Replies to This Discussion

Permalink Reply by Smitty on May 2, 2010 at 2:27am

I've found that I can ask for supervisors, demand, explain...all to no avail. Bottom line is the home sellers entered a contract with the lender long before I ever came along, so the lender calls the shots. The incentive for your home owner is that they are avoiding foreclosure by doing the short sale. The lender may "reserve the right" to pursue the deficiency, and may never do it or maybe they will...no one knows. In my state they have 20 years to reserve that deficiency. This is one of the potential consequences of a short sale and it needed to be explained to the homeowners.

Permalink Reply by Brian Peters Jr on May 2, 2010 at 3:04am

Not to disagree with you, but I believe that your overall attitude is a little off kilter.

The bottom line is not the contract that was entered into between the lender and the homeowner, it boils down to this:

Who has the money and who doesn't! Wouldn't you agree with me on this scenario for isntance:

Let's setup this scenario:

HO buys a house for $200k, HO does not maintain property, foreclosures and crime bring the area home values down, along with the decline of lending, and now let's say that now the house is not worth to average investors/other smart home buyers $75k. We negotiate with the bank and now the bank has a deficiency of $125k off of the original note. Now I do not know if you are aware of this but when a lender, lends money they put away 3-6 times that amount in an account, unseen and un-touched by the mainstream. (depending on the lender)

Now, doesn't $75k (negotiated) plus $600k, totaling $675k sound a lot better to the vault of a bank all at once then $200k over the next 30 years? Plus when they foreclose they must go through all of that, pay realtor fees, attorney fees, insurance, hazard insurance, keep the grass cut, zoning violations, declining depression of market value, repairing eventual vandalism, BPO's, appraisals, paying a department to field calls for REO negotiation, the costs can become astronomical and can escalate out of control. It makes FISCAL sense to short sale and not chase down deficiency judgement. Lenders who leave the hole open in the approval letter for deficiency judgement are setting themselves up for failure and are not being realistic. The reason for the short is to bust free, and become a good customer once again. Making and keeping good customers is the ultimate goal of any all legitimate banking institutions.

Letting the lender call the shots is misguided and confused. We create the rules and we change the rules of the game when we see fit. The lender at this point is just a detail that we have to contend with. Basically lenders are children who we must place candy in the right place and the right color, taste, texture in order to facilitate the short. (Note: At this point in time, lenders are shaking in their boots keeping their heads above water)

Learning to step outside of our comfort zones and realizing that we have no duty to any lenders whatsoever for any reason, is paramount. The sooner we learn this, the sooner the country will pull out of the housing crisis that we are still in, believe it or not.

I mean all of this to be constructive and not destructive.

Smitty said:

I've found that I can ask for supervisors, demand, explain...all to no avail. Bottom line is the home sellers entered a contract with the lender long before I ever came along, so the lender calls the shots. The incentive for your home owner is that they are avoiding foreclosure by doing the short sale. The lender may "reserve the right" to pursue the deficiency, and may never do it or maybe they will...no one knows. In my state they have 20 years to reserve that deficiency. This is one of the potential consequences of a short sale and it needed to be explained to the homeowners.

Permalink Reply by Smitty on May 2, 2010 at 9:35am

Brian, you're comparing a short sale to a foreclosure. His issue was the deficiency wasn't waived. My point is the homeowner and buyer can enter a contract for purchase, but it is the lender who holds the final cards and say over whether or not they will forgive the deficient amount. NO ONE can gaurantee that every short sale will come back with a zero deficiency, unless there is some sort of side deal with a higher up at some lender (which is WAY too far fetched) -

The most important thing you can do for a homeowner is educate them that you'll do your BEST to get a zero deficiency and let them know there could be OTHER outcomes, such as a promisary note or "right to pursue" a deficiency, which is just that...they are reserving the right, and doesn't necessarily mean they will.

Trust me, IMO short sales are a WAY better option than foreclosure, so I'm not sure why you were comparing the short sale to the foreclosures, but what I was trying to state was the lender calls the shot on whether or not the homeowner walks away with 0 debt or a deficiency. Believe me, if I called the shots as opposed the lender, no homeowner I work with would ever have a deficiency.

Brian Peters Jr said:

Not to disagree with you, but I believe that your overall attitude is a little off kilter.

The bottom line is not the contract that was entered into between the lender and the homeowner, it boils down to this:

Who has the money and who doesn't! Wouldn't you agree with me on this scenario for isntance:

Let's setup this scenario:

HO buys a house for $200k, HO does not maintain property, foreclosures and crime bring the area home values down, along with the decline of lending, and now let's say that now the house is not worth to average investors/other smart home buyers $75k. We negotiate with the bank and now the bank has a deficiency of $125k off of the original note. Now I do not know if you are aware of this but when a lender, lends money they put away 3-6 times that amount in an account, unseen and un-touched by the mainstream. (depending on the lender)

Now, doesn't $75k (negotiated) plus $600k, totaling $675k sound a lot better to the vault of a bank all at once then $200k over the next 30 years? Plus when they foreclose they must go through all of that, pay realtor fees, attorney fees, insurance, hazard insurance, keep the grass cut, zoning violations, declining depression of market value, repairing eventual vandalism, BPO's, appraisals, paying a department to field calls for REO negotiation, the costs can become astronomical and can escalate out of control. It makes FISCAL sense to short sale and not chase down deficiency judgement. Lenders who leave the hole open in the approval letter for deficiency judgement are setting themselves up for failure and are not being realistic. The reason for the short is to bust free, and become a good customer once again. Making and keeping good customers is the ultimate goal of any all legitimate banking institutions.

Letting the lender call the shots is misguided and confused. We create the rules and we change the rules of the game when we see fit. The lender at this point is just a detail that we have to contend with. Basically lenders are children who we must place candy in the right place and the right color, taste, texture in order to facilitate the short. (Note: At this point in time, lenders are shaking in their boots keeping their heads above water)

Learning to step outside of our comfort zones and realizing that we have no duty to any lenders whatsoever for any reason, is paramount. The sooner we learn this, the sooner the country will pull out of the housing crisis that we are still in, believe it or not.

I mean all of this to be constructive and not destructive.

Smitty said:

I've found that I can ask for supervisors, demand, explain...all to no avail. Bottom line is the home sellers entered a contract with the lender long before I ever came along, so the lender calls the shots. The incentive for your home owner is that they are avoiding foreclosure by doing the short sale. The lender may "reserve the right" to pursue the deficiency, and may never do it or maybe they will...no one knows. In my state they have 20 years to reserve that deficiency. This is one of the potential consequences of a short sale and it needed to be explained to the homeowners.