San Jose Short Sale Agent: Silicon Valley Foreclosure Prevention Specialists

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.

Yes, sometimes it takes a few months, and the waiting is difficult; but when the end result is the perfect case scenario, everyone comes out happy.

In this particular case, the seller gets the short sale approved, but more importantly, she gets the approval plus the waiver of the deficiency claim and with no contribution in the form of cash or promissory note. The perfect scenario for the seller.   She gets to sell this place and start a new chapter of her life without the constant fear of the underwater mortgage and the fear of foreclosure and its impact on her future looming over her.   A young person gets another chance at her life.

Bank of America Approval

Continued…..

According to Negotiator A, they were having some systems issues which prevented them from having full access. Whatever the problem was, it was now resolved.   The  final approval from Negotiator A came and was agreed to by the sellers today; we are to close escrow the first week of January 2011.

Everyone is happy: Lender A, Lender B, Sellers and Buyers.   This long, and arduous process has essentially come to a near perfect ending.  Who said Real Estate business is boring?

Why would banks agree to a short sale when they know they are going to be losing money?  This is the question I get posed to me frequently.  My answer: it costs them less money than to foreclose on a property; lenders’ primary responsibility is to mitigate their losses. Once we understand that, then the concept of a short sale is really not a mystery.

When you speak with short sale negotiators and other people in the industry, it is common knowledge that banks make more money when the sale is completed through a short sale, rather than permitting a property to go into foreclosure.  This was the unspoken truth that everyone acknowledged but no lender published any data to support or deny these truths.  Not having published data can be problematic for bloggers, as  postings are much more credible when there is data to support your contentions, rather than anecdotal evidence.

Today, for the first time, I discovered published data which sheds light into the true disparity between homes that are disposed as short sales vs. those disposed as REOs after returning to the lenders after foreclosures.    Short Sales net the banks between 13-26% more than REO sales according to Clayton Holdings after conducting a 6 month survey conducted between October 2009 – March 2010. (I’ve heard some higher numbers from other industry insiders).

13-26% is a nice tidy bag of cash for the lender holding those underwater mortgages; fantastic job of mitigating their loss.   And people still wonder why short sales are approved.

Now they can move on with their lives and leave behind the difficult phase of their lives.   Feels good to be a part of the solution.

This is an excellent article about the general overview of how short sales are reaching into the mainstream of the real estate industry.

The article, however, leaves a false impression that the REO listings are receiving more money because they close at 99% compared to 91% for short sales. However, there are plausible explanations for the differences in those two closing ratios.

1.  Short Sales generally have to start off at market price and require systematic price reductions which must be justified to the lenders for them to agree to the sale. Because buyers want deals but the lenders want to start with market price, price reductions are inevitably built in to the process.  Whereas in a REO, the bank and its accountants have pre-determined their bottom-line net price, which is typically below market rate.  Because they are dealing with bottom-line net prices, the banks will rarely agree to accept prices that are far off their list price, if at all.  By contrast, there is a bit more latitude in negotiating price in a short sale.

2.  In addition to having to start off at market price, comparable short sales generally list at a higher price point because owners typically live there and take better care of their homes where their family still resides; compare that to an REO where the owners often destroy many components of the house during the eviction process.  Short sales show better so are also more popular because they are closer to move-in condition that REOs.

So despite the impression that short sale properties receive less money, the reality is that short sale properties, sell at higher price points for comparable properties, yet close at a lower ratio relative to list/sold price because of the lenders demands to list at or near market price.

Click for the story

It’s  about time!

Those of us who specialize in short sales obviously know, believe and have been evangelizing about the fact that short sales not only help the homeowners but the lending institutions as well.  Unfortunately, there is a lot of misconception and misinformation floating about out there (especially on the internet by unenlightened, so-called “authorities”) who try to contradict these facts and – for whatever reason – plant seeds of doubt in confused homeowners’ minds.    Unfortunately these doubts germinate into inaction and often end up denying a perfectly viable alternative (inaction leading to foreclosure) to distressed homeowners who need them most, out of their difficult situations.

Now the Treasury has finally taken a position and set things straight with HAFA (Home Affordable Foreclosure Alternatives):  short sales are better for homeowners than foreclosures because: 1) they preserve the homeowner’s credit rating, especially in obtaining Fannie Mae loans in a much quicker manner and 2) they are also better for the lending institutions because the former typically gets higher prices than foreclosed properties.  These are truly win-win situations for the homeowners and lenders and that is precisely why the Treasury is pushing to make them easier to complete if a loan modification is not viable.

This program tries to address a lot of what is wrong with the short sale process, however, in my opinion, it addresses the single biggest enemy of short sale practitioners: the dreadfully drawn out approval process by many lenders. (Although prior to HAFA, some lenders decided on their own to streamline the approval process.)  It is not uncommon for the approval process to take 3+ months due to a combination of inadequate staffing and simple bureaucracy.  It will be manna from heaven to reduce the approval timeframe to only 10 days, as opposed to months.  Short Sales get a bad reputation because buyers often walk out of a deal because they are simply tired of waiting for the lender approvals and buy different, unencumbered properties.   An approval or denial within 10 days will save many, many short sale deals and give the distressed homeowners dignified resolutions to their financial ordeals.

Granted, HAFA, like HAMP (Home Affordable Modification Program) cannot be forced on the lenders, but at least it will lend political and social pressures on these mega-lending institutions which have been given so much assistance during their difficult times by the Treasury. This is definitely something in the right direction in addressing our foreclosure fiasco by the Obama Administration.