Save Your Home

There seems to be a lot of confusion when it comes to the term “short sale”.

A short sale is when a home owner owes more than the property is currentlly worth, the home is sold and then the bank agreesto accept less than the payoff amount to satisfy the loan.

Seems pretty straight forward, right? This process usually takes from 3-6 months! In some cases longer and in some rare cases, it can be done within a couple of months, but this is a very rare case.

The homeowner can stay in the home, rent/mortgage free (the missed payments are still accumulating as $ due to the bank of course)for the time the home is on the market until it sells and the bank agrees to the short sale.  The process takes so long mainly because of the amount of these transactions each bank is working on at any one given time. We must imagine that each bank representative has 50, 100 or more of these files they are working on at the same time.

I work with a team of short sale specialist that are on the phone with the banks EVERY DAY working to expedite the process and it still can be a long drawn out  process. The good news is once we convince the bank to agree to the short sale, it keeps a foreclosure off of your records, making the recovery process easier in the long run.

It can be very emotional and discouraging at times to go through such a process.  Remember, this too will pass and you will be in a better place before too long. Find someone that has experience with the short sale process, that can actually help you and has a successful track record of being able to actually close short sale transactions. It takes the right chops to be able to close these types of transaction and work with the banks the correct way.

Email me with any questions at ddonjacks@gmail.com

Until next time, make it a great day.

Options For Homeowners to Avoid Foreclosure

    

Know your options

• Reinstatement – To reinstate a mortgage, the homeowner has to pay all the missed payments, late fees and legal fees that are due up to the date that the loan is reinstated.
• Forbearance or Repayment Plan – The lender allows the buyer to pay the missed amount over a period of time or the lender places the missed payments on the end of the amortization of the loan.
• Rent the Property – In some cases, homeowners facing foreclosure will have payments low enough to allow them to rent their property and keep up their mortgage payments.
• Sell the Property – If sellers have equity in their property, they can sell it and prevent a foreclosure.
• Refinance – if homeowners have sufficient equity and income and their credit has not been too badly damaged, they may be able to refinance.
• Mortgage/Loan Modification – A loan modification is very similar to a lower interest refinance where the lender lowers the interest rate on the existing loan to lower the payments.
• Short-refi – This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well.
• Deed-in-lieu of Foreclosure – A deed-in-lieu of foreclosure is some times referred to as a friendly foreclosure because the homeowner essentially gives the deed back to the bank.
• Bankruptcy – A bankruptcy may stop a foreclosure and allow homeowners to reorganize their debt and keep their property.
• Servicemembers Civil Relief Act (SCRA) – This law provides certain protection to military personnel who are in foreclosure in specific situations.
•  Short Sale – When homeowners owe more on a property than it is currently worth and one of the previous solutions does not apply to their situation, there is the option of pursuing a short sale. A short sale is when your lender agrees to accept less of payoff than what is owed against the home.

In the past, it was rare that a bank or lender would accept a short sale. However, due to the overwhelming market changes, lenders have become much more negotiable when it comes to these transactions. Recent policy changes within many organizations have made the chances of getting a short sale approved even higher.

The following information descries the short sale process:

• Homeowners are “short” when they owe an amount on their property that is higher than the current market value.
• A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company to accept less than the full balance of the loan at closing. A buyer closes on the property, on the property is “sold short.”

The current U.S. housing market and financial crisis have caused tremendous stress and heartache for families across America. During times like these, there are always a certain percentage of homeowners who are distressed. According to the Mortgage Bankers Association, as many as 1 out of 10 homes are either delinquent or in foreclosure, and unfortunately, 7 out of 10 homeowners in foreclosure, proceed without assistance or advice of real estate professionals or mortgage representatives. If you or someone you know is among the millions of people affected by the prospect of foreclosure, understand that you have options.

Foreclosure vs. Short Sale   Homeowner Consequences…
ISSUE	FORECLOSURE	SUCCESSFUL SHORT SALE
Future Fannie Mae Loan PrimaryResidence (Effective May 21, 2008)	A homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.	A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.
Future Fannie Mae Loan Non Primary (Effective May 21, 2008)	An investor who allows a property to go to a foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years.	An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.
Future loan with any Mortgage Company	On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks, “Have you had property foreclosure upon or given title or deed in lieu thereof in the last 7 years?” This will affect future rates.	There is no similar declaration or question regarding a short sale.
Credit Score	Score may be lowered anywhere from 250 to more than 300 points. Typically, this will affect a score for more than 3 years.	Only late payments on a mortgage will show and an after sale mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points if all other payments are being made. A short sale’s effect can be as brief as 12 to 18 months.
Credit History	Foreclosure will remain as a public record on a person’s credit history for at least 10 years.	A short sale is not reported on credit history. There is no specific reporting item for a “short sale.” The loan is typically reported “paid in full, settled.”
Security Clearances	Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA or any other position that requires security clearance, the clearance will be revoked and the position will be terminated.	A short sale on its own does not challenge most security clearances.

Do You Owe More Money Than Your Home Is Worth?

Has Your Mortgage Interest Rate Dramatically Increased?

THERE IS HELP AVAILABLE!

Call me today to reveiw your options.

We have an established relationship with your bank that allow us to negotiate on your behalf faster and more successfully.

POSSIBLE OPTIONS MAY BE:

1. You may qualify for a Short Sale whether you have missed a payment or not.                                                                                                                                                         2. We can have Short Sale approval within 45 days or less upon opening escrow. (Current Market average is 3 – 9 months)

YOU NEED TO KNOW YOUR OPTIONS!

The sooner you call us the sooner we can help determine if a Short Sale is your best option.

562.201.4670

Short Sale Q&A

Short sales are becoming more common.  For those of you who are not familiar with this terminology, a short sale is the sale of a house for less than the amount that is owed to the bank/mortgage company. Occasionally, homeowners find themselves in positions in which they must to sell their home, but the reality is that their property is worth less than what they owe the bank…perhaps they did a “cash-out” refinance?…perhaps they bought at the peak of the market with 100% Financing? Many banks will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a costly foreclosure, and the owner is able to pay off the loan for less than what he owes.

I have successfully negotiated and closed several short sale transactions for both buyers and sellers.  Please contact me at ddonjacks@gmail.com or 562.201.4670 if I can assist you.

Let me just tell you – if you are a  buyer or seller dealing with Wachovia Bank on a short sale, you have stumbled upon the golden goose!

Wachovia has one of the smoothest short sale approval processes I have witnessed. They actually have a local representative that personally meets with the short sale seller and the listing agent, who personally views the property, and issues short sale approval in a short time – usually within 3-5 days. Wachovia commonly offers the sellers incentives to move out and leave the property in good condition. Ocasionally a Wachovia short sale can be “conditionally” approved before it is listed in MLS. The seller generally does not have to supply much financial documentation – rather the seller must be prepared to discuss their financial / hardship situation with the local rep during their in-person meeting.
I would post the local Wachovia short sale rep’s name, telephone number, and email address, however since I have her direct contact information, I am going to refrain from posting it so that she does not receive an onslaught of communication.

A few myths about short sales:

1) “The seller must stop making payments on their loan.”  Not necessarily.  I have negotiated short sales where the seller has not missed any payments, and were not in default. In those instances, we were able to prove that future default was imminent and that the seller was trying to be proactive with the short sale.

2) “The seller is in foreclosure.”  Not necessarily.  It is possible to have missed payments and not be in full-blown foreclosure.  Generally most lenders will not file a formal “Notice of Default” until the seller is 90 days or more late.

3) “Buyers will not want to make offers on short sale property.”  Not true.  Occasionally buyer’s agents are reluctant to represent offers on short sale property.  Often times, listing agents will take on short sale listings when in reality they have no knowledge base or skill set to successfully negotiate the lower payoff.  A shrewd buyer’s agent will call the listing agent and make sure they are competent to complete the process, and then submit an offer.

4) “Financial hardship is the only reason a lender will accept a lower payoff.”  Not true.  There are many potential reasons a lender will allow a lower payoff.  One such example is that the seller must relocate for some reason, such as to care for a sick relative, or due to employment requirements.  Other examples include divorce, illness or injury, the birth of a child, death of a family member, etc. Of course the short sale lender will want some sort of proof of these circumstances.

5) “A short sale where there is a first mortgage and a second mortgage will not be approved.” Not true.  While this scenario requires diligent negotiation and tends to add complication to the transaction, many 2nd mortgage holders will accept as little as $1,000.00 in lieu of a full payoff.

6) “A short sale means that the escrow period will be short.”  Generally no.  Depending on how much negotiation can be completed in advance, a typical timeline for lender approval can be 2 weeks – 2 months or longer.  Once the lender approves the lower payoff, escrow is opened and the transaction timelines proceed from that date.

7) “Short sales are a bargain!”  Banks do not give property away.  They base approval on recent sales comparables, and actually retain the services of a local agent to perform a BPO (aka, Broker Price Opinion).  While I do believe it is possible to get a lender approval for a property a few percent under its market value, purchasing at “wholesale” is just not reality.

8) “The seller of the property can make money from the short sale.” Not true.  The lender will REQUIRE that the seller nets $0 from the sale.

9) “The mortgage lender is the seller in a short sale transaction.”  Nope, the homeowner is still the seller! While the mortgage lender(s) must ratify the transaction and agree to lower the payoff so that the seller can sell, the lender is not a party or principal to the actual transaction. The purchase agreement is between the buyer and the seller.

10) “Once I get an offer on my short sale and submit it to the bank, I can stop showing the home to other buyers.” This is not something I would advise a seller to do.  Buyer offers on short sales are frequently withdrawn for one reason or another.  Occasionally the short sale will take so long to negotiate that the buyer’s circumstances may change (change in income, family, etc.) and they may decide not purchase the home. Many buyers will continue to look at other homes even after an offer has been accepted on a short sale listing.  I do not personally condone this practice, but other agents encourage their buyer clients to do so.  In light of this, it is a good idea to continue to show the home so all the seller’s eggs are not in one basket.

These are just some of the common questions and assumptions I get from both buyers and sellers regarding short sales.  In reality, most people (buyers, sellers, and even some real estate industry professionals) do not have a clear understanding of what they are and how they work.  I have successfully negotiated short sales in the past for seller clients.  If you are facing the reality that you have to sell your home, and you owe more than its current market value, I may be able to assist you with this transaction.  I welcome your call at 562.201.4670 so we can discuss your options.