Presentation on theme: "SHORT SALES Guidelines and Tips for a Successful Escrow Transaction."— Presentation transcript:
SHORT SALES Guidelines and Tips for a Successful Escrow Transaction
Short in MONEY, not short in time Not enough value in property to cover the loan balances due For property owner to sell, the bank will need to take a loss What is a SHORT SALE?
Where Do I Start? Obtain Listing Prelim from Ticor Title Representative Review Prelim: -Past due taxes, liens, possible NOD filing Obtain Current Payoff Statement(s) Review for prepayment penalties, past dueinterest, possible foreclosure fees. Add extra…just in case. Do not use mortgage statement to figure the amount due–it does not include all of the possible fees.
Ask Escrow Officer to Prepare an Estimated Closing Statement Will include all costs of sale: Commission, Termite, Property Taxes, Prorations, Payoffs, HOA fees, etc. Estimate figures high; pad the estimate!
Prepare Hardship Letter Possible reasons: Death, Divorce, Unemployment, Medical problems Heartfelt letter from the seller explaining the circumstance to the bank What changed from the time the seller obtained the loan to now? Seller cannot have a lot of money in the bank or just want to sell to buy another home; it must be a true hardship
Get the Contract Signed…QUICK! Don’t do the Work Without the Commitment to List with You It’s a lot of work, but it is a valid listing and worthwhile to you and your seller. Disclose the Short Sale in the listing contract and MLS – “upon approval of Short Sale” should be everywhere. Commission is usually limited to 5%, sometimes 4%, total. Be sure buyer is highly qualified. Timelines will be extremely important.
Prepare the Short Sale Package and Submit to Bank for Approval Request Short Sale Package from Payoff Bank(s) Short Sale Department will send Guidelines Requesting Particular Documents: Tax returns, W-2’s, Bank Statements, Prelim, Broker Price Opinion, Estimated HUD, Hardship Letter Submit the complete Short Sale package to the Bank–be sure it is accurate and complete. Be persuasive–tell the bank why this is makes sense for them and the seller. Usually a two week turnaround for response
Items Commonly NOT Allowed by Short Sale Approvals Home Warranty Paid by Seller Broker Commission above 5% Seller Carry-backs Credits to Buyers for Repairs Seller Paid Closing Costs–if too large
Got the Listing, Bank Approved the Short Sale, We are in Escrow… Now What? Keep a Close Eye on Your Timelines and Close that Deal!! Short Sales are approved up to a certain date Extensions will need to be requested if you get close to deadline Any Changes to the figures provided in the Est. HUD will need to be approved by the Short Sale Dept. in advance of closing Close the Deal, and collect your Commission Check!
SB 306 (Chapter 43, Statutes of 2009) SHORT SALE DEMANDS
SB 306 New Short Sale Demand Procedures Effective January 1, 2010
YOU NEED : “Short-pay agreement” (approval)—already in writing Escrow open/contract received Preliminary Report and/or other information about other liens THEN SEND : The above items Your “short-pay demand” request
AND RECEIVE : “Short-pay demand”* Good for up to 30 days Approval of estimated HUD-1, if required, within four days of submission. Close without lender approval if no conflicts (defer to your company guidelines that may require prior underwriter or manager review) Complete all steps for Civil Code protections at payoff * Lender may refuse (See Civil Code Section 2943 (b)(2))
SB 306 Creates New Escrow Terms Effective January 1, 2010 SB 306 adds THREE NEW definitions to California Civil Code Section 2943
" Short-pay agreement " means: An agreement in writing in which the beneficiary agrees to release its lien on a property in return for payment of an amount less than the secured obligation. (Civil Code Section 2943 (a)(6)) SB 306 Definitions
"Short-pay demand statement" means: : A written statement, issued subsequent to and conditioned on the existence of a short-pay agreement that is in possession of the entitled person, that is prepared in response to a written demand made by an entitled person or authorized agent, setting forth an amount less than the outstanding debt, together with any terms and conditions, under which the beneficiary will execute and deliver a reconveyance of the deed of trust securing the note that is the subject of the short-pay demand statement. The period shall not be greater than 30 days from the date of preparation by the beneficiary. (Civil Code Section 2943 (a)(7)) SB 306 Definitions (cont.)
"Short-pay request" means: A written request made by an entitled person or authorized agent requesting the beneficiary to provide a short-pay demand statement that includes all of the following: (A) (B) (C) SB 306 Definitions (cont.)
A) A copy of an existing contract to purchase the property for an amount certain. B) A copy of the short-pay agreement in the possession of the entitled person. C) Information related to the release of any other liens on the property, if any. ( Civil Code Section 2943 (a)(8))
Closing statement deemed approved: If the terms and conditions of the short-pay agreement require approval by the beneficiary of a closing statement or similar document prepared by an escrow holder, approval or disapproval shall be provided not more than four days after receipt by the beneficiary of the closing statement, or the closing statement shall be deemed approved, provided that the statement is not clearly contrary to the terms of the short-pay agreement or the short-pay demand statement provided to the escrow holder. Civil Code Section 2943 (c)(2)) SB 306 Other important considerations
Closing without approval of the closing statement, if required by the short-pay lender, is NOT without risk: Know your company procedures and consult your underwriter or manager or other appropriate party prior to proceeding!
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