San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

It was a pleasant, beautiful sunny day today as the San Jose Short Sale Agent drove around previewing some homes while listening to some oldies on the radio.   It turned into a much nicer day when my client who was closing on his short sale today, invited me to lunch after he picked up his check for the $3000 relocation assistance check from his HAFA short sale.  He was so excited that the nightmare was ending, that he wanted to celebrate with me.

It a little over two months ago when he contacted me, feeling he was at the end of his ropes.  Chase had just informed him they were denying his request for a loan modification after dragging it out for months and the prospect of staying in his home was now up in the air.  But he had made up his mind.  He realized, despite his emotional attachment, he could no longer afford to keep the home.  He had to give it up and move on with his life and make a new life for him and his family.

In a little over two months, that same lender – Chase – was willing to allow him to sell his home for a loss, forgive him the deficiency, but on top of that gave him a check for $3,000 to help with the relocation to his new rental.   As we were discussing over  dim sum lunch, he was so happy and grateful that he is able to move forward without the burden of his mortgage, he seemed like a different man.  He was saying he could not sleep even last night, because he was concerned that something could go wrong and we would not be able record the deed and close escrow today.  He was going to sleep well tonight!   My client is now a friend and an evangelist on my behalf.

We were discussing why more people who are in similar situation as himself would not choose his route if they were unable to get loan modifications or otherwise afford to keep their homes.  We came to the conclusion it is probably due to lack of information.  If distressed homeowners knew that their income tax exemptions and the benefits of financial incentives from HAFA were ending soon, they would probably take decisive action as to prevent missing out on those valuable benefits.  He would tell his friends whom he knows are having difficulty paying their mortgages to take action.

Dear reader, if you or someone you know, are in a similar situation where you have come to the conclusion that you cannot afford to keep your home, but you cannot sell your home either because of the debt you owe to the banks, please take action soon and before this year is up.  Naturally, if you reside in the greaterSilicon Valley, I would love to help you so you can move forward with a new chapter in your life.

However, I am not saying you have to come to me necessarily; I respectfully and sincerely urge you to talk to someone who is an expert in the field of Short Sale  and get help soon before the two programs expire.   I think I would not be doing my job and my personal quest to help as many people fight foreclosures if I were not educating people about programs that are available; yet many people are not taking advantage due to lack of information.

Please talk to someone.  Indecision means you are making a decision to allow foreclosure to happen to you.

Another short sale approval came in today.    Another young family can now move forward and use the $3,000 check to help them relocate.  This was a HAFA short sale and another $6,000 from the proceeds were given to the second lien holder to help settle their claim.  After submitting the offer, it took less than 45 days to get the final approval.   This approval again, contradicts the rumors floating around out there that HAFA automatically causes delays in short sales.   HAFA deals with deadlines and was designed to speed up the process.

It was good for the bank, the seller and the buyer.   The house may not have sold for the amount borrowed, but we received a fair market value offer that was sufficient to pay monies to all parties involved to get them all to settle.   A happy day for all.  A good day for all.
Wells Fargo Approval

The internet is great for getting information quickly.  I love the fact that I can go to one of the search engines and type up a questions and get a list of responses which I can quickly look over.  However, there is so much unfiltered information out there; sometimes you become more confused about the topic after reading a lot of conflicting information.

This obviously applies, and perhaps more so, in the world of Short Sales and Foreclosures. There seems to be so much incorrect and half correct and sometimes completely wrong floating around out there.

The one that I hear frequently and had to deal with today was the one about HAFA.  There seems to be a consensus out there that HAFA slows down the short sale process.

I’ve heard of this before and interestingly I heard it from a negotiator with Chase who flat out told me that HAFA will tack on 90-120 days to the overall process (I didn’t bother grilling her on how she arrived at these statistics).  I’ve often heard Realtors on the buy side of my transactions tell me that they are not interested if the sellers were going for a HAFA short sale because it would add months to the process.   I try to explain that is not a universal truth, and that things are different on a case by case basis; but some listen most don’t.  To combat these issues, revisions were made to HAFA as of February 2011, one of the key revisions specifically states that a request or application for HAFA (with an executed contract) MUST BE responded to within 30 days. New information takes time to filter downward.

HAFA Request

I just received an approval from Chase today.  And it was a huge surprise for the buyer’s agent.  As you can see from the filing of the request to the issuance of the approval letter, it took 12 days (within the revised 30 days requirement and not 120 days as claimed by the negotiator).  The Request was made on June 2, 2011 and the approval letter was generated on June 14, 2011.  Granted this particular one only involved one loan so there was no second to deal with, but it still took less than two weeks.

Chase Approval Letter

This particular agent repeatedly asked me who was the third party handling the HAFA, but I always assumed he was asking me who was servicing the loan.  And as such, I never paid too much attention to his query about the HAFA third party.

When I emailed him a copy of the approval letter, he was obviously happy about the quick turn around time but again asked me about the third party handling HAFA.  This time I asked him to what he was referring?

This Realtor was under the impression that HAFA was a government program, so there was a central clearing house where all HAFA files went and that a third party was somehow responsible for getting the approval from HAFA.  In our case, it was his belief that the Chase negotiator would simply collect the documents and then forward everything to a “HAFA negotiator” who would then take months to get the approval from this entity called HAFA and then refer the approval or denial back to the Chase negotiator.

Now I understood why he thought simply doing a HAFA short sale would delay the approval process by several months.  (Now I appreciated him taking my word and sticking out the waiting period).   I had to explain to this seasoned Realtor that HAFA is not a thing or a place which de-toured the short sale process; rather, it was just another process or a set of guidelines by which the participating lenders all agreed to abide to actually shorten the process; not cause further delay.  He seemed surprised to learn this.

So what was my take-away from this experience?  There is a lot of mis-information regarding HAFA and other things associated with short sales and distressed properties out there.  Even the negotiators inside the banks are under the false belief that HAFA automatically means there will be a delay in the process and are not up to date on changes to the program.  This is quite ironic in that HAFA was designed to expedite the short sale process; but the rumor has it complicating and delaying the process instead.

HAFA could take more time once the reponse has been granted but need more information or denied and must pursue a traditional short sale, but from my experience, it has to do with number of issues such as: not using the correct forms to initiate the request, or not providing sufficient documentations requested, not responding to requests in a timely manner, or a myriad of other reasons.  After all, this is a new program which is only one year old, so there is the learning process by which everyone subjected to endure some discomfort.  But one thing is certain: simply by requesting a HAFA short sale DOES NOT AUTOMATICALLY cause months of delay.

Don’t buy into the Urban Legend and continue to feed it more misinformation or half-truths.

The Answer:

Really, it is free to you.  But you must choose wisely to insure a smooth and effective transaction.

The Question:

Is it true that the seller is not responsible for paying real estate commission in a short sale?

This must be a strange concept for those who are unfamiliar, but it is absolutely true.

The candidates for short sales are in their difficult situations because they are suffering financial hardship and unable to make their mortgage payment, let alone the commission to pay a Realtor helping them with the short sale transaction or the closing costs associated with said sale.

Common sense dictates, if the sellers had the money to pay such listing associated costs, then they would be able to help pay the mortgage in the first place.  Hence, it is customary for the lenders to pay listing commissions. The HAFA program, which is standardizing the short sale process, specifically states that they will pay customary listing commissions as long as the seller hires a licensed real estate broker.

I raise this issue because some scared homeowners are so accustomed to and afraid of interest, fees and penalty charges being slapped on them, that they are in shell-shock mode and continue to delay their decision to seek short sale assistance, often to their detriment.

For those who are uncertain:  It is absolutely true. Your lenders will pay for your Realtor commission, as long as you hired a licensed one.

Now that the issue of who pays has been resolved, the only thing that you have to worry about as a seller, is hiring a Realtor who is experienced and competent to insure that the short sale deal will close once and for all.    If you do not have to pay for their fee, why wouldn’t you want to hire the best and the most experienced Realtor you can find out there?  Do your research and ask the right questions.

When the Federal Government rolls out a new program, it does so by rolling out the program first, then working out the details and bugs after the launch.  Ideally, it would be nice to work out the details and bugs before the program were to be launched.  But when politics are involved, rolling out the program is more important than insuring its efficacy before the rollout.    The same was true for HAMP (Home Affordable Modification Program) when it first rolled out, it took many months before the number of permanent modifications started to increase to acceptable levels.

The Federal Short Sale program called HAFA (Home Affordable Foreclosure Alternative) suffered the same fate.  It was rolled out with much fanfare as it was designed to get all lenders to participate in and streamline the very complicated and fractured short sale process.  The intention to serve the homeowners in distress was certainly there; but the initial execution was much to be desired.

Eight months after its launch in April 2010, there is major make-over or policy update of the program to work out the kinks as that were identified by short sale practitioners like myself from CAR (California Association of Realtors).

Some of the more significant changes involve:

1. Loan Servicer no longer being required to verify financial information
2. Properties now being permitted to be vacant or rented out for up to 12 months
3. 6% cap on second liens being withdrawn
4. Loan Servicers are required to respond within 30 days to short sales request

The full text of the HAFA policy update is attached below.

The changes  were designed to speed up the slow process by which many of the loan servicers were handcuffed and still pushing paper,  rather than moving quickly towards the approval process to fight off  foreclosures, which is the ultimate goal.  Hopefully these changes will permit them to reach that goal.

As a service professional, I am of the belief that we must always  be learning.  We must not only participate in the required  continuing education courses, but go beyond by obtaining specialized training to differentiate ourselves from the average Real Estate Agent.  Only by becoming better educated, can we serve our clients better by utilizing the latest changes in laws and policies.

What exactly is a Short Sale?

Simply put, it is when you sell a home for less than what is owed on it with the lender’s approval and the lender forgives you for the difference (what is short) between what is owed and for what it ultimately sells.  The Federal Government is now pushing for this option for homeowners who are unable to obtain loan modification and offering lenders financial incentives to permit homeowners to choose this route.

Why would the lender agree to do this?

Money.  It’s always about the money isn’t it?   Typically, it is cheaper for the lenders if the house is sold prior to getting into foreclosure and being sold at auction.  There are costly expenses associated with foreclosing on a home (aside from the fact that owners who are going through foreclosure typically destroy the homes before they are evicted); but with short sales, it takes less time (meaning less carrying cost for the lender) and makes more economic sense for lenders if the homeowners have an interest in and participate with the lenders in selling their homes, rather than fighting with them.  The lender saves money because they don’t have to pay for eviction, go through an auction only to have to take the property back because the auction did not meet their floor price or no one attempted to bid, make repairs and then pay Realtors to sell it as a bank owned (REO) property which typically gets deeply discounted by buyers anyway, in the meanwhile, still paying for taxes, insurance, association fees, etc… that the seller failed to pay.  A home where the seller still resides and maintains will fetch a much higher selling price than an abandoned eye-sore type of property.

Why would it be good for the seller?

It allows them to have control over their economic future and sense of dignity.  Let’s face it, if you are contemplating foreclosure, that means your financial situation will not be changing for the better in the immediate future.  Don’t let others dictate your financial future; get involved and control and participate in your own financial outcome.

The most important facet to the short sales process is that it permits you to have control over your financial future.  If you are forced into a foreclosure situation, your credit score will be devastated as you had no participation with the lender to help address the situation.  The net result will be more devastating than bankruptcy from the Fannie Mae Underwriting Guideline point of view and you will not be able to buy a home or apply for a credit card for many years; additionally, now more and more employers are doing credit checks on prospective new hires and a foreclosure on your credit history may put you in jeopardy, especially if the job requires security clearance status, is a government position or involves handling of money. If you choose to take control and complete a lender approved short sale, you will be able to salvage your credit by more than halving the seasoning requirments (only 2 years) for Fannie Mae Underwriting Guidelines for re-establishing credit and give yourself the opportunity to be in a situation to buy a home again in a relatively short time.  Naturally, individual sitautions will vary in results.

Who pays for the commission?

Because you are facing financial difficulties, the lender is required to pay for the commission and associated closing costs for completing the short sale.  On top of that, if this it is a HAFA  approved short sale, you may be entitled for up to $3,000 in relocation expenses to help you move out and find another place to live.

Time is not on your side, please take action.