Selling a home while going through financial hard times can be unbearable. It can be difficult, confusing, and simply unmanageable if you’ve never done it before.
You might be behind on payments and afraid that any day the bank will foreclose on you. You might be on the verge of missing payments and unsure of how to move forward. The bank may be bombarding you with mail and phone calls offering you confusing and conflicting options.
You may know you want to sell the home but you don’t know where to start.
Selling a distressed home can be a disaster if it’s not handled correctly. You may have an agent who doesn’t understand foreclosure timelines and can’t help you know when the right time to sell is. You may not know if your foreclosure has already been made public.
It may be hard to know whether pouring money into home repairs is the right thing to do. There may be other debt attached to the home that needs to be handled but it may be hard to know who owns the debt and who you need to contact.
Lenders make it difficult to get a straight answer as to how much you owe to pay off the mortgage making it hard to understand how much money you can get from the sale.
Fortunately, you are not alone. A Distressed Sale Manager can help you navigate the process. In particular, if your Distressed Sale Manager is an attorney, you will have the best shot at success. Unlike real estate agents and escrow agents, an attorney can help you negotiate debt, work with trustees, and file for mediation, as necessary.
Six Things a Distressed Sale Manager Does
- Advise on the timing of the sale and track the foreclosure timeline: Someone needs to be monitoring how long you have to sell the home before you lose it to foreclosure. You also need to figure out how long it will take to bring in an offer and how long it will take to close the transaction. You also have to build in enough time so that if your buyer walks away you have time to find a second buyer.
- Monitor when your home is set to receive a public notice of foreclosure: If possible, you want to sell your home before information about your foreclosure goes public. This will help your negotiation position with potential buyers. If buyers know you are facing foreclosure, they may offer less for the home as they will know you have to sell. You will be in a better negotiation position if your sale closes prior to the public notification of the sale.
- Advise on the efficacy of making repairs: Sometimes, you’ll have enough time to make the repairs you want to make to increase the value of your home. Sometimes, you won’t. Understanding this timing is crucial so you don’t waste time making repairs that will make the timing too stressful at the end of the process.
- Locate and negotiate all junior liens on title: You need someone to review and understand what is showing up on the title report so you don’t pay more money to other creditors than you need to. While the sale of the home is underway, you should have a knowledgeable party working on any negotiable liens so you can maximize your equity. Not all liens on title need to be paid in full, especially old credit card debt. Liens also get sold between creditors as time passes. Sometimes, you simply need someone to simply find which creditor is handling the lien.
- Track your eligibility for mediation: Someone needs to be tracking your foreclosure timeline so that you know whether you’re eligible for Mediation. Mediation can stop the foreclosure and buy you more time to complete the sale. If you miss your eligibility deadline, you can miss the opportunity to stop the foreclosure and sell the home on your terms.
- Order, audit and maintain payoff statements: You need to know how much money you owe on the mortgage AND on any additional liens on title so you can estimate how much money you will receive from the proceeds of the sale.
- Escrow agents who don’t work with distressed properties much are very slow to request these statements. Often, these statements are not produced by the lender themselves so someone needs to get it from the correct party (typically a Trustee or foreclosure attorney).
- Fees can get attached that need to be audited and the number needed to pay off the mortgage can change every 15-days. So, you need someone responsible for keeping the numbers up to date to prevent delays in closing.
Real estate agents will tell you that it’s easy to complete a “quick sale” when you’re in a distressed situation but I can’t tell you how many times clients come to me in a frenzy a few days before a foreclosure auction date because something has fallen through the cracks.
I recently had a situation where a client came to me one week before their sale was supposed to close.
The closing was scheduled for one week before the foreclosure auction date so they were two weeks away from foreclosure (closer to foreclosure than I would ever let a sale get!).
Nobody had paid attention to the two credit card judgments on title. Payoff statements were not ordered and nothing was negotiated.
The closing was stopped and the sellers were told to call their creditors (creditors from years ago) and figure out how much they owe. The debt had been sold several times so my clients didn’t even know who their creditors were – nobody could find them and they were told by escrow that they couldn’t close.
I was able to step in, locate the creditors, and knock off $1,500 on one of the judgments through a quick negotiation.
The property closed on time but the lesson here is that these people could have used help earlier in the sale process. They never would have ended up in a frantic situation had they hired a Distressed Sale Manager. A manager hired earlier would have located the creditors, gotten payoff statements ordered earlier, and had more time to negotiate the best possible deal for the sellers.
If you’re considering selling a distressed home, find a Distressed Sale Manager to help you.
If you can’t find one, take the following steps so your sale closes smoothly:
- Find out your exact foreclosure timeline, continue to track it and monitor any new notices issued
- Understand when you may become eligible to take advantage of foreclosure mediation
- Order a title report on your home right away – review any other liens or judgments attached
- Find the creditors who hold liens on your home and order payoff statements from them as quickly as possible
- Order a payoff statement on the primary mortgage
- Keep the payoff statements for the liens and the mortgage updated every 30-days
- If you have judgments on title, find out which types of judgments are negotiable – negotiate the judgments for yourself to see if you can reduce the amount owed so you don’t have to pay the full amount
- Create a selling timeline that provides enough of a buffer for the deal to fall apart and for you to bring in a back-up offer before you lose the home to foreclosure
- Keep in touch with your escrow agent to ensure they don’t need any last minute items that they haven’t requested
- Review a copy of your settlement statement to make sure the judgment and mortgage payoffs are reflected correctly so there are not any post-closing issues
Doing the above things yourself is a ton of work and very difficult, stressful and time consuming. If you’re considering a distressed sale or need help with an existing sale, call me today at: 425-654-1674.