PARTIES INVOLVED IN A SHORT SALE Are you interested in pre-foreclosures and short sales? This is the 6th in of a series of pre-foreclosure investing articles published in this magazine. Short sales are one of real estates most thrilling acquisition strategies. Short sales are about obtaining properties at good prices by resolving peoples problems. Short sales are multi player win-win transactions. Here are the parties involved in a short sale. Satisfy them all and you will be rewarded! Home Owner Properties in foreclosure tend to have problematic title issues. Officially, the owner is the person appearing in the county records as owner of the property. The ownership of the property is shown in the document known as deed or title. The easiest way to know who the owner of the property is, is by obtaining a trio from a local title company. The best way to confirm all the parties with right of ownership on a property is to read the title report. Often properties have more than one owner. This is because property can be co-owned by a married couple, friends or business associates. This will be immediately evident in the deed. However the deed may not show all the present owners because owners can be added or taken out of title via quit claim deeds or other similar title instruments. That is why, when it comes to finding all the owners of a property, nothing beats a title report. The home owner is not necessarily always the same person as the mortgagor. This is not uncommon with properties in foreclosure. Mortgagor The mortgagor is the person that took a loan and secured it with the property in foreclosure. The mortgagor is the person legally responsible for paying. The best way to know who the mortgagor is, is to see the document known as the deed of trust or trust deed.The mortgagor will be listed as grantor. See sample. It is often with properties in foreclosure that the mortgagor and the owner are not the same person. Below are a few examples of the cause of this situation. The property gets deeded to another person without refinancing. Properties that have been bought subject to existing financing have this problem. Properties in which, because of divorce, where there are two mortgagors home owners, one of the home owners has quit claimed out the property to the other person without refinancing. Under both of this conditions the mortgagor that quit claimed out of the property or deeded the property to someone else has no ownership rights over the property but are still fully responsible for the mortgage. Creditors Creditors are all institutions, businesses or individuals secured through trust deed or lien by the property . Creditors secured by a property can include banks, individuals, municipalities, home owner association (HOA), ex-spouses claiming child support, etc. Properties in foreclosure often have more than one creditor. To buy a property in a short sale the investor needs to negotiate and settle with each of the creditors, one by one. The best way to confirm who all the secured are is to review the title report. Loss Mitigation Officers This is the banks representative assigned to resolve the issues associated with a defaulted loan. When dealing with banks, the loss mitigation officer is the person with which short sales are negotiated. Loss mitigation officers work for the banks loss mitigation department. The loss mitigation department is the banks unit in charge avoiding, reducing, and minimizing losses due to loans in default. Most banks have an actual loss mitigation department, separate from everything else. Loss mitigation officers are debt collectors. As such any information given to them will be used to collect on the debt. Trustee The trustee is the person or entity in charge of foreclosing the property in behaves of lender. The trustee is usually an attorney firm dedicated to performing default services for lenders. Some of these firms, such as Northwest Trustees, Regional Trustees and Cal Western Reconveyance are very large, with hundreds of employees, and are foreclosing at any one time several hundred properties. Other firms are smaller real estate attorney firms. The specific function of the trustee is to foreclose, according to law, in behalves of a lender, in order to collect on a debt. In addition, depending of the specific agreement with the lender, the following additional services are additionally performed. Provision of payoff statements Collection of payments Negotiation of short sales Collateral preservation (lock-up and winterizes the property if vacant) To learn more about the trustee services see the following trustee websites. Northwest Trustees - www.northwesttrustee.com Regional Trustees - www.rtrustee.com B ishop , W hite & M arshal - www.bishoplynchwhite.com Trustees very greatly on how accessible and easy to deal with they are . Some of them, such as North West Trustees have user friendly web sites, an available specific assigned representative with a direct phone line and a quick response time. Other, can only reached through 1-800 numbers with multiple menus to pass through, long waiting periods and no specific representative to deal with. Unfortunately, when it comes to dealing with the trustee there is no choice. You have to work with whoever you have to. Because of this, the profit potential of the transaction must justify it. Additional Lien Holders These are any other creditors or lenders secured by the property. These include first mortgages, second mortgages, judgment liens, tax warrant liens, city and county taxes, home owners association (HOA) liens, contractors mechanics liens, etc. The best way to locate them is in the title report. By far the most common type of additional lien holder is the second mortgage lender secured by a property in default in which the first mortgage is foreclosing. The majority of the good short sale profit opportunities come from this situation. Under these circumstances the second mortgage lender is compelled to discount because most likely it will loose more principal if the property is sold at auction. That is why second mortgages always have higher interest rate than first mortgages. Title Company A title company is a neutral party that examines the title, issues a preliminary title report, acts as escrow (or settlement) agent, records documents, and issues the title insurance policies for a transaction . The main business of most title companies is to sell title insurance and close real estate transactions. Escrow is the closing a real estate transactionwhen all required documents and funds are placed with a third party for processing and disbursement. Title companies want to do as many transactions as possible. They need the investor to be successful and close a lot of transactions with them. To help the investor do this, title companies provide great resources. These include real estate investing essentials such as: Property information Farm lists NOD lists Access to online real estate information Escrow Agent or Officer The escrow agent is the title companys representative engaged in closing a transaction. This is the person that will be handling, in behalf of the title company, all the documents and funds needed to close a transaction. Escrow officers are regulated by the state and the title company they work at. An escrow agent willing to work in short sale transactions is one of the most important and valuable members of the pre-foreclosure investor team. Not all escrow agents are interested in working in short sales. Appraiser The appraiser is a licensed third party professional who estimates the dollar value of a property. An appraisal is the estimated dollar value of a property based on a detail study of the property. Appraisers are involved in determining the value of property in foreclosure only when the bank requests it. This is usually when the loan is government guaranteed, about 30% of the time. Appraisals cost over $400 and Broker Price Opinions cost less than $100. Either way, they give the same result because both use the comparable value method of to determine the value of a property. Appraisers and BPO Realtors are usually hired by the bank through a third party company dedicated to serving exclusively this need of the foreclosure industry. One of the larger companies dedicated to this is Asset Valuation and Marketing (AVM). Companies such as AVM have a large pool of appraisers and BPO Realtor. The main difference between an appraisal and a BPO is that the appraisal is a formally presented and printed study on the value of the property. BPO Realtors BPO means Brokers Price Opinion. BPO Realtors are realtors that provide property price opinions. Because of price difference, lenders usually hire for BPO rather than appraisal. Brokers that do BPOs are usually in the business of listing bank owned properties. These realtors usually get paid less than $100 for each BPO. The main reason for a realtor to want to do BPOs is to get bank owned listings. The problem is that this creates conflict of interest. For them the more properties make it back to the bank the better. However, the chances of the same realtor that did the BPO getting to list the property if it gets repossessed are low. Because of this it is good to always be professional and be in good terms with the BPO realtor. ###### Please contact Oscar Mornate for Permission to post this article on your site. Credit for the article must be give to Oscar Morante, Best Short Sales (C) 2006 Advanced Real Estate Concepts, LLC., Portland OR. All rights reserved. More information about the author can be found at www.bestshortsales.com. Offering Short Sale Products & Short Sale Seminars