Archive for Buckeye AZ Homes For Sale
Short Sales
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This is not to be considered legal advice. Legal advice can only be given by licensed attorneys from your state and we recommend that you hire an attorney.
Short sales are becoming more and more popular when buying a foreclosure just because of the huge discounts they offer.
These sales are another method of buying real estate when in one of the three stages of the foreclosure process: pre-foreclosure, foreclosure auction, and bank owned properties REO.
Foreclosure is a process in which the estate becomes the absolute property of the lending institution.
It starts when a home owner is faced a foreclosure suit against their financial interest in a property. They have missed numerous payments on the first mortgage. Often that same property owner has also missed payments on a second mortgage. Rarely, there might even be a third mortgage.
A short sale is basically an offer from an investor to the first and/or second note holder offering a discount to purchase and pay off the notes.
Benefit to the Property Owner:
An investor pays off the mortgage averting foreclosure and a stain on the property owners’ credit report
Benefit to Investor:
Buys a property at a discount often gaining immediate substantial equity.
Benefit to Mortgage Holder:
First mortgage holder gets less than owed for a property but does not add it to their ever growing list of REOs. From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process – attorney fee’s, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. They would rather discount a mortgage than go to the courthouse steps.
Any additional note holder, that is, second or third mortgage holder will likely not get any money in a foreclosure. A substantially lower offer may be accepted as they will probably feel that anything gained is better than losing everything.
Disadvantages to the Property Owner:
There is a possibility that the homeowner may lose all equity. This may include any down payment made to purchase the property originally.
The new owner may insist the old owner vacate the property.
The original homeowner may still owe the difference between the balance of the mortgage and the discounted amount as a result a deficiency judgment. If granted, this judgment will affect the homeowners and their credit report.
A short sale entails considerable paperwork for the investor but will frequently become a win-win situation for both the property owner and the investor.
Short Sales – Tips For A Successful Loss Mitigation Transaction
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Short sales can be a life-changing option for many people. Although it can be painful to walk away from your home, it’s important to realize you can make any house a home. If you are facing foreclosure, real estate short sales can provide you with the opportunity to break free from the ******* of homeownership and make a fresh start.
Real estate short sales are occasionally offered to homeowners who are seriously delinquent on their mortgage payments. When properly negotiated, homeowners are able to walk away from the property, salvage what is left of their credit and avoid foreclosure.
In order to keep the house out of foreclosure, lenders might accept less than is owed on the mortgage note. Certain requirements must be met including the presentation of a short sale package. Although requirements vary from lender to lender, typically lenders will require the following information:
Financial statement which includes details of income and expenses Short sale hardship letter Bank statements, investment statements and current year tax return Realtor listing agreement Signed sales contract Estimate settlement statement (HUD-1) Proof of buyer’s financing
Additionally, short sales agreements require that you cannot have any equity in your home and must owe more on the mortgage note than the home is worth. Short sales can be quite complex, therefore it’s a good idea to hire a professional who can assist you in organizing and negotiating a short sale offer.
The primary goal in real estate short sales is to convince the lender’s loss mitigation department to accept ‘payment in full without pursuit of deficiency judgment.’ What this means is the lender agrees to accept a lesser amount than is owed on the note and will not pursue you for the difference. Not all banks will agree to this and some require homeowner’s to pay the difference between the short sale amount and loan balance.
For instance, if the mortgage note balance is $100,000 and the bank agrees to accept $95,000, you could be responsible for the $5,000 difference. If you are unable to pay the difference, the lender can file a deficiency judgment against you. Deficiency judgments are reported to credit bureaus and can remain on your credit history for 7 to 10 years, even when it has been paid in full.
Another downside of short sales is that you may have to pay income tax on the difference. Using the example above, you could end up owing tax on the $5,000. Working with a short sales specialist can help you avoid the pitfalls of this type of real estate transaction.
While short sales will not allow you to retain your home, they can help you retain your pride and integrity. Short sales are usually less detrimental to your credit; however, they can prevent you from purchasing another home for several years.
Take time to fully understand the pros and cons of short sales prior to making a final decision. Work with an individual or organization that specializes in short sales to ensure you obtain the best deal and the least harm to your credit.
The Short Sale Process – Understanding the Short Sale Process
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asked:
When housing prices in many parts of the country were booming a couple of years ago, there wasn’t much national attention given to short sales. But with the current subprime debacle and increasing mortgage delinquencies, many people are wondering if the short sale process is a way to avoid foreclosure.
Basically, the definition of the short sale process is when the lender of a property allows the property to be sold for less than the amount due on the mortgage loan.
The obvious benefit to the short sale process is that it allows the seller to avoid the credit report damage associated with a foreclosure. A foreclosure can stay on your credit report for up to 10 years and can take an emotional and financial toll on you and your family.
But the pitfalls of the short sale process should be considered as well. The I.R.S. may consider any debt forgiveness as taxable income, thus resulting in a tax liability. In addition, lenders can often pursue a borrower for the deficiency balance (the difference between the amount owed and the amount paid).
In some cases you may be able to avoid taxation if you can prove you are insolvent. But if insolvency is unsuccessful, and you are faced with a tax liability resulting from the deficiency amount, it may make more financial sense for you to let the lender foreclose.
The Short Sale Process
The short sale process can vary, but it will generally work as follows:
1) The lender is contacted to discuss the possibility of a short sale and to determine the lender’s process for completing the sale.
2) The seller issues a letter authorizing the release of personal information about the loan and the property to the buyer or escrow agency.
3) The lender will review a settlement statement, which will indicate the proposed selling price, remaining loan balances and itemize all expenses, including real estate commissions and other fees and expenses associated with the closing.
4) The seller will complete a “hardship letter,” which will detail and explain all financial difficulties. Lenders will usually want to validate the seller’s financial situation by looking at bank statements, investment accounts, along with examining paystubs and other financial records.
5) The lender will then look to the broker to provide a price opinion by examining the condition of the house and the market value of comparable properties.
6) The lender will then want to scrutinize the purchase agreement to determine if all amounts are reasonable and the real estate commission is acceptable.
Because of the documentation required, the short sale process can be lengthy. But if done correctly, it can work well for all parties involved. The lender avoids the uncertainty of the foreclosure process, the seller avoids a foreclosure on his or her credit report (along with potential bankruptcy), and the buyer hopefully got a good deal on a property.
Considering the complexity of the short sale process, you must be educated. If you are considering a short sale, make sure that you discuss your situation with a competent lawyer and accountant. The more educated you are on the process, the easier the transaction will be, and the better the impression you will make on the lender.
Short Sale Vs Home Loan Modification
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Short Sales are when a lender is “shorted” on the balance of the mortgage that they are holding. The client can’t afford their monthly payment and have to find other means on getting out of their current financial situation, by selling their home. Doing a short sale could be like wrestling with a Tiger and trying to win. There are so many stipulations on doing short sales and most of the lenders won’t even talk to you about doing one.
Lenders are leery about the short sale process; they’re going to lose money on the sale itself. Lenders will determine if the short sale is a good step for the client and also for them. Short Sales are a case by case process, which is only determined by the lender themselves. Most lenders are losing anywhere between 40k-100k per sale; which is going to affect their bottom line.
The work on the part of the seller and buyer on a short sale is overwhelming. The lender doesn’t have a specific department dealing with short sales directly, like with Home loan modifications (loss mitigation department). The seller could be making a lot of phone calls to the lender just to get to the specific person. Here is some basic information that is needed on a short sale, bare in mind that every lender is different.
• Call the Lender
• Submit Letter of Authorization
• Preliminary Net Sheet
• Hardship Letter
• Proof of Income and Assets
• Copies of Bank Statements
• Comparative Market Analysis
• Purchase Agreement & Listing Agreement
Home loan modifications are in essence the restructure of the original contract with the lender. Many adjustments can be made on the contract to bring it to a current status, if delinquent. Lenders will be able to restructure the current loan by lowering the interest rate, lowering the monthly payment, reducing the principle balance or changing the terms to a fixed rate, (if current loan is an ARM, adjustable or interest only loan).
Currently lenders are gearing towards home loan modifications. Lenders are feeling “safer” doing a loan modification because they are not going to lose money. The process for a loan modification is easier for the owner. There is a specific department with the lender that you can speak with (loss mitigation department) when wanting to do a loan modification.
The economy being in the situation that it is currently, and from my experience, home loan modifications are the way of the world. It is actually a “win/win” situation for the home owner and for the lender. The home owner gets the relief that they are searching for, and the lender get to bring the delinquent contract to a current status, showing profit.
If you are feeling the pinch of a delinquent home loan and stressed about losing your home to foreclosure, we are here to assist you. We offer a money back guarantee if we can’t get your delinquent home loan modified.
Short Sale Facts – Do You Know If You Qualify For a Short Sale
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Short Sale Right For You?
This Article has one main goal, and that is to help you understand how a bank determines if you qualify for a short sale, or not. There is no doubt that you have heard of a short sale by now, even if you do not understand what they really are. Basically a Short Sale is when a home owner owes more on their property than it is worth, and the bank agrees to allow the sale of that property for the current market value of the property, regardless of what the current property owner owes on the home.
Short Sale Information and Negative Equity – For example, let’s say a homeowner owns a home that appraised at $540,000.00 when he bought it three years ago. However, three years later, it’s appraising at $230,000.00. The homeowner currently owes a first mortgage of $432,000.00 and a second mortgage of $108,000.00, bringing his balance to a total of $540,000.00. That means he is upside in the house by $310,000.00. Or as it is often called, “Negative equity.” The bottom line is; the homeowner owes more on the home than it is worth.
How Can That Happen? – There are many ways this could happen, and lets take a look at one common scenario; let’s say the home owner bought the property when credit was real easy to get, and basically if you had a heartbeat, you could get 100% financing.
If you recall, five years ago, a lot of home buyers were recipients of over inflated appraisals. They could have been buying a house that was only worth $400,000.00, but they’d get an appraisal at $540,000.00. Regrettably, many people bought homes like that: over inflated appraisals and easy credit.
Those poeple buying a home then never considered what would happen if the market bottomed out, or if we hit an economic recession. When things started going south, these negative equity homeowners were some of the first to feel the crunch! Because they are upside down with the equity, they aren’t going to find any buyers on the open market. Let’s face it; in this market, no smart home buyer is paying the price of what a property was worth a couple of years ago. So the expectation that they would pay more than the property is worth borders on insanity.
Don’t Let This Short Sale Information Shock You! – In these instances, this type of sale is probably the best route for all parties involved. In a short sale, the bank or lender agrees to accept an amount less than the actual loan balance, “As payment in full!”
In our above example with the $310k in negative equity, they may accept a amount of $310,000.00, if that’s what the market is bearing. I can hear people screaming, “No way a bank accept an offer like that!” They will and they are IN THIS CURRENT MARKET! That’s why this short sale information is so vital.
Short Sale Information and The Cost of a Foreclosure – What most people don’t factor in is the cost of a foreclosure. On average, a foreclosure will cost a bank around $50k to $60k per property. That figure includes but is not limited to the legal fees, court fees, appraisals, clean up fees, repairs and maintenance, insurance and taxes and upkeep until the property is no longer on the books at the Bank Owned REO Department.
Based On This Short Sale Information Will The Bank Foreclose? -Let’s look at the facts and the numbers; if the bank forecloses, fixes the property up and puts it on the market for $540,000.00, serious home-buyers are going to chuckle and keeping driving by and investors are going to Roll On The Floor Laughing!\
Especially if they are in the neighborhood and see “For Sale” signs like these (For Rent, FSBO, Lease With Option, Rent to Own, No Credit Check, Bank Owned, Make An Offer, Bank REO, etc.) all over the place. With that type of competition the bank could be forced to maintain that property for years and that’s not going to happen!
Short Sale Information and Loss Mitigation – When the situation looks bleak, the issue is usually sent to the Loss Mitigation Department to figure out which option IS GOING TO COST THEM THE LESS DAMAGE! They have accepted the fact that they are going to lose money on the deal, so their only question is, “Will we lose less on a foreclosure or on a short sale?”
Typically, a short sale is quicker and less expensive than a foreclosure. Some banks will require that you prove you can no longer afford to make the payments, but once you jump through those hoops, you should have no problem making the deal happen. One last caveat; if you are upside down in your home, it’s best to TAKE ACTION NOW!
