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The purpose of this class is twofold.
A Realtor representing a Buyer
A Realtor representing a Seller
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The purpose of this class is twofold.
As Realtors we are often in the best position also
become Investors of a Short Sale property.
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Objectives
Help Realtors provide
the best possible
fiduciary skills to Buyers
or Sellers in a Short Sale
transaction.
Help Realtors take
proactive, skilled action
as real estate investors
of Short Sale
opportunities.
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Poll Question 1.
The Objectives of this course are:
A
Help Realtors provide the best
possible fiduciary skills to Buyers or
Sellers in a Short Sale transaction.
B
Help Realtors understand the
concerns of people Selling their
home in a Short Sale
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C
Help Realtors understand the
Lenders concerns in a Short Sale
D
Help Realtors take proactive, skilled
action as real estate investors of
Short Sale opportunities.
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1-800-328-2008
Poll Question 1.
The Objectives of this course are:
A
Help Realtors provide the best
possible fiduciary skills to Buyers or
Sellers in a Short Sale transaction.
B
Help Realtors understand the
concerns of people Selling their
home in a Short Sale
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C
Help Realtors understand the
Lenders concerns in a Short Sale
D
Help Realtors take proactive, skilled
action as real estate investors of
Short Sale opportunities.
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1-800-328-2008
As a Realtor
CHAPTER 1
As an Investor
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What is a Short Sale?
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What Is A Short Sale?
As a Realtor
A licensed entity who wants to JUST facilitate a traditional sales transaction:
 Agency agreement with a Seller
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 Agency agreement with a Buyer
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What Is A Short Sale?
As a Realtor Investor
A licensed entity who wants to capitalize on the numerous opportunities
for profit in the world of the short sale.
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Possibly receiving compensation
from the lender
Acting as the Buyer and reselling it to another buyer
Owning the property and renting it out
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What Is A Short Sale?
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Short sale is a transaction where the title to the property
changes, the sales price is insufficient to pay all the liens, the
seller does not provide funds to clear the liens on the
property, and the lender agrees to allow the sale to occur by
releasing the liens on the property.
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Feedback Question 2.
Who releases the Liens on a property?
A
The Debtor
B
The Seller
C
The Sellers attorney
D
The Lender
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Feedback Question 2.
Who releases the Liens on a property?
A
The Debtor
B
The Seller
C
The Sellers attorney
D
The Lender
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What Is A Short Sale?
Under no circumstances will the Seller, home owner, debtor
receive ANY money whatsoever at the closing.
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Why would someone do this?
Because they owe more on their
property than what the property is
worth.
They purchased a home during the
boom and the house depreciated in
value;
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They are behind in their mortgage
payments and the loan is upside
down.
They have refinanced and borrowed
against their equity to the point
where there is no more equity
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What is an Approved Short Sale?
As a Realtor
Buyer via Buyers Agent submits an offer
to Sellers Agent and bank approves
that
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offer
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What is an Approved Short Sale?
As a Realtor Investor
The short sale expert finds the
opportunity and negotiates with the
bank in a position as the Buyer.
Generally before a real Buyer actually
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exists
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What is an Approved Short Sale?
As a Realtor
The listing agent out sources their short
sale activities to a third partywww.Mckissock.com
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Feedback Question 3.
A Realtor Investor acting as the
negotiator in a Short Sale, negotiates a
low price with the Lender, closes on
the property in his name and moves
into it. This is NOT allowed by the
Real Estate Board.
A
TRUE
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B
FALSE
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Feedback Question 3.
A Realtor Investor acting as the
negotiator in a Short Sale, negotiates a
low price with the Lender, closes on
the property in his name and moves
into it. This is NOT allowed by the
Real Estate Board.
A
TRUE
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B
FALSE
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Short Sale Foreclosure Resource
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http://www.realtorsfr.org/
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Realtor Becomes Certified
As a Realtor
To Become A Short Sale Foreclosure Resource
Follow these four steps:
3 - 1hour
Webinars or US
Treasury Course
Pay $175
Complete a
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qualifying 1 Day
core course.
4
3
Be a member in good
standing of the
National Association
of REALTORS®
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2
1
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Poll Question 4.
A ___________________________ is a
designation that is recognized by the
National Board of Realtors as having
received extensive training in Short Sales.
A
L.R.I.- Licensed Realtor Investor
B
L.L.S.S.N.- Licensed Short Sales
Negotiator
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C
S.F.R. -Short Sale Foreclosure Resource
D
A.S.S.E. – Accredited Short Sale Expert
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Poll Question 4.
A ___________________________ is a
designation that is recognized by the
National Board of Realtors as having
received extensive training in Short Sales.
A
L.R.I.- Licensed Realtor Investor
B
L.L.S.S.N.- Licensed Short Sales
Negotiator
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C
S.F.R. -Short Sale Foreclosure Resource
D
A.S.S.E. – Accredited Short Sale Expert
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As a Realtor
Substantial liability is placed on the Realtor© and the Broker.
 Failure to disclosewww.Mckissock.com
 Negligence
 Agency
Are the top 3
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As a Realtor Investor
Tremendous liability is placed on the Realtor© and the Broker.
 Failure to disclose
 Negligence
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 Agency
Are the top 3
&
Substantial Investment of Time and energy
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As a Realtor & Investor
2 Areas Overlooked by Realtors and Investors:
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Deficiency Judgments
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Taxes
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Deficiency Judgments
As a Realtor & Investor
Little Known Fact
A deficiency is the difference
between the principal www.Mckissock.com
Contrary to what people think,
balance due and the amount
deficiency judgments occur
received. (providing the
when a borrower defaulted on
amount received is less than
a promissory note, not the
the amount owed.)
mortgage.
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Deficiency Judgments
As a Realtor & Investor
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Deficiency Judgments
As a Realtor & Investor
Bank can sue the Seller;
 Seize assets
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 Garnish Wages
 Report on credit
 Other legal actions
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Feedback Question 5.
A deficiency judgment occurs when the
homeowner defaults on a mortgage and
there is not enough to pay off the loan.
A
TRUE
B
FALSE
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Feedback Question 5.
A deficiency judgment occurs when the
homeowner defaults on a mortgage and
there is not enough to pay off the loan.
A
TRUE
B
FALSE
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Deficiency Judgments
As a Realtor
Whether the bank can pursue a deficiency judgment
after a foreclosure or short sale depends on whether
the promissory note makes the seller personally liable
for the debt. Somewww.Mckissock.com
states allow for personal liability.
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Deficiency Judgments in California
As a Realtor
California all purchase-money loans on a one- to
four-unit residential dwelling are exempt from
deficiency judgments.
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Loans taken out after the home was purchased
through a refinance or second mortgage -- can be
subject to a deficiency judgment under the certain
conditions.
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Deficiency Judgments
As a Realtor & Investor
 Most sellers don't obtain legal or tax advice in advance.
 The deficiency judgment
comes as a surprise.
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 Deficiency judgments are not easy to understand.
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Taxes
As a Realtor
If you transfer title on your home, whether
voluntarily through a warranty deed or grant
deed, or involuntarily through foreclosure,
you have sold your home. www.Mckissock.com
A taxable event has occurred.
(Whether by a Short Sale or by Foreclosure)
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Feedback Question 6.
The owner of a 3 family home in California
went into default on his mortgage. The
bank that had a first mortgage agreed to a
short sale and took a loss of $74,000. Then
they issued a deficiency judgment against
the homeowner for the $74,000.
The Homeowner:
A
Had his wages garnished and his
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credit declined.
B
The Homeowner disagreed with the
bank and won his case
C
The homeowner didn’t care as he
was filing bankruptcy in a year.
D
None of the above
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Feedback Question 6.
The owner of a 3 family home in California
went into default on his mortgage. The
bank that had a first mortgage agreed to a
short sale and took a loss of $74,000. Then
they issued a deficiency judgment against
the homeowner for the $74,000.
The Homeowner:
A
Had his wages garnished and his
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credit declined.
B
The Homeowner disagreed with the
bank and won his case
C
The homeowner didn’t care as he
was filing bankruptcy in a year.
D
None of the above
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Taxes
As a Realtor
The Seller might be subject to taxes, even if
they sold their home at a loss.
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Taxes
As a Realtor & Investor
If Seller owned for 2 years or less
all loss
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If Seller owned for a long
period of time
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gain
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Taxes
As a Realtor
Before The Seller Goes Through
Foreclosure or Short Sale
Plan Ahead
 Seek legal and tax advice.
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 Contact a Certified Public Accountant
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Poll Question 7.
Seller Jeremy owned his house for a year
and a half and lost it in a short sale.
He would be considered difference
between what he owed and what the
house sold for was $43,000. Generally
speaking that would be considered a gain
and he would be liable for it.
A
TRUE
B
FALSE
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1-800-328-2008
Poll Question 7.
Seller Jeremy owned his house for a year
and a half and lost it in a short sale.
He would be considered difference
between what he owed and what the
house sold for was $43,000. Generally
speaking that would be considered a gain
and he would be liable for it.
A
TRUE
B
FALSE
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Taxes
As a Realtor & Investor
Example
Seller paid $300,000 put down $15k and paid
$5k in payments. Loan balance is $280,000,
The Short Sale amount is $230,000.
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The tax code treats the transaction
as a sale.
The Seller incurs a nondeductible loss of
$70,000. The amount by which his house’s
basis of $300,000 exceeds its market value of
$230,000.
It is quite possible the Seller will owe taxes on
the $70,000 it will be considered income and
is generally taxed at the current level.
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As a Realtor & Investor
The Mortgage Forgiveness Debt Relief
Act of 2007
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Provides relief from debt forgiveness
taxation for certain owner occupants until
December 31, 2012.
Seller’s attorney needs to determine
eligibility
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As a Realtor
New FTC Rule Requires Short Sale Disclosures
This may impact real estate professionals who
represent clients involved in a short sale transaction.
Mortgage Assistance Relief Services Rule or MARS
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Real estate professionals must make certain
disclosures to consumers if they:
1. Negotiate a short sale with a lender
2. Advertise short sales experience
3. Take upfront fees from short sale sellers.
The MARS rules took full effect on January 31, 2011.
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New FTC Rule Requires Short Sale Disclosures
The real estate professional needs to be aware of the MARS rule and the
disclosure requirements.
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Note: As of this writing the FTC said they would not be enforcing the new
rules (MARS) on fully licensed Realtors. Except in cases of
misrepresentation.
Be careful- Very Careful.
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Feedback Question 8.
The Mortgage Forgiveness Debt Act of 2007
will expire December 31 2013.
A
TRUE
B
FALSE
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Feedback Question 8.
The Mortgage Forgiveness Debt Act of 2007
will expire December 31 2013.
A
TRUE
B
FALSE
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The short sale process, from submission to short sale approval, is generally as follows:
Submission of offer and complete short sale package from the seller.
10 to 30 days.
Bank acknowledges receipt
30 to 120 days.
File is approved or
rejected
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30 to 90 days.
Level II negotiator
may be assigned
30 to 60 days.
Negotiator is assigned
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TIME LINE
30 to 60 days.
Bank orders a BPO or
appraisal
30 to 60 days.
File is reviewed
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Time Line
Before you undertake this in
any capacity make sure your
buyers, sellers and in the case
of investors- secondary
lenders are aware of the
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extreme ambiguity of the
transaction. Buyers change
their minds after 3 months.
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Feedback Question 9.
Which of the actions a Realtor can perform
does NOT apply as outlined from the MARS
laws Mortgage Assistance Relief Services
Rules
A
Negotiate a short sale with a lender
B
List a property in a foreclosure
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C
Advertise short sales experience
D
Take upfront fees from short sale sellers.
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1-800-328-2008
Feedback Question 9.
Which of the actions a Realtor can perform
does NOT apply as outlined from the MARS
laws Mortgage Assistance Relief Services
Rules
A
Negotiate a short sale with a lender
B
List a property in a foreclosure
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C
Advertise short sales experience
D
Take upfront fees from short sale sellers.
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1-800-328-2008
CHAPTER 2
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As a Realtor
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FINDING THE PERFECT
SHORT SALE OPPORTUNITY
As a Investor
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As a Realtor
The Buyer's agent in a short sale has virtually no involvement whatsoever in the
transaction.
The Listing agent is solely responsible for the success of a short sale.
All the negotiation will be handled by the listing agent or the Short Sale expert.
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The buyer's agent cannot contact the bank nor speak with the seller.
The skill of the Buyer's agent is important and the onset of the offer. The offer needs
to protect the buyer's interests.
There are certain items in a short sale offer that are not present in a regular
transaction. Agents who list and sell a lot of short sales can identify these elements
for a buyer.
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Poll Question 10.
Since the Buyer is the one making the offer
the Buyers agent will be the person
negotiating the short sale amount with the
bank.
A
TRUE
B
FALSE
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Poll Question 10.
Since the Buyer is the one making the offer
the Buyers agent will be the person
negotiating the short sale amount with the
bank.
A
TRUE
B
FALSE
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As a Realtor
When a buyer writes an offer on a
short sale, that buyer wants some
kind of assurance that the
transaction will close.
Experienced Short Sale Agent
The buyer doesn't want to lose
the
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home to another buyer or have the
bank reject the buyer's offer.
Because a short sale listing agent
has first-hand knowledge of the
process, a buyer may want to hire
an agent with Short Sale
experience.
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Experienced Short Sale Agent
As a Realtor
Here are some of the things an experienced Buyers Short Sale agent will do:
 Review the number of the listing agent's sold short sales to determine the
agent's experience level. If the listing agent hasn't closed many short sales,
there could be concerns.
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 Find out whether there are two loans on the short sale and the identity of
the lenders. This will help know the possible wait time for short sale
approval.
 Talk to the listing agent and ask whether the agent is negotiating the short
sale or if it is handled by a third-party, which could cause delays.
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Experienced Short Sale Agent
As a Realtor
Here are some of the things an experienced Buyers Short Sale agent will do:
 Ask whether the seller has a hardship. Without a hardship, it's possible the
short sale could be denied.
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 Run the comparable sales for the home because the list price could mean
nothing.
 Eliminate the competition and the chances that the seller will send
multiple offers to the bank
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As a Realtor for a Buyer
Qualify Your Short Sale Before Writing the Offer
Before you / your Buyer decide to buy a short sale home, you as an agent to
do a little homework
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Examine the Comparable Sales
Many banks will discount the price a little bit
from market value, but to get an acceptance, offers should be reasonable and
close to the comparable sales.
Check Out the Short Sale Listing Agent's History If the short sale listing agent
has very few short sale listings and has little experience actually closing a
short sale, your chances of offer acceptance may be slim.
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Feedback Question 11.
In a short sale you have one new
component that is not in a traditional sale.
Who is the new component that has
tremendous impact on the sale?
A
Short Sale comparable sales prices.
B
Short sale Sellers agent
C
The lender
D
The track record of the Buyers agent
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1-800-328-2008
Feedback Question 11.
In a short sale you have one new
component that is not in a traditional sale.
Who is the new component that has
tremendous impact on the sale?
A
Short Sale comparable sales prices.
B
Short sale Sellers agent
C
The lender
D
The track record of the Buyers agent
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As a Realtor for a Buyer
Qualify Your Short Sale Before Writing the Offer
Ask How Many Short Sale Offers Have Been Submitted. The listing agent will
probably NOT share the offer amounts. The agent should let you Buyers Agent
know how many offers have been received. If there are multiple short sale
offers, your Buyer may need to
offer more than list price.
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Find Out if the Sellers' Short Sale Package is Complete. Bank negotiators will
work on an incomplete short sale package .
Get the Name and Number of Lenders More than one lender might mean
the file will take longer to close. Some 2nd place lenders are requiring
unsecured promissory notes from the seller or more money than usual from
the first lender.
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As a Realtor for Buyer & as an Investor
Things to Know Before You Write an Offer to Buy
Comparable Sales For That Short Sale House
A good Short Sales listing agents shows comps below current. Short sales
take anywhere from 2 to 4 months,
to close, and pending sales will become
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the comparable sales at closing.
Some short sales are priced crazy low. The sellers' bank will never accept
them. These listings receive multiple offers. To get your offer accepted, it will
need to be priced near market value.
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As a Realtor for Buyer & as an Investor
Things to Know Before You Write an Offer to Buy
Mortgage Amounts, Number of Loans and Lenders
The Buyers Agent needs to research how much is owed against the home and
the number of loans in place. A second or third mortgage lender will receive
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little compared to the amount a first position lender will get.
Some lenders have are difficult to work with. The Buyers Agent if experienced
on Short Sales will know who these lenders are and can know the types of
difficulty the Buyer may encounter.
If the Buyers offer is 30% or 40% of the mortgaged amount, it is unlikely that
your offer will be considered by the negotiator.
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As a Realtor for Buyer & as an Investor
Things to Know Before You Write an
Offer to Buy
A seasoned Short Sale listing agent
could receive dozens of offers. The
listing agent will help his sellers
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decide which offer to accept.
When you represent a Short Sale
buyer, you need to know from
experience on the listing side how
that listing agent and seller will
interpret the offer. This is the #1 way
to ensure you/ your Short Sale buyers
make offers that get accepted.
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1-800-328-2008
Feedback Question 12.
An experienced buyers agent needs to forecast
comparable prices ___________ to ________
month‘s in advance of the offer.
A
One ,Two
B
Two , Four
C
Three, Five
D
None of the above
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1-800-328-2008
Feedback Question 12.
An experienced buyers agent needs to forecast
comparable prices ___________ to ________
month‘s in advance of the offer.
A
One ,Two
B
Two , Four
C
Three, Five
D
None of the above
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1-800-328-2008
As a Realtor for Buyer & as an Investor
Things to Know Before You Write an Offer to Buy
Short Sale Listing Agent's Track Record
A listing agent who has a short sale but has never closed a short sale is liable
to make mistakes. Usually the listing agent will submit the short sale package
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to the lender and negotiate. You as the Buyer's agent can't talk to the bank.
Some states allow listing agents hire outside companies to do the job. Those
negotiations are iffy.
Do you want to risk rejection of your short sale because the listing agent has
no experience? You need to identify what level of expertise the negotiator
has.
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1-800-328-2008
As a Realtor for Buyer & as an Investor
Things to Know Before You Write an Offer to Buy
Hiring an outside Short Sale expert.
There is no cut and dried answer to working with short sale experts. There
are several scenarios
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 Many listing agents work closely with a short sales expert.
 He finds the opportunity, hands you the listing and he finds the buyer.
 You could easily be the Buyers agent as well.
 Clearly this is fraught with problems.
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As a Realtor for Buyer & as an Investor
Things to Know Before You Write an Offer to Buy
Hiring an outside Short Sale expert.
The upside is substantial:
 Many of the short sale facilitators are indeed experts.
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 They might have done 100’s.
 They are highly skilled professionals.
 They handle every nuance of the short sale.
 All you do is meet with prospective Buyers and the BPO agent.
 The best part of working with these professionals?
The majority of the time they will have an agreed upon Sales Price from the
lender well before the buyer shows up.
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1-800-328-2008
Feedback Question 13.
Is it possible to have a short sale negotiated
before the buyer makes an offer?
A
YES
B
NO
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1-800-328-2008
Feedback Question 13.
Is it possible to have a short sale negotiated
before the buyer makes an offer?
A
YES
B
NO
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1-800-328-2008
As a Realtor for Buyer & as an Investor
Things to Know Before You Write an
Offer to Buy
Hiring an outside Short Sale expert.
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The newbie negotiator won’t work
the bank until an offer comes in.
That usually ends up to be a serious
commitment of time that ultimately
goes nowhere.
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As a Realtor for Buyer & as an Investor
Things to Know Before You Write an Offer to Buy
Short Sale Seller Qualifications
Find out if the listing agent has received a completed short sale package from
the seller.
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The Sellers agent should have received at least the following:





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Sellers' hardship letter
Tax returns
W-2s
Payroll stubs
Financial statement
Bank statements
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 Some sellers do not want to
cooperate and are slow to return
these documents. Some Sellers
have no idea these documents
are mandatory..
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As a Realtor for a Buyer
Things to Know Before You Write an
Offer to Buy
Number of Short Sale Offers Received
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Homes priced under market value will
receive multiple offers. An agent is not
required to disclose the terms of those
offers, but you do want to know how
many offers you are up against.
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As a Realtor for a Buyer
Things to Know Before You Write an Offer to Buy
Number of Short Sale Offers Received
Usual Scenario
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 When a short sale home first comes on the market, the first offer will most
likely be below list price.
 The second, at list price.
 The third offer will be slightly higher, maybe by a $1,000 or $2,000.
 The fourth offer will be more.
 You / your Buyers offer needs to beat the competition and still be below
market, otherwise it’s a waste of time.
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1-800-328-2008
As a Realtor for a Buyer
Things to Know Before You Write an Offer to Buy
The Listing Agent's Short Sale Procedures
Although REALTORS are required by the REALTOR Code of Ethics to treat
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everybody fairly, not every agent
is a REALTOR. This means the short sale
listing agent may submit only the first offer to the bank. And hold on to the
others
Withholding other offers might be a violation of the fiduciary relationship.
The seller is entitled to receive the highest and best price. And be aware that
even if your offer is submitted to the bank, another buyer could outbid you.
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1-800-328-2008
As a Realtor & Investor
There can be no financial
contingencies on the real estate
contract.
No inspection contingencies. All
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of your due diligence regarding
the state of the home should be
done prior to submitting the
proposal to the lender. The only
thing you should be concerned
with is getting clear title.
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1-800-328-2008
PROBLEMS FOR LISTING AND BUYER AGENTS
The biggest problem happens when an agent takes a listing on a home that
is not yet in default, meaning the seller is still making payments to the
lender. During the listing agreement term, if a Notice of Default is filed, this
could change the terms of the listing. It now becomes a short sale listing,
subject to commission negotiation by the lender.
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In some states the rules require that agent comments – on MLS - must
state that the sale is subject to lender approval and the commission will be
divided 50/50 between the agents.
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PROBLEMS FOR LISTING AND BUYER AGENTS
Lenders in a short sale generally
discount the commission, paying
less than a seller would pay. One
listing agent did not includewww.Mckissock.com
this
verbiage. While in escrow, the
buyer's agent insisted that his
brokerage was entitled to the fee
originally listed in MLS. The listing
agent was forced to give part of his
commission to the buyer's agent.
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1-800-328-2008
Poll Question 14.
Most sellers realize that they will be
required to provide substantial
documentation. They are so happy to get
out of the problem they are eager to
cooperate.
A
TRUE
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B
FALSE
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1-800-328-2008
Poll Question 14.
Most sellers realize that they will be
required to provide substantial
documentation. They are so happy to get
out of the problem they are eager to
cooperate.
A
TRUE
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B
FALSE
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1-800-328-2008