short sales slides
TRANSCRIPT
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REAL ESTATE SHORTREAL ESTATE SHORT
SALESSALES
Presented by:Presented by:Mike ChesserMike Chesser
Chesser & Barr, P.AChesser & Barr, P.A..
ShalimarShalimar DestinDestin NicevilleNiceville Santa Rosa BeachSanta Rosa Beach
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About the FirmAbout the Firm
Mike ChesserMike Chesser Real Property/CommercialReal Property/Commercial
Harry BarrHarry Barr Personal InjuryPersonal Injury
Lou LongLou Long Bankruptcy/CommercialBankruptcy/Commercial
LeslieLeslie SheekleySheekley LitigationLitigation
ColleenColleen CoffieldCoffield SachsSachs Real Estate,Real Estate,
Condominium HOACondominium HOA
Casey JerniganCasey Jernigan General PracticeGeneral Practice SteveSteve CopusCopus Family/CriminalFamily/Criminal
Allison SebastianAllison Sebastian General PracticeGeneral Practice
JenniferJennifer CopusCopus General Practice,General Practice,LandlordLandlord--TenantTenant
JerryJerry ZivanZivan Business OrganizationsBusiness Organizations
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HARLEY DAVIDSON MANTRA:HARLEY DAVIDSON MANTRA:
RIDE IT LIKE YOU STOLE ITRIDE IT LIKE YOU STOLE IT
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What is a Real Estate ShortWhat is a Real Estate ShortSale?Sale?
Any sale of propertyAny sale of propertyin which:in which:
1) The probable quick1) The probable quicksale price of thesale price of theproperty is less thanproperty is less thanthe total amount of allthe total amount of allmortgages on themortgages on theproperty;property;
2) The mortgagee will2) The mortgagee will
be asked to satisfy abe asked to satisfy amortgage for lessmortgage for lessthan the amountthan the amountowed.owed.
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Why is a Short Sale important toWhy is a Short Sale important to
you?you?
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In what ways could youIn what ways could youbecome involved in a Realbecome involved in a Real
Estate Short Sale?Estate Short Sale?
As an investorAs an investor
As a realtorAs a realtor
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In what context will you see a shortIn what context will you see a shortsale?sale?
Example 1:Example 1: Mr. and Mrs. JonesMr. and Mrs. Jones
HomeHome
Job or businessJob or business One investmentOne investment $450K debt$450K debt
A+ credit ratingA+ credit rating Investment mortgage paymentsInvestment mortgage payments 11stst mortgage $3800/mo,mortgage $3800/mo,
interest only ($300K total)interest only ($300K total)
22ndnd mortgage payment $1,600/mo, interest only ($140K total)mortgage payment $1,600/mo, interest only ($140K total)
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Facts We KnowFacts We Know
1. Needs to buy more equipment1. Needs to buy more equipment 2. Cannot pay IRS debt2. Cannot pay IRS debt
3. Cannot continue with negative cash flow3. Cannot continue with negative cash flow
4. Mortgage is not in default4. Mortgage is not in default
5. Needs to borrow money to expand business5. Needs to borrow money to expand business
This couple needs helpThis couple needs help who do they call?who do they call?
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WHAT INFORMATION DO YOUWHAT INFORMATION DO YOU
NEED TO KNOW ????NEED TO KNOW ????
Information about:Information about: A. The Owner A. The Owner
B.B. The propertyThe property C.C. The mortgageThe mortgagess
D.D. the mortgage companiesthe mortgage companies
E.E. Information about how this happened?Information about how this happened?
F.F. Information about the prior closing?Information about the prior closing?
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SO WHO ARE YOU??????SO WHO ARE YOU??????
1) Friend1) Friend
2) Clergy2) Clergy
3) Attorney3) Attorney
4) Realtor4) Realtor
Are you a transaction agent ?Are you a transaction agent ? Do you have a duty to Owner?Do you have a duty to Owner?
Do you have aDo you have a fiduciaryfiduciary relationship with Owner?relationship with Owner?
Do you have a duty ofDo you have a duty ofconfidentialityconfidentiality to Owner?to Owner?
Do you have malDo you have mal
--practice coverage for matters outside the realpractice coverage for matters outside the real
estate market?estate market? Will you put in large amounts of time, even if there is never aWill you put in large amounts of time, even if there is never a sale?sale?
How and when will you get paid?How and when will you get paid?
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OWNEROWNERINFORMATION YOUINFORMATION YOU
WILL NEEDWILL NEED
1.1. Can the OwnerCan the Owners community reputation survive a real estate short sale?s community reputation survive a real estate short sale?
2. What is the Owner2. What is the Owners present credit rating?s present credit rating?
3. How important is that credit rating?3. How important is that credit rating?
4. Can the Owner pay the balance without asking the Mortgagee to4. Can the Owner pay the balance without asking the Mortgagee to forgiveforgivea balance not paid?a balance not paid?
5. What other properties fall into this category for the Owner?5. What other properties fall into this category for the Owner?
6. If Owner must have a loss, what is his best loss?6. If Owner must have a loss, what is his best loss? 7. If a short sale is done, can other properties be saved?7. If a short sale is done, can other properties be saved?
8. Why is this person in credit trouble? (and does this matter?)8. Why is this person in credit trouble? (and does this matter?)
9. What are the person9. What are the persons prospects for increase in income?s prospects for increase in income?
10. Is the person able to handle a 1099 being filed?10. Is the person able to handle a 1099 being filed?
11. What are the person11. What are the persons income and expenses?s income and expenses? 12. Are there other assets owned by the Borrower that might be u12. Are there other assets owned by the Borrower that might be used assed as
collateral?collateral?
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PROPERTYPROPERTYINFORMATION YOUINFORMATION YOUWILL NEED:WILL NEED:
1. When last purchased, and price.1. When last purchased, and price. 2. What changes since last purchase.2. What changes since last purchase.
3. What probable quick sale price (appraisal)3. What probable quick sale price (appraisal)
4. Who occupies, and what income4. Who occupies, and what income
5. Where does income go?5. Where does income go? 6. What are the claims against the property other than6. What are the claims against the property other than
the mortgages? (title search)the mortgages? (title search)
7. Is there something happening to the property or7. Is there something happening to the property or
neighborhood that is likely to change its valueneighborhood that is likely to change its valuedrastically?drastically?
8. Status of tax payments and insurance coverage.8. Status of tax payments and insurance coverage.
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MortgageMortgageInformation You WillInformation You WillNeedNeed
1. Identify name & address of all mortgagees1. Identify name & address of all mortgagees
2.2. KnowKnow the amounts owedthe amounts owed 3. Are the loans in default?3. Are the loans in default?
4. Who at the mortgage company will make a short sale decision?4. Who at the mortgage company will make a short sale decision? Phone NumberPhone Number Fax NumberFax Number
Email AddressEmail Address
5. Is there a short sale package provided by this lender?5. Is there a short sale package provided by this lender? (See Countrywide Addendum)(See Countrywide Addendum)
6. How many lenders will be asked to agree?6. How many lenders will be asked to agree?
7. Is there any evidence of loan or mortgage fraud when the loan7. Is there any evidence of loan or mortgage fraud when the loan waswasclosed?closed?
8. Will the Lender give an answer to a short sale question witho8. Will the Lender give an answer to a short sale question without aut acontract?contract?
9. Can you get documents from last closing?9. Can you get documents from last closing?
10. Has mortgage been discounted, and if so, can you talk prior10. Has mortgage been discounted, and if so, can you talk prior to default?to default?
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MortgageeMortgagee Information You WillInformation You WillNeedNeed
1) Where is the mortgage held?1) Where is the mortgage held? 2) Is there a short sale package?2) Is there a short sale package?
3) Is there a short sale department?3) Is there a short sale department?
4) Phone number, fax, email, street address of4) Phone number, fax, email, street address ofthethe personperson
5) Who will make a decision?5) Who will make a decision?
6) Will that person require a contract?6) Will that person require a contract?
7) Is there a specific appraiser they will require?7) Is there a specific appraiser they will require? 8) Will the mortgagee pre8) Will the mortgagee pre--approve a sale?approve a sale?
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DocumentsDocumentsYou Will NeedYou Will Need
1.1. Written, notarized consent for you to talk toWritten, notarized consent for you to talk tothe mortgage company (plural?)the mortgage company (plural?)
2. Current title search or commitment2. Current title search or commitment
3. Initial appraisal, if possible3. Initial appraisal, if possible 4. Owner4. Owners initial application for each loans initial application for each loan
5. HUD from each closing5. HUD from each closing
6. Statements of balance of each mortgage6. Statements of balance of each mortgage 7. Current financial statement, if possible7. Current financial statement, if possible
8. Current market analysis of house8. Current market analysis of house
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Documents You Will NeedDocuments You Will NeedCont.Cont.
9. Current pictures of house or neighborhood9. Current pictures of house or neighborhood 10. Purchase contract10. Purchase contract
11. Two most recent tax returns11. Two most recent tax returns
12. Documentation about financial difficulties12. Documentation about financial difficulties
13. Closing and savings deposit statements13. Closing and savings deposit statements 14. Any consents of other mortgages already obtained14. Any consents of other mortgages already obtained
15. Financial statement of borrowers15. Financial statement of borrowers
16. Negotiation agreement, if available16. Negotiation agreement, if available
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In what context will you see a shortIn what context will you see a shortsale?sale?
Example 1:Example 1: Mr. and Mrs. JonesMr. and Mrs. Jones
HomeHome
Job or businessJob or business
One investmentOne investment $450K debt$450K debt
A+ credit ratingA+ credit rating Investment mortgage paymentsInvestment mortgage payments 11stst mortgage $3800/mo,mortgage $3800/mo,
interest only ($300K total)interest only ($300K total)
22ndnd mortgage payment $1,600/mo, interest only ($140K total)mortgage payment $1,600/mo, interest only ($140K total)
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Facts We KnowFacts We Know
1. Needs to buy more equipment1. Needs to buy more equipment 2. Cannot pay IRS debt2. Cannot pay IRS debt
3. Cannot continue with negative cash flow3. Cannot continue with negative cash flow
4. Mortgage is not in default4. Mortgage is not in default
5. Needs to borrow money to expand business5. Needs to borrow money to expand business
This couple needs helpThis couple needs help who do they call?who do they call?
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Context for problem continuedContext for problem continued
Example 2:Example 2: Mrs. AdamsMrs. Adams
Bought investment condo in 2005Bought investment condo in 2005
One bedroom, one bath inOne bedroom, one bath in SundestinSundestin $360K$360K Two mortgages:Two mortgages:
11stst Mortgage $250KMortgage $250K Payment: $3,000/moPayment: $3,000/mo
22ndnd Mortgage $100KMortgage $100K Payment: $1,000/moPayment: $1,000/mo
Total income: $1,200/moTotal income: $1,200/mo
Mrs. Adams wants you to list the property. What do youMrs. Adams wants you to list the property. What do youtell her?tell her?
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What do you want to beWhat do you want to be
when you grow up?when you grow up?
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How doHow do youyou do a Realdo a RealEstate Short Sale?Estate Short Sale?
Example : 1Example : 1
Home value when purchasedHome value when purchased
three years agothree years ago $250,000$250,000
Unpaid mortgage amountUnpaid mortgage amount $200,000$200,000
Cost of foreclosureCost of foreclosure $215,000$215,000Value of houseValue of house $175,000$175,000
Short Sale Amount, after costsShort Sale Amount, after costs
and commission, approximatelyand commission, approximately $ 50,000.00$ 50,000.00
Owner has lost his job, wants to leave town to go back to TexasOwner has lost his job, wants to leave town to go back to Texas to liveto livewith his parents. The housewith his parents. The house isis already in foreclosure.already in foreclosure.
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Can you provide a service?Can you provide a service?
1. Will the owner give you written, notarized permission to spe1. Will the owner give you written, notarized permission to speak with theak with the
loan officer or mortgage company?loan officer or mortgage company? Is the bank open to discuss the account and the value of its secIs the bank open to discuss the account and the value of its securityurity
with you, the ownerwith you, the owners agent, even if you have written consent?s agent, even if you have written consent?
3. Can you get a listing agreement?3. Can you get a listing agreement?
4. Can you find someone to pay a reasonable price, say $175,0004. Can you find someone to pay a reasonable price, say $175,000,,
reasonably quickly?reasonably quickly?5. Can you get paid a reasonable commission?5. Can you get paid a reasonable commission?
If you can answer these questionsIf you can answer these questions
withwithyesyes, you can, you can
provide a service.provide a service.
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What does a Realtor sayWhat does a Realtor say
to the Bank?to the Bank?A.A. You must have written authority to speak for theYou must have written authority to speak for the
ownerowner
B.B. YouYou mustmust find the person who can make a decisionfind the person who can make a decisionabout that loanabout that loan
C.C. A misrepresentation by you will go less than nowhere;A misrepresentation by you will go less than nowhere;if you have any chance to show your knowledge andif you have any chance to show your knowledge andhonesty, you will likely have only onehonesty, you will likely have only one
D.D. Chances are you will know nothing about the propertyChances are you will know nothing about the propertythat athat a local banklocal bankofficer does not know, but if youofficer does not know, but if youdo, tell her (or him)do, tell her (or him)
E.E. Engage the bank officer about the bankEngage the bank officer about the banks needs fors needs for
this loan, and its intentions regarding collectionthis loan, and its intentions regarding collection
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As in computers,As in computers,
thisthis cookiecookie isisnot good.not good.
The bank is not in the business of owning realThe bank is not in the business of owning realestate. Real estate owned, calledestate. Real estate owned, calledOREOOREOto ato abank, is not a good thingbank, is not a good thing itits a very bad things a very bad thing
If you can show the bank their loan getting reIf you can show the bank their loan getting re--paid, or becoming a good loan on the books,paid, or becoming a good loan on the books,you can make this happenyou can make this happen
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You must convince theYou must convince the
loan officer that you canloan officer that you can
make his life bettermake his life better1.1. His legal bills keep going upHis legal bills keep going up2.2. The house may be unoccupiedThe house may be unoccupied
3.3. The house may require repairThe house may require repair
4.4.
Your sale will bring more than the bank can get in aYour sale will bring more than the bank can get in aforeclosure saleforeclosure sale
5.5. If owner files bankruptcy, that could take monthsIf owner files bankruptcy, that could take months
6.6. There may be other ways to secure the loanThere may be other ways to secure the loan
7.7. The borrower may qualify for an unsecured loanThe borrower may qualify for an unsecured loan
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Multiple Listing Service RuleMultiple Listing Service Rule
The rule applicable to the Multiple Listing Service (MLS)The rule applicable to the Multiple Listing Service (MLS)is as follows:is as follows:
If a gross commission is subject toIf a gross commission is subject tolender approval, orlender approval, oris subject to reduction by ais subject to reduction by alender,lender,the potentialthe potentialreduction in compensation payable to cooperatingreduction in compensation payable to cooperatingbrokersbrokersmust be clearly communicated to potentialmust be clearly communicated to potential
cooperating brokerscooperating brokersprior to the time they produce anprior to the time they produce anoffer that ultimately results in a successful transactionoffer that ultimately results in a successful transaction[MLS Rules Section 5, Note 5].[MLS Rules Section 5, Note 5].
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Commercial Brokers RecommendedCommercial Brokers RecommendedRuleRule
The Commercial Brokers Committee of the Emerald Coast Board of RThe Commercial Brokers Committee of the Emerald Coast Board of Realtors,ealtors,
has before it the following rules that should be considered, athas before it the following rules that should be considered, at least until theleast until thecurrent mortgage crisis has dissipated:current mortgage crisis has dissipated:
1.1. The listing agent should know the remaining balance of all mortgThe listing agent should know the remaining balance of all mortgagesageson a property. If a mortgage is currently in default, he (or shon a property. If a mortgage is currently in default, he (or she) shoulde) shouldknow that.know that.
2.2. The fact that a listing price will require the consent of a lendThe fact that a listing price will require the consent of a lender iner inorder to pay the promised commissions should be disclosed to othorder to pay the promised commissions should be disclosed to other agents.er agents.
3.3. A Purchaser should not sign an offer without disclosure to theA Purchaser should not sign an offer without disclosure to thePurchaser that a contract at that price would require lender conPurchaser that a contract at that price would require lender consent if thesent if theSeller cannot pay cash to close.Seller cannot pay cash to close.
4.4. A seller should not sign a contract that cannot be closed withouA seller should not sign a contract that cannot be closed withouttmortgagee consent without placing into the contract a contingencmortgagee consent without placing into the contract a contingency for they for theevent consent is not given.event consent is not given.
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817.545. Mortgage fraud817.545. Mortgage fraud
(1) For the purposes of the section, the term "mortgage(1) For the purposes of the section, the term "mortgagelending process" means the process through which alending process" means the process through which aperson seeks or obtains a residential mortgage loan,person seeks or obtains a residential mortgage loan,including, but not limited to, the solicitation, applicationincluding, but not limited to, the solicitation, applicationor origination, negotiation of terms, thirdor origination, negotiation of terms, third--party providerparty provider
services, underwriting, signing and closing, and fundingservices, underwriting, signing and closing, and fundingof the loan. Documents involved in the mortgage lendingof the loan. Documents involved in the mortgage lendingprocess include, but are not limited to, mortgages,process include, but are not limited to, mortgages,deeds, surveys, inspection reports, uniform residentialdeeds, surveys, inspection reports, uniform residentialloan applications, or other loan applications; appraisalloan applications, or other loan applications; appraisal
reports; HUDreports; HUD--1 settlement statements; supporting1 settlement statements; supportingpersonal documentation for loan applications such as Wpersonal documentation for loan applications such as W--2 forms, verifications of income and employment, credit2 forms, verifications of income and employment, creditreports, bank statements, tax returns, and payroll stubs;reports, bank statements, tax returns, and payroll stubs;and any required disclosures.and any required disclosures.
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817.545. Mortgage fraud Cont.817.545. Mortgage fraud Cont.
(2) A person commits the offense of mortgage fraud if,(2) A person commits the offense of mortgage fraud if,with the intent to defraud, the person knowingly:with the intent to defraud, the person knowingly:
(a) Makes any material misstatement, misrepresentation,(a) Makes any material misstatement, misrepresentation,or omission during the mortgage lending process withor omission during the mortgage lending process with
the intention that the misstatement, misrepresentation,the intention that the misstatement, misrepresentation,or omission will be relied on by a mortgage lender,or omission will be relied on by a mortgage lender,borrower, or any other person or entity involved in theborrower, or any other person or entity involved in themortgage lending process; however, omissions on a loanmortgage lending process; however, omissions on a loan
application regarding employment, income, or assets forapplication regarding employment, income, or assets fora loan which does not require this information are nota loan which does not require this information are notconsidered a material omission for purposes of thisconsidered a material omission for purposes of thissubsection.subsection.
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817.545. Mortgage fraud Cont.817.545. Mortgage fraud Cont.
(b) Uses or facilitates the use of any material(b) Uses or facilitates the use of any materialmisstatement, misrepresentation, or omission during themisstatement, misrepresentation, or omission during themortgage lending process with the intention that themortgage lending process with the intention that thematerial misstatement, misrepresentation, or omissionmaterial misstatement, misrepresentation, or omissionwill be relied on by a mortgage lender, borrower, or anywill be relied on by a mortgage lender, borrower, or any
other person or entity involved in the mortgage lendingother person or entity involved in the mortgage lendingprocess; however, omissions on a loan applicationprocess; however, omissions on a loan applicationregarding employment, income, or assets for a loanregarding employment, income, or assets for a loanwhich does not require this information are notwhich does not require this information are notconsidered a material omission for purposes of thisconsidered a material omission for purposes of this
subsection.subsection.
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817.545. Mortgage fraud Cont.817.545. Mortgage fraud Cont.
(c) Receives any proceeds or any other funds in(c) Receives any proceeds or any other funds inconnection with the mortgage lending processconnection with the mortgage lending processthat the person knew resulted from a violationthat the person knew resulted from a violationof paragraph (a) or paragraph (b).of paragraph (a) or paragraph (b).
(d) Files or causes to be filed with the clerk of(d) Files or causes to be filed with the clerk ofthe circuit court for any county of this state athe circuit court for any county of this state adocument involved in the mortgage lendingdocument involved in the mortgage lending
process which contains a material misstatement,process which contains a material misstatement,misrepresentation, or omission.misrepresentation, or omission.
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Mortgage Fraud Example 1Mortgage Fraud Example 1
SettlementSettlement Stmt.pdfStmt.pdf
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Chesser & Barr, P.A.Chesser & Barr, P.A.
Fort Walton Beach AreaFort Walton Beach Area Destin AreaDestin Area
1201 Eglin Parkway1201 Eglin Parkway Old South Centre, Suite 7102Old South Centre, Suite 7102
Shalimar, FL 32579Shalimar, FL 32579 36468 Emerald Coast Pkwy.36468 Emerald Coast Pkwy.
850.651850.651--99449944 Destin, FL 32541Destin, FL 32541
850.654850.654--38553855
Santa Rosa Beach AreaSanta Rosa Beach Area
1719 South County Highway 3931719 South County Highway 393Santa Rosa Beach, FL 32459Santa Rosa Beach, FL 32459
850.622.1141850.622.1141
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