Real Estate Blog - Loss Mitigator: The Ins and Outs of Short Sales & Understanding Credit Reports/ Q&A
The author of the article gives us his notes after going to a lecture from a "Loss Mitigator".
Please be aware the information regarding deficiency and tax liability does not apply to many California real estate owners. California has a complex web of consumer protection statutes which protect many California homeowners from deficiency judgments. (Tax liability is another complex area of law. It should only be tackled by a lawyer with the tax regulations in front of him (or her), and understanding of the anti-deficiency statutes and case law.) Finally, it is my opinion a short sale is rarely the best option for a California homeowner. In fact from my perspective the Lender is the party who should be suggesting the short sale and making the concessions if the homeowner negotiates properly.
Here is my condensed version of the "notes" for the lecture.
A credit history which shows a history of making mortgage payments is important. Lenders may forgive missed payments if the applicant had a very good reason for the missed payments.
The above information about credit may not apply during our current credit squeeze. (I think there is a strong chance this will hold true in the future.)
Short Sale Negotiation
The negotiator should convey the following:
- We want to work with with you (the lender) to minimize your loss.
- We have determined reason for delinquency. (What factor did the lenders miss during underwriting which should have tipped the bank off to the increased risk.
- Ask the bank if it is willing to give up some of the fees and penalties to get a sale done.
- Also ask the bank if they are willing to reduce the principle.
- At the time of the lecture the loss mitigator stated the banks did not want to believe their appraiser would have let the borrower pay too much for the real estate. (Banks no longer suffer from this illusion.)
- It is helpful to have the listing aged and to show the property has zero interest at a higher price.
- The loss mitigator does not make the decision, he packages it up for a supervisor or officer at the bank.
- And now perhaps for my favorite piece of advice which I have suggested before. Attorneys have options which bring the loss mitigators or the foreclosure departments to the negotiating table. If your home is in danger of becoming upside down, you should work with a San Diego attorney who understand this area of the law. Your short sale team should have a licensed California attorney and a licensed California real estate agent.
"Again, banks do not want to believe they made a mistake by approving your homeowner. However, they want to minimize losses. They also want to avoid a bankruptcy filed by the homeowner at the very last minute right before the forced sale. If you can document your homeowners desire to file bankruptcy (via attorney letterhead) then you may have a better chance at getting the short sale done according to your terms."