Lake Peekskill Short Sale: He Always Paid His Bills

We closed recently on a short sale in Lake Peekskill, Putnam County that was a challenge with both the seller’s lender and the buyer. The details aren’t important; it took some hard work, patience, and even a bit of diplomacy because the buyer rejected the first proposed approval from the bank and we had to take another 6 weeks and get a revised approval the buyer would accept. No easy feat, but we got it done and closed.

One of the things that stuck with me was the sadness of the seller client when we first listed the house. The circumstances upset him terribly. He had always paid his bills. He felt like he had failed because his value had dropped and illness had caused financial challenges to the point where he couldn’t continue. The thought of defaulting on his mortgage was an anathema to him. He was very upset.

Almost 30  million people are upside down in this crazy market, and in the case of the vast majority, they did nothing wrong except live in an era where they got caught in the undertow of declining values. Had they lived in any other era, they would have enjoyed appreciation of their value and built equity. But not today. My client was not alone. But it still killed him inside a little to sell the house under those circumstances, and his attitude about making good on his debts spoke to the honor he had always lived his life by. It was  difficult, but we sold the property for less than what was owed successfully, and he had no deficiency to haunt him after the closing.

These are heady times we live in, but I am gratified that in this client’s case, in spite of his adversity, we helped him avoid foreclosure and dispense with the property with dignity.

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Notes from the Short Sale Trenches

Athletes speak of a “good tired” and a “bad tired” after a game, good after a win and bad after a loss. Tonight I am the good kind of tired. 13 months ago I met with a very nice lady in White Plains who called me after a Realtor she was interviewing proposed that since she was a short sale, she should deposit an amount equal to the commission in escrow with the broker to ensure their fee payment. That didn’t strike her as terribly kosher, she got on the Internet to research short sales in Westchester County, and she found me.

 

I got the listing; Ms. Escrowed Commission didn’t. The condo market was slow at that time, and we went the first 6 months with only one aborted offer. However, I earned her trust in the process and got an extention. We determined that in order to secure a buyer, we should clean up the overgrown outside patio. I put on jeans one afternoon and trimmed, raked and perspired the area to an appealing level. It worked. This past June we got our buyer, and in perhaps some of the best work I have ever seen from our team, the approval came through on August 2nd.

 

You read that right. It took us under 60 days to get the short sale approved (with two lenders!), but we didn’t close for another 4 months. When the buyer was unable to close at the end of August for what was then an unknown reason, we got a rare 30-day extension from the two lenders-yes, two lenders. When the second deadline approached, the buyer was again not ready. For the first time in my career, we got a second extension from both lenders. As the 3rd deadline approached, we discovered the buyer’s problem: They didn’t tell us this, but to raise their downpayment they were refinancing another property. This was a very unsettling revelation. Had we known that their mortgage hinged on such a dubious condition (a financed down payment), we might never have engaged them.

 

As you might imagine, the stress on my client, an Ivy League graduate, a cancer survivor and a single mother, was mammoth. As you might not have imagined, we actually had to negotiate a THIRD extension with both lenders, and were told that no further extensions would be granted. On the Tuesday before Thanksgiving, their refinance closed. Today, we closed our tranaction one day before our final deadline. My client, a hardworking soul, hugged me after the closing was buttoned up and returned to her job to finish her day.

 

Sometimes, you can do a great job and have it squandered because the people on the other side of the table aren’t on point themselves. Among the crosses we had to bear were a frustratingly uncommunicative attorney on the other side, and a weak and not terribly forthcoming buyer. I truly believe the agent on the other side was not at fault and frankly aghast at events on their side. My seller and her attorney, two consummate professionals and people of high character, did voice their feelings-professionally and calmly- at the closing table and left complete.

 

There are very few easy deals, and that is especially the case on this deal. Tonight, I will sleep soundly. And so will my client.

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Yonkers Short Sale: Do You Need an Attorney? YES

Here’s one from the other side of the closing table, where I represented buyers on a 5-month odyssey to purchase a short sale in Yonkers. It made me appreciate the waiting game that buyers must endure, and how valuable status updates are to home purchasers of a short sale in order to stay engaged and committed to the purchase. Buyers need to be updated to, among other things, time their mortgage application, appraisal, and rate lock.

Note that I did not say anything about ordering title work. Title work in a short sale MUST be ordered by the seller’s attorney in the beginning to ensure there are no 3rd party liens that might scuttle the sale later on. 3rd party judgments and liens are common in default properties because when there is financial hardship, there are other bills than the mortgage that go unpaid.

The home my clients sought to purchase was perfect for them- a recent build on a dead end street with a good location for their commute to work. Things on the seller’s side were not organized from what I could see, until I made substantive contact with the seller’s attorney, who entered negotiations later in the game when a private 3rd party hired to negotiate the short sale was sacked mid-process. I can’t judge their circumstances, only the scenery from our point of view. From contract signing in May until August, everything seemed to be in limbo.

In early August, the seller’s attorney spearheaded negotiations. The short sale was approved in late September with terms the seller could live with. We closed September 29, which was a nice anniversary gift. His communication with me was crucial to my buyer clients’ management of their mortgage financing. When they were ready, we were ready. No delays, no snafus, minimal drama.

This was a unique file in that I had a direct line of communication with the seller’s attorney, which brokers seldom have. Typically, I would deal with a listing agent, but that agent would be the conduit to their attorney. But the bottom line here is that the attorney’s involvement was indispensable, and the communication with our side affected a successful outcome. New York is different from many states where an attorney is not part of the process. But in New York, Connecticut, and New Jersey, it is clear to me through experience that without an attorney closely involved in the short sale, the closing may not succeed.

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Peekskill Short Sale: Lessons to Learn

We recently closed on the short sale in Peekskill, NY and it was rather unique. For one, the seller, a licensed professional, had to come up with some money at the closing due to being lighter in the hardship department. We warned the client of this possibility, but the way the bank went about it is indicative of why we have the problems we have in this economy. In addition to that, the buyer almost couldn’t close because of a discrepancy on the taxes.

The seller had relocated out of state and was renting the home. He moved to an area of the country with a lower salary scale, and was now teaching in his field rather than in practice. He therefore could not write a check for 6 figures to make the lender whole. There was some acrimony with the lender as to the value of the home; as  is often the case, the lender broker price opinion was done by an out of area licensee with no clue on the local market, and their “value” came in at a  price point where we once were, and could not get anyone to even come look. Bad BPOs are a problem that could easily be solved by using local brokers and appraisers. Why lenders do not grasp this is beyond me.

Meanwhile, the buyer’s purchase appraisal came in too low! Their bank was reticent to loan that much on the home, and there was another problem with a re assessment raising our published tax figure. Evidently, both my and the buyer agent’s verification of taxes came prior to the bill going up. Their appraiser caught the discrepancy. This temporarily put the kabosh on the buyer’s mortgage.

As with many short sales, it was our job to go to the mat with the lender to get the deal done, which we did. The seller had to write a small percentage of the shortfall at closing to avoid any long term deficiency, which he had and did.

Lessons learned:

• Re-verify taxes when homes are listed on or near reassessment dates.
• For the banks: stop using out of market brokers for price opinions. The same goes for out of market appraisers.

I give credit to our proactive seller for helping himself and remaining in strong communication. I am more leery than ever as to the wisdom of those people at the lenders, whose myopia about local knowledge for BPOs contributes to muddying up the short sale process and causing more stress and angst. I am sure this is part of the issue with recent moratoriums on foreclosures– the banks are getting unforgivably sloppy.

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Dutchess County Short Sale: Old School Guy from the Bronx

Earlier this month we closed on a short sale that was another marathon. I listed it in April of 2009 and got an offer that August. It went under contract in early September and everything looked like a relatively smooth deal until about a month into the contract period we still did not have a negotiator assigned to our case. I always warn short sale clients that we might be in for a wait, so we were all on the same page.

My client was a very nice man- a widower, originally from the Bronx, and had the house decorated “bachelor style” in his own words, and I knew what he meant. His other half had departed this earth, and he couldn’t handle the house alone.

By the time the autumn rolled around, we finally started to get some communication from the lender. They moved slow as molasses, and the buyers were getting understandably restless. These were cash buyers; we wanted to keep them and avoid the uncertainty of waiting out a loan approval once we had the short sale finalized. However, as autumn gave way to the holidays and Winter, it was clear that the bank did not share our zeal to put this transaction to bed.

A title issue was discovered in March when we thought that this was going forward, and at that point the buyers asked for their money back. Deadlines had long since passed, and we had no contractual enforcement to keep them in the transaction. It took until May to clear up the title issue, thanks in so small part to my clients’ hard work to produce needed documentation (clearly, his late wife was the organized one in that partnership, by his own admission).

I had remained in touch with the buyer agent and our attorney kept the lines of communication open with the buyer’s attorney. When we informed them that the issues were cleared and the bank was ready to close, they elected to return to the table. On July 12, 13 months after I listed the home, we closed. We successfully held off foreclosure action from the bank for over a year, the seller had a fresh start with no liability or debt after the closing, and he left the house with dignity. He deserved it- he was a good guy and a team player, and if he was stressed, he dealt with it very well.

Short sales are seldom this long a process, but even if they aren’t, a good short sale broker will help stop foreclosure action on the client’s house and keep negotiating with the lender until we get to “yes.” Moreover, it took some real teamwork to clear the title issues and get our client to the table. To his credit, he was very cooperative, and that is all you can ask for from a client selling his home in a short sale. Except maybe tidy up a little!

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The Fast Closing: Putnam Valley Short Sale

128 days ago, I sat at a dining room table in Putnam Valley, New York, just north of the Westchester County border with a young couple who were listed 4 times previously with 3 different brokerages in unsuccessful attempts to sell their home. Along the way, they got behind on their payments due to loss of income and had all but lost hope that they could avoid a foreclosure. 

One of my agents, Tom Ricapito, had found these nice people quite by accident, and told them to talk to me before giving up. This was the first time they had ever heard of a short sale. I told them I had closed dozens, and they listed with my company with Tom as their agent. He later told me that our meeting gave them new hope. It is funny how these people found us quite by random chance, and not through our regular marketing. When you specialize in New York short sales, they sometimes find you.

Continued here.

J. Philip Faranda is Westchester & the Hudson Valleys’s Premier Short Sale REALTOR. He has listed and sold successful short sales in Westchester, Rockland, Putnam, Dutchess, and Orange County, as well as the boroughs of New York City. Find out more at www.NYShortSaleTeam.com

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The Divorce: Dutchess County Short Sale

This short sale closed at the end of this past year. The clients were divorced, and the home they had built while married was incomplete and upside down. The house was listed this past summer.

Divorce cases are in and of themselves difficult. I have to give both clients credit in their dealings with me- they kept it to the transaction. It still was more difficult than with a happily married client, and there were the dicey moments one might expect, but in context we did well in spite of the circumstances.

There were numerous offers on the property, but getting consensus on which one to submit to the lender complicated matters. No offer separated from the pack- price was an issue with one (rather crucial in a short sale), another was an acquaintance of the husband, which the ex wife was reticent to accept, and we were unsure of how to go forward for a time.

Not long after, what appeared to be a tie-breaking offer came in. Price, terms and details did give it a distinct advantage, that is, until the incomplete state of the home came into play. Without a final certificate of occupancy, they reduced the offer by $20,000. A decision had to be made, and with time running short the acquaintances were chosen.

It took another 90 days to get approved. Unfortunately, the buyers then asked for an extension! Given the rigid guideline of the approval we could only grant one brief extension. When another was requested, we had to deny it. We began to get concerned that the buyers might no longer qualify, but the file was cleared to close the day after their extension was denied. They might have been jockeying for a better loan; it might have been a stroke of luck. Because the closing was scheduled in haste for a morning I was already booked, I was unable to be present for the closing.

I later found out that the buyer voiced a complaint about me at the closing. I have never dealt with this person (just his agent), nor was I the source of any of the difficulty on our side. The combination of a short sale and divorce would make any transaction difficult, and perhaps the buyer transferred his frustration to me. I have no way of knowing. I do know that the seller’s attorney advised him that he was mistaken and that I was a good guy. You know you are living right when an attorney sticks out their neck for you and you don’t get a bill!

J. Philip Faranda is Westchester & the Hudson Valleys’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com

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The Option-ARM Victims -Westchester Short Sale

Predatory lending is an insidious practice. Those that make a short term profit at the expense of another person’s financial health are criminals. Of course, they know little of the damage they cause, but those of us who try and pick up the pieces know that harm all too well.

I was called to meet with an elderly couple in White Plains, and a family friend was also present. I thought little of it in the beginning, but as I came to learn of their circumstances, I understood that the friend was there to ensure that they wouldn’t get hurt again. About a year earlier, a mortgage person convinced them to refinance their home with an option-ARM, which is a very exotic product intended as a short term loan for investors. I am sure the loan officer made a healthy commission, but these people belonged in this loan as much as Stevie Wonder belonged behind the wheel of a Ferrari.

The way it works is that the interest rate is artificially low in the beginning period, and then the difference between the note rate and the market rate is added to the loan principle each month. If the ARM  (adjustable rate mortgage) rate is 2% and the market rate is 7%, that month’s 5% annual interest is the amount that the loan amount increases. The low payment literally cannibalizes equity. Investors like them because the teaser rate is low, and by the time the adjustable rate period is at hand the home is resold. Not so for a long term owner occupant. By the time I had gotten there, they had realized that tens of thousands of their equity had disappeared. Nobody explained this to them, or, if it was covered, it was sped through so quickly they didn’t know what hit them. To make matters worse, the loan had a prepayment penalty, which is incredibly rare in the state of New York.

The clients were understandably mistrustful of anyone who promised to help them, and it was only their friend’s presence that convinced them to work with me. For the entire period of the listing (it took almost 7 months from listing to closing) we never met alone once. There was always a friend or relative present.  I didn’t blame them, and I actually preferred it that way, because every new person that met me became an ally.

It was a tough sell: we had subordinate financing, a prepayment penalty, a very outdated house, and the sale price of comps was still high at that point because the market decline was in it’s infancy. Even if we brought an offer, there might be appraisal issues. They also had a large amount of personal belongings to move, a difficult task for elderly, infirmed people.

We did get an offer, and the work began on negotiating the short payoff. One piece of good luck came through when a local non-profit that the clients contacted on their own got the pre-payment penalty disallowed (another example of people doing something to help themselves rather than curl into a fetal position). In our process we have the buyers sign a conditional contract, contingent on bank approval of the short sale. These things can go on for months, and there is always a danger of the lender giving the buyer an “out” by countering at a higher price. After weeks and months of frustration and waiting, the buyers did become nervous. I spoke with their agent quite often, and much of the discussion was reassuring them that we were confident we would get the deal done.

The approval did come through, and with a rare caveat: an unsecured note of $30,000 would have to be paid back by my clients. The lender would allow them to sell and release the lien, but the bank  wanted another $30,000. The term was advantageously long and the rate low, so the monthly payment would be a fraction of a $30,000 car for example, but it was a post closing obligation.  This is exceedingly rare; we had little choice. It was either that or foreclose. The clients accepted the lender’s terms.

They are renting now, and their expenses are far more in line with their fixed income. The stress is alleviated, and in spite of the small compromise they had to make with the lender to make the deal work, their quality of life is far better. In a perfect world, I would hunt down the loan officer that put them in that option-ARM and make him pay back the $30,000.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com  

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The Widower -Westchester Short Sale

The stereotypical view of people who face foreclosure is that they are irresponsible or unintelligent. But sometimes, they are good, intelligent professionals who have had bad things happen. My own older brother, a Cornell alum, lost his house in the early 90’s due to illness.

One couple I listed was in similarly bad circumstances. She was a nurse; he was incapacitated due to an incurable debilitating illness. They were certainly upside down after refinancing 2 years earlier to catch up when health and work issues crippled their finances. One week after they went on the market she told him she had a headache. Those were the last words she ever spoke.

The house was taken off the active market while the family grieved. It was a terrible, unexpected tragedy, and bitterly ironic, since she was the healthy one. Unfortunately, the house was off the market for the earlier summer and when it went back on the sub-prime crisis hit, thinning the herd of buyers and blowing a hole in the confidence of those that remained. Fortunately, that winter we got a buyer.

The loss mitigation process on this file was particularly difficult, because the original lender was insolvent. Then, when the buyer’s lender required a test of the underground oil tank, it failed. We needed to get another $10,000 from the lender to remediate, but that wouldn’t be issued until closing. The buyer agent and I called in ever favor we could from the oil tank company to do the work and get paid at closing. They were understandably reluctant. This closing was not a sure thing. Thanks to the good relationship the buyer agent had with the owner of the firm, the work was competed, allowing the borrower to get their mortgage cleared to close.

Last minute environmental issues, while rare, can send a regular tranaction into a tailspin. You can’t underestimate the havoc they cause in a short sale. Teamwork got this done, and my client was able to open a new chapter in his life and move on as best he could. In a way it was almost like an estate sale as well, because they were in sense taking the last step in burying a loved one.

A young newlywed couple bought the house.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com  

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We Want a Baby -Orange County, NY Short Sale

Some transactions stay with you your whole life. This occurred almost 2 years ago and seems like it was last week. The clients lived in Orange County, an exurb of NYC about 40 minutes north of White Plains. They were desperate, and their situation was compelling.

First, they were restoring an older Georgian. Even in an incomplete state, it was a magnificent place. As with many younger couples in the multi-tasking pursuit of making a family, they were also trying to have a baby with little luck. Then, she got pregnant.  Their daughter was born prematurely, and never made it home. Language limps in describing such a tragic event. She became understandably depressed, and then he lost his job.

I met her at the house on a cloudy day. She was back on her feet, physically and mentally, with a fat file filled with research on short sales on the kitchen table. She knew everything I was talking about. She educated herself. Unlike many people with overwhelming financial problems, she was not paralyzed with fear. I’ll explain.

While she was showing me the house, explaining what was completed and not, we came to what was the baby’s room. The poor Little Soul never slept in it. Briefly, she was sad again. She became depressed when she was told she couldn’t have a baby. I am blessed with 4 rugrats- what could I say? Have you thought of adopting, I asked. She looked me right in the eye. “Of course. But they won’t let you adopt if you have a foreclosure.” How dumb of me! Adoption agencies weigh finances very heavily!

And THAT is why she was on her feet, lucid and fighting. She wasn’t fighting to save her credit; she wasn’t fighting for sheetrock and plumbing;  she was fighting for motherhood. She was on her toes for a child who wasn’t even in her life yet, a child who was just an idea.

I am proud to say that there were multiple offers on that house (it was expired with a prior broker who tried to sell at a higher price because they didn’t know short sales). The lender approved the short sale, an offer about $15,000 over asking price as I recall, and it closed successfully. Was it easy? Hell no. Did I care? Hell no.

They mailed me a photo of their daughter later that year. You can’t make this stuff up.

J. Philip Faranda is Westchester’s Premier Short Sale REALTOR. Find out more at www.NYShortSaleTeam.com  

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