Home > Blogs > Susan Hilton > College Station & Bryan's Real Estate Home Sales Blog

Short Sale Advisory for Homeowners in Bryan College Station

By Susan Hilton

Real Estate Agent with CENTURY 21 Beal, Inc.

November 25, 2010 01:48 PM

What is a Short Sale? A Short Sale is the sale of real estate where the price paid is insufficient to pay the loan or loans against the property, plus the costs to sell the property (title policy, title fees, legal fees, real estate sales commissions, etc.), and the seller cannot pay the difference. There are a multitude of issues in a Short Sale, including (but not limited to) legal and financial risks. This post is not intended to address all the issues. Neither does it purport to be comprehensive, or to provide financial or legal counsel. However, it is designed to provide information on some of the issues and risks involved in a Short Sale situation.

Before Proceeding with a Short Sale… – Discern a Lender’s Options upon Loan Default – Determine the various types of loans that secure real property:

Purchase money loans
Refinanced loans
Home-equity loans
And many others

The type of the loan and the property has a big influence on what the lender may do if the homeowner defaults on the loan (i.e., fails to make the agreed upon payments). The homeowner’s overall current and future financial strength, the cost the lender incurs when the loan is acquired, and the current value of the property are also factors in the lender’s decision to foreclose.

Beware of Predatory “rescue” Scams and Short Sale Fraud If the homeowner is behind on payments and worried about foreclosure, they may be susceptible to people and companies that will try to take advantage of them. “Rescue” scams may cost the homeowner money with no results provided. These scams may result in the loss of the home through foreclosure or even put the homeowner in a potential legal issue of fraud. For additional information about fraudulent schemes, go to:

www.efanniemae.com/utility/legal/antifraud.jsp

www.efanniemae.com/utility/legal/pdf/fraudnews/mortgagefraudnews0709.pdf

“Red Flags” to watch for to avoid a fraudulent scheme include:

A Guarantee to Stop the Foreclosure
Requirement of payment upfront
Instructions to NOT talk with the lender
Transfer the title to another entity prior to the sale
Buyer wanting to purchase is an LLC
Have the Homeowner complete a Power of Attorney
New Buyer reserves the right to negotiate a Short Sale for the seller’s benefit

To report suspected scams, contact:

Financial Fraud Enforcement Task Force – www.stopfraud.gov
Loan Modification Scam Prevention Network – www.PreventLoanScams.org
NeighborWorks – www.loanscamalert.org/default.aspx

Contact a FREE HUD-Approved Housing Counselor or Your Lender:

HUD-approved counseling agency online http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=tx or call (800)586-4287 or TDD (800)877-8339
http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure
Neighborhood Assistance Corporation of America www.naca.com/refinance/refinanceTenStep.jsp
Lender directly – check your billing statement or coupon book. Ask for the lender’s home retention department, loss mitigation department, or another department that helps homeowners who are in loan default. Explain what is happening and normally the lender will be willing to discuss your options.

Legal and Tax Advice May be Needed

Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act – www.irs.gov/individuals/article/0,,id=179414,00.html

The Consequences of Committing “Waste”: If you decide to damage the property, remove fixtures like sinks, toilets, cabinets, air conditioners, water heaters, light fixtures…. The lender may accuse you of “waste.” This liability to the lender may make it possible for the lender to sue you for damages. The suit would be for damages because you physically abused, damaged, or destroyed part of the property. Imagine having to deal with a lawsuit in addition to a foreclosure! Stay tuned for the next 2 posts –