Short Sale May Be an Option When Mortgage Debt Looms Too Large
Question: Could you please explain more about a short sale. I am stuck in my home with two mortgages and can't get out. Please help. I cannot afford this house anymore and can't work anymore due to health reasons.
-- Debbie Garcia, New York
Can you relate to Debbie?
OUR SHORT SALE TEAM CAN HELP!
We are here to assist with every facet of the ever-growing short sale business. Whether you are looking to efficiently and effectively reduce the number of challenged loans you have, or a buyer looking to have your offer accepted on one of these properties or a seller who is simply looking to avoid foreclosure or bankruptcy, we can help you! As you have certainly heard, this is a nationwide challenge, which seemingly changes and worsens each day. We simply provide assistance to help you travel through these troubled waters . . . without becoming lunch for the nearest hungry shark! It is our intent and our belief that all parties, lenders, buyers, sellers and real estate agents benefit from the services we provide. We take the unique approach of always asking "What can be done so that we can help you today?"
WHAT WE DO
We do what works. We are an ever-expanding team assembled to assist with closing short sale transactions. RCA Team Inc. and the Short Sale Specialist back support team have many years of experience in real estate investing, real estate law, civil law, administration, economics and mortgage lending. Our S.S.S. back support team knows what the banks are looking for, where the pitfalls lie and how to circumvent the problems to maximize the odds of closing a successful short sale.
We are here to assist good people in getting themselves out of bad situations in the most efficient manner possible. As you are undoubtedly aware, we are facing an as of yet, not fully known American tragedy, millions upon millions of US homeowners are, or will be facing situations where continuing to struggle to own a home either simply is impossible, or at the very least no longer makes sense. The "American dream" of home ownership, for most, no longer makes financial sense. You, or people you know, may be feeling caught in this correcting market and simply need a way out. We can help you. Are you ready to do the smart thing and simply let us help you today?
A short sale is when your lender agrees to take less money than is owed to them due to a hardship on the part of the seller. This process is similar to the one in which you went through when you obtained a mortgage on the property. You probably met with a lender's representative and had to provide them lots of documentation that supported the fact that you could qualify for the mortgage. Now, we're doing it in reverse. Have a question? Check out our FAQ section, it may already be answered.
Congratulations on considering this great value! As a savvy home buyer you certainly realize that the best buys available today are most likely to be in short sales. All costs, fees, commissions, payoffs, etc. are subject to the lender’s approval. We have found that your offer will have the highest chance of being accepted if you present it with the buyer paying the $2,500.00 fee to our Short Sale Specialist back support team as part of the buyer's closing costs. Remember to take this into account when writing your initial offer. Many buyers and their agents adopt this approach and simply ask for the seller to pay all or a portion of the buyer's closing costs.
Please remember, with the current mortgage fallout across the country, most lenders are being inundated with short sale requests. As a result, this has become a somewhat lengthy process. Average response time from the lender is 6-8 weeks and can be as long as 90 days or more. However, the RCA Team’s Short Sale Specialist back support team has been able to establish relationships with specific leading lenders to expedite this process.
F.A.Q's - List from Buyers and Sellers
What is a Short Sale?
A short sale is when your lender agrees to take less money than is owed to them due to a hardship on the part of the seller. The agent you've chosen to work with is highly trained and specialized in this process. This process is similar to the one in which you went through when you obtained a mortgage on the property. You probably met with a lender's representative and had to provide them lots of documentation that supported the fact that you could qualify for the mortgage. Now, we're doing it in reverse. Have a question? Check out our FAQ section, it may already be answered.
Will I Owe Money After I Have Been Foreclosed On?
When the lender or bank forecloses on the property and they eventually sell the property for less than what was owed, then a deficiency exists with the loan. The deficiency is the difference between what the homeowner owed and the amount the property sold for.
Will the bank come after me for the difference?
During the short sale process, we can negotiate with the lender to not seek a deficiency judgment against the homeowner.
There is a second issue as it relates to the deficiency and the infamous 1099. When you complete a short sale the lender will report that loss to the IRS. If this is your primary residence the IRS can't tax you on the deficiency anymore. (Please see the link below for more information.)
It is obviously in the best interest of the homeowner to be proactive and deal with the prevention of foreclosure NOW. At least there is a chance that we can negotiate a deal for you during your short sale period.
What about My Credit?
The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is the most damaging event a credit status can encounter - worse than bankruptcy. In the course of getting your short sale approved you may miss your mortgage payments, and these will show on your credit.
By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods and such) relatively quickly. Your credit will recover much quicker from the credit dings of a few late mortgage payments, if you keep your other accounts current. Always stay on top of your consumer credit. So, consider allocating your funds to meet basic necessities (food, utilities, household needs, auto expenses and such) first. Beyond paying for necessities plan to pay other bills to keep as many accounts current as possible. Keep “necessary” accounts current when deciding which credit bills to pay. If you are using a credit card to temporarily pay for necessities, you want to be sure not to jeopardize the availability of that account. A short sale may be just one part of a larger effort to get through a tough period. We want to help make it possible for your credit to recover quickly.
You need to avoid Foreclosure or Bankruptcy – and that’s where our Team can assist you.
WHY USE RCA Team with a Short Sale Specialist back support Team?
Hiring the RCA Team will benefit you and your future because Real Estate Agents should spend their valuable time assisting sellers, not on repeated holds, no return calls, or get run around with the lenders. RCA Team’s back support has direct access to many lending institutions and they can expedite the process, stream lining contact points for you during this troubling times. Our team work and back support set up keeps Our Client Care Services in place for our clients.
Is a short sale right for me?
Mortgage lenders are increasingly willing to work with borrowers faced with a financial hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship, and are unable to meet your obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking the property through foreclosure.
As you consider the option of pursuing a short sale, remember your lender is looking to limit any potential loss on your loan. By completing a short sale, your lender has arrived at a solution that is, for them, much better than a foreclosure.
What sort of hardship would my lender consider legitimate?
To some extent, that will depend upon the mortgage company considering the short sale request. Generally, as long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the short sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter with a strong offer. The hardship letter, proper packaging, with a solid offer sets the tone for the entire file.
I am current on my mortgage; will my lender consider a short sale?
From our experience, most lenders will process mortgages that are in default (late or missed payments) and are being accepted. However, Wachovia loans do not require late or missed payments. Citi mortgage will accept seller's hardship package without an offer.
Why would a mortgage company agree to accept a short sale?
There are actually several reasons why a mortgage company would approve a short sale payoff, including the following:
· Legal Concerns: Mortgage lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.
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· Wall Street is Watching Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender's ability to sell their loans on the secondary market. A successful short sale gets the loan payoff resolved quickly.
· Asset Management Expenses- If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage real property assets - homes – spread throughout the region, the state and possibly even the nation. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful short sale eliminates most of these costs.
· Reserve Requirement
- Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful short sale lets the lender put more money to work.
I have two loans; can I still do a short sale?
My property is in rough shape and needs work; can I still do a short sale?
Absolutely. In fact, lenders are more motivated to do a short sale on a property that needs work than on a property that doesn’t. The lender knows the risk of loss goes up when they foreclose on a property that needs lots of work. Aside from expense of completing the work, lenders are simply not set up to get the work done. They are in the loan business, not the fix it business.
Who pays for the RCA Team’s Short Sale Specialist back support Team?
Our team will negotiate with the sellers' lenders to pay brokers at closing in escrow. Charge to the Sellers will be negotiated by our S.S.S. support team directly with seller's lenders and will be paid with the submission of the necessary forms at the beginning stages of the establishment of our working relationship. In the past, our S.S.S. support team have experienced several unfortunate situations of working very hard on a file up to the time of closing, only to be dismissed by the Seller withdrawing, receiving nothing for our time and efforts. As we anticipate your agreement, our time is valuable as we believe your time is as well and we should be compensated for our efforts. There will be fees charged, Only if, sellers decide to change direction of the short sale listing agreement after the agents have delivered their services. This amount can range, will be determined, and included in agreement, per listing basis. Our agent is committed to answering any questions pertaining to all terms and condition.
HUD Hardship Conditions
The underlying reason behind most delinquent mortgage payments is what the mortgage industry defines as a "hardship condition." A hardship condition is basically an unexpected financial crisis of some sort.
HUD recognizes the following situations as valid hardships and reasons for default:
• Death of Principal Mortgagor
• Death of Mortgagor's Family Member
• Illness of Principal Mortgagor
• Illness of Mortgagor's Family Member
• Marital Difficulties
• Curtailment of Income
• Excessive Obligations
• Abandonment of Property
• Distant Employment Transfer
• Property Problem
• Inability to Sell
• Inability to Rent Property
• Military Service
• Business Failure
• Casualty Loss
• Energy-Environmental Costs
• Servicing Problems
• Payment Adjustment
• Payment Dispute
• Transfer of Ownership Pending
Procedural rules governing bank and government foreclosures
Foreclosure is governed by state law, and different states observe different procedures
Typical foreclosure methods
- Strict foreclosure: the lender, mortgagee, automatically becomes full owner of the property when a borrower, mortgagor, defaults.
- Judicial foreclosure or public sale: court decides on title questions and approves each step of the foreclosure procedure.
- Foreclosure by power of sale.
- Foreclosure through the deed in lieu method.
Steps in foreclosure procedures
Following an alleged default, the lender or claimant will typically be required to serve the borrower a property owner with a summons and a complaint for foreclosure (lis pendens). The borrower or property owner must promptly file responsive pleadings to answer the complaint, and appear at any hearings to explain the alleged default. Borrower or property owner can get the foreclosure law suit dismissed at any time during the foreclosure proceeding by making the entire payment claimed to be due by lender.
Judicial sale of property
If the borrower or property owner does not timely file responsive pleadings to the complaint, the court will typically enter a default. Subsequent to the entry of a defaultor the tiling of responsive pleadings, the court will generally enter summary judgment in favor of the lender or claimant if there are no genuine issues of material fact and the court finds that (a) obligations exist between the property owner and the lien holder, (b) the property owner is in default of the performance of his obligations to the lien holder, and (c) the lien holder is entitled to assert his lien or interest against the real estate.
The court will order the sale of the real estate at a public sale and lender or claimant gets paid for the full loan amount. Balance, if any left, goes to the borrower or previous owner upon application. If the sale amount is less than the loan amount, borrower still owes such balance to the lender. This amount determined as a result of deficiency proceedings.
If the borrower has a right of redeem, sale notice indicates such right of redemption and the redemption value of the property. As a final step, the court transfers the deed to the purchaser or new owner after all taxes, sale-related expenses, and other additional defendants, if any, are paid.