Distressed Properties
Attention Distressed Homeowners
Owe more than your house is worth? Behind on your mortgage payments, under financial duress, facing possible foreclosure or considering a “short sale”? Below are your options:
1. Assumption permits a buyer, who qualifies, with the existing lender to take over your mortgage debt and pay the mortgage payments, even if the mortgage is non-assumable. As a result, you may be able to sell your property and avoid foreclosure.
2. Short Sale If you can sell your house but the sale proceeds are less than the total amount you owe on your mortgage, your mortgage company may agree to a short payoffand then write off the portion of your mortgage that exceeds the net proceeds from the sale.
3. Deed-In-Lieu of Foreclosure your mortgage company may agree to a deed-in-lieu of foreclosure if you agree to voluntarily transfer title of your property to your mortgage company in exchange for cancelation of your mortgage debt. In most cases, you must attempt to sell your home for its fair market value for at least 90 days before a mortgage company will consider this option. This option may be unavailable if there are other liens on your home, such as judgments from other creditors, second mortgages, or tax liens.
4. Foreclosure A legal process in which a lender takes the title or forces the sale of a property as a result of the borrower’s failure to comply with the terms and conditions of the mortgage.
Not sure what is best for you? Feel free to contact our office to discuss your situation. We will be glad to explain these options and explain how often a short sale is the best solution for the homeowner as well as the lending institution(s). As a Certified Distressed Property Expert (CDPE) along with our team of short sale attorneys, we can seamlessly guide you through the arduous short sale process.
Short Sale FAQs
What Is A Short Sale?
A short sale occurs when the net proceeds from the sale of a home are not sufficient to cover the sellers’ mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate agent’s commission. In other words, the seller is “short” and does not have the means satisfy the obligation. A short sale is an alternative to foreclosure which generally benefit both lender and borrower alike. The lender is getting paid back much of the money which it lent to the borrower as well as getting disposing of the property without having to go through the lengthy and costly process of foreclosure. The borrower is getting out of their mortgage without having to go through foreclosure proceedings or expend any more money towards the home. Typically, the lender pays most all sales costs, including repairs, escrow and title fees and realtor commissions.
How Do I Know If A Short Sale On My Property Is Right For Me?
Because of the current market conditions, mortgage lenders are more willing to work with borrowers faced with a financial hardship by agreeing to the short sale process. If you are faced with a hardship and are unable to meet your financial obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to repossessing the property through the foreclosure process.
If I Do A Short Sale, What Do I Have To Pay To Sell My Home?
In most cases, you will pay literally no sales costs if your lender approves the Short Sale. The agent commissions, title and escrow fees, and even most repair expenses are paid by the lender as part of the Short Sale approval. In most cases, the amount the lender reduces the sellers’ payoff is considered to be “forgiveness of debt.” This amount is normally taxable. Congress has passed a temporary relief for taxpayers under the“Mortgage Forgiveness Debt Relief Act of 2007”. This act is currently in place through the end of 2012. Consult your tax professional.
How Do I Get Started On The Short Sale Process?
There are very specific categories that lenders consider “qualified hardships.” A short sale can only take place if both your property and you qualify . You will need to make sure you are working with an experienced short-sale transaction management team so that you will significantly increase the odds of having your lender accept the proposed short sale with your first request. Not all lenders will accept a short sale. Experienced negotiation is the key.
What “Hardship” Is Acceptable For A Lender?
Below you will find a list of “hardships” that are frequently accepted by mortgage lenders:
1. Job relocation
2. Unemployment
3. Significant income loss
4. Divorce
5. Separation
6. Excessive medical bills
7. Death of spouse
8. Death of a family member
9. Business failure
10. Damage to property
11. Incarceration
12. Military service
13. Adjustment in mortgage payment or unforeseen increase in living expenses
Most mortgage companies or lenders require the hardship letter pursuant to a short sale. In the hardship letter, it is important to present the facts clearly, and above all else, be honest. The hardship letter must be able to prove the situation which caused you to fall behind on your payments and you must be able to document the reason for falling behind.
Do My Mortgage Payments Need To Delinquent?
Most lenders will turn down a request for a short sale if the seller is currently making the payments. Generally they will consider a short sale, only when the seller’s payments are delinquent. This presents a particularly difficult dilemma for the seller. Sellers who keep their payments current are protecting their credit rating, but the lenders require delinquency to do a short sale transaction. This depends on the lending institution.
I Have Two Loans; Can I Still Do A Short Sale Transaction?
Yes. This will require us to work with both lenders to put together a Short Sale transaction packet for each lending institution. Most sellers in this situation are usually successful at getting the two lenders to cooperate because neither lender wants to own another home through foreclosure.
I Am Concerned About My Credit-How Will A Short Sale Effect My Credit?
Late payments leading up to a Short Sale will negatively impact your credit. Much depends on how the lender reports the Short Sale to the credit rating agencies Equifax, Experian and Trans Union. However, if your bank accepts a Short Sale and does not negatively report, the short sale will not in itself negatively impact your credit score. For sellers, the key advantage to selling in a short sale is avoiding foreclosure. A short sale does much less damage to a person's credit report than a foreclosure. It’s also less detrimental than a “deed in lieu” (of foreclosure), in which a borrower gives the lender the keys to the house and stops paying the loan.
List of Required Documentation For A Short Sale
In order to complete a Short Sale request, your lender will typically ask you to complete a Hardship Package that will need the following included in it:
•A Hardship Letter explaining cause of current financial situation.
•Financial information (Monthly Financial Statement).
•Last 2 years federal tax returns.
•W-2’s
•Last two months’ pay stubs.
•Last two months’ bank statements.
•If there is more than one mortgage or line of credit connected to this house, they will need information on all the mortgages.
•If you are in Chapter 7 or Chapter 13 Bankruptcy Proceedings, a letter from the Federal
Bankruptcy Trustee allowing the sale of the property is Mandatory. If you are discharged under Chapter 7 liquidation proceedings, a copy of the Discharge letter is mandatory.
If you have more questions or would like to meet with Mark and his Short Sale Team, please give Mark a call at 301-758-2751. We are here to help.
1. Can my real estate agent explain the short sale process to me?
Answer: Mark Day and his Team are a group of qualified short-sale real estate specialists. We can clearly and logically help evaluate your situation, explain in detail the short-sale process, and create a strategy.
2. How do I know if my property will qualify for a Short Sale?
Answer: We know the specific guidelines and understand the short sale process so that your property can be accurately evaluated to address your specific situation.
3. Does my real estate agent know what information I will need to provide to the lending institution?
Answer: Yes, Mark Day and his Short Sale Team will be able to ask the right questions and provide you with the appropriate paperwork to begin the process of creating a short sale package for the lending institution(s) to review your current financial situation.
4. Does my real estate agent know what “hardship” categories qualify me as a short-sale candidate with the lending institution?
Answer: There are very specific categories which lenders consider as “qualified hardships.” Mark Day & Associates will be able to review your situation and inform you of the different types of hardships that most lenders consider “acceptable.”
5. Does my real estate agent know how to create an effective short-sale strategy?
Answer: A short sale will only be accepted by the lending institution if both your property and you meet the lending institution’s guidelines. With the knowledge and expertise of Mark Day and his Short Sale Team, every effort will be made to ensure that you have all of the necessary elements documented to qualify for and complete a short sale.
6. Does my real estate agent have prior experience and specialize in working with home owners and lending institutions to create a short-sale transaction?
Answer: Getting a short sale approved by banks can be an arduous task and requires specialized knowledge and experience. Hiring an inexperienced agent can result in the short sale not being approved and consequently foreclosure. Mark and his Team have the knowledge and experience to get your short sale successfully approved. As REO Specialists, we deal with banks, loan servicers and asset managers on a daily basis. You can be sure that you’ve selected a firm with the knowledge, experience and expertise to move you forward.
7. Does my real estate agent know how to market my home, since timing is essential?
Answer: Marketing is critical to helping getting a home sold. Mark Day & Associates have resources and skills for selling your home, including the MLS (Multiple Listing Service), numerous customized websites, email marketing to other brokers, open houses, market flyers and brochures. Again, because timing is so crucial, we know about advanced technological services and know how to apply them to the sale of your home.
8. Does my real estate agent know how to price my home?
Answer: Mark Day and his Team understand the current market conditions and trends and more importantly how the market is affecting home sale prices. We will be able to back up our assertions with solid proof by preparing a detailed comparative market analysis to include three items: the listing and selling prices of homes in your area, a description of comparable homes, and the length of time the homes have been on the market. This data will give you confidence that your home’s proposed market value is set at an accurate pricing range.
9. Does your real estate agent have a pricing/marketing campaign for 14, 30, and 45-days?
Answer: If your home isn’t seeing much interest by prospective buyers after 14 days, Mark Day and his Team will promptly be able to provide you with a list of things being done on a regular basis to generate activity. We will provide you with a "Weekly Status Report" so you do not have to continually request updates and they will make suggestions as to how to sell your home.
10. How do I know if I am really comfortable with the real estate agent I am selecting?
Answer: This is a great question to ask yourself. We have all had times where we went along with a decision because of pressure, but knew it wasn’t the right choice. Ask yourself if you trust Mark and his team and more importantly, if you feel confident in the way we conduct business. We are happy to provide references so that you can be educated with respect to our skill level and expertise in selling your home as a short sale. You are dealing with a very emotional issue…selling your home. Make sure you make good business decisions during this trying time.
