Penfield Negotiation Services Achieves Better Short Sale Results
Problems with the Conventional Short Sale Process
The typical short sale negotiator is a real estate agent who has maybe taken a one or two day class in short sale negotiations. The agent will list the house for sale, guessing at what price the bank might accept. Buyers will know bank approval of a short sale takes a long time, so many of them will avoid the house. Once a buyer is eventually found and a contract signed, the agent will collect financial documents from the homeowner along with a cringing, apologetic hardship letter. This package will be dropped on the bank’s short sale negotiation department, where it goes to the bottom of the stack. After 2 to 3 months, the file will rise to the top of the stack (if it wasn’t lost in the meantime) and a negotiator on the bank’s side will be assigned. The agent has maybe been coached in what words to say, but he or she has no leverage over the bank. Agents are basically begging the bank to cut their clients a deal. The bank may push back on several issues:
- The bank might demand a higher price from the buyer. The bank is not bound by the list price or the contract price. If the buyer has stuck around this far, they may walk at this point.
- The bank might insist that the seller pay some thousands of cash towards the loan deficiency – the portion of the loan that the sale won’t cover. They might ask the seller to sign a promissory note covering the whole deficiency.
- The bank might put a deadline on their approval that hurries up the seller’s move out plans.
Finally, the bank will blot the seller’s credit report with an account that was not paid in full. Sellers are typically told that they’ll just have to accept a drop of 200 points off their credit score and expect to wait two years before qualifying for a new home loan.
At the end of this bruising process, the seller is often left wondering if the short sale was worthwhile. Foreclosure might have been less stressful.
A Speedy and Efficient Short Sale Solution
Penfield Negotiation Services (PNS) offers an entirely different approach. PNS is a branch of a Bellevue, Washington law firm, Penfield Legal Services. PNS gets you a better short sale outcome through research into your loan and the respect a law firm commands by the threat of litigation.
The short sale process with Penfield Negotiation Services works as follows:
- The home owner fills out a client intake form and puts down a small fee to cover paralegal duties.
- PNS will research the loan, looking for deficiencies in its origination or handling. For example, the banks would routinely ignore IRS rules about assigning loans into the tax deferred trusts they sold to investors, calling into question whether there is a valid owner of the loan. See “The Gathering Mortgage Securitization Scandal” for more discussion of this topic. A loan originated between 1992 and 2007 is a prime candidate for this service. Old WAMU and Countrywide loans are Penfield’s favorite targets.
- PNS will start negotiations with the bank right away – no waiting until you find a buyer, starting with the bank’s legal department. PNS will draft a QWR (qualified written request), asking the legal department to identify the true owner of the loan and responding on any discrepancies found. Under the RESPA law that governs lending, the bank must acknowledge the request within 5 days and respond in detail within 30 days. The tar trap of the bank’s short sale negotiation department is avoided.
- PNS will direct the bank to send communications to them, relieving the homeowner of more worry.
- Negotiations proceed apace with the bank’s legal department and a bank approved short sale price is agreed on.
- In the meanwhile, the homeowner would put the house up for sale with a qualified real estate broker. If a “bank approved” price can be advertised on a short sale, a greater pool of buyers will be interested in the property. They will know that there need be no long delay waiting for bank approval.
- The bulk of PNS’s fee is paid at the back end – after the house is successfully sold – out of the proceeds going to the bank. The home owner owes nothing more to PNS.
- PNS will not accept in most cases that the bank has the right to go after the homeowner for a deficiency. PNS will propose that the deficiency be waived.
- In certain circumstances, the bank will be asked to mark the account as “paid in full”, so that the home owner’s credit score will not be dinged.
What is a Short Sale?
A short sale is the sale of a property for less than is owed to the lender. The lender’s permission is required to release their lien and allow the sale to proceed. Typically, a home owner who is underwater on a property and interested in a short sale will have stopped paying on their mortgage. This gives the bank an incentive to accept the sale at the current market level and write down the loan. Before you cry a bucket of tears for the bank, realize that they typically have a loan insured for 65% of its face value (entirely separately from whether the borrower is paying mortgage insurance). When you add the proceeds of the typical short sale onto the 65% recovery through insurance, banks usually make a profit on a short sale. On top of that, they may ask the borrower to pay a portion of the loan deficiency. No wonder then that banks are now encouraging short sales.
Penfield Legal Services can be reached at firstname.lastname@example.org or 425-770-4245. Or fill out the contact form below.