Short Sales
Short sales have become a large and growing part of the real estate market today. Short sales are defined as a transaction where the seller and their lender accept a purchase contract for less than the amount owed on a property.
Short sales can prevent a costly foreclosure from a lender's and owner's perspective and from an investor's perspective, short sales may allow you to acquire a distressed property significantly below market value.
Short sales. even when beneficial to all parties, are notoriously difficult to negotiate unfortunately, given their complex nature and many homeowners and investors and their Realtors "give up" when the lender becomes difficult to deal with.
As a result, and as a part of my loan modification services, the attorney group I work with are offering to negotiate with the lender to bring short sales to a successful close and in a timely manner.
If you are a homeowner trying to negotiate a short sale of your home, you absolutely need legal representation to avoid a deficiency judgment after the sale.
If you are an investor trying to buy a property in a short sale, our attorneys can help you and the seller negotiate with the lender to actually get the transaction closed. While our attorneys represent the seller, they are working in the interest of getting the transaction done and can be very helpful in negotiating a win-win situation for all parties.
If you are a Realtor representing a homeowner, bringing in a skilled negotiating team of attorneys into the mix will often be the difference between closing quickly or simply adding one more foreclosed property to your local inventory.
Short Sales 101 is a FAQ that I wrote from the homeowners perspective that may be useful to you or your clients.
Short Sales 101 Financial hardships are often unforeseeable events. Thousands of people are in this situation. You are not alone.
But for now, take a long deep breath, and read the following information to learn more about our services. We can help save your home and possibly avoid foreclosure. Once you apply, our professional staff of specialists will evaluate your hardship and current financial situation. A representative will contact you immediately. You will rest easier knowing you have a team of professionals on your side through these hard times.
What is a short sale? A short sale is an agreement with a lender allowing for the sale of a property to a third party for less than the amount owed on the mortgage. Under this agreement, the lender accepts less than the amount owed and releases the borrower from the mortgage, thereby preventing foreclosure.. (This would include all excise tax, closing costs, agent commissions, etc.)
Why would my Mortgage Company want to allow a Short Sale to help me? That is a simple answer, the short sale can save your mortgage company thousands of dollars. The average savings for the companies range from $10,000 - $60,000. Good reason for lender to do a short sale.
When should I start my Short Sale? When you realize you can no longer afford the mortgage and cannot sell the property for what you owe on it. The quicker you start, the more chance you have.
How long does it take for you to complete a short sale once we fill out the paperwork? The typical time frame to complete a short sale is three months. If we are in a time crunch with a foreclosure sale date approaching, a rush will be put on the file.
What is a Deed in Lieu? A Deed in Lieu is when the property is deeded back to the lender with the approval of the borrower prior to foreclosure. This can have a huge impact on one's credit.
What is a Deed? A legal document conveying title to a real property.
What is Loss Mitigation? Loss Mitigation is a process to avoid foreclosure. Lenders use loss mitigation to contact and help borrowers who have fallen behind on their mortgage payments.
What is a Loan Modification? A mortgage modification is an option that allows a borrowers to refinance and/or extend the term of the mortgage loan and reduce the monthly payments.
What is a Forbearance Plan? A forbearance plan is an option where the lender arranges a revised repayment plan. This could include a temporary reduction or suspension of monthly loan payments.
How long is a Short Sale process? Each case is completely different depending on circumstances and the mortgage company, but usually a short sale process can take between 2-5 months. There must be an end buyer to the property to be completed.
How does a short sale and foreclosure report on my credit? Foreclosures can show up as a FORECLOSURE. This could report for as long as seven years. Foreclosures will usually have to be disclosed on any new loan applications in the future. A short sale usually reports as a SETTLED DEBT. This could have less impact on your credit, but please consult a credit company for more information.
What liabilities could result from doing a short sale? A lender could possibly 1099 you for the difference in what you sell your property for and what was owed on the property. What this means, the IRS could consider this taxable income. Another result could be the lender requiring a portion of the difference to be paid back in form of an unsecured note. All of this is up in the air until these items are negotiated. That's were we step in to help you. We want to have the lender consider the debt SETTLED.
What liabilities could result from getting foreclosed on? Unlike a short sale, a foreclosure is usually sold at auction. This usually means there is a wider gap in the difference that you owe and what the house actually sales for. What does this mean to you, a higher potential tax liability. Furthermore, the bank may come after you for a Deficiency Judgment. If a short sale is accomplished compared to a foreclosure, there are no guarantees, a successful short sale should eliminate a deficiency judgment, minimize your tax liability, and keep the foreclosure off your credit. President Bush signed law H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007 to help relieve borrowers from getting 1099 and their losses. Losing your house is enough. "On December 20 President Bush signed into law H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007. H.R. 3648 will provide relief from that kind of tax bite in certain specified situations. Beginning January 1, 2007 and lasting until January 1, 2010, certain discharges of mortgage indebtedness on a principal residence will be excluded from a taxpayer's gross income. As always, though, certain restrictions apply. For more information on deficiency judgments and the tax liability you may face based on your current situation, submit your information to one of our analysts for a free consultation, and as always consult your attorney/tax advisor."
What is a Deficiency Judgment? A Deficiency Judgment is the usual result from a lender selling a house at foreclosure auction. The judgement is usually the differenct between the amount that was owed on the house (including any fees, taxes, etc..) and the amount the recieve from selling the home.
Why is the process take so long? The lenders are overwhelmed with borrowers in this same situation. Lenders are processing thousands of files each day. Thats why its exttremely difficult to actually work with the lenders if you do not know the process. It can often take 8-12 phones calls everyday for weeks just to get a return phone call from your lender's loss mitigation deparment. We even sometimes sit on hold for one to two hours.Luckily, with many lenders, we have ongoing relationships that allow us to negotiate multiple transactions with the same phone call.
How are non-owner occupied properties affected when short selling them? For short sale negotiations, non-owner occupied properties are handled in the same way as owner occupied properties.
Can the listing real estate agent be the purchaser on a short sale? Usually, that is not a very good idea. We like to keep and maintain arms length relationships in short sale transactions. We do not buy your home or have any reason to buy your home. Our goal is to help you avoid foreclosure by selling your home.
Must there be a hardship to do a short sale? Not necessarily, but having a hardship will have a better chance of doing a short sale.
Why are photos needed for the home? Your lender relies on us to provide them information. They have know knowledge of any of the homes disrepair without photographs. The old say "A picture is worth a thousand words" is needed here. Photos of repairs needed, such as roof and pool repairs should always be taken. Photograph every little deficiency in the entire home to paint a picture for the lender.
Can I short sale multiple properties? Yes, but we will still need the short sale packages completely filled out for each property. However, the supporting documentation such as the hardship letter, financial statement, bank statements can just be reproduced for each package.
Can I short sale on commercial and Multi-Family Properties? Yes, same packages must be filled out too.
Can multi-million dollar homes be sold by short sales too? Yes.
How much attention does my short sale file receive? We usually touch each file transaction almost every business day, we are here to help you get relief quickly.
Can I call for updates on my short sale transaction? Yes, but remember, the more calls to our office the less time we are working on your file. This is not a one week solution. Limited calls will also allow our specialist to focus their time and effort on your transaction. Once the complete package is received, it will be assigned to a specialist who will call you with updates.
Email me at bgammache@verizon.net for more information or call Bob Gammache, CMPS at (888) 648-1714
Comments(3)