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- If my seller owes more than I think the house can be marketed for, how can I tell if the lender will be open to a “short sale” offer?
- The seller doesn’t have the money to pay his closing costs and there is no equity in the property, how can he sell?
- As the listing or selling agent, how will I get paid since there is no equity?
- I have a challenge on a REO property that you may have a solution for. I know of a REO property but the lender that owns the property has filed chapter 11 bankruptcy and gone out of business. They took ownership this year and went out of business this year as well. I am trying to find out who has control of that property now because I want to make an offer. The REO real estate agent told me the listing for that home was taken from him and he doesn’t know who has it now. Do you know of a way I can track down who controls that property now? By the way, the 2006 real estate taxes were paid by the original homeowner last year prior to him being foreclosed on. Thanks for any advice you can give me.
Q: If my seller owes more than I think the house can be marketed for, how can I tell if the lender will be open to a “short sale” offer?
A: The first step is to open the lines of communication with the lender’s collections or loss mitigation department and just discuss with them the possibilities of accepting a lower offer. Here’s how:
First: have your client sign a General Authorization to Release Information form. This gives the lender permission to discuss the loan with you.
Second: Call the customer service number on the client’s monthly mortgage statement. Ask them what fax number to send the authorization from to.
NOTE*: Many lenders will take up to 2 business days to put the authorization in the system. If you would like to talk to the lender sooner, ask if you can 3-way call with the seller and the lender and get verbal authorization. This will allow you to discuss the loan with them right away, but for some it is only a 24 hour permission, so you still want to fax in the written authorization.
Q: The seller doesn’t have the money to pay his closing costs and there is no equity in the property, how can he sell?
A: When a bank considers a short sale offer, they will look at the NET offer. This means that if you offer $80,000, the bank will not net $80,000, they will net that MINUS: Realtor commissions, sellers closing costs, costs to cure title, back taxes, etc. In this example, the bank may net $71,245.98. When considering your offer, this is the figure they will go by, so if they accept your offer, they will ensure that all closing costs will be covered through the sale.
Q: As the listing or selling agent, how will I get paid since there is no equity?
A: When a bank considers a short sale offer, they will look at the NET offer. When you submit your offer, you will also send them a Net Sheet or a Preliminary HUD-1 Settlement Statement. This will show the bank how much they will NET after expenses if they take your offer, so make sure that both sides of the Realtor’s commissions are listed on the HUD-1 as a seller’s expense. As long as this is done, you should receive your commissions without any problem, because the lender has agreed to the numbers. NOTE* I have heard that in some cases the lender at the last minute is refusing to pay ANY commissions even though you secured the buyer for the property. I have not seen this first hand yet. If you know of someone that has had this happen, please have them contact me.
I DO know that many lenders will cap your commission. For example: You’ve negotiated a 20% listing which will be shared 10%/10%. Another agent brings a buyer and you submit the full short sale offer. The lender accepts it, however they are limiting your commissions to 1% total. To protect yourself, always disclose that all commissions are subject to lender approval in your MLS data, and it may not be a bad idea to have both brokers sign an acknowledgment of the reduced commissions.
Q: I have a challenge on a REO property that you may have a solution for. I know of a REO property but the lender that owns the property has filed chapter 11 bankruptcy and gone out of business. They took ownership this year and went out of business this year as well. I am trying to find out who has control of that property now because I want to make an offer. The REO real estate agent told me the listing for that home was taken from him and he doesn’t know who has it now. Do you know of a way I can track down who controls that property now? By the way, the 2006 real estate taxes were paid by the original homeowner last year prior to him being foreclosed on. Thanks for any advice you can give me.
A: That’s a tuffy! There will be someone that has taken over or will take over their entire portfolio, but that may not have happened yet, it may still be tied up in the bankruptcy courts. Here’s some ideas for you to try:
- You may be able to find out who the attorney is that is handling the bankruptcy and contact them. Do you now the bankruptcy case number? You can reverse look up by the case number.
- Does public record show a transfer from the lender to another entity on that property? Your title company may be able to find out, this would show you who has it now. try googling the lender for stories and news about who might have bought their assets.
- try googling the property address to see if it’s showing up on anyone’s REO list.
- Also, maybe the old listing agent can help you, was his contact with the lender, or through an asset management company, if an asset manager, they will know who has it.
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