Short Sales in Residential Real Estate

Home values are down more than twenty-five percent from their peak in 2006 and continue to fall rapidly across the country. Some experts predict an additional fifteen percent decline in the upcoming year. As a result more than 12 million homeowners now have mortgage debt that exceeds the value of their homes.

WHAT IS A SHORT SALE?

A short sale occurs when the lender agrees to discount a loan balance and accept less than the total amount due incident to the sale of a home due to financial hardship. In today's economic environment more and more lenders are initiating short sale programs to assist people in selling their homes and thereby avoiding foreclosure.

WHO QUALIFIES?

Once homeowners find themselves in a circumstance where their home is worth less than the mortgage balance this is just the beginning of the process to determine if they are eligible for a short sale. Moving into 2009 more lenders appear ready to assist homeowners in loan modifications and short sales in an attempt to slow down the ever growing foreclosure crisis.

In virtually every short sale negotiation the lender will be looking for a statement of hardship from the homeowners which explains why they need relief and more specifically why the homeowners cannot pay the difference still due on the mortgage after the short sale. Declining property values coupled with a need to relocate or upwardly adjusting mortgages and unable to refinance are the beginning, in many cases, of the hardship picture. The declining home property value, increasing adjustable rate mortgages coupled with unemployment greatly defines the downward spiral leaving many homeowners in desperate need to sell their homes, which would not be possible without short sale assistance.

THE SHORT SALE PROCESS

The first and most prudent step would be to seek the assistance of a competent real estate lawyer to assist in the process. While each lender has their own specific requirements there is a consistency in the nature and type of documentation that can be expected.

The first step is to contact the lender to see if they have a person or department set up to respond to inquiries regarding short sales. While the situation seems to be improving as lenders become more and more organized in dealing with short sales it still may require some persistence in getting the proper individual on the phone to ascertain the lender's procedure.

Once contact is made with the workout or short sale department typically a lender will want an authorization signed by the borrower(s) which would allow the real estate attorney to communicate directly with the lender regarding the potential short sale. Many lenders will merely accept a letter, others will require a signed authorization and still others will require their specific written authorization form to be signed.

Once proper contact and authorization is in place the following requirements can be expected from your lender:

o Hardship Statement

This is a written statement which describes for the lender what has changed making it difficult/impossible for the homeowners to continue paying their current mortgage. Specifically, this is the statement where it is outlined for the lender if the homeowner(s) has lost a job or had a significant decrease in income, was hospitalized or had some other unexpected illness or medical emergency contributing to their problems, or simply had their mortgage adjust up making the payments no longer affordable. Again, your real estate attorney should assist you in writing this letter making a strong plea to your lender to accept less than the full payoff.

o Statement of Income/Assets

Most lenders will require a financial statement outlining all liquid assets, including savings accounts, checking accounts, money market accounts, stocks, bonds, cash and other real estate. Obviously this statement needs to be consistent with the facts outlined in the hardship statement in order for a lender to seriously consider the request. In many cases the borrower should be prepared to provide backup information including bank and other statements for the accounts disclosed in your statement of income and assets.

o Appraisal/Comparative Market Analysis

As part of the short sale process most lenders will require either that an appraisal be performed confirming the value of the property or in the alternative a current market analysis obtained from a real estate agent which will compare the suggested price of the home to that of similar homes that are either currently on the market for sale or have recently sold.

o Listing Agreement and Purchase Agreement

Many lenders also require a copy of a Listing Agreement with a real estate brokerage for the sale of the property together with a copy of the Purchase Agreement for the sale of the property as part of the short sale package. Obviously, any such Purchase Agreement should be carefully worded to include language that the sellers' obligations are expressly contingent upon lender approval. The lender may also require a preliminary settlement statement or net sheet which includes estimated closing costs and reflects the bottom line payoff to the lender.

In most circumstances after a complete short sale package is received by the lender it will take thirty to sixty days for approval and if granted sellers may move forward and close the sale of the house to the prospective purchaser.

CREDIT CONSEQUENCES

Selling a property by short sale will cause a hit on the sellers' credit report and in many cases the affect on credit and FICO scores could be the same as a foreclosure. As such, a short sale should only be considered, and in most cases will only be considered by your lender, to avoid a foreclosure. The good news for short sale sellers is that in most circumstances the wait involved before qualifying for a loan to buy another home is much shorter than if a foreclosure occurs. New Fannie Mae guidelines now require only twenty-four months seasoning before a short sale seller can again buy with a reasonable interest rate. In most cases a person who wants to buy another home after a foreclosure may end up having to wait as long as thirty-six to seventy-two months before a lender will offer a reasonable interest rate in relation to the current market.

One of the key areas that must be negotiated for sellers incident to the short sale is whether or not they will be subject to a deficiency judgment, meaning having to repay the difference between the loan amount and the amount paid to the lender at the short sale. In most cases it is up to the lender to decide whether to require a payback of some or all of the deficiency and as such the seller should discuss this matter with a real estate lawyer prior to finalizing a short sale. A lender's position regarding pursuing a deficiency varies from institution to institution and is greatly impacted by the hardship circumstance as well as the seller's income and assets. In many cases a good attorney can present the case to a lender and reach some agreement that is acceptable with regard to the deficiency.

TAX RAMIFICATIONS OF A SHORT SALE

While I am a licensed attorney, I am not a CPA and cannot advise on tax consequences. Generally speaking the cancellation or forgiveness of debt is included as taxable income. If a lender forgives that balance of a mortgage there is cancellation of that debt which could be taxed as ordinary income. Fortunately, tax relief has been enacted for such debts secured by a principal residence. Congress has passed the Mortgage Forgiveness Debt Relief Act of 2007 which is effective for discharge of indebtedness on or after January 1, 2007 and before January 1, 2010. The federal bailout legislation passed in October, 2008 extended this relief through December 31, 2012. In most circumstances, under this law, the forgiveness of debt incident to the sale of a qualified principal residence is excluded from taxable income.

CONCLUSION

Given the ever changing challenges of today's economy short sales are going to become more and more prevalent. With continued declining property values homeowners are in need of assistance and both lenders and the government are recognizing this need and enacting programs to provide for that assistance. While a short sale will have a negative impact on credit in many cases it is the only opportunity a seller may have to avoid foreclosure and will potentially afford the short sale seller the opportunity to qualify to purchase a new home sooner. The need to get out from underneath the negative equity is something that has been recognized by our government and the IRS but should only be considered after consultation with the appropriate real estate and tax professionals.

Always seek legal counsel before attempting to pursue a short sale. A real estate agent, although qualified in other aspects of real estate, is not qualified or licensed to give legal advice.

Joseph Curran is a Virginia attorney with more than 25 years of experience representing banks, mortgage lenders, homebuilders, and real estate companies with offices in Prince William County, Virginia. http://www.curranwhittington.com

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Negotiating a Short Sale With Outsourcing

That professional real estate investors, like Guru Pat Precourt, are able to close so many deals at any given time may seem like some kind of short sale magic, but it's not. There is a little short sale magic going on behind the scenes in negotiating a short sale. Investors like Pat have figured out that it's a lot easier to outsource their short sale negotiations rather than doing it themselves.

Outsourcing short sale negotiations isn't a cheat. It's just a way of taking back your personal time and using it for more important tasks, like finding good leads or actually closing deals. These days you can outsource just about any part of your debt negotiation to short sale services and loss mitigation services. This is the real short sale magic behind these Gurus who are making so much money on so many deals.

Outsourcing companies will do the following for you; spend time tracking down the bank's loss mitigation officer, search out property leads, compile most if not all of a short sale packet, perform due diligence and even negotiating a short sale.

Anyone can Outsource their Short Sale Negotiations

Outsourcing is a true method for skyrocketing profits and business success. Real estate investors who have already completed a few of their own short sales still consider themselves newbies. How much time do you think was spent on this short sale process? Maybe 50 hours can be involved in;

o tracking down the right person at the bank,

o gathering all of the information for the short sale packet,

o calling the bank back to confirm they received the packet and then

o quibbling with them over an acceptable offer!

Using a short sale services company is an easy way to create some of your own short sale magic.

Why not let go of time spent and even gain an increase in profits in return for outsourcing your time consuming tasks?

It's still a time saver even if you are only willing to hire someone to do the talking in negotiating a short sale. For those investors who have trouble making a good impression on the phone this is real a chance to seal more deals.

How to Find the Best Short Sale Negotiators

An excellent source to use in negotiating a short sale with the bank are loss mitigation services. These service offering companies are staffed by the very same loss mitigators that used to work at the banks.

These loss mitigators know how to find the best offer price that suits you and appeals to the bank. Short sales negotiation services companies know more about the process of short sale negotiations than a real estate investor ever could.

In addition to helping real estate investors with negotiating a short sale deal, loss mitigators also work with homeowners to try and save their homes from foreclosure. They also perform a myriad of other services.

You'll have to do a little research to find a company that performs the kind of short sale magic that you are looking for on a short sale deal.

When looking for a good short sale services company to outsource negotiations to here are a few tips to keep in mind:

o Does the company protect the homeowner by seeking out a Waiver of Deficiency or Satisfaction of Mortgage? This document states that the banks won't go after the homeowner for the remainder of the mortgage after the short sale.

o Make sure this company only does short sale negations. You don't want a company that also works buys short sales for themselves. They'll be your competition then!

o Ask what the company charges and what they charge for?

o Do they have a referral service with a network of other professionals in the real estate field? This shows you that they've got proven experience in working with real estate and short sales with other investors.

o Ask about the company's success rate? No short sale services company can guarantee that your short sale will be approved, but the higher the approval rate the better.

o If the short sale services company insists on being in charge of the land trust, if you plan on setting up a land trust, make sure they have a good reason.

Outsourcing debt negotiation is the big secret of a successful real estate investor. Investors rely on a little short sale magic by hiring help in negotiating a short sale and other business problems.

Colin Egbert is an experienced Real Estate Investor with a trick to help investors lighten their workloads. Help yourself by hiring us to start negotiating a short sale [http://realestateinvestorshortsales.com/] for you today. Colin Egbert is also the author of the ebook "Getting Started with Short Sales" providing the tools needed to start your own real estate investing business. Colin is also the CEO of Realestateinvestor.com a website dedicated to helping investors make the most of their business.

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Market Realities of the Short Sale - An Appraisers View

In a short sale, the home owner tells the lender that the house will sell below market and the lender accepts the proceeds from the sale as payment in full for the loan, even though the mortgage balance may be much higher. Short sales can be beneficial for both homeowner and lender because the owner can reduce damage to his credit report and the lender saves money and reduces the business negatives associated with foreclosure.

As mortgage foreclosures continue to be the major drag on a weakening national economy many consumer advocates and real estate experts are advising home owners to consider the, short sale. The short sale is recommended because the home owner has fallen behind on house payments due to some kind of hardship like death of a spouse, job loss, divorce or a major illness and the house is worth less than what is owed. The short sale is often recommended with only an AVM (Automated Valuation Module) or comparative market analysis also known as a BPO (Broker Price Opinion) valuation report. The AVM does not deal with the specifics of the home owners property. Market adjustments for condition, location to comparable sales and amenities of the property are generally unknown and not made. The property is assumed equal to similar properties, which have recently sold, in the local market. In a BPO estimate of comparative value, the broker who wrote the BPO may have inspected the home owners property but few brokers have the professional training or expertise to extrapolate market based adjustments for differences in condition, location or amenities. Additionally, the AVM and BPO analysis seldom adjusts for or distinguishes between R.E.O (Real Estate Owned by banks), investor sales and arms length sales. In the case of F.N.M.A (Federal National Mortgage Association) properties, F.N.M.A has traditionally instructed appraisers to appraise for collateral value and to adjust final opinions of value to reflect a 120 day marketing time. In a declining market this virtually assures that appraised value, on the sellers home, will be less than similar properties which sold arms length.

It is normally important for any valuation or appraisal report to distinguish arms length sales transactions from short sales, R.E.O and investor driven sales because the R.E.O, investor and short sale represent the minimum collateral value of the property and not the value that would be paid by a buyer intending to occupy with the expectation of quiet enjoyment and the growth in wealth home ownership represents. The American desire for home ownership has been a building block of our society and despite the cyclical nature of our economy, real estate will experience strong growth in the future because of supply and demand. As a millionaire friend was fond of saying about the inevitability of wealth maximization through real estate, "God only made so much." This is why sales prices of property sold arms length (to buyers that intend to occupy or put the property to a personal use) are higher than short sales, those purchased by investors, whose intent is to resell for profit as quickly as possible or R.E.O (Real Estate Owned) sales by lenders attempting to cut their losses.

Most lenders believe they are aware of the value of a home because they usually insist on a comparative market analysis (B.P.O), or AVM report. However, because the B.P.O and AVM do not take into account property condition, amenities and whether the reported comparable sales used in the analysis were equally located and arms length, the B.P.O and/or AVM estimate of value can be considerably less than the homes arms length or true market value. In the past, if a lender believed a better price could be obtained by taking the property back in foreclosure over a short-sale offer, it would hold out for a price felt closer to market value. However, with foreclosures increasing exponentially and the inventory of existing homes greater than 11 calendar months, in some parts of the country, lenders are accepting short sales when they clearly believe the home is worth more than the short-sale price.

Morally, from the standpoint of ethical code, I have no problem with short sales. The lender ultimately gets out in better shape than it would in a foreclosure and the borrower/homeowner can come out of a short sale with credit virtually intact. One interesting point in the short sale process is that the buyer has less control than in an arms length purchase and can be mislead, by well meaning real estate agents, into believing the significantly reduced purchase price does not represent the homes true, current, value when in most cases, from the collateral value standpoint of lenders, it probably does. The agents reason this is true because of much higher past sales prices for similar homes in the community. The truth is that, excluding arms length sale prices, the short sale is probably market if compared to the sale prices of similar foreclosed homes. It is also probable that in a declining market sale prices of similar homes will continue to fall. Another example of agents misleading buyers on value is the situation where sellers paid more than the home was worth when they bought it. Let's say the home sold for $300,000 a few years ago and is now on the market for $200,000. This does not necessarily mean the buyer gains $100,000 in equity, but that the seller paid too much in an expanding market and now the market has fallen. The market reality of this situation is that the seller has no equity and the purchaser gained no value over the purchase price.

Another market reality for buyers on short sales is that lenders often require purchasers to accept the home in its present, as is, condition. Lenders typically will refuse to pay for suggested repairs disclosed on a home inspection, pest inspections or work necessary to issue a clear pest report, roof certifications or roof repairs, home protection plans for the buyer, deferred maintenance or length of time to close. Lenders may also change conditions of the sale, discount commissions, increase buyer closing cost by refusing to pay for standard seller closing costs such as transfer taxes and length of time to close the sale. Additionally, the short sale home closing process can take extended amounts of time. The sellers lender controls the closing process, not the buyer or the buyers lender. Buyers who are trying to coordinate the close of escrow with the sale of their old home will find this difficult to do in the short sale process. Also, if the sellers discover that the short sale effect on their credit score is identical to that of a foreclosure they may not be motivated to move out before the foreclosure is concluded.

The market reality for sellers is that when facing foreclosure it is time to be less concerned with true market value and more concerned with the economic well being of his or her family. Sellers can successfully sell their home in almost any market because there are always buyers at the right price. An example of this would be if sellers house is worth $200,000 would someone buy it for $50,000? Of course they would, even in the worst market. The short end of the short sale is that most people don't know that a lender can still come in and foreclose on a home even if it is a homestead and the seller has declared bankruptcy. The I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.

However, with most short sales, the only penalization on the credit report is for the missed payments. Consumer advocates and real estate experts are right about the distinct advantages of a short sale versus being foreclosed upon or declaring bankruptcy. Despite its potential for leaving the homeowner responsible for a deficiency or an I.R.S claim of the forgiven debt as income, most homeowners are better off with a short sale, rather than a foreclosure, if the weight of our declining economy should fall upon them.

Calvin Johnson, pen name Calvin Johnson-Rowe, in addition to his professional activities as a Certified General real estate appraiser, is author of The Lightning Bug Science Fiction series, a hobbyist wine maker and lover of the arts. He has been an avid fiction and Science Fiction fan most of his life and counts Walter Mosley, Gloria Naylor, Octavia E. Butler, and Jack L. Chalker among his favorite authors. Calvin is currently a Commercial Real Estate appraiser and broker in Michigan. In the early 1990's he created the model and application parameters for, The Virtual Appraiser, an Internet based home valuation application. Preview his new novel at: http://www.google.com/search?q=calvin+johnson-rowe%3A+the+lightning+bug&btnG=Search+Books&tbm=bks&tbo=1 Watch the video preview at: http://www.youtube.com/watch?v=5WoOJJcmiI4

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Short Sale 101

This occurs when the net proceeds from the sale of a home are not enough to cover the sellers' mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner's commission. The seller is unwilling or unable to cover the difference.

Some -- although by no means all -- short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.

Other sellers simply don't understand that if they have assets, such as stocks or a high-salaried job, a lender is not going to let them just walk away from a short sale without signing a note to repay what they owe.

How do I know it's short?

A CMA will be your first indicator, but you also need to ask the seller what their outstanding debt is and calculate the cost associated with a sale -- from transfer taxes to your commission. This will give you an estimate of the net proceeds that will be realized, often called the net sheet. This information can then be entered into a HUD-1 Settlement Statement to calculate out the final, negative result at closing. Some lenders also have their own forms.

Check with the title company and the lender to get exact figures on closing costs and loan balances and to find out what procedures they have in place. If they can afford it, sellers should also consider getting a home inspection to determine what repairs are needed on a home and how this might affect its value.

Who do I and the seller need to talk to about the problem?

If there are a first and second mortgage or a home equity line of credit, you may have to talk to more than one lender to get approval for a short sale. In addition, you may also need approval from the entity that holds the pool of loans if the mortgage has been securitized.

The presence of two lenders makes a short sale more complicated since it's often the lender holding the second, or junior, mortgage that has to absorb most of the loss.

Opinions differ, but most experts suggest that you let the lender involved know as soon as possible of the potential short sale. Others say you should wait until you have an offer because you'll get no action until then. "Without a viable purchase offer, your deal won't be considered by mortgagees," says Margot Cole-Murphy, broker with RE/MAX Equity Group, Portland, Ore.

Tip: Be sure you contact the bank's loss mitigation department, which will be the group to decide whether to accept a short sale, rather than the collection or customer service department, which is only interested in recouping past due loan payments. Finding the decision maker is often one of the biggest initial challenges in a short sales.

What information will the bank need to decide whether to accept a short sale?

The sellers' submission package should include W-2 forms from employers (or a letter explaining the seller is unemployed), bank statements, two years of tax returns, and other financial documents outlining income and debt obligations. The bank will also need comps or a broker's price opinion showing your estimate of value.

In addition, the sellers should submit a "hardship letter," explaining the circumstances that make it impossible for them to pay the full amount of the loan. The seller needs to be able to show true financial hardship. Someone with the assets or the income to pay is unlikely to be considered, say most interviewees.

Thanks to programs such as those proposed by Fannie Mae and Freddie Mac to assist subprime borrowers, many lenders are more willing to offer loan modification options. This option can extend the term of the loan, add on delinquent payments to the loan principal, and/or reduce the interest rate to make the loan more manageable for the home owner.

Another option is a repayment plan that requires home owners to increase their monthly payments until the loan is current. It may be possible to refinance an adjustable rate loan with a Federal Housing Authority or conventional fixed loan. Note that lenders will not postpone a foreclosure just because a property is listed, although they may postpone if you have a reasonable offer in the works.

How should I price a short sale property?

In general, most short sale experts say to price the property at or near fair market value, although a few will begin with the total payoff amount owned by the seller. How frequently prices are dropped will depend in part on whether the property is in preforeclosure. Most banks have a formula for what percentage under market value they will accept, say interviewees. Figures cited vary from 8 percent under to almost 20 percent under.Most lenders will want to get a broker's price opinion or even an appraisal to see what the property is worth before you and seller set a list price. One way to help ensure that the bank's estimate of value is realistic is to offer comps of recent sales -- both traditional and REO.

What and how should I disclose about the short-sale property to prospective buyers?

Opinions vary on this topic, although most experts favor disclosing that a property is a short sale in the comments section of the MLS listing. Others suggest waiting to disclose the need for lender approval of the sale until a buyer is ready to make an offer.

How long does it take to complete a short sale?

Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. That's why it's critical that buyers and their representative understand and accept that time frame before they make an offer.

An addendum to the California Association of REALTORS purchase contract includes a provision allowing either party to cancel a short-sale contract within a set period if the seller hasn't gotten the deal approved, says White. Properties with securitized loans (which are the majority these days) may require a longer time to get an approval of a short sale because of the possible need for approval from the entity holding the pool of securities.

What can the seller and I do to make a short sale more attractive to a lender?

Getting a lender to approve a short sale is primarily a question of economics. You have to provide hard numbers to show that the amount of money a bank will realize on the short sale is better than the amount it may recoup from foreclosing on the property and selling the property as an REO.

A 2002 study by Craig Focardi of the Tower Group estimated that the entire cost of a foreclosure was $58,759 and took 18 months. Other factors that can influence a bank's decision include the liability risk it assumes by owning the property after foreclosures, the money tied up during the holding period for a foreclosure and REO resale, additional costs associated with an REO such as attorneys' fees, and the additional reserves it will need if REOs rise in the bank's portfolio.

However, to avoid unnecessary costs, buyers should wait on having a home inspection and an appraisal for the loan until after the bank has accepted the short sale proposition, such as a lost job or high medical bills from an illness may also have an influence.

What are the seller's options if a short sale is rejected by the lender?

There are a variety of reasons a bank will reject a short sale -- from too low a price to too many files on the loss mitigator's desk. You can look for another buyer or even try resubmitting the same contract. Banks don't want to take properties back in foreclosure, so they are going to do everything they can to make it work. You also need to prepare your seller in advance for the possibility of foreclosure if a short sale fails.

What financial or credit liabilities will a seller have as a result of a short sale?

Many lenders ask sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation as a condition to a short sale. In such cases, the note gives lenders the right to sue a seller and attach other assets if the note is not paid when due.

It's particularly important to understand this distinction if you work in states such as California that have a nonrecourse mortgage. In such states, the lender cannot pursue a deficiency judgment against a seller for any deficiencies after a property is foreclosed. Because of this distinction, sellers who are already in default on a mortgage and do not have the resources to pay off a separate promissory note after a short sale might be better off letting the lender foreclose, he says. If you are working in a state in which mortgage loans are nonrecourse, be sure and alert your seller-clients to this distinction.

What tax liabilities will a seller have as a result of a short sale?

One often overlooked aspect of short sales is that a seller must count any amount forgiven by the lender as income and pay taxes on that income, even if no actual money was received. The IRS requires lenders to submit a Form 1099 stating the forgiven amount. Sellers who meet the Internal Revenue Service definition of insolvency (either in bankruptcy or with debts exceeding assets) will not have to pay taxes on the forgiven amount.

Tip: The U.S. House of Representatives has introduced the Mortgage Cancellation Tax Relief Act (H.R. 1876), which would eliminate taxes on any debt forgiven on a principal residence through either short sale or foreclosure. The NATIONAL ASSOCIATION OF REALTORS has been working to support this bill.

What compensation will I receive as the real estate salesperson or broker in a short sale?

Banks are going to want you to discount your commission. It's the first place they'll look to save on closing costs. Rates offered can vary, but are typically 1 percent to 2 percent below averages in the market. More lenders now seem willing to pay a full commission on sales.

Where can I find clients if I'm interested in specializing in short sales?

Word of mouth remains the biggest source of new business, experts say, but you can also promote your services to individuals attending credit counseling classes (now required prior to filing bankruptcy), to people who receive state notices of loan defaults, and to home owners named on lists of ARMs that will be resetting in the next few months. To find buyer clients, creativity is a plus.

Tip: FSBOs are another good source since many upside-down sellers think they can't afford to pay a commission and so try to sell on their own. Many don't realize that in a short sale, the lender pays the broker's commissions.

Are short sales for me?

With many more adjustable rate mortgages ready to reset to higher loan amounts in the next couple of years, short sales represent a growing sector of the market. However, because sales are time consuming, they aren't for everyone. I always say that if you're going to succeed in short sales, you need the 3 Ps -- patience, persistence, and problem solving.

Rick Saroukhanian of http://www.RealEstateInvestorsLife.com is an active nationwide real estate investor and certified appraiser. He has been investing in foreclosure and preforeclosure real estate for the past 18 years.

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Anyone Can Do a Short Sale

Yes, it’s true, anyone really CAN do a short sale. But, the real question for any REALTOR considering taking on this challenge is “Why would you want to?”

As a Realtor, surely by now you’ve become aware of the awesome potential of pre-foreclosure short sales in the current real estate market. With newspaper articles, internet blogs, and even such heavy-hitters as CNN and CBS touting the benefits of short sales, it’s nearly impossible to go a day without hearing some new claim about how to capitalize on this great opportunity. In fact, if you’re like most Real Estate Agents and Brokers, you’re currently being hit daily with e-mails and flyers promoting 1 to 3 day “Seminars” which promise to teach you how “anyone” can learn the “secrets” of doing a short sale. Perhaps you’ve even taken the bait and, like countless other agents looking for an edge, you’ve decided to shell out the hundreds and, in some cases, thousands of dollars to learn the short sale business from a self-proclaimed “guru”.

Again, I ask, “Why?”

Have you ever really sat down and considered “what is the return on my investment for all the time and effort it takes to do a short sale?” Or better yet, “am I really growing my business or am I just spinning my wheels?” And perhaps most importantly of all, “am I really the most qualified person to help my homeowners who need a short sale?”

Let’s face it, the PROCESS of negotiating a short sale is really quite simple on the surface, and if all goes well, “anyone” really can negotiate a short payoff with a lender. In fact, after you handle a few transactions, you might even get very good at negotiating a deal with the banks. Yet, if you’ve tried your hand at short sales, then you know that, after all the flowery promises of the guru’s fade away, that’s where the rubber meets the road and that’s when you are left to fend for yourself – battling against a bureaucratic process that is different with every lender and which can become so frustrating that you just want to quit. If you’ve been through it, then you know that the short sale process can take months. You might question whether it’s by design or ineptitude when the banks’ default and loss mitigation departments seem to be toying with you: keeping you and your homeowner stressed out and jumping through hoops the entire time. Did your paperwork get lost? (aagh!) Were your phone calls not returned? (how rude!) Did they find your paperwork (hooray!), only to be lose it again (oh no!). Yes, the list goes on and on, and if you’ve tried your hand at short sales, then it’s likely you have a few “war stories” of your own! Surely you’ve experienced the unpleasantness of when your homeowner becomes unhappy with the process – thus causing you, the agent, even more stress. Hopefully, you have NOT been a party to the worst of cases – in which the agent may be sued by the homeowner if the process fails despite your best efforts! Do you even know how to protect yourself from this disaster?

In the end, you are likely forced to face the question “Just what is my grand reward IF I’m successful in obtaining a bank approval letter for the short sale?” Yes, this question is so vital for the real estate agent to understand, that I’ll state it again a different way, “What’s in it for me?” You already know the answer, yet you may not want to admit it. The fact of the matter is that if you as the realtor are successful in negotiating a short sale, if you spend the 50-100 extra hours of your time to do everything that is required to obtain a short payoff Approval Letter, and if you finally complete a closing for a short sale, then your payoff is… a Real Estate Commission! (Or in many cases a REDUCED commission!). Yes, if you’ve “done short sales”, then you well know that for all those dozens of hours of additional time spent, your reward is…a pay cut! A pay cut? Yes, it’s true, when you do short sales, it’s very likely that the bank will only approve you for a reduced commission (a pay cut). And that’s when you’ll finally learn the “REAL SECRET” of short sales for Realtors (the one the guru’s don’t tell you): more work for less pay! That’s what Realtors get from doing short sales.

So I ask you, does that sound like an effective strategy towards growing your business?

For some readers, the above scenario may seem alarmingly familiar. For others, the process may sound scary. Yet, all is not lost. You can indeed capitalize on the amazing opportunities that short sales have to offer. There is a better way – a solution to the short sale rat race. Did you know that some agents have broken the code to pre-foreclosure sales success? Would YOU like to know their secret? Would it benefit you to know how you can get involved in the short sale process and get paid the same amount that you would get paid if you did it on your owns? Would you like to know how this secret can actually save you time and effort, and free you up to do what you do best? It’s really not a “secret” at all. It’s just common sense!

So what is the real SOLUTION to effective realtor-driven short sales? It’s simple: OUTSOURCE the short sale NEGOTIATIONS portion of your growing portfolio of pre-foreclosure listings. Think about it for a minute and you’ll realize that outsourcing negotiations truly represents a win-win-win for you as the agent, for your homeowner clients, for the banks, and even for your final buyers. But how do you go about outsourcing? The answer is to utilize a company that specializes in building, submitting, and negotiating short sales and take advantage of the Relationship Leverage which they have built with lenders.

These so called “Loss Mitigation” specialists are now representing a new concept in pre-foreclosure sales. After all, the banks have Loss Mitigation Negotiators working on their end; so why shouldn’t you have such a specialist on your team as well? By working with one of these negotiation specialists, you’ll be free to act as the real estate agent, while your Loss Mitigation Service Company will handle ALL aspects of Short Sale Processing. It’s important to know that these “Short Sale” companies are not Real Estate companies, so there is no need to fear losing the listing. In addition, the Loss Mitigation organization will likely get paid their service fee from the lender’s sale proceeds, so you also won’t have to worry about losing your commission either. Yes, there are many benefits to outsourcing your negotiations to a professional, but besides saving yourself all the time and headaches of trying to manage the process on your own, one of the best things you’ll experience is that you’ll be free again to concentrate on earning your commissions by doing what YOU do best: marketing, showing, and ultimately SELLING your client’s home. And when this occurs, when you can actually give your homeowner clients a fresh start and a way to escape the pressures of mortgage default and potential foreclosure or bankruptcy, that’s when you’ll realize the true worth of this “secret”. That’s when it will become clear that you as the real estate agent and your loss mitigation specialist actually share a symbiotic relationship -- where you both can thrive, even as you save banks money, get great deals for buyers, and of course provide a new beginning to your homeowner clients!

So how do you get in touch with a Loss Mitigation Service Company?

Well, the good news is that the list of companies performing these functions for agents and homeowners continues to grow monthly, and just about every state will soon have companies standing by to help you! Nonetheless, it’s not all a bed of roses; prudence demands due diligence and therefore you should exercise caution when seeking a company to handle their short sales because there are a few scams being run. In the October, 2007 issue of Florida Realtor magazine, a number of “foreclosure scams” are detailed in the article “Whose Behind the Smiling Face?” Among them:

1) “…groups of investors calling themselves a ‘Trust Company’…ask the homeowner to quitclaim their home’s deed to the trust, saying they will negotiate a short sale.” Unfortunately, some of these groups never do. Instead, “the trust pays off the loan amount at less than the full amount without negotiating with the lender or getting the lender’s approval, so the lender goes after the seller for the difference even though they no longer own the home.” (An ethical company is when that, IF they use a trust, it is only AFTER they obtain an Approval Letter from ALL lien-holders and the trust is not activated until the actual closing occurs in which the homeowner actually sells their property. Utilization of a trust prior to closing is merely a way for an investor to gain control of your homeowner clients and only serves to place your homeowners at the mercy of the investor. It is the author’s opinion that land trusts are not necessary prior to obtaining an Approval Letter).

2) Another scam involves the “sale of the home to a straw buyer, who would borrow against the home’s value and pocket the money. The original owners were told their payments were brought up to date, allowed to stay in the home, and were promised that they’d be able to buy it back from the investor.” Only to later learn that “the home’s equity was gone and [they were thus now] unable to afford to buy it.” (While a pre-foreclosure short sale and owner-leaseback can indeed be an effective way to avoid foreclosure and give your homeowners the ability to save their home, unfortunately all too often such arrangements are fraught with fraud. If you or your homeowners are approached by such an offer, be sure get everything in writing (especially the terms of the lease and future resale!). Have a real estate attorney review it and thus protect yourself and your clients. This can work, but you must ensure that the investor group you are working with is both fair and ethical. Do your research first!).

Sadly, these are just two of the “foreclosure scams” being run today which are plaguing the industry and giving short sales a bad name.

So, how can you choose the right company?

Here are some tips that might help you when choosing a Loss Mitigation Firm to partner with:

1) Ensure that the sole service of the company is Loss Mitigation.

2) See if they have a referral network of other professionals they work with.

3) Where does the company’s focus lie? Are they just in it for money for themselves (or) are they focused on helping those who really need their help? An ethical company will have the desire to make YOU as the realtor a “Hero to your homeowners.” And most importantly of all, the primary mission of the company will be to save homeowners from foreclosure and get a fresh start in life.

4) Ask the company if there are any other alternatives besides a short sale. An ethical company will help you explore other foreclosure-stopping alternatives besides just a short sale. (Since these other alternatives likely do NOT involve that company – and thus won’t provide an income stream for them – if the company overlooks telling you about these other options, you might want to steer clear).

5) Does the company require your homeowner to deed their house to a trust? If so, why? When? And who will be in control of the trust?

6) Will the company let you and your homeowner see the HUD? Will they tell you exactly how much they stand to make or will they tell you “it depends.” (An ethical company will disclose all fees in advance, will put everything in writing, and will let both you and your homeowners examine all short sale documents at any time).

7) How will the company keep you informed during the long process? Will they give you a way to track your file’s progress as it progresses?

8) Will the company fight for your homeowner to get a Waiver of Deficiency or Satisfaction of Mortgage? If the homeowner’s lenders don’t agree to such a request, then your homeowner could end up still owing the difference between the short sale proceeds and the balance of the mortgage(s). The result, your homeowner really didn’t benefit from the short sale at all!. (An ethical company will make it the purchase contract contingent upon all lien-holders agreeing to provide a Waiver or Satisfaction. Yes, it will make the loss mitigations more difficult for them, but to do anything less would be a disservice to the homeowner).

9) What kind of guarantee of success will the company give you? The fact of the matter is that there is NO GUARANTEE. No company is 100% successful at completing every short sale and if someone tells you they are ALWAYS successful, then you should really question them as to how that is possible. The national industry average for short sale acceptance is 30-75%. If the company you approach provides a higher or lower figure than that, they may not be telling you the truth. (An ethical company will admit that there are no guarantees. And a better one will tell you WHY sometimes deals don’t work out and what they are doing differently to continually improve. The market constantly changes, your loss mitigation company must be able to adapt to the ever-changing lender requirements).

10) Examine the company’s website. It’s hard for a tiger to hide his stripes. When you look at their website, it will become pretty evident where their focus lies. If they are really about helping others, the site will be more focused on providing information and solutions versus just about making money.

11) Ask your gut. When you talk to the company’s representatives, how do they make you feel? Trust your instincts. You’ll know when you’re dealing with a scammer or when you’re dealing with a potential valuable partner.

These are just a few of the questions you might ask, if you interview a company to handle your Loss Mitigation negotiations. No matter who you work with, hopefully you now understand that while it’s true that “Anyone can do a short sale,” it’s the smart realtors who don’t “do short sales” on their own, but instead add a Negotiations Specialist to their team to “do” it for them!

Anthony Teagardin is a Loss Mitigation Negotiator for Genesis Property Solutions, LLC (GPS). No matter where you are at in the country, GPS would like the opportunity to try to help you help your clients. For more information on the benefits of working with GPS, including a full disclosure of their costs and services, please visit [http://www.HelpMeGPS.ORG] or google “sell foreclosures gps”. Give GPS a call and let GPS guide you to a new beginning!

Anthony Teagardin is a Loss Mitigation Negotiator for Genesis Property Solutions, LLC (GPS). No matter where you are at in the country, GPS would like the opportunity to try to help you help your clients. For more information on the benefits of working with GPS, including a full disclosure of their costs and services, please visit [http://www.HelpMeGPS.ORG] or google “sell foreclosures gps”. Give GPS a call and let GPS guide you to a new beginning!

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Short Sales - 3 Key Factors Gurus Never Tell You About How To Do Short Sales

For those of you who are new to the Short Sale arena or new to real estate investment, let's first define what a "short sale" is and what it's SUPPOSED to accomplish. A short sale is the process of negotiating with a Mortgage Lender to convince them to accept less than the Homeowner's mortgage balance as payment in full for the property in order to prevent foreclosure, eliminate the nonperforming loan from the Lender's balance sheet, and allow savvy real estate investors to profit from purchasing property below market value. A Short Sale is generally a great strategy to use when a Homeowner is behind on their payments and owes close to or more than what the property is actually worth. The state of being "Upside Down" (Debt > Equity) is the ideal situation when targeting short sale candidates and getting these deals done successfully on a consistent basis.

Negotiating a short sale is SUPPOSED to help the Lender and the Homeowner in default by preventing the foreclosure, wiping the slate clean for the Homeowner, and providing that Homeowner with an opportunity for a fresh start--and providing the investor with a substantial discount vs. Fair Market Value (FMV) to earn a reasonable profit on the immediate sale or on a fix & flip sale down the road. However, it doesn't always work out that way. Experience has taught me that these 3 Key Factors are HUGE components of the harsh reality you can expect throughout the short sale negotiation & completion process.

KEY SHORT SALE FACTOR #1:

In spite of the reality that we're in the midst of a tremendous foreclosure tsunami, some Lenders are still irrational and downright idiotic in their decision-making process. Case & Point: GMAC will only accept short sales that come in @ 90~100% of fair market value (FMV). So, they've effectively taken the "short" out of "short sale"! Now ain't that just dandy? OK, time to whip out your calculators and see how much profit we real estate investors can bang out buying short sales @ 95% of FMV. Hello! Time for a reality check!

KEY SHORT SALE FACTOR #2:

Regardless of the fact that we always include a line item on our Purchase & Sales Agreement (PSA) stating: "This offer is contingent upon Buyer arranging for [Lender] to accept $________ as full payment WITHOUT pursuit of a deficiency judgment against Seller for the mortgage that Mortgagee holds on the Property", some Lenders completely IGNORE that contractual line item. For example, HSBC is notorious for NOT waiving deficiency judgments.

Buried among the standard jargon on HSBC's short sale acceptance letter is "HSBC Mortgage Services will retain the note on this loan. The customer shall be responsible for any deficiency remaining on the balance. All terms of the original note shall remain in force." Wait a minute! So, HSBC agrees to do the short sale so long as they don't end up short? They'll discount their lien as long as they get the whole thing!? Wow! What a deal! The bottom line is that after you've painstakingly negotiated to get HSBC to agree to accept a short sale you realize that you've been hoodwinked because the deal is contingent upon the fact that it's NOT really a short sale at all. Welcome to Crazy World!

The slick tactic here is that HSBC is making a brazen attempt to get your clients to bind themselves contractually to pay the deficiency as part of this "short sale" (ya know, the kind where they'd still owe 'em everything). C'mon guys! We've gotta stand firm and do like Nancy Reagan on this one--JUST SAY "NO"! In spite of the existence of less-than cooperative Lenders with unhealthy attitudes, this HAS to become the Golden Age of Short Sales because Lenders simply can NOT keep being idiots and stockpiling REOs in perpetuity. Something's gotta give!

KEY FACTOR #3:

There's one document that none of my colleagues ever seem to include in their short sale packages perhaps because I've never seen it on the documentation list of HOW TO DO SHORT SALE programs. Since that document didn't exist, I just had to invent what I call the Offer Price Determination (OPD), which basically walks the Lender through the process of exactly how we've determined our offer price. A sample of our unique, Radiant Properties OPD is available to you for FREE on our website, with which I'll provide you below.

For those of us who've endured the short sale process, we're aware that influencing the BPO (Broker's Price Opinion) is perhaps THE most critical aspect of getting our short sale offer accepted and closing the deal. When I personally meet the BPO Broker at the subject property, I hand her or him the BPO Packet that I've carefully prepared just for them. That BPO Packet generally includes:

Comps @ or near our offer price

Detailed Rehab/Repair Estimate

Homeowner/Seller's Hardship Letter

PSA

OPD

For many of you, the mounds of required documentation is the scariest aspect of short sales. To alleviate that fear, Real Estate Profit Pro (REPP), an indispensable tool created & developed by my mentor, friend, and confidant--mega successful real Estate Investor, GERALD ROMINE is THE system that all PROFESSIONAL real estate investors should use to quickly & efficiently prepare short sale paperwork AUTOMATICALLY. So when the foreclosure glut causes the mortgage industry to implode (more acutely than it already has) as a result of the Lenders' own greed & lack of foresight, since YOU will have access to this information and powerful tools like Real Estate Profit Pro, you'll be fully prepared to swoop in, clean up the bloody mess, then reap your profits using REPP--your powerful secret weapon to complete massive short sale packages in just minutes!

When you've made the wise decision to have REPP & real estate investment superstar Gerald Romine on your side, you too will be armed & ready to locate & complete the REAL Deals with the Lenders that will eventually be FORCED to become flexible enough to work with you to help them put an end to the foreclosure glut and CREATE WINNING SITUATIONS for Homeowners, Lenders, YOU, and your real estate investment business!

Since many Lenders are still in SERIOUS denial about this foreclosure mess that THEY created, realistically, some short sales will work--others won't. So, the idea is to be sure to have a system in place to analyze deals and make offers quickly. Since I've been fortunate enough to have direct access to Gerald Romine and Real Estate Profit Pro since my very first real estate investment deal, I must admit that I've been operating at a tremendously unfair advantage vs. my competition. The GREAT NEWS is that when you visit the Radiant Properties website, you too can access this powerful REPP unfair advantage!

When you arrive at the Radiant Properties website, just look on the left menu, then click on the link to check it out. While you're there, you can also click on the menu link to get your FREE sample of our unique, proprietary Offer Price Determination document that will MAKE YOU MONEY by giving you an unfair advantage over your competitors within the short sale investment arena. When you apply this new knowledge and Real Estate Profit Pro to your real estate investment business, you'll certainly notice the difference in your bottom line soon enough. Since we intend to include the OPD worksheet in an upcoming short sale system that will soon be FOR SALE, the OPD Sample will only be available for FREE on our site for a VERY limited timeframe. So you'd be wise to hurry!

Finally, now that you're fully aware of these 3 Key Factors Gurus NEVER Tell You About HOW TO DO SHORT SALES, just visit our Radiant Properties website listed below, get the REPP and FREE OPD info you need, then go negotiate & CLOSE a PROFITABLE short sale deal! Short sales aren't easy, but you can successfully close these deals on a consistent basis--when you have the right tools...

Charles Emery, CEO of Radiant Properties LLC is a Real Estate Acquisition Specialist who has negotiated tons of short sales. To get your FREE proprietary OPD Sample and discover Real Estate Profit Pro so you can learn HOW TO DO SHORT SALES quickly & efficiently by streamlining the short sale documentation process, empowering you to rapidly analyze profitability so you can MAKE MORE OFFERS and CLOSE MORE PROFITABLE DEALS, just visit ==> [http://www.radiantproperties.biz]

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A Short History of English Movies and Philippine Literature

The history of English-movie is very old dating nearly back to the same time as other most of the European countries and America. While Philippine literature is also very old and most of the ancient literature of Philippines dates from ancestral worship and legends which were brought by the first settlers from Taiwan.

In 1913, American movies and actors had infiltrated deep into England and this fashion became so popular that a London based film company started making films in the UK casting American actors.

The Philippine islands were a Spanish colony from early 1500s and were controlled by the US in the first half of the 20th century. The written literature was present much earlier than the Spanish colonial period. Because Spain was in a grip of investigation, the church doctrine passed a decree to destroy the Philippines written records and be replaced by Catholic teachings only.

There were problems with the English-movie industry for maintaining its pace with the progressing technology. Because of this problem, there was technical comparison of English-movie industry with its European and American counterparts.

The English movies were also greatly impacted by the theatre culture. The presentations of English movies were similar to the style of screen play as stage play. Many English movies ended up in the same actors and sets that were used in the stage plays.

The First World War was also a cause of problems for the English movie industry. The audiences were more attached to American movies and they were praised a lot. The downfall of English movies continued despite the infusing of private sponsorships into the English movie industry until it finally ceased completely in 1924.

Through the first half of the 20th century till this time, most Philippine poetry and literature was written in Spanish. José Rizal is a Philippine national hero and considered the father of Philippine literature. Although his work was written and published in Spanish language but it has inspired many Filipinos. José Rizal was also a model of civilized living and he had also studied medicine and philosophy and was awarded for his work.

The downfall of English film industry did not remain forever and the dedicated efforts of some film producers and actors luckily revived the English movie industry in 1927. Many Philippine writers excelled to the level that story writing and poetry became a major cultural export. Although the professional writing in the Philippines is nowhere near as advanced as other English speaking nations but several awards are offered annually that recognize the excellence of Philippine literature.

You might also be interested in learning the detailed History of English Movies and also The History of Philippine Literature.

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Short History of Philippines Literature

Philippine is an island country situated in Southeast Asia along the Philippine Sea, Sulu Sea, Celebes Sea and South China Sea. The language spoken by the people is known as Tagalog. The islands were a Spanish colony from the early 1500s. The US controlled the islands in the early 20th century. Philippines is the 11th most populated country of the world.

The Philippine islands have a rich oral history of legends, poetry and tales which is common with other aboriginal societies. Unfortunately, a lot is not known among urban inhabitants and the older generations have retained them in most cases who are the subject of an anxious project by universities and cultural awareness groups.

Legends were brought with the Taiwanese settlers, it was the first homeland from the Austronesian people. The old stories of heroes and gods are shared in many parts with the stories that are familiar for the people of Indonesia, Pacific islands, Madagascar and New Zealand. However, Philippines have been settled for a mot longer time that allowed home grown versions to develop. The story of monkey and turtle is a favorite tale with the Philippine children. The moral of the story was that one should always share everything with friends. This is a defining nature of Filipinos.

Written literature existed prior to the start of Spanish colonial period. Spain was however gripped by inquisition and the church passed a decree that the existing Philippines records should be destroyed including unique Philippine alphabets. They were all to be replaced by Catholic teachings in Spanish only.

Baybayin was the only surviving documents written in tagalong alphabets. The written form literature in Philippines is only known from times of the colonial period. Most of the works written in those periods were religious praising the Christianity to the population that was previously following polytheism.

Poems were energetically encouraged that could be read or used in church or local festivals. A poem written by Fernando Bagonbanta in 1605 contained many lyrics that could be sung. In 1705, Gaspar Aquino de Belen wrote quintillas in succession that were more serious as compared to Bagonbanta. Philippines still use them today.

Since the first half of 20th century, many poetry and literature of Philippines was written in Spanish. Tagalog was frowned as the base language not capable of great works. Francisco Balagtas was one of the greatest writers of Philippines. He was a man compared with William Shakespeare for his deep nature of works. Florante at Laura was his greatest work written in Tagalog. It is about a man and woman during the times of Greek Empire.

José Rizal was the Philippine national hero and is considered the father of native Philippine literature. His works were also published in Spanish language. José Rizal was not only revolutionary but he was also very intelligent. For him, Philippine independence was very important for survival of Tagalog language.

Jozé Rizal was a source of inspiration for many Filipinos. He was also a model for civilized living. He had also studied Philosophy and Medicine and he was awarded many degrees from several European universities. Rizal also spoke 22 languages. Unfortunately, his works on literature were limited to only two novels. The second one was a sequel owing to his execution by firing squad in 1896 at the age of 35 after being convicted of up roaring revolutionary ideas. Philippines came under US control after Rizal's death. It was later associated with the US as a Commonwealth. The chosen language of the early 20th century was Spanish.

English became the preferred language of literature by the start of World War II. There was a brief flirtation with writing Tagalog during the Japanese occupation as Japanese forces were suspicious that Philippine spies would use English for passing secret messages to US forces.

On the contrary, writing in English allowed Philippine authors to successfully expand their horizons having their writing published globally. Several awards are offered annually that recognize the excellence.

You might also be interested in learning history of Philippine Literature and also history of the U.S. Constitution.

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