Short sales are one of the most exciting acquisition strategies in real estate. Short selling is about getting property at good prices by solving people’s problems. Short sales are win-win transactions. Here are the parties involved in a short sale. Satisfy them all and you will be rewarded!
Home owner
Foreclosed properties tend to have title problems. Officially, the owner is the person listed in the county records as the owner of the property. The ownership of the property is shown in the document known as a “deed” or “title”. The easiest way to find out who owns the property is by obtaining a trio from a local title company. The best way to confirm all parties with ownership rights to a property is to read the title report.
Properties often have more than one owner. This is because the property may be co-owned by a married couple, friends, or business partners. This will be immediately apparent in writing. However, the deed may not show all current owners because owners can be added to or removed from the title by deed of resignation or other similar instruments of title. So when it comes to finding all the owners of a property, nothing beats a title report.
The homeowner is not necessarily always the same person as the mortgagor. This is not uncommon with foreclosed properties.
Debtor
The mortgagor is the person who took out a loan and secured it with the property in foreclosure. The mortgage debtor is the person legally responsible for the payment. The best way to find out who the mortgagor is is to look at the document known as a “deed of trust” or “deed of trust.” The mortgagor will be listed as “grantor”. See sample.
Often times, in the case of foreclosed properties, the mortgagor and the owner are not the same person. Here are some examples of the cause of this situation.
- The property is “passed on” to someone else without refinancing. Properties that have been purchased “subject to existing financing” have this problem.
- Properties in which, due to divorce, where there are two mortgage owners, one of the owners has “renounced and claimed the property” from the other person without refinancing. In both conditions, the mortgage debtor who gave up claimed the property or transferred it to someone else has no ownership rights to the property, but remains fully responsible for the mortgage.
Creditors
Creditors are all institutions, companies or individuals guaranteed by deed of trust or property lien. Creditors secured by a property can include banks, individuals, municipalities, homeowners association (HOA), former spouses claiming child support, etc.
Foreclosed properties often have more than one creditor. To buy a property in a short sale, the investor must negotiate and reach an agreement with each of the creditors, one by one. The best way to confirm who all the policyholders are is to review the title report.
Loss mitigation officers
This is the bank representative assigned to resolve problems associated with a delinquent loan. When it comes to banks, the loss mitigation officer is the person with whom short sales are negotiated. Loss mitigation officers work for the bank’s loss mitigation department.
The loss mitigation department is the bank’s unit in charge of avoiding, reducing, and minimizing losses from bad loans. Most banks have a real loss mitigation department, separate from everything else. Loss mitigation officers are debt collectors. As such, any information provided to them will be used to collect the debt.
Trustee
The trustee is the person or entity in charge of executing the property in the conduct of the lender. The trustee is usually a law firm that is dedicated to providing default services to lenders. Some of these firms, such as Northwest Trustees, Regional Trustees, and Cal Western Reconveyance, are very large, with hundreds of employees, and are running several hundred properties at any one time. Other firms are smaller real estate law firms.
The specific function of the trustee is to foreclose, in accordance with the law, on the behavior of a lender, in order to collect a debt. In addition, depending on the specific agreement with the lender, the following additional services are additionally performed.
- Provision of payment statements
- Payment collection
- Short sales negotiation
- Collateral preservation (closure and winterization of property if vacant)
For more information on trustee services, see the following trustee websites.
- Northwest Trustees – http://www.northwesttrustee.com
- Regional Trustees – http://www.rtrustee.com
- Bishop, Blanco and Marshal – [http://www.bishoplynchwhite.com]
Trustees heavily on how accessible and easy to deal with they are. Some of them, like the North West Trustees, have easy-to-use websites, a specific assigned representative available with a direct phone line, and quick response time. Others can only be called through 1-800 numbers with multiple menus to go through, long waiting periods, and no specific representative to deal with. Unfortunately, when it comes to dealing with the trustee, there is no other option. You have to work with whoever you have to. Therefore, the profit potential of the transaction must justify it.
Additional liens holders
These are other creditors or lenders secured by the property. These include first mortgages, second mortgages, judgment ties, tax order ties, city and county taxes, homeowners association (HOA) ties, contractor mechanic ties, etc. The best way to locate them is in the title report.
By far the most common type of additional lien holder is the second mortgage lender secured by a defaulted property on which the first mortgage is foreclosed. Most of the good short selling profit opportunities come from this situation. In these circumstances, the second mortgage lender is forced to discount because they will most likely lose more equity if the property is sold at auction. That is why second mortgages always have a higher interest rate than first mortgages.
Title Company
A title company is a neutral party that examines the title, issues a preliminary title report, acts as an escrow (or settlement) agent, records documents, and issues title insurance policies for a transaction. The core business of most title companies is selling title insurance and closing real estate transactions. Trust is the closing of a real estate transaction when all required documents and funds are placed with a third party for processing and disbursement.
Escrow agent or officer
The escrow agent is the representative of the title company involved in closing a transaction. This is the person who will handle, on behalf of the title company, all the documents and funds necessary to close a transaction. Custody officers are regulated by the state and the title company they work for. An escrow agent willing to work on short sale transactions is one of the most important and valuable members of the investor team before foreclosure. Not all escrow agents are interested in working in short sales.
Appraiser
The appraiser is a licensed professional third party who estimates the dollar value of a property. An appraisal is the estimated dollar value of a property based on a detailed study of the property.
Appraisers participate in determining the value of the foreclosed property only when requested by the bank. This usually happens when the loan is guaranteed by the government, about 30% of the time. Appraisals cost more than $ 400 and broker price opinions cost less than $ 100. Either way, they give the same result because they both use the comparable value method of to determine the value of a property.
BPO real estate appraisers and agents are typically hired by the bank through a third-party company dedicated to exclusively serving this need in the foreclosure industry. One of the largest companies dedicated to this is Asset Valuation and Marketing (AVM). Companies like AVM have a large number of appraisers and BPO Realtors. The main difference between an appraisal and a BPO is that an appraisal is a formally presented, printed study of the property’s value.
BPO real estate agents
BPO stands for “Broker’s Price Opinion”. BPO Realtors are real estate agents who provide opinions on property prices. Due to the difference in price, lenders generally contract for BPO rather than appraisals.
Brokers doing BPOs are typically in the business of listing bank properties. These real estate agents are generally paid less than $ 100 for each BPO. The main reason a real estate agent wants to do BPO is to get listings owned by the bank. The problem is that this creates a conflict of interest. For them, the more properties that return to the bank, the better. However, the chances that the same realtor who did the BPO will get the property listed if repossessed are low. That is why it is good to always be professional and on good terms with the BPO realtor.
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