“SunTrust Mortgage, Inc. (STM) is dedicated to careful counseling and responsible lending, and we view foreclosure as the last resort for customers experiencing financial difficulty. Foreclosures hurt everyone involved— homeowners, lenders, communities, and the economy as a whole. Our goal is to help our customers be successful homeowners through responsible lending. One of the options available for assistance may include the Short Sale.

What Is A Short Sale?

A Short Sale is a workout option that allows the homeowner (mortgagor) to sell the home for less than the total amount owed on the mortgage. Upon final approval, a Short Sale can help mortgagors avoid foreclosure action. Although there will still be an impact to the mortgagor’s credit history, the effect will be less than if the foreclosure had occurred. The mortgagor’s credit report will be noted as follows: “Settled for amount less than owed.”

How to Get Started (Short Sale Package requirements)

1. The homeowner must call the SunTrust Mortgage Short Sale Phone Team at 800.443.1032, Option 3. The Short Sale Phone Team reviews the mortgagor’s financial information and completes short sale counseling.
2. The mortgagor and his/her real estate agent then assemble a Short Sale Package that contains: from the mortgagor:

• last two (2) years tax returns
• two (2) most recent bank statements
• third party authorization form (to speak with real estate agent, attorney or other 3rd party)
• completed financial form
• two (2) most recent pay stubs from the real estate agent:
• Arm’s Length Transaction document
• HUD-1
• listing agreement
• fully executed purchase contract

3. The mortgagor (or designated third party) faxes his/her information to (telephone number). The real estate agent faxes the complete Short Sale Package to 804.675.7399, Attn: Setup

Documents Required To Begin an Application from the mortgagor:

• Fully executed listing agreement
• Signed and dated financial worksheet listing all monthly expenses
• Signed and dated hardship letter (an explanation of why the homeowner is unable to pay the mortgage)
• Letter authorizing the real estate agent access to information on the account (must be dated and include the last 4 digits of the mortgagor’s Social Security Number and signature, the full account number and the complete property address)

Short Sale Approval Process

1. Once all documentation is received (please refer to “Short Sale Package” requirements), the short sale team completes a property valuation (appraisal or BPO per investor requirements).
2. The short sale file is then assigned to a negotiator on the short sale team who will review the file including the documentation and the offer.
3. If there is any missing documentation or request for more information, the short sale negotiator will contact the designated third party or the mortgagor.
4. Once all of the required documentation and information is received and in order (refer to “Short Sale Package” requirements), the short sale negotiator recommends approval to the investor and/or insurer. If the short sale offer is acceptable, the negotiator drafts and sends an approval letter to the borrower(s) and/or the designated third party. The short sale negotiator then works closely with the real estate agent, title company and the mortgagor to establish a final settlement date. The short sale approval is good for up to 45 days.

Additional Information

Short sale approval is good for up to 45 days. If closing does not occur within 45 days, the entire Short Sale Package may need to be resubmitted with updated information, or the approval process may need to start over.

The real state agent or STM mortgagor/designated third party should direct their inquiries 1.800.443.1032, Option 3. The Loss Mitigation Team will answer their questions regarding the status of the account. The call will be forwarded to the short sale negotiator as appropriate.

Real estate agents are generally allowed 5% to 6% commission based on investor rules. If dual agency applies, maximum commission is 5%. Some investors operate on a reduced commission structure and the actual commission schedule can be confirmed during the introduction call.

The short sale must be an “arm’s-length” transaction. The property may not be sold to anyone the seller has a close personal or business relationship with, including family, friends or neighbors.

During the discussion with the short sale negotiator, the following will be addressed:

• Commissions
• Fees and costs
• Pricing of the property
• Timeline
• Borrower Contribution

In some cases investors and/or Private Mortgage Insurance (PMI) companies require mortgagors to make a cash contribution or sign an unsecured note for some or all of the difference between the net proceeds from the sale and the total amount due. This is communicated as part of the response on a short sale offer.”

Once All items above are complete…
Short Sale Application decision.
Short Sale Decision letters issued to appropriate parties.

The deal in question involved two mortgages, a tremendous amount of debt, and a fair market value that had dropped from over $400K down to the mid $200K’s.  Both mortgages were staring at a big loss and buyers were not coming in droves.   Because the deal quickly had to be converted to a retail short sale, we then had to not only find a buyer with a high enough offer, but also convince them to make their offer inclusive of extra funds to go to the 2nd mortgage, GMAC, which we ultimately needed to get this closed.

Those were the initial challenges.

Now down to the solutions.  As I said, the property had two mortgages.  The first was only allowing $1000 to the 2nd mortgage, and the 2nd mortgage wouldn’t cooperate unless they got $6000 at closing.  So the first challenge was to meet that requirement.  By working with the offer price and the buyer’s agent, I was able to get the buyer first to agree to pay the difference, by way of us negotiating seller’s concessions for the buyer.  The next step was to get the 1st mortgage on board.  At first they only agreed to half the seller concessions that the buyer would need to pay the 2nd, but I continued to push and got an approval for the full amount, and in turn the written short sale approval letter from them.

I then proceeded to attack the 2nd mortgage. Now that I could depend on the sum they required at closing (which, incidentally, they had already approved on a prior offer), I was not only able to tell them the 1st mortgage and buyer were on board to pay them, but also to remind them that they had already approved the amount I was proposing.  And now for the icing on the cake – the negotiator at the 2nd mortgage was a rep that I had dealt with on a prior short sale and built a level of trust and rapport with.  So I knew I had an ally that would help me in getting this deal done.

Through some more perseverance I got the 2nd mortgage on board to approve $6000 once again, and we were able to get the offer accepted.  Once we got both lenders on board and approved, we now had to coordinate the closing and settlement phase of the process.  At the last minute, the buyer’s agent came out and told us he was going to have to cover the balance of the sum that was to go to GMAC, since at the last minute the buyer claimed they forgot they were responsible for that.  Once we got that sorted out, I then moved to get all the necessary paperwork to the title company.  At the last minute, I also needed to get another extension (the 2nd) from ASC to make sure there was enough time to close, since the buyer’s lender was dragging their feet (no surprise!).

After all challenges were met, both preliminary ones and last minute ones; the buyer closed and a property that we had been working on for roughly 8 months finally disappeared from my pile.  As for how we got paid on this one…we received $7,400 in short sale fees.

Take – Away

Always persevere when working on your short sales, especially those that have multiple mortgages or liens.  They may seem like an insurmountable task at the outset, but if you keep pushing and don’t give up, you will be successful!

And always, always be professional and courteous when dealing with any and all negotiators that you face.  You never know when you’ll see them again and they’ll be in the position to either make or break a deal for you.  For more articles and videos with real-time updates on changes in the pre-foreclosure industry visit www.RealEstateBusinessMentors.com and if you would like to ask me a question visit www.AskBobLachance.com.

Well luckily for us, 1st mortgages have paid attention to the changing trends and have changed their policies to match. Now, more and more 1st mortgage holders are allowing a payoff of 10% to 2nd mortgages to avoid any complications. And for us short sale specialists, this is perfect! One of the lenders that have started to be more open to this policy change is ASC.

Keep in mind, not all 1st mortgage holders are doing this, and it is on a case-by-case basis, but, they are at least open to it and some will approve 10% to be paid to 2nd mortgage holders. Try to determine your particular investor’s guidelines. Some 1st mortgages will only require that their net amount is met, and they won’t have any restrictions on how it happens. But in all cases, it is worth pursuing getting them to pay 10% to the 2nd mortgage, because you just might get it!

Strategy:
When it comes to actually putting this knowledge in practice, the best way to approach it is this: initially offer $1,500 to the 2nd mortgage, that way you can negotiate up with them. On the HUD that you send to the 1st mortgage, include a payoff amount of 10% of the 2nd mortgage’s principal. That way, you can initially explain the situation and try to get the full 10%. Otherwise, you can still hopefully get the 1st mortgage to pay above the $1,500 you initially offer the 2nd, so both mortgages feel like they’ve won! For more articles and videos with real-time updates on changes in the pre-foreclosure industry visit www.RealEstateBusinessMentors.com and if you would like to ask me a question visit www.AskBobLachance.com.

And so we decided to roll the deal into a retail short sale and realized that we could have the buyer pay us a fee equal to the one we’d make if we completed the wholesale short sale! (In Connecticut part of the reason that this can occur is because when doing wholesale short sales we have to perform two separate closings and added costs). This is how we did it…

In looking over the contract, we noticed that the buyer did not require any concessions/closing costs, and so we spoke with the buyer and his agent and told them that we could work out a way to have the lender pay our fee. We then spoke to the buyer’s attorney and informed him that not only would we be able to accomplish this, but that we’d be able to represent everything on the HUD1 to satisfy title issues. And so what we did was negotiate 3% seller’s concessions for the buyer, which they in turn agreed to pay us at closing. The beauty of this was that the buyer wasn’t faced with having to pay us that amount out of pocket, and so they gladly agreed to pay the concessions, especially since we negotiated them and got them approved to begin with.

As I said, the initial offer was $400,000. The first time the buyer set out to get a clear to close, their appraisal came in at $350,000, and so we had to go back to the lender and get them to approve $350,000, which we were able to do shortly thereafter. For more articles and videos with real-time updates on changes in the pre-foreclosure industry visit www.RealEstateBusinessMentors.com and if you would like to ask me a question visit www.AskBobLachance.com.