| House Refinance Center |
| Short Sale To Stop Foreclosure |
 | |  | |  | |  | |  | |  | |  | |  | |  | |  |
| Who Benefits From A Short Sale? Not The Homeowner! The homeowner might prefer a short sale to foreclosure, but is this the best choice? The lender likes the short sale. Foreclosure is very costly and can drag on for months and sometimes even years. According to the National Association of Realtors as of the 4th quarter of 2009 foreclosures sold at a 15% discount while short sales sold at a 12% discount. On paper a short sale is simple and easy to understand. You owe the bank $200,000 but your house is only worth $180,000, therefore you are $20,000 short. You talk to the bank, and you both agree to sell the house. This decision is made over 2 to 3 months or sometimes longer. The bank has to be sure that the deal qualifies for a short sale. Qualification for a short sale. The market value of the house has dropped substantially. An appraisal has to be completed to arrive at the fair market value (FMV) of the house. Usually, the lender will pay for the appraisal. A Broker Price Opinion from a realtor might be acceptable. It's cheaper than a full appraisal. Recently there have been problems with appraisals. Many of the appraisers are from out of the area. They are using foreclosures and short sales as comparables, which further depresses the house prices. The mortgage is in default, or default is imminent. In some cases the short sale process starts before the homeowner misses a payment. If there is a job loss and the homeowner knows that it would be impossible to keep the house, he might ask the bank to allow the short sale. This is advisable in a market that is falling fast. The sooner the short sale is done, the better price the house will fetch. The homeowner has hardship. From the lender's point of view, acceptable hardships are long-term illness, loss of a job, death in the family, divorce or separation. The homeowner will have to provide documents to prove the hardships. The home owner has no assets. The lender will look very hard at the assets, and might even hire a professional investigator to look into the borrower's financial affairs. He will be looking for bank accounts in the USA and possibly offshore in places like the Cayman Islands, the Bahamas and other offshore banking countries. Bonds, stocks and real estate holdings will be scrutinized. If the above four areas are verified, the lender will say yes to the short sale. The lender is basically in the driver's seat. Short sale process. The seller/homeowner lists the house with a real estate agent. The agent finds a buyer after showing the house to several prospects. The name "short sale" brings out all the bargain hunters. They think they will be getting the deal of their lives. There will be dozens of "low-ball" offers and several open houses. This is a major disruption to the homeowner and his family. The buyer makes an offer. The seller accepts the offer with the approval of the bank. In many cases the bank has been known to kill many deals. The buyer pays the price and the transaction closes. Seller gets the short-end of the deal After the deal is closed, the seller is left to pick-up the pieces of his life. His credit is ruined. The short sale is a settlement of a debt, and will remain on his credit report for seven years. It is not as bad as a foreclosure. He might be able to purchase another house in 2 to 3 years provided he doesn't get into financial trouble again. Can you imagine having to pay taxes after you lose your house? Well, this is possible. If the lender issues a 1099 for the shorted amount, the IRS will be expecting you to pay some taxes. However, before you get depressed and stressed out, get a copy of the Mortgage Forgiveness Debt Relief Act of 2007, and read it a few times. You will discover that you might be exempt. We strongly advise you to consult a tax professional, not a real estate agent, and discuss your options. As a matter of fact, this discussion should have started a long time ago, when the lender agreed to the short sale. Second liens The biggest problem facing the homeowner when the house is sold in a short sale is the second lien holder. For the deal to be completed and for the buyer to get clear title, the second lien has to be satisfied. Usually, the second lien holder will accept a small amount of money, about $2,000 to sign off on the transaction. This is better than writing off the full amount of the home loan. Then he will sell the balance to a collection agency for a bit more money. So you can imagine the surprise when the homeowner gets a telephone call a year later asking for money. Overall, the short sale process has to get better. The length of time to close a transaction is still too long, and obtaining a mortgage is difficult for some buyers who would like to seize the opportunity of a short sale in a depressed housing market. Readers of this articles also liked: Government Backed Zero Down... ARMs To Reset: More Defaults... |
| Shortsale? You Need To Sell Fast! The housing market shows no signs of recovery. Across the country home sales are down 28 percent since 2006. We have mounting inventories, tight loan underwriting policies and absolutely no new job growth. If you are in a short sale situation, you need to pull out all the stops to get your house sold. Remember, this is a competition for buyers. There are thousands of available houses for the buyer to choose from. Here are some tips to help you sell your home. Tip #1. Find a realtor that specializes in short sales. Short sale real estate is a specialty that only a handful of realtors will ever master. Do not settle for the realtor who gives you unrealistic promises. There might be several players involved in a short sale transaction. In many cases you will find second and third lien holders. The selling price is generally lower than a regular sale. The time is drawn out. A recent study showed that it takes the seller 62 days to get the green light from the bank. And it takes another 67 days to close the deal. With all these factors you need a realtor that is willing to be patient. There are no "quick" sales in short sales. And you need a realtor who is an excellent communicator. There will be plenty of emails, telephone calls and letter with the seller, the realtor and all the lien holders. Tip #2. Hire a professional to stage your house. You need to create an appealing environment that will prospective "lookers" into buyers. When someone walks into your home, they must be able to picture themselves living in that "space". Tip #3. Elevate the curb appeal. First impressions speak volumes. Make sure the exterior of your house is top notch. Cut the grass, plant colorful flowers, do some landscaping. Go the extra mile and paint the exterior of the house. Tip #4. Put something extra in the deal. Buyers like to get perks. An extended warranty on several appliances usually works. The buyer can see that for the next 2 years he doesn't have to worry about repairs to appliances. Some money towards paying some of the closing costs also is a great idea. Your chances of selling your house is when the listing is fresh on the market. The longer the house remains unsold, the harder it becomes to attract new "lookers". So be positive and put your best foot forward. prev: next: Home: |
| Short Sale or Foreclosure: Pick Your Poison Whether you choose a short sale or a foreclosure, you will lose. A foreclosure rescues your credit score from sinking to the depths of obscurity. Who cares? You didn't pay your mortgage. The bank wants you out. With a short sale your credit score doesn't get as bad a beating. But it has the same effect. Who will take a chance and give you a mortgage again? Watch the above video. |
| After A Shortsale Or Foreclosure: Taxes Remember that Uncle Sam wants his taxes after a short sale or foreclosure. If you come up short when the house is sold you might be liable for taxes. Consult a professional tax consultant. Watch the above video. |
| Loan Forgiveness: New Tax Rules When the bank or lender forgives your loan, that is not necessarily the end of the story. The amount that was forgiven and written off by the lender will be reported to the IRS. This amount will be income to you, the borrower. You might have to pay taxes. Watch the above video. |
| Treasury Makes Short Sales Easier, Quicker A recent report from the Congressional Oversight Panel, the office the checks TARP, said that there were 661 short sales completed under HAFA. The report also said that Treasury has spent $4.3 million on these short sales. With 11 million homeowners underwater with their mortgages, these numbers are disturbing. So much so that the Treasury has decided to make some drastic changes before house prices dip even further. 1. Loan servicers no longer have to verify the borrowers' finances. 2. The 31% debt-to-income ratio is out the window. Servicers no longer have to check this number. 3. With regards to second lien holders, servicers decide who gets paid and how much. The limit is still capped at $6,000. 4. Borrowers must get an answer within 60 days. The changes are good and should help move housing inventory faster. What concerns me is fraud. Greed and fraud got us in this mess. Now, we are opening the doors and inviting the scam artists to have a feast. Since the borrowers' finances are no longer checked all that is needed is a hardship letter. I am sure that this would be no problem for the thousands of criminals to produce a letter, and the necessary documents to support the hardship. Meanwhile, the homeowners could be sitting on a $2 million. prev: next: Home: |
calculators zero down mortgage second mortgage mortgage interest deduction mortgage servicing first time buyer financial reform fannie and freddie
FHA mortgage approval nonprofit brokers servicemembers stated income refinance calculator downpayment closing fees bank owned (REO)
Home Credit Foreclosure Refinance Hard money Interest only mortgage Loan modification Shortsale Reverse mortgage Strategic default
title insurance buying a home refinance with ARM appraisal inspection community banks good faith estimate FHA streamline 203k breaking news
| Short Sale: Best Of 3 Evils Many homeowners owe the bank more than the house is worth. They are in a sense, between the devil and the deep blue sea. The choices are bankruptcy, foreclosure or short sale. And the winner is short sale. A short sale lets you sell the house with the help of a competent real estate agent. This is all done with the blessings of your friendly banker. Yes, the bank has to okay the deal. They give you permission to sell. They also has the final say on the price being accepted. There are two very important issues after the short sale is completed that bankers do not like to talk about. The first is reporting the transaction on the homeowner's credit file. Bankers can cut the homeowner a little slack and report the sale so that it favors the homeowners. The borrower might be back a couple years later for a loan. The second is income taxes. What about the shortfall? This could be thousands of dollars. The IRS looks at this as income to the homeowners and would like some money. Watch the slideshow. |
