ForeclosuresShort Sales

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Foreclosures/Short Sales

• Presented by Metropolitan Title

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Foreclosure Process

• Foreclosure by Advertisement
• Sheriffs Sale
• Redemption Period
• After Redemption

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Foreclosure by Advertisement

• The Mortgage must have a power of Sale Clause
• Mortgagor must have violated a term in the
  mortgage document
• Lack of Payment
• Insurance has lapsed or cancelled
• Unpaid Property Taxes
• Unlawful Use of Property
• Severe Deterioration or Destruction
• Mortgagor Sold Property

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The Process

• DEFAULT
• LOSS MITIGATION
• FORECLOSURE SALE
• REDEMPTION
• MARKETABLE TITLE

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Foreclosure by Advertisement

• Name of Mortgagor
• Name of original mortgagee and/or foreclosing
  entity
• Date of Mortgage
• Date of Recording
• Amount claimed due
• Legal Description
• Length of redemption period

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Advertisement

• Notice shall be given by publishing for 4
  successive weeks, at least once in each week.
• Newspaper published in county where property is
  located
• Copy of notice posted in conspicuous place within
  15 days of first publication.

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Sheriffs Sale

• After Advertisement, there is a sheriffs sale.
• Anyone can bid on the property at that time.
• Usually purchased by the foreclosing entity.

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Redemption Period

• 6 months for property 3 acres and less.
• 12 months for property over 3 acres.
• 12 months for loans that are more than 1/3 paid
  off.
• Can shorten redemption period to 30 days if the
  property is abandoned.
• Redemption period can be extended by at least 60
  days if bankruptcy is filed, within the
  redemption period.

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After Redemption Expires

• All liens subordinate to the foreclosing entity
  will be removed from the property.
• All liens superior will remain.

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Short Sales
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The Definition Of A Short Payoff Sale

• "A sale in which a lender allows the property
  securing a mortgage or deed of trust loan to be
  sold for less than the existing loan balance, due
  to factors such as the borrowers financial
  circumstances, the propertys physical condition,
  and local real estate market conditions.

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Why Do The Banks Short Sale?

• The mortgage is in arrears or foreclosure.
• The property is in poor condition.
• The homeowner has hardships and cannot afford the
  payments.
• The area has depreciated in value.
• The bank's shareholders are concerned when there
  are too many defaulting loans on the books.
• Some banks are required to have an amount equal
  to six times the retail value of each REO "on
  hand".
• An REO is a liability, not asset. Too many
  liabilities will cause any business to go under
  if not dealt with quickly.

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What documents do I have to include in a short
sale package?

• Documents depend on the lender. Each lender
  has different requirements. The Following are
  examples of what you might include (Minimum)
• Hardship letter
• Purchase and sales contract
• Settlement statement (HUD 1)
• Net sheet
• Pay stubs
• Bank statements
• Personal financial sheet (monthly budget)

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What Steps Do I Take to Complete a Successful
Short Sale?

• If not Listed
• Find a property owner in distress.
• Put a deal together with the homeowner.
• If Listed
• Homeowner sign an authorization to release form.
• Sales contract with Homeowner Signature.
• Call the Loss Mitigation department at the bank.
• Fax them your offer along with the following
• Your cover letter explaining why you can't offer
  full price.
• The sales contract.
• Justifying comps of the area.
• Pictures, if you have them.
• A net sheet or closing statement
• A hardship letter from the homeowner that
  mentions the dreaded word.. bankruptcy.
• Estimated list and cost of repairs, using retail
  repair prices that the normal homeowner would pay
  for these items.

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What Exactly Is a BPO?

• BPO stands for Broker's Price Opinion. All this
  means is that a real estate agent or broker will
  assess the property and give their professional
  opinion of it's value to the lender. The closer
  that number is to your offer the better. You want
  the BPO to be as low as possible.
• Listed below is a snap shot of a BPO
  requirement.
• Run comps and take pictures of the surrounding
  neighborhood, subdivision, or area.
• Inspect the overall condition of the home and
  estimate the cost of repair. Take pictures.
• Formulate their "opinion" of the property's value
  based on the information that was gathered.
• Submit a detailed report of their research to the
  lender.

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Here Are 5 Necessary Steps to Influence the
Broker's Price Opinion (BPO)

• Step 1 Order Full BPO.
• Step 2 Be informed.
• Step 3 Meet at unoccupied home.
• Step 4 Shadow BPO agent and point out relevant
  repairs and damage.
• Step 5 Give input and ask for Estimate.

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Step 1

• Step 1
• Before your package is submitted ask the
  loss mitigation's rep to order the BPO. Give them
  the best number to reach you and have the agent
  doing the BPO call to set up an appointment. You
  must be present for the BPO. Note There are
  two types of BPO's 1.) Full BPO - The agent
  does a full inspection of the home.2.) Drive-By
  BPO - The agent only takes pictures of the
  outside and other homes in area.Always request
  a full BPO. If a drive-by BPO is done, you will
  not have any one-on-one time with the agent,
  therefore eliminating any possibility of
  influencing the outcome.

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Step 2

• Compile Comps
• Estimated costs of repair, and any other relevant
  information that will justify a discount.
• If possible, visit the property prior to the BPO
  or at the least a half hour before the agent
  arrives.
• Make two lists for repair costs.
• One with all of the obvious repairs such as wall
  damage, carpet, paint, etc. The first list will
  be mostly cosmetic repairs.
• Make a second list of all repairs that the agent
  will not see with their naked eye (i.e. roof and
  water damage, faulty plumbing or electrical
  fixtures, pests, mold, etc. This list will
  contain more serious problems. Be sure to have an
  itemized breakdown of the costs involved. Bring
  this information with you to the BPO appointment.
  Be prepared to explain in detail how you came up
  with your estimates.

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Step 3

• Make Sure the Home is Unoccupied.

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Step 4

• On the day of the appointment shadow the agent as
  he/she does their assessment.
• Bring a camera and take pictures of every room in
  the house. The agent will only take a limited
  amount of pictures and may miss something
  important.
• As you are walking throughout the house, point
  out the most important repairs only.
• Take notes and make them aware of other homes in
  the area that are comparable to your offer.
• Share with the agent the information about the
  house that you've compiled.
• Doing these things will help establish you as a
  well-prepared professional and help you earn
  respect with the agent.

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Step 5

• Before the BPO is complete
• Ask the agent if they have a ballpark estimate in
  their head. They will most likely tell you that
  the numbers will be determined once they complete
  their report.
• At this time, ask when they will be finished and
  if you can give them a call at a specific time to
  get their final numbers.
• Note
• The agent works for the lender and more than
  likely they will inform you that their report is
  proprietary to the lender. You have to feel that
  person out and see if they may be willing to
  share that information with you. It doesn't hurt
  to ask more than once if necessary.

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Tip (YPO)

• Let the agent know that you are very familiar
  with the neighborhood and tell them what you
  think the property is worth. The agent doing the
  BPO knows only what they have researched and what
  they discover once they actually see the
  property. You will be surprised as to how much
  your opinion matters. I like to call it YPO (Your
  Price Opinion). If the agent views you as someone
  who is educated about the property and the
  activity in the neighborhood, your opinion will
  be valued and taken into consideration when they
  make their report to the lender.

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Real Life Examples

• Discussion

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Notes
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Most Lenders Have A Stringent Hardship Test That
Borrowers Must Pass

• Catastrophic Illness.
• Death or Divorce of Spouse
• Employee Transfer
• Military Service
• Disabling injury.
• Unemployment
• Financial Insolvency
• Incarceration

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Factors That Influence A Lender's Willingness To
Approve Short Payoff Sales

• The number of nonperforming loans that the lender
  has in their portfolio.
• The lender's overall financial condition.
• The financial condition of the third party
  investor who owns the loan.
• The loss mitigation policy of the third party
  investor who owns the loan.
• The loss mitigation authority of the lender
  servicing the loan.
• The loss mitigation policy and procedures of the
  government agency insuring or the loan.

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Six Factors Lenders Consider During The Short
Payoff Sale Approval Process

• Factor 1 The borrower's overall financial
  condition.Factor 2 The property's as is
  value.Factor 3 The cost to put the property
  into resale condition.Factor 4 The property's
  as repaired value.Factor 5 The cost of
  securing and maintaining the property while it's
  being marketed for resale.Factor 6 The cost of
  marketing and selling the property.

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The bank may say no for several reasons

• High BPO
• An inexperienced loss mitigation rep
• A foreclosure sale date that is just days away.

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Misc.

• 1099
• Deficiency Judgment
• Homeowners Credit

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Foreclosure Process Take Control, Know the Facts

• Payments are Behind

• Find a Way to Catch Up

Default
Loss Mitigation
Foreclosure by Advertisement
Choices
Mortgage
Foreclosure Sale

• Short Sale
• Listing
• Stop Foreclosure
• Deficiency Judgment
• Avoid Debt Collection
• Dedicated Foreclosure Professionals
• Minimize Losses

Redemption

• Foreclosure Action Published for 4-5 Consecutive
  Weeks
• Post at Property for 15 Consecutive Days
• Sheriffs Sale, 6 Months Redemption

• Sheriffs Sale

• 6 12 Months

Contact Charles Busch Metropolitan Title Phone
810-499-2809 E-Mail busch_at_metropolitantitle.com

• Recorded as a Lien Against the Property Until
  the Mortgage is Paid In Full
• Acceleration Clause Allows Lender to Call for
  Immediate Payment

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What Next

• What Happens when a Property Becomes an REO
• How Do I Get REO Listings
• Building an REO Resume
• BPOs lead to Listings
• Lists of Asset Managers
• Important Web Sites
• What to do Once I have an REO Listing
• Requirements for Closing

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REO

• Term used to define a property that has not been
  redeemed within the redemption period
• Bank now in Ownership
• Marketable Title
• Usually turned over to an Asset Manager

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How They Assign the REO

• Pick an Agent who is within 10-30 miles of
  property.
• Pick an Agent who has given accurate BPOs
• Pick reliable/available Agents.
• Pick Agents with a good Track Record.
• Relationships . . Relationships . . Relationships.

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How To Build Your REO Resume

• Years of Experience.
• Do Not Highlight that You Work With Investors.
• Do Not Highlight that You Purchase REO Property.
• Emphasize Team and Experience.

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How To Get REO Listings

• BPOs
• Cold Calls.
• Good Experience with Buyer of REO
• Conferences.

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BPOs

• Lenders Usually have their own Form.
• Fill Out Form Thoroughly.
• Comments About Area and Market
• Quick Response
• If you Accept the BPO and Cannot Finish on Time,
  Inform Lender Immediately.
• NEVER Approach Occupant Unless you have Been
  Instructed By the Lender to Perform an Interior
  BPO.

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Suggestions for a Complete BPO

• Receiving an BPO Order
• Respond Immediately when Accepting a BPO Order.
• Inspection
• Even for a Drive By BPO it is Required that you
  Physically See the Subject Property. All
  Photographs Must be Taken Live. (No MLS Photos)

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Suggestions for a Complete BPO (cont.)

• Complete and Accurate Data
• Square Footage
• Room Count
• Exterior Features
• Selection of Comparables
• Similar Size
• Similar Location
• Similar Construction

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Suggestions for a Complete BPO (cont.)

• Valuation of Property
• Must be Similar to Comps
• Any Adjustments need to be Justified by Comments
• Recommending Repairs
• List All Repairs
• List All Repair Estimates

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Suggestions for a Complete BPO (cont.)

• Sending a Completed BPO
• Do Not Be Late !
• Within 3 Days
• Lenders Continue to use Agents who are Timely and
  Accurate.
• Additional Information
• Do Not Share BPO Data with Owners, Tenants, or
  any other entity.

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Now its Assigned

• Determine Occupancy 24 hours (response time
  important)
• If occupied, you may be instructed, by the lender
  to offer keys for Cash.
• If occupant is cooperative you deliver a signed
  Stipulation to Move out.
• If non-cooperative notify lender to start legal
  eviction and monitor property for occupancy
  changes.
• If vacant, re-key to secure property
• Make recommendations on repairs.

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Now its Assigned (cont.)

• Winterize
• Check for Major Damage, Pipes, Toilets etc.
• May be required to order Pest inspection, clean
  up, repairs etc.
• Agent must oversee all work done on property to
  make sure its done to lender approval.
• Prepare BPO with AS IS, AS REPAIRED pricing and
  costs to repair with pictures.

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Now its Assigned (cont.)

• Obtain Home Owner Assoc. info to include amount
  and monthly fees.
• Turn on Utilities, if safe.
• Provide weekly/monthly updates.
• Pay bills and submit invoices for reimbursement.
• Monitor property.

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Marketing Property

• Submit Copy of MLS Printout.
• Provide Monthly Report.
• Weekly Check of Property.
• Provide any Copies of Flyers, Open Houses,
  Advertisement to Lender.
• Follow-up on all Showings with Lender.
• Provide Seller Net Sheet and Buyer
  Pre-Qualification with any offer.

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Marketing Property (cont.)

• Important to Provide Accurate BPO.
• When asking for a Price Reduction, dont Go Too
  Low.
• Provide Feedback to Indicate need for Price
  Reduction.

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Closing an REO

• Agent to Follow all Contingencys and Ensure
  Removal, per Contract.
• Agent to Follow Buyer Loan Process.
• Schedule all Necessary Inspections.
• Coordinate Utility Transfer.
• Provide all Closing bills within 30 days.
• Inform Buyer of Unique Closing Requirements of
  Bank Owned Property.

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What Do I Need Now ?

• A list of Lenders to Market To.
• A list of Web Sites to Register On.
• A list of Potential Conferences to Attend.
• Cell Phone.
• Digital Camera with Excellent Pixel Definition.
• Know How To Upload Pictures and Use Word.
• Use of PDF and JPEG software.
• Knowledge of the Internet.
• HARD WORK THICK SKIN URGENCY

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Most Important

• Experience Behind You.