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Short Sale Help

Short Sale Help

For the past two years, home values have plummeted. Couple plummeting values with the hyper inflated prices Florida homes saw over the past five years, and the result is a large number of stressed out homeowners with mortgage balances that exceed the value of their home. Add in job-loss or decreased income and many home owners are left wringing their hands with fear or worry and are frozen into inaction.

Market America Can Help

Many of the soon to be defaulting borrowers are not taking action for a number of reasons:

·         They are embarrassed

·         They are afraid of what may happen if they alert the lender to impending problems

·         They are unaware of their options and do not seek help

·         They are intimidated by the process

·         They feel inadequate to talk intelligently about financial matters to strangers

·         They are in denial

·         They do not take the time to deal with the issues or follow up by providing documentation that supports their case

·         They are unaware they could be a candidate for a loan modification or short sale

·         They believe that they will hurt their credit score

·         They are solid citizens that were raised to fulfill their obligations no matter what the cost to them of their family

·         They have a view that a workout may be a form of welfare and do not like that stigma

There are Solutions

We don’t have a silver bullet or a magic pill, but what we do have is a process that  has a high rate of success. It is a process that will identify, number one, if you and your situation qualify for a loan modification or a short sale. We help you identify your objectives and assemble the necessary paperwork, and then we take over negotiations with your financial institutions. Possible outcomes include:

1.   Interest Rate Reduction

2.   Extension of Loan Terms

3.   Delinquent Payment Forgiveness

4.   Conversion from Adjustable Rates to a Fixed Rate

5.   Principal Reduction

6.   Forbearance Agreements

7.   Deed in Lieu of Foreclosure

8.   Short Sales

9.   Auction

What's the Next Step?

You need to arrange a confidential meeting with one of our Short Sale experts.

We understand these are difficult times, but you are not alone. There are answers, and there are actions you can take. We can help.

We have done many short sales. We have the experince and the professionalism.

FIll out the below form or call Gregg Fous @ 800-439-1580, Ext. 52.

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Nine Options When Facing Foreclosure

9 Options When Facing Foreclosure:

1.    Do Nothing: If a homeowner does nothing, they most likely will lose their home at a foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information. Therefore, doing nothing is not the best option.

2.    Payoff/Refinance: Completely paying off the entire loan amount plus any default amount and fees. Usually, this is accomplished through a refinance of the debt. New debt is a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, you will want to make sure there is equity in the home.

3.    Reinstatement: Completely paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.

4.    Loan Modification: Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level. To qualify, you must prove to the lender you have fixed the problems that caused the late payment.

5.    Forbearance: Lender may be able to arrange a repayment plan based on the homeowners financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.

6.    Partial Claims: A loan from the lender for a 2nd loan to include back payments, costs and fees.

7.    Deed in Lieu of Foreclosure: Give the property back to the bank instead of the bank foreclosing. Banks generally require the home to be well maintained, and all mortgage payments and taxes must be current. Most loan applications ask if this has ever happened.

8.    Bankruptcy: This option can liquidate debt and/or allow more time. I can refer you to a qualified bankruptcy attorney.

n  Chapter 7 (Liquidation) They completely settle personal debt

n  Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.

n  Chapter 11 (Business Reorganization) A business debt solution

 9.  Sale: If the property has equity (money left over after all loans and monetary encumbrances are paid), the homeowner may sell the home without lender approval through a conventional home sale. In this case, the homeowner will get cash from the sale. On the other hand, a Short Sale (also known as a pre-foreclosure sale) can be negotiated with your lender by the real estate professional if what is owed is MORE than the property's value.


What is a “Short Sale”?

WHAT IS A SHORT SALE? A "Short Sale" (Also referred to as: "Negotiated Settlement" or "Short Pay") occurs when a lender agrees to accept less than the amount owed on the original note or total payoff, as an alternative to foreclosure. If the property is worth less than the amount owed on the loan, then, even if the lender forecloses and takes back the property, they know they are going to take a loss. We can often convince lenders that they will "do better" if they take less than what is owed now rather than taking the property back by foreclosure.

HOW LONG WILL IT TAKE? The Short Sale negotiation process can be rather lengthy. It may take several weeks to several months for an approval. Many lenders will have several layers of bureaucracy, insurers and investors that we will have to maneuver through in order to get a Short Sale approved. So, it is important to be patient during this long process.

BUT MY HOUSE IS GOING TO FORECLOSURE, WILL I HAVE ENOUGH TIME? Maybe, maybe not. Just starting a Short Sale will NOT automatically stop a foreclosure. However, many times we can convince a lender to stop the foreclosure to let us attempt to negotiate the Short Sale. While there are no guarantees, it is worth the attempt.

CAN I STAY IN THE HOUSE? The key word in a "Short Sale" is sale. The purpose of a Short Sale is to get the property sold. This is not a program that can stop a foreclosure and allow you to keep the house indefinitely. Moreover, it will be easier to sell the house if it is vacant. Therefore, you should most certainly begin making plans to vacate the property.

HOW DO I KNOW THIS WILL WORK? Again, there are no guarantees. We cannot, have not, and will not make promises to you that this will work. Once you miss a payment, the lender is in charge and can proceed to foreclosure if they choose. But we know they do not want to and we are very good at presenting alternatives to the lender that they often want to accept, as opposed to moving forward with a foreclosure. We are very proficient at what we do, but NO GUARANTEES are being made as to whether or not the lender will accept the Short Sale.

WILL I GET ANY MONEY FROM THE SALE? No. A universal requirement of lenders in granting a Short Sale is that the borrower will not get any proceeds from the sale of the property. Being that the lender is going to take a loss on your loan, they are most certainly not going to allow you to profit from the situation.

WHAT HAPPENS IF THIS DOESN'T WORK? Your house will likely go to foreclosure. A Short Sale is something we try after you have exhausted your other options.

WHAT IS A "RELEASE"? A lender may offer a "release", which is a security instrument against the property in exchange for less than the total amount of the note. A release will allow the property to be sold without paying off the obligations of the note. However, the note is not satisfied. Advantages: This successful Short Sale will allow the property to be sold and thus, avoid foreclosure. Disadvantages: The remaining debt on the property (sometimes called a "deficiency") still exists. In other words, you are still liable for the note and still owe the money to the lender. Reality: It is not likely the lender will purse the deficiency unless you have other significant assets. However, if you chose not to try the Short Sale before going to foreclosure, and then you end up going to foreclosure, it will result in you having a deficiency anyhow.

WHAT IS A SATISFACTION? A lender may agree to accept less than they are owed as complete and total satisfaction of the note and release its lien against the property. Advantages: Your note and obligation to the lender are satisfied for less than you owed. When the property is sold, the debt is paid off completely. Disadvantages: You may have some tax consequences that you should discuss with your tax advisor due to the fact the lender is making money you owe them disappear. Sometimes our negotiations are successful in obtaining a satisfaction. However, there are other times where the lender will only negotiate to a release.

HOW CAN I HELP? The lender will require a review of a financial package that usually includes: (2) months of banks statements, (2) months of paycheck stubs, (2) years of tax returns, a financial worksheet and other information. The leading cause of delay and even denial of our offer to the lender is caused by the seller failing to cooperate and/or deliver the necessary items in a timely fashion. To help us succeed, please find as much of this information as you can right now and complete the attached "Financial Worksheet." These things will help us work faster and increase your odds of a successful Short Sale.



Are You Upside Down on Your Mortgage?


Are you upside down on your mortgage? Which one of these travelers are you?
 
I have this vision of two different people traveling two different paths to the same goal. One traveler is carting luggage over one shoulder, two bags in one hand, a brief case in the other and his carry-on tucked under his arm. He is a mess. He keeps getting jostled by people passing him because he is going so slowly; mentally, our first traveler is bogged down not only his baggage, but he is worrying about missing his plane. He cant get his last meeting out of his mind, and his preoccupation with his thoughts make him miss the signs along his path that would give him directions to his gate. By the time he gains enough concentration to figure out where to go, he missed his plane.
 
Our second traveler travels light. No baggage. No thoughts about his last meeting. He can concentrate on where is gong and how to get there. He sees his directional signs as they appear. Not only does he get to his plane on time, he gets there with a clear enough presence of mind to board first, get an isle seat, and get a pre flight beverage which he sips while planning his next venture.
 
Ok, corny, sure, but I was having a discussion about foreclosures, short sales, upside down loans, overdue credit cards bills, the ethics of stopping payments on a mortgage and, indeed, bankruptcy, with my dental hygienist yesterday. While my eyes were closed and I couldn’t talk because of the prodding and poking happening on my teeth, I thought of that analogy in trying to explain that moving ahead and getting free of the shackles of financial stress.
 
I have a number of friends that described almost a feeling of weightlessness once a decision was made to move forward without the baggage of debt, upside down mortgages, large house payments and the fear of their own ethical and financial demise.
 
You may recognize yourself as the first traveler. You need to be the second.
 
I am not an attorney. I cannot and will not give legal advice, and anyone in a tough financial position should consult a good attorney. If you need a reference to one, I am happy to oblige.
 
I can tell you that it will be very difficult to move forward with your life and to begin the journey of rebuilding your finances if you still carry all the baggage you have now and try to travel a path to your goal of financial freedom, since your path, in reality, is strewn with obstacles.
 
Here are some things you need to know.
 
  1. The bank that you gave the mortgage to anticipated that you might default on your loan and made provisions for it. The bank loaned you money based on at least two major factors: 1) Your credit worthiness and 2) The value of the house. If the house value was not important, they would not have asked you for a mortgage. A mortgage is a document that accompanies the “promise to pay” note that says, in short, “If I don’t pay, you can take my house.” I was brought up with the same ingrained ethical doctrine that most of you were. I promised to pay, so I will. But, you need to know all the facts.
  2. Your credit may be repaired in a few years, but it might take ten years for the value of your home to rise above your current mortgage balance. Meanwhile, you may still be hurting your credit while you try to juggle your credit card and mortgage balances.
  3. Strategic default and foreclosure may be the wisest financial decision you could make.   Brent White has written a must-read white paper for those involved in this decision. I have pasted the abstract below. Be sure to read the entire report here.


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I Want Out of This House, But I Owe Too Much.

 

I have often been approached by friends or subscribers that are caught in the same bind that has swallowed up many real estate owners. Their loan is accelerating or being called, the interest rate is adjusting or they just can’t keep up the payments on the three homes they bought.

 

“Gregg, can you help me quickly sell my home?”

 

“What should I do? Can you find me an investor? Another lender?"

 

“Help!”

 

Some of these folks are still unrealistic in what they think their investments are worth. They are thinking, “I paid $350K for this house. If I could just get my money back, I don’t need to make a profit.” 

 

Remember, what you pay for something has absolutely no bearing on what you can sell it for or what it is worth in today’s market. I have said it before, you lock in your profits when you buy, not when you sell.

 

I am not a lawyer, and in all situations, you should consult one before making any major decisions. If you are in a crunch financially, you have trouble making the new payments or you are in an “upside down” loan situation (you owe more than the house is worth), here are some the actions you should take:

 

  1. Define you situation. Make a very detailed financial summary. Create two documents. One should be a concise and substantiated list of all your assets and associated debt. It should include account numbers with bank names, loan amounts, payments, terms and balances - a full disclosure financial statement. It helps to keep this on a spreadsheet that you can update as needed. Assemble the bank statements, appraisals, market comps, etc. that correlate to the statement (this is what I mean by substantiated). It would be helpful to get an accordion file to keep this information in so you can use it in a meeting if you have to. Do not lie to yourself about market values. Make sure to separate retirement funds that are in an IRA or 401K from other funds. On your real estate holdings, either consult a good Realtor or get an appraisal. Market America Realty can get a BPO (Broker Price Opinion) for you for $75.00. This will be money well spent - a value with no emotion, substantiated by logic.

The second piece of paper should be an income statement. How much cash is coming in and how much is going out? Don’t forget to include insurance and property and income tax payments that may only be made yearly. Make a forecast for any income swings like lost rent or raises.

 

  1. Evaluate your situation. If you do the above thoroughly, you will be able to unemotionally review your situation and make clear choices based on facts, not emotions. No one cares how you got here, why you lost your job or why you made poor decisions. What matters is what you do from today on. Your evaluation may tell you that you have four months before you have to default, or perhaps you are already in default.

 

  1. Sit down with an advisor or two. I suggest an attorney and a Realtor. Your meeting will help you distill your options and simplify your alternatives. I have one of these meetings at least once a week. The preparation you did will determine if the meeting is productive or not. Putting all your documents together is critical. At this meeting, you will have many of the unknowns explained to you. Many of my clients' fears have to do with not knowing options. Once they are in black and white and you can hear the “worst case scenario,” you can address your concerns and move forward.

 

  1. Move Forward. Most of the problems we have with Short Sales and loan modifications comes from the inability of the borrower to put his data together. I have clients that have actually not opened any of the mail sent to them by the bank. I call this the ostrich response – you know, the old head in the sand. Big Mistake. The actual truth will be better than what your imagination can conjure up.

 

We are not lawyers, we are Realtors. I cannot give legal advice, but I can tell you where to get it. I have put together a package of forms that is very complete, and, once filled out by you, we can sit down and help you decide on the move forward plan. To get this package, CLICK HERE. If you would rather have a confidential conversation about your options, call me at 800-439-1580 ext. 52 or email me for an appointment  mail@greggfous.com

 

We can discuss:

 

Short Sales

Loan modification

Attorney referrals to discuss bankruptcy and what that will mean to you

The value on your house – you can order a BPO through us.

Selling your house

 

 

 

The Biggest Mistake I See in Short Sales by Sellers

 

Once you have done all of the work to prepare a tight package for the bank (see above), the last remaining piece is the contract to buy the home. Most banks will not look at a Short Sale Package until there is an executed contract to sell the home. What’s the biggest mistake sellers make? They ask too much for their home, so they can’t get that last piece.

 

If you are under water, it does not really matter how deep, now does it. This is not the time to worry about what a “good deal” your purchaser is getting. What the seller should be concentrating on is getting this situation behind him and moving on with life and reconstruction, not the maximized return for the bank. Get a BPO done, or get two if you wish. The bank will insist on their own BPO anyway. By the way, many Short Sales sell well below the BPO value and are accepted the banks.

 

What about the deficiency? If you owe $300,000 on your home, the BPO and contract come in at $200,000 and you have no other funds to pay the bank with, the only way for you to sell that home is to get the bank to release you from the promissory note for less than you owe. This is called a Short Sale. You are selling the home short of what you owe the bank. The difference is called the deficiency. 

 

You need to clearly understand the ramifications of this deficiency. I have had sellers tell me the only way they would accept the short sale is if the bank waives the deficiency (actually writes it off). However if the bank does that, they will report it to the IRS, and the debtor will have a taxable event (he will have to pay taxes on the amount waived). If the bank reserves the right to come after him later there will be no taxable event, but he will have this hanging over his head. Oh what to do?

 

The answer is not simple, but has a lot to do with the personal financial picture that he put together in step one. Whether the home was his primary residence or an investment home will also be a big factor. Without knowing the particular situation, I cannot answer the question about the deficiency, but there are ways to not pay tax on this event, and this would be reviewed in the attorney meeting.

 

 

What about all of the fees and closing costs? In a Short Sale, the seller generally has no money for closing costs like title work, etc. These fees will come out of the proceeds and will lessen the amount the bank gets. We do not charge an upfront fee for handling a short sale. Our attorney does the short sale negotiating work for a nominal fee at closing, but that fee  comes from the bank as well. Please do not hire someone to handle your short sale that charges a fee to you.

 

If you would like to sit down with one of our Short Sale specialists, please call 800-439-1580 ext. 52 or email me at Mail@greggfous.com.

 

Gregg