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Short Sale Series, Part 2: Determining if a deal is viable, and the foreclosure timeline.

By
Education & Training with Short Sale Processing Inc.

Determining if a deal is Viable

These are the questions you need to ask to determine if this deal is worth taking.  It is no fun to find out down the road that there is no way in hell that this deal will be approved or close.  Taking this ten minute step can save you months of frustration, so, you need to ask:

 

•1.       What is the current mortgage balance off all mortgages?  Get statements, and find out any   second or third liens-homeowners won't always tell you about them. They may be embarrassed to admit that they have taken money on top of money...smoke them out!

•2.       Are there any other possible liens attached to title?  Mechanics liens, personal guarantees, loan shark markers...whatever.  Smoke them out.  These liens popping up in the 11th hour will kill a deal deader than dead-quickly! Sometimes you just need to pull title to find them.

•3.       Will the seller be cooperative?  There will be paperwork, there will be documents to collect, if they aren't on board right away, you will spin your wheels.  If they aren't sure, ask them to talk with an attorney or a trusted friend or family member.  Make yourself available to them to answer questions.  We are here to help people, and we have nothing to hide.  Tell them that unless they commit to the process and time is of the essence, that you regret that you will not be able to help them.  You are either 100% working to sell their house and complete the short sale with their cooperation or you won't do anything.  Period.

 

Remember, the goal of the short sale is usually to prevent a foreclosure, so it is important to educate yourself as to what actually happens when a borrower goes delinquent on their mortgage. 

 

The Foreclosure Timeline

In order to prevent foreclosure, you must first learn what the foreclosure process entails.  This is a typical foreclosure timeline.  Some lenders, however, will move to foreclose in as little as 90 days, so remember, Time is NOT on your side!  Also remember, each state has different guidelines.

  

Day 1

Mortgage payment due, borrower misses it.

 

Day 16-30

Late charge of 5% assessed on payment.  Mortgage servicer starts attempting to make contact demanding payment. Reports to credit bureau on day 30.

 

  

Day 45-60

Lender send out "Demand" or "Breach" letter to borrower pointing out that mortgage terms have been violated.  30 and 60 day late reported on credit, severely impacting credit rating.  Borrower given 30 days to resolve delinquency.  Many lenders initiate foreclosure on day 90.

 

Day 60-90

Lender refers loan to an attorney to initiate foreclosure proceedings.

Depending on the state, the lender or servicer may record a formal notice of foreclosure, or "Notice of D Default."   Or simply, the NOD. The lender may post this notice at the courthouse or in the local newspaper, and will commence filing the appropriate court actions.  This is when the foreclosure becomes public knowledge and all the investors start circling the property like vultures.  The homeowners stress level usually goes ballistic about now.  This is when you will receive a lot of calls - when the homeowner realizes that they can't recover, that they need to sell and get out.

 

Day 90+

House sold at courthouse or Sheriffs sale or auction.  Wide time range due to differing state requirements.  After the sale, some lenders grant borrowers a "Redemption" period, where if you pay all back payments, fees, taxes, and foreclosure expenses, the lender may allow you to re buy the property.  Most lenders, however, force the borrower out immediately after the sale or foreclosure is complete.  In Illinois, where the laws are heavily in favor of homeowners, the lenders will usually not file a foreclosure in the courts for several months after the 90 mark.  One the homeowner is summoned to appear, they must go to court and answer to the judge.  Now, I don't give legal advice, but usually, a judge just wants to see that something is being done to remedy the foreclosure.  If you show the judge that you are trying to sell the property, and hand him the listing or purchase contract, he will usually stop the proceeding and give an adequate amount of time to complete the sale.  If the homeowner doesn't show up, a judgment of foreclosure is entered, and the official clock starts ticking.  After a judgment, Illinois usually takes 4 to 9 months before the property goes to sale.  The earlier you get involved in the process, the less credit damage the seller incurs, and the greater the chance for success.

 

  

 

  

  

  

Posted by

www.ssprocessors.com

www.josephalfe.com

www.shortsale-rescue.com

Comments (2)

P G
Charlottesville Solutions - Charlottesville, VA

I see that you are new to Active Rain and I just wanted to welcome you. I hope that you enjoy it as much as I do and that you find it a great resource.

Jul 19, 2008 12:47 AM
Joseph Alfe
Short Sale Processing Inc. - Chicago, IL

Thanks Peg!

Jul 19, 2008 03:36 AM