I wanted to share a story about a Bergen County family we were able to help this past week. This is a true story that I have permission to share. It all began in the middle of the summer, I called on this gentleman who had a For Sale By Owner sign on his front lawn. We had a nice conversation and he began to tell me a little bit more about his situation. I asked him how he came about the price he wanted for his home. He told me that he owed about $650,000 on his home and would sell for $625,000. He told me that he liked me, but couldn't use me as his Realtor because he was already losing $25,000 at his asking price. I asked him more questions and was able to set up a time to meet at his home. Ends up the reason he felt he could get so much for his home was because he had refinanced in September of 2006 and had an appraisal for $660,000. He took a 97% loan and now he wanted to sell because he had some hard luck and had lost his job.
Unfortunately, and through no fault of his own, the Real Estate market in his area had taken a major hit. He had received no offers and was continuing to have difficulty meeting his obligations. I asked him what his goal was in selling the house, he said that he wanted to sell and be able to get back on his feet and one day in the future own another home. I can relate to that, people who find themselves in these situations aren't bad folks, they have just come upon hard times.
The potential answer for this family... a Short Sale. What is a Short Sale? When a home is sold and the proceeds are not enough to cover what is owed on the mortgage. By accepting a short sale, the mortgage company can avoid the costly process of foreclosure and the homeowner can be released from the additional debt. This does not work in all situations, however if you have had some form of hardship (loss of income, divorce or some other special circumstance) this may be a viable alternative. The key to having a positive outcome is in having people on your side who have experience with this type of transaction. You will have to prove your situation to the mortgage company, a Realtor, experienced at negotiating Short Sales is of the utmost value.
The family trusted me and let me put their home on the market, not for the original price of $625,000 but for a much more realistic $499,000. Even at that number, we did not receive any offers. After one month we reduced the price to $450,000. We received multiple offers on the home, now the real work started, we had to negotiate with the bank to get them to accept much less than they were owed. This was a lengthy process, it took almost 3 months to get a confirmation from the bank. Everyone really needs to be patient during this time. Persistence pays off, after many hours of being on hold, then finally talking to someone and being able to explain how this benefits the mortgage company. We were presenting them with a qualified buyer, taking care of all the details of the closing, all they had to do was agree to accept less money. Based on our negotiation skills and hard work, the bank accepted a net amount of $399,000. The bank paid for all the closing costs, including brokerage commission, attorney's fees, transfer tax and current payment of taxes. The homeowner walked away with no money following the transaction but was able to sell their home without having to spend any additional money (which they did not have). This scenario seemed very unlikely when I presented it to the homeowner in July. Essentially the mortgage company took over a $250,000 write off on this property. Remember, banks and mortgage companies are making decisions each day to make loans to people. This was an unfortunate circumstance for the mortgage company, however, getting back this money would allow them to lend it to someone else. This home closed on December 14th and the homeowners were so happy. Christmas is only a few short weeks away and they were able to really have a Merry Christmas. It is very difficult having financial problems, remember you are not alone and that there are people out there who want to help you. After all, we should all be looking for opportunities to help our fellow man during the Christmas season and throughout the year.
UPDATE: A Real Christmas Present from the US Government. On December 21, 2007 President Bush signed into law
H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007 This family will not be penalized by the government.
They will not be required to pay taxes on the money that was forgiven them.
For more information on Short Sales or any other topic, call Sal Poliandro, Realtor,
ePRO, SRES at 201-259-2187, or visit our website: http://www.salanddawn.com/
Sal can be reached by snail mail at RE/MAX Properties 81 North Maple Avenue Ridgewood, NJ 07450
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I have just gotten into a few short sales and they have panned out well. By the way, what bank did you deal with? Some are easier than others.
Were you able to get your full commission rate and how hard did you have to fight for it? Some of them can be pretty tough to deal with on that issue and some don't fight it at all. You really did well at what looks like around 64% net of the balance owed. I assume that is net after commissions.
What did it bpo at? Sorry for the 20 questions but after having a few under my belt now I am trying to gather the traits of the different lenders I may encounter.
Lastly, how were you able to negotiate the seller's position as to deficiency judgements or 1099 consequences? Did they have to sign any promissary note?
Thanks. Any more knowledge I can gain is a plus.
Bob