The bank won't mind, "reasoned" the seller....if he would sell his present home for less...after all the mortgage for his imagined new house would be much more and then the bank would more than make up their losses.....the "Rob Peter to pay Paul" scenario. It made perfect sense to him.
Every agent who includes short sales as a part of their practice makes every effort to help every homeowner avoid foreclosure and begin a new life free of the ties that bind to a mortgage that is no longer affordable.
Hardship is not 20 minutes longer to drive to work.....it may be divorce, death of a wage earner, unemployment, under employment..a combination of circumstances that make paying the mortgage an upside down scenario...too much debt and not enough income.
Short sales are not a convenience. Some people may argue that "THEY" should have planned ahead...nothing brings my blood boiling faster, my lip bit harder than thoughtless remarks from critics who have not seen the devastation of loss of income through no fault of the homeowner. Who ever gets married to get divorced...imagines that an illness will take them out of the job market....that a primary wage earner loses life too early....the list goes on and we share the heartbreak of the losses and do everything we can to lessen the pain, find alternatives, help where we can to make the transition to the next part of life a little bit smoother....finding some sunshine where there has been none....helping to rebuild a life or lives that have been shattered by hardship.
We will help anyone...anywhere with a local expert figure out the very best way to survive a difficult situation....call us...we're here to help: 414-525-0563.
Driving 20 more minutes to work...hmmm....buy a car you can well afford that gets better mileage and donate the money you save on gas to the food pantry for those less fortunate who are short on all the things that matter most in life.
Where did you get the shirts? Love them!
People have such flawed logic at times, or even absent logic. Good post!
Amazing what some people think they can get away with, and what they think is a hardship...........think again! Great post Sally and David.
just iron on the letters Michele....hi Gary....logic flawed you bet....Roger ....hardships are hard...have to learn to recognize them !
HI guys...love the final paragraph, really nails the point ! Frustrating stuff, right? I just explained this the other day to a seller!
Had a friend call to ask my opinion. Her relative wanted to borrow $200k cash. Why? ... to "short sale" his home and buy a better home at a huge reduction! Aaaargh!!!!!
Margaret
Taking advantage of the system that was put in place to protect them should be like a false claim to an insurance company. They should be locked up for such an act. No wonder we are in the situation we are in with the economy if we continue to allow such despicable acts.
I remember a California blogger on AR lamenting they had three mortages on the home they had owned for two years and wanted to move up to a better, bigger on. I asked the broker whoa, if the place they have now is worth less than owed, if they are upside down they just have to stay put. But her retort was they want to move up, get a better place to impress and have parties in with all sincereity and seeking let's feel bad for the Jones. I said in rural states, impressing someone was not the items you spent money on. She said oh, I love the country and put my hair in a pony tail, wear jeans once in a while. I shook my head. There are folks that got way over extended by themselves and not the life hardships of divorce, lay off, sickness caused too right? Responsiblity for shooting yourself in the foot needs to happen too.
When there are sooo many people deserving of a short sale.....the few with selective hearing ....forget the hardship ...just short the bank...will find themselves one sale short of a short sale.
Personally I think it's time to start robbing Paul to pay Peter.
People never cease to amaze me!
You wonder who told them that the bank was stupid!
Well Judi...there are some "not Einstein" lenders out there....the ones that have 2, 3, 4 mortgages on properties worth a fourth of the mortgages....even when they did them...the "value" was questionable.
Entitlement is the inclination of many in our society and we are a country driven by many in power who believe that they can legislate more entitlement to completely destroy our freedom and liberty. Government interference in economics will only continue to stall the inevitible. The saying don't fool with mother nature needs to be applied here and the economy needs to wring itself out, those who are not responsible need to be allowed to learn their lessons, not be rewarded and then we can move on. Unfortunately, this is not what is currently happening in the Short Sale and HAMP movement and it will continue to errode our markets until it stops. Oh Well, that is just my opinion.
There's a lot of people grasping at short straws; it's up to us to guide them.
It is amazing what people will do for money, or an attempt to get "ahead."
There's always the dream of getting the good deal in America and not necessarily being responsible for your past actions.
Mary....I don't think that not "allowing" short sales would be much of an economic boost...if the thousands of people who have done short sales all went into foreclosure...that would be a bigger mess...the mess didn't happen with one administration...one legislature...it's been here a while and it will take a while.
Straws cn be slippery Terry...good point.
Catherine...ahead is right...he actually thought he was doing the bank a favor getting a bigger loan.
Gabe...responsible is a word that's easy to forget when you are sure everyone else will take the reins.
And to those "prospects" just watch this http://www.youtube.com/watch?v=XsNJDWA0sAw
and then you'll freely say bye-bye
What makes these rocket scientists think they'll qualify for another mortgage after a short sale? NOT! At least not for a few years!
Somehow people believe that there is an ounce of "common sense" to the bank losing on one end to gain on another....ewww
After doing a lot of short sales, I have gotten better at knowing which ones to walk away from before I begin. True hardships along with total cooperation is needed for us to work three times harder than on a normal sale. No scamming allowed.
Sally and David, it seems there is always someone out there who will try to take advantage of the system. Makes it harder for the people who really need the help.
Agents have to decide which clients they can work with and which ones they have to say no to. That's a business decision based on each agents' own criteria. Hopefully agents aren't making "lack of business" the primary motivator ... it tends to make people do unwise things.
Tragedy brings scams it seems...we have to have eyes wide open to prevent falling for them !
It is true that life changes and tragedies can quickly take a family to financial devastation. It's nice to know there are good people like yourself that will help them sort through the problems they face with their homes and mortgages.
Short sales are going to be a part of the landscape for a long time. Unfortunately, people that try to scam the system aren't going anywhere either. We can just choose not to work with them.
thank you Kate...you made our day !
I recently let a client go because she wanted to short sale her current home that is in Northern California and then purchase a home in San Diego. She didn't have a hardship, she just wanted to move to San Diego and was upside down on her home. When I told her that I couldn't work with her because she didn't have a true hardship, she wasn't happy with me. Too bad. I tell my prospective short sale clients that everything you put in that hardship letter to the bank must be backed up by documentation. There are many legitimate hardships and people who need my help--those are the ones I'm happy to work with.
The media keeps spinning that we will just "have" to change the rules for the short sale epidemic. I believe the rules for these folks will be more like the "old days" say 20% down and solid - Rebuilt - credit BEFORE we give you the loan.
Makes as much sense as the argument that every homeowner that has a loan more then the value of the home be adjusted to today's values... and the deficiency amount "just forgiven"... (at the expense of the U.S. Taxpayer.)
That's what we get for tolerating a society of "entitlement" minded Citizens.
What's really sad is the number of people out there that just let their old home go to foreclosure... and paid for a new one with CASH.
The qualification to just "fog a mirror" to get a mortgage is our opinion is not the fault of the buyers...they followed the rules...the lenders made them.
Hi Paul....don't know anyone who let a home go to foreclosure and paid cash for a new one....there oughta be a law if there isn't !
I am sure in their mind it was a great scenario. You know, why wouldn't the bank accept that?
We earn every dollar and then some on short sales.
I find it amazing that you know what the bank will accept or not accept. There are blogs all over activerain where agents talk about banks accepting short sales without hardships. It is not our job to be judge, jury and excecutioner.
No Matt...not our job...it is our training and ethics that speak loudly to justifiable hardship.....as my Father used to say...just because everyone else jumps in the lake...in this case swamp....we would not do it ethically, morally.....and I know of no legitimate training that would suggest "I don't wanna" as a hardship....if other agents do and can sleep nights...that is certainly their choice..."all over the rain"....
The short sale process is going to be looked at under many different perspectives, some as the only way out and others as a way out to take advantage of a new situation.
It is up to each of us to respect the process....the profession...the situation and not advance listings where no real hardship exists...in our opinion.
Sally & David, I am finding the same tactics being applied here in NJ, I tell all of those people considering this option,...beware, the short sale is becoming more popular by the day which means it will be under the microscope for fraud so as a Short Sale specialist I tend to lean towards the people that really need the help.
The seller wants to do the deal, the buyer wants to do the deal and the bank wants to do the deal, but the real estate agent does not want to do the deal? I do not understand. When did you become a party to the transaction? You are free to pick the clients you wish to work with.
Matt....you are making assumptions that are not true...we provide honest representation....fraud is fraud
Thank you Malik...short sales are for people who need help not people who "don't want to"
Why are you making a judgment that it is fraud? If you tell the bank the 100% truth, full disclosure, and they still decide to do the deal, where is the fraud?
Thanks Sally & David for this blog. The short sale used to be all about hardship... the bank making an exception to those in need. For some reason, buyers, sellers and some agents believe that it is some sort of requirement for the bank to accept a short sale now.
People taking advantage of the system is the exact reason why the system is so complex right now. I started to do short sales to help people in need. Now I hear about people using them to get a larger house.... makes me sick to my stomach.
One thing I've seen in real estate though.... you can get away with it today, but it doesn't mean you won't be tracked down later!
matt...if you would like to have a discussion please call us or e-mail us....hardship is not defined as driving 20 minutes...hardship is the requirement....not my call...
Hi Michael...honesty is the best policy....there are enough real hardships without having people trying to stretch the rules...
It will continue to be a problem -- but I think the "greater good" IS being served by making people aware of the fact that Short Sales have significant advantages over Foreclosure!!
Seeing more "Short Sale Opportunists" like what you're dealing with is an inevitable side effect .. but I think it's worth the cost as long as we're making the American public more informed!!
Hi Michael,
I have never done a short sale without a hardship. But when I read about all of the short sales done without hardships, some without a hardship letter, what should I think? The bank makes the rules for the short sale and they can change the rules. If they want to approve the short sale, for whatever reason makes sense to them, who am I to judge? The bank has many lawyers and real estate experts on their staff. Full disclosure and I do not make decisions for the bank. The bank can decide what is best for the bank.
Side effect is right Mike....good term !
Maybe Matt you should think that you can't believe everything you read...
Some people have common sense, some people don't. Good luck if he really thinks he can pull that off!
And who says we don't have PERSONAL RESPONSIBILITY anymore?
While all lenders require a hardship letter, not all lenders place the same amount of importance on how it affects their decision to approve the short sale. In addition, different lenders have different opinions of what is "verifiable", "legitimate", etc.
This inconsistency has created a serious "grey area" when it comes to hardships.
Some of the short sale training gurus claim that in order for a hardship to be "legitimate", it needs to be one of the following:
Loss of job, death of spouse, loss of employment, divorce, etc...
While these are all serious, life-changing events, there are a myriad of other hardships as well. What about the teacher who is still waiting on their contract to be approved for the following school year? Or, when one of the wage-earners is working two jobs, and can no longer do it because they just had another child and need to stay at home? The list of circumstances goes on-and-on.
Don't limit yourself to only what the short sale trainers say. Go with your gut, talk to other agents, read the blogs, and do whatever you can to help your client avoid foreclosure.
All we can do is listen to our clients' situation, advise them as best we can, and decide if the chance of not getting the short sale approved is worth our/their time. If it's not a deal that you think will get approved, move on to the next client. Or, if you find it to be ethically immoral, walk away.
In recent months, we've closed several listings where the seller did not have what most of us (or some of the so-called short sale training gurus) would call a "legitimate hardship". What I've learned is that at the end of the day, if the short sale is in the best interest of the bank, the seller, and the buyer (vs. foreclosure), then who are we to stand in the way?
We recently closed a short sale for a couple that purchased their home in 2005 for $400,000. Both are still employed, but are constantly being warned from their respective employers that their hours MIGHT be cut in the next 6 months. Their financial analysis form & bank statements showed them being barely capable of covering their mortgage each month. We sold the home for $150,000. Realistically, it would have probably taken them 3-5 years to recoup their loss. The husband's parents bought another home for the couple (which we helped them find), and they are now making payments to them. The home is larger, in a nicer area, and they paid $200k for it. They've since referred two acquaintances to me to help them with their short sales. So, do I lose sleep at night for helping them out? Heck No!
In other words, determining the "legitimacy" of a hardship is better left with the lenders, not the real estate agents. Each case needs to be looked at on an individual basis, as each lender deals with hardships differently. If you don't ask, you don't get.
With that being said, the beauty of this is that we, as agents, can choose to simply "walk away" from a listing, if we're not comfortable with what we are hearing.
This is an excellent blog post that I'm sure will produce a variety of opinions/insights. Thanks for writing it!
There are still homeowners that think the bank will just accept a Short Sale and call it a day. Not the case, as you have pointed out. Short Sales will only be accepted if there is a true Hardship.
Sorry Robert....we have listed and closed dozens of short sales...all with legitimate hardships....weight or not weight...I know of no lender that does not want a signature on a hardship letter...and I am sure just as there are agents who will list homes for what is owed plus commission plus "start over money" this seller will find someone who will list it too...it won't be me or any other ethical agent I know.
Thank you John....a hardship in this case cannot be defined as driving 10 more minutes to work....and that he believed, was the reason his debt should be forgiven.
This is hard to write because you do not fully explain this persons hardship and you contradict yourself. On the top you state 20 minutes and in #49 you state 10 minutes.
Yes, it can be a hardship if the bank accepts it. You do not state if they are already driving 2 hours a day each way. You do not state if they have to pick a child up by a certain time and face a fine every time they are late. Maybe he is working 2 jobs and the extra 10 minutes means he will be late to work every day and he will lose the second job. Maybe there were 10 little reasons and this one was the "straw that broke the camels back."
And no, another agent is not unethical to present the information to the bank and let the bank make its own decision. The bank can say yes or the bank can say no. It is the banks decision.
Robert told you about a deal that did not meet your criteria and the bank approved it. If you read other blogs here, some banks in certain situations have approved short sales for investors, for high income people, for people who could afford to make their payments. Do the banks not know their own rules? Are the banks unethical for approving these transactions?
I joined Activerain to gain knowledge from other agents. Sometimes I do not agree with them. Robert has said that he has done this deal. Maybe he knows something that you and I do not know as neither of us have done a similar deal. Maybe we both can learn something.
What you can learn here is that every detail is not all that important....I am sharing what we have already learned...not from an agent...from the bank's mouth...10 or 20 minute drive is not a hardship....that is common sense....when people have no money and this person earns a very healthy salary..he is not at all upside down.....it is not a hardship....we do our homework....we learn things every day...no bank that we have done business with has been presented an unethical less than real hardship situation....we know many bankers personally...and many many other short sale agents...you don't have to agree with me...I don't have to agree with the bank...the bank makes the decision...good night
No need to apologize. Let me clarify... I too, have always had a hardship letter included in my short sale packages (all signed by the Seller, of course). I haven't run into any lenders that will accept an unsigned hardship letter, as you pointed out. As we all know, a hardship letter is required by all lenders, and I won't take a listing without one.
Now, let me share with you what I've also learned not "from an agent", not from the "bank's mouth", but from the banks actions...
I'm pretty sure that all of my closings had "legitimate hardships" (as you call them), because they closed...Right? After all, if the weren't "legitimate hardships", they would have never been approved.
While I'm not sure what you mean by "start over money" (how does a seller get any money out of a short sale?), I can tell you that I never list a property "at market value, plus commissions". I've learned that pricing it just above market value, and moving the price down until we obtain an offer, is the best strategy. Again, that's my opinion, and I'm not trying to tell you how to run your business.
The point of my comment was simply, "Who are we, as real estate agents/brokers, to determine what classifies a hardship as "ethical" or "less than real" hardship situation, as you pointed out? Isn't this for the bank to decide, especially in this environment where each bank is making up/changing the rules on a daily basis?
Like you, I know many "bankers". Most of them don't have a clue to what is actually going on in the real world of short sales (they're too busy golfing). As you know, we are forced to deal with the $10 per/hour "underlings" that are making huge financial decisions (and determining what is an "ethical" or "less than real" hardship situation). Truth be told, in most cases, we ARE NOT dealing with bankers, but loan servicing companies (whether it be BofA, OneWest, Wells Fargo, etc.), who are making these decisions for the investors that own the loans. Do you think these guys have an ethical/moral bone in their body?
I simply tried to come into this discussion and offer what I've learned recently in closing short sales, and even gave you credit for what I think is a great blog post. You chose to patronize my response by apologizing (for what reason, I don't know), then talk about signatures on hardship letters, and something about some agents that list their homes with "start over money".
All I know is that after 9 years as the owner/broker of Summit Home Consultants, I sleep well at night, knowing that I've done everything I could to help my clients and the people they have referred to me. In those 9 years, I've never had a complaint registered against our company, and have never been threatened with one.
In my opinion, our fiduciary responsibility doesn't lie with the lenders we deal with, or other realtors, for that matter. it lies with the clients that hired us to keep them from going into foreclosure. I could care less how a $10/hour negotiator at ABC Bank thinks about my "ethics". If they feel that they are better off foreclosing, so be it! Move On!
I sleep well knowing I helped another homeowner avoid foreclosure, dreaming about the next referral he/she is going to send my way.
Sorry to write such a long response, but I'm really shocked at your response. I simply shared what I'm seeing in the marketplace, and thought I'd share it with the rest of the readers. I never thought it would turn into this, but, "it is what it is".
i guess I didn't see the need to go into every detail just to give some information...this seller earns well into six figures...it was "inconvenient" to drive a little further....if he chose to...he could easily pay the short fall....which was not huge...he wanted to elect not to....and felt as a loyal bank customer, they owed him that...the Devil is in the details ...didn't see the need to explain them all....we make sound judgements not on flimsy evidence...no need to be shocked....
Sally and David,
The whole short sale market is so confounded it's hard to decide whether to even take a buyer to some of the listings. Sometimes priced so low relative to what is owed that you have to think it could never close. Just saw one house recently go from $129 to 149k after having been Pending. Looks like the bank realized they weren't being given anything close to market value (and they weren't).
Rather than not show a listing...check out the listing agent's success rate with short sales...if they list AND close them.....full speed ahead with buyers with a little patience .....
Sally and David,
Good tip on the track record. The few we've seen that made us particularly wary, the agent had no track record, and the homes were grossly underpriced for what they were. A recipe for keeping your buyer hung up for months!
For us...no track record ...per MLS...not the agent...no showing....
Hardship is having to take a shower, brush the teeth, shave, dry the hair, get dressed, and then drive 20 minutes to work. LOL
Hardship is having to take a shower, brush the teeth, shave, dry the hair, get dressed, and then drive 20 minutes to work. LOL