More on Bankruptcy and Short Sale Negotiation

I posted two blogs in bankruptcy yesterday and several people contacted me with questions so I thought that it made sense to expand on this series of blogs. I mentioned that you do not necessarily need bankruptcy court approval in most bankruptcy short sale scenarios because the debtors are probably in Chapter 7 and the home has no equity so the trustee will likely “abandon:” his or her interest in the property since there is no equity to distribute to creditors. The trustee’s duty is to the creditors and NOT the debtor (as many erroneously believe). I also noted that the real estate agents must be approved by the court in order to receive their commission in matters that require court approval. This is an easy, but essential step. Typically a CV and affidavit will suffice. There is one substantial issue that bears mentioning. When you are working with a client on a short sale, it is not a bad idea to ask them whether they are contemplating bankruptcy. Note, I am not suggesting that you ever SUGGEST bankruptcy. PLEASE do not do this!! However, their home sis underwater and there is a pretty good chance that they are contemplating bankruptcy (or they have already filed and not notified you). This is critical information because when a short sale is in negotiation and the home owner files bankruptcy, the short sale negotiation on the servicer side will be transferred to the bankruptcy department. You guessed it, you are probably starting all over again!! That is why it is critical to ask because it may be prudent to not begin the short sale negotiation AFTER the petition is filed. Of course you can always wait until the debtor is discharged too. However, if you are inclined to wait, I would only do it if it is a Chapter 7 since they are typically of short duration. Having to interrupt a short sale negotiation during a bankruptcy is disruptive for the agents, negotiator, bankruptcy attorney, lender negotiator and debtor. A little information on the owners’ situation may prove to be invaluable. Be careful how you ask about bankruptcy in these politically correct days in which everyone is hyper sensitive!! Padraic Deighan J.D. Ph.D

Realty Trac Announces List of Best Short Sale Lenders

Realty Trac announces list of best Short Sale Lenders. There certainly is a lot of negative press about short sales and the lenders that participate in them. There never seems to be any positive input and the realty Trac announcement sounds positive. However, according to the RealtyTrac findings, some banks have found that by courting short sale buyers, short sale sellers benefit as well. The data firm recently released a list of its “best major banks to work with when buying short sale homes,” and many analysts believe that these banks are also the best to work with when trying to sell those homes. RealtyTrac named PNC Financial Group the best major bank to work with thanks to an average transaction time of 151 days and an average percent discount of 40 percent. Government entities like Fannie Mae, Freddie Mac, and HUD came in second. They had an average turn-around time of 154 days for the transaction and an average percentage discount of 42 percent. Rounding out the top three, Ally Financial offered an average 35 percent discount with 188 days from start to end of the transaction. These seem like positive numbers and the percentage of discount seems healthy. However the turn-around time seems atrocious to me, especially considering the healthy discounts. If the GSEs can turn around properties that quickly then it seems reasonable to conclude that non-government lenders and servicers should be able to do it more quickly. Chase, Bank of America and Wells Fargo have all introduced new programs so let’s see what happens in the coming months. There is certainly a lot of hype that the markets are improving and I find little credence to it, but we can all work hard and get as many deal completed as we can!! Paddy Deighan J.D. Ph.D http://www.homesavers.pro