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Short Sale Start to Finish. A Home Owners Guide to Short Sales

February 9, 2012
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5 Million Home Owners Likely to Face Foreclosure

By Jeff Donnellan RE/MAX  www.webhomesearcher.com

I attended a RealtyTrac webinar earlier today and the host projected that up to 5 Million home owners could face foreclosure between now and 2014.  This figure is shocking, but not surprising.  Most economists project the true unemployment rate at 13-14% including everyone who has stopped looking for work or is under employed.  The report showed slides how foreclosures mirror the unemployment rate.  To throw one more devastating blow to a weak housing market, millions of loans with teaser rates or ARM are about to reset to much higher rates ( average increase of $1000 per month).

The 1st option for any home owner who is having trouble making payments but is able to stay in their home should be to use HARP or HAMP the government sponsored refinance or modification programs.    If staying in your home is not realistic and you need to sell a short sale is a much better option than letting the home foreclose.  The major banks are supporting this as I detailed in an earlier blog “Why Would a Bank Accept a Short Sale“.  Chase Bank is even offering up to 5% ($45000 in some cases) of the loan amount back to the owner at closing if they complete a short sale.

The short sale process can be long, complex and is always evolving to better refine the procedure and speed of the transaction so here is what a home owner attempting a short sale should expect:

1. Contact your bank.  Let them know there are problems and you’re listing your home as short sale.  This will alert their loss mitigation department to assist in this matter. The longer you wait the less time you will have to sell your home and avoid foreclosure.  See if you qualify for HAFA.  Home owners can receive up to 3k in moving expenses.

2.  Contact an experienced short sale Realtor who can guide you through the process.  Be careful not all Realtors are short sale experts.

3.  Your bank will require documentation.  A hardship letter explaining why you are unable to make payments, 2 years tax returns, 2 recent bank statements, 2 recent pay stubs & a financial worksheet.

4.  The next step will be to list your home for sale.  Make sure your agent does a CMA and lists the home near market value.  This will show your bank you are trying to get top dollar and not creating a fire sale or blind auction.

5. Home values may be shifting in your market so make sure to use regular price drops to stay current with surrounding home values.  This will also create a record to show your bank you tried to sell for market value.

6.  Getting an offer from a qualified buyer is extremely important.  Check out their financing to make sure it’s solid.  I see a lot of transactions fall apart because of weak financing.

7. Negotiate the highest possible offer before accepting.  Make sure the buyer gives earnest money and does their due diligence right away.  It’s important to know the buyer is committed to stay with the process and flush out problems early on.

8.  The next step is to submit the offer to your bank.  It may take time to have a contact assigned but be persistent with regular calls.

9. The 1st sign the bank is processing the short sale is when they order a BPO or broker price opinion.  A real estate agent not associated with the transaction will do an independent  valuation and submit this as a starting point for the negotiation.

10.  Usually with in 10-14 days after the BPO the bank will ask for additional documentation and counter or accept the buyers offer. They outline terms, release of liens & waive the deficiency.  Usually 60 days in from step 8 offer submission.

11.  After all terms are agreed upon everything will be submitted to the investor ( owns the loan ) &  a short sale approval letter will be issued.

12. Closing has to happen 30-45 days after acceptance so make sure the buyer has their financing ready.

Choosing the right agent is everything.  National average for successful short sale closings are 30-40%.  Realtors with the CDPE (certified distressed property expert) have a 75-80% success rate.  Let the right person guide you through the complex process and save you from foreclosure.


Is Your Mortgage Weighing you Down? Short Sale v.s. Foreclosure

February 3, 2012
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What Home Owners Need to Know about Avoiding Foreclosure

By Jeff Donnellan RE/MAX

25% of Home Owners are underwater on their mortgage due to 5 straight years of home price declines and home prices have reverted back to 2001-2002 values in most markets.  This means that anyone who  has purchased a home in that time & didn’t make a large down payment owes more than what their home is worth.  During this time  many Americans have lost their job, experienced wage reduction or other hardships that made paying their mortgage extremely difficult.  This is nothing to be ashamed of because most people in this situation spend all of their savings just trying to keep their home.

Our neighbors are suffering in silence. 1 out of every 7 homes in the U.S. is in some state of foreclosure.  7 out of 10 do absolutely nothing about it.  It doesn’t have to be so.  Their are foreclosure alternatives such as a short sale, renting the home or a deed-in-lieu.  A foreclosure is an extremely traumatic event for a family and the worst thing that can affect your credit score (worse than bankruptcy).

Reason Against Foreclosure

  • A foreclosure is worse than bankruptcy
  • A foreclosure is public record for 10 years
  • A foreclosure could jeopardize future employment because employers check credit.

Reasons for a Short Sale

  • Home owner is in control of the selling process, allowed to sell and move with dignity
  • Less impact on credit score. Can drop as little as 50 points v.s. foreclosure 300 or more
  • Owner can qualify for another mortgage in 2-3 years, 7-10 after a forclosure
  • Short sale will be recorded as ” Paid in Full” or “Settled”
  • Owner can receive up to 3K to moving expenses under HAFA guide lines

Most mortgage companies and banks are now more cooperative than ever by participating in programs such as HARP, HAFA, & HAMP.  These programs are meant to help home owners  refinance or modify their mortgage and stay in their home or short sell their home if the hardship is too great.  In a previous blog  Why Would Your Bank Accept a Short Sale I detailed why banks don’t want to foreclose and how they are trying to help home owners relieve the burden of a mortgage they just can’t afford.

To find the best option contact an experienced short sale Realtor.  Since each person has a different situation, an experienced short sale Realtor can make recommendations what is best for you.

This Article was written by Jeff Donnellan RE/MAX CDPE (Certified Distressed Property Expert).  Find more information about Foreclosure prevention and short sales at www.webhomesearcher.com