Randi Bennett Part three: Foreclosures & Short Sales
Read Part one of the interview here
Read Part two of the interview here
About: Randi shares her experiences concerning the hot topic of short sales and foreclosures.
Note: This 3-part article is not meant to encompass all the details regarding the topics mentioned.
Our hope is that through Randi's personal experiences we can all learn something new and hopefully aid us in our decision-making.
Tell us more about short sales?
The first things is that there are several conditions in line when you're doing a short sale.
The owner has to be a few months behind before the lender would even help look into what they would have to deduct their payoff to be. Then the house usually has to be listed for more than six months. And they have to prove that. Whether through a listing agreement or newspaper article or a For Sale by owner, something to prove to the lender that they've been trying to sell it and they are still behind in their payment .
The bank won't even look at the short sale until the offer is on the table. So again if you have surrounded yourself by a good Realtor. The Realtor will put in the listing that it is subject to short sale approval because that at least let's the buyers know that it's going to be a longer escrow. It's not a quick 30-day escrow. You can't do it in two weeks.
You submit a bunch of stuff, a letter of explanation of financial hardship .You submit the contract so they could take a look at the offer. I'd put together a closing statement so the bank could look at how much they are going to lose, and all that gets submitted to the bank and you wait.
But You have to be careful because you border the short sale and foreclosure and so the two departments usually don't talk to each other so if you get close where you've missed six or seven payments now and they're in a foreclosure status but you've almost got the short sale approved, make sure you're talking to both departments because they can foreclose without letting the short sale department know and then the whole transaction is dead because now it has gone down to the court house steps and somebody else can buy it. That is the number one problem with my short sales.
We get all the agreements coming up and we try to get everything all cleaned up and then we still lose it to the Court House steps because it went too far. Its been on the market for eighteen months. They haven't made a payment for six months. So as a seller it's important that you communicate with the foreclosure department and let them know what's happening. Try to get it all in writing, fax them information. Have them fax you information back so when it comes down to it you've got it all in writing. That seems to be huge problem as well.
Difference between short sale and foreclosure?
There are several things the seller could do. There is a short sale process, there is a deed in lieu of foreclosure then there is the actual foreclosure.
Short sale process is basically you owe the bank $200,000 and the bank says, "ok you could pay me off at $190,000. " But what happens especially with a lot of people in this market, is that they have 1st and 2nd loans so you have to get short sale approval on both loans and some of them have different lenders and then if you don't pay off the loans completely they have the right to come to you after the escrow has closed and say "ok, now we need the remaining $15,000." and then they will lien you personally for that loan and then you have to make payments on it. So the short sale even if you've sold your home and the mortgage has gone away you have to be aware that the lenders could still come back to you afterwards and ask you for that money.
Can you expound further on that point. I think some people have the idea that once we let go of that property our debt that came from that property is totally forgiven free of that debt.
Well,everything is a little different. In a short sale they could come to you for the deficiency. So let's say you have a first loan for a $100,000 and a second one for $50,000 and you sold your home for $125,000 so by the time you pay all your closing costs and those kinds of stuff the second probably won't get much at all. What you have to be aware of is that they could come back to you for the deficiency. So that's the short sale process.
A Deed In lieu of foreclosure basically means the seller or the current owner deeds the property back to the bank. But again if there's a first and a second (loan) you can't do that, if the second lender holds it up. If there's just one loan you can deed it back to the bank. But when you have two lenders you can't, because you can't deed it to both banks. Only one person can be an owner. So when you deed it back to the first then the second loses interest and then of course,loses their mortgage.
Foreclosure
Is basically where you skipped all these payments. They do the foreclosure process and they record a notice of default on the home and then they record a notice of sale showing on the County records,the sale date. Then it goes to the Court House steps. People then bid on it. And if it's not a good bid, the bank takes the property. The only thing is they could still come to you for the deficiency. So then people have to be aware of that they would need to file bankruptcy to stop the lenders from coming after them. So if they do a short sale, it's probably safe to file for bankruptcy. So that the banks cannot come to you for the deficiency.
Tell us more about foreclosure sales. I've been hearing and seeing a lot about investing in foreclosure sales. I mean you see a ton of signs, 'make money with foreclosed homes.' How does foreclosures really work ? People have this idea that, “ oh I have money. I want to be Robert Kiyosaki. It's a down market. Let's invest. Let's get a foreclosure deal and get a $80,000 discount." What do you think of this?
A foreclosure sale, if you've never experienced it is an amazing thing to watch. There's a little tiny house on the courthouse steps and there's a judge and he's standing there and he goes, 'ok we start the bidding at $100,000. So you start bidding at $100,000. And the bidding starts . I mean it's truly like buying art and its just absolutely amazing how it works. Well, you have to have cash on hand, walk in with a cashier's check for a $125,000 or have your loan ready to go.
You don't know what you're buying. You don't know if there are liens on the property. You don't know if the walls are still standing in the property. Because you can't view the property prior to foreclosure. They lock the house. So if you are on the courthouse steps, you are buying the structure as is. You need to know what you're doing. There are good things too, don't get me wrong. You can get some great deals. But you really have to be aware of what your doing.
Randi began her career in 1994,right here in Reno. With over thirteen years of experience in title and escrow. And with her incomparable attention to detail, organizational skills and dedication to superior customer service. She is truly one of the most successful in her field in Reno & Sparks.
Here's another post from Mark Graham. He shares to us his opinion on foreclosures.
Here's What Wikipedia Says About Foreclosures
Related reading:
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Definitely gave more insights on the whole process of short sales and foreclosures.
i was kind of ignorant of some topics you discussed. hope you can go more in depth with some issues that arise in foreclosures.
thanks for the post
Posted by: Anne | January 03, 2008 at 02:37 PM