Homeowners right now are facing this scenario of having to sell short

Mike Rockwood: Because I owned a bunch of homes that declines so rapidly in value and eventually some are ditching. They can see rate was way up. I just needed to do something to hang on to my property so I started trying to do loan modifications almost two years ago now. And I – it was such a fiasco but I learned so much and I’ve learned so many tricks that a lot of people just encouraged me to, you know, write those things down and get the word out to help others and now, it’s turned into a full time profession for me. This is my avocation and my vocation.

I’m called the Loan Mod Mercenary because I do – you know, actually we work loan mods for people all over the country and we created this self – do-it-yourself kit that has now become the most popular do-it-yourself loan modification kit and we’ve just been getting the word out in helping people get loan modifications since the housing market turned down. So, that’s really kind of the tip of the spear. That’s how we got involved intimately and then, of course, that leads to all the other foreclosure workout solutions.

Ryan Rockwood: You know, but it isn’t all roses. This is Ryan Rockwood in case you’re just tuning in, and welcome to those of you who haven’t been with us before. My dad, Mike and I we host a couple of online sessions and on full [phonetic] sessions like this one each week trying to take some actual questions, step away from the desk and we also have a new program for folks getting out of credit card debt and that’s something that if you have interviewed for, you want to do it right away.

But if not, it’s fine to wait until after you get your housing problems sorted. But that’s kind of – so, we have a new one and that’s tomorrow. If you’re interested in that, go to on this webpage that you’re looking at and be sure to sign up for it. It’s a do-it-yourself program as well instead of, you know, ripping you off and wasting your time. What we try to do is just deliver about a few minutes of value a week and coach you through the whole loan mod process. Now, I have a bit of an echo. Can you hear an echo?

Mike Rockwood: Yes. That an echo.

Ryan Rockwood: Hopefully that’s okay. Testing, testing, 1, 2, 3. That did it again?

Mike Rockwood: Yes.

Ryan Rockwood: Okay. So anyway, I did want to see it’s not all roses though. Unfortunately, you know we’ve had tons of success with one of our clients on the credit card program settling 28,000 Bank of America the other day were just 9,000 and you know, usually [phonetic] for charter reports some good things too, but you know not just to blow rainbows up your butt [phonetic] here. This week we had the second ever return of the product. Well no, not second ever return for someone says they want double their money back because that just didn’t work for them. Yes. So we’re out of some money.

Mike Rockwood: Good thing we didn’t charge them much.

Ryan Rockwood: Yes. Good thing it’s cheap.

Mike Rockwood: Yes.

Ryan Rockwood: That’s always kind of demoralizing when someone comes and callback. They say hey, your product sucks. I only save a dollar on my mortgage. It’s one this Gala said. She said she had a loan mod.

Mike Rockwood: And she only saved a dollar.

Ryan Rockwood: You know that as I’m speaking that that sounds kind of hard to believe.

Mike Rockwood: Yes.

Ryan Rockwood: That they would bother saving a dollar whoever got a loan mod could save a dollar.

Mike Rockwood: You know what happened is they wrapped in escrow. She didn’t have it escrowed before and so now she thinks she save the dollar but you know.

Ryan Rockwood: Probably saving 500.

Mike Rockwood: Yes. And she was interest only and now she’s – so yes.

Ryan Rockwood: Yes.

Mike Rockwood: Let’s look into this before we give others 50 cents back.

Ryan Rockwood: It’s on our system so whatever. Anyway that’s a bit of a disappointment. I got to say, though, you know. Someone also called this week in one of their free CD, money back for the free CD.

Mike Rockwood: Yes, that was a real bummer.

Ryan Rockwood: I’ll tell you though –

Mike Rockwood: How do you give him a free back?

Ryan Rockwood: I don’t know. I guess we got to go and …

Mike Rockwood: We got to, this seemed — they got shipped that CD back to us in order to get their refund.

Ryan Rockwood: Hey, she did. She did and then when she said – what the bummer is though that …

Mike Rockwood: Send me money – here, I’m returning it. Send me my – I pay for postage. Now, send me the postage …

Ryan Rockwood: That I paid. I guess we got to go to her house and clean the toilet for her.

Ryan Rockwood: Anyway, but people still do – the vast majority of people are still having good success and hopefully we’ll be able to unveil some things that are a little bit more viral in the future so there’s some who has success, they can easily have a link that they could send to their own friends and get paid for spreading the word and so on and so forth. You know just from a technological standpoint.

Mike Rockwood: See here, the thing with the any of the workout solutions these days is the banks are so overwhelm that for somebody who knows that they’re doing in terms of short sales or in terms of a loan modification or just walking away or settling on a second mortgage, settling on a hillock anything like that. For those who know what they’re doing, you have some streets smarts and tons of nerves, this is the time to make hay and to get out of line, get up to the front of the line and get some kinds of deals that people are going to be getting a year from now. But if you hear about them, understand them, and you have the nerve to implement the strategies now, you can get those kinds of deals now.

I already gave all the disclaimers but just real briefly want to make sure that all of you on the web as well understand that we’re not lawyers and not CPAs. The information that we pass on is, in fact, in a courtroom would be considered hearsay. We’re telling you what we’ve heard and what we’ve learned working with hundreds of clients in workout situations in – well not every state – but in all of the major foreclosure states throughout the country. So what we’re passing on to you should not be taken as legal or tax advice. It’s just advice from a couple of realtors in Southern California who work at this all day long everyday of the week. For some reason, we’re just working crazy fools. Anything else to add before we get going?

Ryan Rockwood: No, I don’t think so. People can try to chat to contact us at their questions. Well, let’s have a short one today because we were not able to get out the e-mail so we’re going to have a lot of people in the call, so let’s take questions.

Mike Rockwood: Well look, we got an awful lot of people tuning us in. I don’t know a lot of people get to it by because this is the public one. It’s Foreclosure Doctor, so a lot of people get on to it by the internet.

Ryan Rockwood: Yes. But we didn’t get to give them enough notice so I think that we’re not going to have a really good time.

Mike Rockwood: Yes, but look at the – the numbers are there. Okay, look at this now everybody. We’re going to talk briefly about selling your home short. This is we’re talking about short sales this evening. And I want to give a little plug for a book that I wrote and that is currently at the printer being upgraded and it is the Notice of Default Handbook. And in this book, I talked about seven different ways that people are working out their mortgage situations. And Ryan, in front of everybody here, I want to ask you to please put this on the website and make it available. It’s at Barnes & Noble after all. People can go on barnesandnoble.com and buy the notice of default handbook but you have to pay, like, $29 plus shipping and handling. So, we should have it on our site for $9.99.

Ryan Rockwood: You know what? That reminded me that someone, and I’m getting a sick feeling in my stomach, that someone called me from [Indiscernible] Empire and said hey, I’m calling for Mike. I saw this book at Barnes & Noble, but then it’s $99 and doesn’t include the …

Mike Rockwood: Well, then he must have seen the 60-Minute Load Modification at Barnes & Noble.

Ryan Rockwood: Yes. Pretty neat, huh.

Mike Rockwood: Send those guys an invoice. All right, so in this book, one of the sections is on selling the home shorts. And Ryan and I have short selling experience all over the country. What we do because the Department of Real Estate is state run in every state in which we’re not licensed, we contract with a local realtor to sell the home for you but we run your negotiations. And the beautiful thing about that is you get to hire us and we’re very, very experienced short-selling agents and we run the negotiations for you. We’re expert at it. And you don’t have to pay for us.

The bank pays – we split the commission with the local agent. They’re glad to do it because they don’t have to do the bank negotiations. We’re glad to do it because we don’t have to do the listing. It works out just fine and you get our expertise as well as the local smarts as well. So, we’re available for short sales nationwide.

But if the value – I’m just going to read the section from the book which takes us through some really key questions and that will kind of introduce the topic. If the value of your home has declined below the amount you owe on it, you’re said to be upside down or underwater, right. And by the way as many as 50%, one out of two homes are going to be upside down by this time next year. Most economists agreed. Prices are continuing to – going to continue to deteriorate and those of us what got mortgages, most of us or half of us are going to be upside down. So this is going to get really sweet.

Both terms upside down or underwater kind of conjure up a negative though, right. Rightly so, with all the due diligence that you put in to the purchase and all the business smarts that the bank put into it, you both were wrong and the deal went south. But it did goes out. In fact, over 15 million homeowners right now are facing this scenario of having to sell short. A short sale can be an excellent workout solution. Ryan and I think they are delightful for a number of reasons, and we’ll share those with you in a minute. Short sales have gotten plenty oppressed in the last couple of years and you may harbor some false notions of just what they are. So, let me start by debunking some of those.

The first one is, ah, my lender will foreclose rather than bothering the short sale. Well, this isn’t really true. The reality is that the bank does not want to foreclose or certainly does not prefer to foreclose over a short sale because keep in mind if the bank takes your property, first of all it takes them several more months to take it away from you. Then, it takes them time, and in the foreclosure process then they strip off the other liens, and then they have to take it to market just like you’re doing now.

So if you have hired realtor or, you know, listed with a realtor and can supply to them a market price from a good offer at around market price from a good buyer, they’re better off to take it because they’re going to incur those same expenses and more several months later. By most accounts, it costs between $50,000 and $80,000 for every home that a bank forecloses on. So certainly they have plenty of the leeway in terms of selling to you earlier because early – of course, everybody knows earlier is better in terms of getting money, right. So, the bank actually loses less through a short sale than through foreclosure.

Another myth is that you have to be late on your mortgage to negotiate a short sale and once that was the case, but it has not been the case for a long, long time. Lenders are looking for very verifiable hardship and monthly cash flow shortfall beyond that, the deal really hinges [phonetic] this on determining the current market price and finding a qualified buyer. And honestly that’s where 90% of the work is done is trying to figure out if, in fact, that is a good market price and that’s what everybody argues about because prices have been declining so steadily, you get into an awful lot of arguments between an appraiser, a local agent who does a broker price opinion. Of course, the bank wants the most for it, the buyer wants to pay the least, so that is really the issue is. What’s market price?

Another myth is that there’s not enough time to negotiate a short sale before the trustee sale. Well, I mean that could be the case but honestly Ryan and I have had success getting called in at the 11th hour when they’ve exhausted all other opportunities to work out this foreclosure and we have stopped a trustee sale with only days before the trustee sale.

Ryan Rockwood: Hours.

Mike Rockwood: Yes. Actually the day before because, again, the bank is more interested in accepting your short sale and if you can provide, you know, a good offer, a bona fide offer from a qualified buyer, it’s better for them. So don’t give up because you think it’s too late. It’s really never too late.

Myth number four, listing my home as a short sale is an embarrassment. Throughout the time I wrote this book, I think that might have been true but that’s a year ago now and I don’t think that’s really true anymore. I mean people – we’ve kind of gotten conditioned to it, haven’t we? I mean after all, half of the homes – right now, almost 70% of the homes in Nevada are upside down, 42% in Arizona and something like 32% in California. So, in some states we’re already moving on toward 50%. So you know this is a very serious epidemic. It’s going to get quite a bit worst so I don’t think listing your home as a short sale is an embarrassment anymore. It’s just kind of – it’s reality.

Short sales are impossible to get approved is myth number five. Well, it’s just simply not true. Getting a short sale approved admittedly is quite a bit of work.

Ryan Rockwood: You know but it’s funny after your loan mods …

Mike Rockwood: Yes.

Ryan Rockwood: It seems like a piece of …

Mike Rockwood: No kidding.

Ryan Rockwood: Cake.

Mike Rockwood: Maybe because it is like three or four weeks before they get back to you instead of three or four months.

Ryan Rockwood: I think I’m going to go now and go get some short sale.

Mike Rockwood: Yes.

Ryan Rockwood: Remember how it was always solitary [phonetic] with us.

Mike Rockwood: We thought it was so bad.

Ryan Rockwood: And it was. You know, we think, oh, working on this thing [phonetic] …

Mike Rockwood: Yes.

Ryan Rockwood: I guess it grabs out a greener [phonetic].

Mike Rockwood: See now the beautiful thing about the short sale is, I mean, the lender has some motivation to move it along. I mean, they realize that the buyer is going to ditch if they don’t move pretty fast. So there’s some financial motivation for them to move on. In the case of a loan mod, you know, it’s just a matter of making a deal and especially you’re not late on the mortgage or not very, very much in default so maybe that’s part of it.

But anyway, short sales are not impossible to get approved. In fact, I wonder if we’ve ever not gotten one. Well, we’ve certainly lost.

Ryan Rockwood: Sure, we lost.

Mike Rockwood: We lost some short sales many – really it was often because some administrative thing went on. You know what I mean? Like the buyer couldn’t get approved in time so the bank went ahead and foreclosed.

Ryan Rockwood: Well, no. I would mostly describe it as – I mean, I’m sure we’ve lost over 50 listings that are short in sales to foreclosure, gone outdoor, and it’s heartbreaking at that time. But nearly all of them, we were dealing with barely nearly crazy sellers that really, in many cases, didn’t care whether they really sold …

Mike Rockwood: Yes.

Ryan Rockwood: We’re at all kinds of other stuff going on their lives that – I mean this – their life has not started spinning out of control because of their house. Quite the opposite, you know.

Mike Rockwood: Right. Right. The house is more of a symptom.

Ryan Rockwood: Yes.

Mike Rockwood: Yes. All right myth number six is that banks are waiting on a better bailout and they’re not accepting short sales and it’s just not true. And who really believes that a better bailout is coming. I mean, the government obviously is struggling with monetary policy and fiscal policy and tax issues and the war and healthcare and I don’t think a better bailout is coming.

And then lastly buyers are not interested in short sales and that’s just flat out not true. A lot of buyers or buyers may shy away from short sales but there’s awful lot of buyers that, you know, that are focusing only on short sales. So, you know, a patient buyer can really do well with short sales and agents who are discouraging their clients from offering on short sales really are being short sided. Get it? And really missing an opportunity for their buyer and for themselves and a lot of times they’re just motivated, you know, to get a paycheck faster.

Well, I mean if you play it right and you understand how the game is played, you can pretty well assure that your buyer is going to be, you know, still in on a deal when it gets approved if you know what you’re doing because that’s all always a big risk. You feel like you’re going to make an offer and then it will become just used by the listing agent to get a deal approved then you don’t know what if you’re actually going to be the one that gets the deal. Well, there are ways to lock that in and if you have an experienced short sale agent, they should be able to help you with that.

Now, what I’d like to do is turn to a couple of half a dozen questions that I deal with it in the book that I think will kind of give us a good platform for discussion and then I see we have some e-mails that have come in, some questions specifically on short sales.

The first one is who qualifies for a short sale? Well, actually the qualifications for the short sales are the same as those for any workout solution. You have to be having financial difficulty and the home obviously must be upside down because the bank is looking for a market price and if that doesn’t cover the knot, if that doesn’t cover the mortgages, one or both, then it’s going to be a short sale. So those are the people who qualify.

Number two, are short sale applications ever denied? Yes, but as Ryan and I were saying very, very rarely. And it usually has to do with arguments over the value of the home.

Question three, who pays for the sale for escrow, title brokers, inspection, appraisals et cetera, et cetera, et cetera? That’s the beautiful thing about is the lender pays for it. So if you’re in that situation where you’re upside down on your home, you feel you need to sell it short to get out from under the debt, then you won’t incur any cost in selling the home, none. None. It’s a beautiful thing financially. And you will deal decisively with your lenders in terms of deficiency judgments. If you are in a non-recourse state, your lenders will not have any recourse to pursue you for a deficiency judgment. If you’re in a recourse state, you will settle with those lean holders before you close the deal, so you will know when you end the deal just how much of the damage you have to absorb.

In other words, let me explain. Like in states like Florida, many of the lenders are, you know, they threatened to pursue deficiency judgments and so ask the sellers – and those homes are so terribly upside down – to go ahead and accept a part of the shortfall. So like last week I had a client who is $87,000 short. The lender asked him to take $18,000 in a promissory note that was payable over five years at 0% interest. So it’s really – it’s bad but it’s not terrible, is how most sellers are feeling about it because it gets them out from the secured loan, it gets them out from underneath the big mortgage, and it gets them on to unsecured loan that they can deal with, you know, either by paying it off or if indeed they’re heading to bankruptcy or to settlement they can deal with it in a different way because it’s now unsecured.

All right, how does a short sale impact my FICO score – well, the – your credit score? The short sale itself does not impact your credit score whatsoever. In fact, if the short sale gets you out from underneath the mortgage in which you’re missing your payments, it helps your FICO score immensely. So, a short sale is certainly does not get reported to the credit bureaus. What does get reported is your missed mortgage payments.

Now, most people, when they decide they’re going to short sale their home, have a real hard time writing another mortgage check. So they usually begin to default on the mortgage once they’ve decided that they’re selling short. The logic kind of is well, gosh, I lost all my down payment, I lost all my sweat equity, I’m not going to send it, and now I’m going to ask the bank to take to let me sell this thing short. I’m certainly not going to send them any more money, you know. If you really think about it, the logic just isn’t there to keep making payments. The only reason you would, would be to prevent any damage to your FICO score and if you are so attached to your FICO score, if that is so important to you, you know you really have to think that through and think why is that and how much is that worth. And if it really is worth that mortgage payment to you, well then, more power to you.

Now, another question is, why would the bank approve such a deal? Well, I think I already answered that. The real high cost of foreclosure and the market realities of the declining value of the collateral for this business arrangement. See what this mortgage is, is a business arrangement between two people and there’s a clause in that business arrangement that says, if this party doesn’t make the payments, this party takes the home. And so that is the clause that you are invoking when you short sale. You’re saying to the lender, we, the two of us have the opportunity to extricate ourselves from this deal by letting this other person take over that collateral and, you know, liquidating the deal. I want to do it. Do you? And if the lender agrees then you part.

What happens to the forgiven amount? Can the lender later sue me for a deficiency? Well, the forgiven amount certainly gets reported to the IRS. You will get a 1099 for any forgiven amount. So, will the IRS. They’ll be told that you were forgiven in that debt. Now, if this debt is your prime – if this home is your primary residence, you do not owe any taxes on that forgiven amount by virtue of the Foreclosure Debt Relief Act.

And another way that people get out of having to pay any taxes on that forgiven amount is because so many people these days are in fact insolvent [phonetic] because so many of us held our wealth in real estate with values having done what they’ve done. Many of us owe more money than we have, then our net worth were actually insolvent.

And so if you are insolvent, your taxes preparer can prepare an insolvency statement for you and thereby get you out of the taxes. The third way you can get out of paying any taxes on that forgiven amount is by declaring bankruptcy. So there really are those three ways.

This next question is a good one. Can I have my brother buy the home to get – this is crazy. We had a very similar question that came in at questions@60minuteloanmodification.com about half hour ago. Can I have my brother by the home to get a great deal and then – okay, this other person asked and then buy it back from him a year later.

This guy asked can I get a kickback from the buyer or can I have the buyer buy my couch for $10,000? And my answer is sure and you can smuggle drugs from the third world countries too. The question really is, is it legal? It’s not. It’s blatantly patently illegal. And you sign a statement saying that there are no tertiary deals, there are no rent back agreements, there are no relations between the buyer and the seller, and no money has exchanged hands in any other agreement other than the one that’s fully transparent to the bank. So, I mean you can do all those things. That’s your choice but it sure is illegal. And I really wouldn’t want to mess with that.

All right. Do you have some questions you want to move to Rockwood or do you want me to take some of these?

Ryan Rockwood: Yes, I’ve got someone that has a question about kind of starting over. Let’s see, Jason and Crystal made a lot of the same mistakes that you did with all [phonetic] those mistakes in that you just went about, and good naturedly [phonetic] filled out the information to the best of their ability, and got a crappy loan mod.

Mike Rockwood: Okay.

Ryan Rockwood: So, now, and they have – it seemed to say they have an appointment with you scheduled Thursday.

Mike Rockwood: Okay.

Ryan Rockwood: Do you happen to remember that?

Mike Rockwood: I don’t remember it but …

Ryan Rockwood: Okay. Because I’ll have to follow up because I don’t have it and I just want to sure we don’t blow it.

Mike Rockwood: Yes.

Ryan Rockwood: Anyway, the question is – okay. So now, he’s listening to the videos, bought the kit, you know, he’s following along and he knows he needs to start over. So, how best to do it? They have to decline a loan modification is what he feeling like because he has what he feels is a bad loan modification.

Mike Rockwood: Yes.

Ryan Rockwood: And maybe we can do on that Thursday one-on-one call is help make sure that he’s thinking correct and that is a bad loan modification.

Mike Rockwood: Yes.

Ryan Rockwood: You know, there is some misunderstanding that I ran into a lot among some people and that is that people will say, well, this is a bad loan modification and it may not be. There are bad moments. But in talking to them, we kind of a lot – because, you know, a lot of times if we tell people, “Hey, loan modification isn’t for you,” they don’t return the kit. They think – it turns into a consulting fee in other words. They don’t say, “Well, I don’t want to talk to you.” They just say, “Thank you for your time. Your honest opinion and education is well worth it to me.” So, anyway don’t be disturbed if we tell you that loan mod isn’t for you. We kind of take that’s part of our services is telling people …

Mike Rockwood: Sure.

Ryan Rockwood: You know we’re not to be, [inaudible].

Mike Rockwood: You have a different workout solution.

Ryan Rockwood: Yes. So, anyway, a lot of times people say this isn’t good and what turns out is that the loan modification is okay it’s just their financial situation isn’t better. And there is like, you know, it’s like square peg in a round hole kind of thing, you know.

Mike Rockwood: Yes.

Ryan Rockwood: You can’t – it’s not something you’re going to be able to force. We’ll help you. I mean to some extent, we’ll help you force you in there if at all possible, but if it’s clearly not, you know, if it’s just too egregious, I mean there’s one gal locally that’s going through a lot of pain and we could hear in her voice every time we talk to her, and she – I think she’s coming to it but the problem is zero income, and that’s no going to get resolved through a loan modification, you know.

Mike Rockwood: Right. Yes. And a lot of people mistakenly, you know, hope that in fact it can get modified into being able to balance their budget. Well unfortunately that’s just not the way things work. It’s kind of like you can get a loan if you don’t need one. Well, you can get a modification if you don’t need one. So, you have to prove adequate income to be able to sustain the payment that you’ve got now and then you qualify by virtue of the qualification criteria in the program. Now, we’re not going to be able to tell …

Ryan Rockwood: No, I don’t mean to indicate that that might be the situation in this here.

Mike Rockwood: Yes. We’re not going to be able to tell.

Ryan Rockwood: You just maybe think that. You just maybe think of that.

Mike Rockwood: But yes, a lot of people say this isn’t a good loan modification because I can’t afford it.

Ryan Rockwood: Yes. Well, you know, it’s not a good property.

Mike Rockwood: Yes.

Ryan Rockwood: You know it blows. By anyone’s account, it’s horrible, you know. And so anyway, that’s just on the side [phonetic] but this people …

Mike Rockwood: Yes, let’s try to get on Thursday. Be sure to get, you know, let’s review it before you reject it, Jason because …

Ryan Rockwood: And maybe they don’t, you know, maybe in talking to Jason and Crystal, maybe we won’t have to reject it.

Mike Rockwood: Yes.

Ryan Rockwood: Maybe we can go back and say, you know, I do want to get this loan mod but I better give you some update to financials.

Mike Rockwood: Yes.

Ryan Rockwood: Because I know how important that is for you guys and I realize there was an error and let’s – could we enter that in now and could you tell me what kind of modification that would enable?

Mike Rockwood: Yes.

Ryan Rockwood: You know what I mean? So in other words, it might not be as dramatic and kind of starting all over it.

Mike Rockwood: Sure.

Ryan Rockwood: Than you might think you would have to. Okay, so, how to start over? How do we do that? Well, I think that in this case, you know, all you can do is have that appointment with Mike when you buy the kit. The consult is included and we’ll talk to you on the phone for 30 minutes if you buy the kit. And basically give you overall game plan. Then we could tell you what to do when you go and you get those documents in order and you send those documents to us and we review and send them back to you and you go to your thing. And I think, and that is all you’re going to have to do in terms of starting over there in this case. What do you think?

Mike Rockwood: Yes, starting over is just as easy as it sounds. You have all your documents prepared. You’re just going to resubmit them so you have to get, you know, a newer pay stub and newer bank account, stuff like that, but honestly it’s that easy. You just tell him forget the old, we’re starting again. Well, they’ll tell you that because they won’t – sometimes they won’t let you start over once they formally made an offer. In months [phonetic], the system has generated the offer.

All right, here’s a good one. Bob says I’m renting a house that’s in foreclosure and the landlord and I get along great. He says he would like me to get a chance to buy it. How can I know how much to offer? Bob that is a great question and here’s the deal especially when you’re in cahoots with the seller. See, that’s the beautiful thing about short sales is, everybody except the bank is working in the same – pulling in the same direction, working toward the same goal. And that goal is to get this property sold.

It’s not like a traditional deal where you have two parties on the scene pulling at each other or trying to get more, more, more, less, less, less, more, more, more, less, less, less. On a short sale, everybody is pulling the same direction. We want this thing to close. So the listing agent and your agent – and by the way I think in short sales it’s smart to have those people be the same agent – can really work together for the good of the seller to get the deal done.

See the beautiful thing is the bank – the only one who wants higher price is the bank and they’re in New York. So nobody is talking to them or they’re in Dallas so nobody is talking to them. They’re not in the room. They’re not even in the state so everybody is pulling in the same direction. You should get your agent to talk real frankly with the listing agent or just go to the listing agent and hire him as your buyers agent and tell him, explain, do you want to get this deal done, and he will explain to you that the deal probably will go for somewhere in the [indiscernible] of 90% of market value. That’s what most short sales do, somewhere in there. And so what I would do is I would do a real good job of figuring out what market value is, go 10% lower. And if you’re comfortable with that number, then I would submit that number and fully expect that it would get accepted.

But I gave you a couple of insight tips there in terms of working with the listing agent. Honestly, I think that’s a duh, unless you get a local realtor who you really are – you really trust and who knows short sales. Just go right to the listing agent. They’re the one that can make you the primary deal because remember their responsibility today is to that seller and their primary responsibility is to get that property sold.

Ryan Rockwood: Hey, you know, you just don’t know what they have in their butt [phonetic] though, they – I wouldn’t …

Mike Rockwood: Yes.

Ryan Rockwood: What were you saying?

Mike Rockwood: I said go to the listing agent.

Ryan Rockwood: If you want to do what?

Mike Rockwood: Buy the short sale. I think that’s

Ryan Rockwood: Yes, that’s probably true.

Mike Rockwood: Yes.

Ryan Rockwood: I mean no matter how dumb they are. Yes, because then at least you have two …

Mike Rockwood: Okay. Come on now. Then, they should go to have two agents trying to communicate with each other, you just have one better. Okay, Anna says, can my brother buy this house short? This is the question, yes, and sell it back to me in a year or two, and I already answered that one. No, no, no.

Ryan Rockwood: Yes, I mean they could but here’s the thing. Believe me you’re not the first to think about that and it’s done.

Mike Rockwood: It’s done all the time, yes.

Ryan Rockwood: But to what advantage? Let’s think about this for a second. Your – here’s the thing. It’s a common – and I was just talking to someone about this the other day – when you swim up to someone – here’s a metaphor for you – you’re a lifeguard and someone is drowning. And if you’re good natured and you swim up to him and you try to help them, you will die. You know, you have to be able to disable them.

Mike Rockwood: Yes.

Ryan Rockwood: I mean, this is not a matter of judgment call.

Mike Rockwood: Okay. Okay. Close now. Help us with the analogy part of it.

Ryan Rockwood: Okay. So if you are in a situation, that kind of situation, we will all do everything possible we can to kill ourselves and bring down everyone around us. It’s just human nature. You borrow, you borrow some more, you borrow, you borrow some more, hurt the ones we love.

Mike Rockwood: Yes.

Ryan Rockwood: Alienate our friends, family. The story is old as earth itself, right. So, anyway, I don’t know a single home owner who wasn’t for – didn’t have foreclosure sales scheduled tomorrow and wanted to borrow – didn’t want to borrow $10,000 from a family member so that they …

Mike Rockwood: So they can extend another two months.

Ryan Rockwood: Didn’t want to throw away their family members’ money not only their own because they get this, you know, like crazy goggles on where they can only see saving, saving, saving, saving, saving and the – to bring the analogy home, it comes back to this. It’s like you think oh, it’s such a value. My brother would love it and I’ll put all this money to. I’ll tell you what in that neighborhood; I can find you 10 homes that have some hundreds of thousands more than you put into your little indoor-outdoor carpeting or your fancy hardwood floor or whatever. I guarantee you no matter how fancy you think your place is, it is a dump compared to what some bigger idiot has put into their homes. Okay, that is just the whole point.

Mike Rockwood: But you’re out of tear [phonetic] today. I think your point is really well-made though, but it could be overstating, Ryan, because there certainly would be deals where a person just has a home that for some – maybe he’s been in the family forever. You know what I mean? And when they bought it from dad, they overpaid it and now they’re underwater and so now their brother is going to buy them out.

Ryan Rockwood: So maybe to honor their dead parents’ memory, it would be best that multiple members of the family …

Mike Rockwood: Suffer.

Ryan Rockwood: Suffer more.

Mike Rockwood: No, but come on …

Ryan Rockwood: That was a drunk at the hallway [phonetic]. It was a beer anyway, so it does continues to that [phonetic] thing.

Mike Rockwood: Hey, wait a minute. So you can get – so let’s say they’re going to take the bank you know let’s say they’re going to short sale it $100,000 out of the banks’ pocket and now they’re going to be able to own it roughly at market value a year or two later. Okay, yes. Okay. Keep in mind, this is Ryan’s point is, Anna, that you’re talking about market value you know what I mean, you’re not like talking that your brother is going to come in and buy something way below and earn some money at it. He’s going to pay market value and then you’re going to pay market value and have a fully mortgaged market value home and we’ve all got this mindset that homes are beautiful appreciating-tax-deductible entities. Well, not right now, they’re not.

Ryan Rockwood: Yes. I’ll tell you what.

Mike Rockwood: And a lot of people are saying not for quite awhile.

Ryan Rockwood: Yes. I mean, you don’t want to buy that home – I mean unless you’re sitting on a diamond mine you don’t – that home value is going up.

Mike Rockwood: Yes.

Ryan Rockwood: So, your brother gets it at today’s value today well guess where home value is going for next five years.

Mike Rockwood: Yes.

Ryan Rockwood: You know what I mean? And I’m just saying that this is zero. I have seen it over and over and over and believe me; I’ve tried to work the math. You know what I mean? And then, anyway, give it up.

Mike Rockwood: Okay.

Ryan Rockwood: Give it up.

Mike Rockwood: And give that up.

Ryan Rockwood: Yes.

Mike Rockwood: All right, Allen says we’re about to sell our home short, it closes in one week. Now, I learned that lenders pay to get former owners to move out if the former owner stays after foreclosure. So, we’re talking about staying in the home and refusing to sell it short and then getting the lender to pay us to move out. Will that work?

Ryan Rockwood: Well, the lender won’t pay you to move out. The hope might be that a new landlord would pay you to get out.

Mike Rockwood: Either – yes, either could pay you to if they evict you but the new owner might it it’s – I mean, if the bank takes it, the B of A takes it back, they routinely offer cash base. So I think you’re correct in your assessment, but I really want to question some of the things you’re thinking about, though. Because if you’re about to sell this thing short, you are at the end of a very long journey that could have some very good consequences for you.

Number one, you’re going to tie up all loose ends with any lien holders. Number two, you’re going to start rebuilding credit the day after you close, the day after you close. If you haven’t made a mortgage payment on this thing, I don’t care if it’s been two years. The day after you close, you’re going to be able to start a rebuilding process that really can take as little as 12 months to get your credit score right back up into the 700s and you’re that close to it. And then if you want to add foreclosure and eviction to your credit score, that’s going to drag down your score for – well, this could be on your record for 7 and 10 years but it’s going to drag your score down really significantly for three years and a little bit for five years.

So, really think about what you’re doing and not only that but you’re really talking about hosing some people who probably have invested in your whole effort like any title officers, escrow officers, the buyer has probably done an inspection. They’ve probably paid for their own appraisal. So, there are probably a thousand bucks, anyway.

Ryan Rockwood: Yes. But someone in that position can’t think of – they don’t care of anyone else. Here’s what I’m thinking. The real pain, I mean, you got no one to hold when you got no one to unfold, right?

Mike Rockwood: Yes.

Ryan Rockwood: So I would suggest that this may be a time to fold them because what are we looking at. We are potentially looking at things in the next couple weeks going extremely bad and you getting all – I mean you have legal rights blah blah blah. But what are you going to do, you know? You think you could find a lawyer that wants your case? I can tell you not. You’re going to find that you’re now on – once ownership has changed, yes, you may find some lovely, lovely investor who wants to float down and magically give you money to go away peacefully. But you’re just as likely to find …

Mike Rockwood: Yes.

Ryan Rockwood: A freaking biker gang …

Mike Rockwood: Yes.

Ryan Rockwood: Who wants to live with you.

Mike Rockwood: Yes, or that doesn’t mind taking your tires.

Ryan Rockwood: And doesn’t mind changing your lock several times a week. Completely illegal. Yes, it’s illegal, you know, whatever.

Mike Rockwood: Yes.

Ryan Rockwood: What are you going to do? What are you going – and people just have this idea. Listen, you’re no longer a homeowner. You’re a squatter and you’re – and anyway. So, here’s the thing. You got to know when to hold of them, you got to know when to fold them. This is a great time to cut off …

Mike Rockwood: Yes.

Ryan Rockwood: Tie the loose ends in one [phonetic] way.

Mike Rockwood: You’re already at the end of a good, good …

Ryan Rockwood: We’re talking about – we’re not talking about …

Mike Rockwood: Transition.

Ryan Rockwood: Yes. Now, we’re not talking about a bank anymore. We’re talking about investors, potentially homeowners. We’re talking about people who get kicked off and I’ll tell you it does happen. We can see several times. I mean there’s nothing to say that I know of these people can’t visit you at work and can’t visit your neighbors and can’t visit your kids at school that I know of. I don’t know. But anyway, you’re well in pursuit of harassment [phonetic] thing, but there is also …

Mike Rockwood: Yes. Yes. There’s stages [phonetic] to some agreement.

Ryan Rockwood: There’s also the huge possibility that during all this time, you dig in and fight and, of course, they’re going to be filing the paperwork and it is going to mature and the sheriff will lock you out, if not them, in a certain number of time depending on your area, whether it’s two weeks, a year, six months or whatever, you know. But there’s going to be a lockout date and that date, it’s all over, you know. And so …

Mike Rockwood: So really you could be scooped between two or three months …

Ryan Rockwood: Yes.

Mike Rockwood: Of rent. I don’t know.

Ryan Rockwood: And here’s the problem. It’s like, where we’re going to go in the future as well? Is there a chance that right now you could find a place to rent if you’re short selling your home? Definitely, okay during – oh, there’s lots of people.

Mike Rockwood: Yes, those lots of people.

Ryan Rockwood: You know is there a chance to once you burn all the rest of your bridges and …

Mike Rockwood: And the credit score says eviction and foreclosure.

Ryan Rockwood: Yes.

Mike Rockwood: It’s much less like that.

Ryan Rockwood: It’s a good point.

Mike Rockwood: Yes.

Ryan Rockwood: Well you know we’ll say what does it say? Does it say foreclosure?

Mike Rockwood: Yes, and eviction.

Ryan Rockwood: Once it says that I mean do you think – I don’t know.

Mike Rockwood: No. It’s better.

Ryan Rockwood: Yes.

Mike Rockwood: So, I think, you know, when you’re thinking on what you could do, we sure don’t recommend it.

Ryan Rockwood: We got another question here. Someone asked what about if they adjust the late, you know, the payments and stuff and someone had $3,000 in arrears.

Mike Rockwood: In arrears.

Ryan Rockwood: Sticking on the end of the loan. And someone says well, what if they do that but the maturity date does not cover the additional years it will take to cover that? I think I know the answer to that, but what is the answer to that?

Mike Rockwood: Well, it jerks around the monthly payment and they can extend it to 40 years. If this is the Making Homes Affordable Modification then …

Ryan Rockwood: I think someone – I’m thinking they’re thinking of it wrong though. I don’t think that anyone says – they won’t modify your payments and not have it that up is that I think – is that the implication there?

Mike Rockwood: You mean in terms of amortizing?

Ryan Rockwood: Yes.

Mike Rockwood: I mean it will all amortize.

Ryan Rockwood: You know amortize – balloon –balloonify [phonetic].

Mike Rockwood: No. There won’t be a balloon payment. They will amortize it over the length of the loan so …

Ryan Rockwood: But she’s saying what if the late payments are added at the end of mortgage but maturity date is not covered with the additional years it will take to complete the payments?

Mike Rockwood: Well, see, you know what? They’re going to be rewriting the mortgage, so remember they’re going to work the numbers. So if you’re mortgage, like if you are only 10 years left on it, you’re probably going to be offered a 30–year modified loan.

Ryan Rockwood: So when they say 30 years, they will need 30 more years.

Mike Rockwood: Oh, yes.

Ryan Rockwood: And you might be thinking, what’s a 30–year mortgage?

Mike Rockwood: And I’m 20 done.

Ryan Rockwood: It’s the same 30 more – okay.

Mike Rockwood: Yes. Yes.

Ryan Rockwood: So maybe that’s where the – I mean that’s the little – the mind bender there.

Mike Rockwood: All right, Tim says, after months of arguing and 11 months without making a payment, we are now on a Making Homes Affordable Loan Modification. We had hopes to get principal relief because we’re $120,000 upside down on this home. We owed 180 plus 110. So they owe 290 and they’re 190 upside down. Hello. At least we can stay in the home while we figure out what to do. Would a short sale make sense for us? Oh yes, you bet it would. Here’s the thing though. So if you are 120 upside down, okay, so really you’re not terribly upside down as far as the first mortgage holder is concerned. It’s the second mortgage holder who ain’t got no equity. So here’s a – if you are please, Tim, if you’re pleased with the monthly payment, what you should do, on your first, what you should do is turn the big weapons, the big guns, and aim them right at your second mortgage holder and let them fly fire. I would stop making payments and begin to negotiate in dead earnest. That’s what one maggot said to another. We’re negotiating dead earnest.

Ryan Rockwood: I’m not sure they get it.

Mike Rockwood: Let’s see. I would negotiate in dead earnest with them about accepting settlement or accepting some token payment. I think you could get them certainly to cut the payment that you currently have in half. You could do that in a heartbeat with one phone call and I think that you’re – the time is getting right now for a lot of these second mortgages to settle and we’re hearing more and more about it around the country where people are making an offer for 10% to 20%. We haven’t heard settlements around 10% but we’ve heard of a number of them at 15% or 20%. So that’s what I would begin to work if I were you because let’s say over the course of the next year, you come to settle on that second and get rid of your $110,000 second.

Now, that’s a good thing. You’ve got a beautifully modified first and you fire the second if that was for $110,000 what if you could settle it for $10,000 or $15,000 in a lump sum payment. Wouldn’t that be sweet? Then you would, you know, have a good mortgage on the home that you like anyway and you have a good payment? So I think that’s the way you should think about going and if that doesn’t work out, then I definitely would consider short selling because think about it. That second mortgage holder is going to get $1,000 to $2,000, $5,000 at the very most from the first. See what the first does, it will pay some token amount for the second to accept, you know, release on the lien.

So they’re in for, you know, $1,000, $2,000, $5,000. Your offer of 5,000 or 10,000 bucks is sure heck a lot sweeter than that but it takes them quite awhile to get to the point where they really understand you’re serious. That very often is like you know 5 to 7 months of missed payments or more, so good luck to you. That’s all the questions I got. How are you doing?

Ryan Rockwood: We are done. I’ve got one client who wants to do an appointment Saturday at 1:00 p.m. That’s not good for us so I’ll respond to that. Otherwise, someone on the call tonight hit the blue button below to schedule their conference, and they want to do it 11:30 a.m. tomorrow. Does that work for you or you need to check your schedule and we can confirm it later?

Mike Rockwood: I have to check.

Ryan Rockwood: Okay. Anyone else needs to hit that blue button, and there’s a drop down menu in the upper left. Thank you so much. Thank you so much for joining us guys, and have a great evening. Congratulations on getting a week closer to …

Mike Rockwood: Yes. Press on.

Ryan Rockwood: Your modification done.

Mike Rockwood: Press on everybody. So long.