So, you think you want to become an REO Broker?

Get ‘Em Listed and Roll in the Dough…

It happens every time I teach a class (and I just had an (FIS) class in Charleston last week). Several of my students will get all fired up about becoming a listing agent handling REO’s as the fast track to real estate success. Even though the class is (and is advertised as such) designed to help REALTORS learn how to be successful with options to AVERT foreclosures, someone always attends for the SPECIFIC purpose of meeting me and having me tell them the short cut to becoming a Fannie Mae broker or a representative for some other REO account. Aside from the fact that that is not the purpose of the training, there will always be someone who is persistent in trying to move conversation in that direction.

This article is for you—you know who you are.

Ah-h-h, the Cushy Life of an REO listing agent

I’ve been there, done that, got the T-shirt AND the award. I received the 1st Rising Star Award as Rookie Broker of Year for the United States from Fannie Mae in 2000. They were right on target with their assessment; my star has been rising, (also drifting, getting lost and other mundane contortions) ever since. Oh, but I digress.

The truth is that my Fannie Mae experience was, overall, a really good one. I received excellent training at the Disposition Center in Dallas, and great support from my initial salesperson, Shirley Mastenbrook. I learned how to effectively price property based on a precise analysis of market data and I sold a heck of a lot of Fannie Mae homes. My sales volume and income both increased dramatically. However, my life, as I knew it, completely disappeared. It’s emotionally devastating to process a forceful eviction. To be the person who stands there and officially authorizes someone to be thrown out of their home. Being property manager extraordinaire is an emotionally draining and time-consuming gig.

It’s a New Day

The REO market is booming and in some areas there are more REO’s available than traditional listings. Loss mitigation efforts, including modification and short sale attempts, have slowed the number of completed foreclosures even though the number is still unbelievably high. However, the amount of ‘shadow’ inventory (REO’s being held by guarantors and NOT being placed on the market) is estimated to be a significant amount and must eventually be placed on the open market.

Market dynamics are rapidly evolving. A new mixture of guidelines for disposition changing in response to market conditions and/or government regulations, recommendations or directives and REO owners all serve to make today’s REO broker’s job a very challenging one. The practicalities of good business decisions shaping what will or can be during the time period the REO is under the control of the guarantor or lender is fluid. When you own or manage a few properties you can be almost casual about how you dispose of them. When you own thousands upon thousands, stacked on top of each other, you have to utilize a more systematic, inventive approach in reducing those expenses which revert to you and become vigilant in avoiding any expenses you can. Utilization of a strong contract, with strict adherence to its dictates can mean survival or failure to survive. Whether expenses are moved to listing agents, buyer’s agents or buyers is immaterial; what is important is that anything which can be shifted to someone else, be shifted. The list is growing—now even eviction costs have been added to the list of costs which can be shifted to someone else.

Flies in the Ointment

Nothing messes up a good plan faster than messy details. It should not cause you concern if the dollar amount tied to a detail is a small number, with only two place holders, like $99.00. It gets serious when the numbers are BIG numbers, with 3 or more placeholders, say $475.00 for instance.

Likewise, phrases such as “shall maintain the premises” are not a big deal, unless the premises include a pool or some other high maintenance component. Assuming the responsibility to maintain can keep a person awake at night better than a crying baby. Didn’t they explain that ‘handle utilities’ meant that ‘deposits when required’ would come from your checking account? I suggest you re-check your account balance to be sure you can AFFORD to be an REO listing broker. It’s good business, if you can get it—provided you are sure you understand what you are signing up for.

Re-imbursement is on the Way

**Insignificant detail—To be delivered by deranged carrier pigeon who will be dispatched later this year.

I am not throwing snipes at Fannie Mae. They did an excellent job of processing reimbursements and doing so in a timely fashion based on the criteria they had set for their agents. However, things could be dicey IF you forgot to submit invoices on time. REO sellers are SERIOUS about their deadlines. You miss it; you eat it!!! No equivocating. You agreed and said you understood, this is a business, not a game for newbies who want to play at REO sales. Suck it up, write the check and remember to check due dates more carefully in the future. If you want to depress me, e-mail me and ask about the $15,000.00 I had to shell out after missing a few deadlines—it doesn’t take long for carpet and paint to run into some serious money. BIG numbers, with five place holders—like $15,000.00.

REO’s can be LEASED

Awesome plan! Announced by Freddie Mac in January of ‘09 and Fannie Mae in November of ‘09. This is the deal. Both organizations were (and remain) concerned with the increasingly large inventory of foreclosed properties as well as the public perception that they are not doing all they can to help alleviate the problem. Both have begun lease-back programs so that either the former owner of the property or a tenant placed there by the owner can lease the home back—AFTER foreclosure.

In a nutshell, the Freddie plan is a month-to-month lease, at current market rent. The property will be on the market during that timeframe and the new BUYER assumes responsibility for the eviction process and related costs to get the occupant out of their new home.

The Fannie Mae plan is essentially the same, except that it allows for a one year lease period. If you are the REO broker for either of these guarantors you have the honor of explaining the particulars and the implications to a buyer’s agent. What appears to be a win-win for Fannie or Freddie and the occupant can become a nightmare for the agents involved and a potential purchaser. The magnitude of unintended consequences is enough to make my hair go straight (and I have a very short, curly Afro). I suggest you take a crash course in landlord-tenant law in your state. Additionally, please check to be sure your E&O Insurance premiums are current.

Would I do it again?

The truth is, I might be tempted because of the guaranteed revenue stream. The reality, however, is the same as the prospect of teaching middle school kids: someone has to do it but I am not that hard up yet. Having sold REO’s for 2 ½ years, very successfully, I can see how dramatically the terrain has changed. Today’s REALTOR has a lot more risk, many more potential ‘bosses’, and fewer clear guidelines in an arena which mimics the wild, wild west pretty closely. Training by the companies who select agents is almost non-existent. The entire process is further complicated by the fact that you are stepping into situations like the landlord scenario I mentioned in the paragraph above.

For agents who decide this is still the route you wish to pursue, I’d like to share some thoughts on making an informed decision.

The Five Star Conference, complete with training institute, offers just what you need—but the entire cost for that training will be at your own expense. The timing of the annual event may not coincide with when you want to get started and there are numerous other challenges to concern yourself with as well. Learn how to perform a professional BPO (www.fanniemaebpo.com) so that you are really good at determining property value PRIOR to the listing. Additionally, it might be beneficial for you to read the actual contract used by the guarantor you think you want to represent. I am suggesting that you read both the listing agency contract (which you and your broker will need to sign) and the contract which you will provide to buyers/buyer’s agents. You can learn a lot about the firm you will be working for by studying the documents which will bind you to them.

REO sellers do not all require the same level of service

It is important that you pre-determine what type of REO listing agent you want to be: an agent who only lists properties (such as HUD homes) without an obligation to handle utilities, etc – or does property management to a degree (Fannie Mae or Freddie Mac) or offers an even broader range of services such as rehab, keeping utilities in your name and a full menu of other services. Then only seek or accept listings from an REO seller whose needs mesh with those services which you are willing to perform.

I would caution you to avoid seeing the REO business as something you will just ‘tack on’ to the rest of your business. Most REO sellers are very demanding. Their volume is growing faster than mushrooms and a huge quantity of ‘shadow’ inventory is just waiting to be released. It would be wise to see this as a major part of your business and to make a decision based on whether you were prepared or willing to shift and become primarily an REO seller’s agent if this is the path you chose. If you do well, the volume will definitely follow. If you do poorly because you cannot handle unexpected volume, they will drop you like a hot potato and never speak to you again. They take “failure to perform” very seriously.

I would encourage you to talk to some agents who have listed REO’s within the past 18 months. Sit down with them over dinner (your treat) and ask for an honest analysis of those things which they see as problematic.

Your final question to them should be: “What is the worst thing that could happen?” Consider their answer. If you can live with the worst thing that could happen, then go for it.

Best of luck in the REO world.

Happy to be a “Former Fannie Mae Broker”

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

From the Desk of: REO Landmines

Let’s start with the basics: REO (real estate owned) refers to real estate which is owned by entities such as lenders, servicers or corporations. There are several ways property becomes REO but most often it is through default of the borrower who is either foreclosed upon or voluntarily relinquishes the property through deed-in-lieu. Corporations also become entitled if they acquired the home as part of an employee relocation package buyout.

Whatever mechanism resulted in the acquisition, a piece of real estate is now owned by an entity who needs to sell it. A special division, either called the REO or disposition division, is usually charged with the task of turning REO properties into liquid assets. As the foreclosure problem worsens the percentage of homes on the local market for sale which are, in fact, REO’s has increased. Strategies for dealing with the holders of these properties are somewhat different than purchasing from a private citizen. Those differences can be looked at as potential landmines if you are not familiar with the process.

Landmine # 1. Most REO properties are sold using a standardized contract which will be used throughout the nation. (for instance, HUD, Fannie Mae, VA). The language and terms in these contracts will supersede anything you write in your local purchase agreement, therefore, it is critical that you understand all the language in their standard contract.

Landmine # 2. Most REO properties are sold “as is”. While entities must allow for an independent inspection if one is allowed by state law, there is no requirement that any repairs be made as a result of the inspection.

Landmine # 3. Buyer are frequently charged a per day fee for delays in closing caused by their side of the transaction. Whether caused by the borrower, their lender or the realtor does not matter. It is not uncommon for the delay fee to be $100.00 per day.

Landmine # 4. Transfer of title will usually be granted with a special warranty deed or a Sheriff’s deed. Both provide a MARKETABLE title; not a CLEAR title. It is common for liens to remain attached.

Landmine # 5. When submitting an offer on an REO property, you buy the whole “kit and kaboodle.” What’s in the “kaboodle.”

Copyright 2007, Home Ownership Matters, LLC. All Rights Reserved.

(As always, if you have any questions, comments or feedback, we welcome and appreciate them. Just e-mail Heather at homeownershipmatters@gmail.com. Thanks for reading, and come back soon to see what else we've posted!)

REO Assumptions and Assertions

REO Assumptions and Assertions

Biggest Assumption: They just need to dump it

Translation: They’ll take any kind of crazy offer

Assertion: N-O-T YET

As a former Fannie Mae Broker–Specialist, I can provide insight into the real world of buying and selling bank-owned properties. First, forget most of what you think you know about such transactions—you’re probably way off target.

The Devil’s in the Details . . .

If you’re assuming they just need to dump it, you are half way right. They do, they really do, but not at any price. The most common misconception is that the holder of REO property will accept any offer without consideration for the value of the collateral. I suspect you’ve been watching too much late night television. While it is true that the increased volume of foreclosed properties means a substantial increase in REO inventory, the basic business principles which govern liquidation are not changing as rapidly as they need to (or as you had hoped they would.)

Harsh New Reality

It is a harsh new reality that today’s market is being flooded with REO’s. Thousands more will be added in the months ahead as a result of the backlog which has been created because of political posturing. As a consequence, both federal agencies (HUD, VA, Fannie and Freddie) and private mortgage insurance carriers will need to adjust their guidelines during the upcoming months. Unfortunately, as a practical matter, in the meantime, they and loan servicers must operate within the guidelines of existing regulations and existing contractual stipulations until they are amended. They will be relaxed—necessity will dictate that they must be. The consequence will be a ‘let’s make a deal free-for-all.’ Good for agents and buyers—not so good for price stabilization. But it has to happen and the sooner we get to it the better.

They Don’t Know Its Value

You’re right on target with that assertion. The “local market reality” is a piece of data which is hard for the servicer to grasp when they handle properties around the country from a centralized location. The truth is, their usual resources are less than reliable. They must rely on:

• Their appraisal, and we know how likely that is to be inflated
• A $50-$75 BPO—okay, does anyone really think you’re getting an accurate evaluation with a product produced in a BPO mill? Do you really think that they are trying to determine value with that document? (They are NOT. They are fulfilling a servicing requirement to have a BPO performed.)
• Their gut instinct
• The loan amount shown in their computer—but since when has that been connected to the ACTUAL value of the property?

Hence, the market will dictate and that process takes time. If the property is ‘rejected by the market’ for an extended period of time then it is declining in both actual and perceived value. It’s in everyone’s best interest to determine fairly accurately, from the onset, what is today’s market value. Consequently, the servicer needs a current, as-is appraisal. While many appraisers were rewarded for inflating values during the boom years, they are now stuck with the unpleasant task of trying to justify vast differences between former and current value. Market correction is not enough of an explanation but the recently sold comps don’t lie. It’s worth what someone will pay for it—today—not last year.

The Law of Supply and Demand

In time (I think within the next three to four months) the inventory will be so high that the valuations will plummet and get in line with what a ready and able buyer is willing to pay a reluctant REO owner. During the boom years hundreds of thousands of houses were built across the country without any clear need based on population growth. Speculation in real estate was HOT. The jobs created, the loans generated, and false illusion of prosperity made for wonderful headlines.

I was nearly thrown out of a Foreclosure Task Force meeting in Indiana in 2006 when I dared to mention the need for a moratorium on new construction since the city had already built more than 30,000 new homes in 5 years for only 10,000 new residents. I mentioned a college business class on supply and demand. I visited Denver in 2006 and thought they were building homes for the entire United States to move there. Then I moved to Florida and quickly observed that enough new houses were being built there for the few folks who didn’t want to move to Denver or Indianapolis. Shall I mention Atlanta, Las Vegas and twenty other cities which issued building permits without checking to see where the buyers were coming from. We are paying the piper (and we will be paying for the next ten years) for allowing an excessive amount of housing to be built. We created an economic situation which will dictate FEWER aggregate occupied households as people move to sharing homes in order to survive the financial crisis created, in part, by the ‘creative financing’ used to sell the new housing stock.

In time, the newly created rental housing market (previous homeowners, now renting again) will absorb much of the current excess single family housing but we will have changed the dynamics of communities across the countries from single family, owner-occupant to rental dwellings, perhaps housing more than one family. Investors are the most likely purchasers for the glut of foreclosed homes which will hit the market during the next two years. As businessmen and women, they will make decisions based on totally different criteria than buyers who would be owner-occupants. Financial institutions will have no choice except to reconsider their options when holding costs, fines from municipalities and other constraints dictate they do something to stop the bleeding. Excess has its payback. The law of supply and demand will not be ignored; pretending it does not exist is a sure fire way to pay the piper.

Now About that Insurance and Title Work

If you do not know the difference between a ‘marketable title’ and a ‘clear title’ this would be an excellent thing for you to research if you are planning to purchase an REO property. Suffice it to say that the REO you are purchasing can have gaps in the title coverage which leave room for undisclosed liens to surface after the closing and bite the new owner in the proverbial behind. Since you will have signed numerous documents which stated that you understood that you had no recourse after closing: you will not be surprised when I tell you: YOU HAVE NO RECOURSE AFTER CLOSING.

Watch for an upcoming webinar on the HOM website: “Buying REO is Risky Business”. You might want to put that on your schedule.

Copyright © 2008, Home Ownership Matters, LLC. All rights Reserved.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

WORD: REO

And the WORD for Today is:

Real Estate Owned (REO)–Real Estate Owned by a lending institution. An institution becomes the owner by foreclosure or by accepting a deed-in-lieu. A lender may also receive property through an insurance settlement. The disposition of the property will be handled by their REO Disposition Department.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth #3

Myth #3: That bank-owned property is always free of any undisclosed liens or other encumbrances.

Reality: Many of the homes being purchased as REO or bank-owned properties are being transferred with liens already attached or the possibility of liens becoming attached.

Reason: The kind of title policy which is used for REO sales is a special, limited coverage policy. The holder of REO properties makes no warranties about possible clouds on the title prior to their acquisition through foreclosure or deed-in-lieu. Title is transferred using a special warranty deed or a sheriff’s deed and most importantly all the documents which the purchaser has signed states that they understand these facts.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please e-mail Heather at homeownershipmatters@gmail.com with any questions, comments, or concerns you might have. We appreciate all feedback, comments, and especially your questions. Don't be shy!)

INtro #51: Buyer's Agent—A Different Game...Short Sale & REO Buyers

HOM INtro #51: Buyer's Agent—A Different Game...Short Sale & REO Buyers

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Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q: What designation will lenders look for when applying for REO's and BPO's?

A: Until 2 years ago there was NO designation available, primarily they looked for experience. Within the past two years the Five Star conference, associated with dsnews (default servicing news) has been offering a certification program which is the national , elite certification for folks trained by the default industry—to serve the default industry.

The (FIS) Foreclosure Intervention Specialist certification is less well known (been around for 3 years) but is certainly excellent additonal training if you are interested in going after foreclosure related business.

I think the combination of BOTH would make you very well prepared to handle REO/BPO work if you are trying to break into that business. That is one of the few areas of real estate which has an abundance of activity right now and will continue to do so for the next 5-10 years.

Since the instructor worked for Fannie Mae as a Broker-specialist, I strongly urge you to take the FIS training and the Five Star training.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Highest and Best

I am sure that the person who submitted the question below will have made a decision before they have a chance to get my answer. In any case, the answer could be helpful to anyone who has or might write an offer on an REO property so I am including it on the website.

Q. My wife and I wrote an offer a week ago on a bank-owned house and today our agent told us that the bank has another offer in addition to ours and gave us an opportunity to change the offer if we want to and give them our ‘highest and best’ offer by 5 p.m. tomorrow. Is this common? How should we respond?

A. First, just as a point of clarity, we are talking about a fairly common practice when you are trying to purchase an REO (real estate owned) property. The process of purchasing such a property is significantly different. The guarantor or lender who is selling such a property is interested ONLY in the highest net dollar amount. One way to increase the net is to encourage competing buyers to make offers on the same property (creating a multiple offer situation). Once the agent who represents such a seller is holding more than one offer, the strategy is then to have them compete against each other which results in a higher amount being offered for the home.

This process has rules. All potential buyers should be given the same time frame to respond and either increase their offer amount or re-affirm the amount they offered before is, in fact, their ‘highest and best’ offer. This option should be provided to the buyer’s agent (via fax) and provide for a signature so that the buyer’s agent can confirm that they have received the notification that the buyer needs to respond by a specific time.

The time frame for response varies but it is not uncommon for it to be 24-48 hours. A buyer has the option of withdrawing their offer if they decide they do not wish to participate in the bidding war. A buyer who is still interested and wants to increase their bid should be certain that their agent gets their revised offer in prior to the expiration of the required time frame. A follow-up phone call would be appropriate since the seller is going to make a decision based on the offers they receive during the stated response time.

Copyright © 2009, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

From the Desk of..."REALTOR at the Crossroads"

You’re a

REALTOR at the Crossroads

This is not a time for ‘dabbling’ in real estate. If you’re not a BIG DOG or prepared to become one, you really must stay on the porch. If you’re a little ‘soft around the edges’ and cry at scary movies, now would be a good time to non-renew your license.

Challenging Times

We are hard pressed to remember a time which has been harder for the housing market, and consequently, for real estate professionals in the past 25-30 years. If you are still trying to decide whether or not to renew your license, then read on. I have been warning that we were headed for just this situation since 2002. Mostly, I have been laughed at for my trouble or asked “Are you serious?” I was serious and correct. Everybody else is adequately covering the challenges now that we are actually in the midst of them. I have chosen always to understand my environment and figure a way to become at peace with it. So, let’s fast forward to the best of times.

Best of Times

This is the best of times to seize the opportunities being presented by today’s challenging real estate market. If you have lived a few years past, say, 30, you know that inherent in all difficulties lies the potential for new opportunities. This really is the best of times to take stock of both your personal and professional lives and decide—AGAIN—what you want to become when you grow up. While traditional real estate sales, for the average REALTOR, have become difficult at best, YOU are not average. You decided to read this article hoping to find insight and perhaps direction since you recognize you are at a crossroads.

Today’s Reality

No matter what city or state you happen to call home the challenges facing real estate professionals today are remarkably similar. There are more properties available for sale, a somewhat (or perhaps extreme) smaller pool of traditional buyers, tighter guidelines for financing, more REOS and a multiplicity of factors pushing property values down. Did I describe your market pretty accurately? There are exceptions, of course, but your market is likely described above. Today’s reality. Your success depends very little on what is going on in your market. Instead, your success is tied to how you respond to the market and whether or not you position yourself to be one of the agents who not only survives---but thrives—during this turbulent market. A concentrated, committed, full-time effort will almost guarantee success.

Specialization in Expanding Fields

The successful real estate professional two years from now will be able to look back and tell you with clarity exactly when they stood at the crossroads and made a choice which took their career to a new level. Specialization in one of those areas which are expanding because of the downturn will allow you to become one of those future success stories.

What Might a Career Shift Look Like?

• REO sales person—representing lenders/servicers by selling bank owned property. ( I am a former Fannie-Mae Broker specialist.) Can you imagine the volume of listings I would have now if I still represented them?
• Trash-out Specialist—handling all the details needed to trash-out and prep homes which have been foreclosed
• Locksmith—again—working for lenders to re-key when properties are vacated prior to foreclosure and again after the sheriff’s sale for placement on the open market as an REO
• Reverse Mortgage Specialist—working for a company which sells reverse mortgages to seniors who have equity in their homes as a way to avoid foreclosure/enhance their lives
• Foreclosure Intervention Specialist—(FIS)–starting a business as a consultant to offer foreclosure intervention counseling/representation, especially in upper end markets/areas
• Investor—in rental property you expect to hold for the duration of this down economy
• Property Manager—for single or multi-family—WARNING—not a simple as saying you can.
• Short Sale Specialist—again-not as simple as saying you can. Agents who have learned to be proficient at the strategies for successfully completing a short sale will be in demand. You would have more business than you could handle—IF YOU KNEW the secrets to successful short sales.
• Default Counselor—not the same as a foreclosure intervention specialist at all. You would most likely work for a non-profit agency doing counseling or you might start your own firm
• Real Estate Attorney–who decides to represent consumers who are struggling with their mortgage payments. You would also receive referrals from REALTORS, default counselors, and foreclosure intervention specialist when legal help was needed—WHICH IS CONTINUALLY.
• Lawn Care Company—not very glamorous---but definitely a business with a strong demand. As more foreclosures occur lenders are increasingly under the gun to keep properties which they own maintained. They’d rather pay you than the city.
• Show Home Franchisee Owner—finding qualified tenants for upper end properties while they remain listed. It’s a different class of property management. Great income—thriving in some markets.
• Property Valuation—using professional BPO forms ( such as the Fannie Mae BPO long form) and skills which include making adjustments for individual components of the property. Your most likely employer: lenders and servicers. Additionally, I believe consumers would be willing to pay for fairly accurate assessment of their property’s current resale value in order to help with their difficult choices in this climate. (I’m sorry guys, the traditional BPO or CMA is not thorough enough for today’s market.)

Dare to Re-Define Yourself

Trust me, time is on your side. The current wave will be rolling for the next 5-7 years or more. Get ready for the next ‘stage’ of your real estate career. Since I entered real estate in 1993, I have gone from buyer’s agent for entry level homes to listing agent to Fannie Mae Broker-Specialist to becoming a national trainer on foreclosure issues. Life is about ‘stages.’ Get un-stuck, buckle up and hang on!!.

You’re a REALTOR at a crossroads; which path meshes with your skills and interests?

Observations From the Desk of Mildred Wilkins,
President and Founder of Home Ownership Matters, LLC.

© Copyright 2008, Home Ownership Matters, LLC. All rights reserved.
(FIS) is a registered trademark of Home Ownership Matters, LLC.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

...From the Desk of..."Are You Ready to Intervene?"

Twenty Questions for Today’s Real Estate Professional

I was recently asked by the Charleston Trident Board of REALTORS® to differentiate the (FIS) Foreclosure Intervention Specialist certification from other short sale certification programs. Please know that the Board has offered both the (SFR) (Short Sales and Foreclosure Certification) and the (LMC) (Loan Modification Certification) certifications which are excellent programs.

Both have been widely attended in Charleston and I strongly encourage you to sign up for one or both at the next opportunity. Every single licensee should avail themselves of a basic short sale class so they have a rudimentary understanding of this ‘new’ transaction which is dominating the market in many parts of the country.

(FIS) will be offered for the first time in South Carolina beginning March 2010, courtesy of a FPR (Foreclosure Prevention and Response) grant from NAR. I think the operative word of distinction is ‘basic’ as compared to ’comprehensive’. This 30 hour program is designed for the agent who has decided to commit to getting an in-depth understanding of the various facets of handling these intricate transactions—the relationship connection, the Law, the Ethics, property valuation, the process, the negotiating, getting to the closing table, the downside, the resources needed, community partnerships, the self-study to continue to grow and much, much more.

Why offer (FIS)? Because hundreds of students who had taken either the 4 or 8 hour basic short sale training classes offered by Home Ownership Matters beginning in 2003 demanded more. More time, more expansive, more details. The course evolved and in 2005, the (FIS) certification was introduced in Ohio. Since then (FIS) has been approved for CE credit in six (6) states and there are graduates from twelve (12) states. States approved for CE include: Ohio, Indiana, Kansas, Nebraska, Colorado and Oklahoma.

30 hours, 700+ pages of material.

Tried and true methodology coupled with sound philosophy

from a former Fannie Mae Broker-Specialist

Updated regularly and state specific (Law section)

I decided the easiest way to say what you’ll learn is to pose the questions which will be addressed.

Are you ready to intervene?

1. Do you know how to distinguish a ’frozen customer’ from a potential short sale client? Do you currently use an intake form to determine who is a viable candidate for this type transaction and who is just not prepared for the commitment? Can you screen OUT the 60% of folks whom you should not list as short sales?

2. Are you prepared to analyze/distinguish the many HATS which may be required to help someone who is in default: the social worker, medical counselor, marriage counselor, human resources helper, spiritual advisor, budget counselor, salesperson extraordinaire, valuation expert, etc.

Are you real clear on what role you can and/or should play? Are you connected to/familiar with the community resources to address those needs which are outside of your scope of expertise? Do you currently utilize a referral form for this purpose? Can you see the potential for a fair housing complaint (or other complaint) without some standardized referral policy/form?

3. Do you know how to ‘handle’ the law while avoiding the ‘practice of law’? Do you clearly understand that it is necessary to understand some components of the law (and be able to explain them to your client) as part of a short sale attempt or an REO purchase?

4. Do you understand the impact of the seller filing bankruptcy on a potential short sale? The increased likelihood of a deed-in-lieu? Do you currently discuss this at the onset with your customer since it could/should end your relationship if they file later?

5. Are you familiar with the new Treasury guidelines for short sale—other than the fact that the commission cannot be reduced below 6%? Have you studied the guidelines? Do you understand them?

6. Are you familiar with the foreclosure law in your state? Is it a judicial or non-judicial process? What difference does it make? The guidelines for service on a defaulted borrower? Familiar with what the customary forms are and what they look like? Are you aware that violation of state foreclosure law can work in a borrower’s favor to gain extra time which could be used to facilitate a short sale? Or a reverse mortgage?

7. Do you have the expertise to accurately determine the value of a property in today’s declining market? Are you familiar with the professional BPO which is used as the industry standard (fanniemaebpo.com)? Could you complete one and do you understand why it can be much more accurate than the more commonly used CMA or market analysis? Are you clear on why accurate property valuation, from the beginning, plays such a critical role in the success or failure of your short sale effort?

8. Do you feel you clearly understand the unique protocol for short sales, not to be confused with REO and traditional sales? Who signs what? When? Presentation of offers? To whom?

9. Have you figured out what to disclose? To whom? And when?

Are the guidelines set by your Broker consistent with both Federal and state requirements/prohibitions on disclosure? Are you clear on the Who? What? When? HOW?

10. Are you familiar with your Board and Broker’s position on:

a. Disclosure—Who? When? How?

b. Commission—Who? What? When? How?

c. Signing of offers/amendments/price reductions—Who? When?

d. Presentation of offers—To whom? When? Signatures? Why?

e. Multiple offers—that is a whole other 20 questions

11. Does your brokerage utilize a set of disclosure forms which have been customized for the use with short sale scenarios? Are you familiar with them? Do you understand the protection that you may gain from covering the special risks associated with short sale transactions? Are you interested?

12. Do you understand the tax implications for a borrower who has completed a short sale? Please don’t tell me that you thought they were off scot free because the short sale was approved. (They are not) Do you have a referral to a tax accountant?

13. Have you read your state’s Seller Disclosure Law? Have you studied the state disclosure form? Does it include a reference to “threatened or pending litigation“? Or perhaps “notices from any Government or quasi-governmental agency”? Any “challenge to the title”? Are you clear on why any/all of these could forestall a short sale approval and therefore need to be disclosed?

14. Do you have clarity on the impact of a foreclosure on your customer’s ability to purchase down the road? Was that part of your discussion about the reason to consider a short sale in the first place? Have you discussed operating ‘in good faith’ as vital to the ability to keep the house on the market?

15. Is there a 2nd (or 3rd) mortgage? Are there other potential liens against the home (home owners’ association, taxes, personal judgment) which must be dealt with? Got a plan for how you are going to handle those? Do you know where to start?

16. Do you clearly understand the role of the Guarantor and/or the investor in determining whether or not a specific short sale can be approved? For that matter, do you know that the Servicer is merely a go-between hired to facilitate the administration of the loan but is NOT a decision maker? Who is? How can you find them? What are THEIR guidelines? Are they the same from Guarantor to Guarantor? Available in public records?

17. Are you familiar with the Qualified Written Request—backed by Federal Law (RESPA, no less) and the impact it can have as a ‘tool’ in delaying the foreclosure process if well-prepared? Used effectively and in a timely manner, you can gain valuable time to complete the short sale. We’ll cover that.

18. Has your firm/Broker created a “hold harmless” document which covers the scenarios which you cannot be responsible for with the clear understanding from your client that you will have no liability? Since the risk of lawsuit is pretty high with this new type of transaction, getting some understanding of what should be included and why should be paramount, I would think.

19. Have you identified as an agent/brokerage/Broker those scenarios which will require you to end the relationship? Have you established a policy concerning the need for a unilateral (not mutual) release? Under what circumstances, with what notice?

Certainly advance disclosure would be required: I would recommend at the inception of the agency relationship. We cover in detail during (FIS) training what I call the “Divorce Decree”. What happens if the client abandons? Files Bk? Enters into a deed-in-lieu? Refuses showings? Fails to cooperate in other ways? Policies should drive practices and both help to minimize liability.

Proper training and thorough understanding on each of these issues is paramount in order for you to be both effective at processing a short sale from beginning to end AND avoid the various opportunities to get yourself or your client into serious trouble along the way.

Short sales are the new reality for many markets around the country. They have become a major part of the market (along with REO’s) and becoming intimately familiar with how to process them successfully is paramount for any agent who wishes to thrive in today’s market.

If you do not already have clarity on ALL the issues which have been addressed in this article, then you are a prime candidate for the (FIS) certification program. Each of these will be explored and addressed during this 30 hour training program. You will leave with clarity on every single point covered here and will have the expertise to feel confident that you are representing your client with strong tools which have prepared you to be successful in getting the result you hope for and they deserve. YOUR knowledge base is a key component of your professionalism. Your success as a REALTOR® is tied directly to the caliber of your information.

Don’t miss an opportunity to learn, explore and interact with one of leading instructors on this timely topic. Her experience actually doing short sales, her time with Fannie Mae as a Broker-Specialist and expansive training (HUD, Fannie Mae, NeighborWorks, Legal Services, and National Consumer Law Center) can be invaluable to you.

Sign up today! Coming soon to a classroom near you!

Final Question

Is there someone in your office to whom you can refer a customer who needs short sale help? Within your firm? Maybe you can/should become that ‘Referral agent’ if you do not have the expertise today.

Are you Ready to Intervene????

*(FIS) is a registered trademark of Home Ownership Matters, LLC.

Other Foreclosure Resources

1. www.HOMwebinar.com

3. www.HomeOwnershipMatters.com — Calendar and Foreclosure/Loss Mitigation sections

4. www.nti.org — NeighborWorks America — Training Institute

5. www.consumerlaw.org — National Consumer Law Center

Mildred Wilkins

President of Home Ownership Matters

Author of “Your Real Estate Advisor”

available at: www.DovePublishingHouse.com

Toll-free 1 (866) 507-5105

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

What's That Mean? (O-Z)

OCC- Office of the Controller of the Currency

PI– Principal and Interest

PITI- Principal, Interest, Taxes and Insurance

PMI- Private Mortgage Insurance

POB- Point of Beginning

P.O.C.- Paid Outside of Closing

PUD- Planned Unit Development

QWR- Qualified Written Request

RAL- Refund Anticipation Loan

REIT- Real Estate Investment Trust

RESPA- Real Estate Settlement Procedures Act

REO- Real Estate Owned

RTO- Rent-to-Own

SRA- Senior Residential Appraiser.

SREA- Society of Real Estate Appraisers.

SRPA- Senior Real Property Appraiser.

TILA- Truth-in-Lending Act

Y.S.P.- Yield Spread Premium. See Predator Lending Practices.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

You can find more helpful definitions of WORDS like these in Your Real Estate Advisor which can be purchased at www.DovePublishingHouse.com.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Your Real Estate Advisor: Inspections—Top to Bottom “Check-Up” for the House

Inspections—Top to Bottom “Check-Up” for the House

When you are thinking about buying a home, you need to know what kind of condition it is in BEFORE you complete the transaction. You need to know just because you need the information (even if you are buying it as is. It is critical that you get accurate information about a wide spectrum of components of the property). In the event this is a regular transaction (not REO or short sale), then you can use the results of the inspection report to negotiate repairs which you wish to have completed at the seller’s expense, prior to closing.

What’s included?

We will cover the basic items for a full mechanical and structural inspection. The inspection will be a visual inspection of these components. While this list does not cover everything which could be inspected, it does cover the more common items you should expect with a full inspection of your home.

((Area: Components Checked))

Furnace: Burners/elements, heat exchanger, blower fan, ducts, air flow, filter, the flue pipe, humidifier and the thermostat

Electrical System: Breakers, fuses, main panel, sub panels, main service wire, switches and receptacles, amp rating, light fixtures, door bell and all smoke detectors

Plumbing: Water heater and gas lines, water lines, waste pipes, all fixtures and faucets, drainage, sump pump, caulking and grouting

Interior: Walls, ceilings, floors, steps/stairs/railings, fireplaces, all doors and windows

Attic: Structure, the decking of the roof, insulation, Ventilation and water penetration

Crawl Space: Water penetration, water damage, the structural integrity of the walls, insect damage, the structural integrity of the support system for the 1st floor of home as well as the location and condition of insulation

Slab: Water seepage into ducts (under slab) cracks and/or settlement

Basement: Water penetration, any water damage, the structural integrity of the walls, evidence of insect damage, floor condition, structural integrity of the support system for the 1st floor, finished wall and ceiling condition

Exterior: Roof, flashing, skylights and chimneys, walls, soffits and facia boards, gutters and downspouts

Grounds: Driveway, walks/steps, patio/porch, retaining walls, railings, balconies and drainage

Appliances: (Check to be sure your inspector will check the appliances, not all companies do) (Most built in items will be checked). Range, oven, exhaust fan, refrigerator, dishwasher, disposal and trash compactor


There are additional components which may need to be inspected but are not part of the standard inspection. Your inspector may inspect these for an additional fee or it may be necessary to call a company who specializes in this type of inspection.

Those items include:

Well/Septic System Security systems
Water testing Insect Infestations (termite/other)
Radon Water softeners
Sprinkler systems Pools and/or spas
Asbestos

We’ll cover these in a future article. Remember: your best bet is to use an ASHI certified inspector and attend the inspection so you can ask lots of questions. It’s an investment in your future. I’m trying to look out for you.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Myth—“As is” means inspection is unnecessary

MYTH: One of those myths which will not seem to die is that there is no need to have a home inspection on a property which is being sold “as is” since the seller has already indicated they are not going to repair anything. Failure to get an ASHI certified home inspector to thoroughly evaluate the home you are about to put down hard cash for is by far one of the riskiest things you can do when dealing with real estate.

REASON: You can’t judge a book by its cover (or a house by a walk-thru) 

The need for an inspection has been recognized by laws in almost all the states which grant the buyer the right to have an inspection and further to have certain types of issues addressed (to their satisfaction) or they have the right to walk away, retain their earnest money and go on about their business to find something more acceptable. 

In today’s climate with so many homes being offered for short sale it is increasingly likely that a traditional seller will offer a home for sale ”as is” because they have no money to provide repairs in the event an inspection shows there are items which need repair. 

Additionally, the market is currently flooded with bank-owned homes (REO’s which have been acquired via foreclosure or deed-in-lieu.) In either case the home has been vacant for an extended period of time, almost certainly without utilities on, and likely with delayed maintenance prior to the borrower losing it. Mold you see is definitely an issue: mold which has not yet manifested itself should cause you greater concern. There are so many major problems which can lie dormant in a long vacated home that you couldn’t give me one, much less convince me to buy it, even at a deep discount. (I rented a very nice, expensive Florida home which had been vacant for 3 years; I could tell you stories). To buy such a property without the benefit of a home inspection is foolhardy. If your REALTOR doesn’t advise you to have one, you need to 

start looking cross-eyed at the person you have trusted to advise you in your housing matters.

REALITY: A side benefit of an inspection is to know what repairs you want to ask the seller to take care of as a condition of moving ahead with the transaction. The core purpose of a home inspection is to determine what is the actual condition of the property (structurally, mechanically, etc) in order to determine if you wish to buy it: whether repairs are made or not. You may find a problem which is so expensive to repair or cannot be fixed to your satisfaction no matter what is done, which could cause you to decide to walk away from the transaction. As a real estate salesperson I had a couple walk away from a home after the home inspection found major termite damage as well as an active infestation of termites which we had not seen during our tour of the home. It could have been fixed but they were not certain that they would ever feel quite right about the integrity of the kitchen floor when so much of it (and the support beams) had been eaten away by the little varmints.

An inspection is for your peace of mind about the quality and condition of the home you are acquiring. It matters not whether it is being sold ‘as is’ or otherwise. You still need to know you’re not paying for a ‘pig in a poke’. Get the toughest inspection company you can find and ask for their TOUGHEST inspector. 

Good luck with your purchase.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Is the Seller Responsible for back taxes?

Q: When selling their home, is the seller responsible for paying the back taxes or tax liens?

A: Short answer: YES, to both.

Individual sellers of real estate are required to provide a clear chain of title and that requires that any back taxes or tax liens would have to be satisfied prior to or at the closing. In order to demonstrate that there are no outstanding debts against the property, the seller signs a vendor’s affidavit which affirms that there are no outstanding obligations which have not been paid. Additionally, they provide the purchaser with a general warranty deed further guaranteeing that a clear title has been conveyed.

Buyer Beware—Bank-owned sellers

The use of the word ‘their’ in the question above indicates you are talking about buying a home from an individual rather than an REO (bank-owned property) from an insurer such as HUD, VA, Fannie Mae or Freddie Mac. While these insurers are required to pay back taxes and Federal tax liens before they transfer title, they are NOT required to cover all liens and consequently you will most often receive what is called a “special warranty deed”, “sheriff’s deed” or “trustee’s deed”. Irrespective of what it is called, any of these types of deeds will be transferring “marketable title” but not necessarily “clear title” to you. You owe it to yourself to get clarity on all the words highlighted in this section before you purchase a home which is being offered for sale by an institution rather than an individual.

Pass it on! your ‘contingency’ and move to a closing.

What are contingencies?

They are stumbling blocks which must be addressed before you can close on the new home purchase. It might be that you have a home you must sell first. It might be that you need to get money from a 401K and have not yet applied for that to be released. You might need to pay off some outstanding judgments in order to get final loan approval to complete this transaction. It could be that you are awaiting a final answer from your employer about a possible job transfer or any one (or ten) other things.

Most important is to discuss with your agent whether or not there are conditions in the content of your offer, (probably under further conditions) which grant the seller permission to continue to show the home. If there are NO contingencies then I would say the home should have been pended and no, there should be no further showings.

Real estate contracts are somewhat complex but you really can understand them if you take the time to understand what the words really mean. Read your specific contract and see what they can and cannot legally do until the closing actually occurs. Best of luck.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Your Real Estate Advisor: 4 Prudent Rules for Buyers of Short Sale Listings

Four Prudent Rules for BUYERS Who Write Offers on Short Sale Listings

Rule 1: STAY PUT: Do not give notice in your existing housing until after you have closed on a short sale listing. Even if you have to pay a significant amount to go to a month to month arrangement where you currently live. The path to a closing on a short sale listing could get bumpy. The seller might:

1. File for bankruptcy which removes the home from availability
2. Receive an offer from another potential purchaser which the lender decides to accept instead of your offer
3. Lose the home to foreclosure in which case you will no longer have a valid offer and will need to attempt to purchase it as an REO, if you are still interested

Rule 2: BE SUSPICIOUS: If your offer is signed by the seller very shortly after you write the offer (within a few days) then the chances are pretty good that the seller signed without the lender’s approval. There is no guarantee that the lender is going to approve. Most likely you have a listing agent who does not clearly understand that “lender approval required” means the “Lender has the right to accept or reject any offer which is not to their liking”. Everyone should wait until you have the lender’s “required” approval for the acceptance of a short sale.

You should not be celebrating that you are going to be closing if the seller signed but you do not have the lender’s approval. Lenders make the final decisions on short sales, not the sellers who are upside down nor the REALTORS who are unfamiliar with or unwilling to bend to the way short sale transactions are typically handled.

Rule 3: BE PATIENT: We mean be prepared to be ‘seriously’ patient, like for a few months. Literally. Buying a home which is listed for a short sale can get you a great deal on a property, but you must be prepared to wait for an extended period of time (2-3 months is common). The lender has numerous things they must check and cross-check before they can approve a short sale. Watch for a future blog on “What is Taking Them So Long?” We’ll address the laundry list of things which must be checked before a short sale can be approved.

Rule 4: EXPECT A COUNTER: Four things you should understand from the beginning:

1. Your offer is likely to be set aside until the lender gathers the information they need to make a decision
2. Your offer is likely to be ‘joined’ by additional offers during this waiting period
3. The Lender is likely to present a COUNTER OFFER to the potential purchaser who they believe has the offer which will net them the most
4. That this COUNTER may not be presented to all potential buyers

Consequently, you should write the offer for the amount you are willing to pay since you can not be guaranteed a second opportunity to increase that amount. Short sale transactions are a real estate gamble; you’ve got to realize that going in and decide if you have the stomach for this kind of acquisition. If not, find a regular listing which will offer you the comfort of more traditional negotiating and timing.

It’s all in the game. All in the wonderful game that we know as: Short Sale.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Q&A: Clear Chain of Title

Q: When selling their home, is the seller responsible for paying the back taxes or tax liens? I have always assumed that they would be.

A: Short answer: YES, to both. More accurate answer is: Depends on whether the seller is an individual or an entity.

Individual sellers of real estate are required to provide a clear chain of title and that requires that any back taxes or tax liens would have to be satisfied prior to or at the closing. In order to demonstrate that there are no outstanding debts against the property, the seller signs a vendor’s affidavit which affirms that there are no outstanding obligations which have not been paid. Additionally, they provide the purchaser with a general warranty deed further guaranteeing that a clear title has been conveyed.

Buyer Beware—Bank-owned sellers

The use of the word ‘their’ in the question above indicates you are talking about buying a home from an individual rather than an REO (bank-owned property) from an insurer such as HUD, VA, Fannie Mae or Freddie Mac. While these insurers (as well as other guarantors) are required to pay back taxes and Federal tax liens before they transfer title, they are NOT required to cover all liens and consequently you will most often receive what is called a “special warranty deed”, “sheriff’s deed” or “trustee’s deed”. Irrespective of what it is called, any of these types of deeds will be transferring “marketable title” but not necessarily “clear title” to you. You owe it to yourself to get clarity on all the words highlighted in this section before you purchase a home which is being offered for sale by an institution rather than an individual.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)

Short Sale Buyer: 10 Critical Areas of Concern

Short Sale BUYER

Ten (10) Critical Areas of Concern

If you are thinking of buying a home in today’s market, there is a pretty good chance that you will find a home you like which is upside down (seller owes more than the house is worth in today’s market and the sale will require that the lender approve a short sale). Buying a ‘short sale’ is not necessarily a BAD thing but it is definitely a DIFFERENT thing than a regular purchase and so you need to ask yourself some important questions before you embark on this journey. I am going to assume that if you know the right questions to ask that you will be diligent about getting some good answers before you move forward.

Here are areas where you need to do your homework:

1. AGENT—Is your real estate agent experienced in working with short sale buyers? Know how short sale transactions differ from regular transactions? Provided you with sufficient documentation to help you know what the current value of the property is?
   
   
2. TIMING—Are you aware that it could take months (several months) for you to get an answer and go to closing on a short sale? Can you afford to wait for an indefinite period of time? Can you STAY in your current housing until you get closed—however long that might be? Did you know you can decide to walk away anytime you want to even though you have made an offer? Simply tell your agent to rescind your offer if you want to consider another house. (You know to do that in writing, yes?)
   
   
3. NEIGHBORHOOD—Have you done the research you need to do to be sure that the back side of the neighborhood is as appealing as the front side? Are you comfortable with the mix of owners vs. tenants in the neighborhood? Is the neighborhood moving more toward tenants? Are homes well-kept or more of them in disrepair? Have you driven the area at night—do you feel comfortable with the nighttime look and feel of the area you will be calling home? Is there a significant numbers of homes empty—whether for sale or otherwise available for occupancy (rent, lease, etc)? Are property values still falling or have they hit a plateau? Where did you check? (and don’t tell me you just asked your agent). Are you comfortable with the levels of taxes in the area? Are there any special assessments which you need to consider? If there is a neighborhood association, how financially sound is it? Have you stopped and talked to neighbors to see what is REALLY GOING ON IN THE NEIGHBORHOOD?
   
   
4. PROCESS—Did your agent carefully explain the short sale process to you? Did you ask for a response based on how long you are willing to wait (2-3 months) or based on the traditional practice of allowing only a few days? You wrote an offer which was presented to the local owner/seller but then forwarded to their lender/servicer for consideration. Are you aware that the lender may/will consider multiple offers and then make a decision on ONE of them? Were you warned that the Lender may counter your offer—after a very long time—even months after you initially wrote the offer? Are you prepared to increase the amount you are willing to pay or risk losing the house? Have you pre-determined how much you are willing to pay? May I suggest that should be the amount you should offer in the first place?
   
   
5. RISKS—Are numerous but forewarned is better than being caught off guard. Risks include:
   
   a. The SELLER may file bankruptcy—and the house cannot be sold to anyone
   
   b. The LENDER may foreclose and the property become unavailable
   
   c. ANOTHER OFFER may be accepted instead of yours (even if the seller signs your offer that does not mean that the LENDER/SERVICER is going to approve your offer instead of another one which they have received)
   
   
6. LONGTERM—Have you carefully considered whether this house meets your long-term needs (say for the next 10 years)? Lifestyle? Location? Size? Amenities? Condition? Does it have ‘growth potential’?
   
   
7. FINANCING—Do you already have a firm loan commitment from your institution—not a pre-approval? You should start out with a /loan commitment/ to increase your chances of getting your offer accepted and to avoid any surprises down the road. Can your lender use the appraisal recently acquired by the selling institution in order to speed up the process at the end? Did you know that your earnest money check should not be cashed until AFTER you have an offer accepted by the LENDER who is the real decision maker on a short sale transaction? (That could be 3 months from now.)
   
   
8. INSPECTION—Are you aware that most states allow you to have inspections on any property which you wish to acquire (including REO’s, short sales and anything listed ”as is”?) Is your agent encouraging you to have a full property inspection as a way to be sure you fully understand the ACTUAL condition of the property you want to acquire? (Good agents will insist that you should, especially on a short sale which probably has not been well maintained if the home is in foreclosure). Are you aware that you can decide NOT to move ahead with the purchase if the inspection shows some substantial issues which are unacceptable to you?
   
   
9. REPAIRS—Are you prepared to cover the cost for any repairs which are needed immediately (and in the near future) once you close? Have you gotten estimates based on the items uncovered during the inspection?
   
   
10. GETTING TO THE CLOSING—Are you prepared to wait a few or several months to get to the closing date? Are you comfortable knowing you may be asked to increase your offer amount at the last minute, once the lender knows EXACTLY how much is needed to make the deal work under the guidelines from the Guarantor on the loan?

I am a firm believer that if you point someone in the right direction, they will usually get where they were headed. These are not ALL the questions you need to be asking but you are certainly headed in the right direction.

A short sale does not have to be a nightmare. Not with an experienced agent and a well educated consumer. Good luck with your new home experience.

Copyright © 2008, Home Ownership Matters, LLC. All Rights Reserved.

(Please E-mail Heather at homeownershipmatters@gmail.com with any questions, comments or concerns you might have! We appreciate all comments and feedback, so please don't be shy.)