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Most simply, your seller will have questions that you are not allowed to answer within the scope of your license.
Besides success rates, the most important reasons for an agent to hand off the short sale negotiations to seasoned professionals is that Markve and Zweifel Law Firm transfers both the time commitment and the legal liability of the negotiations from the listing agent to the attorneys. Experience in problem solving of complex short sale negotiations can often make the difference of approval, closing, and earning a commission or not. When you have the aid of professionals that have successfully negotiated over 2,000 short sales, the likelihood of successful approval and closing increases exponentially. You can use your valuable time bringing in new business while the law firm is completing your short sales.
Regardless of what is owed against the property, it is important that you list the property at fair market value as determined by you through your Comparative Market Analysis. Then, if lack of activity or lack of buyer interest warrants, you reduce the price in small increments until you get an offer, just like you would do in a traditional short sale. Remember, every day your seller is in default, their credit drops further and they are closer to foreclosure. Your seller is trusting you to get this done as quickly as possible.
Different investors have set commission rates they will allow to be paid from their sale proceeds and, in most cases, that percentage is not negotiable. On any government mortgages, (ie: FHA, VA, or conventional with FNMA or Freddie Mac) you will receive 6% commission. Those government backed mortgages comprise approximately 80% of all home mortgages in the US. The other 20% of home mortgages are either portfolio loans or have private investors. In those cases, there is a possibility that the maximum commission allowed by that investor's guidelines is 5% and not negotiable.
Seller should not accept a short sale offer from a buyer unwilling to deposit earnest money. Once offer has been sent to seller’s lender, showings all but cease. It is critical to seller’s interests that earnest money be deposited to prove buyer is earnest. Deposited earnest money also prohibits buyer from walking away from the transaction without notification given to seller via the cancellation of purchase agreement.
It is in both buyer’s and seller’s best interests for inspection to be done prior offer being submitted to seller’s lender. Benefit to the seller is that we find out immediately if buyer is going to cancel the purchase agreement due to unfavorable inspection results saving seller critical market time. It is in buyer’s best interests to do inspection at time of purchase agreement so they know the condition of the property and adjust their offered price accordingly, if necessary, due to unfavorable inspection results. If buyer waits for short sale to be approved, then does inspection and wants to lower their offer, it is too late. Seller’s lender will not lower their approved price based on inspection results acquired after the short sale has been approved. Seller should require inspection to be completed before offer is submitted to their lender.
The reason is simply that the lender is not only approving buyer’s offer. The buyer’s offer is the last thing they examine. Through several reports ordered and analyzed by seller’s lender, the negotiator must first examine seller’s financial situation to see if they will approve a short sale for this seller and under what terms they will approve it. Seller’s lender also examines the title work on the subject property to make sure the transaction is closeable if they continue with the short sale approval process. They order tax returns from the IRS and credit reports on the seller to verify that financial information provided by the seller is factual. An appraisal or broker price opinion is ordered and analyzed so seller’s lender knows the value of the property. Lastly, they determine if buyer’s offer is acceptable based on their value. Once all that is completed, the file then commonly gets forwarded to Mortgage Insurance Company (if applicable) for approval, and lastly to the investor for final approval. With most mortgage servicers today, that process takes 8-12 weeks for seller’s lender to complete.
As with many questions relating to short sales, the answer is “it depends.” Some mortgage servicers and investors will not work with short sales in the redemption period. It is important for listing agent to know which servicers and investors will or will not consider a short sale in the redemption period before they waste their time and money listing a property for short sale after sheriff sale has occurred. Currently, VA mortgages cannot be considered for short sale after the sheriff sale has occurred and FHA or Freddie Mac conventionals can only be approved for short sale in certain situations if sheriff sale is imminent or has already occurred. Agent should consult our law firm before listing a short sale property in the redemption period.
In some cases, a lender will postpone the sheriff sale so the short sale process can continue. However, if the lender is not willing to do so, a homeowner has the right to postpone the sheriff sale themselves. If the property is homesteaded, the homeowner can postpone the sheriff sale for five months by filing certain documents with the county offices and foreclosing attorney. This must be done at least fifteen days prior to the date sheriff sale is scheduled. When the homeowner postpones the sheriff sale, the redemption period is decreased from six months to five weeks. That five month postponement can make the difference of getting the short sale approved or not. For instructions and forms to postpone their sheriff sale, (click here).
If the bankruptcy is Chapter 7, the seller must wait until it is discharged before short sale offer can be considered by their lender. Despite the fact that a short sale should be negotiable during a Chapter 13 bankruptcy plan, in practice the lenders have exhibited a refusal to cooperate in those negotiations. After discharge of either, the short sale tends to be easier to get approved, due to the homeowner being released of the debt obligation through the bankruptcy.
Refer them to a short sale attorney to discuss the potential consequences of that action. If a homeowner buys another home with the intention of short selling the current home, it is possible that short sale may be denied, or only be approved with significant seller contribution to the lender’s loss. They have just proven to the new lender that they can afford both mortgages, now they have to prove to the old lender that they cannot afford both payments. Pretty difficult. If a homeowner buys a new home, and then cannot get a short sale approved on the old home, foreclosure becomes their only option. Their lender can also foreclose by legal action leaving the borrower responsible for the debt. It is important that they have all the information and consider all possible consequences to make informed decisions.
As with most short sale related questions, the answer is “it depends.” Some mortgage investors such as HUD (FHA or VA loans) require that the homeowner has a financial hardship and is in default before they will approve a short sale to close. Some investors, such as Fannie Mae and Freddie Mac have requirements that the seller is either already in default or that the seller’s financial situation proves that default is “imminent.” Most people without financial hardship cannot prove that default is imminent and cannot be considered for short sale unless they are in default on their mortgage payments. Default requirements are case by case based on your specific mortgage investor guidelines and requirements.
A seller should not accept a “low ball” offer on their short sale property. Remember it takes weeks for their lender to get far enough into the approval process to examine the buyer’s offer. If the buyer’s offer is not at or very near fair market value as determined by lenders Broker Price Opinion (BPO) or appraisal, the offer will be countered. If this buyer is not willing to come up to the countered price, you will have a cancellation. Better to counter to fair market value at the time of purchase agreement so buyer cancels now rather than 6-8 weeks from now. Again, waiting for bank to counter this low ball offer wastes too much of your seller’s valuable market time.
If buyer’s offer is at or very near fair market value, inspection is done at time of purchase agreement and you keep buyer’s agent informed of the progress so buyer stays in the deal, you will likely get approvals and close on over 90% of your short sales.
Contact Wendy Haisley, Program Coordinator, at 763-450-1639 or firstname.lastname@example.org. You will be required to attend a “new agent” introductory class on short sales as soon as possible. From then on, your time commitment to your short sale listings will not be much more than your traditional listings. You list and sell them, and the law firm does the rest.
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Markve & Zweifel lawyers and attorneys practice in the area of short sale negotiation for the Minneapolis, St. Paul, Maple Grove areas including Bloomington, Brooklyn Park, Anoka, Brainerd, Fridley, Eagan, Shakopee and surrounding areas in Minnesota. This includes short sales in Wisconsin from Hudson to Milwaukee overseen by our attorney licensed in Wisconsin.
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