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Avoid Foreclosure

Avoid Foreclosure

 

WHAT IS A SHORT SALE?

A homeowner is “short” when the amount they owe on a property, when combined with the costs of selling their home is higher than the current market value.  A “short sale” occurs when the bank is willing to accept less than the full balance at closing when the home is sold.  It is a very involved and constantly evolving process.  Many homeowners have not just a first trust note but second trusts, third trusts and equity lines of credit.  These are often held by different banks than the first trust further complicating the process.  Many folks in today's market are upside down in their home value but few meet the qualifications for a “short sale” and not everyone qualifies for a short sale.

WHAT ARE THE ADVANTAGES OF A SHORT SALE?

  • Pay nothing
  • Avoid Foreclosure & Bankruptcy
  • Save Your Credit
  • Potentially walk away from your house and your mortgage with no debt or tax consequences

 

SHORT SALE VS. FORECLOSURE
 
Security Clearances:
Current Employment:
Future Employment:
Deficiency Judgment:
Deficiency Judgment (Amount):
Future Fannie Mae Loan- Primary Residence:
Future Fannie Mae Loan- Non Primary:
Future Loan with any Mortgage Company:
Credit Score:
Credit History:
FORECLOSURE SHORT SALE
Foreclosure is a challenging issue against a security clearance. In most cases clearance will be revoked and position will be terminated A short sale on it's own does not challenge most security clearances
Employers have the right and d are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases isgrounds for immediate reassignment or termination. A short sale is not reported on a credit report and is therefore not a challenge to employment
Many employers are requiring credit checks on all job applicants. A foreclosure is one of the mostdetrimental credit items an applicant can have andin most cases will change employment. A short sale is not reported on a credit report and is therefore not a challenge to future employment
In 100% of foreclosures (except in those states wherethere is no deficiency) the bank has the right to pursue a deficiency judgment. In a properly managed short sale the home is soldat a price that should be close to market value and in almost all cases will be better than an REO saleresulting in a lower deficiency
In a foreclosure the home will have to go through anREO process if it does not sell at auction. In mostcases this will result in a lower sales price and longertime to sell in a declining market. This will result in a higher possible deficiency judgment. In a properly managed short sale the home is sold at a price that should be close to market value and in most all cases will be better than an REOsale resulting in lower deficiency.
A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgagefor a period of 5 years. A homeowner who successfully negotiates andcloses a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years
An investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investmentmortgage for a period of 7 years An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Maebacked investment mortgage after only 2 years.
On any future 1003 application, a prospective borrowerwill have to answer yes to question C in Section VII of the standard 1003 that asks "Have you ever had a property foreclosed upon or given title or deed in lieuthereof in the last 7 years?" This will affect future rates There is no similar declaration or questionregarding a short sale
Score may be lowered anywhere from 250 toover 350 points. Typically will affect score for over 3 years Only late payments on a mortgage will show andafter sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50points if all other payments are being made. A shortSale's effect can be as brief as 12-18 months.
Foreclosure will remain as a public record ona person's credit history for 10 years or more. Short sale is not reported on a credit history. There is no specific reporting item for short sale. The loan is typically reported "paid in full, settled".

 

WHY HIRE A SHORT SALE SPECIALIST?

The banks are very specific in their time frames and if the ball is dropped on any one of those then you have lost your opportunity. It takes an experienced “short sale specialist” to handle the regulations & the entire process.

Spencer Marker is a certified Distressed Property Expert (CDPE), which is a real estate professional with specific understanding of the complex issues confronting the real estate industry, and the foreclosure avoidance options available to homeowners. Through comprehensive training and experience, CDPEs are able to provide solutions for homeowners facing hardships in today’s market, specifically short sales.

The prospect of foreclosure can be financially and emotionally devastating, and often homeowners proceed without guidance of any kind. The best course of action for a homeowner in distress is to speak with a well-informed, licensed real estate professional that has the tools needed to help homeowners avoid foreclosure through the efficient execution of a short sale.

While enduring financial difficulties is challenging for any family, the process of finding a qualified real estate professional should not be. Selecting an agent with the CDPE Designation ensures you are dealing with a professional trained to address your specific needs. Not only is Spencer a CDPE, but also he is an experienced, seasoned agent with 25 years experience and over 22,000 successful sales. He knows how to price your home and he knows how to market your home successfully. Before considering a short sale, banks want to see that the property has been marketed and there has been an effort to sell it.

DOES IT COST ANYTHING?

Typically the commission is paid from the proceeds of the sale. In the case of short sales, the home seller does not pay the commission. This is another incentive for a home seller to pursue a short sale and use a qualified real estate agent. Moreover, many lawyers, although representing home sellers, are able to have the lender pay their fees.

ARE SHORT SALES GUARANTEED TO WORK?

No. All the criteria MUST be met for a bank to even consider a short sale. They do not like to take a loss on a loan. It’s not easy to convince a bank that the market value of a property is worth less than what they’re owed. They must be convinced to discount the mortgage enough to make it viable for an investor to make a profit for his work and risk. The discount must cover all repair costs, closing costs, broker commissions, taxes and still allow for a profit for the investor. In some cases, we do all the paperwork and wait several weeks just to be denied. In those cases, you continue to own and live in the house if you choose. If the lender does not approve the short sale, we have no rights at all to the property and no transaction occurs. The purchase agreement we have signed becomes void.

WHAT ARE THE QUALIFICATIONS?

First and foremost a seller needs to have a “hardship” or in other words a legitimate reason that they cannot keep making their payments. By definition it is a material change in the financial situation of the homeowner that will affect their ability to pay their mortgage.  A seller without a financial hardship that is upside down in the marketplace is nothing more than a dissatisfied homeowner.  They will not qualify for a short sale and they will have to wait until the market comes back, go to foreclosure or make up the shortfall with cash at closing.  Some examples of hardships are:
· Mortgage adjustment or payment increase
· Loss of job
· Failure of business
· Severe property damage
· Death of Spouse or other wage earner in family
· Severe illness
· Divorce
· Incarceration
· Reduced Income
· Tax Increase
· Relocation, having to support two households if you are transferred
· Too Much Debt
· Military Service
Again, if you do not have a legitimate hardship then you will not be eligible for a short sale.
 
Second, you must be insolvent.  You cannot have the ability to pay down your mortgage.  If you have the liquid cash or assets then you must use them to pay down your mortgage.  If you have some cash or other liquid asset but no enough to pay down the mortgage then the lender most likely will require you to use that towards the sale of the property. 
Keep in mind that a short sale is not a way to get out of a mortgage; it is a tool for a borrower to use when they truly cannot make their payments.  

THE SHORT SALE PROCESS

There are many, many factors that go into a successful short sale scenario.  If you have already contacted your lender or lenders and tried to work out loan modification then that is a plus and helps with the process.  The very first step though is to get your property on the market and get an offer.  In this market that is not easy and you must price the home aggressively to entice a buyer to go through the short sale process.  It is longer and more uncertain than regular sales so most buyers try and avoid them.  You cannot go too low on the pricing as the banks will come up with their own value and if it is too low then they will disqualify the contract and you will have to start over again.  Often times there is not enough time to go through this process a second time before the foreclosure process is completed.  You cannot go too high in your pricing because you need to obtain an offer quickly.  It is always a race against the clock.  Once we have a contract we put a short sale package together that includes:
· The executed contract
· The buyers pre approval letter
· The listing history
· The hardship letter
· Your paycheck stubs
· Your bank statements
· Your financial worksheet
· Your tax returns
· The listing agreement
· A sample HUD one showing all closing costs
· A list of any damage or repairs
· A list of any other deficiencies or liens against the property
Perhaps the most important of these documents is the hardship letter. Remember, you promised to pay a specific amount. You signed a legally binding contract saying you would make the payments and that you are aware that he lender could take your home if you didn’t. In the hardship letter, you must explain why you can’t afford the mortgage.
Once the package is in the hands of the lenders then they will order their own determinant of value, which is typically a BPO (Broker Price Opinion) or an appraisal.  Each trust holder will do this as well and each trust holder gets his or her own package.  If the lenders value comes back higher than the contract price by any significant margin then they will counter the contract terms to reflect this value.  If the buyer rejects this price then we will at least have an approved price and we will have to begin the process of marketing the home at the higher price.  This costs us time, creates additional expense in the carrying costs and potentially we can run out of time before the foreclosure process takes place.  If this is something that you are considering do not wait until way late in the process.  The sooner you can get started the better off your chances of a successful short sale will be.
Once value is established and all lien holders have verified that the hardship is acceptable then the negotiation begins!   If there is more than one lien holder then there is negotiation between them that we facilitate.  In most cases the second or third trusts have nothing to lose in short sale negotiation and everything to gain but they will get wiped out in the foreclosure process.  The first trust holder will come out best in the foreclosure process but wants to avoid the costs if they can. They cannot accept the short sale unless the other lien holders accept the terms as well.   So typically they will have to give up some of their gain to the other trust holders to make the transaction work.  Each lien holder will want to negotiate with seller as well as far as deficiency judgments and any cash contributions.  It is a long and very involved process and it requires expert assistance.

FREQUENTLY ASKED QUESTIONS

1. Why would a bank or mortgage lender want to do a short sale?

Taking a property back via foreclosure is a long and costly process for a bank and results in the bank holding the property as a non-performing asset in their inventory. Banks are limited in the amount of non-performing assets they can hold. Once it’s exceeded, they have incentive to get rid of them at discount prices. Doing a short sale avoids many of the costs for the bank associated with a foreclosure such as attorney fees, property damage, property tax, bankruptcy, and costs of resale. In a short sale, the lender is able to cut its losses by getting rid of the property faster, especially in areas where the foreclosure rates are high.

2. Do I need to be behind on my payments?

No, This is a common misconception. You do not need to be behind on your payments or have been late on a payment to do a short sale, although the lenders are more motivated to do the short sale if you are not making payments.

3. How common are short sales?

There are thousands of homeowners marketing their homes as “short sales” throughout our area.
Currently the administration has enacted legislation that it is favorable to short sell as opposed to foreclosure. You need to act now before this changes the sooner you start, the more options you have

4. How long does the short sale process take?

It varies depending on the lender. It can take as little as 45 days or as long as 180 days. Our average time is 90 days. The time period also varies upon circumstances, although he approval process and time to closing is usually longer than a non short-sale situation.

5. What are my options as a home seller when my property is in or heading toward default?

If you have not been making your payments or if you anticipate that you will not be able to make payments, your options will vary based on several factors specific to you and your property. Remember that all parties involved will evaluate each possible resolution on a case-by-case basis. When considering your options, you should take into account

  • The amount of equity you have in your house compared to the current loan balance
  • The additional financing resources you may have
  • Whether or not you live in a homestead state, and the nature and amount of homestead exemption
  • The amount of mortgage insurance you have

All of these factors should be taken into account along with many other variables and special conditions. The most important decision you need to make is to “make a decision”

6. How do I know if my property and I may be considered for a short sale?

Eligibility for a short sale depends on your lender’s short sale policy. Your lender will also direct you as to what you must do to comply with their process and procedure. We can contact your lender directly on your behalf

7. How would multiple liens on my property impact short sale approval?

Each lender must recognize how it is in their best interest to approve a short sale resolution versus a more costly and protracted alternative. Here again, an experienced real estate agent in this multiple-lien scenario can be instrumental in developing a multi-party resolution strategy satisfactory to all

8. As a homeowner, what incentive do I have to assist in the sale of my property if I am not going to receive any proceeds from the sale?

The higher the realized sales price, the more likely the lender will be to grant a short sale for the homeowner and possible either fully or partially waive a deficiency judgment. Also, be wary of any real estate agent who, for the sale of facilitating a guaranteed sale in order to collect a commission before a property is foreclosed (ruling out any commission), demonstrates les than professional marketing commitment. These agents will often justify the attitude by telling the owners that it only affects the lender’s pocketbook and not the owner. This disregard for marketing on behalf of some agents seeking to facilitate a short sale at all costs is one that lenders readily recognize. This unprofessional approach to marketing is to the detriment of well-intentioned homeowners who are hopeful of gaining lender cooperation, which is influenced by how honorable they believe both the homeowner and real estate agent are, despite the difficult circumstances facing the homeowner and the challenging marketplace facing the agent.

9. Does a “Listing Agent” represent me (as the homeowner) or the bank if I have intentions of gaining a short sale approval?

We do not represent the bank

10. What is a deficiency judgment?

A deficiency judgment is a court order authorizing a lender to collect part of an outstanding debt from foreclosure and sale of the borrower’s mortgaged property or repossession of property securing a debt after a finding that the property is worth less than the book value of the outstanding debt. The vast majority of our clients pay nothing at all.

11. Which Banks participate in short sales?

Virtually every bank participates in the short sale process! Countrywide, Chase, Wells Fargo, Bank of America, Downey Savings, CITI, Chevy Chase, Washington Mutual, Wachovia, Fifth First, World Savings, EMC, First Franklin, Flagtare, GMAC, Greenpoint, Homecomings, Home Eq, HSBC, Irwin, National City, Novastar, Option One, Ocwen, Aurora, Deutsche Bank, and may more. Again, the current administration and financial institutions favorably support short sales. By starting now you give yourself more options.

It takes an experienced professional to guide you through the pitfalls of selling your home short and preventing foreclosure. Few understand what truly goes into making a short sale successful. We have a 100% success rate and fully 20% of our business is in this arena. Our success rate is so high because we understand the system and what the banks require, we are diligent in our follow up, we have contacts with most all of the banks allowing us to get past the phone loop and we provide a level of marketing that the banks like to see rather than just gutting the price. The short sale process exists for a reason and it is a wonderful benefit to those that are in need of it. Don't wait and run the risk of losing your home to foreclosure. We are happy to provide a free consultation and show you how we can help you through a difficult time. We are the proud recipient of the CDPE (Certified Distress Property Expert) designation and more importantly have a proven track record of success in this arena.

Get Started Now

Contact us today. Don’t wait. Delaying only
The short sale process can be long and you don’t want to run out of time before the foreclosure auction. Contact us. We will discuss a few simple questions and we will send you the paperwork. We will answer questions and get you information you need without any pressure and will keep all information confidential. It is not simple to begin the process. We will review your information, determine if you’re a good candidate and contact you with the appropriate paperwork. Once you return the paperwork it can be 45 to 180 days for a short sale to get approved. Fill out the contact information below and we’ll get started

 

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