Navigating Short Sales Even in the Hottest Real Estate Market Ever

Share News:

image7

Short sale- sold!

The Dallas Fort Worth real estate market is light years away from where it was in 2010. Home values are up so much some now say we may be in a bubble. In 2010, it was another world. The market was flooded with foreclosures and buyers were having a hard time getting loans. Houses were staying on the market for months, and it was dang hard to find a traditional buyer.

Fast forward to 2015 and we are experiencing multiple offer situations with homes selling within days of listing. Foreclosures, what foreclosures?

If the market is that good, and values that high, how can short sales still be around for investors to snap up?

Nicole Espinosa is a realtor and short sale expert with JP & Associates. Back in 2010, Nicole cut her teeth working at an REO brokerage. Working in foreclosures gave her first-hand knowledge of the lenders’ loss mitigation department — that’s the department in banks where short sales are handled — and how the systems worked. In 2011, she obtained her real estate license and completed her first short sale transaction.

Nicole loved the detail required to complete the transaction, but agonized over the time and repetitiveness. She figured there was a way to be more efficient. There was — Nicole was able to come up with a personal system in order to get the short sales approved more rapidly and avoid a lot of the road blocks many agents face when dealing with them. After all, she was working 24/7 with lenders to get her short sales approved when there were no short sale departments at the banks!

“A short sale is a very detailed transaction for the seller,” says Nicole, “it’s like being their doctor. You get to know your client very, very well over a short period of time.”

She needed a partner, if only to finally get some sleep. She needed someone who would invest in her clients and help her work directly, diligently, with the lenders. In 2013, Nicole teamed up with Catherine Aliaga who, with her background in sales and management, was a perfect fit. As a team, they have taught their MCE class “Navigating the Dreaded Short Sale” to dozens of brokerages, title companies and even asset managers. Their goal is to change the misconceptions of short sales and educate the public on their options when facing foreclosure. They encourage agents who do not want to handle short sales to send clients their way.

Nicole and Catherine

Catherine & Nicole

image8

But, are there any short sales still on the market?

“Let us say you purchased a house when the market was “hot” and you payed full price, maybe even over asking,” says Nicole. “You owned the house for two years, and then something happens — job loss, family tragedy.”

There are, says Catherine,  SO many ways a borrower can end up in a short sale situation. All they have to do is experience some type of hardship: job loss, divorce, death of a borrower, excessive debt and obligations, and the list goes on. Homeowners will not stop experiencing financial setbacks just because the real estate market is healthy.

“When you purchased the house you could not have foreseen this. So you miss one house payment while you try to find supplemental income. You get letters from your lender suggesting you try a loan modification. You apply, but continue to miss payments because the lender does not accept payments during the process,” says Nicole.

Then, eight months later you are denied for the loan modification because you do not make sufficient income. Now you are behind $25,000 or more on your mortgage, facing possible foreclosure. You order a payoff statement, says Catherine, and find a slew of fees that have accumulated, “late fees”, “attorney fees”, “filing fees”. Your payoff has increased significantly.  The little equity you had is now gone, sucked dry. You have to do a SHORT SALE.

While appreciation and the hot market have helped homeowners who weren’t able to sell before, short sales will always be around. Nicole and Catherine will be bringing us monthly reports on short sales –where to find them, how to manage them. CandysDirt wants to know so much:

CD: So Nicole, is there any part of town, and demographic more prone to short sales than others?

NE: No, short sales are solely based on the seller and their financial situation.

CD: What about price point — do short sales all but disappear after $1.5 million?

CA: A short sale can range in any price, any seller can end up in a short sale situation. If you go on the MLS right now you’ll see a handful of short sales over 1.5 million. The majority of the short sales that we see are 500k and below price range.

CD: Are buying short sales a good way for an investor to find a real estate bargain? I mean, wouldn’t the bank just want to go ahead and put the house on the market?

NE: You would think so. Back in 2011 and 2012 when short sales really became prominent in this market investors were able to buy houses $.50 on the dollar. The banks are a lot smarter now and they want close to market value. If the house is heavily distressed then investors will get the price discounted for repairs. All short sales are sold as is.

CD: Tell us your favorite short sale story…

CA: We had a seller who came to us with five liens. He had one week before the foreclosure, and we had to get every single lienholder to agree to the short sale. It was the first time I had negotiated more than three mortgages on a house! We had to stop the foreclosure AND go to each lender to get approval. It is extremely difficult getting every single lender on the same page. Halfway through the transaction, the third lender tried to foreclose. I had to go down to the courthouse to get it stopped because the attorney they hired refused to acknowledge any of our emails or calls. After four long months, we got everyone to agree and found a buyer that was willing to pay the price. After going through all of that, the buyers do a final walk-through and the house had been vandalized! I’m talking about completely stripped of everything.  It was a nightmare. We had to go back to every single lienholder and get them to reduce the price again.

CD: No way! What if those buyers had walked?

NE: Thankfully they wanted the house. We finally were able to escalate it high enough to get someone to look at the file and it’s entirety. We were able to get the price reduced to reflect the new condition. That was probably one of the most challenging short sales I think I have seen yet!image9

Candy Evans, founder and publisher of CandysDirt.com, is one of the nation’s leading real estate reporters.

Leave a Comment