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 Joshua Talayka
REALTOR
Cell: 775 220 1630
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521
November 2014
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Short Sale 101 – A basic introduction to the short sale process

Posted By Josh Talayka on June 17, 2013

With Foreclosure filings beginning to ramp up again, it is expected that we will also begin to see an increase in the need for borrowers to have access to foreclosure alternatives, including short sales. Before a homeowner decides to list their home as a short sale, they should have at least a basic understanding of the short sale process in order to ensure as short sale is the best option for them.

Short Sale defined – A short sale is a transaction in which a lender agrees to take less than a full payoff at the time a property is sold. This is typically done by the lender in order to avoid the costs that are associated with the foreclosure process. However, in general; a lender will only consider approving a short sale once it has confirmed that: the property is indeed worth less than what is owed, and the homeowner has proven they have a financial hardship.

Timeline of a Mortgage

Before explaining the short sale process, it is important to understand the evolution of a mortgage and what parties are involved.

Homeowner Borrows funds – The Borrower is generally personally liable for the mortgage debt after they purchase the home or refinance their existing loan. In the event of a default, the borrower may lose the home to foreclosure if they do not take separate actions (short sale, modification, etc.).

Bank/Lender sells mortgage – After mortgages are originated, they are sold in pools to Investors. The pools of loans are managed by a Trustee who disperses payments to the investors

Bank/Lender becomes servicer – After the mortgage has sold the pool of loans, they continue to service the loan on behalf of the investor. These services include collecting payment and handling loss mitigation activities such as short sale negotiations.

Party Benefits

For a short sale to be successful, there must be a benefit to all three parties described above (borrow, Services, Investor).

Homeowner – Avoids foreclosure and the stigma associated with it such as damaged credit and deficiency judgments. Another benefit is their ability to purchase again in a short amount of time when compared to a Foreclosure. (See Consequences of foreclosure for a more comprehensive list of how a foreclosure may impact a borrower).

Servicer – Will escape some legal fees, holding costs, and may be able to mitigate losses sooner than if the property goes to foreclosure.

Investor – Will net more money now, rather than les money after a foreclosure occurs less all the expenses that are involved in a foreclosure.

Short Sale – Basic Process

Short Sale Package – Although every lender may require additional documentation, or have their own application, every lender is going to require the following documents as a minimum requirement for a short sale package:

– 3rd Party Authorization form allowing you agent to negotiate on your behalf
– Hardship letter explaining your financial hardship and request for short sale
– Financial worksheet (generally on their form)
– Copy of the Listing agreement
– Tax returns (Last 2 years)
– Bank Statements (Last 2 months, all accounts)
– Pay Stubs (1 month’s worth) or YTD P&L (Profit and Loss Statement) is self employed
– Copy of the executed Sales Contract
– Buyer’s Pre-Approval Letter or Proof of funds if Cash
– Estimated HUD-1 (Closing sheet)

Although there are a few lenders that will begin the short sale process without a complete package, most will not (this includes and accepted offer). Once the short sale is opened, a bank/servicer negotiator will be assigned to the file. Once the negotiator has verified a complete package has been received, they will order a BPO (Broker Price Opinion) on the property in order to determine the properties current market value. The BPO is generally performed by a Licensed Real Estate agent who determines the property’s value based on area comparable. However, an actual appraisal will be performed if the mortgage on the short sale property is a FHA or VA loan.

Once the BPO has been completed, the lender will verify whether or not the current offer meets their Investor’s guidelines as to whether or not it is an acceptable offer. Lender guidelines listed below based on loan type:

FannieMae: Offer must net 92% of BPO Value or more
FHA: Offer must net 83-88% of Appraised Value or More
VA: Offer must net 88% of Appraised Value or More
Private/Portfolio: Net requirements on private and institutional portfolio loans will vary from lender to lender. An experienced short sale agent should be familiar with your lender’s requirements.

If the net payoff received from the accepted offer is below these amounts, the bank will either instruct the seller to counter the offer, or reject the short sale all together and close the file if it is too far below the net requirements. If the file is closed, then the short sale process will start over once a new offer has been received. Since it can take between 30 – 60 days to get to this point in the process, having to start over is the last thing that an owner will want to do as their credit will continue to be impacted. An agent who is experienced with short sale should know and understand these guidelines in order to price the home accordingly, and also to properly advise the homeowner on what offer the lender is likely to approve.

Once the servicer confirms that the accepted offer meets the investor’s requirements, the completed package will be sent to the investor for final approval. The final approval process will vary with investors, and could take anywhere from 3 – 45 days. If the investor determines the file is acceptable, they will instruct the servicer to issue an approval letter. After the approval letter is received, the sales process can move forward and close.

Short sale timetables:

To have a better understanding of exactly how long each step in the short sale process will take, please view: Short Sale Timetables

The Human Variable (negotiator)

Even if you and your agent understand the short sale process and submit all documents in a timely fashion which meets the lender’s guidelines, you still may fall prey to the ineptitude of an inexperienced short sale negotiator.

Although most lenders have by now instituted comprehensive training programs for short sale negotiators, there is no substitute to actual experienced. Unfortunately, the position of short sale negotiator can be very stressful, and has a very high turnover ratio with the majority of negotiators being replaced every 30-60 days. Because of this high turnover combined with the high demand for negotiators, many of the replacements come into this position with only brief training, and possibly little to no background in the financial/banking industry.

In general, a seasoned short sale agent will be able to pick up on the quality of the negotiator during their first interaction with them. Although this does not necessarily mean that the file will not be approved, it will generally require that the file may need to be escalated to management should it become apparent that the file is not progressing as it should.

The Human Variable (Real Estate Agent)

Although the negotiators and the lenders are generally the first to be blamed for a failed short sale, in many cases the fault can also lie with the real estate agent if they do not have an understanding of how this process works on the negotiators side of the table.

Depending on the lender, a typical short sale negotiator may be handing anywhere from 250 – over 1,000 files at a time. They are also generally rated based on the number of short sales they are able to complete on a monthly basis. Because of this, most negotiators may elect to focus on files that already meet their investor guidelines, and are listed with an agent that understand their time if limited. Lengthy voicemails, emails, or incomplete short sale packages may present themselves to a negotiator as warning signals that this particular file may be more work than others. As a result, your file may find itself at bottom of the proverbial pile.

Agent Interview

With a basic understanding of the short sale process, we now can touch on the 1st and most important step in the short sale process; selecting an experienced short sale agent. Ultimately, your agent will be driving the short sale process, and it is important that they understand where they are going, and the obstacles they may encounter along the way. The following are a few things you will want to be aware of during your interviewing process:

Knowledge of current programs – There are many programs available to homeowners which offer options in both home retention (modification) and release (short sale, Deed in lieu, etc.). Although it’s nearly impossible to keep up on all the programs as some may change on a weekly basis, an experienced short sale agent should have at least a general knowledge of the programs that are currently available no only though your lender, but also through state and federal government agencies, as well as area non-profit organizations.

Designations – The time requirements placed on an agent whose primary business is Short Sales does not leave much time to sit through the hours of class room training needed for most designations. Although the majority of experienced short sale agents will have a few designations they have obtained through training, you should be aware that there are also many agents who have a habit of collecting designations, but may not be very experienced with short sales.

Short Sale & Foreclosure Resource

Should you happen to be interviewing an agent whose business card includes a string of designations, you will want to make sure they can demonstrate that they have the knowledge and experience to back up those designations. One question you can ask is how long they’ve had their license. If they have been in the business less than a year and already have 6-7 designations behind their name, there’s a good chance that they have spent most of their time obtaining designations and not negotiating short sales. Although lack of experience does not necessarily mean they will be unsuccessful in getting your short sale approved, it is something you will want to be aware of.

Memorizing Scripts – One of the first things all agents are taught to do is memorize scripts which helps us overcome people’s objections. With short sales, these scripts may include basic facts about programs and lenders. As time goes on, an agent will gain experiences and will replace these scripts with meaningful conversation which should relay not only facts, but also the agent’s personal experiences. In general, when asking questions or raising objections, ask yourself if the agent is actually engaging your concern, or does it feel like they are reciting a rehearsed canned explanation.

Instinct – After the interview process, you ultimately should be asking yourself if you feel this agent will be able to effectively negotiate a short sale, while keeping you best interest in mind.

Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com

Joshua Talayka
NAR designated: Short Sale & Foreclosure Resource
Chase International
Office: 775 850 5953
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521

Legal disclaimer: I am not an attorney, tax professional, modification specialist or credit counselor. The information contained in this article/blog is intended to provide general information on the subject and not to provide any legal, tax, or credit advice. You should not act upon this or any information without first seeking independent tax and/or legal counsel.

Short Sale Timetable

Posted By Josh Talayka on June 17, 2013

The following is a brief outline of the timeframes involved in typical the short sale process, assuming the short sale package meets the lender’s guidelines.

Short Sale Package submission: 3 – 7 days

A complete short sale package is submitted after an offer has been received. It can take anywhere from 3 – 7 days for the lender to acknowledge receipt of the package. If the package is not complete, or is sent as one file, the process could be delayed up to 3-4 weeks.

Short Sale Package Processed & Negotiator assigned: 2 -4 weeks

Once the lender has determined the package is complete, the file will be placed in queue to be assigned to a negotiator. Negotiators are generally limited to a certain number of files they may have at any given time, so the assignment process is generally based on first come first serve. However, some lenders will assign a negotiator once the package has been received, but it is then still placed in a queue for when the file will become active for that negotiator to begin working on it.

Package update request: 1 – 2 weeks

Once the negotiator begins actively working the file, they will check to see if any documents are out dated (pay stubs, bank statements, etc.). If so, the negotiator will request updated documents before they can proceed on the file. It is a good practice to provide the lender with up to date documents as they are received in order to avoid a delay caused by having an outdated package.

BPO ordered and completed: 1 – 2 weeks

The negotiator will order a BPO after determining the file is up to date. Generally, a licensed real estate agent will be completing the BPO in order to determine the property’s fair market value based on area comparable. An actual appraisal will be performed for certain loan types (VA & FHA).

Net Payoff Determined, Offer rejected, countered, or approved: 1 -2 weeks

Once the BPO is completed, the negotiator will determine if the offer meets the investor’s minimum net requirement in order to be considered for a short sale. If it does not, the negotiator will either instruct the seller/seller’s agent to counter the offer, or reject the offer and close the file. In the event the offer is within the net requirements, it will be approved as meeting the investor guidelines and will be sent to the investor for final review.

Investor Review: 1 – 4 weeks

The investor will determine whether or not it will approve the short sale, require additional changes, or deny the short sale.

Approval letter: 3 – 7 days

Once the investor has approved the short sale, it will instruct the lender/servicer to issue an approval letter.

Closing: 30 – 60 days

Once the approval letter has been issued, the transaction may proceed to closing. This timeframe will vary based on the buyer’s lender and how long they require before they can fund the loan.

Total Process, open to close: 10 – 22 Weeks

If all documents are submitted in a timely manner and the process is does not encounter any problems, it is possible to have approval within 30-45 days, with a 30 day or less escrow period to close. However, if an incomplete package is submitted, or anything happens to cause a delay, the timeframe can increase significantly.

Recovery: 2 – 3 years

With the short sale closed, the borrower may now begin the recovery process. They may be eligible to purchase another home in as little as 2 – 3 years (immediately if current on mortgage at time of sale).

Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com

Joshua Talayka
NAR designated: Short Sale & Foreclosure Resource
Chase International
Office: 775 850 5953
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521

Legal disclaimer: I am not an attorney, tax professional, modification specialist or credit counselor. The information contained in this article/blog is intended to provide general information on the subject and not to provide any legal, tax, or credit advice. You should not act upon this or any information without first seeking independent tax and/or legal counsel.

Renewable Energy: High Maintenance cost of Wind Turbines

Posted By Josh Talayka on October 9, 2012

Turbine Components

I’ve always been a big advocate of increasing our use of renewable energy sources, and on the surface, wind does sound like a great source of energy. However, before you decide to invest your money into the next wind farm or even just have a small windmill built for your personal property, you will want to make sure you factor in the high maintenance costs that you can expect with most wind turbines.

Wind turbines like all mechanical devices do experience wear and tear and will require continual maintenance. The extent of maintenance items will vary depending on the size and complexity of the turbine. However, you will generally at least need to conduct the following ongoing maintenance of a unit:

  • Torquing and re-torquing the tower bolts. Because of the extreme forces and changing wind velocities the turbine experiences, the tower bolt will constantly be experiencing pull and therefor will need to be torqued down on a regular basis.
  • Ensure that oil, belts, lubrication, and air filters are being changed out regularly. In some cases, just little dirt in the system or a faulty belt can lead to a catastrophic failure of a major system. There are now some vendors that have the ability to monitor these items for you remotely.
  • Ongoing inspections, testing, and realignment of things like the turbines brake pads, shafts, and all the units’ hydraulic components.

General maintenance on a small turbine producing up to about 20 kilowatts, your annual maintenance can be as low as $1,000. However, large industrial units can easily be 10 to 100 times that amount. Even with the larger units, the general maintenance costs are usually low enough to ensure profitability. The main cost issues associated with wind turbines which can easily tip the balance sheets does not occur until a major system failure is experienced.

For example: One of the most expensive systems in a turbine is the gearbox assembly (most gear box failures can be prevented by ensuring proper lubrication). Even on a small unit, replacing a gearbox can cost up to $100,000 after you take into account crane rental. For large scale units, this type of replacement can easily cost up to $1 to $1.5 million. Depending on the manufacturer, you may also need to include high shipping costs if the replacement unit needs to be shipped from over seas. Keep in mind that while all this is happening, money is being lost do to the lack of energy production.

Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com

Joshua Talayka
Commercial Sales
& Property Management
Chase International
Office: 775 850 5953
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521

Legal disclaimer: I am not an attorney, tax professional, modification specialist or credit counselor. The information contained in this article/blog is intended to provide general information on the subject and not to provide any legal, tax, or credit advice. You should not act upon this or any information without first seeking independent tax and/or legal counsel.