It Takes Time
So when a client comes to you, what do you prepare them for in terms of time frame?
I would say somewhere between 3 and 6 months is normal. I’ve seen longer, I’ve seen much shorter. When you see substantially shorter time frames, a couple of things tend to be involved. Normally there’s what is called a “fast track” program, a seller incentive program, a relocation program, or something like that. So those are the loans that we see where folks are getting a check at closing, and a “thank you for doing a short sale, here’s your $5,000, $10,000, $20,000,” whatever it is.
Those are typically loans they want to get rid of. For example, we’ve seen a big push on that with Wells Fargo and Chase and Bank of America. They’ve all three acquired other (lenders), and those (loans are) harming their balance sheets, it’s impacting their stock prices which is why they want to get rid of them. In those cases, they do move a little bit more quickly. I’ve seen some fast track programs will guarantee approval within 7 days, some say thirty.
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So you’re counseling patience right?
I always tell people, it’s a lot of work, we’ll be happy to pull the wagon for you but you’ve got to be patient, you’ve got to understand it’s a little bit like standing in a line in Disneyworld. It’s hot, you’re tired and you’re thirsty, and nobody wants more on the ride than you do but that doesn’t mean that the line goes faster.
And that’s really the most difficult thing for folks to keep in mind is this is going to be slow. Everybody says in the beginning that they understand that, that they’re going to be patient and everybody has a tendency to get antsy throughout the process. But, no one is being singled out, the bank is not working on your file on purpose. You just have to keep in mind the human factor that the person you’re working with literally has hundreds of files on their desk.
I’ve heard you mention that the thousands of applications for short sales and modifications that banks are getting, literally tens of thousands a month.
Yes, absolutely, and some tens of thousands a week. So they’re doing the best they can. They don’t have any disincentive to not help you. Many of the negotiators are being paid on a per file basis so they do have motivation to get this file out of their office. But you have to keep in mind how many things they’re trying to do, which is why I really encourage a nicely organized package. There’s nothing different than the good old third grade example; if your handwriting’s good on your paper, you might get a better grade.
[Related Article: Credit Score Recovery Time from Foreclosures and Short Sales]
Get Help Before You Need It
As a real estate attorney, you help clients with short sales. What point do you come into this process?
Certainly I always think it’s always a good idea to get me involved sooner or later. There’s so much planning we can do ahead of time that can maybe reduce tax implications of a short sale, maybe reduce a potential for a deficiency judgment, or for a seller contribution fund that the seller might have to provide at closing. There’s a number of things that we can do if we simply have adequate time.
I’ve been called in to help on a short sale after the person has already listed the property and has an offer from the buyer but there’s just less planning that we can do. We could be of more value by the time the person has the contract. We could negotiate with the bank and make sure that all of the most valuable information is presented in the most beneficial way.
Learn More (Podcast): Listen to a 30-minute interview with attorney Jo Ann Koontz, CPA on Talk Credit Radio where she explains in more depth how short sales work, including what to do if you have a second mortgage and how to avoid a big tax bill. Download the interview here (right click and choose “save as”); listen online; or listen on iTunes.
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