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So, your house is in foreclosure? Now what? You are not alone. Causes of mortgage defaults may include, over extended financial obligations, loss of income, loss of employment, divorce, long term illness, etc. Try to look at the situation without attaching your emotions. From a strictly business viewpoint, you can more successfully analyze which option might best suit your needs and desires and move toward resolving your financial difficulty. One very important thing to remember: Time is of the essence, so take quick action in order to allow yourself enough time to complete the chosen process.
We are here to help you avoid foreclosure. We are foreclosure/short sale experts and specialize in creating win-win solutions for property owners that are facing a bank foreclosure. We can usually help you get out of your current situation FAST, possibly within 48 hours. There are never any fees or commissions to pay. We will buy your property in 'As Is' condition so there is no need to fix up or repair your property. If your home has enough equity, we can give you a cash offer and close within a week or less. If you have some equity, we may be able to take over your payments for you and make up your back payments. If your home has absolutely no equity, we can negotiate a short sale with your lender.
Rather than foreclose on your home, lenders would rather help you find ways to come current on your home mortgage or approve of a short sale. A short sale is a special real estate transaction which allows you to sell your home even if your mortgage loan is higher than the value of your home. Lenders want to help you avoid foreclosure because alternatives are less expensive, saving them thousands of dollars. If you are a few months behind on your mortgage and facing a foreclosure, you need to act quickly, before the foreclosure sale date. A short sale with your lender usually takes 3 months or longer.
So if you want to AVOID FORECLOSURE on your home, please don't delay. Give us a call right away at 303.564.9637.
Here is general info on short sale pertaining to different loan types:
FHA Loan:This is called the pre-foreclosure sale program. The Pre-Foreclosure Sale Program allows a Mortgagor in default to sell his or her home and use the sales proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount owed.
• The requirements are:
1. You must be living in the home-or moved out because of unstoppable reasons. For example, job transfer, couldn•t afford the utilities anymore.
2. Must be 31 days behind on payments
3. Must show reduction in income or increase in living expenses
4. Cannot abandon home
• You lender will always do a full settlement and they cannot pursue the deficiency.
• Your lender will pay you $750-$1000 incentive when you sell your house.
• The foreclosure sale will be postponed for 4-6 months to allow you to sell your house under the program.
VA Loan:
• You can be current or behind to do a short sale
• If you have a security clearance it will most likely not challenge any security clearance.
• You will be able to keep your VA eligibility on a short sale. The amount of the eligibility will be reduced by the deficiency amount.
• Your lender will always do a full settlement and they cannot pursue the deficiency.
Seller gets $1500 incentive from your bank.
Conventional Loans:
• Home Affordable Foreclosure Alternative (HAFA)
Requirements to be in the program:
1. Must be your primary residence
2. If you already moved out, it must not have been more than 1 year ago.
3. Loan must be originated before Jan 1, 2009
4. Your are delinquent on your mortgage, or you will be delinquent very soon.
5. Your unpaid principal balance must be less than $729,750
Details of HAFA for borrower:
1. You will get $3,000 incentive for relocation expense.
2. Foreclosure sale with be postponed for 4 months to allow you to sell your house.
3. Requires that borrowers be fully released from future liability for the debt
4. Lenders pay all servicing fees - homeowners have no out-of-pocket expenses
• If homeowner doesn't qualify for HAFA program they can still do a short sale:
* Anybody can participate in the short sale
* Unfortunately no incentives
* No Requirements other than experiencing a hardship.
* You can be behind or current on payments.
Here are some questions you may have regarding a short sale.
1. Why a short sale?
2. What is a short sale?
3. Why would my lender want to take a loss on my property by doing a short sale?
4. How do you convince the lender to do a short sale?
5. What are my options?
6. Can I still do a short sale if I'm trying to do a loan modification?
7. Should I just let the house go?
8. Will I have any out-of pocket expenses?
9. Can't I just have my house listed with any realtor?
10. Why should I work with you?
11. How can I trust you?
12. Can the bank come after me for anything?
13. Will a short sale 'save my credit?'
14. I have already declared bankruptcy; can I still do a short sale?
15. Will my property be listed for sale?
16. What if the bank doesn't accept the offer?
17. How does the entire short sale process work?
18. How long will the short sale take?
19. Can I live in my house while you are negotiating the short sale?
20. Why is a short sale better than a foreclosure?
1. WHY A SHORT SALE?
A short sale is one of the best ways to avoid foreclosure and might be the best course of action when homeowners do not have equity in their homes, are delinquent in their monthly mortgage payments, or are about to be.
Most lenders would much rather approve a short sale than foreclose on a property and take it into REO (Real Estate Owned). Foreclosure proceedings can cost as much as $75,000 to a lender, before they have to assume market volatility.
2. WHAT IS A SHORT SALE?
A short sale is a complex real estate transaction where the lenders agree to allow a homeowner to sell their property for less than the amount owed on the property. In other words, it is like a normal real estate sale, with a buyer and a seller, but in a short sale the contract between the buyer and the seller is subject to the seller's lenders approval of the loss. The reason the real estate transaction is subject to the third party approval of the lender is because in a short sale the lender must agree to write off or take a loss on the portion of a mortgage that is higher than the value of the home.
A short sale is a difficult residential real estate transaction to manage and get approved by the lender. It involves almost as much paperwork as it took to obtain the mortgage itself, and generally requires the homeowner to prove a financial hardship as to why the short sale should be approved. Most lenders will accept a short sale instead of a foreclosure because it gets the property off their books and more money in their pocket. Often lenders are not satisfied with the payoff in the contract between the buyer and seller so there is much negotiation between the parties. The paperwork involved in a short sale is unique and each lender often has different procedures in place for handling short sales.
This seems like a difficult and arduous process, and sometimes it often is. However, in general, a short sale is a better option for a current homeowner then bankruptcy or foreclosure proceedings. This is because a short sale allows the homeowner to sell the property and remove the secured debt associated with the home. Moreover, the seller can walk away from the sale with significantly less damage to their bottom line. A homeowner who chooses a short sale typically experiences significantly less impact to his/her credit and can sometimes negotiate a full settlement from his/her mortgage obligation.
3. WHY WOULD MY LENDER WANT TO TAKE A LOSS ON THE PROPERTY BY DOING A SHORT SALE?
Lenders are not in the business of owning real estate. They get upset when they have too many properties on their REO (real estate-owned) books instead of out in the market making it a profit through monthly mortgage payments. Plus, the foreclosure process is not free. Every house they foreclose on costs them thousands of dollars. So, in some instances, agreeing to a short sale is in the lender's best interest and they will save a lot of money.
4. HOW DO YOU CONVINCE MY LENDER TO DO A SHORT SALE?
We convince the lender that this is one of those circumstances where it's better to fish and cut bait. It's a matter of numbers and economics. We demonstrate to the lender hard numbers that will lead the lender to conclude that selling via a short sale is going to benefit them more than the amount they would get from foreclosing on the property and then selling it as an REO.
5. WHAT ARE MY OPTIONS?
Repayment Plan: This is a written agreement between you and the lender to help you make up missed payments. Generally these agreements require higher payments than the regular monthly mortgage amount for a short period of time, until the loan is brought current.
Loan Modification: A loan modification involves changing one or more terms of a mortgage. Modifications can be considered to reduce the interest rate of the mortgage, change the mortgage product (from an adjustable rate to a fixed rate, for example), extend the term of the mortgage or capitalize delinquent payments (add delinquent payments to the mortgage balance ' only available in extreme hardship situations).
Forbearance: The lender will allow you a period of time (3 to 6 months generally) during which to make either lower payments or no payments at all. Unless the loan term is extended, later payments generally will have to be higher than the original monthly mortgage payments until the loan is up-to-date again.
Reinstatement: A reinstatement is the simplest solution for a foreclosure; however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender's approval and will 'reinstate' a mortgage up to the day before the final foreclosure sale.
Special Forbearance: (Applicable to FHA-insured loans only.) The lender may allow partial payments for up to 18 months to allow the borrower to get back on track. The lender may also offer 'partial claim,' or advance funds, to help you become current.
Refinance: This will usually not be an option if you are seriously delinquent on the current mortgage (more than 3 payments late). If you are current, however, and there is equity in the property, this might be an option.
Rent: You might be able to rent your property if your house is vacant and you just need debt relief to cover most of the mortgage. This might not be a good option if you are unable to cover vacancies, maintenance, repairs, or if you are unable to pay the monthly difference between what the house rents for and what your monthly mortgage payment is.
Deed-in-lieu of foreclosure: This is considered a "voluntary foreclosure" and may even damage your credit every bit as much as an involuntary foreclosure or bankruptcy. However, this process allows homeowners to avoid public notice of a foreclosure sale. However, lenders are not obligated to accept your home's deed in lieu of foreclosure and you may be responsible for additional fees and costs associated with this process.
Deed for Lease: Homeowner returns the property that is FHA-insured back to the lender and leases the property for a twelve month period.
Short Refi: Homeowner negotiates with lender to refinance a mortgage for less than what is owed on the property.
Bankruptcy: Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.
Refinance: If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.
Servicemembers Civil Relief Act (military personnel only): If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.
Sell the Property: Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.
Foreclosure: This is the process by which the lender takes back the property and then tries to sell it. There are serious credit repercussions to allowing involuntary foreclosure on your home, much more so than with a short sale. Often the home sells for a lower price during a foreclosure sale or auction, potentially leaving the homeowner with an additional obligation for the deficiency amount. Additionally, the homeowner may be responsible under its agreement with the lender for the costs of the foreclosure process, which can often be tens-of-thousands of dollars. Homeowners should seek to avoid involuntary foreclosure.
Short Sale: If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.
6. CAN I STILL DO A SHORT SALE IF I'M TRYING TO DO A LOAN MODIFICATION?
Absolutely! You don't want to focus on only working a loan modification. A loan modification is never a guarantee and they usually take 6 months. The lender will usually tell you in the last minute, (usually a few days before the foreclosure sale date) that the loan mod didn't go through and now you need to move out the house. We've heard many stories from our clients that we were trying to help out. They were negotiating a loan mod and a few days before the foreclosure sale, they found out the loan mod did not go through. They then called us for help a few days before the foreclosure sale and we could not help. There just wasn't enough time for us to postpone the foreclosure sale.
7. SHOULD I JUST LET THE HOUSE GO?
You are probably under a lot of pressure right now, and might think you will be relieved if you just 'walk away' from the house and let it go to foreclosure, but I would caution you that the worst thing you can do is let your house go. It is well worth taking the time to find out what we can do for you or explore the above referenced options. You need to realize that a foreclosure can affect you for up to 7-10 years, so when you want to buy a new home, get a car, or anything else relying on your credit then you will be able to do it because your credit isn't damaged as it would be if you had a foreclosure on your record. Bad credit can even affect getting jobs these days.
8. WILL I HAVE ANY OUT OF POCKET EXPENSES?
You won't have to pay us anything nor will you have to pay for any of the closing costs or commissions from the sale. All expenses will be covered by the lender or the buyer.
9. CAN'T I JUST HAVE MY HOUSE LISTED WITH ANY REALTOR?
Our method is significantly more effective than just listing the house with any agent. We work with people facing foreclosure almost exclusively and have the expertise to get the job done right.
Most agents that do list short sales are unfamiliar with the process and don't really understand the details of how they work. Plus, the process most real estate agents use is ineffective. When you list your house with most agents, they will put your property in the MLS system as a short sale and then wait for someone to put an offer on the house. A lot of times, that offer never comes and the house forecloses. When an offer does come in, the agent then has to submit it to the bank and wait typically weeks or 1-2 months to get an approval or disapproval. Most buyers don't want to wait to buy a house, especially when there are thousands on the market right now that aren't short sales.
We will write an offer on the house immediately and we will negotiate with the lender until we reach a satisfactory purchase price. Also if you get the house listed with an agent, a buyer may need repairs to be made to the property to pass their loan conditions. If the bank can't make the repairs, which they usually don't, then the buyer will probably walk. We will buy the house AS-Is and make all the repairs ourselves. You also won't have to deal with a picky lender because we are a CASH buyer.
10. WHY SHOULD I WORK WITH YOU?
Because we are experts who specialize in short sales and you need someone who understands and does a lot of short sales. There are a lot of details to a short sale that only someone who does them can look out for and be aware of. If you are not working with someone who is proficient in short sales, you may not get a resolution to your foreclosure situation and unfortunately you could have a foreclosure on your record for 7-10 years as a result.
11. HOW CAN I TRUST YOU?
We have helped over 180 customers save their home from foreclosure. We have a high success rate. We have many testimonials from our happy customers. We would be happy to give you their number so you can call and verify. We are also proud local sponsors for Susan G Komen for the Cure.
12. CAN THE BANK COME AFTER ME FOR ANYTHING?
First, we cannot guarantee what the bank will or will not do but they usually do one of the following three things: issue a form 1099, sue for a deficiency judgment, or have you sign a new unsecured promissory note as condition of the short sale. The lender cannot issue both a deficiency judgment and issue a form 1099. Most people's experience is that the lender knows they will likely not recoup any money so they choose to write it off with a 1099 but each lender is different.
A form 1099 is a federal tax obligation a homeowner may receive if the property is sold for less than what is owed. For example, if you owe $250K and we sold your house on a short sale for $200K then you would have a tax consequence of $50K. The Mortgage Forgiveness Debt Relief Act of 2007, signed by President Bush in December 2007 excludes principle residences from tax obligation until 2010 as long as the loan was used to acquire, construct, or rehabilitate the home. A form 982 filed might provide relief for non-owner occupied loans but in all above circumstances. If you qualify for the Mortgage Forgiveness Debt Relief Act, then you will not have to pay any taxes on the loss. If you do not qualify for the Relief Act, you may have to pay taxes on the loss. If your CPA deems you to be insolvent, then you may not have any tax consequences either. Please consult a income tax professional (CPA) to find out what your tax liability will be.
A deficiency judgment is like above, when the property is sold for less than what is owed and they may pursue you for the deficiency. For example, if you owe $250K and we sold your house on a short sale for $200K then you would have a deficiency of $50K. These can be negotiated down. For example, the $50K deficiency can be negotiated to where you only pay $10K over 15 years at 0% interest (real example).
An unsecured promissory note is a new agreement between you and the lender in which you agree to pay a portion of the deficiency on a monthly basis as a condition of the bank accepting a short sale.
NOTE: Whether there is a short sale, deed in lieu of foreclosure, or foreclosure, one of the above will occur.
13. WILL A SHORT SALE 'SAVE MY CREDIT?'
The short answer is yes and no, a short sale can save you from the worst credit disasters. By defaulting on mortgage payments or having a foreclosure filed against your property, you will have damage to your credit. Your credit score will decline and those negatives will stay on your credit report for some time. However, it will get much worse if you allow the foreclosure to continue and do not try to short sale the property.
Once a foreclosed property is sold at auction, your credit score is further reduced and when the foreclosure is completed via eviction and repossession of the home, your credit will be even further damaged. If you can complete the short sale BEFORE either of these takes place, then you can prevent that further damage to your credit. What typically happens is the loan will show up as 'paid" on your credit report; however there can be a notation that says "settled for less than contracted amount. ' This is much more favorable than having a foreclosure on your credit report. In addition, the bank/lender reserves the right to add a deficiency judgment to your credit report for the discounted amount.
14. I HAVE ALREADY DECLARED BANKRUPTCY; CAN I STILL DO A SHORT SALE?
Yes, but it is more difficult. If the property is currently involved in a bankruptcy, the lender is not the only one who has to approve a short sale. The bankruptcy trustee will also have to approve it. This creates an additional layer of oversight and an additional party which wants to squeeze all it can out of the homeowner.
If you are considering bankruptcy as a way to stop the foreclosure, be sure to get good legal advice, since it is possible that a bankruptcy may not completely stop a foreclosure. Lenders often can get the bankruptcy set aside to continue to pursue a foreclosure.
15. WILL MY HOUSE BE LISTED FOR SALE?
It depends on the type of loan you have and if the bank is requiring the home to be listed.
16. WHAT IF THE BANK DOESN'T ACCEPT THE OFFER?
If worst case, they bank will not accept our offer, we can have an agent list the house to get a back-up offer in to the bank.
17. HOW DOES THE ENTIRE SHORT SALE PROCESS WORK?
Appointment with seller:
We all need to agree that a short sale is the most appropriate solution to your situation after eliminating all other options. If we all agree that a short sale is the most appropriate solution, we will schedule an appointment to meet with you at the property.
During that time, you will gather all the required information for the short sale package. If you live out of the area/state, we will require you to email, fax, or mail the documentation. Every lender requires the same documentation and the reality is that your transaction will not even be reviewed or begin until the necessary documentation is delivered. The documents we need you to provide are:
A. 2 months bank statements
B. 2 months proof of income
C. 2 years tax returns
D. Financial sheet showing income and expenses (we'll bring this)
E. Hardship letter explaining your circumstances
F. Copy of mortgage statement (for our records only)
G. Info from Home Owners Association
H. Authorization to Release Loan Information (we'll bring this)
I. Purchase and Sales agreement (we'll bring this)
At the appointment, we will go over the short sale process with you, sign and collect the short sale documents, and inspect the house for needed maintenance and repairs. If you are out of the area/state, we'll do everything by phone and we'll need access to the property to perform the inspection.
18. HOW LONG WILL THE SHORT SALE TAKE?
Typical timeframes and what to expect (varies between lenders):
Week 1 - Initial marketing and packaging. There's more to it than what one might think. We will be accumulating approximately 100 to 120 pages of documentation to send to the lender, and this process is very complicated. There is 90 % preparation only 10 % negotiation. If we do a great job packaging the home and seller, this will expedite the entire process.
Week 2 - The lender receives our package. It takes about 48 hours up to one week for the package to enter the lender's database.
Week 3 - The lender assigns the file to a loss mitigator who will likely work the case until closing. NOTE: This process can take the lender as short as 3 days to as long as 3 weeks (sometimes longer) to assign a loss mitigator. This process is out of our control. A lot of it depends on the lenders work load at the time of our request.
Week 3-4 - Let the games begin. Now that the loss mitigator has all the necessary documentation, they will order a Brokers Price Opinion (BPO) or an appraisal of the house. We will meet with the BPO agent or appraiser at your house to go through it with them and to provide sales comparable and a repair list. It is crucial that we be there to meet with them to ensure they are given adequate information about the house and the neighborhood. After the BPO or appraisal comes back to the lender, price negotiations begin.
Week 5+ - There will likely be a minimum of 3 to 4 counter-offers until we have a final answer. We will use a multitude of strategies to thwart the efforts of the evil empire A.K.A. the lender. This process tends to wear out most sellers, so please sit back and let us do our job. NOTE: Some loss mitigators make it very difficult to get a hold of them, which can further extend the process. We do everything we can to contact them or their supervisor but that too takes time.
Extra Information regarding the short sale process:
We will contact you once a week to let you know how the process is going.
Please do not talk to the lender during this process. They are trained and skilled in negotiations and many times like to use a technique called "good cop, bad cop.' They will cause chaos and only confuse issues that will be to their benefit. We may involve you if necessary, however, only if necessary, and only after we have spoken.
19. CAN I LIVE IN MY HOUSE WHILE YOU ARE NEGOTIATING A SHORT SALE?
Yes you can live in the property up until the day before the buyer purchases the property. The short sale process can take 30 days-90 days. Once we have a short sale approval letter in our hands, the lender will give us 30 days to close. At that time, we will give you a 30 day notice that we will be buying the property as soon as you can move out, but we need to close within 30 days or the short sale approval letter is void.
20. SO IS A SHORT SALE BETTER THAN A FORECLOSURE?
- Future mortgage loans and interest rates will be affected because the foreclosed homeowner must answer "Yes" to the Form 1003 Uniform Residential Loan Application question "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?"
- A foreclosure affects credit scores downward by 250 to 300 points, typically for over three years.
- Foreclosure stays on credit history for 10 years or more.
- Current and future employment may be affected as many employers now require credit checks, particularly for employees in financial or sensitive position.
- Outside of conviction of a crime, foreclosure is the most serious issue affecting a security clearance. For those employed by a police force, the military, a security company, the CIA or other governmental agency, a foreclosure could mean immediate loss of the security clearance and the position.
I hope I have covered all your questions. If you have any additional questions or want to schedule an appointment for me to meet with you, please give me a call immediately.
So, your house is in foreclosure? Now what? You are not alone. Causes of mortgage defaults may include, over extended financial obligations, loss of income, loss of employment, divorce, long term illness, poor financial management, etc' Try to look at the situation without attaching your emotions. From a strictly business viewpoint, you can more successfully analyze which option might best suit your needs and desires and move toward resolving your financial difficulty. One very important thing to remember: Time is of the essence, so take quick action in order to allow yourself enough time to complete the chosen process.
We are here to help you avoid foreclosure. We are foreclosure/short sale experts and specialize in creating win-win solutions for property owners that are facing a bank foreclosure. We can usually help you get out of your current situation FAST, possibly within 48 hours. There are never any fees or commissions to pay. We will buy your property in 'As Is' condition so there is no need to fix up or repair your property. If your home has enough equity, we can give you a cash offer and close within a week or less. If you have some equity, we may be able to take over your payments for you and make up your back payments. If your home has absolutely no equity, we can negotiate a short sale with your lender.
Rather than foreclose on your home, lenders would rather help you find ways to come current on your home mortgage or approve of a short sale. A short sale is a special real estate transaction which allows you to sell your home even if your mortgage loan is higher than the value of your home. Lenders want to help you avoid foreclosure because alternatives are less expensive, saving them thousands of dollars. If you are a few months behind on your mortgage and facing a foreclosure, you need to act quickly, before the foreclosure sale date. A short sale with your lender usually takes 3 months or longer.
Most realtors have a success rate of around 25% for short sales. The reason for this is because most buyers don't want to wait 3 months or longer to see if their offer has been accepted by the bank. Realtors also can't submit a short sale package to the bank until they have a buyer for your property, which delays the short sale process significantly. We on the other hand will submit an offer immediately to your lender and we don't mind waiting until the short sale has completed. This is why our success rate is 95% or higher. We have successfully completed many short sales and have saved many families homes from foreclosure. Our success ratio makes us Denver Short Sale Experts!
So if you want to AVOID FORECLOSURE on your Colorado home, please don't delay. Give us a call right away at 303.564.9637 or enter your property info using our Fast Response Form!
We are here to help you avoid foreclosure. We are foreclosure/short sale experts and specialize in creating win-win solutions for property owners that are facing a bank foreclosure. We can usually help you get out of your current situation FAST, possibly within 48 hours. There are never any fees or commissions to pay. We will buy your property in 'As Is' condition so there is no need to fix up or repair your property. If your home has enough equity, we can give you a cash offer and close within a week or less. If you have some equity, we may be able to take over your payments for you and make up your back payments. If your home has absolutely no equity, we can negotiate a short sale with your lender.
Rather than foreclose on your home, lenders would rather help you find ways to come current on your home mortgage or approve of a short sale. A short sale is a special real estate transaction which allows you to sell your home even if your mortgage loan is higher than the value of your home. Lenders want to help you avoid foreclosure because alternatives are less expensive, saving them thousands of dollars. If you are a few months behind on your mortgage and facing a foreclosure, you need to act quickly, before the foreclosure sale date. A short sale with your lender usually takes 3 months or longer.
So if you want to AVOID FORECLOSURE on your home, please don't delay. Give us a call right away at 303.564.9637.
Here is general info on short sale pertaining to different loan types:
FHA Loan:This is called the pre-foreclosure sale program. The Pre-Foreclosure Sale Program allows a Mortgagor in default to sell his or her home and use the sales proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount owed.
• The requirements are:
1. You must be living in the home-or moved out because of unstoppable reasons. For example, job transfer, couldn•t afford the utilities anymore.
2. Must be 31 days behind on payments
3. Must show reduction in income or increase in living expenses
4. Cannot abandon home
• You lender will always do a full settlement and they cannot pursue the deficiency.
• Your lender will pay you $750-$1000 incentive when you sell your house.
• The foreclosure sale will be postponed for 4-6 months to allow you to sell your house under the program.
VA Loan:
• You can be current or behind to do a short sale
• If you have a security clearance it will most likely not challenge any security clearance.
• You will be able to keep your VA eligibility on a short sale. The amount of the eligibility will be reduced by the deficiency amount.
• Your lender will always do a full settlement and they cannot pursue the deficiency.
Seller gets $1500 incentive from your bank.
Conventional Loans:
• Home Affordable Foreclosure Alternative (HAFA)
Requirements to be in the program:
1. Must be your primary residence
2. If you already moved out, it must not have been more than 1 year ago.
3. Loan must be originated before Jan 1, 2009
4. Your are delinquent on your mortgage, or you will be delinquent very soon.
5. Your unpaid principal balance must be less than $729,750
Details of HAFA for borrower:
1. You will get $3,000 incentive for relocation expense.
2. Foreclosure sale with be postponed for 4 months to allow you to sell your house.
3. Requires that borrowers be fully released from future liability for the debt
4. Lenders pay all servicing fees - homeowners have no out-of-pocket expenses
• If homeowner doesn't qualify for HAFA program they can still do a short sale:
* Anybody can participate in the short sale
* Unfortunately no incentives
* No Requirements other than experiencing a hardship.
* You can be behind or current on payments.
Here are some questions you may have regarding a short sale.
1. Why a short sale?
2. What is a short sale?
3. Why would my lender want to take a loss on my property by doing a short sale?
4. How do you convince the lender to do a short sale?
5. What are my options?
6. Can I still do a short sale if I'm trying to do a loan modification?
7. Should I just let the house go?
8. Will I have any out-of pocket expenses?
9. Can't I just have my house listed with any realtor?
10. Why should I work with you?
11. How can I trust you?
12. Can the bank come after me for anything?
13. Will a short sale 'save my credit?'
14. I have already declared bankruptcy; can I still do a short sale?
15. Will my property be listed for sale?
16. What if the bank doesn't accept the offer?
17. How does the entire short sale process work?
18. How long will the short sale take?
19. Can I live in my house while you are negotiating the short sale?
20. Why is a short sale better than a foreclosure?
1. WHY A SHORT SALE?
A short sale is one of the best ways to avoid foreclosure and might be the best course of action when homeowners do not have equity in their homes, are delinquent in their monthly mortgage payments, or are about to be.
Most lenders would much rather approve a short sale than foreclose on a property and take it into REO (Real Estate Owned). Foreclosure proceedings can cost as much as $75,000 to a lender, before they have to assume market volatility.
2. WHAT IS A SHORT SALE?
A short sale is a complex real estate transaction where the lenders agree to allow a homeowner to sell their property for less than the amount owed on the property. In other words, it is like a normal real estate sale, with a buyer and a seller, but in a short sale the contract between the buyer and the seller is subject to the seller's lenders approval of the loss. The reason the real estate transaction is subject to the third party approval of the lender is because in a short sale the lender must agree to write off or take a loss on the portion of a mortgage that is higher than the value of the home.
A short sale is a difficult residential real estate transaction to manage and get approved by the lender. It involves almost as much paperwork as it took to obtain the mortgage itself, and generally requires the homeowner to prove a financial hardship as to why the short sale should be approved. Most lenders will accept a short sale instead of a foreclosure because it gets the property off their books and more money in their pocket. Often lenders are not satisfied with the payoff in the contract between the buyer and seller so there is much negotiation between the parties. The paperwork involved in a short sale is unique and each lender often has different procedures in place for handling short sales.
This seems like a difficult and arduous process, and sometimes it often is. However, in general, a short sale is a better option for a current homeowner then bankruptcy or foreclosure proceedings. This is because a short sale allows the homeowner to sell the property and remove the secured debt associated with the home. Moreover, the seller can walk away from the sale with significantly less damage to their bottom line. A homeowner who chooses a short sale typically experiences significantly less impact to his/her credit and can sometimes negotiate a full settlement from his/her mortgage obligation.
3. WHY WOULD MY LENDER WANT TO TAKE A LOSS ON THE PROPERTY BY DOING A SHORT SALE?
Lenders are not in the business of owning real estate. They get upset when they have too many properties on their REO (real estate-owned) books instead of out in the market making it a profit through monthly mortgage payments. Plus, the foreclosure process is not free. Every house they foreclose on costs them thousands of dollars. So, in some instances, agreeing to a short sale is in the lender's best interest and they will save a lot of money.
4. HOW DO YOU CONVINCE MY LENDER TO DO A SHORT SALE?
We convince the lender that this is one of those circumstances where it's better to fish and cut bait. It's a matter of numbers and economics. We demonstrate to the lender hard numbers that will lead the lender to conclude that selling via a short sale is going to benefit them more than the amount they would get from foreclosing on the property and then selling it as an REO.
5. WHAT ARE MY OPTIONS?
Repayment Plan: This is a written agreement between you and the lender to help you make up missed payments. Generally these agreements require higher payments than the regular monthly mortgage amount for a short period of time, until the loan is brought current.
Loan Modification: A loan modification involves changing one or more terms of a mortgage. Modifications can be considered to reduce the interest rate of the mortgage, change the mortgage product (from an adjustable rate to a fixed rate, for example), extend the term of the mortgage or capitalize delinquent payments (add delinquent payments to the mortgage balance ' only available in extreme hardship situations).
Forbearance: The lender will allow you a period of time (3 to 6 months generally) during which to make either lower payments or no payments at all. Unless the loan term is extended, later payments generally will have to be higher than the original monthly mortgage payments until the loan is up-to-date again.
Reinstatement: A reinstatement is the simplest solution for a foreclosure; however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender's approval and will 'reinstate' a mortgage up to the day before the final foreclosure sale.
Special Forbearance: (Applicable to FHA-insured loans only.) The lender may allow partial payments for up to 18 months to allow the borrower to get back on track. The lender may also offer 'partial claim,' or advance funds, to help you become current.
Refinance: This will usually not be an option if you are seriously delinquent on the current mortgage (more than 3 payments late). If you are current, however, and there is equity in the property, this might be an option.
Rent: You might be able to rent your property if your house is vacant and you just need debt relief to cover most of the mortgage. This might not be a good option if you are unable to cover vacancies, maintenance, repairs, or if you are unable to pay the monthly difference between what the house rents for and what your monthly mortgage payment is.
Deed-in-lieu of foreclosure: This is considered a "voluntary foreclosure" and may even damage your credit every bit as much as an involuntary foreclosure or bankruptcy. However, this process allows homeowners to avoid public notice of a foreclosure sale. However, lenders are not obligated to accept your home's deed in lieu of foreclosure and you may be responsible for additional fees and costs associated with this process.
Deed for Lease: Homeowner returns the property that is FHA-insured back to the lender and leases the property for a twelve month period.
Short Refi: Homeowner negotiates with lender to refinance a mortgage for less than what is owed on the property.
Bankruptcy: Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.
Refinance: If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.
Servicemembers Civil Relief Act (military personnel only): If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.
Sell the Property: Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.
Foreclosure: This is the process by which the lender takes back the property and then tries to sell it. There are serious credit repercussions to allowing involuntary foreclosure on your home, much more so than with a short sale. Often the home sells for a lower price during a foreclosure sale or auction, potentially leaving the homeowner with an additional obligation for the deficiency amount. Additionally, the homeowner may be responsible under its agreement with the lender for the costs of the foreclosure process, which can often be tens-of-thousands of dollars. Homeowners should seek to avoid involuntary foreclosure.
Short Sale: If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.
6. CAN I STILL DO A SHORT SALE IF I'M TRYING TO DO A LOAN MODIFICATION?
Absolutely! You don't want to focus on only working a loan modification. A loan modification is never a guarantee and they usually take 6 months. The lender will usually tell you in the last minute, (usually a few days before the foreclosure sale date) that the loan mod didn't go through and now you need to move out the house. We've heard many stories from our clients that we were trying to help out. They were negotiating a loan mod and a few days before the foreclosure sale, they found out the loan mod did not go through. They then called us for help a few days before the foreclosure sale and we could not help. There just wasn't enough time for us to postpone the foreclosure sale.
7. SHOULD I JUST LET THE HOUSE GO?
You are probably under a lot of pressure right now, and might think you will be relieved if you just 'walk away' from the house and let it go to foreclosure, but I would caution you that the worst thing you can do is let your house go. It is well worth taking the time to find out what we can do for you or explore the above referenced options. You need to realize that a foreclosure can affect you for up to 7-10 years, so when you want to buy a new home, get a car, or anything else relying on your credit then you will be able to do it because your credit isn't damaged as it would be if you had a foreclosure on your record. Bad credit can even affect getting jobs these days.
8. WILL I HAVE ANY OUT OF POCKET EXPENSES?
You won't have to pay us anything nor will you have to pay for any of the closing costs or commissions from the sale. All expenses will be covered by the lender or the buyer.
9. CAN'T I JUST HAVE MY HOUSE LISTED WITH ANY REALTOR?
Our method is significantly more effective than just listing the house with any agent. We work with people facing foreclosure almost exclusively and have the expertise to get the job done right.
Most agents that do list short sales are unfamiliar with the process and don't really understand the details of how they work. Plus, the process most real estate agents use is ineffective. When you list your house with most agents, they will put your property in the MLS system as a short sale and then wait for someone to put an offer on the house. A lot of times, that offer never comes and the house forecloses. When an offer does come in, the agent then has to submit it to the bank and wait typically weeks or 1-2 months to get an approval or disapproval. Most buyers don't want to wait to buy a house, especially when there are thousands on the market right now that aren't short sales.
We will write an offer on the house immediately and we will negotiate with the lender until we reach a satisfactory purchase price. Also if you get the house listed with an agent, a buyer may need repairs to be made to the property to pass their loan conditions. If the bank can't make the repairs, which they usually don't, then the buyer will probably walk. We will buy the house AS-Is and make all the repairs ourselves. You also won't have to deal with a picky lender because we are a CASH buyer.
10. WHY SHOULD I WORK WITH YOU?
Because we are experts who specialize in short sales and you need someone who understands and does a lot of short sales. There are a lot of details to a short sale that only someone who does them can look out for and be aware of. If you are not working with someone who is proficient in short sales, you may not get a resolution to your foreclosure situation and unfortunately you could have a foreclosure on your record for 7-10 years as a result.
11. HOW CAN I TRUST YOU?
We have helped over 180 customers save their home from foreclosure. We have a high success rate. We have many testimonials from our happy customers. We would be happy to give you their number so you can call and verify. We are also proud local sponsors for Susan G Komen for the Cure.
12. CAN THE BANK COME AFTER ME FOR ANYTHING?
First, we cannot guarantee what the bank will or will not do but they usually do one of the following three things: issue a form 1099, sue for a deficiency judgment, or have you sign a new unsecured promissory note as condition of the short sale. The lender cannot issue both a deficiency judgment and issue a form 1099. Most people's experience is that the lender knows they will likely not recoup any money so they choose to write it off with a 1099 but each lender is different.
A form 1099 is a federal tax obligation a homeowner may receive if the property is sold for less than what is owed. For example, if you owe $250K and we sold your house on a short sale for $200K then you would have a tax consequence of $50K. The Mortgage Forgiveness Debt Relief Act of 2007, signed by President Bush in December 2007 excludes principle residences from tax obligation until 2010 as long as the loan was used to acquire, construct, or rehabilitate the home. A form 982 filed might provide relief for non-owner occupied loans but in all above circumstances. If you qualify for the Mortgage Forgiveness Debt Relief Act, then you will not have to pay any taxes on the loss. If you do not qualify for the Relief Act, you may have to pay taxes on the loss. If your CPA deems you to be insolvent, then you may not have any tax consequences either. Please consult a income tax professional (CPA) to find out what your tax liability will be.
A deficiency judgment is like above, when the property is sold for less than what is owed and they may pursue you for the deficiency. For example, if you owe $250K and we sold your house on a short sale for $200K then you would have a deficiency of $50K. These can be negotiated down. For example, the $50K deficiency can be negotiated to where you only pay $10K over 15 years at 0% interest (real example).
An unsecured promissory note is a new agreement between you and the lender in which you agree to pay a portion of the deficiency on a monthly basis as a condition of the bank accepting a short sale.
NOTE: Whether there is a short sale, deed in lieu of foreclosure, or foreclosure, one of the above will occur.
13. WILL A SHORT SALE 'SAVE MY CREDIT?'
The short answer is yes and no, a short sale can save you from the worst credit disasters. By defaulting on mortgage payments or having a foreclosure filed against your property, you will have damage to your credit. Your credit score will decline and those negatives will stay on your credit report for some time. However, it will get much worse if you allow the foreclosure to continue and do not try to short sale the property.
Once a foreclosed property is sold at auction, your credit score is further reduced and when the foreclosure is completed via eviction and repossession of the home, your credit will be even further damaged. If you can complete the short sale BEFORE either of these takes place, then you can prevent that further damage to your credit. What typically happens is the loan will show up as 'paid" on your credit report; however there can be a notation that says "settled for less than contracted amount. ' This is much more favorable than having a foreclosure on your credit report. In addition, the bank/lender reserves the right to add a deficiency judgment to your credit report for the discounted amount.
14. I HAVE ALREADY DECLARED BANKRUPTCY; CAN I STILL DO A SHORT SALE?
Yes, but it is more difficult. If the property is currently involved in a bankruptcy, the lender is not the only one who has to approve a short sale. The bankruptcy trustee will also have to approve it. This creates an additional layer of oversight and an additional party which wants to squeeze all it can out of the homeowner.
If you are considering bankruptcy as a way to stop the foreclosure, be sure to get good legal advice, since it is possible that a bankruptcy may not completely stop a foreclosure. Lenders often can get the bankruptcy set aside to continue to pursue a foreclosure.
15. WILL MY HOUSE BE LISTED FOR SALE?
It depends on the type of loan you have and if the bank is requiring the home to be listed.
16. WHAT IF THE BANK DOESN'T ACCEPT THE OFFER?
If worst case, they bank will not accept our offer, we can have an agent list the house to get a back-up offer in to the bank.
17. HOW DOES THE ENTIRE SHORT SALE PROCESS WORK?
Appointment with seller:
We all need to agree that a short sale is the most appropriate solution to your situation after eliminating all other options. If we all agree that a short sale is the most appropriate solution, we will schedule an appointment to meet with you at the property.
During that time, you will gather all the required information for the short sale package. If you live out of the area/state, we will require you to email, fax, or mail the documentation. Every lender requires the same documentation and the reality is that your transaction will not even be reviewed or begin until the necessary documentation is delivered. The documents we need you to provide are:
A. 2 months bank statements
B. 2 months proof of income
C. 2 years tax returns
D. Financial sheet showing income and expenses (we'll bring this)
E. Hardship letter explaining your circumstances
F. Copy of mortgage statement (for our records only)
G. Info from Home Owners Association
H. Authorization to Release Loan Information (we'll bring this)
I. Purchase and Sales agreement (we'll bring this)
At the appointment, we will go over the short sale process with you, sign and collect the short sale documents, and inspect the house for needed maintenance and repairs. If you are out of the area/state, we'll do everything by phone and we'll need access to the property to perform the inspection.
18. HOW LONG WILL THE SHORT SALE TAKE?
Typical timeframes and what to expect (varies between lenders):
Week 1 - Initial marketing and packaging. There's more to it than what one might think. We will be accumulating approximately 100 to 120 pages of documentation to send to the lender, and this process is very complicated. There is 90 % preparation only 10 % negotiation. If we do a great job packaging the home and seller, this will expedite the entire process.
Week 2 - The lender receives our package. It takes about 48 hours up to one week for the package to enter the lender's database.
Week 3 - The lender assigns the file to a loss mitigator who will likely work the case until closing. NOTE: This process can take the lender as short as 3 days to as long as 3 weeks (sometimes longer) to assign a loss mitigator. This process is out of our control. A lot of it depends on the lenders work load at the time of our request.
Week 3-4 - Let the games begin. Now that the loss mitigator has all the necessary documentation, they will order a Brokers Price Opinion (BPO) or an appraisal of the house. We will meet with the BPO agent or appraiser at your house to go through it with them and to provide sales comparable and a repair list. It is crucial that we be there to meet with them to ensure they are given adequate information about the house and the neighborhood. After the BPO or appraisal comes back to the lender, price negotiations begin.
Week 5+ - There will likely be a minimum of 3 to 4 counter-offers until we have a final answer. We will use a multitude of strategies to thwart the efforts of the evil empire A.K.A. the lender. This process tends to wear out most sellers, so please sit back and let us do our job. NOTE: Some loss mitigators make it very difficult to get a hold of them, which can further extend the process. We do everything we can to contact them or their supervisor but that too takes time.
Extra Information regarding the short sale process:
We will contact you once a week to let you know how the process is going.
Please do not talk to the lender during this process. They are trained and skilled in negotiations and many times like to use a technique called "good cop, bad cop.' They will cause chaos and only confuse issues that will be to their benefit. We may involve you if necessary, however, only if necessary, and only after we have spoken.
19. CAN I LIVE IN MY HOUSE WHILE YOU ARE NEGOTIATING A SHORT SALE?
Yes you can live in the property up until the day before the buyer purchases the property. The short sale process can take 30 days-90 days. Once we have a short sale approval letter in our hands, the lender will give us 30 days to close. At that time, we will give you a 30 day notice that we will be buying the property as soon as you can move out, but we need to close within 30 days or the short sale approval letter is void.
20. SO IS A SHORT SALE BETTER THAN A FORECLOSURE?
- Future mortgage loans and interest rates will be affected because the foreclosed homeowner must answer "Yes" to the Form 1003 Uniform Residential Loan Application question "Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?"
- A foreclosure affects credit scores downward by 250 to 300 points, typically for over three years.
- Foreclosure stays on credit history for 10 years or more.
- Current and future employment may be affected as many employers now require credit checks, particularly for employees in financial or sensitive position.
- Outside of conviction of a crime, foreclosure is the most serious issue affecting a security clearance. For those employed by a police force, the military, a security company, the CIA or other governmental agency, a foreclosure could mean immediate loss of the security clearance and the position.
I hope I have covered all your questions. If you have any additional questions or want to schedule an appointment for me to meet with you, please give me a call immediately.
So, your house is in foreclosure? Now what? You are not alone. Causes of mortgage defaults may include, over extended financial obligations, loss of income, loss of employment, divorce, long term illness, poor financial management, etc' Try to look at the situation without attaching your emotions. From a strictly business viewpoint, you can more successfully analyze which option might best suit your needs and desires and move toward resolving your financial difficulty. One very important thing to remember: Time is of the essence, so take quick action in order to allow yourself enough time to complete the chosen process.
We are here to help you avoid foreclosure. We are foreclosure/short sale experts and specialize in creating win-win solutions for property owners that are facing a bank foreclosure. We can usually help you get out of your current situation FAST, possibly within 48 hours. There are never any fees or commissions to pay. We will buy your property in 'As Is' condition so there is no need to fix up or repair your property. If your home has enough equity, we can give you a cash offer and close within a week or less. If you have some equity, we may be able to take over your payments for you and make up your back payments. If your home has absolutely no equity, we can negotiate a short sale with your lender.
Rather than foreclose on your home, lenders would rather help you find ways to come current on your home mortgage or approve of a short sale. A short sale is a special real estate transaction which allows you to sell your home even if your mortgage loan is higher than the value of your home. Lenders want to help you avoid foreclosure because alternatives are less expensive, saving them thousands of dollars. If you are a few months behind on your mortgage and facing a foreclosure, you need to act quickly, before the foreclosure sale date. A short sale with your lender usually takes 3 months or longer.
Most realtors have a success rate of around 25% for short sales. The reason for this is because most buyers don't want to wait 3 months or longer to see if their offer has been accepted by the bank. Realtors also can't submit a short sale package to the bank until they have a buyer for your property, which delays the short sale process significantly. We on the other hand will submit an offer immediately to your lender and we don't mind waiting until the short sale has completed. This is why our success rate is 95% or higher. We have successfully completed many short sales and have saved many families homes from foreclosure. Our success ratio makes us Denver Short Sale Experts!
So if you want to AVOID FORECLOSURE on your Colorado home, please don't delay. Give us a call right away at 303.564.9637 or enter your property info using our Fast Response Form!
