What's new with short sales?

Question

I haven't worked on a short sale in a year and a half, but I'm ready to pursue them again.

What has changed?

Is meeting and selling the BPO agent still the biggest key?

What percentage of short sale approvals have the 30 day anti-flip rule?

What percentage of short sale approvals have the 90 day anti-flip rule?

Are lenders ever rejecting requests for an internal BPO?

How many BPOs are being done? I've heard that some lenders will do a drive-by BPO as soon as there's a notice of default on the property... any truth to this?

Maryann L. · Answer

I don't think much has changed, other than lenders are getting more stringent in their approvals and some "investors" are out to scare the crap out of people saying everything is FRAUD.

GMAC has a GROSS affidavit now.  I think if you scroll through the short sale forum Duane Ortega posted the exact verbiage.  The lenders are still trying to control the terms of the transaction instead of worrying about getting their NET.

I still find them doable.  You just have to work within the lender's parameter's if you plan to do a flip.  Any HAFA short sale you'll have to take title for 90 days.  It's tough.

Just set yourself up with a good closing attorney and make sure he tweaks your contracts for disclosure issues.

I do think the BPO is the key to the process.  We try to do our legwork before hand to see exactly what the property is worth and go from there.  You never know though.  We had a BPO on a condo done and the value was around $320,000 and the BPO came in at $400,000.  We figured out how and why, but it took BOA about a month to order another BPO which obviously put us back some time.  Just do your homework and get accurate comps and pray you get someone from your local market and not two counties away, because not only is that a disservice to the seller but to the lender.

Cheryl C. · Answer

Well, I had no way to prove the BPO was wrong.  I think it's about right.  It just upsets me because it's 30K - lost.  Another (an reo) just closed above my price.

People (investors - and I choose the term loosely) are crazy around here.  Some subdivisions are up almost 100% from the late 2008.  I'm totally backing-off.

Maryann L. · Answer

@ Aly - If it's a HAFA short sale then the 90 day hold is going to be in the approval paperwork or addendums somewhere.  Fannie and Freddie also follow HAFA protocol, but have their own rules.  All non-GSE mortgages will follow traditional HAFA protocol.  The thing to keep in mind is HAFA short sales represent a VERY small number of short sales on the market.  There were over a hundred thousand short sales completed last year and only about 8000 were HAFA.

@H Mann - The servicer will determine if the homeowner qualifies for HAFA

@Cheryl - The coop program is similar to HAFA only there are some key differences that mainly affect the seller such as the investor may retain rights for deficiency, they will allow jumbo loans and NOO properties to qualify.  The big thing about the BPO is that usually it's done BEFORE the listing of the property like HAFA.  I find this an issue because most of the time the BPO price is WAY off and that's because many times the list price affects the BPO.  If a property has been listed for 60 days with a couple price drops a BPO can see the listing agent has tried to sell and that the price is likely lower than what it's currently listed at if there are no offers.  If there is NO list price to start with and you get a BPO agent from two counties away, you're going to be stuck with a value that isn't possible to get.

The way I got a new bpo is basically PROVING the original appraisal price was off.  I found comps to support the offer price..wrote a written submission about how it wasn't possible for the BPO price to be even close to what they wanted.  I kept pushing and pushing. Eventually they ordered another one and we were good to go.  It could have been that we surpassed the 90 day bpo order mark too.

Cheryl C. · Answer

Maryann,

I'm buying a short involving BOA and just got a rather shocking "new" bpo.  Unfortunately, a TH 2 doors away closed 2 wks ago at a very high price (325K) after a very nice rehab and then the new bpo was done.  I was in at 220K and BOA came back at 254K.  It was mls listed and I'm dealing with the lister.

My question is how you were able to get the time from BOA to re-do the bpo?  On my deal I asked the lister if we could give an explanation of the recent comp (I was told that 65K was put into the rehab - but I don't really believe it) and go back at 235K.  She said no and that she had been instructed to immediately re-list at 254K.

This is the first time a lender has come back with a higher price on a short that I had under contract.  I am ending up paying the higher price because I was down to the wire on designating a 1031 and it really is a nice place and still a good deal - just not a terrific deal.  It'll be a rental and is move-in ready and the owner is allowing me to show it.

So how did you get a chance to negotiate?  I got the feeling that BOA is really playing hardball now.  The lister said BOA wanted a "co-op" bpo.  How is this different from a regular bpo?

Herm M. · Answer

Thanks Maryann.

And I have the same question as Aly... how often, and under what guidelines, does a short sale qualify as HAFA?

Aly W. · Answer

Maryann, is this an Fannie rule or by lender?

Maryann L. · Answer

Hafa is a govt run short sale program.  It's a joke.  It was supposed to "streamline" the process, however I know personally people waiting 10 months for HAFA short sale approvals, so IMO it did NOTHING except protect the lenders.

The only thing you really need to know as an investor is you'll have to hold the property 90 days before you flip it.  Now, if you're rehabbing, that MAY not be an issue, but you won't be able to do a back to back closing on this.

Herm M. · Answer

Can someone explain to me what HAFA is please?

Cheryl C. · Answer

Hi Aly,

In my situation, I had the short UC (thru the lister) in 2 hrs after it coming on the MLS.  She later had 12 agents wanting to write on it.  Maybe BOA was suspect about lack of time on the market and/or the double-end on comission(?).  Oh well...I have another BOA with the same facts that is sailing thru at original price.

Aly W. · Answer

I had a similar experience with Nationstar, Cheryl. Original BPO was done, they dragged their feet another 6 months, BPO expired, they had another agent go to the property. I met him there. Since the first BPO, the property (vacant) had been vandalized and the copper stolen. BPO jacked the value up another $3K. WTF?? Nationstar wouldn't budge either, another 2 months went by trying to negotiate. They are incredibly slow to respond.

B of A is a dream compared to these folks.

What's new with short sales?

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