Tag Archives: notice of trustee sale

NEVER EVER GIVE UP – even if they say you are crazy. (Part 1)

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Short Sale Negotiators working for lenders will say and do whatever is necessary to gain any perceived advantage.   Saying and doing things that are questionably ethical or flat out lies are not uncommon.  Like the general public, there are good negotiators and there are bad ones who give the whole industry a bad name.

I have been dealing with a tough negotiator for a large lending institution.  In my experience, I find there are two major types of negotiators working at lending institutions: one type tries to bully and overwhelm you - sort of like a large child who wants to overwhelm another child by the threat of doing bodily harm; while the other type tries to rely more on finesse and starts off being helpful and cordial and sets the tone for the duration of the negotiation process (we will leave out the third type which is simply clueless and overwhelmed).  I am a person who believes in the Golden Rule, so needless to say, I would rather deal with the latter types who don’t try to annihilate the opponent.

Unfortunately for me, my tough negotiator was the first type (let’s call him Negotiator A):  he wanted to show me that he is a tough negotiator who takes no prisoners.  He started the relationship by demanding an unreasonable price that was beyond market value and essentially forcing the buyer to walk out on the deal. The net proceed he wanted alone was more than what the buyer had offered.

Needless to say, it took a long time to find a second buyer, but we managed to find someone who was willing to pay something very close to what he was demanding.  Unfortunately, while we were waiting for the second buyer, a Notice of Trustee Sale had been filed.  I couldn’t and he wasn’t willing to request an extension on the sale date unless and until I had a viable buyer.  Now that we had a buyer willing to pay close to what he was demanding, I requested that he extend the sale date which was scheduled for 10 AM, November 30, 2010.

He told me he would only agree to extend the sale date if I could provide him with the written approval from the second lender.  He demanded this of me the Tuesday afternoon before Thanksgiving.   Now getting the second to settle before the first settled was going to be a difficult task in of itself, but to do this essentially during the Thanksgiving weekend was going to be a monumental task.  He knew it, I knew it.  He told me I had until end of business day Monday, November 29 to get him the written approval or there would be no way to stop the sale.

I had to be constantly on the phone with the second lender’s negotiator (Negotiator B – who just got a new offer package) and force her to make a decision in less than three days – all while I was at a family gathering in Southern California for the weekend.  Although Negotiator B  knew we had until Monday to provide the written approval to the first, Murphy ’s Law kicked in.  She was missing in action Monday morning.  Out of desperation, I tried to get her manager and her senior manager on the phone, but was unable to reach either.  I got a horrible sickening feeling in my stomach……….

The mystery: why are foreclosure notices increasing but actual foreclosures decreasing in Santa Clara County?

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http://www.mercurynews.com/search/ci_13553869?IADID=Search-www.mercurynews.com-www.mercurynews.com&nclick_check=1

The above article mentions an interesting phenomenon that occurred last month in Santa Clara County’s foreclosure market. Between August and September of 2009, the actual number of homes being foreclosed (either sold at auction or returned to the bank as REO properties) decreased, while filings of Notices of Default and Notices of Trustee Sale remained consistent.

“Lenders foreclosed on 415 homes last month, down about 5 percent from August.….. Of these, 109 homes were sold at auction to third parties and the remaining 306 were taken back by the lender. …… At the same time, lenders filed 1,257 notices of default, the first step in the foreclosure process, and 1,027 notices of trustee sale, the final step before actual sale of a foreclosed home. The numbers for August were almost the same.”

The author doesn’t really reach a conclusion but leaves us wondering as to why this may be happening.

Well, I will pull data from the MLS in an attempt to interpret what may be happening in our back yard.

But first, it is important to understand the process of foreclosure.  Simply put, when a person receives a Notice of Default from the lender, they have 90 days to cure the default, or a Notice of Trustee Sale will follow, scheduling a date and time by when the property will be sold at the County Courthouse.  By the Notice of Trustee Sale date, if the delinquent amount, plus penalty and interest  is not cured, then it is sold.    But there is a wonderful vehicle which by now everyone has heard, which can stop that foreclosure if executed properly: the Short Sale.

If, from the time that the lender issues the Notice of Default and before the auction date, an experienced  San Jose Short Sale Agent can bring in a qualified buyer who is willing to take the property off the sellers’ hands and if the lender agrees to the terms of the sale, then that foreclosure process is stopped with the closing of escrow on the property in question.

What the article did not factor into the equation were approved short sales that closed escrow. I pulled data about Short Sales that actually closed during the months of August and September.

For the Month of August 2009, in Santa Clara County 187 properties identified as being short sales (both single family and condo/townhomes) successfully closed escrow (Fig A).  But in September 2009, 251 properties identified as short sales closed escrow (Fig B).  I’m not a mathematician, but by my estimate, that is an increase of 25% from August to September of short sales approved by lenders. And more than sufficient to explain the disparity as to why the notices are increasing but why the final result is  decreasing.

So let’s look at the complete picture in September 2009 in Santa Clara County.  Over 2000 notices starting the foreclosure process goes out to homeowners.  Of those, approximately 1000 attempt a short sale and 251 of them are successful in preventing a short sale (Campbell Communication conducted a survey  in February 2009 of Realtors and concluded only 23% of short sale are successfully completed). Of the 750 who were unsuccessful in their short sales, 415 of them actually get foreclosed (109 of them lose their homes to auction and another 306 of them are evicted and the lender takes  over their homes).  That leaves 1335  people still stuck in foreclosure limbo — the original 1000 who chose not to do a short sale and the remaining 335 who were unsuccessful with their short sales but have not gotten around to being foreclosed yet — wondering when they will be evicted.  And these homes that have not been foreclosed or sold through short sales are often referred to as the shadow inventory of bank properties.  Depending on how this inventory will be released, it could have a tremendous impact of flooding the market with cheap, bargain priced bank owned (REO) properties.   Let’s hope the lenders will release them gradually, rather than all at once or, even bettter,  allow more of them to be sold as short sales so they can stop the influx of undervalued properties from hitting the market place and bringing down home values.

Fig A .  August 2009

aug 09 ss

Fig B. September 2009

sept 09 ss

Greed run amok: a short sale story

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greed

I had a listing where a friend referred a friend whose family was going through financial difficulty and could not pay their mortgage.   As a San Jose Short Sale agent, I agreed to work on their short sale in an effort at least to prevent the non-payment and the probable foreclosure from greatly affecting their family business.  I explained exactly what I would do and how we would go about getting a good offer so as to slow down the foreclosure process and negotiate with the lenders for a mutually beneficial sale.  They were genuinely thankful and wanted to do everything they could to help me achieve our mutual goal.  So we sign the listing agreement.

Two weeks later, I get a call from the father saying they wanted to cancel the listing because they wanted to try a loan modification.  I had seen all of their financial statements, no lending institution was going to cut their interest rate or forgive portions of their principal – which was what he says he was trying to get.  I didn’t want to be the one to splash cold water in his face; so I said I would withdraw the listing while he tried to get a loan modification.

Three weeks later, I get another call from the father.  He wanted me to cancel the listing rather than withdraw the property from the market.  Why I asked?  He said that the loan modification person told him that in order for them to take on the loan modification project, they needed to sign a listing agreement.  I was supposedly preventing him from getting a loan modification……   What could I say to that?   He sounded so convinced that he would get a loan modification, I didn’t have the heart to tell him with their decrease in income, they were not going to get anything meaningful modified.

I knew a legitimate loan modification organization had no reason to sign a listing agreement.  Why would they?  All they were trying to do was get the loan re-worked; they had no need to list the house for sale for that purpose.  I knew something was not right; but this was a friend of a friend, I didn’t want to appear to be standing in his way of getting at that loan modification in the sky.

Two weeks later, I check and the house is listed as a short sale with a Realtor and not some loan modification company.  I sensed something was not right, but I wasn’t going to go back and demand an explanation.  I just wrote it off as someone who must have found someone they felt would do a better job at saving them from foreclosure and moved on.

A few days ago, six months after I canceled their listing, I got a frantic call from the father again.  He wanted to know if I could help him.  According to the MLS, the house was supposed to close escrow in early October, but he was advised by the agent that the buyer had backed out and the Realtor wanted him to write a check for one month of mortgage payment after six months of non-payment to stop the foreclosure (What?!). Apparently he was told three buyers had backed out over the months.  He graciously offered to give me the listing if I wanted it……..

I thanked him but declined.  I advised him that the listing agreement was active for two more weeks and I could not take the listing even if I wanted it.  So I started asking questions to see why the nice house in a good neighborhood had fallen out of contract on three separate occasions.

It turned out that the only reason why the father had me cancel my listing and went with another Realtor was because the other Realtor had offered to kick him back $5,000 after close of escrow! I do a lot of short sales, I understand the need for money and how enticing that could be for a family in financial distress.  So right off the bat, I don’t blame him for being enticed and going against the recommendation of the friend who introduced me and my explanation of why I was best equipped to help with their short sale; he saw an opportunity to make free money.

What I was able to find out was: he knew absolutely nothing of what was going on with his short sale which progressed for the past six months and went through three offers. He never saw any paperwork, not even a copy of his own listing agreement, so he didn’t know when his listing agreement expired.  He never saw any communication with the lending institutions, never saw the notice of default, the notice of trustee’s sale…..nothing.  He was lulled into oblivion with the promise of free money. Yet, the Realtor had persuaded him to move out to an apartment because the buyer was going to close escrow.

I specifically asked him to go and get copies of the listing agreement, notice of default, notice of trust deed sale, and any other written communication from the lending institution explaining the status of his short sale, as he knew nothing except an offer had backed out and he was not going to get his $5,000.

We spoke again today.  The realtor did not give him any of the documentation and had told him that the house went through an auction and is now an REO property.  So why ask for one month’s worth of mortgage payment to stop the foreclosure on an REO property? They now have a foreclosure on their record, so my initial effort in trying to minimize the effect on their family business by avoiding a foreclosure on their record was thrown to the wind for the promise of free money which never materialized.  He now wants to sue the Realtor……

So what did this family gain by going with a Realtor they did not really know but who promised them free money?  They lost their family home; have a foreclosure on their record; live in an apartment and paid rent when they did not have to; all the family members probably went through an emotional roller coaster ride which could have been avoided; and now needs to spend money they do not have to sue this Realtor.  Did this family’s fate have to end this way?  Was one bad decision the result of these compounding negative effects?

What is the moral of this story?  I believe it is that short sighted greed should not be the driving force behind your long-term decisions.

What do you think is the moral to this story?