As home prices have dropped in some areas of the country, a growing number of homeowners are finding their home is worth less than the mortgage amount still owed to their lender (known as being "under water" or "upside down" in the mortgage). Owners may find themselves in this situation because they purchased their home at the peak of the local market, just before prices began to drop. Or, using an interest-only or payment-option loan, their monthly payments did not reduce the principal owed--and the home's value dropped. Some tapped too much home equity through second loans or lines of credit, even as much as 125% of the home's value.

Those "upside down" mortgage holders who can still make their monthly mortgage payments are safe if they don't need to move. They can wait out the market--perhaps even benefiting from lower property taxes from a lowered tax assessment--until the correction is complete and home prices again begin to appreciate.

Others, however, find themselves caught by escalating mortgage payments and other household expenses they can no longer afford. Although some borrowers can negotiate "workouts" and "loan modifications" with their lenders, others don't have those options. The only choice left to avoid foreclosure is a "short sale"--where the lender agrees to accept, as fulfillment of the borrower's obligation, a sales price lower than the amount still owed on the mortgage.

If you find yourself in this situation, or you know someone else who is, here are five critical factors every short-sale seller must know.

Short Sale Beats Foreclosure On Credit Report
A foreclosure is a court settlement process involving legal action and possible attorney fees. A short sale, on the other hand, is a negotiated settlement with the lender--no attorneys required. Both show up on the borrower's credit profile, but the difference between a foreclosure and a short sale is the difference between broken credit and badly dented credit. The "short sale" consumer has better options sooner in terms of buying another home, qualifying for loans or credit cards, securing reasonable interest rates, finding rental housing, even applying for insurance.

Often Lenders Prefer Short Sales To Foreclosure
Foreclosing is an expensive, time-consuming process for lenders (costing an average $50,000 per property, according to a 2007 report by the Joint Economic Committee of Congress). In a foreclosure, the lender sells the property at auction--which may also result in lower net than the outstanding mortgage--or repossesses and sells the property as "lender owned" real estate, which is a "non-performing asset" that negatively impacts the lender's ability to make loans. In short, lenders want your money not your home.

You Need An Offer To Get Short-Sale Approval
Lenders generally do not "pre-approve" borrowers to conduct a short sale. Instead, the seller-borrower finds a buyer, who makes an offer that is presented as part of a short-sale package for the lender's consideration. The package will include information such as the purchase contract, an estimate of the net from sale, a complete seller's financial disclosure and a hardship letter stating why the seller can no longer make payments. The lender often requires other information as well.

If the lender is open to a short sale, their loss mitigation department orders a Broker's Price Opinion (BPO), asking a knowledgeable real estate professional to render an opinion on the market value of the property (by looking at sold prices of comparable properties, the cost of making repairs and any other factors that might impact the property's value).

Assuming everything is to the lender's satisfaction, if the buyer's offer meets or exceeds the BPO, chances are the lender will accept the short-sale offer and "forgive" the difference between the offer and the outstanding mortgage 

 New Law Waives Income Tax On Forgiven Debt
Until recently, mortgage debt forgiven by a lender was considered to be part of the borrower's taxable income, meaning the taxpayer would have to pay income taxes on the forgiven amount. That rule has changed: On December 20, 2007 President Bush signed into law the Mortgage Forgiveness Debt Relief Act of 2007, which excludes forgiven mortgage debt from taxation. The exclusion only applies to a taxpayer's principal residence and to indebtedness forgiven between January 1, 2007 and January 1, 2010. The excludable amount of debt is limited to $2 million. Other restrictions apply; consult a knowledgeable tax professional for all the details.

Short-Sale Process Requires Professional Help
Conducting a short sale is not a simple process, as it requires negotiations with the lender (often more than one lender is involved) as well as the buyer, who may not understand the unique intricacies of the process. That's where our expertise becomes essential. We understand the complexities and critical timing of short-sale procedures and can guide you--whether you want to sell your property as a short sale or you're interested in purchasing a short sale. Please feel free to give us a call for more information. I'll be happy to discuss all your options!
 

Patricia " PATTIE" Romano
REALTOR® Associate
RE/MAX At Barnegat Bay
31 North Main Street ( RT 9 )
Manahawkin,NJ 08050
www.soldbypattie.com
609-978-4046
Direct cell-609-312-9043
eve: 609-978-5985 - till midnight
Toll free-(888) 860-9177

 

Patricia " PATTIE" Romano
REALTOR® Associate
RE/MAX At Barnegat Bay
31 North Main Street ( RT 9 )
Manahawkin,NJ 08050
www.soldbypattie.com
609-978-4046
Direct cell-609-312-9043
eve: 609-978-5985 - till midnight
Toll free-(888) 860-9177

 

If you're getting ready to sell your home, news reports of foreclosures, a buyer's market or slower home sales may not sound encouraging. The good news?

You're not really competing with the entire world-you're competing with your neighbors!

Remember: All real estate is local. What's happening nationally, in other regions or communities, has little relationship to your local real estate micro market, which has a buyer demand, housing supply, location and amenities that are unique to your area. Even neighborhoods within larger markets can differ a lot in home prices and the pace of sales.

Also understand that buyers typically narrow their sites to a particular neighborhood; then they zero in on the best value among the homes for sale in that neighborhood. Value means more than price-it's a combination of amenities (location, size, style, condition, conveyances, etc.) and financial considerations (price and monthly payment, closing costs, utility bills, taxes and so on).

To sell quickly today at the best price, you must show buyers that your home offers better value than competing neighborhood homes. Accomplishing that in a buyer's market calls for a creative approach. Consider the following strategies.

Price Right From The Start

Many home sellers are tempted to start their home sale with the highest listing price they could hope to get. Unfortunately for sellers, today's buyers are more educated about home values than ever before-and they're comparison shopping. In a buyer's market, a creative strategy is setting your home's price at the lower end of its market-value range, maybe even below neighborhood comparables. This attracts pent-up buyer attention fast and generates competition that could result in a full-price (or higher) offer. We'll be happy to conduct a comparative market analysis (CMA) to determine the best listing price for your home.

Maximize Visual Appeal

It's important  to create curb appeal, clean everything, declutter, remove personal items, paint and recarpet, update fixtures and repair anything that's not working properly. Those are necessary basics to home selling in today's market. Here are some creative strategies to consider:

• Hire a professional to "stage" your home. Using proven design techniques, "stagers" rearrange furnishings to best complement a home's unique features. The stager may ask you to place some of your furnishings and possessions in storage or might bring in furniture to create a particular look.
  
  
• Add fresh flowers for scent and color in rooms throughout the home and, weather permitting, in flowerbeds and pots outside.
  
  
• Decorate dining tables with beautiful cloths or placemats and full place-settings to emphasize the entertainment possibilities of the space.
  
  
• Focus on first impressions. Pay special attention to the front-door area outside and the area a buyer first sees upon walking inside.
  
  

Get The Word Out

Having your home in the local multiple listing service is important, of course, but you can do other things yourself to turn up the volume on your home-sale announcement.

• Make sure your home's property flyer highlights the unique and attractive aspects of your home: upgrades to structure or systems; new appliances; energy-saving features; landscaping; etc. Enlist a child to keep a brochure box filled. Consider a map showing proximity to amenities such as public transportation, parks, schools, supermarket and so on. Include a floorplan showing location and sizes of rooms, so buyers can plan how their furniture might fit.
  
  
• Use your e-mail signature to promote your home sale. Even if recipients aren't interested, they may know someone who is.
  
  
• Most likely buyers (first-timers, young families, empty nesters, retirees, etc.) through organizations you and/or they may be involved with. Use bulletin boards, newsletters, websites, meetings, etc.
  
• Call me today for a FREE no Obligation Home Sale consultation of your home.

Patricia " PATTIE" Romano
REALTOR® Associate
RE/MAX At Barnegat Bay
31 North Main Street ( RT 9 )
Manahawkin,NJ 08050
www.soldbypattie.com
609-978-4046
Direct cell-609-312-9043
eve: 609-978-5985 - till midnight
Toll free-(888) 860-9177