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Short Sales For Real Estate Professionals

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Short Sale Presentation for Real Estate Professionals

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Short Sales For Real Estate Professionals

  1. 1. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />
  2. 2. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Introduction to<br />Short-Sales for the<br />Real Estate Professional<br />2009<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  3. 3. Objective<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />We want discuss:<br /><ul><li>Our mission to homeowners and the neighborhoods in which they live
  4. 4. Background and key statistics on delinquencies and workouts
  5. 5. Real estate professional’s prospective on current environment
  6. 6. Retention and Liquidation Workout Options
  7. 7. Short-Sales</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  8. 8. Our Mission<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />MAXIOM is dedicated to:<br /><ul><li>Supporting early intervention efforts to help homeowners stay in homes they can afford and want to keep
  9. 9. Avoiding foreclosure when homeownership retention is not possible
  10. 10. Reducing credit losses while maintaining neighborhood values
  11. 11. Reducing the percentage of homeowners who go to foreclosure without ever making contact with their servicer</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  12. 12. Personal Communication<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />What percentage of loans are placed into the foreclosure process without any personal contact being made with the borrower?<br />5%<br />10%<br />25%<br />35%<br />50%<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  13. 13. Background<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br /><ul><li>Loan modifications have been the workout of choice for the last several years
  14. 14. As property values decrease, there will likely be an increase in the number of short-sales which will keep REO inventories down and preserve neighborhoods</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  15. 15. Background<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br /><ul><li>It’s becoming more difficult to negotiate short-sales due to the frequency and size of junior liens
  16. 16. Many real estate professionals are new to the short-sale experience
  17. 17. As short-sales increase, the default servicing industry must re-develop relationships with all parties</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  18. 18. Key Statistics<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Delinquent Loan Inventory<br /><ul><li>30-days delinquent at record number
  19. 19. 90-days or greater continue to grow
  20. 20. Foreclosure sales at all time high</li></ul>Environment<br /><ul><li>Housing prices/valuation falling in many areas of the U.S.A.
  21. 21. Housing stock with high inventory
  22. 22. Tight money supply and credit market makes it harder to obtain financing</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  23. 23. Key Statistics<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Data<br /><ul><li>Completing high number of workouts a year
  24. 24. 75% of Loan Modifications ‘cure’ for good
  25. 25. 70% of late stage repayment plans fail versus 40% of early stage
  26. 26. Servicers report that less than a 50% contact rate with borrowers that went to foreclosure sale
  27. 27. Roper survey showed the majority of borrowers do not contact their Servicers, but are willing to talk to a financial counselor</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  28. 28. Workout Options<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Retention:<br /><ul><li>Full or partial reinstatement
  29. 29. Short-term or long-term forbearance
  30. 30. Repayment plan
  31. 31. Loan modification
  32. 32. FHA partial claim / MI claim advance</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  33. 33. Workout Options<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Liquidation:<br /><ul><li>Full payoff
  34. 34. Make whole preforeclosure sale
  35. 35. Short-sale
  36. 36. Deed-in-Lieu of foreclosure
  37. 37. Delinquent loan assumption</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  38. 38. What Is A Short-Sale?<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />A short-sale is when the net proceeds from the sale of a property are insufficient to cover the mortgage obligations and closing costs and the seller is unwilling or unable to cover the variance. <br />Property Value $350,000<br />Total Amount Due – 1st TD $420,000<br />Sale Price $340,000 (97% of Value)<br />Brokerage fees & closing costs ($30,600) (9% of Sale Price)<br />Less homeowner paid costs $1,000<br />Payment to $50K – 2nd TD ($3,000)<br />Net Proceeds $307,400 (88% of Value)<br />Shortage/Loss ($112,600)<br />20% MI Claim (100% of claim) $84,000<br />Shortage/Loss ($28,600)<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  39. 39. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Parties in Typical Real Estate Transaction<br />Agents<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  40. 40. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Parties In A Short-Sale<br />Agents<br />Seller<br />Loan<br />Servicers<br />Mortgage<br />Investor<br />Mortgage<br />Insurer<br />Buyer<br />Housing Counselor<br />Primary<br />Pool<br />Junior<br />Lienholders<br />Buyer’s<br />Lender<br />HOA <br />Liens<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  41. 41. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Short-Sale Process<br /><ul><li>Short-sale closes
  42. 42. Seller contributes to minimize the loss based on ability
  43. 43. Seller avoids foreclosure
  44. 44. The investor and the MI company minimizes losses
  45. 45. Real estate professional closes an additional sale
  46. 46. Neighborhood avoids the stigma of foreclosure</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  47. 47. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who Benefits From A Short-Sale?<br />MI Company<br />Neighborhood<br />Servicer<br />Investor<br />Homeowner<br />Real Estate Professional<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  48. 48. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who Benefits From A Short-Sale?<br />Homeowner<br /><ul><li>Satisfies the debt for less than the full amount
  49. 49. Avoids a foreclosure on credit record
  50. 50. Avoids the pursuit of a deficiency or a deficiency judgment
  51. 51. May avoid reporting of discharged debt to the IRS</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  52. 52. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who Benefits From A Short-Sale?<br />Investor<br /><ul><li>Potentially reduces losses over the insured amount
  53. 53. Avoids an REO and the expenses incurred</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  54. 54. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who Benefits From A Short-Sale?<br />Real Estate Professional<br /><ul><li>Enhances relationships with buyers and sellers
  55. 55. Increases listing inventory
  56. 56. Increases sales activities</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  57. 57. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who Benefits From A Short-Sale?<br />Servicer<br /><ul><li>Enhances relationships with Investors
  58. 58. Avoids an REO on portfolio loan
  59. 59. Potential investor incentives for completed Short-Sales
  60. 60. Avoids expensive servicing costs incurred on delinquent loans
  61. 61. Enhances goodwill for future business</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  62. 62. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who Benefits From A Short-Sale?<br />MI Company<br /><ul><li>Reduces claim losses
  63. 63. Avoids an REO and the expenses incurred</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  64. 64. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who Benefits From A Short-Sale?<br />Neighborhood<br /><ul><li>Keeps housing values from declining
  65. 65. Allows existing homeowners to keep refinance efforts
  66. 66. Reduces housing inventory</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  67. 67. Short-Sale Preparation<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Pre-listing interview with homeowner/ seller<br /><ul><li>Does homeowner really want or need to sell?
  68. 68. Discuss other workout options
  69. 69. Obtain payoff statement
  70. 70. Determine all contingencies at time of listing (subject to lender approval, etc.)
  71. 71. Advise the seller of their financial participation in the sale is a condition</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  72. 72. Short-Sale Preparation<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Pre-listing interview with homeowner/ seller<br /><ul><li>Time is of the essence
  73. 73. Start with first trust deed
  74. 74. Communicate with junior lien holder(s) and know their payoff requirements
  75. 75. What is required by the seller’s servicer (loss mitigation department)
  76. 76. See workout documentation</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  77. 77. Documents For A Short-Sale<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />General workout documentation<br /><ul><li>Hardship letter
  78. 78. Seller financial statement
  79. 79. Statements – bank, investments, retirement, etc.
  80. 80. Recent pay stubs or P&L/Tax returns if self-employed
  81. 81. Estimated Seller Closing Cost / HUD-1
  82. 82. Complete purchase contract signed by all parties
  83. 83. Buyer FNMA DO/DU or AUS equivalent approval
  84. 84. Buyer Proof of Funds</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  85. 85. Documents For A Short-Sale<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />General workout documentation<br /><ul><li>Mortgage statements for all mortgages
  86. 86. Separation/Divorce agreement or court documents
  87. 87. Comparative Market Analysis with model match homes sold, REO, pre-foreclosures, cancelled, and expired
  88. 88. HOA & Property Management Information
  89. 89. Real estate professional visual inspection with repair estimates</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  90. 90. Short-Sale Requirements<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Interior Broker Price Opinion (BPO) with the 90-day “as is” marketing timeframe<br /><ul><li>Sale is always “as is” condition
  91. 91. Will accept more recent comparable sales to support current value</li></ul>Net proceeds required<br /><ul><li>Percentage of interior BPO value
  92. 92. Closing costs and brokerage fees
  93. 93. Includes any payment to junior lien-holder(s)</li></ul>Seller’s financial participation in the transaction based on ability<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  94. 94. Short-Sale Obstacles<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br /><ul><li>Seller’s financial participation in seller’s closing costs
  95. 95. Have better or recent comparable sales available
  96. 96. Obtaining buyer loan approval through reputable lenders
  97. 97. Must be arms length transaction – notarized affidavit if unclear
  98. 98. Know who the owner (investor) of the loan note
  99. 99. Present market value offers
  100. 100. Negotiations with all junior liens holders
  101. 101. Clear, easy to read documentation</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  102. 102. Short-Sale Obstacles<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br /><ul><li>Buyer on the Final Settlement Statement (HUD-1) must be same buyer on short-sale lender approval
  103. 103. Seller receives no rebate, proceeds, or commission from sale
  104. 104. Include Power of Attorney when sending HUD-1 to servicer
  105. 105. HUD-1 must be “Certified True Final”</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  106. 106. Certified True Final<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />Who certifies the Final Settlement Statement (HUD-1) as “Certified True Final”?<br />Servicer<br />Closing Agent<br />Real Estate Broker<br />Investor<br />Title Company<br />Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  107. 107. Short-Sale Obstacles<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br /><ul><li>Promissory note must be prepared by Freddie Mac
  108. 108. Executed promissory note must accompany HUD-1
  109. 109. Do not reduce seller cash contribution for closing cost
  110. 110. Changes on HUD-1 to purchase price or buyer not able to perform will negate the short-sale</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  111. 111. Resources<br />MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br /><ul><li>Reinforce short-sale as a workout option with servicers
  112. 112. Continue to educate homeowners to avoid foreclosure
  113. 113. Retention options
  114. 114. Liquidation options
  115. 115. Real estate professional competency development
  116. 116. Training
  117. 117. Educate
  118. 118. Seminar / Workshops
  119. 119. Conferences
  120. 120. Reference materials</li></ul>Source: Freddie Mac<br />Copyright © 2009 Maxiom California Realty All Rights Reserved <br />
  121. 121. MAXIOM<br />California<br />Realty<br />Maxiom Agents. Maximum Results.<br />

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