Short Sales can be challenging, and FHA Short Sales seem to have a lot more challenges than HAFA or Traditional Short Sales do. That’s partly why we’re pleased to announce this Bank of America FHA Short Sale was just closed in North Newark, NJ 07104.
The subject property was a beautiful 2-Family Home, just 6 years young with 13 total rooms, 6 total bedrooms and 4 ½ bathrooms, and offered hardwood floors, a finished ground level recreation room and central air/heat. Located in North Newark with close proximity to shopping, major transportation, Branch Brook Park and other public facilities, this home was a steal at just $250,000.
HUD Pre-foreclosure Sale (PFS) guidelines require that borrowers apply for a loan modification prior to being considered for a Short Sale of their FHA Loan. That was one challenge on this NJ Short Sale, but after being denied for a loan modification, we were clear to proceed with the Short Sale. An FHA Appraisal was done, and a negotiator was assigned. We received our Approval to Participate in the HUD Pre-Foreclosure Sale Program.
Our offer was accepted, and we received our Sales Contract Review Approval, but there were still some loose ends to tie up. Specifically, there was a tax lien against the property clouding title. The sellers did not have the funds available to pay this lien, and the Buyer’s funds were limited as well. Luckily, HUD PFS guidelines provide for up to $2,500 from the sale proceeds to go toward satisfaction of junior liens. This was exactly what we needed to get the deal done. We ordered a payoff statement for the tax lien, and it was paid out of the proceeds, right on the HUD-1 Settlement Statement at the time of closing.
While the Sellers did not receive any relocation assistance money (HUD PFS guidelines do not allow sellers to receive any incentives when proceeds are be used to pay junior liens), they did have $460,000 in debt dismissed and were able to do so prior to the expiration of the Mortgage Forgiveness & Debt Relief Act, which expires at the end of this calendar year. So in addition to the debt being forgiven, the Sellers will not have to pay income tax on the deficiency, which was $210,000 in this case.
Another Bank of America FHA Short Sale in the books, and we hope to get more done in the near future.
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