Ron Caudle

Tag: AVP

  • Third Misconception of Short Sales – At No Time Do Banks Take Less

    The Third misconception to short sales is that the bank would never accept (for example) $40,000 on a loan of $100,000. First, let me tell you, NEVER SAY NEVER. People generally believe that the banks care a lot more about loss then they actually do. It all depends on the situation and how you set up the sale and structure the hardship.

    Now wait a second because I don’t want you to misinterpret me, Banks do care about a severe loss a lot. Think about this, a $40,000 recovery on a loan that was $100,000 is a loss of 60%, that isn’t something that a bank is willing to just let roll off their shoulders.

    If a bank puts $100,000 up originally for the mortgage, there is no chance they are going to walk away with only 40% of their money without checking into it. The bank employees who set up your loan and the ones that answer your phone calls are subordinate level employees, and they are not going to have the clearance to approve a loss of that significance. Honestly, it is a good thing that the employees that you normally deal with are not the ones with the final okay or denial of the loss. Though they are the people that you will have to go through (or maybe around would be a better term) in order to get your file to the Associate Vice President (AVP), who one understands math, and can make the final decision on your file, and to who mitigates the situation, or makes the loss seem less severe than the loss that could have happened if the offer is not taken.

    If you can convince the AVP that the offer that is reasonable and/or reflects the current market value, then the bank may accept a severe loss, even one as high as 60%. There are and has been many cases where the banks have accepted a significant loss, even one of that severity.

    The severity of a loss that a bank would be willing to accept, again depends on the situation and how well you present the hardship and file. Okay, now let’s consider a property that now has a fair market value of $55,000, though the people that own the house still owe $109,000. No matter which way we or the bank looks at it, they are going to be out a very large portion of the money originally invested. In a case such as this, there’s a large chance that the bank would agree to an offer of $50,000 to avoid the hassle and uncertainty of letting the house go into foreclosure and having to resell it as B Owned Real Estate (REO). In this case even trying to sell the property as an REO, the lender would still not satisfy the lien originally placed on the property.

    First-position liens, which is a claim against a property that will be the first claim to be repaid if the property owner would declare bankruptcy or default on the loan, rarely sees a loss as high as 50%. However, it definitely does happen at times. Though a severe loss of 99% is not uncommon in second-position or other junior liens.

    Contact me on more information about how to package your file and hardship accurately and present the numbers. to the AVP.

  • Fifth Misconception of Short Sales

    The bank is not going to take your offer if the person you were dealing with at the bank turned it down.

    The person you speak with at the bank, us basically a low level paper pusher, or a middleman. They aren’t concerned about financial loses of the bank, simply because it’s not their money. They could really care less about your offer because they get paid the same salary no matter if the loses money because of your offer. It’s not going to have an impact on their paycheck on Friday.

    If your offer gets turned down, and you think that it is a reasonable one, the bank will probably accept, even if the low level paper pusher you talked to says it won’t. If your offer gets declined, you need to talk to someone who’s a little higher up on the ladder.

    I can’t stress it enough, 9 chances out of 10, if you’re having issues, you’ve been talking to the wrong person.

  • Sixth Misconception of Short Sales

    Lenders don’t care about accepting a short sale, they would much rather just foreclose the house.

    Even know that agents nation-wide close 10% of their houses on short sales, this myth has been spreading and has gained a lot of attention. I’ll be honest with you explaining why 90% of short sales fail. Most people simply don’t know what they’re up against and don’t know who they need to talk to be to successful, and of course when and how to follow up on the short sale.

    I’ll be the first to admit that short sales, nationwide, have such a low success because of lack of knowledge.  If you go to your MLS, you’ll notice that 10 to 20 percent of houses were sold on short sales. Don’t forget that these statistics have nothing to do with the actual success of short sales or banks’ willingness to accept a short sale. It’s simply because agents go about the short sale process all wrong. With proper guidance, your short sale can easily be a success.

    Thinking back to the market in 2003, lenders had no problem foreclosing a house. They could do it because they knew that they would get the late payment cost back, the principal balance and turn around and sell the house within 60 days since the market was so demanding.

    However, in today’s market, lender try as hard as they can to keep houses from reaching foreclosure. The philosophy “The first loss is the best loss.” is used by major lenders. Though this philosophy doesn’t deal with any kind of low loss mitigators.

    When talking to a mitigator, you need to keep in mind that they are an hourly employee, and also someone who really doesn’t understand what is good for the bank. In most cases, it’s always best to have the conversation escalated to someone who will know more about what you are offering, and produce a much more successful outcome.