By Ralph R. Roberts
RISMEDIA, April 11, 2009-Many real estate professionals ask me what they can do to help stem the tide of foreclosures and stabilize the housing market in their area. One way you can help is by offering a free CMA (Comparative Market Analysis) to homeowners who are struggling to make their house payments. (A CMA is sometimes referred to as BPO – Broker’s Price Opinion.) Let homeowners in your area know how valuable a CMA can be, regardless of whether they plan on selling or keeping their home. The CMA together with the principal balances on the various loans attached to the home enable the homeowner to estimate their equity. Because of this, the CMA is key document to have for evaluating and pursuing a number of foreclosure alternatives:
Refinancing: The CMA can help a mortgage broker calculate the all-important LTV to see whether the homeowners would likely qualify for loan to refinance their mortgage and perhaps even consolidate debt.
Loan modification: When homeowners can prove that they are upside-down in their current mortgage (owing more on the home than they can sell it for), lenders have much more to lose by foreclosing and much more to gain from a loan modification. A current CMA can often convince a reluctant lender to approve a loan modification request.
Short sales: Sometimes homeowners want to get out from under a property they can no longer afford, but they cannot sell it for enough to pay back all the money they owe on it. Lenders may be willing to accept less than they are owed to allow the homeowners to sell and walk away debt-free, but they will want to see a CMA before agreeing to such a proposition.
Short refinance: Like a short sale, a short refinance (short refi) calls for the lender to accept less than the full balance due on the loan, so the homeowners can refinance into new mortgage with a lower balance and lower monthly payments. Before agreeing to a short refi, lenders want to see a CMA to make sure the property is truly worth less than what’s owed on it.
Principal forbearance: A principal forbearance is sort of a cross between a short refi and a loan modification, but the lender does not completely forgive the difference between what’s owed on the property and its market value. Instead, the lender agrees to collect the difference later – when the homeowners sell or refinance the property. Like a short refi, the new monthly payment is calculated on a lower principal balance (based on the property’s market value), resulting in a lower monthly payment. The CMA is key for establishing the property’s true market value.
Listing and selling: Rarely do homeowners think their property is worth less than its true market value, but it happens occasionally. By presenting homeowners with a CMA, you provide them with a valuable piece of information for considering another option – listing and selling the home to cash out any equity they may have in it and move to more affordable accommodations.
By providing distressed homeowners in your area with free CMAs and presenting them with a menu of foreclosure options from which to choose, you play an important role in keeping homeowners in their homes and helping your market rebound. In addition, when these homeowners you have helped decide to sell their home or buy a new one, they will never forget the real estate professional who reached out to help during their hour of need.
Ralph R. Roberts is a consumer advocate, host of KeepMyHouse.com, and author of numerous books, including Foreclosure Self-Defense For Dummies and Loan Modification For Dummies (Summer, 2009). Ralph is based in Sterling Heights, Michigan and can be reached at RalphRoberts@RalphRoberts.com.
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