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July 07, 2010

Short sale negotiation: A real estate debt settlement and foreclosure primer

I recently posted about the situation of a woman in a debt negotiation predicament. She tried to sell her condo in a short sale, twice, and the bank rejected offers from buyers, twice. A reader who works in real estate (and a close personal friend) commented on that blog post with this information. It is so informative that I wanted to give it its own post, so others seeking this info can find it easily. Googlers, welcome! Keywords: short sale, debt negotiation, settlement, foreclosure, Chase Bank.

Without further ado, N's comment:

Every bank has a specific formula they use to accept or deny requests and people that have worked with the banks before are most knowledgeable on the topic. Also, the bank usually pays their fees so no money out of her pocket. Furthermore, most of the time it is as simple as her not submitting all the necessary information to the bank along with her offer. Every bank has slightly different requirements and is so overloaded with requests that they simply deny offers without giving specifics as of why(i.e. no letter of hardship, tax returns, comparable property analysis. I'll leave the fact that she was at the Salon worrying about her financial problems alone for the moment. Here is a basic list of what she should submit with an offer, however Chase should have their own list on their website:
1. Authorization To Release Information(ATRI) Form
2. HUD-1 or preliminary net sheet
3. Completed financial statement
4. 2 years of tax returns
5. 2 years of W-2s
6. Last 2 months of bank statements
7. Hardship letter(unemployment/reduced income, divorce, medical emergency, job transfer out of town, bankruptcy, death)
8. Most recent checking and savings account statements for all borrowers
9. Proof of all sources of monthly household income, such as pay stubs(most recent), or if self-employed, profit and loss statements for the last two quarters along with the most recent federal tax return. Leases and social security, pension, or disability statements are required if applicable.
10. Any other documentation or information you feel may be relevant to this situation
11. Documentation showing the complete listing history for this property(listing agreements)
12. A sales contract signed by buyer and seller
13. Recent Appraisal and or Market Analysis
14. An estimated settlement statement showing all proposed seller paid closing costs
15. Proof of Buyer’s financing(i.e. pre-qualifications letter, etc..)

Also, there is alot of predatory action taking place with individuals in her situation. Here is a list of questions she should be thinking about or asking when looking for a Short Sale Negotiator. She still can complete before it goes into Foreclosure FYI.
1. Will you be able to protect my legal rights and interests?
2. Are you an actively licensed Real Estate Attorney or Law Firm (licensed in WA)?
3. Do you represent banks, lenders or in any way help them to foreclose on homeowners?
4. What services do you actually provide?
5. Is there a limit to the number of hours or amount of time that you’ll spend on a file?
6. Which party to the transaction do you represent (seller, buyer, both, neither)?
7. Will you provide the seller with legal advice, if requested?
8. Do you use any third parties to perform work on the file (i.e., lawyers, processors, etc.)?
9. Who handles the actual negotiations with the lenders and what are their qualifications?
10. What is your fee?
11. Who pays your fee?
12. Do you accept all short sale files or are there certain criteria that must first be met?
13. Do you have a system for handling short sales? What is it?
14. How often will you provide me with updates regarding the short sale file?
15. How will you communicate those updates to me (email, website, telephone, fax)?
16. What services are NOT included (i.e., legal advice, stopping trustee’s sale, etc.)?
17. Have you or has your company ever been subject to discipline by a governmental entity, association or organization to which you belong?
18. When should I begin thinking about a short sale as an option (i.e., before I miss my first payment, when I receive a Notice of Default, just before the foreclosure auction, etc.)?
19. Should I contact a negotiator before I list my home for sale with a real estate agent?
20. Do you have any special training or qualifications to act as a negotiator? What is it?
21. Do you or does your company ever act as an investor, buyer or “flipper” on short sale transactions that you handle?
22. If you or your company acts as an investor, buyer or “flipper” on the short sales that you negotiate, then how can you ethically represent my interests in the transaction?
23. Do you or does your company buy properties at foreclosure auctions? Do you buy any properties that were once owned your customers?

Also, make sure she writes her loan number on every sheet of paper submitted to the bank. It makes it alot easier for them to process and therefore greater chance of success.

Hard to come by a good education resource for people in her position but I did some searching and this is the very best I've seen. It pretty much covers everything she needs to be thinking about and er options in the correct order:

Hope this helps with her success.

Thanks, N!

I will keep you posted.
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