| An awareness of the short sale offer from the bank's | | | | 6. The borrower's finances |
| view is a substantial edge in negotiating these deals. It | | | | The lending institution may ask for additional information |
| will help you very much in communicating with loss | | | | on the borrower's finances. You must be the go-to |
| mitigators and other short sale decision-makers. The | | | | person to get this information, collect it in the proper |
| better you understand these people the more likely | | | | documents, and get back to the bank in a timely |
| they will be to agree to your short sale offer. There | | | | manner. Just keep in mind the rule that your job is to |
| are 12 factors a bank or lending institution will take into | | | | be persistent and to make a short sale happen. |
| consideration for a short sale deal. | | | | 7. Mortgage insurance |
| 1. The amount of non-performing loans currently on | | | | Because of the intricacy arising of third-party investor |
| their books. | | | | participation, the issue of mortgage insurance should be |
| Banks consider loans to be assets. They continue to | | | | handled through the service lender. Just anticipate that |
| be listed as assets as long as payments are being | | | | there may be issues related to the mortgage |
| collected. If the monthly payments stop, that loan is | | | | insurance that will need to be handled by you. Your |
| thought to be a non-performing asset. If a bank or | | | | service lender is the contact person for having those |
| lending institution has too many non-performing | | | | questions answered. |
| mortgages on its books it runs the unfavorable option | | | | 8. The as-is value of the home |
| of getting in hot water with federal regulators and | | | | The as-is value of the home is considered to be the |
| investors. You can anticipate that as the real estate | | | | current value of the home with no repairs or deferred |
| market cools banks will experience an increase in their | | | | maintenance done. Typically two broker price opinions |
| number of non-performing loans. Your short sale offer | | | | are ordered and compared against the initial appraisal |
| gives the bank an option to get a non-performing | | | | to see if there has been any degredation in the value |
| assets off the books. | | | | of the property. Broker price opinions are usually used |
| 2. The lender's overall financial condition | | | | in the place of a formal appraisal. The lender relies on |
| Federal regulators give mortgagers a set amount of | | | | these appraisals heavily. When dealing with the service |
| time to change a non-performing asset into a | | | | lender for third-party investor, the service lender |
| performing asset before requiring them to list it in their | | | | requests the broker price opinions. |
| financial statement as a liability. This grace period is | | | | 9. The expense of repairing the property for resale |
| usually 180 days. Shifting what was an asset over to a | | | | Real estate contracts on houses needing repairs |
| liability is a bad thing for a bank. If the bank can do a | | | | require an explanation if the owner is unable to take |
| short sale on a non-performing loans before the grace | | | | care of the work. Two written bids for the repairs |
| period ends it doesn't have to record it as a liability. | | | | must accompany the short sale package. These |
| This is a useful piece of information tokeep in mind as | | | | repairs may be presented to and negotiated with the |
| you negotiate this deal with the bank decision-makers. | | | | mortgager. |
| 3. The financial circumstances of third-party investors | | | | 10. The After Repaired Value (ARV) |
| Most banks work in what's known as the secondary | | | | In a short sale offer, the "after repaired value" (ARV) |
| mortgage market. This means that when they loan | | | | of the home gives the mortgager some idea of what |
| money they can "sell the paper" (the actual mortgage | | | | the house would be worth if they foreclosed, repaired |
| agreement) and get their money back, which they can | | | | the house and put it back out on the market |
| then re-loan. The mortgage is of course now owned | | | | themselves. Banks would do this if they thought they |
| by the third-party investor. The Federal National | | | | could recoup the defaulted loan balance, all the back |
| Mortgage Association (known as Fannie Mae) and the | | | | payments, foreclosure costs, and repair costs. |
| Federal Home Loan Mortgage Corporation (known as | | | | 11. Securing and maintaining the property |
| Freddie Mac) are two examples of third-party | | | | Securing and maintaining a house includes protecting it |
| investors. They are both stockholder owned | | | | from vandals, fixing broken windows and doors, and |
| corporations, created by Congress to aid | | | | paying the water and utilities. It also includes such things |
| homeownership and rental housing. If these third-party | | | | as removing trash and debris, yard care and keeping |
| investors are enduring high rates of foreclosure on | | | | all the mechanicals of the house in good working order. |
| non-performing loans, they become motivated to do | | | | 12. Holding costs and expenses related to selling the |
| short sales, and often use the original bank to service | | | | property |
| the transaction. | | | | A mortgager must approximate the cost of taking |
| 4. The third-party investors' loss mitigation department | | | | back a foreclosed home and maintaining it until a |
| Once a foreclosure has started on a loan backed by | | | | qualified buyer can be contracted. In a short sale offer, |
| a third-party investor, their loss mitigators can and will | | | | this is known as holding costs. Holding costs can |
| act quickly to finish a short sale. For example, Freddie | | | | include making repairs, painting, replacing damaged or |
| Mac will often allow short sale offers of 90% of the | | | | broken appliances, water heaters, air conditioners, |
| brokers price opinion, and take just two to three | | | | furnaces, floors and carpet, insurance and property |
| weeks to get processed. | | | | taxes. This can get very expensive. In addition to that, |
| 5. Servicing lenders that work for third-party investors | | | | finding a buyer through a common real estate |
| Servicing lenders are organizations that collect | | | | professional can take up to six months and sometimes |
| payments for the third-party investor organizations. | | | | longer. Always keep in mind: banks are not in the |
| Though the servicing lender won't make a decision on | | | | housing business, they are in the paper business. |
| the short sale, you must deal with them in presenting | | | | These holding costs and other expenses are a terrible |
| your short sale offer. Find out if a service lender is | | | | inconvenience to banks, and in most cases they will |
| handling your mortgage, and who the contact person | | | | take substantial discounts to keep from dealing with |
| is. | | | | the hassle. |