Pleasanton short sale webinar 12 19 2012 v2
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  • 1. Short Sales – Start to FinishPresented by Lynda Divito – Redfin’s Bay Area Listing SpecialistDecember 19, 2012Follow: @RedfinbayareaLike: http://www.facebook.com/RedfinbayareaSlide 1 of 21
  • 2. The Life of a Short Sale ● How to grow a short sale ● Getting a short sale listed ● Picking your team ● Searching for short sales ● Market statistics ● Negotiations and research ● Sit and wait, finally explained ● Getting a loan ● Home inspections and warranties ● Getting a clean titleSlide 2 of 21
  • 3. What is a short sale? ● A short sale allows the homeowner to avoid foreclosure, minimize financial damage and move on from a burdensome, unaffordable mortgage. ● In many cases, a short sale allows the borrower to qualify for a new mortgage in just 24 months, as opposed to five years or more after a foreclosure. ● A trained real estate agent can negotiate a short sale with your lender if you have three qualifications. ► First, you must show some type of financial hardship. ► Second, you must have a monthly shortfall, meaning your monthly expenses are greater than your monthly income. ► Finally, you need to prove that your debts are greater than the value of your assets (certain investments, property, etc.)Slide 3 of 21
  • 4. How to Grow a Short Sale ● Supply vs. Demand ● 80/20 Loans ● HELOCS (disappearing money) ► Recourse in a Non-recourse state ● Market crash ► 50% drop in home values ● Making the decision to short sale ► Loan modifications ► Bankruptcy ► Credit ImpactSlide 4 of 21
  • 5. What Qualifies as a Distressed Property? ● Property that is in poor physical condition ● Property that is or will soon be in some stage of the foreclosure process ● Property that has an owner who is experiencing a period of financial instability ● Property on which the mortgage obligation exceeds its current value, causing its owner to sellSlide 5 of 21
  • 6. Market Trends ● 2012 ► 34% sub prime in foreclosure or default ► 7% prime in foreclosure or default ► 15.77% FHA in foreclosure or default ► 8.72% VA in foreclosure or default ► 5,881,000 mortgages are not being paid in 2012Slide 6 of 21
  • 7. Foreclosure Activity and 30-Year Interest Rate – Pleasanton, CA Slide 7 of 21
  • 8. Foreclosure Activity by Month – Pleasanton, CASlide 8 of 21
  • 9. Getting a Short Sale Listed ● Seller’s mindset ► Home maintenance ► HOA dues ● Bank’s attitude ● Listing agent’s struggle ● Pricing strategies ► Some things are too good to be true ● Approval Notice complications ● Trustee’s sale dateSlide 9 of 21
  • 10. Getting a Short Sale Listed● Verifiable financial hardship● Preparing of all financial paperwork for the ‘short sale package’. Bank statements, w2’s, employment history, hardship letter, frank Dodd certification, 3rd party authorization, arms length agreement, ect● Prep the listing and put on market● Negotiate short sale. If it’s a HAFA short sale, the bank gives approval before the house is listed and the bank sets the listing price.● The bank gives approval and a date to close by so the buyer/buyers agent has to be ready to close sometimes very quickly.● The seller walks away with absolutely no proceeds from the sale of the home at all…HAFA offers a 3K incentive for moving out but the banks cover all closing costs, commissions and debt forgiveness.Slide 10 of 21
  • 11. Understanding Cause of Distress● Verifiable financial hardship ► Loss of employment ► Reduced income ► Business failure ► Damage to property ► Death of a family member ► Illness ► Many others… ► It is estimated that most American families can only maintain their current living expenses for 30 days or less when income is interrupted for any reasonSlide 11 of 21
  • 12. Picking Your Team● Qualifying Your Realtor ► Experience, education, designations ► What does it mean to you?● Qualifying Your Lender ► Rates are just the beginning ► New lender pay compensation● Partner Lenders ► A hidden valueSlide 12 of 21
  • 13. From the buyers perspectiveSlide 13 of 21
  • 14. Searching for Short Sales● Active, AWC and Pending ► What do they really mean?● Accurate and reliable websites● AWC, Pending and Sold stats● Pre-foreclosure lists ► What are they?Slide 14 of 21
  • 15. Moving Forward…● Writing the Offer ► Tips, tricks, pointers ► Low and Low Method● Youre Under Contract, Now What? ► Sit and wait… and wait… and wait… ► Do an Early Home Inspection ► Revisit the home, occasionally● Approval Process ► What’s involved? ► Approval Letters and Transferability● What If… ► House gets trashed ► Critical items are missing to qualify for the loan ► What leverage do you have?Slide 15 of 21
  • 16. Sit and Wait, Finally Explained!● The short sale approval process (chart)● Parties involved (chart)● Types of liens● Getting updates ► Frequency and quality● Approval NoticeSlide 16 of 21
  • 17. Short Sale Parties Short Sale Bank #1 Title Customer Short Sale Litigation Care Center Department Escrow Officer BPO Mortgage Appraiser Insurer Escrow Assistant Mortgage Negotiator Investor #1 Sellers Bank #2 Mortgage Investor #2 Customer Short Sale Attorney Litigation Care Center Department Closing Buyers Department BPO Mortgage Home Buyer’s Appraiser Insurer Appraiser Inspectors Lender Mortgage Negotiator Investor #1 Underwriter Mortgage Investor Investor #2 Guidelines Closing DepartmentSlide 17 of 21
  • 18. Short Sale Approval ProcessSlide 18 of 21
  • 19. Getting a Loan● #1 Question ► Credit inquires and FICO scores● Pre-qualification vs pre-approval● Changing underwriting guidelines● When to lock your interest rate ► Short sales● Loan Options ► Conventional, FHA, Rehab, HomepathSlide 19 of 21
  • 20. Home Inspections● What to look for yourself● Missing components ► Big ticket items (AC, cabinets, appliances) ► Deliberate damage & safety (electrical)● Severe neglect● What an inspector won’t find and won’t test ► Hidden defects ► Untested system defectsSlide 20 of 21
  • 21. Home Inspections● Most common concerns ► Plumbing ► AC ► Maintenance ► Termites ► Fresh PaintSlide 21 of 21
  • 22. Home Warranties● What is a home warranty?● What is covered?● What is excluded from coverage?● Benefits of a home warrantySlide 22 of 21
  • 23. Home Warranties● Managing the risk of unexpected repairs● As-is, what can be covered?● Pre-existing conditions ► Known ► Unknown● Home inspections and warranty coverageSlide 23 of 21
  • 24. Title and Closing● Getting a clean title ► Last minute liens ► Title insurance● Mortgage Electronic Registration System● Recording Process● Keys!Slide 24 of 21