I’ve been asked over and over why people should short sale the property as opposed
to just living in it till the bank finally forecloses. We’ll the truth be told,
the banks are allowing people to live in the property for nearly two years
before they even decide to put you out. In one rare instance, my partner Steve
told me that he just spoke to a woman that was in the house 23 months before
she even received an NOD, which happned to be a Bank of America.

But will all the incentives that the banks are giving
you might as well just take the relocation money and play it safe, because the
possibility of buying another home at a lower price is just on the horizon. So
I took a moment to outline the reasons that short sale makes sense.

Avoid The Foreclosure Stigma – Homeowners
will always have to disclose that they had a foreclosure on any mortgage
application and (many job applications) that they submit in the future.
Foreclosure is asked about specifically in credit inquiries. There is no
seven-year time limit on this term.

Protect Credit Score – Foreclosure
typically lowers all credit scores by 300 points , as opposed to Short Sale
which is about 50-100 points

Improve Eligibility for a Government Insured Loan –
Homeowners will NOT be eligible for a government insured loan for
5-7 years. But with a Short Sale that restriction is reduced to TWO years.

Avoid a Deficiency Judgment - Lenders can
seek a deficiency judgment and collect any amount they do not recover at point
of sale. California Code of Civil Procedure Section 580e prohibits any lender
from rendering a judgment against a homeowner who executes a Short Sale

Protect Employment Prospects – Many
employers run credit checks on prospective employees. Foreclosure is one of the
top items that will put a potential new hire, or even current employee, in
jeopardy of not being hired.  It will put any security clearance at risk of loss or suspension.

Freddie Mac reported that short sales have risen from roughly 4 percent on completed workouts in 2000 to almost 14 percent in 2010. With the increase of foreclosures comes the increase in fraud. Freddie Mac says that short sale fraud has become top priority for their fraud investigation unit. Violators are added to GSE’s “Exclusionary List”- companies and individuals that attempt to perpetrate any type of fraud will be barred from doing business with Freddie Mac. Last month RealtyTrac reported that these transactions are being processed at an accelerated rate. But with declining jobs data and a poor economic outlook, these foreclosure figures are expected to continue through 2015. These scams include flipping schemes, agents manipulating the short sale price and obtain a lower broker price opinion (BPO) by inflating repair estimates, making the house look more distressed than it is -something called reverse staging. Realtors take an ethics code that is to be upheld. When joining the Beverly Hills Association of Realtors, I was given an oath and sworn to uphold these ethical standards. There are many honorable and ethical agents out there that go at the job every day, regardless how difficult it may be, with nothing but integrity. So be sure to kick the tires and ask questions of any agent that wishes to represent you. These perpetrators may come with a listing presentation and bleached smile, so always do your due diligence as a homeowner and never be afraid to call someone that is widely known in the short sale-foreclosure community as a trusted authority.

The Map indicates Auction and Bank Owned Properties

I hear a lot of chatter about what it takes to get a short sale approved and who is capable. Lawyers often think they are the go to guy, because they’ve earned a Juris Doctorate, have that God given gift of gab and speak legalese, which is a technical jargon used by attorneys that is often beyond the comprehension of the non-lawyer. Then there’s the Realtor that’s never been involved in a short sale transaction, who will tell they’ve done a million of them. When in fact, they have never been a party to a short sale transaction, because they simply handed the file over to third party who negotiates the approval for one third of the agent’s commission. Typically, one percent of the purchase price is what a short sale negotiator gets for his or her service. Investors sometimes approach Realtors and the investor may convince the agent that they are capable of getting an approval from the lender. In the litigious society we live, this is a lawsuit just waiting to be filed. When the seller doesn’t get that approval and it’s finally revealed that a third party was used- look out! When an agent signs a listing contract to represent a seller they are HIS client. HE is THEIR trusted adviser and advocate.  It’s my suggestion that when searching for a Realtor to list your home, kick the tires a little bit and ask questions of the agents credentials and how qualified are they to negotiate with lenders and banks regarding the short sale approval.

• Are you CDPE trained? Certified Distressed Property Expert training is what asset management companies look when assigning properties to agents
• Do you have a Short Sale Foreclosure Resource designation from National Association of Realtors?

With all the these acronyms flying around, its enough to make any loss mitigation manager giddy. But these are the industry standards and these certifications are the only way to gauge a qualified Realtor before you ask him to sell your property. If you are not careful, you may be in for a long wait and be extremely disappointed with the outcome if you delegate this task to an agent that has no clue about the process. Ask lots of questions when choosing a realtor to sell your home.

This week, I completed the CDPE training offered by the institute. I can’t tell you what a world of difference it made and how I saw short sales upon completion. Distressed properties will continue  to flood the market for the next 5-7 years. No agent should be without this training

On Friday, Aug 12th Wells Fargo held their West Side Sales Rally at the downtown Los Angeles Marriott. Manager’s said; ”we have no shadow inventory, but its coming.” Anyone that was in the room knows that if you haven’t paid the mortgage in 12 - 18 months- THAT’S SHADOW INVENTORY !