My clients are always asking me why short sales for sellers in default of their mortgages are a better solution than foreclosure and deed-in-lieu-of foreclosure. My response is that it will be less damaging to your credit and you will be able to recover faster than if you have a foreclosure listed on your credit. I did not know exactly how much faster, though.

Fannie Mae has just introduced their most recent guidelines for new mortgage loans which address individuals with various types of foreclosure history.

Potential borrowers with a foreclosure on their credit record must wait 5 years to be considered for new funding, and are subject to additional credit and down payment requirements for 5 to 7 years.

Deed-in-lieu-of-foreclosures requires 4 year wait with additional requirements for 4 to 7 years.

Short Sales require only a two year wait with no additional requirements.

These new guidelines make short sales a much better option for homeowners, as well as provide realtors with a great opportunity to assist distressed homeowners with a short sale AND future home ownership.

The clients you help save now, could be your future buyers in 2 years. Providing these clients with assistance for credit repair though a lender or reputable source, could enable these clients to move forward and be homeowners, again. Life moves on!

I just wish FAR would come up with some required short sale procedures that ALL Realtors & R.E attorneys must follow so that we are operating in a manner that best represents our clients in this "Wild Wild West" scenario of real estate that we are all trapped in.

 There are several ways that short sales are being handled and you better make sure you understand how your clients, sellers & buyers, will be working with the seller's lenders. Each lender has its own agenda and usually dictates how the short sale process will be accomplished.  Most people are not mind readers, so when working with a lender, it is critical that you understand the lender's wishes and rules of operation. This might not be the way you operated as an agent in your past short sale transactions. We are continually having to adapt to the latest perceived, as the best way of transacting and negotiating with the seller's lenders. When did we all lose all of our power to the lending institutions? They are controlling all aspects of the contract and it's negotiations. Most of the time there will be no negotiating. It is their price and terms, on their time schedule with limited or no choices left for the buyers to make. Their only decision is to accept the counters and the addendums or don't and not get the property. No worries to the lenders, because they think there will be offers coming in packs.

 We are all wondering how to handle a short sale transaction in the most legal , ethical and fair way to not only represent our clients but to also satisfy the hurdles that these lenders and their representatives put forth. It seems that true market value, which is reasonably assumed by the general public, to be close to the list price of the property, no longer should be assumed to be the case. Some short sales homes have list prices set at half their appraised value in order to bring droves of offers to the lender. It becomes a challenge for the buyer's agent to convince their clients to make offers way above the list price. This is not easy to do with market conditions favoring the buyers.

  So much for buyer's making a fair offer with consideration and having that offer valued on it's own merit without other buyers, real estate agents and attorneys clouding the honored negotiation process. The term contract or executed contract has no meaning anymore when multiple offers, instead of back up contracts, are the norm.

In some short sale R.E. transactions, the buyer's are allowed to make multiple offers without any consequences or any regard to commitment. There is no seller's signature and no at risk deposit/consideration.

 In other cases, the buyers and sellers both sign the contract with deposit/consideration, so there is  execution of the contract, but the contract still remains contingent upon the seller's lender's approval to be made within a specified date. The seller will then submit multiple offers for their lender's approval, instead of one offer being submitted with sufficient time for the lenders to respond. This goes against all the contract law that I have learned, where the seller can only sign one offer with possible back up offers only introduced when the first offer has been dismissed.

This results in a disadvantage to the buyers. They are bound to this executed contract until the specified deadline for lender approval. The sellers are not bound because the lender is receiving multiple offers as if it was an auction. The winner is the highest bidder with the best terms and no one, not even the listing broker really knows what that number is going to be!

In my opinion, as a short sale listing agent, the best way to handle multiple offers, is to gather the unsigned offers and you and your sellers determine the best price and terms combination. The sellers then sign this best offer. The buyer's deposit will be made upon lender(s) approval.  This best offer is then submitted to the lender(s) for their approval. All other offers will be considered as backup offers and will this will be communicated to each of those buyer's agents. This method keeps things simple for the lender(s).  The lender(s) only need to evaluate market value and hardship in regards to one offer at a time.

The Florida State Constitution provides for Florida homestead status which saves the homeowner on their real estate property tax assessments, caps the amount a homeowners property can be reassessed annually and protects a homeowner with asset protection for his home against third party creditors.

Article VII, Section 6 of the Florida State Constitution extends homestead protection to "every person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, or another legally or naturally dependent upon the owner..." Accordingly, to qualify you must own the real estate and make it you principle residence. You can own it individually, jointly or as the beneficiary of a trust holding the title.

When to File

Generally, initial application for property tax exemption must be made between January 1 and March 1 of the year for which the exemption is sought. The owner of the property must appear personally at the County Property Appraisers office and complete a Form DR-501 application for a tax exemption.

At the time of application it is required to produce a copy of:
1) Recorded deed reflecting property owner, or alternatively, a tax bill reflecting the legal description and owner's name;
2) Florida automobile registration;
3) Collier County voter registration card;
4) Social Security number

Filing Deadline

To be entitled to a homestead exemption for assessment purposes for the current year you must be a record titleholder as of January 1st, however, an application for homestead exemption can be applied anytime after a new residence is acquired. The deadline for any current yea application is March 1st. If an application is made after March 1st, the exemption is lost for tax purposes for the balance of the year but will be applied to take effect for the following year. Once homestead is applied for, it will roll over automatically every year until you vacate the property as your primary residence.

Tax Savings
Once homestead is properly declared, Florida law provides the homeowner a $50,000.00 exemption from real estate tax assessment. For example, if a home is assessed at a market value of $250,000.00 the $50000.00 of this value is exempt from taxation thereby computing the property taxes on only $200,000.00. With and annual tax milage rate of approximately 1.5%, this exemption equates to an actual savings of $375.00 annually.

Assessment Cap Savings
Obtaining homestead status caps the amount a homeowner's property can be reassessed annually to 3% or to the percentage change in the Urban Consumer Index, which ever is lower. Annually properties throughout Collier & Lee County are reappraised to reflect the actual current market value. In the past this gas led to dramatic increases in certain years, however, due to the recent TRIM amendment to the Florida Constitution, the property owners are beginning to receive additional savings by applying for homestead exemption.

Third Party Creditor protection
The Florida Constitution provides homestead property with protection from third party creditors. The only exemption is if a property owner pledges his or her homestead property as security for a mortgage or improving the property and thereby subjecting the property to the construction lien law. Even after a property is sold, if there are judgment liens against the property owner provided the homestead proceeds are reinvested in another homestead property, they are again immune from third party claims.

Additional Exemptions

$500 Widow's and Widower's Exemption
Any widow or widower who is a bona fide Florida resident may claim this exemption. On remarriage, the widow or widower is ineligible for the exemption. A person who is divorced before the spouse's death is not considered a widow or widower.

$500 Disability Exemption
A Florida resident who is totally and permanently disabled may qualify for this exemption.

$5,000 Disability Exemption for Ex-service member
An ex-service member disabled at least 10% in war or by service-connected misfortune may be entitled to a $5000 exemption on any property owned by the ex-service member.

$500 Exemption for Blind Persons
A Florida resident who is blind may qualify for this exemption. If claiming exemption based on blindness, the applicant must have a certificate of blindness issued by the Division of Blind Services of the Department of Education, the Federal Social Security Administration, or the Veteran's Administration.

Exemption for Totally and Permanently Disabled Persons
1.Real estate used and owned as a homestead by a quadriplegic, less any portion used for commercial purposes, is exempt from taxation.
2.Real estate used and owned as a homestead, less any portion used for commercial purposes, by a paraplegic, hemiplegic, or other totally and permanently disabled person, who must use a wheelchair for mobility or who is legally blind, is exempt from taxation.
A person seeking exemption under number 2 above must meet gross income limitations. Gross income includes veterans' and social security benefits. The gross income of all persons residing in the homestead for the prior year cannot exceed $14,500. However, beginning January 1, 1991, the $14,500 limitation will be adjusted annually. The adjustment will be based on the percentage change in the average cost-of-living index of the immediate year compared with the prior year.
If filing for the first time, a certificate of total and permanent disability from two licensed doctors of this state or from the Veterans' Administration is required.

Additional homestead exemption for persons 65 and older
In accordance with s. 6(f), Art. VII of the State Constitution, the board of county commissioners of any county or the governing authority of any municipality may adopt an ordinance to allow an additional homestead exemption of up to $25,000 for any person who has the legal or equitable title to real estate and maintains thereon the permanent residence of the owner, who has attained age 65, and whose household income does not exceed $20,000.
Beginning January 1, 2001, the $20,000 income limitation shall be adjusted annually, on January 1, by the percentage change in the average cost-of-living index in the period January 1 through December 31 of the immediate prior year compared with the same period for the year prior to that. The index is the average of the monthly consumer-price-index figures for the stated 12-month period, relative to the United States as a whole, issued by the United States Department of Labor.

Please consult your tax advisor for additional information concerning the Florida Homestead Exemption

Foreclosures are here to stay for some time. A lot of those potential short sales will soon be foreclosures. Adjustable mortgages, lost jobs, divorce, deaths and other foreclosures and short sales pulling down market values are causing people to lose their homes. For the buyers, this can be a great time to buy.

Foreclosures are bank owned properties, that were acquired through nonpayment of lenders, tax liens and HOA and Condo associations dues. In most cases, a combination of all of these may be the cause. In most cases, these bank foreclosures are purchased for considerably less than the homes surrounding them. Foreclosures can be reduced as much as 33% below the normal market value for non-foreclosures and short sales. In most cases, the prices are already reduced when you see these homes on the internet or have received info from you realtor. Offering 50% of the asking price is a public misconception that you buyers need to know.

The banks are willing to negotiate on the price and closing costs somewhat, but they will dictate the terms of the contract and who will be the closing agent. Be prepared to make an offer, have the bank come back to you with an approval by sending their own counter offer and addendums completely re-done with your offer price and closing cost amount with the property address and your names. Most likely, the rest of that counter will have a closing date of 30 days after the seller signs the counter, a certain number of days like 5, 10 or even no days for an inspection. Most likely the "seller" will not address or pay for any repairs, termites, mold or structural damages. Your lender and FHA/VA lender will carefully look at this report and determine whether the home appraises for your loan amount and will evaluate whether the home needs too much repairs to qualify you for the loan. Be prepared to have to make a decision whether to accept their counter and addendums or just not get the home. Very few, bank owned, home "sellers" will allow you to negotiate anything once they send their own documents. If you need an extension on the closing date and/or financing, you will most likely have a clause in their counter offer, of a per diem and an additional, non-refundable deposit.

The "sellers" want to use their own attorneys and title companies to be the closing agents. You can have your own escrow agent hold your deposit until the closing agent requests it to be transferred, but you will not be represented by anyone unless you retain your own attorney to perform an independent title search. I really suggest doing this. If you don't find out until after closing, that there are problems that are clouding the title, this would prevent you from easily transferring title when you decide to sell. The ownership of the property needs to be ascertained as to whether the "seller" really owns it or if the proper person actually was the one to sign all of the documents.

The "sellers" will have to clean up most evident title issues in order to provide you with a clear title at closing. These can include: tax liens, mechanics liens, HOA and Condo Association liens at their own expense.

Does all of this sound scary? The uncertainty of this real estate transaction actually closing, the title work performed correctly, the quality of the title insurance policy, the inspection and appraisal results can be very stressful. Some buyers just do not think it is worth the risk, but if you find a good realtor that is experienced and skillful in handling foreclosures and also retain an attorney to perform your own title search, it could be a great investment for your future. The savings on a foreclosure will most likely pay off with reduced risk if done correctly!

I just had another R.E. deal almost blow up and it still could because a lender's agent tried to put my client into a bank program that she later did not meet the guildlines on. The agent did not do her homework on the changing guidelines and then didn't disclose this to us until she returned to work, two weeks later.  I got a sob story about a death in the family, which I sympathized with, but I didn't excuse the fact that no one took over the file for her. We could not find anyone that new anything about the file.

It is 9 days to closing and my client doesn't have financing on a bank foreclosure.

Well, I had to go back to my favorite, Sr. loan consultant, Kent Williams with Home 1st Lending, who I really wanted my client to go with from the beginning, to ask for help. I explained the situation and he quickly took over. He gathered all of my clients info over the phone that evening and met with my client the next morning at her office to fill out the paperwork. We will still need an extension, which I will beg for at a per diem cost of $40 per day, but at least I can go to the bank's agent with a loan approval letter from their in house underwriter to prove that my clients are qualified and prepared to close on the home.

Wish me luck! I would like to keep my 100% closing record.

Thank you Kent!

P.S. The closing is going through and we close on Friday.