Why Do I Need a Loss Mitigation Specialist?

The North Carolina real estate market has seen a rise in foreclosures and short sales. A short sale occurs when a lender is willing to accept less than the loan balance in order to avoid taking the home back in foreclosure.

Many investors work the pre-foreclosure market and have an interest in buying property by means of a short sale.  Real estate agents may be tempted to consider trying to handle short sales themselves, but as an insider Loss Mitigation expert interviewed explains in this interview, it is a process that might best be outsourced to an experienced negotiator.

I recently listened in as Loss Mitigation representative from a major lender responded to some questions regarding short sales. Having spent over a decade working in the Loss Mitigation Department for a major lender, this insider knows how to get the deals closed and which ones are headed to foreclosure. Here are his responses to the questions presented on that call:

1. Why might you ignore a Short Sale Package that you received?

Answer: Incomplete packages are set aside. For example if someone doesn't include a HUD-1 Settlement Statement that package is set aside. The Borrower must supply financial information, tax returns, a hardship letter and more.

2. How many Short Sale files are you working on?

Answer: I am currently working on 400 files. Of those, I would say only about 100 files are workable. This is why it's important to submit complete packages and to know what you are doing.

3. Does it matter if the Buyer in a Short Sale deal is an LLC or an individual? Do you look at them differently?  

Answer: It doesn't matter. We want to know that the buyer is qualified. We look at the market value of the property, the loss we are going to take, and what's owed on the loan.

4. Does the type of hardship the Borrower is facing make a difference?

Answer: Not really. It's a financial decision to the bank. However, it doesn't look good for the bank if we foreclose on a sick, elderly couple. Of course, we do want the Borrower to prove hardship, but the type of hardship doesn't matter.

5. How long does it take for you to conduct the Broker Price Opinion?

Answer: We try to have the BPO completed within 10 days of ordering it. Right now we are backlogged and it is taking quite a while to get the order out. The first step is to receive a complete short sale package. We don't order the BPO until then. Once the BPO is completed it is then reviewed and approved by our valuation department.

6. Do you simply reject low offers?

Answer: Not really. We do have certain targets we are trying to reach. (I've heard around 83% of the BPO, but it really depends on the investor’s criteria.) We also have a certain dollar amount of loss we might accept. Sometimes it's a matter of pointing out repair issues. Tell me why the offer is low and why it should be considered.

7. If the foreclosure sale date is at hand, will you postpone it?

Answer: If it looks like we are close to accomplishing a short sale, we might postpone the foreclosure sale. We need a good reason to do that.

8. Do you ever change the BPO once received?

Answer: No. Once the BPO has been received and approved by our valuation department we will not change it. Why would we? The value is what it is.

9. Do you require a home to be listed before accepting a short sale?

Answer: No, the home doesn't have to be listed. We will talk directly with the buyer/investor. We don't usually talk with the borrower.

10. Will you disclose the BPO results?

Answer: No, we don't disclose the BPO. However, we will talk in ranges of price when negotiating. Our job is to get as close to the BPO as possible.

It is important to realize from this interview that negotiating a short sale is a very complicated matter and that even knowledgeable real estate agents may find themselves confused and unable to help their clients. Consulting with a Loss Mitigation Specialist on our team at Quail Point will expedite the process greatly and achieve a desirable outcome for everyone involved.