Another Successfully Closed Central Connecticut Short Sale
Again, we have helped another Connecticut home owner, this time in Waterbury, to get relief from a home that was severely underwater. What made this even more gratifying is the homeowner was a reluctant home owner. How can a home owner be reluctant? It is easy when lack of complete thought when a relative asks for a favor.
This home seller had never lived in the house that was bought in 2008. The favor was to co-sign for a relative that wanted to buy a house but lacked the necessary credit to obtain a mortgage. The lender that was handling the mortgage offered several options one of which was to find a possible co-signer. That same lender overlooked the part about informing the co-signer of all the ramifications that came with co-signature to a mortgage.
There were no problems for the first few years, but as time went on, a storm of issues hit the original buyer. The economy in our state deteriorated, and the lost their job. After trying to find a job that would carry the mortgage, they decided to relocate to another state where the cost of living was cheaper, and jobs more plentiful.
The burden of the mortgage now shifted to the co-signer, who made some attempt to keep the mortgage current while trying to find a buyer for the home. With savings depleted, the frustration and stress built to where that person now needed protection for themselves. A consult with a lawyer led them to attempt a short sale, and that is where I initiated the process.
First, the definition of a short sale is when the bank agrees to accept less than the value of the outstanding mortgage on the home as payment for the note. This is accomplished by first staying in contact with the bank, and by finding an experienced short sale real estate agent that understands the process, and has successfully taken homes to completion of the process. The short sale process is getting to be so common, that many banks will suggest area real estate agents that they trust to get the job done.
The banks and the agent will need to thoroughly discuss the requirements with the home owner, always maintaining professionalism and confidentiality. Not everyone may qualify, as there are specific hardships that the banks would recognize and allow as cause for a short sale.
These hardships are as follows:
Unemployment: No job no revenue stream to pay the bills Reduced Income: If both incomes were required to make the purchase and one person lost their job or had their job downsized, the balance has been disrupted.
Divorce: If they can’t live together they certainly can’t maintain the home together.
Separation: Similar to divorce, but a legal separation would be needed as evidence
Medical Bills: Medical costs can be staggering and easily pull a family’s finances down.
Too Much Debt: Credit cards and time payments can also get out of hand.
Death of a Spouse or Family Member
Payment Increase: This can be caused by an adjustment common with adjustable rate mortgages, or over time with escrow tax increases if a municipality or county has fallen on hard times.
Business Failure
Job Relocation: Even if the income is sufficient, you can’t be expected to maintain 2 residences.
Illness
Military Service
Incarceration
A combination of either of these issues which individually may not create a hardship, but together creates a burden that causes the home owner to fall behind on their payments.
Banks do not want to be in the real estate business as every home that sits in their inventory as a non performing asset takes away working resources that they can be using to help other people.
Even with the banks on board with a short sale, there may still be those persistent phone calls and communications from the loan servicing departments of banks, as often within a bank, one department doesn’t understand what another department maybe doing on the same issue.
Short sales are not simple, but they can be productive and when the agent handling the short sale understands the process, they do work. When the system flows properly, the time to close on a short sale can typically be similar to that for a conventional sale, with the new buyer getting a deal on a home and not having to deal with the issues created by a vacant foreclosure.
We were fortunate to get a buyer for the home, and the process through the short sale with both the servicer and Fannie Mae progressed with the co-signer finally being relieved of that burden. The banks took the proceeds of the sale as full satisfaction of the outstanding debt, which meant no one would be looking for money in the future. Also, with the passage of Mortgage Debt Forgiveness Act, there would be no tax penalties on the difference in value between the settlement cost and the value of the mortgage which is considered a capital gain and subject to Federal Income tax.
There are a few lessons to be learned from this transaction. First, being cautious as how one might become liable with a simple act of kindness being a co-signer to any type of loan.
in Addition, there is still a way to avoid foreclosure in Connecticut and a short sale may well be the best solution.
Short sales do work. If you are trying to avoid foreclosure in Central Connecticut and are in danger of losing your home, we can help. Call my cell at 203-206-0754 or email me for an appointment to sit down and discuss your problem.
A Successfully Closed Central Connecticut Short Sale
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