premises listing agents on REO properties need to act quickly to avoid liability Purchasing Lender Owned (REO) Properties Buyer Agent-questions to ask a listing agent before writing up an REO offer realistic competitive market analysis for purchasers write-up an effective offer on an REO listing getting an approval/counter offer from an asset manager non-standard purchase agreement form a lender may require disclosure requirements of the law in REO transactions potentially limited disclosure of physical deficiencies in REO sales asset manager punch list sign-off as-is sale selling agent Additional Issues Disclosures in REO Sales Making the Offer Agency Disclosure appropriate questions buyer agent should ask listing agent Property Condition Disclosure Statements Contract Forms Counter-Offers

8 Case Study: Purchasing Lender Owned (REO) Properties individuals who purchase REOs sufficient knowledge and experience to understand risks that includes real estate licensees prior to writing an offer a buyer agent should do due diligence to determine if an offer should be written if so what requirements the listing agent and lender may require Auctions! Bidding for Bargains? Auction Procedures investigate, register, and comply with rules to qualify for a commission agency disclosure requirements property condition disclosure statement Broker Service Agreement Form collusive bidding reserve price information regarding auction process to be placed on MLS key differences in auction sales agreements Buyer s Premium minimum acceptable bid starting bid Broker Registration Procedures Requirements to Qualify Buyer Broker for Compensation on Auction Properties Comply with rules and submit Broker Service Agreement to Auction Company Submit copy of valid real estate license (Associate licensees may have to bring letter) Preview the property with client Sign-in at the beginning of the auction and identify client Attend the auction with client Remain with client during the entire auction process Signing of purchase documentation (power of attorney) Disclosure Statements on Auction Properties Agency Disclosure Property Condition Disclosure Statements

9 Listing Auction Properties Further Issues Auction Sales Agreements Conducting Auctions MLS Issues Case Study: Broker Auction Procedures Client Auction Procedures Brokers should determine rules in advance must comply to qualify for a commission Commissions paid typically based on bid price, not total amount paid purchaser may pay Buyer s Premiums, costs, etc. all that is involved in purchasing real property at auction steps to do an appropriate competitive market analysis steps necessary to bid auction company s rules differences between auctions and normal real estate marketing Additional Issues bid price pre-registration incentives Arriving at Market Value on Auction Properties bidder s card previously valued to $ Bidding Strategies for Informed Bidders informed bidders opening bid

10 Steps to Bid in an Auction Further Issues Pre-register View and investigate the property Check-in and attend auction Bidding takes place after opening remarks Auction Concepts Successful bidder signs documents Case Study: Client Auction Procedures total cost of property is bid price + Buyer s Premium a percentage of bid price prior to attending and bidding, investigate property: expert inspections Review of all documents obtain effective competitive market analysis obtain pre-approval for financing 57 10