Short Sales May Get A Bit Tough In Florida
June 12, 2009
Some interesting news that has come out today about short sales and in particular, the ability to get title insurance on the flipped property. It appears that some title insurance companies are getting uncomfortable with the practice. There is a good article coming from the Tampa Tribune on this topic. To quote a portion of the article:
TAMPA - It may be a bit tougher now for investors to flip short sales for big profits.
Attorneys’ Title Insurance Fund notified its 6,000 member lawyers this week that it will not insure deals made with a popular - but controversial - method for closing flips of short sales. A short sale occurs when a mortgage holder agrees to allow a home to sell for less than the mortgage balance so that foreclosure can be avoided.
The Orlando-based fund is a major underwriter for lawyers who write title insurance in Florida. In a letter to lawyers, the fund said it has become aware of short sale programs advertised on the Internet that promise to make investors lots of money with little or no work.
It will be interesting to watch to see how this impacts the ability of investors to rapidly turn a profit on their short sales.
Broker Price Opinions (BPOs) - How To Get A Good Short Sale Value
April 8, 2009
Oh, the games people play, especially in the real estate business. This is especially true in the short sale world with broker price opinions (BPOs).
For those of you not familiar with the lingo, a BPO is an estimate of value, like an appraisal, but is performed by real 
estate agents. As it was put by one rather biased appraisor in an article recently,
“Unlike standard property valuations performed by licensed appraisers — which can run to hundreds of dollars — BPOs often cost $50 and are performed by real estate agents who may have minimal or no appraisal training and are subject to no regulatory oversight.”
Of course in this topsy turvey market, we have found that some very knowledgeable BPO agents have a much better handle on pricing than some appraisers but that is a different story.
As any experienced short sale investor will tell you, the BPO is the KEY TO MAKING A DEAL WORK. Essentially, a loss mitigator for a bank has certain lattitude to get deals done that are within some % of the BPO. As an example, if the BPO comes in at $150,000, then a loss mitigator may have full authority to accept offers of $130,000 or higher.
If the short sale offer is above that magic threshold, poof the deal gets done, the loss mitigator clears their desk, everybody is happy. Below that number and you may as well try pushing a wet noodle up Mount Everest. Each lending institutions have their own guidelines and these can definitely vary with time.
Many, many investors get stuck at this stage simply because they don’t understand how to play the games. So how are the pros getting BPO valuations that work for them and the bank?
- Always remember that the BPO agent is only making about $50-$75 so they want this done with little friction…. also remember that the bank is paying their bill so they want to make the bank customer happy;
- Well before the BPO agent arrives, the short sale house is marketed on MLS by the investor. They start the price at the highest value that might work and then start dropping the price some set amount (typically $5K- $10K) per week. At the higher prices, frequently no house showings occur; i.e., nobody is interested. As the price drops, you will find a price where a few showings occur and then finally a price where lots of showings occur. For a good short sale investor, their job is to explain to the bank’s BPO agent that no showings occurred until they reached a certain price….. One could argue that this is a good data point for determining true market;
- Next, the short sale investor will be very well prepared….. Lots of comps, lots of repair estimates, and any other justification that they can provide to the BPO agent. It makes the BPO agent’s job easier and helps them truly evaluate real value. A skilled investor can work magic at this stage.
- And of course, the short sale investor ALWAYS, ALWAYS meets the bank’s BPO agent on site so they can explain their point of view.
For the short sale investors who understand how to “play the game”, they get 1 out of 2 deals approved and their are some really good investors that are hitting 90% approvals.
Want To Learn More About Short Sales?
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- State Law Regarding the Use of BPO’s (appraisalnewsonline.typepad.com)
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Good News For Short Sale Investors
April 6, 2009
Its Monday morning so do you want the good news first or the bad news?
Since we mostly hear bad news these days, let’s start with the good news for a change. If you are a short sale investor, or someone considering getting into short sale investing, then you may be in luck. A new report from the Department of Treasury shows that banks approved almost 3 times more short sales in the 4th quarter of last year as compared to the first quarter.
Referring to the table and chart below, we can see that this is really a significant increase.
One of the biggest complaints of short sale investors has been that the banks are dragging their feet in getting their deals done. In part, this may be due to non-ideal techniques used by many short sale investors: there are some short sale investors that are getting a lot of deals done on a consistent basis. Even still, it sure would help to ride a wave of increasing short sales by the lending institutions.
If you are thinking about investing in short sales, you may want to visit this video that we put together.
So What Is The Bad News?
The bad news is that in all categories of loan defaults, foreclosures where just not getting any better by the end of last year…. Gee, isn’t that a surprise. While we will cover this topic in much more detail later, the short story (no pun intended) is that when you look at the number of loans that are
- 30-59 days delinquent;
- 60-89 days delinquent;
- 90 or more days; or
- Foreclosure in process,
all were going up over the course of last year. Looking at those stats, you know that we are not out of the woods yet. Unfortunately, many of these type detail reports are a few months behind so it is just one piece of the puzzle that we all need to be watching.
Loan Modifications - How To Work With Your Lender
March 30, 2009
Talk to almost any ethical homeowner these days that is having trouble with their mortgage and they will tell you the same story……
I talked with my lender but could not find anybody to help…. they told me my loan would need to be in default before anybody would talk to me seriously.
Suppose that you are actually one of the lucky people who gets to a potentially cooperative lender. Now what? There are some major things you should do at that point to maintain this relationship. Yes, it will be work but it will also potentially be extremely important for your financial future.
To be successful in this process, you have to understand how to make it work for BOTH you and the lender. Keep in mind that this will probably be one of the more emotional things that you will have to go through, so one of the tricks will be staying professional and leaving your emotions at the door. Tough to do I know.
Another common mistake is playing your cards a bit too close to your chest. Any lender is trying to sort through two scenarios: Is this person BSing me or do they have a true hardship on their hands: in the laer case, the LENDER KNOWS is is in their best interest to work with you. As a recent Realty Times article put it:
Only by laying all your cards on the table and disclosing the truth can you begin to attend to the root cause of your financial hardship and then develop and implement solutions that put you back on the path to long-term financial health. Understand your lender’s point of view Regardless of how you ended up in the situation you’re in, blaming the lender or the mortgage broker or loan officer who placed you in your current mortgage does little good, unless you can prove your point in court.
This is just a couple of the tricks to use. If you are facing this situation, then this article is definitely worth the read.
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