North Carolina Foreclosure & Short Sale Laws

Important Short Sale Information

Hi, I’m Steve Wild from Wild Law Firm and welcome to Short Sales Gone Wild. Get it? No, I’m not going to take off my jacket. What we’re going to talk about today is the two most important things that you must have if you want to have a short sale, if you want to be successful and have a short sale, that’s what we’re going to talk about. You cannot do without either one of these.

Seller Participation

Number one, the full participation of the seller. We got a mountain of documents we need. We need their financials. We need their hardship letter, all that stuff. We’ll talk about that in another video but we need that. And occasionally you’re going to have someone that doesn’t want to participate. You might have a victim seller and it’s like, “Oh, my God, you have no idea what my life is like right now. You want me to do all these documents? It’s a mountain of paperwork. I can’t. It’s in storage. I couldn’t possible, you do it, you’re getting a commission.” Or you might have someone that’s already tried to do a loan modification. The most unsuccessful program on the face of the earth, chasing a rainbow I call it. They come in to your office and they’re done. It’s like, “Oh darling, you want me to give those documents? I have already done that. I’ve done it five different times. I’ve made every single payment they asked me to make and they turned me down. They turned me down after a year and a half. I am not going to give them those documents again. They already have them. Tell them to send them over. Uh-uh I was sweet as iced tea, no way am I going to do that again, Bank of America.” Now I get it. I would be frustrated to. I would not want to do them either but what I normally do in that situation is just explain to them, “Well I totally understand. It’s a horrible program but that’s a different department in a different state. We got to start over. It’s the same documents. I know you’re frustrated but there’s no short sale unless you do it.” So that’s what we need. We need the full participation of the seller. No amount of hard work or good will on your part is going to get over that hump. We’ve got to have them play ball.

Market Price Offer

So number two, market price offer. What? A market price offer? Yup, Fannie Mae, Freddie Mac guidelines require a market price offer. It’s non-negotiable. It’s a non-negotiable item. You do not get in the door without a market price offer. Well then why would anyone want to do a short sale if you have to pay market price? Well market price is a range. So what has sold in that neighborhood, or in that vicinity, in the one mile radius, in the last three months. What do the cops say? So that’s how they’re going to determine what market price is. We’re usually going to be playing at the low end of the range. So if there was another house on that street that wasn’t a short sale it’s probably going to be substantially higher. So that’s why it’s still viable to do a short sale. There’s a lot of spaghetti being thrown against the wall. A lot of people’s approach to short sales is to just throw and offer at them and get a reaction from the bank. Oh, my God. That’s not the way to do it. We know today, standing here today, they need market price offer. They need all these documents. Why not give them a market price offer, tie it up with a bow, and we can get in and out. It shouldn’t take any more than 45 to 90 days. Go get some more short sales. Shout out, this is for my buddy Steve. Hey, buck, he’s so handsome. Short Sales Gone Wild, really, Short Sales Gone Wild. Some people think of me as a primrose but I’m not. I’m a wildflower, hell, I’m a Carolina hurricane. “What, what’s a short sale?” Oh, my God.

By: Steve Wilde

Now I hear agents all the time come up and say, I don’t want to do short sales. Short sales are too long. They’re horrible, and they never close. I avoid them like the plague. I would encourage you to take a step back and rethink that.

Short Sale Market

For the most part, this is an untapped market. Even when that’s all we had was short sales, nobody dominated the market, and as soon as everything else started selling, everyone got out in droves. It’s so quiet here, it echoes. Nobody is in this market. There’s only a couple people that are even playing around in this market, and guess what? It still pays 6% real estate commission, by and large. If you’re on both sides of the deal, some of the guidelines allow you to get 4% or 5%. We usually get our agents 6%, even then. So this is great, great money.

Short sales are difficult, but you have us now. We do all the heavy lifting. All the agent does is bring a market price offer, show up prepared at the BPO – that means you have comps in hand and walk them through the property – We do the rest. That’s it.  We do all the heavy lifting. We collect all the documents, we talk to the bank every single week. We update everybody every single week. We get the approval. We walk the closing attorneys through the closing, do all the extra stuff associated with closing a short sale, and the best part of this? We don’t have ah upfront fee. We don’t get paid unless we close, and most of the time the bank pays us. We do the short sale, so you don’t have to.  We’re going to see short sales for a long time. In fact, I think we’re always going to see short sales. It’s not going away. It’ll be part of it forever. Why? If you’re underwater on a property, there are only three options: a short sale, a deed in lieu of foreclosure, and a foreclosure. And a short sale, by far, is better for everyone involved.   It’s better for the bank. They’re going to make more money now, as opposed to a foreclosure some time next year. It’s better for the seller. It’s going to affect his credit less. It’s going to be done now. He’s going to get over it. It’s a speed bump compared to a foreclosure, which is, I would say, a financial wreck. Not the end of the world, but my God, the difference between  a short sale and a foreclosure. Huge. And it’s better for the market.

Short Sale Process

Most of the time, we’re on a file as soon as you have a listing. You have a listing. You do the numbers. It’s a short sale. Then you send them to us, free. Again, we have no upfront fee. They have no obligation to use us at all. But I’m going to spend 45 minutes to an hour with your client, going over everything about their short sale. About their short sale. Every bank is different. Not all banks or servicers forgive deficiencies. They can ask for a promissory note. They can ask for cash at closing. It’s important before you spend a great deal of time working and marketing the property, that they know exactly what’s coming.   So we’re going to deal with the deficiencies. We’re going to deal with the tax issue. We’re going to talk about how does this affect their credit. We’re going to talk about any cost or fees associated with a short sale. We’re going to touch on getting a home inspection. It’s so important most of the time to get a pre-inspection, and we’ll talk all about that.

And then, I’m going to send them the documents that we’re going to need for their loan or their loans, and I’m going to go over every one of those documents. I’m going to talk about the hardship letter. I’m going to talk about the financial statement. I’m going to talk about all the financial information they need. They will be a prepared and educated seller. How do we get paid? Well, we have no upfront fee unless it’s Nation Star, and if you’ve ever done a Nation Star, you get it. Other than that, we have no upfront fee. We don’t get any fee unless we go to closing. We’re paid on the hud at closing, and usually, the bank pays all of our fee. More than 80% of the time, the bank pays absolutely all of our fee.   We have a minimum fee. That’s a line in the sand, or a safety net. If we fall below the safety net, the seller brings it up. The bank is not going to skunk us, but if they — if we just fall below, usually it’s $2,500. If we fall below that mark, they just bring us up to that mark. And it doesn’t come out of your commission, doesn’t come out of anything. It’s in the guidelines, and they know that four months ahead of closing.  And that’s it. Go get some short sales.

We’re going to do short sales. Get ready! We’re going to go here.   Short sales, hard work. I’m a hard worker. You got to talk. You got to talk to the bank like you know what you’re doing. But I know you. I know Skippy at the bank.  Of course, the bank knows who I am. I’m Hugh Westonshire. Of course they know who I am, please. Just tell them that Hugh has made an offer, and they’ll do it very quickly.

By: Steve Wilde

Welcome back to Short Sales Gone Wilde, with an E. What we’re going to talk about today is the Broker Price Opinion, the BPO, the most important step in a short sale, and also the weakest link. The BPO – the Broker Price Opinion – arguably the most important step in a short sale. Why? This is our only conversation about price in the entire short sale process.

Importance of Broker Price Opinion

The person that comes to the door, it’s either going to be a broker price opinion or it’s going to be an appraiser, that’s our only conversation. So if this person gets it wrong and comes in with a value too high, it’s got to go to the investor for a value challenge. Our negotiator can’t change it. Now don’t get me wrong. There are some real estate agents that do a fantastic job. They put a lot of time and energy into it, pull the comps, walk through the property, and they do a great job valuing the property. But then again, there are some that don’t. They’re only making $75. They want to do a Zestimate and a drive by, and it’s usually going to come in high. So you always want to plan for the worst. You always want to plan for the person that’s going to do a Zestimate and a drive by. So we have to protect that. We have to make sure that they do a good job.

How? Easy. Show up. First of all, take the lockbox off. Then make sure that you show up prepared at the BPO. If you’re a listing agent and you don’t want to go to the BPO, then you really shouldn’t do a short sale. It’s that important. It is the most important step. You’ve got to show up prepared. What does that mean? You have to have comps. You have to have listing history, showing history, and if condition is an issue – so if you’ve got one of the Big Five: a roof leak, foundation issue, HVAC, mold, or water damage – well, then, you’ve got to prove it. You’ve got to have a home inspection showing that there is some damage, and then you have to have estimates. Why? Well, our BPO agent or even an appraiser cannot make the jump between market price supported by the comps and what the value would be because of a roof leak, or a foundation issue. They are not contractors. So you have to do that work for them. You have to give it to them.

Now some agents have told me, I can’t go to the BPO. I can’t give them any information. That’s not true. The Freddie Mac guidelines allow you to give the BPO agent or the appraiser information. You just can’t give them misleading information, improper comps. You can’t negatively stage the property. You can’t throw trash around, not cut the grass. You can’t give them estimates that are overblown. So it has to be real, and you can give them real information. And they need that sometimes. They need to know that this neighborhood that we’re in is not the same as the neighborhood up the street with all brand new houses. You can take them down to the basement, and you can show them the mold. Here’s the HEPA mask. Come on. You’re going to love this. Come on. Now this is going to be– You need to show them what’s going on in the house. Let’s go look at the hole in the roof.   So it’s your job to walk them through and show them the real condition of the property, and why we have a market price offer right here. We have a market price offer. Let me prove it to you. So that’s how you handle a BPO.

Value Challenge

Well, there’s only one thing they can do, and it’s called a value challenge. A value challenge, that’s where you have to put all the comps and all this document together, and it doesn’t go to our negotiator – because remember, our negotiator can’t negotiate on price – it goes to the owner of the note: Fannie Mae, Freddie Mac, the investor. They get to determine, and this usually takes four to six weeks, and it’s successful less than half the time if you’re right and you have all the documents. So if your strategy is to throw a lowball offer in at the bank, get a reaction, and then argue the point, it’s a terrible, terrible, terrible strategy.

So the best thing to do: Start with a market price offer, and then support it. Show up at the BPO. Show up prepared at the BPO. Remember, comps, listing history, showing history, and then a home inspection and estimates, if there’s condition.  With that, your odds are going to be through the roof. It’s downhill from here, honestly. You get past this, and you show you have a market price offer, it’s just a matter of time before you go into closing. Short Sales Gone Wild! I tell you, it’s great! Because in Scotland, we throw logs and stuff, and that’s pretty wild, Short Sales Gone Wild. I do have a thought, but I think it’s best expressed Bollywood style.  Wilde with a E. Indeed. My apologies. Going Wilde? Great, got to love it!

By: Steve Wilde

Short Sale Expertise

Now I’ve been doing short sales for nine years. My law firm has been doing them exclusively for six years. We’ve done well over (500) short sales, and we have buckets and buckets of emails that say, Thank you very much. This was great. It was the easiest short sale I ever did.

Some agents do nothing but short sales, some just do a lot of short sales, and then some– occasionally, they have a short sale part of their revenue stream. Here’s what some of them have to say:  I’ve used Steve Wilde in the past. I wouldn’t use anybody else.   I loved using the Wilde Law Firm. You guys have been great.   Steve Wilde did a great job.  He is phenomenal.  I would totally recommend.  It is so efficient, so effective, and it gets the job done.  I recommend it all the time.  I can say nothing but great things about Wilde Law Firm.

You know it’s very hard to navigate the short sales, and it’s beyond my scope, so–  They get it done, and you don’t have to worry about it. As an agent, it’s a lot better for you.  It is awesome. It is very streamlined.  As agents, all we have to do is make sure that the contract gets to Wilde Law Firm, and then gets to closing. We’re all set.  Every short sale I have had with Steve has closed in a timely manner, And we’re at 100% success rate right now.  I don’t understand short sales. I don’t want to understand short sales. But they do, and they take care of it.  They save me time, they save me money, and they saved my seller their butt.   Definitely changed my life, and it was fabulous. And they were great to work with, and I love them all.   They’re the only ones I would use.   Do a short sale without Steve Wilde? Never.  I tried, and it doesn’t work well.  Nothing but success with you guys.   Thank you. I really– I had to come over and thank you.  Keep doing it, and I’m on your side.  So if you get a short sale, give us a call. I look forward to working with you.

By: Steve Wilde

Welcome back to Short Sales Gone Wild. Today we’re going to talk about deficiencies. Spoiler alert, you get deficiencies waived, there’s going to be a tax issue, and we’ll talk about that too. What’s a deficiency? That’s the difference between what we’re giving the bank and what we owe the bank. So that’s the difference, the deficiency, the amount that you are short on your loan. And that’s going to include real estate commission, taxes, tax stamps, the difference between what you owe and the offer price. So all of that added up is the deficiency.

Short Sale Deficiency

So what are they going to do with that deficiency? At the end of the day, at the end of the short sale, what are they doing to do? Are they going to waive it? Are they going to forgive that debt? Well there are three options, and that’s the number one option, waiving the deficiency. That’s what we want and you’re usually going to get that with Fannie Mae, Freddie Mac, the VA, FHA, the government type loans. You drop down to tier two banks, tier three banks, credit unions, they don’t have the ability to just forgive the debt. So what are they going to do? Well they’re going to ask for a Promissory Note.

Promissory Note

A Promissory Note usually the terms are zero or very low interest over seven to ten years. It’s a Promissory Note, I promise to pay you $20,000 over the next seven to ten years. It’s unsecured because the property is gone. Number three, a cash contribution, sometimes you’re even going to get a cash contribution and a Promissory Note. A cash contribution just means that the seller brings cash to closing on top of the short sale, maybe $5,000 even $10,000, maybe even more if it’s a huge deficiency. But those are the three options that we’re going to be dealing with in a short sale. What happens if they waive that deficiency? Let’s say we have a $30,000 waiver of deficiency. That’s great, rock on, but guess what? Now we have a tax issue because as far as the IRS is concerned, forgiveness of debt is a taxable event. So the seller has to count on receiving a 1099 for whatever debt is forgiven. They got the use of that money and now they don’t have to pay it back, that’s a taxable event. Now this is a CPA or a tax attorney question. Do not give tax advice. I’m not a tax attorney, I don’t give tax advice. I’ll give them some information and send everybody to their CPA or their tax attorney because it’s going to be their problem to deal with, get them involved now. But the CPA’s going to attack it a couple of different ways. They’re going to look at how much their loss is. Maybe they have a $40,000 loss and a $30,000 deficiency. Well they’ll probably be able to make that go away or mitigate that to some extent. They can also look at the IRS insolvency test. Again, this is for them to deal with. So just advise them that there is a taxable event, you will receive a 1099 for any debt forgiven, and send them to their CPA. And go get some more short sales.

Well partner, I’ll tell you this. I sure as hell would never try to lasso a short sale without my buddy Steve. Short sales you say, I don’t really know this short sales, but you look marvelous doing these short sales things and I want to do one because it looks marvelous. You look marvelous doing them, so I want to do them. I want to do a short sale.

By: Steve Wilde

Welcome back to Short Sales Gone Wild. What we’re going to cover today, who can negotiate a short sale? But more importantly who should negotiate a short sale? Some states have said that negotiation of debt is the practice of law, North Carolina is one of those. But more importantly, who should negotiate a short sale?

Who Negotiates Short Sale?

The answer, a seller, or the sellers attorney? Why? Why can’t an agent do it? Simple, liability. If you negotiate a short sale, you own it. Let’s break it down. Okay, the real estate agent has a special license. That license allows them to negotiate between a buyer and a seller all day long.  That’s their arena. When you negotiate a short sale though, you’re actually negotiating on behalf of and advocating for a seller with a third-party bank. The bank or banks are not a part of the contract. They’re also negotiating their financial obligation to that bank or banks moving forward.  You can see that they’ve stepped out, and they’re no longer negotiating between the buyer and the seller.

My advice, get an attorney involved. They have Malpractice Insurance for this. Sure, agents have got E&O Insurance, but most of the time E&O Insurance is on the sideline cheering you on, but they’re not going to cover any liability, because you have stepped out of your license.  I get a call at least once or twice a month from a seller who had a short sale, and their real estate agent negotiated. And now the bank is pursuing them for their deficiency judgement. And every time they say, “I went to closing, and my real estate agent said that all my deficiencies, that $200,000 worth of deficiencies was waived, was forgiven.”  I said, “Well, send me your documents.” I reviewed the documents, they weren’t wave. Who owns that liability? Well, the real estate agent and their company is in big trouble. So you can see that it’s just not worth it.  Get an attorney involved. You go sell real estate, you get the commission. You don’t get any extra money for negotiating a short sale. Now, here is one other tip we should talk about.

When you close, always, always, always, always, always close with two closing attorneys.  Why? The buyer’s closing attorney represents who? The buyer. By law the buyer’s closing attorney represents the buyer. Who’s losing a house in this deal? The seller. Where is all the liability here? The seller. The worst case scenario ever is when a real estate agent negotiates a short sale, and then everyone closes with the buyers closing attorney.  Nobody is representing that seller who owns that liability. That’s the key. That’s the key, who owns that liability. Stay safe out there. That’s it for now. Bye.

I am a Wilde Law Firm user, because I do not do short sales. I don’t understand short sales, I don’t want to understand short sales, but they do. And they take care of it.  I use Wilde Law Firm because it makes it easy and efficient for us to be able to go ahead and put through our short sales. When we do get a contract or any kind of an offer, we get it signed by the seller. We send it over to Wilde Law Firm, and they take care of everything else for us.  They keep the buyer and the seller in the know, making it as easy for agents as possible. And we get regular updates, and once we get that contract done, we’re pretty much good to go. As agents, all we have to do is make sure that the contract gets to Wilde Law Firm, and then gets it closing. We’re all set.  It is awesome, it’s very streamlined, very little headache for me. And we’re at a 100% success rate right now.

By: Steve Wilde