What is a real estate Short Sale?
An Arizona Short Sale is the process of selling your home for less than what you owe your lender(s). Through expert marketing and negotiations, an experienced short sale Realtor can help you navigate your way to a completed sale and avoid the possibility of a foreclosure on your record! The best part is your lender(s) pay virtually all sales costs including commissions, escrow / title fees and repair costs. My unique short sale program is absolutely FREE to you and is guaranteed to be the fastest way to sell a home that has no equity!
Is an Arizona Short Sale for me?
Well...it depends on your situation! Most mortgage lenders are willing to work with a borrower that is faced with a real financial hardship and is unable to pay their mortgage payments. This is not a "get out of jail free" card and you must qualify. My program expertly packages, proposes, and negotiates a real estate short sale on your behalf while you sit back and allow me to work hard for you for FREE! First we must see if you qualify and that is why I offer a completely free and confidential consultation to go over your situation, explain your options and educate you on the short sale process.
If I do an Arizona Short Sale, will I have to pay to sell my home?
ABSOLUTELY NOTHING! While some short sale companies try and charge you an upfront fee, my team and I will handle your entire Arizona short sale free of charge. And if your lender(s) try and make you come out of pocket and pay them extra money to accept your short sale, then we will negotiate and get them to precede without any out of pocket costs to you!
I add this clause in all of my short sale proposals and offer contracts:
"Seller's agreement to sell is subject to approval by existing lender of a Short Sale at no cost to Seller. Seller shall not be required to deposit funds to close escrow or pay any fees for short sale approval."
Remember, lenders approve Arizona short sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.
Can I simply deed my property to someone else and avoid the hassle?
No, remember that when you purchased your house it came with a note and a deed. The note represents the money that you borrowed from the bank; the deed shows the world who owns the property. Just because you deed your home to someone else, you are still responsible for the note (loan) you borrowed to buy the home. Plus when you deed your property to someone else you lose control of your ability to make decisions.
What sort of hardship would my lender consider legitimate?
While each lender has their own short sale qualifications, there are some basic hardships that all lenders will consider when approving a short sale. Below you will find a list of "hardships" that are common and frequently accepted by mortgage lenders:
•· Family illness, injury, or death
•· Illness or injury in the extended family - particularly if it forces relocation
•· Job relocation when the property is equity deficient
•· Job loss or significant income loss
•· Divorce or split of domestic partners
•· Adjustment in mortgage payment or unforeseen increase in living expenses
I am current on my mortgage; will my lender consider an Arizona Short Sale?
The politically correct answer is MAYBE while the real answer is NO! I have done some short sales where the homeowner was current and it only took me a year and a half. I have also started many short sales while the owners were current and after about 6-7 months of no real progress and multiple buyers dropping out the owners got frustrated and stopped paying. Then we got the results we were looking for and completed the short sales!
So in reality the answer is no because most lenders will not send your mortgage paperwork to loss mitigation unless they have a non-performing asset due to the fact that you are not paying. And until it is loss mitigation we cannot get to the real decision makers who can approve the file!
Why would a mortgage company agree to accept an Arizona Short Sale?
There are actually several reasons why a mortgage company would approve a short sale payoff including the following:
Foreclosure Cost Money - This is the main reason a lender will accept a short sale. When your lender(s) realize you are no longer paying your payment they start calculating their costs to foreclose. They first send out a BPO (Broker Price Opinion) Agent to the home to give an estimation of value! Once they believe they understand the value of the property they then look at the states foreclosure process and then calculate how many months it will be before they own the home. Add some late fees, attorney costs, processing costs, loss mitigation fees and hold time into the mix and they come up with their true cost of foreclosure! THIS IS JUST THE COST TO FORECLOSE...DON'T FORGET TO ADD THE COST TO THE BANK AFTER THEY TAKE THE PROPERTY BACK! There are Asset Management Fees, broker fees, fix-up costs, more holding costs and then they get a low ball offer from some investor or first time home buyer looking to get a good deal and still sell it for less than they would have if they just accepted the short sale offer 10 months earlier!
Government Incentives - Now the government is watching and incentivizing mortgage companies for participating in programs that help homeowners avoid foreclosure! Short sales are no exception and the recent addition to the Making Homes Affordable Plan gives money to lender(s) who accept a real estate short sale!
Legal Concerns - Many mortgage lenders are aware that the loans they purchased or produced have some Real Estate Settlement And Procedures Act (RESPA) or Truth-In-Lending Act (TILA) violations and want to avoid any legal ramifications from borrowers that sue the lender(s) for mortgage fraud. Add this to the negative press they would receive and they have some real incentive to work with a homeowner who has a verifiable hardship!
Wall Street Is Watching - During the housing boom many mortgages were pooled together and sold as Mortgage Backed Securities (MBS). These MBS's were then sold on Wall Street to both national and international investors who had a big pile of money and needed to invest it somewhere. The whole point of buying a MBS was that it was supposed to diversify the risk of default by pooling loans from strong borrowers with loans of more risky borrowers giving a good return on investment (ROI) without a ton of risk. The problem occurred when borrowers from all risk ratings started defaulting and the result was the mortgage meltdown we are experiencing now and the fact that Wall Street no longer wants to buy MBS's! In order to get back to business and start pooling loans again banks need to clean up their books and start making responsible loans to qualified borrowers! A successful short sale gets the non-performing notes off their books, money in the door quickly, and gives banks the ability to start lending again! Once that happens Wall Street will come back around with their big pile of money to buy up the notes!
Reserve Requirement - Every bank that lends money needs to have a certain amount of money set aside in a reserve fund to deal with potential loss from bad loans. The amount of money in the fund is proportional to the amount of money that is being lent out and not performing. As a lender accepts a short sale less money is needed in the reserve fund and more money can be lent out.
I have two loans, can I still do an Arizona Short Sale?
ABSOLUTELY yes! I have completed many short sales on homes with more than one lien. The hard part about negotiating a short sale on a home that has two loans is the fact that we are basically doing two separate short sales so it is double the work. The lender in the first lien position is in the most control and therefore tries to dictate what the subordinate lien holders will get. The subordinate lien holders are trying to mitigate their loss and can become stubborn threatening to disapprove a short sale unless they get more money. This is where an expert negotiator can work with all lenders involved to come to an agreeable payoff resulting in an approved short sale. My success rate when working with two or more lenders is phenomenal and I can show you completed short sales where more than one lender was involved!
My property is in rough shape and needs work; can I still do an Arizona Short Sale?
Sure, in fact this may incentivize your lender(s) to work with you even more! Remember, you lender does not want to own your house...and they really don't want to own your house that needs a bunch of repairs! Aside from expense of completing the work, lenders are simply not set up to get the work done. They are in the loan business, not the fix- it business.
I am concerned about my credit, how will an Arizona Short Sale affect my credit?
Credit reporting is the only consequence of a short sale we have a hard time negotiating away. In some cases we are able to ask for and receive a 90 day halt on credit reporting but it is really rare. Our main goal is help you avoid a foreclosure on your record which could affect your credit score by 200-400 points and will stay on your record for seven years!
Late or missed payments are what negatively affects your credit, not the actual short sale mark. Most homeowners see an 80-200 point drop in their credit score due to the fact that short sale process takes anywhere from 2-6 months to complete and each month a "missed payment" gets reported. In general a short sale will show up on your credit as "Paid As Agreed" or "Paid In Full, Less Than Owed" and stays on your record for seven years but only prevents you from getting a new home loan for about two! This is a dramatic increase over foreclosure or bankruptcy so there is no reason why anyone would just walk away from their home and not attempt an Arizona short sale.
Special Note: We always ask the bank to report a "Full Satisfaction" instead of "Paid As Agreed" or "Paid In Full, Less Than Owed" because it will have less of an impact on your credit rating. Then we would suggest getting credit repair to get the missed payments removed from your report and it should look as if the short sale never happened. If this is achieved, your credit will barely be affected!
Can a lender come after me or my other assets if I sell my home for less than what I owe?
Well that depends if you qualify for protection under Arizona's Anti-Deficiency Statutes. The thing to consider is that the deficiency law will protect those whose home is a single family residence or a single two-family residence on less than 2.5 acres of land.
Currently as long as the money you borrowed is considered purchase money (meaning NOT a HELOC or cash-out-refinance) and the property is a single family residence or duplex on 2.5 acres or less then you should be protected. The only time a HELOC or cash-out-refinance is protected is if you pulled out the loan with the "intent" to upgrade the house and can show receipts! Furthermore the homeowner cannot "waste" the property meaning they cannot deliberately fire sell or damage the property in any way that affects the value of the home. If you do then you are not protected under the law. Lastly, this law is about to change starting September 30th, 2009.
The statute SB 1271 was just passed and is intended to amend Arizona Revised Statutes A.R.S. § 33-814. The new law hopes to protect primary residence homeowners and enable lenders to go after investors who are defaulting on their investment properties. But as it stands the creators of this amended version couldn't even get this right.
As written SB 1271 requires that the trustor (owner) to "utilize" and "use" the property as a dwelling for six consecutive months to be protected from a deficiency judgment. This means that only primary residences are protected!
The very definition of utilize is to: To put to use, especially to find a profitable or practical use for. NONE of that means in any way shape or form for the owner to "occupy" or "live-in" the property. If SB1271 intended the owner of the home must live there then why didn't the revised statute A.R.S. § 33-814 clearly state this intention?
Also Arizona law clearly prohibits a secured lender from suing a homeowner in default when the funds for that mortgage were "purchase money" funds. Meaning that they financing for is mortgage went directly to buy the property.
So this law is being challenged even before it goes into effect and could change within the next couple of months. For now focus on the current law as stated in the first paragraph.
It is important to note that an expert short sale negotiator will negotiate for the lender to produce a waiver of deficiency or to include a paid as agreed statement in their short sale acceptance letter.
What are the possible tax consequences for an Arizona Short Sale?
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home's value or the taxpayer's financial condition.
Your lender will issue you a 1099-C Cancellation of Debt form. In turn you must prove your insolvency by proving that at the time of the discharged debt your total debts were more than the fair market value of your total assets.
Though the forgiven debt is excluded from your income due to the 1099-C, you must still report it on a Form 982 - Reduction of Tax Attributes Due to Discharge of Indebtedness form. Which combined with your insolvency will absolve you of the tax liability.
About The Author Cody Sperber (Arizona Short Sale Realtor)
Cody Sperber is a full time real estate investor, Realtor and small business owner that specializes in short sales and loan modifications. Over the last few years Cody has put together and trained a team of highly skilled loss mitigation experts that masterfully package, propose, and negotiate loan modifications and short sales on their clients behalf. Cody owns and manages www.CodySperber.com, www.SellQuickForCash.com, www.ForeclosureCounseling.com, and www.AdjustMyLoan.com(all top ranking websites in Arizona). Cody's creativity and ability to overcome objections allow him and his team to share a ridiculously high success rate! So if you are facing foreclosure and need someone to educate you on your options, contact Arizona's #1 Short Sale Realtor at 602-626-3598 today for your FREE CONSULTATION.
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