Does this addition to HAFA make you happy?  In general, the terms are similar to the Treasury's short sale program that is supposed to expedite the review and approval of short sales by pre-approving the seler for the short sale and establishing the amount the lender will accept at the time the Short Sale Agreement (SSA) is entered into.  In other words, you qualify the seller and get the amount needed from the sale at the time you list the property.  However, there is a difference with Fannie and Freddie.  With the Treasury's program, the lender considering the short payoff may tell the Realtor how much they will settle for.  For those of you who do a lot of short sales, they will specify the amount they want to be paid at closing as shown on line 504 of the HUD.

In the Fannie and Freddie program, the servicer is prohibited from telling the seller, buyer and Realtor what this amount is.  Instead, the servicer will establish an asking price based on the condition of the market in the area.  Who is better at setting an asking price: (1) the Realtor who works there every day or (2) a Loss Mitigation negotiator with files from all over America?  When the contract is submitted, you hope that this asking price results in the Minimum Acceptable Net Proceeds (MANP).  If you do HAFA short sales, you have to love the acronyms :-) .  

Having the Broker Price Opinion or appraisal already done at the time the offer is presented is a benefit, and the servicer does not tell the Realtor what the acceptable net proceeds are in most of the non-HAFA short sales (except for FHA short sales where you know to the penny).  So, in this manner the program gives a benefit of the BPO already being done and the same result as the old fashioned short sale where you play "guess again" on the amount the lender wants.  But, it could have been better if Fannie and Freddie followed the Treasury's lead.

The other bad news is that the servicer tells the Realtor how to market the property, and supervises the marketing plan.  Again, who knows better what will work (1) the Realtor who has developed an effective program or (2) the loss mitigation negotiator who just took the HAFA training course.   The guidelines mandate that the marketing program includes " a "For Sale" sign, Multiple Listing Service(s), flyers, print ads, open houses as well as appropriate usage of the internet;"  Few will argue with a for sale sign and putting it in the MLS, but open houses work less than 2% of the time according to NAR statistics.  Print ads have dramatically fallen because they are not that effective.  However, if you want to comply with the Short Sale Agreement you will do these things, because the agreement can be cancelled if you violate it.

Another problem is that a seller cannot be considered for a Fannie or Freddie HAFA short sale if a foreclosure is pending that could sell the property in 60 days, or if the state laws would allow a foreclosure in the next 60 days.  States like Texas can go from a dead start to a full foreclosure in less than 60 days, so does that mean you cannot do a Fannnie or Freddie HAFA short sale in those states?

There are some great benefits.  The servicer must respond to an offer within 10 business days.  That beats the months of waiting we do now.  The servicer must allow at least 45 days to close the sale after approval, with a maximum of 60 days.  Also the foreclosure must be postponed during the sale period, wich is at least 120 days. 

The financial incentives are similar. The seller gets $3,000 in moviing assistance.  The servicer gets more under Fannie and Freddie than the Treasury by receiving $2,200 for an approved short sale, as opposed to $1,500 for the Treasury. 

So, like everything else in short sales, there is some good news and some bad news.  But, at least there is a program that provides some tools that a savy Realtor can use to help a borrower in trouble.

If you need an encyclopedial of information on short sales, go to www.ShortSalesR.us and for the complete  Fannie Mae guidelines go to http://shortsalesr.us/FannieMaeHAFA.pdf and for the Freddie Mac guidelines go to http://shortsalesr.us/FreddieMacHAFA.pdf

How do you find the investor? You can ask the servicer. The Internet also provides an abundance of information. Many servicers will not tell you who the investor is, possibly because they do not want the investor to know how poorly they are processing your short sale request.  However, many servicers have rules that require them to furnish the investor’s information if the borrower/seller requests that information in writing.  Some commentators say that another way you can find the investor is to look them up in MERS, the Mortgage Electronic Registration System. 

Why do you want this information? When the servicer knows that their client, the investor, will be looking into how the short sale is being processed, the servicer wants to make it look better.

After signing a contract you will need a home inspector to go through the property in detail to give you a report on any problems.  You will also hire a termite inspector to determine if the property has termites, or to certify that the property is free of termites.   If the property has a well and septic system, you may need inspectors for those features.  If the property has structural issues, you might need a structural engineer.    There are all sorts of other issues that may come up, so you may have even more professionals that you need to hire. Then there are utility services such as gas, electricity, water, trash, telephone, cable TV, and Internet. If you move from outside the Triangle, you will need to reestablish the network you had to provide all the services you need. 

There’s always the Yellow Pages and the Internet, but you may prefer a personal recommendation from your Realtor who should have learned what you value in someone who provides a service. 

For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/first-time-homebuyers-need-service-providers.

Federal legislation in 2007 allows a homeowner to pay less than what is owed on their mortgage and not pay income tax on the “short” amount due the bank, under certain situations. 

To get a short sale approved, you have to find every way to negotiate, and do not give up with the first “no.”  Look at the seller’s monthly mortgage statement to see if there is a mortgage insurance premium.  If so, there is a guarantor that will take some of the loss on this loan.  Even if there no mortgage insurance premium on the monthly statement, the lender may have bought mortgage insurance and the premium is being paid by the lender, typically covered by a higher interest rate charged to the borrower in return for a “no pmi” loan.

The loan I was negotiating had a guarantor, i.e. the bank was not going to take the loss, the mortgage insurance company was, and the guarantor would be the company that was “short” so I contacted the guarantor and negotiated with the loss mitigation expert there.  When the guarantor said they would approve the sale, the bank had to go along with it.  If at first you do not succeed, try and try again.  If the bank turns you down, see if there is a guarantor, or at least a supervisor to review the decision.

For a more detailed discussion on this topic, please go to http://shortsalesr.us/featured/short-sale-with-a-guarantor/

When you purchase homeowners insurance, you buy a package that combines several types of insurance into a single policy.  You can purchase additional coverages and riders also.  There are a lot of choices, so you should have an insurance agent explain the policy in detail to ensure it offers adequate protection for all of your needs.

First time homebuyers need to be advised that they should purchase a policy which includes replacement cost coverage.  Replacement cost is the amount it would take to replace or repair your home with materials of similar kind and quality, without deducting for depreciation. 

A first time homebuyer should shop around when purchasing homeowners insurance.  It is possible to get different rates from different agencies.

For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/homeowners-insurance-for-first-time-homebuyers.

The way you express that is in the hardship letter.    Some seminars give you a list of hardships, but do not limit your thinking to a simple list.  Anything that causes a change in the financial condition from when the loan was taken out which results in the inability to pay the monthly payments and the impossibility of bringing the rest of the money owed to the closing of the sale is a financial hardship.   

The owner should write it personally, with enough detail that the loss mitigation negotiator can feel the pain.  The letter needs to describe what has happened to create the financial setback.  You need explain why, in vivid detail, so that a hardened loss mitigation negotiator who reads these letters all day long can feel sympathetic to your client. 

Do not stop with the description of the problem.  Explain what you have done to try to eliminate the problem, deal with it, or make it better.   You do not want the negotiator to just see that your client has fallen down, you want to describe the efforts to get back up again.

At the end of the letter, tell the negotiator that the owner wants to sell the house so that they can pay back as much of the debt as possible.  The hardship letter has to be signed by the seller, and preferably by both sellers.

This should be on top of the short sale package, setting the stage for why this owner deserves to be allowed to pay less than what is owed to the bank.   It is probably the most important document in the entire package, so give it the attention it deserves.

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-dos-and-donts/do-a-compelling-hardship-letter/

Closing can occur anywhere, but it normally happens at the closing attorney’s office.  You will sign multiple copies of the the HUD statement.  You will also sign the loan documents for your mortgage, starting with the note that says you will pay back the loan, how much the loan is and the interest rate.  After the attorney reviews all the paperwork with you and you sign everything, you will give the attorney the certified check that you brought to pay your down payment and closing costs.  The closing attorney will give you copies of all the documents.

When everything is signed and all the lender requirements are satisfied, your lender will wire the money to the attorney for your mortgage.  Most of the time you will receive the keys to your new home, so you walk out of the closing with the keys to your first home. However, the home is not technically yours until the deed has been recorded at the courthouse, so some sellers, such as relocation companies and banks,  will not let you have the keys until after confirmation of the recording.

Once you complete this step, you are now a homeowner.   Congratulations!

For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/closing-the-purchase-of-your-first-home.

Some Realtors submit the financial information to the lender early in the process, to see if the seller qualifies for a short sale. The seller’s financial information can be fed into a computerized review system to see if the seller qualifies for a short sale.  In some situations, the loss mitigation department will review the financial situation before you have an offer and determine that the seller qualifies for a short sale. This can shorten the review process once an offer is presented.

The last thing you want to do is to give the home equity lender a financial statement showing that the borrower no longer is able to qualify for the home equity line of credit.  So, if you are going to do the short sale, you have to time it right.

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-dos-and-donts/dont-take-away-the-owners-lifeline/.

There are two fundamental considerations, for all buyers:

-         Can you afford the home now?

-         Will you stay in it long enough to justify the initial costs?

First time homebuyers have two huge advantages right now:

-         You don’t have to sell another home first!

-          You can get up to $8,000 from the government!  Not a loan, but free money!

So, if you can buy now, should you?

-         Larger than usual inventory of homes for sale means more to choose between

-         Low interest rates mean you can get more home for the same money

-         A Buyers Market means you have more clout than in a Sellers Market

That adds up to making this an unusually good time to buy a home anywhere from Cary to Wake Forest or any other part of the Triangle in North Carolina.

For a more detailed disuccion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/should-first-time-homebuyers-buy-now.

You need to evaluate the alternatives. You can let the bank foreclose. You might consider giving the bank a deed in lieu of foreclosure.  You can try a loan modification.

A short sale is not an easy process. You have to get the buyers to be patient, as the lenders may take a while to review the offer.  One oddity of this process is the real negotiation is done with the bank and lien holders. Normal negotiations in real estate sales are between the buyer and the seller.

For a more detailed discussion on this topic, please go to http://shortsalesr.us/for-sellers/.

Referrals also come from other agents. In this case, a referral fee is paid to the referring agent if the lead results in the sale of a property.

If you are trying to find the right Realtor, ask a friend who has bought a house in Cary, Raleigh, Apex or anywhere else you want to live in the Triangle area of North Carolina.   If you are a first time homebuyer who is new to the area, find a team that specializes in first time homebuyers so they can give you the extra care you deserve.

For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/referrals-benefit-first-time-homebuyers.

In North Carolina, the Short Sale Addendum to the Listing Agreement says “If a foreclosure or other judicial proceeding is filed with respect to the Property, although Firm may continue to solicit and negotiate offers to purchase and contact, communicate with, obtain information from and supply information to Lienholders,  Firm may no longer negotiate the terms and conditions of a Short Sale with Lienholders, as such negotation would constitute the practice of law.”  Other states have similar interpretations of the line between what a Realtor can do and the practice of law. 

If you are not licensed as a lawyer in the state where the property is located and where the client lives, you need to know about the rulings that may restrict what you do in negotiations when a foreclosure has been filed.  One other pitfall to avoid is the regulations on debt counseling. If you charge the seller a fee that is not contingent on the closing of the sale, it can be argued that you are doing debt counseling.

How do you stay out of trouble?  Follow the wording in your forms.  How do you find the line?  Talk to your broker in charge.  You may also want to talk to an attorney, particularly if your firm has one on retainer. 

For a more detailed discussion on this topic, pelase go to http://shortsalesr.us/short-sale-dos-and-donts/dont-practice-law-unless-youre-a-lawyer/.

As the buyer, you must stay on top of gaining loan approval, providing required information quickly, paying required bank fees, and keeping in touch with your lender.  Your agent will schedule the inspections called for by the contract and help you draft a repairs request.  You will need a closing attorney, who will review the contract, initiate a title search, order a survey (optional), work with you to schedule the closing meeting, work you’re your lender to properly record all related costs, conduct the closing meeting including explaining lots of documents, record the deed, answer questions, and an abundance of other services.  You will need to select a company to provide home owner’s insurance a couple weeks before closing, in order to allow the attorney and the insurance agent to communicate.  At least a week before closing you will need to contact appropriate utilities and arrange for the electric, water, gas, cable, and other services to be turned on in your name.

Think of moving from the point of signing the contract to a successful closing as a project, and select a Buyers Agent who will act as a good project manager – one with the communication skills, work ethic, and attention to detail to handle all the things that come up. 

For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/getting-a-first-time-homebuyer-from-contract-to-closing.

Angie Turner is a paralegal with Clifton and Singer, one of Raleigh’s premier firms in the field of real estate law.  Here is what she has to say about the differences in closing a short sale and a regular sale:

“Short sale transactions are very different from standard closings. They require real estate professionals that understand the process, that can negotiate with the bank, and that can coordinate with multiple parties to complete the transaction.  One of the important parts of the short sale package that is submitted for the lender’s review is a draft HUD statement, in other areas called a closing statement.  The lender will determine whether to accept the short sale based upon the amount of the payment to the lender shown on the draft HUD statement.

The closing attorney’s responsibility is to provide fair and upfront pricing for the seller’s side of the draft HUD statement.  While the pricing for the seller’s side of the draft HUD statement is estimated, the estimates must be as accurate as possible.  Estimating the seller’s fees is often difficult due to the lack of a closing date and other variables.  If the seller or closing attorney is in doubt about the estimated fee, the closing attorney’s office should err on the high side because the bank will be unwilling to accept a higher fee later.  In other words, if the bank settles for a certain amount as a full payoff of their loan, you do not want to go back to them with less money being paid to the bank than what was shown on the draft HUD statement.

The closing attorney’s office is also responsible for making changes to the draft HUD statement and submitting it to the bank and Realtor.  Often the HUD statement will be changed 15-20 times before the bank agrees to the short sale.

Once the negations are completed, the closing documents are signed, and the keys have changed hands, the closing attorney’s job is far from over.  In order for the seller to give good title to the buyer, the deed of trust securing the loan must be canceled of record.  The

loan(s) paid off in a short sale transaction have numerous stipulations and precise instructions that must be followed exactly before the bank is willing to cancel its deed of trust.  Since the bank is taking less that a full payoff, they are even more difficult on the requirements for eliminating the lien on the property that was sold.  Therefore, after closing, the closing attorney is still working with the bank and meeting its requirements to ensure that the deed of trust is successfully cancelled.

Due to the additional requirements in completing a short sale, you will need to choose a closing attorney that is knowledgeable in short sale transactions.  You need a firm that is willing and able to work with you and the bank before you have even scheduled a closing.  For example, even before you have a sale approved, you will need to have a draft HUD statement to estimate the proceeds to the bank.  Also, you need a firm that will follow through with the numerous detailed tasks that occur after closing.”

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-dos-and-donts/select-the-right-closing-attorney-or-escrow/.

Be aware that there is a frequent response to this type of offer. The counterpart will take the best of both choices. If you are looking to close negotiations, give your counterpart a Package Option, but be sure you will be happy if they take the best of both choices.  A related concept is giving people two choices when you want to get a any decision.

For a more detailed discussion on this topic, please go to http://createagreatdeal.com/principles/techniques-tricks/the-package-option-trick/.

1. Homes on busy roads. Keep in mind that traffic will likely increase, not decrease, and roads may need to be widened in the future.

2. Homes close to industrial or commercial facilities. Some are definitely worse than others – homes within walking distance of shopping may actually be a great investment. Being next to hazardous waste sites might be the worst.

3. Flood zones. It is not always obvious by looking at a home – have your Realtor confirm whether or not the home is in a flood zone.

4. Flat out ugly homes. I’m sorry, but we’ve all seen them.

5. Most expensive home in the neighborhood. This may not turn out to be a big problem if the neighborhood might catch up over time – people adding on or even tearing down and building new.

There are other issues that affect resale value that you and your Realtor should consider.  The ones mentioned here are bad moves, so don’t do them.

For a more detailed discussion on this topic, please go to http://solonglandlord.com/first-time-home-buyer-dos-and-donts/warning-to-first-time-homebuyers-dont-make-these-bad-moves.

The first issue is how do you negotiate with all the liens.  Some of the people providing Realtor training say to negotiate with the last one first.  In other words, if you have a first loan and a second loan, find out what the second loan will settle for first, then negotiate with the first loan. 

You can also negotiate all of the debts at once.  The reason is that there is not a linear relationship between them.  How do you break a standoff? You have to know what is allowed under your local rules, the disclosure rules for lenders and the National Association of Realtors code of ethics.

When you get good at short sales, you can handle many liens at once and get them to a closing at the same time, and be able to avoid foreclosure at the same time.

For a more detailed discussion on this topic please go to http://shortsalesr.us/short-sale-how-to/short-sales-with-multiple-loans-and-liens/.

Internet Equals Information

We are in the Internet age. This means you have a golden opportunity to find out as much about the property and the person as you can before you start negotiating.  To learn about the property look to similar Internet sources and public records. In most states, the tax records will tell you when the property was purchased and for what amount. Use every bit of information you can to help your proposal succeed.

Just Chat

You need to get the formal disclosures to find out what is revealed about the property. But, there is an even better substitute for the required disclosure: just chat. Start with something personal about the real estate agent or yourself, just to be cordial. Then, once you are telling each other friendly stories, go on to the property and the client.

You Need to Know the Real Estate

Not only do you have to know about the property, you have to know the real estate market, in detail. Not just the market in general, but the portion of the market that the property is in.

You Need to Know the People

You have to know the personality type of the people involved. There are dozens of psychological treatises that have divided people up into different personality types. You need to know the ability of the other agent involved in the sale. An agent working on a first sale needs to be treated differently than a twenty year veteran.

For a more detailed discussion on this topic, please go to http://createagreatdeal.com/featured/become-powerful/.

To make the home more valuable, do some home improvements.  The most cost-effective improvements are carpet and paint.  Upgrading the light fixtures and the plumbing fixtures will keep your home looking current. 

The kitchen and master suite are some of the most important parts of the home for adding value because they are the parts of the house that are the focus of the buyers’ attention. 

If you want to get seriously involved in changing the house, you can add on a bonus room, additional bedrooms or additional baths.  If you finish off a basement or an attic, you might think that the value goes up by the same cost per square foot as the rest of the house but it usually does not.

Overbuilding the neighborhood is a concern if you are increasing the size of your home.  If all the other homes in your area are around 1,800 square feet, and you are increasing the size of your home to 4,000 square feet, you will have a hard time getting the money back for your improvement. 

If you are going to live in the home for an extended period of time, and you are going to really enjoy the improvement, you may not care if it adds equity. 

For a more detailed discussion on this topic, please go to http://solonglandlord.com/first-time-home-buyer-dos-and-donts/first-time-homebuyers-should-plan-for-becoming-first-time-homesellers.

The Internet provides an abundance of information but keep in mind the legal requirments.

In order to use the online services for Fannie or Freddie, you need written authorization from the borrower.  What if Fannie or Freddie are not the investor, which is a frequent even for luxury housing. Many servicers will not tell you who the investor is, possibly because they do not want the investor to know how poorly they are processing your short sale request.  However, many servicers have rules that require them to furnish the investor’s information if the borrower/seller requests that information in writing.  

Some commentators say that another way you can find the investor is to look them up in MERS, the Mortgage Electronic Registration System. It allows borrowers to see which company manages and owns their loan. The site was made public as part of The Helping Families Save Their Home Act. 

Why do you want this information? When the servicer knows that their client, the investor, will be looking into how the short sale is being processed, the servicer wants to make it look better.

For a more detailed discussion on this topic, please go to http://shortsalesr.us/short-sale-how-to/negotiate-short-sales-better-find-the-investor/.