Loss Mitigation During PreForeclosure: Friend or Foe
By Dwan Bent-Twyford and Sharon Restrepo
It is virtually impossible to complete a successful short sale without dealing with the loss mitigation department at the bank. So, how does one deal with loss mitigation successfully? Hopefully we can shed some light on that today.
For those of you who are new to investing, you might be wondering what a short sale is. Good question. A short sale is getting the bank to accept less that what is owed as payment in full. For example: You find a homeowner in distress who owes $100,000 on a property that is worth $100,000. What do you do? Most investors walk away unless they know how to short sale. Using our “short sale secrets”, you get the bank to accept $55,000 as payment in full. You now have equity in a deal that had none, the homeowners are ecstatic as they can move on with their lives, and the bank has a defaulted loan off its books. Short sales are win/win for everyone.
Once you have your homeowner under control and your short sale package together, you are ready to deal with loss mitigation. When making the initial phone call to the bank, ask for the loss mitigation department. Some customer service reps may say that the bank does not have a loss mitigation department. Keep trying. Ask if the bank has a work-out department, foreclosure department, short sale department, loan modification department, or reinstatement department. The reason we ask for different departments is many times a new person is working the customer service phone and may have no clue what you actually want. By using a term they are familiar with, you will eventually get to the right person.
You have loss mitigation on the phone; it’s time to get to work. This person will make or break your deal so be very nice. Your initial conversation should go something like this: “Hi, my name is your name here and I am calling on behalf of Bob and Sally Smith (your distressed homeowners). I have an “authorization to release information” form I’d like to fax to you. What is your fax number? (Stay on the phone while the rep retrieves the form from the fax machine) Great, I’ll send it right over. – the rep gets the authorization and returns - As you know Bob an Sally are in foreclosure. I recently met them and they seem like sweet folks. When I found out about Bob and Sally’s dilemma, I said I’d try to help. They would like to sell their property and move on with their lives. I own several rentals in the area and am willing to purchase Bob and Sally’s property. However, we have a big problem. I called a real estate agent friend of mine and ask her to run comps for me. Based on her comps and based on what I know about the area, Bob and Sally owe much more than their property is worth. As I said, I’m willing to help them out of foreclosure as well as helping you get a defaulted loan off your books, but I can’t possibly pay the mortgage balance. Will you entertain some sort of short payoff or something along those lines? Great! What do you need from me?”
As you can see in our conversation, we do not come across as professional investors out to make a killing on the banks loss. Many investors chose to present themselves that way. We have much more success as a friend trying to help poor Bob and Sally. Use whichever approach makes you feel most comfortable. However, don’t lie to get the deal. We did recently just meet Bob and Sally, we do have rentals, we do have a real estate agent friend, and we are willing to purchase Bob and Sally’s property. In your conversations with loss mitigation, be certain to refer to your distressed homeowners by name as often as possible. This makes them seem more real to the rep. We are trying to get a banker to make an emotional decision as well as a business one.
Once you build rapport with the loss mitigation rep, send your short sale package. We call our reps at least once a day to follow-up. Always ask the rep how the day is going, how the weather is where they are, how the kids are, and so on. You want the rep to look forward to your calls, not dread them. Find out who makes the actual decision, how long it typically takes, how long the rep can give you to close once your deal is accepted, etc. With a helpful attitude from you, your loss mitigation rep will push your deal through quickly.
Once your deal is accepted, get it in writing immediately. Find your buyer or arrange financing and get the deal closed. You don’t want anything to happen between the acceptance and the closing to make you lose your deal. Once the deal is closed, send the rep flowers or a gift basket and write a letter to the reps boss. The rep will remember you and the next time you call about a short sale, the rep will be more than willing to help you again. Loss mitigation: Friend or foe? We say friend!
Dear Dwan & Sharon,
Thank you very much for the great introductory 1 hour session on the Short Sales. Sounds like a very reasonable opportunity and you are very good in explaining the material. I am definitely recommending your course to my friends.
Best regards,
Dmitry.
Dwan & Sharon
You guys are awesome. It shows you guys are experts!!!!!
I am a newbie and want to start working with these types of transactions. One thing that I have not been able to figure out is how can we flipp this property on to another investor without having to purchase it outright? Can we right the "and or assigns" clause so we can just sell our contract to another investor?
Hey thanks for all the information. You guys are awesome!
Gary
hello
i am in a situation. my parents are divorcing and my dad wants to have a warranty quit claim for his half of the house which i am buying for seven thousand dollars and my mom will quit claim when i raise her seven thousand dollars in six months. do we need a realtor, a lawyer or will a notary do just as well if we have completed all the necessary forms? please hurry the situation is immediate.
thanks
I did a quit claim deed for $1 after I was divorced and the ex abandoned the home to move in with the new hubby (she left the kids behind, too, by the way). After she signed I drove straight to the courthouse and filed the document and requested a copy for myself.
After three months she divorced the new guy and wanted the house back that I gave her in the divorce. The quit claim put a stop to that. I didn't use a lawyer or realtor, just the two notaries and the common form I got at the office supply. She followed up with a lawyer (her cousin) and eventually gave up.
Basicaly, this document is recognized legally by the bank to give you control over the property even though the mortgage may still have their name on it. As long as you make payments the property is yours.
Heard these gals at convention, just had to buy their stuff to get me up and running.
kelly
"Lost mitigation" if that doesnt go well with the person on the phone, you try "work out dept, foreclosure department, short sale department, etc. Are you asking for all this during one phone conversation or asking for a couple then the next day you ask for the other departments?
I dont want to sound lame calling up. I.E. Wells Fargo is called Lost mitigation...
Thank you Dwan and Sharon,
Just had a quick question. You referred a couple of times to a "short sale package". What would you include in this package? Would that be your details about the property, condition, repairs needed, comps, etc? I appreciate any details you can give on what you include in your short sale package. Thanks.
Great article. I am currently in negotiations on a short sale of my neighbor's house. Due to a problem with alcoholism, they moved out and left the house a mess. My problem- I got the husband to sign the offer sheet and release form but the bank wants current pay stubs and he is not around to get me those. The loss mitigation people don't seem to really care about the house and its status. Any ideas how to motivate them into dealing with me?
I have gotten approval for a shortsale already. I followed everything you guys taught to the letter. I am scheduled to close on July 15th. I even got the mortgage company to accept a contract that has the clauses "and or *****igns or nominees", and "this contract is subject to approval of buyers partners". I have a buyer, but this is where the problem lies. He can only pay me at settlement through the proceeds of his loan. The mortgage company I am dealing with (countrywide) says that there closing worksheet has to match the hud-1 statement exactly. Am I in error? Can you *****ign these deals only if you have a buyer that can pay you the *****ignment fee in cash and not from his or her loan proceeds at settlement. Also does loss prevention care that the person who name that is on the approved contract is not the same as the person on the final HUD-1
sheet. What if they ask for approval of the final HUD-1 sheet prior to closing. Would they rescind the agreement if they saw someone else's name on the HUD-1 sheet besides the person who was on the contract. This is important to determine the feasiblility of *****igning these deals for profit. How do you instruct title companies to handle these types of deals.