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Deals for homeowners and buyers have pitfalls and pluses

April 26, 2008|By ARNOLD S. PLATOU

WASHINGTON COUNTY -- It sounds great, but watch your step.

There are quagmires among the latest kinds of deals homeowners - and bargain hunters - are reaching for as economic troubles continue, the top official with the Pen-Mar Regional Association of Realtors warns.

"Bottom line: It is not as clean-cut, the end of the rainbow, as everyone seems to think," said Joan McLernon, president-elect of the 800-member group.

And it's a buyer-beware market for those looking to find bargains as homeowners and lenders alike try to sell the properties, others caution.

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Based on interviews with industry representatives, here is a guide to some of the pitfalls and pluses.

Short sales can occur when a lender agrees to let a property be sold for less than what the owner owes.

On the plus side, the deal allows a homeowner to avoid foreclosure and bankruptcy. And having a short sale on your credit record is less of a black mark than foreclosure because you are making it possible for the lender to get back most of what he's owed, as opposed to leaving him totally in the lurch.

On the other hand, "What a lot of buyers aren't seeing with foreclosure or short sale is the length of time between when you make an offer and when it's ultimately accepted, signed off and returned to you," McLernon said.

And, while you wait, somebody else could make an offer that's higher, she said.

"So, on the surface, it might look as though you're going to get a great deal," but if another offer comes in, there isn't always time to get back to the person who made the first offer," McLernon said. "And so, that's why you tell your people you need to go in with your best offer."

More alarming, perhaps, is this: Say you owe $100,000 and the lender agrees to accept just $95,000. According to McLernon, the lender still can demand that $5,000 later.

"A lot of people think, 'If the lender agrees, that's it. They're done,'" she said.

"It may be lender-specific, however in general, the lenders do have the right to come back and demand payment later, unless negotiated as part of the short sale," McLernon said. "It falls under a provision of the promissory note that the seller signed when they purchased the property originally."

But Anna Couffer, a marketing/settlement agent with Tri-State Signature Settlements, said that's not true of all lenders.

Couffer, who specializes in short sales, said for the lenders she deals with, the "release of lien" means just that.

"There's no them coming back," she said.

Realtor Tina Nash, who also specializes in short-sale negotiations, said she specifically makes settlement of the entire debt part of her negotiations.

There is a difference in how negotiators are paid.

Nash, for instance, said she gets nothing if the deal isn't approved. If it is, she is paid by the lender, she said.

But even that fee can be open to negotiation, said Alison Tavik of the Maryland Bankers Association. She said a banker told her recently that he might tell a homeowner's negotiator, "'Hey, you normally get more, but here, you only get 1 percent.'"

Couffer said she doesn't charge anything. She said she figures if the lender pays her, that "takes away" from what else must be approved in the deal.

She said her only compensation comes if the property is sold through a short sale. Then, she said, she asks the Realtors involved that her firm be hired as the titling company.

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