Learn How a Short Sale Can Help You Sell Your Home and/or Avoid Foreclosure

Feeling like there is no other option but foreclosure can be an overwhelming feeling.  Know that you are not alone!  Thousands of homeowners in the U.S. are facing the same challenge.  Now, more than ever before, there ARE solutions!

I can provide you with information about how to sell your home, avoid a foreclosure, determine if you qualify for a Short Sale and explain the effects a foreclosure or short sale can have on you, your credit and your family.

Even if you have never missed a payment, and need to sell your home, a short sale may still be an option for you.  Feel free to contact me to discuss your options.  Please know that all communication will be strictly confidential.  I am not an investor or third party negotiator.  I am a realtor who will market and sell your home directly to the end user. My emphasis is on consistent communication between us, the homeowner and the homeowner's lender.

Below are some common characteristics that most Short Sales Share....please read and again...call or email me for more information. 

 CLICK HERE for the "Making Home Affordable" Program (HARP, HAMP, HAFA) and VIDEO

What Is A Short Sale:

• The owner owes more than the current market value of the property.

• The lender will agree to forgive a portion of the loan amount to align it with the market.

• The Short Sale is a "pre-foreclosure" activity.  The other type of pre-foreclosure sale is a "deed-in-lieu-of-foreclosure" sale.

The Short Sale is a Contract with the Seller:

• The seller is still the agent's client and must sign off on the transaction.

• However, the terms and conditions of the Short Sale are going to be under the control of the lender.

• Like any other contract, it must be negotiated and agreed to between the parties.

• The lender is not obligated to enter negotiations or to agree to a Short Sale.  Many have not agreed to a Short Sale even when it has appeared that the Short Sale was more advantageous than a Foreclosure.

The Short Sale Through the Eyes of the Lender:

• Excessive inventory of REO's by lenders can compromise a lender in their ability to meet their obligations and obtain funds to make loans.

• A high percentage of non-performing loans will compromise a lender's bond rating and increase their reserve requirements imposed by the Federal regulatory authorities.

• Foreclosures can cost the lenders time, money and other resources.

• Foreclosures can also negatively affect the values of other properties on which lenders have loaned in the areas where they do foreclose.

• Over 1000 mortgage brokerages have closed to date since 2006 and the numbers continue to grow.  Also 140 banks alone became insolvent in 2009.

The Seller Must Provide the Lender the Following Documents:

• Two Years W-2's or 1099's

• Two Years Federal Income Tax Returns

• 90 Days Bank Statements (Complete Statements)

• Last 30 days check stubs

• Hardship (SAD)** letter, usually hand-written, explaining the events that have led to the borrower's current situation.  Again it must be a legitimate hardship that can include : divorce, costly illness, involuntary job loss or costly event.

• Financial statements that depict the owner's current income and expenses along with a statement of their personal assets and liabilities.

A Hardship (SAD) Letter is Required:

• The more tears a seller can provoke from a lender, the better the result.

• The letter doesn't have to be written in English if that is a challenge for the owner, but it might take more time to obtain approval.

Other Workout Options:

• Revised Repayment Plan - Payments are adjusted lower to allow the borrower to remain current on the loan while the terms of the loan remain the same.  This gives the borrower some breathing room.

• Forbearance - This is where the borrower will be allowed to skip some payments or make lower payments for a certain period and then these payments or payment differences are added to the back end of the loan.

• Loan Modification - The actual loan terms and conditions are changed such as the interest rate or the loan is converted to a fixed rate loan as opposed to an adjustable rate loan.

• Short Refinance - The loan is actually refinanced at a percentage of the original loan amount.  This is especially possible with an FHA loan.

• Loan Assumption - Sometimes the buyer can assume the existing loan or in some cases the seller can carry an all-inclusive loan, however extreme caution should be exercised on this option.

• Deed-In-Lieu-Of-Foreclosure - Sometimes the lender or an investor may approach a borrower where foreclosure is imminent and offer them some cash to allow them to live in the property while they (lender/investor) own it to make their (borrower's) transition easier.  In exchange for this, the borrower gives the deed to the lender or investor.  This is the last resort before foreclosure.

Lender Concerns:

• Is the property distressed?  What kind of condition is the property in?  Owners in financial distress often defer maintenance.

• Is the request being driven by fraud?  For example, is this a non-owner occupant attempting to pull the wool over the lender's eyes?

• Is the borrower capable of bringing the loan current?  If the lender feels that the borrower has access to money in any way, they will probably not approve the Short Sale.

• Are there any additional liens on the property?  For example, lenders are not agreeing to cover HOA liens on properties.

• What are the anticipated closing costs to the lender?  There are some closing costs that the lender will not agree to absorb and you will need to know what those are.

The Short Sale Through the Eyes of the Credit Markets:

• F.I.C.O. scores could drop by 100 to 200 points for the borrower.

• The borrower might have to wait 2-5 years before being eligible again to obtain a loan to buy a home.

• The borrower may still have to sign a promissory note for a portion of the forgiven balance and the lender may compel a bankruptcy if the borrower defaults on the note.

The Short Sale Through the Eyes of the Buyer:

• Closing dates are a fantasy.  Short Sale approvals are averaging between 90 - 120 days although some lenders have shortened this period considerable.

• Disclosure of these issues is critical to the buyer at the initial buyer consultation.

Tips For Distressed Borrowers:

• Act quickly.  A borrower DOES NOT have to be in arrears on their loan to ask the lender about a loan modification of Short Sale.

• Keep calling the lender or lenders and don't give up.  Persistence will usually pay off.

• Have all your financial information prepared.

• Consult with a HUD-Approved Intervention Specialist by going on to www.hud.gov.

• Ask an attorney from "Legal Aid" to send a letter to the  lender requesting a loan workout.

Mortgage Cancellation Tax Relief Act:

• Signed by the President on December 20, 2007.

• Established Federal Tax Exemptions on any debt forgiven as a result of Short Sale or foreclosure that occurs between January 1, 2007 and December 31, 2012.

• The tax exemption can only apply to the owner's PRINCIPAL RESIDENCE.

• The maximum tax-exempt amount is $2,000,000; $1,000,000 if the borrowers are married filing separately.

• The exemption can only apply to a purchase money loan or equivalent loan.  Any refinanced cash out will be taxable unless the money was used for home-improvements, essential medical treatment or vocational education.  This also must be documented.

• The seller will receive a special 1099 (1099c) if this is a tax-exempt forgiveness that will alert the IRS that the forgiven amount is exempt.

• The seller must meet the IRS definition of insolvency which means that they must either be in bankruptcy or they must prove that their debts exceed their assets.

• The individual states may still want to collect their income taxes that are due.

• ALWAYS CONSULT YOUR CPA, ATTORNEY or TAX ADVISOR!

 Video and Info on the "Making Home Affordable" Program (HARP, HAMP, 2MP, HAFA) CLICK HERE