Jacksonville Short Sales Information for the Jacksonville Real Estate Market Area

Served with a Lis Pendens or Foreclosure lawsuit on your Jacksonville real estate? Please don't just do nothing!

I am not an attorney and I am not giving legal advice.  I AM giving you real estate advice to seek legal advice. 

Our team does help a lot of people in this type of situation with a short sale.  We help by helping homeowners sell their home for less than they owe on their home. 

You have to be careful.  There are many out there who are trying to feed off of people in an unfortunate situation with their home.

When you are served your initial reaction is probably to crawl into a hole and hide.  Most people we have talked to have frozen up and failed to do anything.  Please don't do this!

You have a few options.  Please explore them, research them and do what is right for you.

Here are a few of the options you can explore:

• CALL A REAL ESTATE ATTORNEY WHO SPECIALIZES IN FIGHTING JACKSONVILLE FORECLOSURES.  That is the first option.  Many of these attorneys give free initial consultations.  The key is to talk to someone who specializes in this. You will get an entirely different answer if you talk to a bankruptcy attorney vs. a foreclosure defense attorney.

• Try to get a loan modification with your lender.  Once there is a lawsuit in progress and the lender is suing you for foreclosure, it is a good idea to have a foreclosure defense attorney involved.  The bank will not stop the foreclosure just because you are trying to get a modification.

• BE AWARE there are people out there who will try to get you to sign over title to your house to them and will make you promises about what they are going to do for you.  Do not fall victim to this scam.

• Consider selling your home in a Jacksonville short sale.  Talk to a real estate professional who knows how to do a Jacksonville short sale correctly.  This is a very complex real estate transaction.  It is not easy and should not be trusted to just anyone.  The bank will not stop the foreclosure process just because you are attempting to short sale your Jacksonville property.  That is another reason that speed and expertise is crucial! Be aware that depending on the bank involved or the number of mortgages and other liens your situation can be far more complicated than average.

Understand how have a foreclosure vs. a short sale on your credit report will matter to you in the years to come.  While they stay on your credit report for a specific amount of time, current lending standards make recovering from a short sale easier and faster than recovering from a foreclosure.  If someone tells you it doesn't matter to you, seek alternate advice because there is definitely a difference.  Do your own research, educate yourself.

Whatever you do, don't just do nothing. 

Strategic Defaults. Would You Walk Away From Your Jacksonville Real Estate?

The topic of strategic defaults has become a widely talked about idea. A strategic default is when you walk away from your real estate by giving your home back to the bank. 

I wanted to cover this because it has become widely talked about.  I'm neither condoning or condemning it.  I will never advise or encourage someone to do this nor will I be judgmental of someone who has. 

If you are considering this you should seek competent legal advice and financial advice, I am giving neither.  You should never make the decision based solely on advice from a real estate agent who advises you to do this so they can attempt to short sale your property.

Why would anyone make the decision to strategically default on their mortgage obligation? 

Well, what if it makes sound financial sense?

For example:

John purchased a home at the height of the market in 2006.  He paid $500,000 for his home.  (No he did not buy more than he could afford and was not stretching beyond his means, so lay that popular misconception aside.)  Today his home is worth around $250,000 because of a few recent Jacksonville distressed property sales in that area.  Once foreclosures start to hit neighborhoods the values begin to rapidly deteriorate since the practice is to under price Jacksonville foreclosures.

John still has a good job, he is not in eminent danger of being late on his home.  In short, he can afford to keep his home.  John also realizes that it might take years for his home to recover in value.  What happens if he loses his job in five years and needs to sell his house?  He doubts that he will be able to.  What about 7 years down the road?  Ten? What if he needs to downsize to retire and can not sell his home.  Will he be able to maintain his payments at that point?  Will his value have recovered so he can sell?   John realizes that if he walks away now, he could begin to recover financially as opposed to waiting for years for the ball to drop.  John starts to seriously consider turning in the keys as part of a financial strategy to move forward rather than stay in a hole that can possibly cause future financial ruin.

To make matters more interesting, due to the drop in commercial real estate values...developers, businesses and even BANKS have begun to make strategic default decisions on commercial property!  This practice is not usually judged harshly by the public, so why the double standard?  Why are so many willing to accept this practice in business as being a sound financial decision?  Why aren't homeowners entitled to make similar financial decisions?  Business decisions for the future of their family's welfare?

I'll say it again.  Banks made the decision to loan the money...the homeowners did not loan the money to themselves.  Banks knew the web that had been built through mortgage securitization...the homeowner could not even begin to grasp the tangled web that they were flying into.  The banks knew the decisions they were making were less than prudent...yet it allowed them to make a profit.  So they did it for as long as they could get away with it. 

The little homeowners (think fly in a web)? They just wanted a home for their family.  They didn't know, or care, about the complexities of the house of cards that the banks had carefully built.  They had no idea that once it was stacked to a certain height that house of cards would begin to crumble.

If this is something you are considering please seek competent legal and financial advice and understand the future ramifications of this decision.  And remember, no one can predict the future.  No one can know that today's decisions will appear to be sound a few years down the road.

Second Lienholders and the Short Sale. A Big and Enduring Problem for Jacksonville Short Sales.

What are second lienholders doing?

Just when first lienholders had gotten very good about agreeing to give them 1,000-5,000 at closing without a big hassle, the second lienholders changed the game. 

The fact that the first  lienholder is willing to give the second lienholder a token amount although they will not be entitled to anything at closing?

That isn't good enough for many second lienholders today.  They want more.

The biggest challenge we see in our Jacksonville short sales is the demands of a second lienholder.

Many times they are sneaky!  We have seen second lienholders change the demand amount daily.  Sometimes they will give you a number, then when you find a way to make it happen the number changes.  It is not unusual for them to refuse to put it in writing.  They are even known to suggest payments off HUD when the first disallows them getting a large cash payment.  The tricks seem to be endless when it comes to seconds these days.

We have seen sellers end up with a foreclosure or bankruptcy because of the second lienholder not being willing to take a small amount that the first lienholder agreed to give.  THIS SHOULD NEVER HAPPEN.

In my most recent case USAA is demanding 75% of the balance of the second note at closing.  This is when they are only underwater around $50,000 and the first lienholder is underwater $100,000.   We will challenge this number and try to arrive at a workable solution for the seller and both lienholders.  Without doubt, this 75% demand is only workable for one of the three parties.

• So what are second lienholders up to?
• Do they have insurance that will pay them more upon a foreclosure than if they accept a small short sale payoff? 
• Are they really just making decisions that appear to be this poor?
• Do the investors and shareholders of these banks and loans prefer to make 3,000 on a bad loan...or NOTHING at foreclosure? 
• Are they really MAKING MONEY at foreclosure although they are not receiving any of the proceeds? 

The real estate business is hard.  Short sales are hard.  But we chose to do them as Jacksonville short sale specialists because we see that as a place where we can really make the difference in the lives of people that desperately need help. 

Jacksonville Home Sellers...The Real Estate Market Doesn't Care That You Need a Certain Amount for Your Home (Although We Wish it Did!!!)

One thing you can always count on when you consult us on selling your Jacksonville home is the truth.  We will be honest about the value of your home even though it may hurt both you and us.  That is because the truth just "is" and anything other than that will be found out.

This topic has been on my mind for a couple of weeks but I wanted to talk about it in the right way so I've been thinking it over.  It's a sensitive topic but crucial to understand.  If you bought your Jacksonville home when it was worth more than it is now this is likely something that causes you a lot of anxiety, lost sleep and even pain.  We understand!  This is amplified when you reach a point where you can no longer maintain payments on the home that has dropped significantly in value.  Sometimes this is caused by job loss or income reduction.  Sometimes it's caused by other life events that can make a homeowner need to downsize their monthly obligations.  It's a hard situation to handle emotionally and financially...no matter what the cause.

Last summer we had an unfortunate Jacksonville home seller contact us about short selling their home.  We had great sympathy for this seller as we do all sellers in this position.  We ran comps of their home and determined that the price should start in the low 200s.  Because we had recently sold other homes around it, we also knew that there was an appraisal problem in the area.  So we were not confident it would even appraise at $200,000.  Because so few homes had sold recently in the area and there was an oversupply on the market some recent foreclosures had moved the price down dramatically in the area.

It is very rare that we do not have a Jacksonville short sale under contract in the first month on the market.  That is because we know how to price homes at market value that should be the next home in the neighborhood or area to sell.  Homeowners that are no longer making mortgage payments do not have time to waste while their home languishes on the market.

At the same time we will not underprice your home because that is not doing anyone any good either.  The bank will not approve your underpriced Jacksonville short sale!  The contract price has to be "right" for both the seller's lienholder and the buyer's bank for the deal to come together.

We took this listing then almost immediately heard from the seller that they were pursing "other marketing options."  We wished them the best and terminated all work on the home.  I didn't think anything else about it, but ran across this same home recently while I was searching for a buyer.

They had found another agent who listed the home at around $500,000.  We don't know what transpired to list the home at this price.  We don't know if the seller was led to believe that we were nuts and the home was really worth far more than we told the seller.  We only know we would not have listed the home for such an outrageous amount since it was more than double the market value. We will not take a listing that is not priced at a level that we can successfully sell it at.  The home has been on the market for around two and a half months now and the price has already been dropped by $200,000.  Our guess is that it needs to drop by another $100,000 at this point to even get a contract on the home.

Who does this help?  Not the unfortunate seller (very nice person, I might add!) who may or may not believe their home could be sold at this high price and has had to endure significant price drops from the initial list price in a short period of time.  The seller  is also headed closer to foreclosure every day if they are not making mortgage payments.  The agent who is spinning their wheels did not gain anything by overpricing the listing.  

If you are in the position where you can no longer maintain payments on your home and need to downsize your monthly payments we have to ask, "Do you want to "list" your Jacksonville real estate or do you want to "sell" your Jacksonville real estate?" We are Jacksonville short sale specialists.   Call us if you want to sell.

Where does it stop? The bank created (and fueled) housing mess. A simplified explanation of the short sale and foreclosure cycle in the Jacksonville real estate market.

• Banks taking people's houses in Jacksonville...then selling them for less than they would have made in a short sale when there was a ratified short sale contract with a ready, willing and able buyer?  Yes.

• Banks putting foreclosures on the market well below what others have sold for?  Yes.

• Banks putting foreclosures on the market well below what the competition is listed for sale at?  Yes.

• Banks making decisions clearly not in the best interest of their investors?  Yes.
  

Where did this fiasco all start?  Banks.  In the past couple of years it has come out that they gave all kinds of loans that never should have been given. (and we're not just talking about subprime which got much of the blame) Why?  Because the banks had no intention of ever keeping the loans.  They knew they were going to sell them and would not be holding the bag if and when the defaults started.  It was never about them making good loans or bad loans...it was simply about making money.

Why did we experience dramatic increases, then decreases, in the value of our homes?  The artificial appreciation caused by the banks giving loans when loans should not have been given, all because they were going to make a quick buck by originating and flipping the loan.  Had this money not been available due to relatively new practice of securitization...prices could never have run up like they did.

Once foreclosures started, the market tanked further with each and every foreclosure.  This led to sellers being unable to sell their homes if they lost their job, or had other life changing events, or even just needed to decrease their monthly expenses.

We are seeing the banks put new foreclosures on the market below fair market value.  Constantly.

This insanity leads to further deterioration in home values. 

The next listing that comes on the market will have to be priced even lower, since the comps were brought lower by a new foreclosure.  No buyer is willing to overpay in this market.  Even if the seller could get a contract for higher, it is likely it would fall out because the appraisal (ordered by the buyer's bank) will not come in at the contract price and the buyer's bank will simply not lend the money for the purchase.   This causes the market value to go down and down and down.  So when the next guy (or gal) loses a job the price they can sell their home for is even lower and the chances that they will have to sell their home through a short sale (or face eventual foreclosure) will increase. 

And so the cycle goes...

The cycle was started by the banks.

The cycle is being fueled by the banks.

The cycle can only be broken by the banks.

At the same time the banks who created this disaster for homeowners everywhere are being bailed out. Many homeowners are losing everything.  And these are NOT irresponsible homeowners.  Bailout funds and loss sharing agreements have empowered the banks to make more poor decisions.  The homeowners continue to be trapped in the insanity of the institutions that have been labeled as too big too fail, but are really just too big to function with any degree of reason.

"There are no other offers on the property so the short sale should go really fast." The sign of an inexperienced Jacksonville short sale agent.

One of our buyers called on a for sale sign she saw while driving around in a Northwest St Johns County neighborhood that she liked.  Our awesome buyer called us very excited after talking to the agent about her listing.  The other agent had told her that there were no other offers on the property so the process should go fast.

We are experienced in Jacksonville short sales and this made no sense.  Being very curious, I started jumping into the public records to research the situation.  After ten minutes I knew that this short sale would be anything but fast, if it was successful at all.

The lien holder is a lender that is notorious for sitting on files for months and months and then sitting on them a little longer.  This particular lender sometimes still does not have a file assigned to a negotiator six months after submission.  This particular buyer needed to be in a property within a a month making a short sale property a very poor option.

Thankfully, the buyer ended up finding other homes that they liked far better that actually met their needs better.  This helped avoid a situation in which we would have had to discredit the other agent...something that we feel like we should never have to do and definitely never want to do.

If you are going to be involved in Jacksonville short sales (either as a buyer or seller) please work with an agent who specializes in short sales and has completed them for both buyers and sellers.  We have heard from many buyers and sellers who have been made highly unrealistic promises.  I do not think that anyone is setting out to intentionally deceive them.  I think that very few people in the real estate industry currently have really good working knowledge of short sales and how to successfully complete them. 

We feel strongly that buyers and seller should have reasonable expectations from the beginning.  This translates into much greater odds of a successful short sale closing in the Jacksonville real estate market.  "Fast" is not a word that frequently describes short sales. 

Getting a Great Deal on a Condo or HOA foreclosure sale? Not so fast!!!

So we've been following a new trend for the past few months.  HOAs and Condo Associations in the Jacksonville real estate market have been moving to foreclose on properties for past due association fees.  Most homeowners are clueless, never suspecting that they can actually DO that.  We have seen several short sale sellers who are in the midst of a HOA foreclosure.  In our business we have seen that more often than not, homeowners quit paying their HOA or Condo Association dues before they quit paying their lender.  They figure that the association is the lesser of the evils.  Well...maybe not.

We have been watching these properties enter the foreclosure funnel and waited to see what happens when they start to emerge on the other side.

We got a call this week from a distraught homeowner.  They had purchased a home for a great deal from a HOA that had foreclosed.  They got a great deal on the property and all was well...until....well the lender still has a legal right to the property that was mortgaged.

Speaking with this unfortunate homeowner, we found out that the bank is now moving to foreclose on their new Jacksonville home.  The bank will not even talk to them since they were not a party to the loan. 

We would have loved to help them with a short sale of this Jacksonville property...but with the bank not cooperating with the current owner...there is nothing we can do to sell their property without having the original homeowner, who has already been foreclosed on, request that the bank talk to us and them.  Even if the current owner is able to track down the previous owner...the likelihood of them cooperating is probably slim to none since they have already been foreclosed on and moved on.

We asked this owner if they had title insurance.  They apparently had been told that you couldn't get title insurance on a foreclosed property.  Not true. However, we are not sure why this buyer was not made aware, during this process, that the bank still had to be paid.  It is apparent that they believed that they owned the home free and clear and got a great deal!

We feel for this Jacksonville homeowner, but all we can do to help is suggest that they contact a competent and knowledgeable real estate attorney regarding this situation.  Buyers of foreclosures should be working with a competent Jacksonville real estate agent to buy their property.  We also suggest a competent closing attorney be used to close the deal.

This is just another nasty part of the fallout of the current real estate market.  Buyer beware!

Foreclosure Sales Scheduled for Duval County for October 2009

As of September 30, 2009 there were 817 foreclosure sales scheduled in Duval County through the Duval County Clerk of Courts office.

To put the magnitude of that number in perspective, during the month of September there were only 724 Duval County real estate sales recorded in the MLS (non-condo).  There were only 1,041 (non-condo) real estate sales that took place in the whole Jacksonville real estate market overall.

You Have To Disclose Everything On Your Financials...A Talk About Jacksonville Short Sales

If you are underwater on your mortgage, but need to sell your home, you may be looking to short sale your property.  The hardest part, for the homeowner, in the short sale process is usually filling out the financial statement and gathering necessary paperwork for the file.  This takes a lot of emotional energy for the borrower who will be applying to short sale their property.  This forces you to look at your complete picture and summarize it on a couple sheets of paper.

A good Jacksonville short sale specialist will prequalify you for your short sale and explain what you should realistically expect based on your financials. 

The banks need to see how much you are spending every month.  Depending on your negotiator, sometimes they will study your bank statements and look for "discretionary spending" and ask for that amount in the form of a note.  For example, a trip to Starbucks every morning for coffee and a donut adds up.  They might see that as real money you can give to the bank for the next ten years instead of your favorite barista. Or they may not care.   Sometimes they will decide you have to bring money to the table for your short sale closing.  Or sometimes they won't.  Sometimes they will just downright turn down your short sale because they think you are trying to hide something...this is the situation you don't want to be in...ever.

You absolutely have to fully and accurately describe your financial situation to the bank. 

Do not ever attempt to hide anything.  You have to paint a full financial picture on your financial statement that is submitted to the bank in your loss mitigation package, even if it is not favorable to your case.  This, unfortunately, is not what some homeowners want to hear, but it has to be said.

If you have money to bring to the table...you need to expect them to ask if you want to short sale your property.

Part of our job is to go through the financial data you submit (we have finance and accounting degrees with audit and tax backgrounds) and look for holes in the information before it is submitted.  We can not submit anything to the bank that we know is not complete or true.  This also speeds up the process on the bank end because we don't later have to waste weeks getting supplemental information to your negotiator once they ask for it.

Your Jacksonville short sale has the best chance of being approved if you are 100% honest and forthcoming about your financial situation and why you can no longer pay for your home.

FHA Short Sale Preforeclosure Sale Rules - Mortgagee Letter 2008-43

I like to follow my web traffic and see what they are coming to my blog to learn more about.  It seems a very frequent search I get is people (and even banks!!!)  looking for the HUD rules for the FHA Preforeclosure Sale program.  Because of this I wanted to address the FHA Preforeclosure guidelines here again and give a little more information.

Click here to download the Mortgagee Letter 08-43-- FHA  Preforeclosure Sale Program guidelines these short sale guidelines can also be found directly on the HUD website Loss Mitigation Policy & Guidance page along with other useful information about selling your home short when it has an FHA loan.

A couple of the important things to take note of:

1. You need to get the process started at the time, or before, the time you list the property with a real estate agent who is a short sale specialist.  You really should hire someone who is familiar with the FHA Preforeclosure Program process.
   
2. This new process gets you an approved price at the beginning so you know what the lender will accept.  This, hopefully, will allow you to get a contract on your home for what you know the lender will accept and will make it easier to get a contract since the buyer will not have the usual uncertainty of a short sale.  The net required proceeds actually went UP with the issuance of these new guidelines.  It used to be 82%.  Now it starts at 88% with the floor being at 84%.
   
3. On the downside. if the lienholder's appraisal comes in unrealistically high, it can become very hard to find a buyer since the bank is dealing with a less than accurate value.  Since the appraisal is good for six months, according to the guidelines, this can be devastating.  Trying to convince the bank to reappraise can be very hard.
   
4. Keep in mind...the marketing periods outlined below concerning the net proceeds required...begin from the time you get your approval to participate from the lender...not from the time you apply or put your home on the market.
5. The rules of allowable closing cost amounts and details are not the same for a FHA short sale seller and a buyer who may be purchasing with an FHA loan. 
   

Below is an excerpt from the Preforeclosure Sale letter that addresses the biggest questions sellers, and short sale agents seem to have.  It deals with the net sale proceeds percentages, allowable closing costs, closing costs not allowed and the time frame:

Net Sale Proceeds – Regardless of the property’s sale price, a mortgagee may not approve a PFS contract if the net sale proceeds fall below the minimum allowable thresholds stated herein.  HUD has established guidelines for varying minimum net sales proceeds based on the length of time a property has been competitively marketed for sale.

• For the first 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 88% of the “as-is” appraised FMV.
• During the next 30 days of marketing, mortgagees may only approve offers that will result in minimum net sale proceeds of 86% of the “as-is” appraised FMV.
• For the duration of the PFS marketing period, mortgagees may only approve offers that will result in minimum net sale proceeds of 84% of the “as-is” appraised FMV.

Mortgagees have the discretion to deny or delay sales where an offer may meet or exceed the 84%, if it is presumed that continued marketing would likely produce a higher sale amount.  However, the mortgagee is still limited to 4 to 6 months after the date of the mortgagor’s approval to participate in the PFS Program. Allowable Settlement Costs – The term “Net Sale Proceeds” is defined as the sales price minus closing/settlement costs (i.e., reasonable and customary costs per jurisdiction that are deducted at settlement).  Allowable settlement costs include:

• Sales commission consistent with the prevailing rate but, not to exceed 6%;
• Real estate taxes prorated to the date of closing;
• Local/state transfer tax stamps and other closing costs customarily paid by the seller including the seller’s costs for a title search and owner’s title insurance;
• Consideration payable to seller of $750 or $1,000 (i.e., if such consideration is not used to discharge junior liens);
• Up to $2,500 to be used for the discharge of junior liens if closing occurs within 90 days.  Within 90 days, the first $1,000 represents the mortgagor’s consideration and the additional $1,500 represents FHA’s consideration for a total of $2,500.  If settlement occurs after 90 days, the first $750 represents the mortgagor’s consideration and the additional $1,500 represents FHA’s consideration for a total of $2,250;
• Outstanding partial claim amount. This entire amount must be paid when calculating the net sales proceeds.  The seller, buyer, or other interested party may contribute the difference if the net sales proceeds’ amount falls below the allowable threshold; and
• Up to 1% of the buyer’s first mortgage amount if the sale includes FHA financing.

Unacceptable Settlement Costs – The following costs may not be included in the net sales proceeds calculation, however, the seller may use their consideration of $750 or $1,000 for these settlement costs.

• Repair reimbursements or allowances;
• Home Warranty fees;
• Discount points or loan fees for non FHA-financing; and
• Lender’s Title Insurance fee.

Duration of the Pre-Foreclosure Sale Period Unless an extension has been approved by NSC, mortgagees have 4 months from the date of the mortgagor’s approval to participate in the PFS Program. Mortgagees have a pre-approved extension of 2 additional months to complete the PFS if one of the following exists: The mortgagee is in the Tier 1 category under the Department’s Tier Ranking System (TRS); or There is a signed Contract of Sale, but settlement has not occurred by the end of the fourth month following the date of the mortgagor’s approval to participate in the PFS Program. Mortgagees are reminded that, on a monthly basis, they must review a property’s marketing status with the mortgagor and/or real estate broker.

The guidelines also only give a lender five business days after receipt of a sales contract on a property that has been accepted into the FHA Preforeclosure Sale program to respond to the executed contract.  (Note: This confirms that they do not want "offers" but contracts.) While this is the new criteria, so far I have not seen a lender keep to the five day time frame.  Hopefully this will improve as they become accustomed to the new process.

IndyMac, OneWest Bank, Taxpayers and the FDIC. Looking Into the Deal Between OneWest and The FDIC and Applying Math To The Resulting Shared Loss Agreement.

First I'd like to say that I'm at the beginning of my research into this whole world of shared-loss agreements.  I am not an attorney.  I am a short sale specialist trying to be the best short sale specialist that I can be. But I have so many questions these days about what is going on behind the scenes.  Many things have stopped making sense in the world of short sales and foreclosures over the past few months. 

I have spent quite a bit of time looking on the FDIC website and pulling documents regarding this issue.  I've also read a lot of commentary and articles for or against shared-loss agreements.  The shared loss agreement that is the subject of this post is, by no means, an isolated agreement.  The shared-loss agreements also seem to have a pretty sizable group of fans.  But should they?

Recently I've been reading posts by other agents involved in short sales with Indymac where approvals were withheld that should have been no-brainers.  While I have had great luck with my Indymac / One West Bank short sales...it seems that increasingly others are not.  

I talked to one agent who had a sales contract at fair market value in to OneWest bank twelve days before the foreclosure sale.  OneWest told her they couldn't act on anything they received less than 15 days before the foreclosure sale. That property went to foreclosure sale this week.   In the past I've had IndyMac/OneWest foreclosure sales delayed a day or two before the scheduled sale date. 

Last week I had my first OneWest bank short sale denial (for my buyer so another agent was processing the short sale with the lender, not me.) in which OneWest was demanding far more than what the home was worth.   I  decided to look into the deal between OneWest bank and the FDIC myself...and see what the agreement was with the shared loss loans and how this might contribute, if at all.

I never expected to find what I found.  I kept hearing that there was a loss share arrangement with the FDIC in which the FDIC was covering 80% of the losses.  In truth, I heard it back when the whole thing was going on, but for some reason it didn't seem to concern me then.  The 80% loss share agreement between OneWest bank and the FDIC is just the tip of the iceberg.

All of the information I got directly off of the FDIC website.  The pictures you see are screenshots of the actual agreement from the FDIC site.  There you can find the Shared-Loss Agreement the Master Purchase Agreement AND the Loan Sale Agreement for the deal between the FDIC and OneWest bank.

Sales/Purchase Price of Loans from FDIC to OneWest Bank

Paragraph 2.02 from the Loan Sale Agreement:

Schedule 2.02 from the Loan Sale Agreement:

So, if I'm understanding this correctly, the amount paid by OneWest for the loans from the failed Indymac was anywhere between 37.75 cents on the dollar (for 60+ day late HELOCS) to 70 cents on the dollar (for current whole loans). 

Homeowners?  How would you like to buy your loan back at this type of discount?

Shared-Loss Agreement between the FDIC as receiver for Indymac and OneWest Bank

First, the definitions in the agreement for foreclosure loss, short sale loss, stated threshold  and loan sale loss:

 Calculation of Foreclosure Loss Summary (Shared-Loss Agreement Exhibit 2a):

LOAN PRINCIPAL BALANCE after last paid installment

Adjusted for:  Accrued Interest, Attorney's Fees, Foreclosure Costs, Property Protection Costs, Maintenance and Repairs, Tax and insurance advances, Appraisal fees, Broker Price Opinion Fees, Inspections, Other

Equals:  Gross Balance Recoverable by Purchaser (OWB)

Less:  Net Proceeds from Foreclosure Sale (adjusted for insurance proceeds (if any), taxes and insurance escrow account balance (if positive) and any other credits)

Equals:  Loss Amount

Loss Amount to be multiplied by either 80% or 95% for amount that the FDIC owes OneWest Bank.

Calculation of Short Sale Loss Summary (Shared-Loss Agreement Exhibit 2c):

LOAN UNPAID PRINCIPAL BALANCE

Adjusted for:  Accrued Interest, Attorneys' Fees, Tax and insurance advances, 3rd party fees due

Equals:  Gross balance recoverable by Purchaser (OWB)

Less:  Amount Accepted in Short-Sale

Equals:  Short Sale Loss

Short Sale Loss to be multiplied by either 80% or 95% depending on whether losses have exceeded the threshold for losses.

Loss Share Reimbursement Percentage

• For the first 30% of losses the  reimbursement percentage is 80/20 (FDIC reimbursing 80% of the losses)
• For the remainder of losses the reimbursement percentage is 95/5 (FDIC reimbursing 95% of the losses)

Simplified Sample Calculation applying the information in the purchase agreement and shared-loss agreement:

• Amount owed on note  $500,000
• Short Sale Net Proceeds $290,000
• Note 30 days past due at purchase date

Amount paid for the note calculation:

$500,000 x 60% =  300,000  Amount paid upon purchase/transfer of the note

Loss Recovery Amount Calculation:

$500,000  Amount due on note

- 290,000  Short Sale or Foreclosure Proceeds

$210,000  Short Sale or Foreclosure Loss

       80%  Receiver Loss Share Percentage

$168,000  Amount due to OWB by FDIC

Putting it all together:

$290,000  Short Sale or Foreclosure Proceeds

  168,000   Proceeds from FDIC for Loss Share

$458,000   Proceeds received by OWB

(300,000)  Amount OneWest Bank paid for the loan

$158,000   PROFIT by OneWest Bank on SHORT SALE or FORECLOSURE LOSS

OneWest Bank has to cover the first 20% of the losses?  Really?  Is that what this is called?

Let's see what happens after the Loss Share Percentage hits 95%:

$210,000   N/C               Short Sale Loss

       80%    95%              Receiver Loss Share Percentage

$168,000     $199,500  Amount due to OWB by FDIC  

This increases the profit by OneWest Bank on the SHORT SALE LOSS to $189,500 on a loan they only paid $300,000 for?

Please say it isn't so!  Please tell me I have misunderstood or miscalculated something. If my math is wrong, I want to know.

This is coming out of the pocket of the FDIC and into the pockets of a Billionaire investment group (George Soros, Michael Dell, JC Flowers, John Paulson, etc are reportedly a few of the investors behind OneWest).

But this is only ONE shared-loss agreement....of many....

How did this happen? 

WHY is the FDIC making decisions like this?   Here is the FDIC's explanation of Shared-Loss Agreements from their website.  I really think they believe they are doing the right thing.  But is it just a vicious cycle that is growing bigger and bigger?

How many other agreements like this exist, where after applying the discount the loans were purchased at, the covering of the top 20% of losses appears to be a sham?

The supposed good news for the people who have loans with these failed institutions is that the FDIC is asking the institutions that entered into loss share agreements with the FDIC to consider temporarily reducing the payments of those who are unemployed or underemployed.  Really???  Isn't that like me leaving my house overnight, placing the car keys in the hands of my teenaged son, giving him a hundred bucks and asking him to please consider staying at the house all night by himself?

OneWest bank just announced a second quarter profit of a meager $182 MILLION. 

...and now the FDIC is running out of money and is proposing that banks prepay their premium for the next three years to replenish the fund.  Well the big banks can handle it (and if not, won't they just get more bailout funds?), but what about the smaller banks? 

Will this lead to the FDIC shutting down more regional and local banks and placing them in the hands of investor groups or other larger banks with more costly loss share agreements that will continue to deplete the fund?

And what happens when the FDIC well runs dry?  Another bailout?

What would happen if homeowners/borrowers had the first right of refusal to purchase their own loan back at a discount before it was sold to another party at the same discount?  

Is this type of agreement interfering with the short sale process?  I think it has to be.

Why Have Jacksonville Short Sales Been Getting Harder? Why Are Banks Leaving Real Money On The Table To Foreclose?

This is a disturbing trend that has gotten far worse this year.

It is getting increasingly difficult to get short sales through when there is a first and second mortgage.  What is going on?

The second lienholders, who will usually get nothing in a foreclosure, have often started demanding more funds in a short sale transaction.  It was quite common to give just $1k-$5k to the second lienholder for a while.  This was because the second lienholder, who realized they would not get anything in a foreclosure sale, would take it to cut their losses. 

Now second lienholders are playing unbelievable games.

We have one right now where the second lienholder (M&I Bank) will not take the $3k we've structured the deal for them to get.  But it gets better.  They refuse to give us any kind of letter or written documentation about what they will accept.  They have changed the number multiple times!  Every time we think we have found a way to get the deal to the number the negotiator has thrown out....the target changes. The negotiator is careful not to give the number they will accept in e-mail.  He calls and gives a verbal agreement number.  This is truly a seller with a profound hardship, the first lienholder has started foreclosure proceedings, and there will be nothing left for the second lienholder in a foreclosure sale because the first lien exceeds today's fair market value of the property.

So why would a bank refuse to act on a solution that gets them some money back, as opposed to none which is their only other option?

We've seen recently a "too big to fail" bank, Chase, (second lienholder) reject another contract where the first lienholder was getting totally paid off (just barely) and they were getting around $35,000.  The seller was filing bankruptcy if this did not happen. Once the deal was structured to get Chase $35,000...Chase raised the approval amount to $40,000.   Chase killed the deal because if they were taking a hit, the first lienholder was too.  What??????  In a foreclosure there won't be anything left for Chase at the end.  Why would they walk away from $35,000 just because the first lienholder won't take a hit too?  

Just heard another story where first lienholder approved a deal giving $3,000 to GMAC, the second lienholder.  GMAC said forget it...they would not even consider sending it to the investor unless they got at least 20% of the balance owed.  How about this GMAC?  You will not get anything in a foreclosure sale.  There won't be anything left!

These stories are rampant now.

What is really going on????  I used to think it was because banks were just making stupid financial decision.  Now I'm convinced it's something more sinister.  Would banks really be making stupid financial decisions like that if there weren't big things at play behind the scenes?

• How does credit default insurance play into this? 
• How does Wall Street (and investors) play into this?
• How do mortgage backed securities play into this? 
• How do servicer contracts play into this? 
• Do servicers make more money when homes foreclose instead of short sale?
• How does the resale of the mortgage note play into this? 
• How do PMI companies play into this?  
• How are Credit Default Swaps tied in?
• How are taxpayer bailout funds playing into this?
• How is the the myth of "too big to fail" playing into this scenario? 

Why isn't anyone looking into this????

You have homeowners with hardship situations that are being foreclosed on every day because the bank makes more money by foreclosing even though short sales or loan modifications should be far better deals financially!  So what is happening behind the scene that is causing banks to make these seemingly stupid decisions?

In the current environment we should be having greater success with short sales...not encountering new obstacles.  Foreclosure is an offense with a punishment that lasts for years and years.  Moreover, it doesn't just punish the unfortunate homeowner who fell upon hard times...it punishes all of the neighbors and community as a whole.  Foreclosure further drives down the values which will inevitably lead to a greater number of foreclosures in the future since it will make it impossible for more people to get out of their homes when they need to.  When so many should be preventable...why are they still happening?

We are starting to get more and more calls from agents across the country who read our blog and are encountering a lot of the same types of issues.  Please keep them coming.  We need to get the real stories out there.

If you are in our area and facing this type of situation, call us if you would like an honest evaluation of what we think about your situation.  We will let you know upfront what we expect.  And please remember, no one can promise you success in foreclosure prevention through a short sale.  That being said, the chances are great in most situations if the short sale is handled correctly.

Short Sale Closing on Jacksonville Beach Condo-Indymac (One West Bank) and Freddie Mac With Delinquent Condo Dues Paid!

We had another Jacksonville short sale closing yesterday and helped another Jacksonville seller avoid foreclosure.

We had listed the property originally and the sellers decided to go for a loan modification instead.  We withdrew the home from the market.  Indymac, which is now One West Bank, proceeded towards foreclosure and obtained a foreclosure judgment in Duval County while their negotiator was sitting on the loss mitigation file.

Once the sellers were within a couple weeks of the foreclosure sale they contacted us for a last ditch effort to try to accomplish a short sale and avoid foreclosure.  They were told that Indymac would NOT cancel or delay the foreclosure sale for a potential loan modification.  The sellers were told by Indymac the only way they would cancel the sale was if they had a short sale contract.

We put the home back on the market and quickly got an offer.  The sellers and buyers came to terms on the short sale and everyone signed off on the contract.  We sent in a complete financial package along with a property package.  Around two days before the foreclosure sale we got Indymac to cancel the sale.  Indymac won't cancel until the sale date is looming.

On this file it took us a long time to even get a negotiator...much longer than on our other Indymac experiences.  Turns out that we got a brand new negotiator who had been someone's assistant and was newly promoted.  The file had been assigned to one of the negotiators  she had previously assisted, and she carried it with her to her new position.

Once the BPO came back we were shocked!  Our contract was for $180,000 for an oceanfront condo complex in Jacksonville Beach.  The negotiator came back and told us we needed to redo the contract for $255,000!!!  This was clearly a  faulty BPO done by a real estate agent who either did not understand the area or erroneously reported the value hoping that if the short sale failed, they would pick up the REO (foreclosure) listing for the lender.

We immediately kicked it into high gear.  I researched for hours and obtained as much comparable data as I could on prior sales.  I investigated the competition to see how everything compared and then I prepared a formal detailed challenge to the BPO.  The BPO was clearly and inarguably WRONG and we had to prove that to the negotiator at the bank or the short sale would die.  We knew there would be no way to get a contract on the property that high.

Roughly ten days later we got great news!  The new BPO had come in at only $165,000.  Then, to our astonishment, the negotiator insisted that we reduce our contract price to $165,000.  This was $90,000 less than her first mandate to increase the contract price.  The lender was requiring no seller contribution for the short sale.  Freddie was also agreeing to pay the condo association lien and all past due condo association dues.

So after a couple of months of hard work and waiting...we were progressing towards closing.  We breezed through inspections.

Then we got some crazy news a couple of weeks ago.  The 2 bedroom/2 bathroom townhouse style condo had only appraised for $130,000!!!  This appraisal was just as erroneous as the first BPO (that came in almost DOUBLE this appraisal) was.  The lienholder, Freddie Mac (and American taxpayers), would have been harmed greatly had we pushed the appraised price and tried to obtain a new approval for the unrealistically low price.

Our sellers decided to hold their ground on the price and not return to Indymac /One West Bank/ Freddie to try to lower the price.  We were getting a large number of calls on the condo still with people questioning the status.  We had a couple of cash buyers who were waiting to hear of a contract fallout so they could purchase the home for the $165,000 amount, which is what our approval was for.

On Monday of this week we got word that the buyer had found someone to lend him the money to make up the appraisal difference and purchase the condo.  The buyer's bank sanctioned this deal with the additional cash input.

By Wednesday we closed.  The buyer got a fabulous deal on a great condo in an oceanfront complex.  The seller was able to complete their Jacksonville Beach short sale and very narrowly avoided a foreclosure.

Jacksonville short sales are not easy transactions.  They require far more work and strategy than a normal Jacksonville real estate transaction.  Be sure your real estate professional knows how to complete a short sale before listing your Jacksonville short sale.  All short sales will not be successful, however, a knowledgeable, experienced agent greatly increases your odds of success. 

Buyers Making Multiple Offers On Multiple Jacksonville Short Sales...Don't Let This Happen To Your Jacksonville Short Sale.

Part of the listing agent's job, when listing a Jacksonville short sale, is to properly prequalify the buyer of your house.

This process is even more important in a short sale than in a regular resale because time lost could cause you to lose your home.  There is no way to be positive that a buyer will still be there by the time the bank gives an answer on your contract, but there are ways to minimize the occurrences of buyers simply walking away.

We got an offer on one of our short sales last week and, as usual, made a call to the agent to determine the quality of the buyer. 

We were shocked to hear that this particular buyer has five or more offers out on different properties.  They wanted to make a lot of offers then buy whichever one got approved by the seller's bank first.  The offer did not even have a short sale addendum, nor did it contain any notation about the contract being contingent on the approval of the seller's lienholder.

The tragic part of this is that the various sellers have probably taken their homes off of the market believing that they have a buyer when they do not.  As a result that seller is losing valuable time that should be spent looking for a legitimate short sale buyer. 

This should not be happening.  It is very harmful to sellers and we have seen it lead directly to foreclosure.  While there is a chance that any short sale will not get approval, the risks to the seller are much greater than the risk to the buyer.  The chances of a successful short sale are high if the short sale is handled correctly by an experienced Jacksonville short sale specialist.  If the buyer doesn't have time to wait on a short sale approval (and possibly have to start over if approval doesn't come)  then they should not be buying a short sale...period.  (An exception would be an FHA when the "Approval to Participate" has already been issued.)

We were able to "save" our seller from this buyer and fortunately got another contract on the property.  Our "real" buyer wants the property.  The buyer understands the time frame,  put down a binder up front, started all time frames,  and is going to stick around because they have a reasonable expectation.

Whether you are buying or selling, it is increasingly important to use an agent who is a short sale specialist and will be personally handling your file.  We handle all of our own files personally and do not turn them over to a third party and rely on someone else for short sale approvals.

Have You Used Up Your Savings Trying to Keep Your Head Above Water? Owners of Jacksonville Real Estate Who Have Done This May Find a Love Letter From The IRS in Their Mailbox Sometime In the Future.

We've talked to them, we know they are out there.  Many Jacksonville homeowners in the recent past have used up all of their savings trying to stay afloat on their mortgage (and other debt obligations).  Many homeowners have also borrowed money from one source or another to keep their mortgage current.  Many homeowners have found their mortgage payments skyrocket to a level that they never anticipated due to teaser rates and ARM adjustments.

Well according to an article published in the Wall Street Journal on Tuesday, article can be found here, these homeowners could be flagged for audit by the IRS in the future if they are deemed to have a mortgage interest deduction that is too high for their reported income. 

A Few Things We Wish All of the Jacksonville Short Sale Sellers Understood About Short Sales

I was talking to an old friend yesterday in the DC area and it really drove home how little many sellers understand about short sales.  This friend has just gone through a divorce and her ex-husbands name is not on the loan so he left her with the house (that has his name on the title) which she can't afford by herself.  Besides her story being heartbreaking on a personal level, I was surprised about how little she had been told about short sales when agreeing to list her home with an area agent.

When I was talking to her and mentioned "deficiency judgment" she asked what a deficiency judgment is.  This led me to wonder how many sellers don't understand the whole picture and what short sales involve.

Here are a few things that we wish all of the sellers of Jacksonville short sales knew:

1. The bank is NOT obligated to work with you.  We have to build a "case" to convince them why they should.  You should also be aware that even if everything is perfect with your file and your sales contract is at fair market value you may still be denied (although this is unlikely).
2. Your bank may not waive deficiency rights.  Even if the bank approves the sale and allows the lien release THEY MAY NOT WAIVE THEIR DEFICIENCY RIGHTS.   Many banks are reserving the right to later demand payment for the difference between the net proceeds on the short sale and the amount that you owed them.
3. Many times the bank, servicer, or insurance company involved will ask you to sign a note for the balance or some portion of the balance owed on the loan if they allow the short sale closing to take place.
4. You need to expect to receive a 1099 tax form at the beginning of the following year for the "amount forgiven."  If you are prepared in advance this will not scare you to death when you get this form saying that the amount "forgiven" was income to you.  Click here for a handy page on the IRS website that helps with this topic.
5. Your agent really DOES matter.  Successfully closing a Jacksonville short sale requires a knowledgeable agent who is a trained short sale specialist.  It is possible that your short sale could close even without someone who knows the system, we've seen it happen, but your odds go down dramatically.
6. A short sale WILL hurt your credit.  However, history shows that it hurts your credit far less than a foreclosure and is easier to recover from.  Fannie Mae current underwriting guidelines allow the seller to purchase two years after a short sale.  Guidelines surrounding a foreclosure now dictate a 5-7 year waiting period up from the previous 4 years (which makes no sense to me!!!).  Here is where you can find this information directly on the Fannie Mae website.

These are some of the most common issues that we think many sellers may not understand about Jacksonville short sales.  There are pitfalls and risks involved in short sales.  We believe that a Jacksonville short sale should only be considered as a next-to-last last resort with the last resort being foreclosure.   We encourage homeowners to try to get a modification first, if at all possible, since it is far better to be able to stay in your home rather than sell it if you can make that work. 

Florida Considering Requiring Mandatory Mediation on Foreclosures. The President and CEO of The Florida Bankers Association Said WHAT???

The residential foreclosure task force of the Florida Supreme Court has recently recommended that all foreclosure cases involving primary residences in the state be mediated.  This could be great news for Florida homeowners who have fallen behind as well as those who have not since the value of everyone's home is directly affected by foreclosures. 

In the current economic climate and housing market...all it takes is one event to shift a homeowner from always paying on time, to no longer being able to pay.  We've seen it over and over with our work on Jacksonville short sales.  The loss of a job, a medical emergency and other unexpected events can launch a homeowner into the abyss that results in the eventual loss of their home. 

This is not just happening to people who were "irresponsible" or "bought more than they could afford."  It doesn't matter how responsible you were in the purchase if you find yourself in a situation where you have to sell and your home has fallen dramatically in value.

Here is the Wall Street Journal, Associated Press article from August 17, 2009 that caught my attention: 

Florida Court Wants Mandatory Mediation on Foreclosures

Now here is the problem.  Mr. Sanchez who is the President and CEO of the Florida Bankers Association is not telling the truth.  I do not know if he knows he's not telling the truth or not.  His statements could be made in good faith.  Banks in general are not telling you the truth.  Banks are working with homeowners only as an exception...not the rule.

Here is an excerpt from the Wall Street Journal article referenced above:

Alex Sanchez, president and CEO of the Florida Bankers Association, said expediting vacant and abandoned property cases is a good idea, but he predicted mandatory mediation for homesteads would cause more delays."

Mr. Sanchez said he cannot speak for other lenders but that banks are in constant touch with borrowers and file foreclosure cases only as a last resort. "

We work with our customers to try to keep them in their homes," Mr. Sanchez said.

Requiring mediation in those cases would just delay the inevitable, he said.

"What if that person then defaults on that mediated deal?" Mr. Sanchez asked."

• Mandatory mediation for homesteads WOULD cause more delays.  Hopefully Mr. Sanchez is correct on this one.  Since banks "file foreclosure cases only as a last resort" and "work with our customers to try to keep them in their homes" according to Mr. Sanchez, they should be okay with this...after all the bank is concerned about the homeowners...right?  So what's the rush?

• Banks are NOT in constant contact with borrowers.  Borrowers who have fallen late can attest to that.  But their story is not being told.

• Banks do NOT File Foreclosure cases only as a last resort.  Working with short sales it is a constant struggle to stay on top of what is happening with the foreclosure case.  Bank negotiators are often sitting on a loss mitigation file for a delinquent borrower while the foreclosure department, along with an outside law firm, is zooming towards foreclosure.  Short sale real estate agents know that we have to constantly request delays in foreclosure sale dates.  Most banks we have seen refuse to delay the sale date until a couple days before the sale date.  We have had one go to foreclosure sale after we had a short sale approval issued by the loss mitigation department with a date given for closing which was after the sale date.  The closing went through with the permission of the lender who recorded a release then months later the bank recorded a deed transfer back to the VA.  We have homeowners having to pay attorneys to fight the foreclosure to give them enough time to complete a short sale or attempt a loan modification.

• Banks do NOT work with customers to try to keep them in their homes.  We've had homeowners who were trying to achieve a loan modification who were told that the foreclosure sale date could not be cancelled because there was a pending modification but that a short sale contract was the only thing that could delay the sale.  A short sale is better for everyone than a foreclosure, but it is not "trying to keep them in their homes."

• The statement "Requiring mediation in those cases would just delay the inevitable" is a ridiculous statement.  Studies show that most of the loan "modifications" that have happened so far have not resulted in a more manageable payment for borrowers.  The most common one we've seen and heard about (if they are lucky enough to get any modification at all) is switching the person from an adjustable rate to a fixed rate...with the resulting payment being around the same amount.  Why don't the banks try true and meaningful modifications for a change?  This kind of statement is deceptive. 
  

Foreclosure is bad for ALL Florida homeowners, not just the homeowner it is happening to.  Banks, after foreclosure, are selling the homes for less than fair market value in most cases we've seen.  This leads to the continuing deterioration of market value of the homes of all Floridians.  It also sets the trap wider, just like a spider expanding their web, so when the next person loses their job, they also find out they can not sell and payoff their mortgage.  Then they are launched into the abyss from which they can't escape.

People are losing their homes, families are having their lives torn apart...and Mr. Sanchez's concern is over who is going to pay for the recommended mediation and/or counseling and that it will delay the foreclosure process?  It appears that he doesn't think the banks should have to pay and he even asks "Are the taxpayer's going to pay for that?"  My question is did the banks mind when the taxpayers paid for the bailouts?  Did the banks say, "Are the taxpayers going to pay for that?"

It's time to move past the blame and focus on the solutions to the problem.  If foreclosing on homeowners was a little bit harder (and more expensive) to do, maybe they would think harder about alternate solutions.  These solutions, involving modifications or short sales, can be beneficial to the homeowner and the bank's bottom line.  Solutions need to happen to provide much needed stability to everyone who owns a home in Florida.

Loan Servicer Math...Fuzzy Math Over at Carrington Mortgage Services (CMS) On a Loan That Was Sold Off To Investors As a Security.

This Julington Creek Plantation short sale deal could have been a template for how short sales need to look.  We got the contract on the property very close to fair market value.  We had an active marketing history that showed why this was a great contract.  Comps in support of the price.  Owner with a true, and permanent, hardship.  The short sale package was over 100 pages when all was said and done.  We provided  all of the financial information possible...all of it illustrated the hardship.

Our file was complete from the beginning and no one ever had to request additional information from us.  This was about as perfect as a short sale could be.

The buyers had gone ahead and gotten the appraisal done.  The appraisal came in at a couple thousand over our contract price.  We sent the appraisal to Carrington.  We were told that the BPO done by Carrington Mortgage Services came in slightly more, but in the same range.

We waited, and waited.  At one point we were told that the negotiator would have an answer for us within two weeks.  Then Carrington shut down their short sale operations in one city...so we waited for the file to be reassigned to a new negotiator out at their California operations center.  They kept giving us sad, sad stories about how the negotiators had hundreds of files on their desk.  (Not inclined to feel too sorry since I had a seller up against foreclosure.)

When we finally got the negotiator to answer his phone (after calling him for weeks with no response) we were blown away by what he had to say.  The CMS negotiator was telling us that even though our contract was at fair market value, it would be in the investor's BEST INTEREST to foreclose.  How exactly does THAT work in a declining real estate market with a fair market value deal on the table?  The negotiator further told us that they needed a net proceeds amount that exceeded both the Carrington BPO and the buyer's appraisal by far!  Now at least Carrington was diligent in informing us that even if we got that 20% above fair market value contract (where it would have to be to meet their "net" demand) they were asking for, they were not guaranteeing an approval because at that point the investor would have to sign off. 

THE INVESTOR NEEDS TO SIGN OFF NOW!  NOT HAVE SENIOR MANAGEMENT AT CARRINGTON MORTGAGE SERVICES BLOCKING WHAT IS A FAIR MARKET VALUE DEAL.   To read the whole Rejection of FMV Contract Letter from Carrington Click Here:  Carrington Rejection of FMV Contract Letter  If the loan goes into foreclosure, can they really expect to get above fair market value?  They will get less and there will be all of the foreclosure related expenses adding to the investor losses.  BUT Carrington Mortgage Services, who is just the servicer, stands to gain financially in a foreclosure even though the investors will lose.

Contacting the "Customer Advocate" department got us nowhere even though, to my delight, they DID admit the above in writing when it had been verbal up until that point. Another useful thing we got out of this was the name of the actual security that this mortgage was supposedly sold off as a part of.  According to Carrington, this loan is part of:  Carrington Mortgage Loan Trust/Series 2006-NC3

New Century originated the loan.  Carrington Mortgage Services is servicing the loan.  Wells Fargo is trustee according to the 8k filed with the SEC.  Coincidentally, Carrington also gets to service the loan if a foreclosure occurs.  It is in Carrington's best interest to not allow the short sale so they can continue to collect fees on this loan from investors who think that the servicer is looking out for their best interests when the servicer is looking out for the servicer's best interests.

Where is the oversight?  Investors...WAKE UP!!! 

A hint for anyone out there...their "Customer Advocate" department is actually a "Carrington Advocate" department.  The lady in that department was with New Century Mortgage before Carrington.  She has been with Carrington for ten years...But WAIT...her Linked In profile says that she is still with New Century Mortgage as well as Carrington.   I was surprised to see any mention of  New Century Mortgage since it was my understanding that they were shut down by regulators for their lending practices and then went bankrupt in 2007.  New Century Mortgage is who originated this loan that my seller has.  I started doing further research...New Century is not in business...or they ARE in business...or they are not really themselves...then just had to put it on hold in the interest of getting this blog post done today. 

Read this recent Forbes article for more on Carrington Mortgage Services and why this type of thing is probably happening: http://www.forbes.com/2009/08/22/carrington-capital-mortgages-business-wall-street-carrington.html

UPDATE!!!
Since posting this article, I have gotten calls from other agents about their Carrington Mortgage Services short sale deals that were rejected. One agent told me that she was told verbatim the excerpt from the letter above. In both of her rejected deals, Carrington asked for $15,000 more than the established Fair Market Value. Are any investors of this Carrington Mortgage Loan Trust out there?

My seller went on to file bankruptcy after this post. At the time of filing, they were over a year late and Carrington had previously modified their loan (around the time we started the short sale process) even though the homeowners had rejected the loan modification proposed by Carrington since it was not meaningful and would not help. Carrington sent them loan modification paperwork anyway, which the sellers refused to sign. Carrington still "modified" their loan, brought them up-to-date on their payments and started billing them for the "new amount". Even though no foreclosure suit had ever been filed or even a lis pendens...Wells Fargo (trustee for the group of Mortgage Backed Securities) filed a request for relief of stay in the bankruptcy.

Jacksonville Beach Short Sale Approval! Indymac Servicer / Freddie Mac Owner

We just got another short sale approval yesterday for our contract on a Jacksonville Beach condo listing.  Indymac is the servicer for the loan.  Freddie Mac is the investor.

This one was under contract for around two and a half  months when the approval was delivered to us.  When we put the house on the market, the sellers already had a foreclosure sale date set.  We were able to quickly get a contract on the condo and get the foreclosure sale date postponed.  Even with a very large inventory level in Jacksonville Beach.

When the BPO came in really high on this, indicating a value of $75,000 over our contract price, we didn't give up.  We successfully challenged the BPO and the negotiator came back and ASKED US TO REDUCE THE CONTRACT PRICE BY $15,000!!!

Freddie Mac approved all of the closing costs except for the home warranty.  They are paying the condo association lien, the delinquent condo fees, and all of the closing costs from the proceeds of the sale.  The seller is not being required to contribute any funds.

FHA Short Sale Closed...Another Successful Jacksonville Short Sale Closing with Buyer Saving Lots of $$$

We have another happy buyer...and another seller has avoided foreclosure through a Jacksonville short sale.  FHA Short Sales are some of the most predictable short sales you can participate in.  This type of short sale happens if the seller has an FHA loan on the property.

HUD has laid out specific guidelines on this type of short sale transaction.  We know these guidelines and can help short sales be successful through the application of this knowledge.

Our buyer got a big surprise in this one!  When she picked out this great townhome off of CR 210 in St Johns county the price was a good price.  This unit was more upgraded than the others, and she chose it over a foreclosure that was priced considerably less.

FHA short sales require the lender to review the sales contract (if all of the required initial steps have been taken and completed) within five working days.  As we've seen in the past, it did take longer than this.  We're not sure if it's due to lender backlog, or lack of understanding of the rules.  In any case, we had prepared the buyer for a potentially lengthy process, detailing out all of the pitfalls and problems that are common, so she was ready for anything.

Several days before closing, we got news that knocked the wind out of the transaction.  The lenders appraisal company (yes--lenders are allowed to own appraisal companies, not sure why...) had appraised the home.  It had come back almost 20% below the contract price.  The buyer did not have the money to make up the difference between appraised value and purchase price.

Because of our knowledge of the applicable rules, we were able to appeal for the lienholder to reduce the purchase price in line with the appraisal. 

It was quite a wait (around 5 weeks from that point) but well worth it.  Two weeks ago the seller's lienholder agreed to accept the price that was 20% lower than the prior contract price..  The buyer's original lender was not going to be able to complete the buyer's FHA loan in time since we were told that the seller's lienholder was insisting on closing within two weeks.  The buyer switched to a fabulous mortgage broker who was able to complete the loan within two weeks.

From start to finish,  this FHA Jacksonville short sale took a little over two months from contract to close. 

Not only did we help the buyer save roughly $20,000 more after the contract became effective due to the low appraisal, but we also saved the buyer other fees that the listing side tried to impose on her after the date of contract because of our knowledge of FHA short sale guidelines.  In addition we were able to recognize the artificial deadlines that the listing side tried to impose on us that were inconsistent with the contract and with HUD PFS guidelines.

Success!!!

Arms Length...Not Just Important for Shirts... Jacksonville Short Sales and the Evolving Arm's Length Requirements by Banks

As we actively work Jacksonville short sales constantly, we are seeing frequent changes to the way banks are dealing with and responding to this type  of real estate transaction. 

We are seeing the banks start to tighten up on exactly who is purchasing a short sale.  They want to make sure that the homeowner does not get their hands back on the house after the sale has taken place.  They don't really seem to care who owns it or lives in it after the sale has taken place as long as it is not the current homeowner or family member, however, this is evolving as we speak.  If you are involved in a Jacksonville short sale situation you need to be aware of this.

Take Wells Fargo, for example, as recently as May we did not have any type of addendum to the sales contract dealing with this on our Wells Fargo short sale transactions.  On the one we are currently involved in, an "Affidavit of Arm's Length Transaction" has been added to the bank's addendums to be signed by all parties. 

This particular addendum states, "No party to this contract is a family member, business associate, or share a business interest with the mortgagor."  It also adds, "The Buyers and Sellers nor their Agents have any agreements written or implied that will allow the Seller to remain in the property as renters or regain ownership of said property at anytime after the execution of this short sale transaction.

BPOs and Appraisals...The Insanity Factor in Jacksonville Short Sales

The seller's lender has to order either a BPO (Broker Price Opinion) or an Appraisal to determine the value of your Jacksonville short sale property and whether your short sale deal should be approved.  When an FHA loan is involved (seller's loan) then the appraisal is done up front and you are given the value that the bank must have to approve the deal.

In a short sale a valuation is required by both the seller's lender and the buyer's lender.  This used to be relatively simple part of the process.  Recently, BPO and Appraisal values have become quite problematic in the Jacksonville Real Estate market for short sales.

We used to love having the lender order BPOs instead of appraisals on our Jacksonville short sales because agents who are actively selling in the Jacksonville real estate market usually have a good handle on fair market value.  We used to see BPOs coming in at or below the contract price.  Appraisals, on the other hand, often came in too high.

This has all changed.  There is no predictability anymore when it comes to the valuation of the property by an appraiser or BPO agent hired by the lienholder.

Here are a few of recent examples of valuation problems with our Jacksonville short sales:

• Seller's lienholder appraisal comes in 20% higher than the Buyer's Bank's appraisal.  Buyer's bank won't lend on the property at the price the lienholder mandated.
• BPO agent values a property $75,000 higher than the contract price.  Property could not even be sold at $20,000 higher, which was the starting price.  Comparable sales support contract price.  Marketing history proves that the BPO is highly inaccurate.
• BPO agent values a home $30,000 too high.  The marketing history on the home supports that the home could not be sold for the BPO price.  

We are, of course, fighting the BPO and appraisal determinations in all of these cases.  When you have a good bank negotiator you can usually get a new appraisal or BPO ordered or at least file a challenge.  When you have a bad negotiator at the bank your challenge might not go anywhere.

Jacksonville short sales continue to be a challenging, ever-changing area of real estate.  Make sure you hire someone who understands the process and how to overcome the challenges involved in Jacksonville short sales if you will be buying or selling a home that is underwater on the mortgage.

Chances Are That You Are Making Your Mortgage Payment to Someone Who is Just Servicing The Loan for Someone Else.

Doing Jacksonville short sales we have come to realize that most homeowners have no idea who they actually owe money to.  So you took out your loan with Bank of America or Suntrust or Wachovia or some other bank and you think that means that they are the entity that owns your loan?  This is often not so.  In the past the law has only required notification to the homeowner if the servicer, that is the person collecting and processing your loan on behalf of the investor, has changed.

Your loan may have been sold to Investor A who sold it to Investor B who then turned it over to Investor C.  Or your loan may have been sold to Investor A who packaged it and sold off pieces to Investor B through Investor Q.  Sometimes your original lender will sell it to the investor after you go late (not sure if this is with disclosure or not).  If you are one of the lucky ones, your loan is just owned by Fannie or Freddie.  This uncertainty and selling off of loans  is something that can often lead to trouble if you are facing a Jacksonville Short Sale or are in Pre-Foreclosure. 

Depending on who the investor on your loan is, your Jacksonville short sale can be either easy or very hard.  Many times it's impossible for the homeowner to figure out who owns their loan.  The servicers are usually very elusive when it comes to the topic, simply referring to the party who owns your loan as "The Investor."  Most of the talking heads in the customer service department have no clue what is going on.  Many times this means that the deal will just take longer to get approval.  Other times it means that your deal will be wrecked and you will go spiraling into foreclosure.

The Truth in Lending Act was modified at the end of May and will now require notification when the owner of your loan changes (instead of just the previous requirement of notification of a servicer change).  In theory this is a great development, it remains to be seen how this is going to change everything.  So far we are seeing that the servicers are still being elusive and many homeowners are still in the dark about who owns their loan.

Do Not Think Having Your Home Listed for Short Sale Will Stop the Foreclosure Process

We work with Jacksonville short sales every day.  Jacksonville short sales are not a science, they are more of an art.  If anyone promises you success or specific results, be cautious.  There are no guarantees in the short sale process.  While there are some absolutes, such as the basic information that has to be included in a short sale package, there are many more factors that vary.  The process varies from bank to bank...and your experience is even different from negotiator to negotiator in the same bank.

One thing that we have found to be pretty consistent is that the short sales and loan modification attempts do not stop the foreclosure process.  When we are dealing with short sales, we have to constantly stay on top of what the lender is doing.

The foreclosure departments at banks always seem to be much more efficient and on top of things than the loss mitigation departments. 

We ask all of our sellers who we have Jacksonville short sales with to notify us immediately when they get correspondence from their bank or their bank's attorneys.  What the proverbial "other hand" is doing can not be ignored when you are attempting to short sale your property.  Staying on top of this can make the difference between a successful short sale and a short sale that is never completed because a foreclosure sale occurs.

We have to constantly request foreclosure sales be postponed.  As an example, we have one particular short sale currently with Indymac that has been particularly troublesome.  The sellers had attempted a loan modification.  They found out a week before the scheduled foreclosure sale that the loan modification attempt would not stop the foreclosure sale.  They were told by Indymac that only a short sale contract could stop the foreclosure sale.  We were able to get them a buyer just in time and got the foreclosure sale cancelled the day before. 

You would assume that they would give their own loss mitigation department time to process the file.  Not so.  Indymac's attorneys petitioned the court to reschedule the sale stating that it was cancelled to try to work out something with the homeowner but they have not been able to.  Their negotiator is in possession of a complete short sale package at a price that is likely above market value at this point.  She has had it for at least 45 days and has been working on it because we have been communicating with her.  Yet their attorneys represent that their "attempts" have not worked.  They will not cancel the new sale date yet.  This is the type of thing that a Jacksonville short sale specialist has to stay on top of or risk having the home sold out from under them while the short sale is in the final stages of approval.

Make sure you, and those you hire, are paying attention if you are trying to get a loan modification or short sale your Jacksonville home.

Banks want contracts not "offers." Jacksonville Florida Short Sale Information.

We ran across a situation with a buyer this week where the seller is sending in tons of offers to the bank for a Jacksonville short sale property.  This property was priced much too low, at a price the bank would never approve, to get lots of attention.  (This presents a totally different issue, which I'm sure I will get to on a future blog post)  We had been told there were already several offers in.  Our buyer put in an offer of over $30,000 more than asking price, understanding the short sale process, and knowing what the home was worth.

When we called a few days later to check the status we found out that the seller is not signing an offer and sending in a complete package to the bank with that offer.  Instead, they are sending in every offer that comes in, even though none are contracts. 

This is a very bad method.  The chance of success is very small.  First, the purpose of having a ratified offer is so the buyer will be around when the answer finally comes in from the bank.  Second, most banks we have dealt with won't even assign the file to the negotiator without a binding contract.  In this scenario, even if you can get a negotiator to make a decision on the file without a signed contract, the buyer will probably be LONG gone.  Supply is great which allows that buyer to find a different home in which the seller WILL commit to selling the home to them.  Even if the buyer is still around, you don't have a ratified contract and the buyer can try to negotiate with you on the price and/or terms or walk away.  

 Many (possibly even "most")  banks will require that the process start over when you find a new buyer at a different price rather than making adjustments to the file.  The short sale process should be done correctly from the beginning.

Lately, it seems that the banks are taking longer and longer.  We've seen banks that had previously given answers in 30 days or less taking 2-3 months.  The simple fact is that they are buried in files.  We were told by one bank the other day that they have 700,000 loss mitigation files.  We don't know how many negotiators this particular bank has, but unless their loss mitigation department is massive...that is a pretty hefty case load per negotiator.

The way to get your file approved much faster is to send in a complete file on day one.  If you owe more than your home is worth you need a real estate agent who understands the short sale process.  You can't afford to waste time on incorrect file submission, especially if you are late on your mortgage.

Banks are NOT waiting until after the negotiator gets to your file to start and proceed with the foreclosure process.  They will send your file to the foreclosure department where they are much more efficient than the loss mitigation department.  In the foreclosure department your file will likely be handled before the negotiator from loss mitigation can even pull your loss mitigation package from his or her stack.

Why Even (Especially) Short Sales Need Multiple Pictures On MLS. Jacksonville Florida Short Sale Advice.

When you need to sell your home fast, it is very, very important to have multiple pictures on the MLS showcasing your home.

The inventory for Jacksonville real estate is large.  You have to make your home stand out or the buyers won't take notice.  You need interior and exterior pictures of your home.  The pictures need to be of high quality and show off your home's greatest features.  If the pictures make your home look dark and cluttered they are not going to help you sell your house.  The pictures need to be taken carefully with all clutter moved out of the way as you go.   Many times the lighting needs to be adjusted before posting the pictures to the MLS.  Only the best pictures should be used online.  It is not unusual for us to take hundreds of pictures of a property to get the very best shots in order to showcase rooms or features in the best light.

If you do not have multiple pictures of your Jacksonville short sale on the MLS the buyers are usually going to think something is wrong with your home.  When this happens they usually reject it outright.  There are so many homes that are being showcased with multiple pictures it seems suspicious to buyers when a seller does not have multiple pictures of their home that is for sale.  Buyers assume that the seller is trying to hide the poor condition of the home from potential buyers even though this is not usually the case.

It is very common for buyers to tell us not to even send them homes that come up for sale if they do not have multiple interior pictures.  Don't put yourself at a disadvantage.

We believe these pictures need to go in at the same time the listing hits the MLS.  That way when automatic e-mails go out to buyers announcing the new listing, the buyers can see what your home has to offer.

Most sellers we see in short sale situations do not have any time to waste.  Banks don't waste any time once you are late.  It is important that your short sale be handled correctly from the beginning.

The Appraisals are Unpredicatable on Jacksonville Short Sales...Why Is There No Consistency?

The appraisal.  Sounds so simple, however, this is one of the biggest killers of Jacksonville Short Sales.

Short sales are unique in that you have two valuations from two different sources that need to match up, or at least come close.  If they do, the chances of a successful short sale goes up dramatically.  If they don't...then it becomes a big hurdle that may or may not be insurmountable. 

Imagine my surprise when I got an e-mail yesterday saying the appraisal on a Jacksonville short sale for one of my buyers came in short.  And not just short...but 20% short.  We were supposed to close on this short sale late next week, everything was complete, just a few last minute items on the loan...then news that the appraisal came in short.

This is an FHA short sale.  HUD guidelines require the lienholder to have a FHA appraisal of the property to determine the sales price under the HUD Preforeclosure Sale guidelines that apply to all short sales that involve an FHA loan on the selling side.  The seller's lienholder has an appraisal showing this northwest St Johns County townhouse is worth $100,000.  Our contract price is several thousand below that.  The buyer's appraisal came in at only $80,000.  How did this happen?  Lack of consistency in the appraisal industry.  Theoretically two separate appraisers, both following FHA guidelines, should have come up with a value that was the virtually identical.  So how did they come up a full 20% different?  Does the fact that the buyer's lender  OWNS the company who was responsible for the buyer's appraisal come into play?  Is that why this appraisal came in ridiculously low?  Why is this practice still being allowed?

Two appraisals by FHA approved appraisers should not have come in so different.  So who is right?  The buyer's lender will not consider that their appraiser could be off.  The only solution is for the buyer to come up with more money down.  Not a possibility with most cash-poor FHA borrowers.  So the best hope in this type of situation is that the seller's lienholder will listen to reason and take the buyer's FHA appraisal into account (which is allowed under FHA guidelines, but at the discretion of the negotiator and lender) and allow the buyer to buy at a lower price.  But 20% lower?  If the seller's lienholder says "forget it" then the seller's only option is to put the house back on the market and try to find another buyer.  Then the likelihood is that the new buyer's appraisal could be too low as well since the margin between the two appraisals is so large.  Even a 5-10% disparity will likely kill the deal in the future.

The buyer can go on to find another property and soon forget this one.  The seller will be the REAL loser in this.  They will end up having a foreclosure on their record when they made every attempt to help the lender sale the property and mitigate their losses.  Their credit will be ruined for years.  All because two appraisers,FOLLOWING THE SAME GUIDELINES,  have said two drastically different things about the value of a Jacksonville short sale property. 

Title Company processing the Jacksonville short sale? No thank you!

Buyers and Sellers of Jacksonville short sales beware.  There is an emerging phenomenon we're encountering working Jacksonville Short Sales.  We've seen several  Jacksonville area title companies who have been struggling for business that have decided to stick a label of "Short Sale Specialists" on their operation to get more business.  These title companies we're seeing do this are seriously hiking their fees up, "processing" the short sale transaction, and advertising themselves as experts.  Based on our experience, these people and companies are not in any way experts.  The ones we've encountered that are doing this are far from expert in the short sale arena.  (Just like with anything else, I'm sure there are some really good ones...we just haven't encountered them yet.)

If you need to sell your Jacksonville home and you owe more than your home is worth, do not hire someone who is going to turn your transaction over to a title company to process. You want to hire an agent who has an understanding of short sales and the different guidelines and issues involved.  You want to make sure your Jacksonville short sale specialist agent will be involved in the processing of your short sale after contract as well.

The latest title company "short sale specialist" experience we have had involves a "short sale specialist" who literally doesn't know the difference between FHA and Fannie Mae.  This "short sale specialist" submitted a preliminary HUD to the seller's lender that indicated a higher payoff than was possible if she had properly accounted for all seller closing costs on the preliminary HUD.  Then they came back to our buyer insisting that the buyer had to pay some of the sellers costs because the lender wouldn't.  Not true, these costs were never properly accounted for and submitted to the lender...a step in the short sale process that is extremely important. 

It is very important that the preliminary HUD have all possible costs accounted for, as well as extra time built in for the process to be completed.  This "short sale specialist" apparently did not know this.  This fact by itself can wreck a short sale deal up until the time of closing.  The HUD they submitted to the lender also does not properly account for prorations, so we are expecting them to come back later and tell us that the buyer has to pay some of the seller's taxes.  All of this could have been prevented with a knowledgeable person preparing the HUD correctly to submit to the lienholder.  When we tried to explain the relevant guidelines to her (in this particular transaction the seller has a FHA loan, which is governed by the HUD PFS program guidelines)  she kept calling this transaction a "Fannie Mae"  (not the same thing!!!) and told us that Fannie Mae required 88% net (not true either, but Fannie Mae has nothing at all to do with this transaction.)  Even if she had said "FHA requires an 88% net" it would not be accurate.  FHA only requires the 88% net of fair market value for the first 30 days during the marketing period which begins when the PFS Approval to Participate has been issued.  And this is an advertised "short sale specialist"

We've heard horror stories from other agents as well about these so called "short sale specialist" title companies and we've also experienced them.  Be careful when dealing with them.  IF you are a short sale seller, make sure your agent is a short sale specialist.  If you are in the market to purchase a short sale property, this is a good idea as well.  Deals that are put together correctly by knowledgeable short sale specialist agents usually go through.

If You Are Considering Purchasing a Jacksonville Short Sale Property or Selling Your Property Short...Hire a Short Sale Specialist.

A large percentage of our real estate business is working with Jacksonville Short Sales.  We represent both buyers and sellers in this type of transaction.

Working with short sales you have to be ready for anything.  We find it particularly challenging when the listing agent has no knowledge or expertise in short sales.  There have been times that our buyers have had to look for other alternatives, even though a particular home was very appealing, because those hired to do the job lacked fundamental knowledge in the short sale arena.

There are basic questions that you have to ask (and know to ask!!!) when you are representing a buyer in a Jacksonville short sale transaction.  We are often shocked at the responses we get when we ask these all important questions when representing our short sale buyers.  Most agents are not educated and qualified in the short sale arena since it differs so greatly from a normal transaction.   There are some Jacksonville short sale specialists that are very good at what they do, this is SO VERY IMPORTANT in a short sale transaction. 

If you are underwater on your mortgage and need to sell your home, hire a Jacksonville Short Sale Specialist.  ASK what qualifies them to be a short sale specialist.  The use of a Jacksonville Short Sale Specialist is also becoming increasingly important when you are looking to buy a Jacksonville Short Sale property since you need to be represented by someone who has a complete understanding of short sales and how to structure your offer based on the type of loan the seller has and the lender involved.

Let us know if we can help you.  904.371-9654.

Banks & Their Foreclosure Attorneys...What a Mess They Are Creating...What They Aren't Telling You on TV.

You've heard me talk before about how even when a homeowner is attempting to get a modification or complete a short sale banks will proceed with the foreclosure process.  It becomes a race against the clock for the homeowner, and us, if we are attempting to help with a short sale.  If they banks would just slow down and act responsibly they could cut their losses dramatically.

You've also heard me complain about how the right hand doesn't know what the left hand is doing.

Here is a good example that happened, or rather came to light, just the week before last.  We got a call from one of our sellers who we helped short sale his home so he could move on.  He had gotten some paperwork he didn't understand.  We asked him to fax it to us so we could see if we knew what it was.  It was a certificate of title conveying title to the VA Administration.  This was recorded at the end of April in the county public records months after title had transferred to the new buyer of the property.  This was also months after the bank had filed the satisfaction of mortgage releasing the property.

We immediately turned around and sent it to the closing attorney's who performed the closing.  We got a call a couple of days later from them telling us not to worry about a thing.  The title insurance company was working to straighten this out and they said that "they weren't surprised."  Apparantly they are used to banks doing this as it's common practice.

The closing attorney also called the clerk of court in the county where the property is located.  The clerk of court said that they wished this was the only case of this.  The employee in the clerk's office stated that the attorney's office (a foreclosure mill who does nothing but spit these things out) for this particular lender does this as a practice after the short sale has already taken place. 

We found out that a day or two after we alerted the closing attorney to this issue, the buyer had gone down to file for homestead exemption and found out that this problem existed with her title so she had called the closing attorney as well, not understanding what was going on.

Bottom line is that we have been assured that both the seller and buyer are okay in this and it's being cleared up, but why does this kind of thing even have to happen?

This is the kind of thing that someone needs to step in and stop.  The banks (in general) just continue to make bad decisions that keep leading them down the wrong path.  The path that leads to greater and greater losses.  But they aren't so worried about losses anymore...a sad fact that has been created by our political environment. 

The attorneys that have been hired to begin and complete a foreclosure process are determined to get these done as fast as possible no matter what negotiations may be going on between lender and homeowner regarding modifications or short sales...often cutting off the negotiation process when the bank could be saved hundreds of thousands of dollars (just with one home!!!) by going the route of common sense and good financial decision making rather than bullying.

As I was finishing this post my phone rang.  A seller for a recently completed short sale just received paperwork from an attorney's office for their old lender...foreclosure paperwork....this attorney's office has a court date to foreclose on the house that the seller no longer owns and the lender has released....here we go again!

Successful Jacksonville Short Sale. Another family saved from foreclosure. Litton Loan/Fannie Mae

We had another successful short sale closing today.  This was a Fannie Mae loan being serviced by Litton Loan.  This success is particularly sweet.  You've heard me talk about how the fate of your short sale often depends on whether you have a good or bad negotiator at the lender.  This is a Jacksonville short sale that almost never happened.  That is because it was assigned to a bad negotiator.  This negotiator, like most bad loss mitigation negotiators, was horrible at communication.  He got agitated when we asked for updates.  He failed to answer phone calls.  He refused to return e-mails and voice mails.  Ultimately he sent a one sentence e-mail saying, "

Per the investor, the request for a short sale has been declined due to the hardship not meeting there guidelines."  (grammatical errors his, not mine).

 

We spent the next several days trying to get in touch with this negotiator to find out what he meant.  Even the main customer service number at Litton was perplexed when they looked at the notes to the file.  He had simply put it that the short sale was declined with no additional information.  The customer service rep even noticed this was "weird."

 

This is where the quality, education and experience of your short sale specialist really comes in.  You see, to us when we are working our Jacksonville short sales...no just means, "not yet" or "try again" or "we'll approve it next time."

 

We updated all of the documents (since it had been a couple of months since the package was submitted) and resubmitted a complete and full short sale package with the same contract as if it were a totally new file.  We then called Litton and demanded that the negotiator that had been on the file previously not be allowed to touch it. 

 

Five weeks later we received our Jacksonville short sale approval.  The file was complete (very important!) , the negotiator did not have to ask for more information.  The negotiator didn't question the hardship.  Not once was it suggested that the hardship didn't meet investor guidelines.  The file was simply sent to the PMI company then to Fannie Mae and an approval was issued.

 

We closed today, three weeks after our approval was issued.  A foreclosure hearing is scheduled in the next week or two but the short sale was successful so that is entirely unnecessary now.  The happy and relieved seller has avoided foreclosure.  Our commissions for handling the Jacksonville short sale transaction are paid out of the proceeds of the sale and the seller did not have to pay us anything.

 

If you are in the situation where you owe more than your home is worth and can't keep your home.  If your lender won't work with you and you want an option other than foreclosure, give us a call.  We can give you an honest evaluation and let you know if we think we can help you.

Big Money Saving Suggestion For Banks! Stop the Insanity! Communicate Between Departments Regarding Modifications and Short Sales!

Working with distressed sellers there is one thing we have noticed that is very common among most, if not all, banks.  They waste a lot of money due to their inefficiencies and the lack of their ability to make common sense decisions.  The larger the bank, the worse this phenomenon seems to be.

Banks...if you are sitting on a loan modification package or a short sale package why do you insist on spending thousands and thousands proceeding with filing legal paperwork when chances are it's unnecessary.  Why do you proceed with the foreclosure process when you are going to modify a loan or approve a short sale.

Banks today are taking longer than ever to assign short sale or modification packages to a negotiator.  At the same time, they have a different department working towards foreclosure.  Coincidentally, this department seems to be FAR more efficient than their sister loss mitigation department.  Banks could save vast amounts of money just fixing this breakdown in their system.

We have seen short sales go all the way through a foreclosure sale while waiting on final approval from a negotiator in a loss mitigation department.  Stranger still...the short sale was still allowed to go through even though the bank had "bought the house back" at the courthouse.  So when all was said and done, the short sale went through and the foreclosure sale was somehow erased.  How much money did this cost the bank?  How much money would the bank have saved had they just held off and let the system work?  And yes...it is our "too big to fail" banks that are doing this type of thing.  We have found that "too big to fail" also usually means too big to function efficiently and effectively and repeated bad business decisions.  And since they are deemed to be "too big to fail" they are free to continue to operate inefficiently and ineffectively.  The free market would demand that they improve their processes to prevent failure...but things are not being allowed to work that way.

We have seen banks proceed with foreclosure action while the sellers are actively participating in the HUD Preforeclosure Sale program for FHA loans.  Why?  These homeowners are doing everything they can to short sale their home in a government created program.

We have approved short sales that we have to keep requesting that the banks cancel the foreclosure proceedings that the bank's outside attorneys keep scheduling.  What is the cost of this??? 

We have approved short sales in which the seller receives a nice large package of paperwork from an attorney regarding foreclosure a week before it closes.  The short sale closes...and the bank is out all of this money.  And they knew all along the home was in the process of a short sale and even had a definite closing date.  But they still pay an attorney to go through the foreclosure process.

We are seeing banks that have prescreened homeowners and said that they meet the qualifications for a modification.  These same homeowners have turned in their modification packages to the banks.  The loan modification packages are sitting around waiting to be assigned to a negotiator who can actually sign off on the modification.  Guess what another department is doing more efficiently while the loss mitigation department is trying to get through their stacks?  Working with outside attorneys to foreclose.  This is adding thousands and thousands of dollars of expenses when if they should just ramp up their loss mitigation departments to meet the demand.  But banks are not being forced to operate efficiently and effectively to stay in business...because that's just the way it is now.  They don't have to since the invention of the trendy new "too big to fail" label that is a thin disguise for "too big to think".

Banks need to stop spending unnecessary money filing legal paperwork and proceedings against people that they are likely going to modify or approve a short sale for.  This is just more wasteful spending...but when you remove the free market penalties for stupidity, inefficiencies and ineffectiveness,  you will only continue to get more of the same.  Stop the insanity.  Bring common sense back to the process (and elementary mathematics!!!).

Another Homeowner Who Avoided Foreclosure through a Jacksonville Short Sale-Indymac Loan

We had another successful Jacksonville short sale closing today.  Indymac approved the short sale of a beautiful home.  The foreclosure process had already been started when the sellers contacted us but we were able to get the home sold before the foreclosure took place.  We found a buyer and carried the home through the short sale process.  The homeowners avoided foreclosure and the buyers got a wonderful home for a great price!

Let us know if we can help you or someone you know.

"Short Sales Are a Waste of Time." No They Are Not. Why We Work Jacksonville Short Sales.

I hear this statement quite often.  I read these type of quotes often in newspapers, on blogs and hear it on television.  I have heard many buyers say this, sellers have said this, and even other agents say this, and I just don't understand.  I definitely disagree.  We hear from buyers quite often who previously worked with an agent who refused to show them Jacksonville short sales, or did everything in their power to discourage them.  A Jacksonville short sale can be a really good deal for a buyer.  That home that is a short sale could be the buyers perfect home.  We believe the buyer should decide based on their needs and circumstances whether a short sale is right for them.  If a buyer is working under a strict time constraint, then they probably shouldn't consider a short sale.  If they have a flexible timeline this could be a great option for them.

The short sale's success or failure starts with the offer.  When you truly understand this type of transaction your success rate goes way up.

We do Jacksonville short sales.  We enjoy doing short sales.  This is the most rewarding type of real estate transaction we have ever been involved with.  We're not talking about money.  It's definitely not the most rewarding financially.  Many times at the last minute the bank decides that unless you cut your commission X% they are not going to allow the short sale to go through and will simply foreclose on the seller.  How is that for a situation to be put in? 

We like short sales because we are really helping homeowners in need.  These are not bad people, these are people who just lost something.  Sometimes they lost their job, sometimes it is their health, sometimes they lost their family member(s) and sometimes it's something else.  Sometimes it's a combination of things.  These are people who have usually tried earnestly and sincerely to remedy the situation but with no success.  These are people that have spent countless hours on the phone with the lenders trying to get loan modifications only to be told the bank doesn't care.  We've seen banks that would rather lose $200,000 today than to modify a payment even a few hundred a month.

This is a hard job, the business of being a Jacksonville short sale specialist.  On occasion we have been told by some bank representatives that they don't care...they will just foreclose.  We have seen files denied and closed for what turned out to be no reason other than the negotiator assigned to the file felt like taking their bad day out on someone.  We have made multiple phone calls for weeks, while being ignored the whole time.  We have been yelled at by talking heads in the customer service department.  We have been hung up on.  We have been argued with.  We have spent hours and hours...even days challenging appraisals.  But still we refuse to give up, we just find a way around the obstacle we are facing and keep going.  Our ultimate goal is to get the short sale approved and we don't quit trying.  Giving up is not an option on something that is so important to a homeowner's future.

Short sales are the most frustrating type of real estate transaction on the planet from an agent standpoint.  Sometimes we work for months just trying to get an approval.  After the approval comes THEN we have to do the normal job of a real estate transaction, the part we get paid for.  All of the work we did to get the approval?  We don't get compensated for that.  It's just part of the overall package and the service we provide homeowners in need.

We have found short sale sellers to be very worthy of help.  We have dug in and fought relentlessly for these sellers.  We have spent countless hours on the phone, sending e-mails and sending faxes trying to help them out of what seems like an impossible situation for them.  We do all of this without any guarantee of ever getting paid a dime since we only get paid if it closes.  But we do this anyway because it is the RIGHT THING TO DO.

If you need help selling your Jacksonville home because you owe more than the home is worth let us know.  Our Jacksonville short sale services are free to you.  The lender pays our fees out of the closing proceeds.  There are never any upfront fees, we only get paid if the short sale is successful.  We also never charge a penalty.  If your circumstances change and you no longer need to sell your home, we happily let you out of the listing agreement.  We love it when homeowners who want to stay in their home can stay in their home.

Are short sales ever a waste of time for us?  No.

Will you be the next person we help?  Do you know someone who could use our help?  Tell them about us.

Jacksonville Short Sales are not easy transactions. Hire an agent who knows the system, can get results, and refuses to give up.

Short sales are not easy but when successful,  they are well worth the time and effort that goes into them.  To successfully complete a short sale your real estate agent has to have what it takes to be diligent and persistent until the end and have a good understanding of short sales.

The biggest factors of Jacksonville short sale success are:

The initial package.  Does the contract price and terms make sense for the bank/investor and is the hardship package complete and convincing.  This is very important.  Price matters.  Banks are not giving houses away.

The bank you are dealing with.  Some banks are next to impossible to deal with.  Others are relatively stable and predictable.  Some have no interest in loss mitigation, some are very interested and concerned about minimizing their losses.

The loan type you are dealing with. Is your loan conventional?  Is it FHA?  Is it VA?  Do you know if it's Fannie or Freddie?  Do you have PMI?  It is very important to know the answers to these questions from the beginning.  Your short sale process will be much different depending on what you are looking at as far as loan type and whether PMI is involved.  FHA is currently the hardest.  HUD changed the FHA guidelines at the end of December and in practice this has made FHA short sales much harder.  Up until the end of December VA seemed to be the hardest.  FHA and VA both have preset rules and ratios that are acceptable.  The short sale arena is constantly changing. 

Your loss negotiator.  You can't live with them, you can't live without them.  You can't....well...you know the old saying...  The good loss mitigation negotiators are really, really good.  The bad loss mitigation negotiators are really, really bad.  Which will you get?  You won't know until your Jacksonville short sale is in process.  How do you know which type you got?  The good ones will have great communication skills and will communicate regularly with your agent.  The bad ones?  These bad negotiators will block all access to themselves and make it almost impossible to communicate.  Some are just downright jerks.  When you get these negotiators you have to resort to calling the customer service number every day and faxing in all messages you want to get directly to the negotiator.  And you usually do not get an e-mail, phone or fax response.  You have to call into customer service to see if any action was taken as a result of your fax.  Wells Fargo, for example, has "talking heads" trained not to give you any contact information at all for your negotiator.  They will give you their name, but they are not allowed to give you any more information.  You can request a call from the negotiator, but the negotiator does not have to respond and the talking head is not allowed to send another request to the negotiator for a call until the computer shows it's been 72 hours since such a request has been made.  Then the talking head can send another request, but the negotiator does not have to listen.  And so the cycle goes.

There are so many important factors that go into a Jacksonville short sale that they are totally unpredictable.  When done right success is a high probability.  If done incorrectly, your time is just being wasted.  Make sure you have the right Jacksonville short sale specialist on your side for your Jacksonville short sale transaction.  Make sure your agent is knowledgeable in this type of transaction and refuses to give up.  This simple factor will greatly increase your chances of success and make it much more likely you can sell your home short and avoid foreclosure.

Litton Loan Short Sale. Did no mean no? No.

We got a short sale approval last week from Litton Loan Servicing that would not have happened had we not absolutely refused to give up.  This was a case where we had been assigned a negotiator from their loss mitigation department that qualified as really, really bad. 

After Litton had the file for over two months, and horrible communication during those two months, the negotiator sent us a one sentence e-mail saying the short sale was denied because it didn't meet investor guidelines.  We proceeded to call and e-mail over and over trying to get an explanation since we knew this was a true hardship, it was a great contract,  and we had proven the case on both points.  The negotiator refused to respond to us at all and we were told by customer service that the file was closed and the issue was dead.

We refused to close the file on our end.  The seller deserved better than that.

We immediately updated the financial data (since two months had passed since our original submission) and resubmitted the complete package with the same information and the same sales contract.  We made several calls demanding the same guy not be allowed to touch the short sale.  We followed up regularly as we normally do. 

Five weeks later we got a call that the short sale was approved, they are allowing the sale to close for less than what the seller owes the bank, and the seller will be able to avoid foreclosure.

Just an example of how a bad negotiator can wreck your short sale, and how a good short sale specialist who refuses to give up can save it.

A Short Sale is Much More Complicated Than That...Why Logic Does Not Necessarily Apply to Banks in Jacksonville Short Sales

Jacksonville short sales are not simple. A lot goes into a Jacksonville short sale, sometimes logic, as you or I would see it, is not part of the equation.   First I'll talk about the logical argument.  Banks should realize that short sales are in their best interest.  Banks should respond to short sale offers fast and sensibly.  Banks should be thankful that Realtors and buyers and sellers are out there working every day to help mitigate their losses.  Banks should have a good system to logically evaluate offers and if Option A will provide less of a loss to the bank then it should be selected over Option B as good business practices would dictate.  These "shoulds" occur in a perfect world...not necessarily in the real one.

We encountered another buyer today that couldn't understand why the seller would turn down his Jacksonville short sale offer for what is probably around 50% of fair market value.

Here  are the reasons that the seller turned down the offer:

• The offer was ridiculously low.  A short sale contract is between the current homeowner and the buyer.  The seller chose to reject the offer because it wasn't even in the same ballpark.  It is the seller's decision whether to accept an offer or not.

• The seller will be potentially facing a deficiency.  This particular bank does not waive their right to seek a deficiency judgment they do "lien release only."  Every dollar of price reduction the seller allows puts them in a position of owing more money down the road should the bank pursue a deficiency. 

• The bank can not just approve a Jacksonville short sale contract when the fair market value of the property is much higher than the contract price.  They have investors to answer to.  When a short sale package is received by the bank they order either an appraisal or BPO to determine the fair market value of the property.  Appraisals usually come in higher than BPOs.  If the property is a VA or FHA there are preset minimum net proceeds to fair market value ratios that must be met.  If it's conventional there are different ratios that have to be followed that are not so clear cut.  The banks are not just going to accept some low number that is well below comparable properties.

• This buyer inaccurately assumed that one comp was sufficient for trying to support his offer.  One comp just doesn't do it.  No less than three comps are used.  If it is a distress sale, or is deemed to have potentially not been an arms length transaction it may be thrown out totally. 

• This buyer also inaccurately assumed that the bank had the right to make the decision about whether to accept the offer or not instead of the seller.  The buyer proclaimed to be providing a significant service to the financial industry by making his significantly low offer.

• The Jacksonville short sale seller has a lot to lose by accepting an offer that does not have a reasonable chance of approval by the bank.  An unrealistic contract can lose the seller valuable time that ultimately leads to foreclosure since in our area MLS the home has to be placed in a contingent status notifying everyone that there is already a contract on the home.

We will be the first to tell you that short sales are unpredictable.  Each one is different from the last, even with the same lender.  The banks are just not good at them yet.  Even the banks that had gotten pretty good at them have been overwhelmed lately.  That being said, a complete financial package, a valid hardship, and an offer that is within the realm of a reasonable discount from fair market value has a good chance of being approved by the bank.

Consult a Jacksonville short sale specialist if you think you owe more than your home is worth.  You need more than a general real estate agent.  You need someone who is educated and understands how short sales work and can help you through the process.

Can you support that Jacksonville short sale offer price with comparable sales? How to price your Jacksonville short sale offer.

We work with a lot of Jacksonville short sale properties.  There are a lot of misconceptions about how to come up with the offer price and what to expect.  Here are a few points I want to clarify:

• You are negotiating with the seller/homeowner of the property.  While the seller wants to get the home sold, it is also in the best interest of the seller to get the highest amount reasonably possible.  The seller maybe be facing a deficiency judgment.  The seller may be asked to sign a note for all or a portion of the difference.  The seller does have an interest in what the property sells for.  Don't go to the listing agent and demand that the bank make the decision, not the seller.  That is not the way the process really works.

• One low comparable sale does not take the rest of the market down to that level.  The sellers bank(s) will have either an appraisal or BPO done.  This requires no less than three comparable properties be evaluated to come up with the fair market value of the property.  The lienholder will then make their decision about whether to allow the closing to take place based on their net percentage of fair market value.  This fair market value is not determined by the fact that there was one foreclosure that sold for a crazy low amount.  Last week we got an offer of 67% on a listing that we are already going to have a tough time proving is not worth more than the asking price.  The comps are very few and far between and would indicate a higher value (all except for this one lonely comp).  There is almost nothing that has sold in the past 2 years.  If you go outside that complex...to get a comparable, which you will have to do, the prices are much higher than our price.  This buyer and agent thought because there was one low foreclosure, the bank would allow the home to go for that same price in a short sale.  It's just not that simple.

• When you are submitting an offer on a short sale, and the price is substantially lower, include a BPO or multiple comps with your offer.  Experienced Jacksonville short sale specialists usually have (and keep) the home priced at a price that the bank should accept given the comparable homes.

• Don't think you have to ask for more off just so you can feel like you got a "deal."  Determine what the house is worth using comparable sales.  If the asking price is already a deal...then just hope you get it for that and the bank doesn't determine the fair market value to be much higher.

If you want to buy a Jacksonville short sale, make sure you hire an agent who is a Jacksonville short sale specialist and knows how the process works.  The process can be long and frustrating.  The more your guide knows, the smoother sailing it will be for you. 

If you have to sell your Jacksonville real estate and you owe more than your home is worth work with a Jacksonville short sale specialist who knows how to properly price your home, negotiate the deal and submit the proper package in a complete format that significantly increases your chances of getting the deal done.   Make sure they understand what the bank will be looking for to prevent you from tying up your home for months for a deal that won't work.

Let us know if we can help you!

Think twice before you accept a contract on your Jacksonville short sale without a binder deposit due at the time of contract.

If you are selling your Jacksonville real estate through a Jacksonville short sale, make sure the buyer puts down the binder deposit at acceptance.  We get a lot of offers on our short sale properties and they almost always state that the binder deposit is not due until lien holder approval of the offer.  This is great if you are a buyer, but not if you are seller.

In our experience, once this term is countered, many buyers feel that they have to return to the property one more time to decide whether to really commit or not.  Sometimes they will even want to do a home inspection before going under contract.  Having this financial stake makes the buyer more serious.   It's easy to put down an offer on a short sale if you have no monetary commitment.  It's also easy to walk away.  This is why we feel strongly that our sellers should never accept an offer where the binder is not due right away. 

As the seller of a Jacksonville short sale property, you do not want to get your approval only to find out that the buyer has already bought.  This can, and does happen in Jacksonville short sales!

Please consult a Jacksonville short sale specialist if you are think you may owe more than your home is worth.  Please be sure you have someone experienced in the process that can look after you and can negotiate terms that will help protect your interests.

The Anatomy of a Really, Really Bad (Okay, TERRIBLE) Jacksonville Short Sale Offer

We've seen lots of Jacksonville short sale offers on our listings.  Some are written up by agents who clearly know what they are dealing with in regards to short sales.  These offers have the correct terms and are for a price that a bank should reasonably accept.  Other offers are downright ridiculous.  Some are just silly in their pricing.  Many are ridiculous with their terms, wanting to lock the seller in while their buyer has the right to go put in offers all over town.  While the buyer is sitting at the closing table on a different home, the sellers think that they have a buyer for theirs.  This should not be happening, but it happens every day in Jacksonville short sales.  It all goes back to the contract terms.

A recent short sale offer we received beat them all.  Here were the terms with a discussion about why this is a bad offer for a Jacksonville short sale seller.

Binder deposit due within 1 day of lienholders written approval. The buyer has absolutely no incentive to ever perform on the contract.  Binder deposits should be due at the time of the contract.  While the house is locked up for the buyer,  and other potential buyers who may be serious are not seeing the home, the seller is barreling towards foreclosure.  Do not think for one second that a buyer who has nothing in the game is not willing to go buy a different home while waiting for the approval from the bank. 

Repairs and replacements allowance written in and WDO paragraph left intact.  Sellers who are in Jacksonville short sale situations are clearly in them for a reason.  They are usually totally out of money.  Short sales are usually bargain priced.  With that buyers should not expect to be able to demand repairs. If they had the money to do all of that, they would usually have the money to make a payment.  This particular offer would have put the sellers on the hook for over $4,000 in repairs.  This is not a reasonable expectation for a buyer to have.

"Buyer reserves the right to withdraw this offer at anytime prior to receiving written notice that the agreement has been approved by the encumbrance holder(s)."  This is what we lovingly refer to as a "wiggle clause."  Why would a seller ever agree to be locked into a contract when the buyer is not?  If you are submitting an offer on a Jacksonville short sale that we have listed, don't even try this one.  If the short sale buyer is not willing to be locked in, the seller should not be locked in either.

"Authorization form for Buyer's agent to be part of Purchase and Sale Agreement" Depending on the circumstances sometimes this is reasonable, sometimes this is not.  This is not reasonable or necessary if the listing agent is a Jacksonville short sale specialist who knows how to work a Jacksonville short sale transaction.  When this is the case, this provision can only hurt.  You do not harass or tick off the negotiator at the bank.  You have to know how to handle the negotiator in the loss mitigation department.  In cases where the listing agent clearly does not know how to work a short sale and the buyer's agent does, this is reasonable and probably even necessary.  If the listing agent knows what they are doing in a short sale transaction, this can ONLY hurt.

Closing to take place at buyer agent's favorite title company.  Most short sales being worked correctly already have an open file at a title company.  This is the title company that should be closing the transaction.  They have many times already run title and checked for liens.

"...any future offers or contracts submitted during the timeframe of this agreement will be negotiated as backup offers to this agreement until the expiration date on the agreement or until both parties agree to release the agreement whichever comes first. Under no circumstances shall Seller submit the backup contract(s) to the encumbrance holder(s) until this agreement is terminated or rejected by the encumbrance holder(s)."  Any future offers SHOULD BE  negotiated as backup offers to the first agreement if the first agreement is still in effect.  However, the mandate to never submit the backup contract to the bank is unreasonable and it is not in the best interest of the seller to agree to this term.  Many times a seller will not want to submit the backup offer, however, they should always have the right to do so.  Our Jacksonville short sale sellers do not agree to this term.  See notes below.

Paragraph 9 of the Short Sale/Preforeclosure Addendum is deleted.  This is the paragraph that allows the seller to negotiate backup offers and submit the backup(s) to the lender at their discretion.  Imagine this scenario.  A seller submits an offer that is on the low end of what should be acceptable to the lender.  The lender is asking the seller to sign a note for the difference between what is owed and what the lender will recover on the sale.  A new offer comes in reducing that deficiency by $20,000.  This is clearly a situation where you would want to submit the backup contract to the lender.  Why would a seller agree to delete a paragraph that would allow them to reduce a deficiency amount?  Answer:  They wouldn't...or at least they SHOULDN'T.

If you are a thinking about selling your Jacksonville real estate in a short sale situation, be sure you are working with a Jacksonville short sale specialist.  You need someone who understands the way a short sale works and what to look out for when that offer comes in.  If you are a buyer looking to purchase a Jacksonville short sale expect to have a reasonable contract, not a contract that is so lopsided that you are the only one with any benefits.  Remember that a seller is headed towards foreclosure, do you really want to tie up their property when you are not committed to purchasing it?  If you buy a different house instead, you may be putting a seller in a situation where they have no time left to find a new buyer before their foreclosure.

Jacksonville short sales need expert handling! The importance of a Jacksonville Short Sale Specialist.

Jacksonville Short Sales are not easy.  If anyone tells you they are, they are not being honest.  It is very important that you hire someone educated and experienced in the process to handle your Jacksonville short sale transaction.

What type of loan do you have?  FHA, VA, Conventional?  Are there any parties on the loan other than the ones residing in the property?  Do you have only a first mortgage, or a first and second mortgage on your Jacksonville real estate?  If you have two mortgages, is the 2nd just a straight 2nd mortgage...or is it a HELOC (Home Equity Line of Credit).   Where are you in the process of missed payments?  Has a lis pendens been filed?  Has a foreclosure hearing date been set?  Has a foreclosure sale date been set?  What has your communication been with the lender?  Have you tried to obtain a loan modification on your Jacksonville home?  Who is your lender?  All of these things matter.

There are very important steps in achieving a Jacksonville short sale to avoid foreclosure.  The first step is to have a complete financial package put together.  This requires the homeowner to go through bills, bank statements, tax returns, etc.  We have to show the bank why you can no longer afford the home.  It's similar to applying for a loan, only in reverse.  We put together a complete financial package for you, based on applicable information and submit it to the appropriate parties.  It is not unusual for this package to exceed 100 pages.  The point that this information is submitted depends on the type of loan.  Most packages will not be submitted without a fully ratified sales contract.  All of this detail is handled for you by a good Jacksonville short sale specialist.  Which is why it is very important not to use just a general real estate agent, but someone who specializes in the process of Jacksonville short sales.  It requires a lot more work, expertise and patience than a normal real estate transaction.

It is very important that the offer from the buyer be negotiated properly.  Sellers should not be taking their homes off of the market for offers that have no chance at acceptance.  By working with a Jacksonville short sale specialist who understands the different loan types and ratios involved you can minimize this risk.

Once you get your home under contract and your Jacksonville short sale specialist has submitted this along with your entire financial package, the fun is just beginning.  It takes a lot of follow up, phone calls, updating and an understanding of market values to successfully deal with the negotiators in the loss mitigation department of banks.  A Jacksonville short sale specialist has to be on top of the file at all times to increase the chance of success.  Your specialist needs to know how to deal with all of the challenges that can and often do come up in a short sale transaction. 

Do you need to get out from under your Jacksonville real estate but know that you owe more than your home is worth?  Talk to us and we will help you evaluate whether a Jacksonville short sale is a legitimate option for you.  We will give you an honest assessment based on your complete situation and give you a truthful analysis of what your home is likely to sell for.  Call us today at 904.371.9654.  Same day appointments are often available.  We're here to help you.

New FHA Short Sale Guidelines issued by HUD in December 2008...a blessing or a curse? Can this wreck your Jacksonville short sale?

In the name of progress and improving the system, HUD issued new short sale guidelines on December 24, 2008 outlining a brand new set of rules regarding how short sales are to work when the seller has an FHA loan.  These new rules apply to Jacksonville short sales and short sales around the country.

Here are a couple of quotes from HUD regarding why they are making the changes:

"High foreclosure rates continue to have devastating effects on families and neighborhoods. The Federal Housing Administration (FHA) remains committed to taking actions to help families avoid foreclosure. "

"FHA has consolidated in this ML the requirements of the PFS Program that have been issued over the years, and has updated and clarified those requirements where needed, to better address the problems faced by mortgagors today and provide greater flexibility in considering a mortgagor’s candidacy for participation in this program. "

We think that the new requirements are a step backwards.  What they had already wasn't bad.  The net to the lender, after all closing costs were paid, had to be 82% of the fair market value of your Jacksonville short sale. 

Out of the blue they changed the reasonable ratio of 82% to a sliding ratio of 88% (first 30 days of marketing), to 86% (for the next 30 days of marketing), down to a minimum acceptable ratio of 84% if the home has been on the market over 60 days.  They raised the amounts that the lender has to net on the deal.  In a buyer's market heavily saturated with distressed sales, we are not sure why they thought that this will provide "greater flexibility."

Sure, they got rid of the pesky ratio that required the market value be a certain percentage of the total loan amount which was definitely a good thing.  Raising the ratio was definitely a giant step backwards that will make it harder to purchase an FHA home in a short sale and ultimately force more families into foreclosure.

HUD requires an appraisal, rather than a BPO, to determine fair market value.  The guidelines instruct the appraiser to determine fair market value using comps that are not distressed properties.  Wouldn't a true "comparable" be a distressed property by definition?  This is while the national average shows around half of all homes being sold now are distressed properties.  Our Jacksonville real estate market shows a similar ratio.  So now you have to obtain an offer of 88% (or 86% or 84%), of an inflated fair market value determination, to have a successful FHA short sale.

Here is another interesting tidbit.   The letter outlining the new requirements state, "Regardless of the property's sale price, a mortgagee may not approve a PFS contract if the net sales proceeds fall below the minimum allowable thresholds stated herein.  HUD has established guidelines for varying  minimum net sales proceeds based on the length of time a property has been competitively marketed for sale."  (Emphasis ours) While the letter says it's based on the length of time a property has been competitively marketed for sale, we are being told by a major lender that the "marketing period" according to HUD doesn't start when the home is actually put on the market.  Instead the marketing period for the purpose of determining the applicable ratio doesn't start until the lender has issued an approval to participate in the program.  This approval to participate is not issued until after a file review is completed and an appraisal determines the "fair market value" for the property which, as we've seen, can take months. 

The lender does not have a timeframe, that we can find, that they have to respond to the application to participate.  It just took over two months to get an approval to participate with complete package submission on Day One for one of our sellers.  Nothing was missing from the package and they did not have to request additional documentation.  They just sat on the file for two months, even with regular calls and communication.  This timeline will vary from bank to bank, and even negotiator to negotiator within the bank.  In the end you will have a preapproved price that you must obtain to successfully sell your Jacksonville short sale, even if the market demands a lower price.

So is the seller supposed to delay putting their home on the market waiting to be told the price they are allowed to sell the home for?  This wait is for an unpredictable amount of time.  In a declining market they will be waiting while market values crash around them and will likely be given an inflated, and unattainable,  price in the end.  And what if an approval to participate is not issued until a long period of time after the appraisal (which is likely to be inflated to start with)  is completed?  Does a seller go ahead and put their home on the market before the approval is issued knowing they have to get 88% of some value they aren't aware of yet?  Why should a seller waste valuable marketing time when values are headed lower?  This defies reason.

This is just one example of why you need an experienced short sale specialist when selling your home.  All short sales will not be successful.  At the same time, if you are working with a Jacksonville short sale specialist who understands the system and the challenges, and how to work around them, you will greatly increase your odds.  If you have a Jacksonville short sale, or are thinking about purchasing one, make sure you have knowledge and experience on your side. 

Jacksonville Short Sale Buyers-The Truth About Buying a Short Sale in Jacksonville

Jacksonville short sales...everyone has heard of short sales today.  Even though everyone is talking about Jacksonville short sales there is an abundant amount of misinformation out there.  You can research the issue online and within minutes will be filled with just as many untruths about the process as facts.

The most important thing, whether you are buying or selling a Jacksonville short sale property is to use an agent who is a Jacksonville short sale specialist.  Here are a few things you need to know if you are considering buying a Jacksonville short sale:

• A Jacksonville short sale contract is binding just like a regular real estate contract.  There is a myth in our area that a short sale contract is not really a contract until it has been approved by the bank.  Not true.

• A Jacksonville short sale will take more time than a regular transaction.  Even banks that have their act together can take a long time to approve Jacksonville short sales.  DO NOT SUBMIT AN OFFER ON A JACKSONVILLE SHORT SALE IF YOU CAN NOT WAIT AT LEAST 60 DAYS FOR BANK APPROVAL.  Will it take sixty days?  Quite possibly not.  Maybe so.  There is no way to know for sure in advance.  Even short sales within the same bank can take drastically different timeframes for an answer.  A lot of it comes down to the negotiator at the bank you are assigned to and the current workload of the loss mitigation department.  Do not put in an offer and start calling and threatening to "walk" two weeks later.  While the seller will care, the bank really doesn't care if you walk or not.  A sad, but true, fact.  Your expectations have to be reasonable or don't bother.

• If you are buying a Jacksonville short sale, you need to realize that the bank is not the seller.  The homeowner is the seller.  The homeowner is the one who negotiates with you and decides whether to accept your offer and submit it to the bank.  Do not submit a silly offer and demand that the bank make the decision, not the seller.

• You need to structure your offer based on the current fair market value of the Jacksonville short sale property.  The bank will order an appraisal or a BPO (Broker's Price Opinion) and will make a decision whether to release the lien and allow the Jacksonville short sale to go forward based on the indicated value of the appraisal.  If there is a VA or FHA loan on the property there are specific guidelines for where the minimum contract price can be, based on fair market value based on an appraisal ordered by the lender.  If it is conventional, it is determined by the internal and investor guidelines and may be determined by a BPO or appraisal depending on their guidelines.

• The seller is in a Jacksonville short sale position for a reason.  They usually do not have money to make any repairs.  This needs to be established upfront in the negotiations. 

• If the utilities are already turned off, you may have to pay to have the utilities to be turned on for your inspections and appraisal, if required. These details should be established upfront in the negotiations.  Do not try to renegotiate this later. 

• Once the Jacksonville short sale is approved, the bank will demand that a closing take place in a certain period of time.  You need to be ready. 

• If the Jacksonville short sale property has a second mortgage on it it will take more time, especially if it is a different lender.  The second lender is usually asked to take a very small amount and may even come in and set additional parameters for the deal that the first lienholder did not ask for.

• All Jacksonville short sales will not be successful.  No matter how perfect the package, no matter how good the offer is, it is always possible the short sale could be ultimately denied based on some obscure "investor guidelines."  Even HUD allows a FHA short sale to be denied  (even if it meets all of the guidelines)  if the lender feels that the home can continue to be marketed and net a higher amount.  It is possible you will have put forth money on inspections or loan charges and will not get the house ultimately.  That is the risk you take for getting a good deal.  Even on straight resales some will fall out after you have put out money on inspections and appraisals.  Nothing is definite, understand this upfront.

If you are not up for the challenge, you should consider buying a straight resale not a Jacksonville short sale.  You will usually pay a little more depending on the seller's equity position but you will have a lot less hassle and be able to close faster, in general.  Attempting a Jacksonville short sale without a Jacksonville short sale specialist is like finding Seattle, Washington without a map.  You may get there eventually, but it will take a lot more time and aggravation.

Jacksonville Short Sale Seller? Get your binder deposit UPFRONT and tighten up that sales contract!

A disturbing trend seems to be emerging in the area of Jacksonville short sales.  We are hoping that it is not prevalent, but fear that it may be more widespread than we realize.

It has come to our attention that there are buyers that are going around and getting into contracts on several homes, usually other Jacksonville short sales or Jacksonville foreclosures.  They are under the mistaken impression that Jacksonville short sale contracts are not contracts although we are not sure why they believe that.  They are putting in "wiggle" clauses that enable them to get out for any reason. 

This is a newer trend and as a seller of a Jacksonville short sale property you need to tighten up your contract at the time the offer is being negotiated.  You need to have a Jacksonville short sale specialist representing you that understands the potential pitfalls and can help get the contract as clean as possible and tighten up the contract terms.

These same buyers are usually failing to put in binder deposits until the bank accepts the contract.  Then if they change their mind, what do you have?  You are weeks closer to foreclosure and have missed out on all of the real buyers who might have liked your home.

This has been made worse by a recent change to our area short sale addendum that states that all timeframes begin after acceptance by the bank.  The state contract short sale addendum gives you a check box option where you have to select whether timeframes begin immediately or when the banks acceptance.  As a seller you always want timeframes to begin immediately. 

Jacksonville short sales are very complex.  Please do not undertake one without having a Jacksonville short sale specialist representing you.  If you do not already have one, we can help you with your Jacksonville short sale.

Once we have a contract on your Jacksonville short sale, according to the local MLS rules, it has to show in the system that there is a contract on it.  We have no way of knowing how many buyers have contracts out on multiple short sales, but we know this is not a good thing for the future of Jacksonville short sales.  This type of activity gives short sales a bad name and is greatly damaging to sellers. 

When you are a seller moving towards foreclosure, every day is crucial.  As a seller of a Jacksonville short sale it has to be done correctly or the odds of success are much lower.  You do not want to get your bank approval only to find out that your buyer is already living in their new home down the street.  This is happening in our market.

January 2009 Jacksonville Florida Real Estate Market-A Huge Leap Occurred in Jacksonville Distressed Property Closings as Straight Resales Continue to Sink Making The Two Essentially Equal.

 January 2009 shaped up to reveal big changes to the Jacksonville real estate market.  Jacksonville Short Sales and Foreclosures sold in January are essential equal to straight resales sold.  This is a big jump from 2007 where distressed properties were just slightly above an average year and were only sitting at 8.56% of total real estate sales.

The Jacksonville metro area saw surprisingly few real estate closings in January.  The number of closings was down dramatically from  January 2008, roughly 28% lower, and experienced a large 38% drop from the prior month, December of 2008.

Distressed property sales (Jacksonville short sales and Jacksonville foreclosures) account for 41.76% of all sales in January while straight resales only account for 42.23%.  In December while these two numbers were trending closer than ever before 26% separated Jacksonville Short Sales and Foreclosures from straight resales.  As of this morning for sales that have been recorded timely, the gap is only FOUR CLOSINGS separating the two.

For those who think Jacksonville distressed properties are not a reflection of the market...Jacksonville foreclosures and Jacksonville Short Sales are MAKING the market.

This is reality.  If you are looking for a good deal on a home, you can not avoid Jacksonville short sales and foreclosures.  Find a great short sale specialist and find your new home.

"Due to the nature of short sales, buyer can cancel at any time" Jacksonville short sale sellers BEWARE!

I laugh every time I see this.  Why should a seller, who is headed down the road to foreclosure be bound to a contract that a buyer is not bound to.  We've seen this appear in several offers that we have received and this clause has to be dealt with at the time of the offer.  If this is not resolved in the beginning, you just may get your lender approval only to find out that the buyers have already closed on a different home.  Don't think it can't happen to you.  We've seen it happen in Jacksonville short sales. 

If a seller is in preforeclosure, this type of clause can destroy your chances of a successful Jacksonville short sale.  While you are sitting there patiently waiting for lender approval on your short sale, your buyer may be out buying another home. 

Under our current Jacksonville MLS rules, the listing must reflect that there is a contract on the home once you have an accepted contract.  This, unfortunately, will turn away most prospective buyers. So are you willing to take your home off of the market for a buyer who is not willing to take themselves off the market for your home?   If the buyer comes up and later lets you know they have purchased another home, you have lost all of that time you can never get back and, more importantly, you may have missed out on your SERIOUS buyer.  Do you want to lose a serious buyer for a buyer who won't even commit completely to purchasing your home? 

Make sure you work with a Jacksonville short sale specialist who knows what to look out for and can help protect you.  While no short sale is foolproof there are ways to greatly increase your odds for success.  A specialist in Jacksonville short sales can do just that.  Let us know if we can help you!

Does the list price matter on a Jacksonville Short Sale? Well that depends on whether the list price accurately reflects the fair market value of the home.

Good Jacksonville short sale specialists will price the home right to start with.  This means pricing the home at fair market value and keeping it priced that way until an offer is received and accepted by the seller.  That is why when you are making an offer on a short sale you can not just decide that you want X% or $X off asking price.  You have to evaluate the situation based on what the true fair market value is and what will likely be reported to the bank as the fair market value via the BPO or appraisal.

If a Jacksonville short sale is overpriced in relation to the fair market value, then a buyer SHOULD lowball the asking price to bring it in line with what the home is truly worth.  Offering substantially lower than fair market value is a poor strategy for a buyer.  A bank will not allow a short sale transaction to proceed if the net proceeds are not within the acceptable range as determined by the loan type and who holds the loan.  These are percentages that Jacksonville short sale specialists are familiar with and will use to back into a number for your offer.  A good Jacksonville short sale listing specialist will not advise that their seller lock into any deal when the net to the bank is too low to be acceptable.  In the time it takes the bank to refuse to release the lien for the deal, the seller will usually have moved much closer to foreclosure.

Before making an offer on a short sale the buyer needs to understand what the home is worth.  The trick to getting a good deal on a Jacksonville short sale, and ultimately completing the transaction, is to offer the lowest price that will generate the net proceeds that will be acceptable to the bank.  We get quite a few offers on our short sales, some are reasonable and some are just stupid.  But we have never had an agent or buyer call us and ask what type of loan the seller has even though it matters.  You have to know this to put together the lowest possible offer that a bank will accept.  If the contract amount wasn't backed into based on the loan type and your short sale offer was ultimately approved by the bank, chances are that you paid too much.

Keep in mind, the homeowner is the seller, the bank is not the seller in a short sale.  The bank does not own the home and can not sell the home to the buyer in a short sale situation.  The closing statement and closing paperwork still has to be executed by the seller just like in a normal transaction.  To demand that a homeowner send a lowball offer to the bank so the bank can make the decision  "because the homeowner shouldn't" is just silly.  Yes, we get that one too.  If you understand how the process works, you will be much better off and your likelihood of success will be much greater.

To greatly increase your odds of success in a short sale purchase, you should seek out a Jacksonville short sale specialist that has gone above and beyond to learn how to complete this type of transaction.  There are many great agents in our area, some are skilled and knowledgeable  in short sales, most are not.  It requires a different set of skills and education regarding the short sale and loss mitigation process. This is not a reflection on the overall quality of the agent, however, you do need a short sale specialist to increase your odds of success.  (Would you go to a cardiologist for kidney failure?)

Let us know if you would like to purchase a short sale and we can help you!

Pre-approved Jacksonville Short Sales? Do you know what you are asking for? Why we think that the results of this are far from the theory behind it.

Pre-approved Jacksonville short sales.  This topic is creating a lot of buzz these days.  In large part by people who do not truly understand short sales.  You now have HUD and Fannie Mae sticking their toes into this arena.  We get a lot of calls every week from buyer agents on our short sale properties asking us if the short sale has been approved.  Most of the time this is from agents who have buyers planning to come in significantly under fair market value on our Jacksonville short sale listings.

As Jacksonville listing agents, and Jacksonville short sale specialists, trying to help our sellers avoid foreclosure, or as buyer agents trying to get our buyers a great deal, we do not want any predetermined price that the bank will accept.  This is setting the deal up for failure unless the buyer is willing to overpay. 

This is the part where we see a lot of confusion coming from the other side.  Many agents and buyers believe that the amount the seller owes is an important factor.  It's not.  Many believe that they have to get a certain amount off of the list price and submit offers that are too ridiculous for the bank to allow the transaction to proceed.

The way to have a bank ultimately approve a contract between the buyer and seller is to write the offer based on what the fair market value of the property is.  When making a decision whether or not to release the lien the lender will have either a BPO or appraisal in the file that tells them what the fair market value is for the home.  Even if this amount is high, it is what they will use in their assessment.  The amount they must receive at the end of the day, so to speak, is what they are looking at.  Depending on the seller's loan type (VA/FHA/Conventional) the net amount they will need to receive is different.  VA has required the highest net of this fair market value historically.  Unfortunately, HUD has changed the guidelines for FHA, raising the acceptable net amounts substantially.   For an FHA short sale (keep in mind we're talking about the seller's financing, NOT the buyers) the amount of time the home has been on the market now also matters as the ratio changes based on this.  For conventional, there is a rule of thumb, but as we've found, some banks require higher than this rule.

It truly is a numbers game for the bank, detached from all emotion.  That is why the BPO or appraisal (once again depending upon the seller's loan type/lender) coming in at true market value is essential.  In a declining market, what will happen if we are working off of a three month old lender's appraisal?  The lender will have an inflated perception of what the home is worth and will have unrealistic demands regarding net proceeds.  Ultimately the transaction will fail and the seller will be that much closer to foreclosure.  The buyer will be incredibly frustrated and the doomed deal will contribute to the rampant myth that short sales don't work.

Jacksonville short sales and foreclosures. It is NOT just the people who bought too much house. This is an inaccurate generalization.

Every day I hear someone else being interviewed on CNBC that states, in some form, that the people being foreclosed on are those who overbought or were "irresponsible."  This is a careless generalization.  Most of the people we encounter in a Jacksonville pre-foreclosure or a Jacksonville short sale situation did not overbuy at all. 

In reality, we are seeing people who have since lost their jobs and can't find work.  We are seeing people who have since had devastating medical problems.  We are seeing people who have since experienced a drastic and unanticipated reduction in income.  We are seeing people who would love to be able to keep their homes.

When these people found out that they had to try to sell their home and reduce their bills they also found out that they couldn't.  The market had already dropped and they owed more than their home was worth.  They did not cause the market drop to the point where they could no longer get out and pay off their mortgage.  But because of the market drop they no longer could sell their home for what they owed. 

This forces those in this position to either give up their home, or explore the option of a short sale.  Either scenario further drives down neighborhood prices. 

The next person to find themselves in the same situation faces an even deeper deficit.  And so the cycle goes.

Popular Short Sale Misconception: Who Is The Owner Of That Jacksonville Short Sale Property?

This is one we've seen and heard quite frequently.  We got it again this week on one of our listings.

In a short sale, the SELLER is the seller.  Confused?  The homeowner is the seller.  Not the bank.  There is a misconception out there, that seems to be pretty common.  Buyers don't always understand that the lender is not the seller.  When the lender is the seller it is an REO, a Foreclosure.

In a short sale, the homeowner is trying to prevent foreclosure.  They have had a change in circumstances which makes it impossible for them to continue to keep the home.  Usually they are not up-to-date on their payments, sometimes they are.  When they realize that they can't keep their home and do not just want to sit back and wait for a foreclosure to happen, and can not get a modification or refinance, some homeowners will attempt to sell their home short.

The lender is not the one responsible for negotiating the contract.  The homeowner is the seller.  The homeowner is who the negotiations take place with when there is an offer on the property. 

The lender's function in a short sale is to release the lien.  This is the same as the lender's function in any other straight resale.  The only difference is they have to make the decision about whether they should release the lien or not given the price, market conditions and fair market value of the property.  If the offer is good and meets specific criteria, and nets the bank a high enough dollar amount, they will usually approve the deal.  When they approve the deal, they are agreeing to release the lien.  This is what it is about.  This is simple, and a non-issue, in a straight resale because why would they not release the lien when they are getting all of their money.  The fact that the bank will not be getting all of their money back is the reason that it is more complicated to get the bank to release a lien on a short sale.

When an offer comes in on a short sale, the negotiation is between the buyer and the seller.  If the buyer and seller can both agree on the price and terms both parties sign the contract and are bound to the terms of the agreement.  The transaction then proceeds.  The only difference is that an extra layer is added because you have to get the bank to agree to release the lien.  That is what makes a short sale take longer.

We have seen short sale offers listing the bank as the seller.  This is not correct.  The homeowner is the one who has to agree to sell the property.  The homeowner is the one who is selling the property.  Not the bank.

We have seen short sale offers (got one this week) where the buyer wants to submit the offer, but refuses to deal with the seller.  They want the seller to submit the offer to the bank because "they want to negotiate with the bank" and "they don't want the seller to decide what price the bank will accept"  This is wrong.  The seller is who the sales contract is with.  It does a buyer no good for the seller to submit an offer to the bank that is not binding on the homeowner who is the seller of the home.  A bank wants to see a legitimate CONTRACT (not an offer no one is bound to).  Without a contract, there is no deal to release a lien for.  The seller is not bound in any way to the deal and can sell the property to any buyer who comes along.  Why would a buyer want to submit an offer to someone who is not even the seller and wait for them to respond when the real seller can enter a contract with someone else to sell the property?  We don't have the answer to this.  We think it's because the potential buyers simply don't understand what a short sale is.

Make sure you are educated!  If you would like to buy a short sale, make sure your agent is a specialist and is well versed in the way a short sale works and very comfortable with the process.  We can help you with any short sale in the Jacksonville real estate market.  Let us know if you need help.

If you can no longer make payments and need to sell your home, give us a call.  Representing a seller in a short sale is a very complicated, detailed job.  Make sure you are giving it to someone who knows how to handle this type of transaction successfully.  Winging it is not an option on a short sale.  You can contact us here.