Working w/ Realtors

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Selling Real Estate Using “Short Sales”

Morgan McDonaldJonas Elliott, Sr. David Ayala

LMS of SWFLLoss Mitigation Services1870 Clayton Ct. Estero, Fl 33907O-(239)689-7672 F-239(689-7079)www.gulfcoastbesthomebuyer.com

Goals

Educate you on how to capitalize in this down market & make additional commissions thru short sales.

Educate you on how to help homeowners who are desperately looking for help by understanding their options.

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Important Information!

What is LMS of SWFL, LLC:

A short sale OUTSOURSING, negotiation

& consulting service

Realtors, sellers and lenders

Here to assist realtors with short sales

Here to provide solutions

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What is a Short Sale?

Occurs when a lender agrees to except less money than what is currently owed on the property to allow transfer to a new buyer.

Not just for pre-foreclosures or loans in default. Can be negotiated on all mortgages plus junior liens.

What if you could…….?

Outsource all the short sale negotiations to an expert Pay no fees (seller, buyer or agent) Check “case” status online 24/7 Title and escrow with a proven expert EARN FULL COMMISSIONS when properties

transfer

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TOPICS

Case Study The Foreclosure Crisis Market Size Working the Foreclosure Market Short Sales: What, When and Why Steps in a Short Sale – Flow Charts How Short Sales Can Benefit You

Case Study - typical deal Payoffs are at or more than the value- Can’t currently sell home to cover what is owed No equity in property when closing costs and

commissions are factored in Homeowner in foreclosure Homeowner wants to get out of situation Realtor wants to outsource extra work involved in

short sale negotiations with lenders.

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The Foreclosure Crisis Increase in the number of ARMs and rising

interest rates:

Nearly 25% of all mortgages – 10 million – carry adjustable interest rates.

Source: Mortgage Bankers Association

One in 8 households with ARMs that originated in 2004 and 2005 will default on those loans.

Source: Moody’s Economy. com

The Foreclosure Crisis

1/8 of all mortgages are considered

SUB PRIME

AND

60% of all new foreclosures are

SUB PRIME LOANSSource: Center for Responsible Lending

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The Foreclosure Crisis The crisis isn’t limited to conventional, sub-prime loans:

12% of FHA loans are either in foreclosure or delinquent. Source: Mortgage Banking Association

As one advocate put it, “This is the worst time for foreclosures basically since the

Great Depression."


Prime loans drop from 66% to 45% of the market from 2002-2006.

Sub-prime, Alt-A, piggybacks (80/20’s), ARM’s, interest only and other “exotic” mortgages take over the majority of market (51%) for 1st time ever in 2006.

Credit Suisse Mortgage Report 2007

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"The biggest growth department in all of the mortgage-lending servicing departments over the last year has been the loss-mitigation department. That is the department dedicated to finding solutions to defaulted loans other than foreclosure” .

Source: Bruce Juenger, President of the Association of Real Estate Owned Managers in Los Angeles

Chicago Federal Reserve Study

Lenders lost about $50k per foreclosure

Lenders re-coup an average of only 59% of the original loan amount per foreclosure

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Market Size - Nationally

Nationally 4.95% of all homes were delinquent – at least 30 days behind

Nationally 1.19% of all homes were in the foreclosure process in varying stages.

Sub-prime and FHA had highest %

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Market Size - Florida One of the worst performing states is Florida,

14.84% of all loans are delinquent, as reported by the Mortgage Banking Association.

SWFL has routinely been in top 3 areas in ENTIRE COUNTRY for foreclosures.

Lenders own 8% of all homes in LEE COUNTY – bank owned

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Working the Foreclosure Market Working with People in Foreclosure

Homeowners rely on your knowledge and advice. You have an obligation to maintain the high standards of technical competence and integrity

Always place the best interests of the homeowner above all else, and disclose fully the facts representing the true costs, benefits and limitations of any recommendation.

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Working the Pre-foreclosure Market Stages of the Foreclosure Process

Collections – 1st 90 days delinquent Pre-foreclosure – 90 days - 12 months

Short Sale Potential in this stage!!!!

Foreclosure Sale – Sheriff’s auction Redemption Period – 30 days or less REO Department – until liquidated

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Working the Pre-foreclosure Market Options for Homeowners in Foreclosure –www.hud.gov

Refinance Loan Modification Forbearance / Repayment Plan Partial Claim Bankruptcy Deed in Lieu (voluntary foreclosure) Sell

Working the Pre-foreclosure Market

Options for Lenders with loans in Foreclosure Workout Plan / Repayment plan Deed In Lieu (voluntary foreclosure) Short Sale Sheriff’s Sale REO

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When Will a Lender Consider a Short Sale?

On loans in default, or where default is perceived or inevitable.

When a lender receives an offer that is higher than what it expects to net by foreclosing.

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Why Would a Lender Consider a Short Sale?

Lenders are in the business of loaning money, not managing and selling real estate.

Non-performing loans reduce what can be loaned by 2-8X the amount of bad debt.

Lenders have Loss Mitigation Departments responsible for mitigating, or minimizing, losses from defaulted mortgage loans.

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Steps In a Short Sale

Refer an owner in foreclosure, or expects to be, who is both interested in selling and participating.

We determine the likelihood of success based on the ability to negotiate a discount and the ability to resell the property.

We confer with the sellers and listing agent to explain the process and coordinate required documents

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We prepare, submit and negotiate the short sale package, driving the entire process for all lien holders.

We prepare a repair estimate. We make an investor offer to start the process. LMS requests the lender to postpone auction (if

needed). LMS follows up on offer & triggers a BPO (Broker

Price Opinion).

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A BPO is ordered by the lender to obtain the “as is” value, which is used to determine if the loan can be discounted and by how much.

Once our offer is accepted by the lender we will supply you with the value for you to list and market this property

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The negotiated settlement will stipulate the lender is to pay all seller closing costs, including real estate commissions.

We will handle title and escrow to transfer property to end buyer.

The Interior BPO

The most critical point of the entire short sale process.

Opportunity to validate the offer. Whatever the BPO comes in at, the lender views

that # as the FMV. Lenders want approximately 85-100% of new

BPO.

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Risks for Agents

Waste time and energy on listings when an acceptable discount could not be negotiated.

Upset agents and brokers when they lose a buyer because the process took too long or the commission was reduced by the lender.

Unable to find a buyer in time. Negotiate a discount and have the buyer not close.

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Risks for Sellers The lender may choose to either:

Seek a deficiency judgment against the seller for the shortfall (HSBC)

Send a 1099C for the shortfall, creating a tax liability for the seller.

IRS Pub 523 Internal Revenue Code Form 982 Sec 121

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Rewards to Agents Allows properties with no equity to be sold at

attractive prices in a short time. There is less competition among agents for

properties that have little or no equity. Allows you to earn full commissions on sales

that would have been lost without a short sale. Provides a way to help people in financial

difficulty who couldn’t otherwise be helped.

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Rewards to Agents Easy to demonstrate benefits to sellers in need. Creates new opportunity in a growing market with little

competition. You set the price where it will sell quickly, since it is a

forced sale, earning commissions on sales you would not otherwise make.

Receive strong testimonials and referrals from people who couldn’t be helped by anyone else.

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How Short Sales Benefit Homeowners Homeowners don’t pay for anything. Sellers avoid a foreclosure on their credit report. Most lenders will waive their right to a deficiency

judgment as part of settlement. Short sales minimize the loss, and therefore any shortfall

reflected on a 1099C. Homeowners can often avoid paying income tax on the

shortfall when professionally advised. Allows sellers to get on with their lives!

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Important Information! Online Case Submission & Management

www.realeflow.com Realeflow is the world's Most Powerful Real Estate

Business Management System. It will allow you to gain access to your clients file 24/7. You can see updates and be kept up to speed through-out the entire process.

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Free Short Sale E-book“Short Sale Manifesto”

WWW.Shortsalemanifesto.com

FREE 50 page e-book on pre-foreclosures & short sales

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Key Points Covered The Foreclosure Crisis Market Size Working the Foreclosure Market Short Sales: What, When and Why Steps in a Short Sale How Short Sales Benefit You

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Questions?To refer short sale business, please contact:

Morgan McDonald

Loss Mitigation Services of [email protected]

Office: 239-689-7672Fax: 239-689-7679