Preforeclosure Help Desk

Secrets to Success

2007-11-27T09:15:00.000-08:00

I've talked with a lot of agents that have been trying to get short sale listings. I have also talked with distressed borrowers that are trying to find the right agent to help them. Based on feedback, what is the best way to market to this group.

Many agents have subscriptions to preforeclosure websites or research homes that are in lis pendins. Then they send them a mailer telling them how they can get their home listed. The problem is the distressed homeowner has received over 100 mailers so what are the odds they are going to choose yours. If you are going after homes in lis pendins, stop by their home in person. Provide them with resources and success stories on how you've successfully closed short sales in the past. The most successful realtors I've talked to, take this approach. However, many of them don't provide resources and visible information. If you provide this then you have a leg up.

Another approach to think about taking is getting the distressed borrower before they go into lis pendins. This is the marketing side of the equation. I have never met a real estate agent that does this personally but I read where a realtor in California is partnering up with HUD approved preforeclosure groups. These groups meet with distressed borrowers before many of them even go into lis pendins. Stop by an office and see if there is a way you can partner up with an individual in these groups. Chances are, they can send you business.

The number one thing to remember is to make yourself different. Provide informational resources and success stories to get the client.

FIRPTA and the Short Sale

2007-11-13T18:44:00.000-08:00

An interesting issue arose on a closing we had recently with regards to FIRPTA and short sale. FIRPTA is a capital gains tax on foreign nationals who sell their homes. Those that qualify for the FIRPTA withholding are selling an investment property or selling their home for more than $300,000. The withholding is 10% which is forwarded to the IRS and then reimbursed back to the seller after a potential withholding.

FIRPTA gets tricky in the short sale. A short sale can only be approved if the seller is making no money on the sale. However, if there is additional money being held that would eventually be reimbursed back to the seller, the lender won't approve it (because the seller would eventaully get the withholding back). The lender won't deal with the withholding because they don't want the extra work in getting additional money back. So who sends the withholding to the IRS? In the closing we handled, the realtor fronted her commission in place of the withholding. This is risky on two fronts. First, the realtor could wait up to a year to get the money back and, secondly, they may not get all their money back.

Always, keep this in mind where helping a distressed borrower out with a short sale. If they are a foreign national, there may be nothing you can do.

Foreclosure Activity Rises Again in Third Quarter

2007-11-01T20:09:00.000-07:00

RealtyTrac, a data provider and an online marketplace for foreclosure properties, released its Quarter Three-2007 U.S. Foreclosure Market Report on Thursday, which shows the number of foreclosure filings jumping 30-percent between the second and third quarter—and nearly 100-percent when compared to last year.

When looking at the actual number of foreclosure filings—which include default notices, auction sale notices and bank repossessions—RealtyTrac says nationwide there were 635,159 foreclosure filings during the third quarter involving 446,726 individual properties.

“August and September were the two highest monthly foreclosure filing totals we've seen since we began issuing our report in January 2005,” said James J. Saccacio, chief executive officer of RealtyTrac. “Although not all areas are being hit as hard as others, the rise in foreclosures is quite widespread, with 45 out of 50 states documenting year-over-year increases in the third quarter. Given the number of loans due to reset through the middle of 2008, and the continuing weakness in home sales, we would expect foreclosure activity to remain high and even increase over the next year in many markets.”

A regional breakdown from RealtyTrac indicates that the states of Nevada, California, and Florida topped the firm's list of states with the highest foreclosure rates for the third quarter. Meanwhile, California, Florida and Ohio ranked the highest in the nation for having the most foreclosure filings during the third quarter.

Source: DSNews.com

Report: Pre-foreclosure filings triple in September

2007-10-28T19:05:00.001-07:00

Pre-foreclosure filings in Florida went up by more than 3,000 in September, Default Research Inc. reported Tuesday.
Florida lis pendens filings, when the bank first files the paperwork on a defaulted payment - the first step in the foreclosure process -- rose from 1,541 in September 2006 to 4,872 in September 2007, according to Default Research. Of those filings, more than 13 percent were condominiums, says Serdar Bankaci, Default Research president and CEO, in a prepared statement.
"Many of these were speculators trying to buy properties and turn a profit, but they got trapped in the market," Bankaci says. "Foreclosures will likely continue to escalate at least for 12 more months as the market and mortgages adjust."
Orange County had 376 lis penden filings in September, a significant increase from the 127 filings in the same month the year prior, the report says.
Default Research also reported Broward, Miami-Dade and Palm counties notched the highest total pre-foreclosures in the state.
Pleasant, Pa.-based Default Research provides clients with pre-foreclosure information.
Source: Orlando Business Journal

E for Effort

2007-10-24T08:51:00.000-07:00

One thing that a lender will look for when determining a short sale or workout option is the effort of the borrower to avoid the situation.

I recently had a realtor contact me to say that she could not get the lender to agree to a workout option. The lender told the realtor that her client had not made a legitimate effort to avoid her situation. The realtor told me that her client had made every effort possible. After some more digging on my part, I found out the reason for the preforeclosure was the client had not made any money in a few months. The client was involved in a commission only job where the commissions were high but infrequent and the client had not made a sale in 6 months. When I asked the realtor what other avenues had been taken to bring in income, she said that the client had a job (the commission only) and was not looking for part time work.

The above story is a combination of ego and laziness. The lender tells you what to do and the better impression you make, the better. If you have a job that is commission only and you haven't made the sale, use every effort possible to make some type of money. If that means flipping burgers, then do it to show that you are making an effort to remedy the situation. If the lender feels you don't make the effort, then the possibility of the workout diminishes.

Three Other Points To Remember About Short Sales

2007-10-19T09:55:00.000-07:00

There was an article in the Orlando Sentinel on October 14, 2007 called "A Short Sale Can Make Sense If You Are A Desperate Homeowner." The article tackles the basic concept of what a short sale is and when you should actually approach the lender about a short sale. As stated before, always contact the lender when you know you may have an issue with making your mortgage payments. While a short sale may not be the option, there may be other workout alternatives.

One point this article brought to the forefront, which is very important, are points to discuss with the lender (outside of the typical short sale package). The author, Tamara E. Holmes, states:

"Get it in writing. Make sure the lender agrees in writing that the short sale will absolve all debts."

"Protect your credit rating. Ask the lender how it will report the short sale on your credit report."

"Get professional tax advice. Short sales often have tax repercussions because lenders can claim the forgiven debt as income that they provided you."

The above points are good reminders to make sure you have all your bases covered when doing the short sale.

Temporary Solutions

2007-10-17T10:25:00.000-07:00

There are many workout options that a lender will present to you if your loan default is the result of a temporary situation. Payment plans and loan forebearance are a couple of options that the lender may propose. Loan modification is another option. While I am not an expert in this field as it pertains workout options, I thought this was a good website to pass along that may help answer those questions if your lender decides loan modification may be your best option. Check out this website from Housing and Urban Development and it should take you in the right direct.

Two Liens from Same Lender

2007-10-16T17:43:00.000-07:00

Many distressed borrowers have a first and second mortgage that must be involved in the short sale. The second lien must be released before you move to the first. One point of frustration that realtors bring to my attention is that they must call two separate phone numbers (one for each lien) to get a release. Most lenders are divided into separate entities when it comes to junior liens (second mortgages). When you go to get the second mortgage released, be prepared to deal with a completely different group when you move to the first lien. You will never have dealings with loss mitigation group for two separate liens (unless it is a very small lender). So even though you may have a good relationship with the specific lender, be prepared to deal with two separate groups even though it is the same lender.