General short sale information for BUYERS, SELLERS and REALTORS - Call: (954) 531-8100

THE FORECLOSURE PREVENTION PLAN IS LIMITED

The eagerly awaited details of the Obama Administration's new foreclosure-prevention plan, while helping many distressed homeowners, does not help a majority of Florida's homeowners because of several key components of the plan. Both the refinancing and the loan modification components are for Fannie Mae or Freddie Mac mortgages that are primary Residences only. This leaves a vast majority of South Floridians out of the program. Those primary homeowners with "jumbo" mortgages (above the conforming loan limit of $417,000 AS OF JULY 09) do not qualify nor those that owe more than 105% of the current value of their home. Many South Floridians have seen their values drop significantly below their current mortgage balance and thus would not be eligible for the refinancing under this program. Homeowners can go to www.zillow.com for an idea of what their real estate is currently worth according to this commonly used site. The government has provided information at www.financialstability.gov for people interested in whether they may be a candidate for these new programs. For additional information you can go to www.addisonfinancialservices.com
( THIS INFORMATION IS SUBJECT TO CHANGE WITHOUT NOTICE AS THE GOV. VARIOUS PLANS ARE NOT YET FINAL)

FORECLOSURE PROPERTY

In today's real estate climate a buyer can actually find terrific deals listed right in the Realtor's Multiple Listing Service. These may not be foreclosures but homes where families need to move and are willing to price their property very competitively. Furthermore, these homes will be in better condition than most foreclosures out there. However, if you are willing to search through the hundreds of foreclosed property, have the ability, money and patience to repair these homes when damaged, you may find a good deal among foreclosures as well.

Basically a property becomes a foreclosure when a loan is in default and no one has come forward to buy property or bail lender and/or home seller out through a short sale. The property is then foreclosed upon and offered at an auction where if there are no buyers because amount of debt is larger than the actual property's value the lender ends up owning the property.

If you are the home owner read below. If you WANT TO BUY THEM at the auction sale keep in mind that with everyone and their dog bidding on the same properties, the margins on foreclosures are paper-thin. When someone finally ends up with the property, all the equity that once made the property a good deal has been chewed up in the process. Not to mention that now you need all the cash up front in order to buy a foreclosure, fixing all the damage usually found in these types of properties, making it next to impossible for the average person to get started buying and selling foreclosures. You need a very deep pocket and nerves of steal.

We Realtors do get some of these foreclosed properties listed once the bank has taken them back when no one else bought them at the auction sale. However, these homes will typically be listed at a price close to market value or just slightly under as banks by then have dropped even more money to repair them and will try by all means to recover as much of their losses as possible. Therefore, in some instances these homes are no better deals than other property around. Some lenders will actually sit on their REOs (lender owned real estate) for a while trying to recover most of their loss.

THE SHORT SALE (PRE - FORECLOSURE)

A short sale is a negotiation done with the lender(s) of record (prior to a foreclosure) when the value of a given property is below the loan amount and the property owner cannot pay his obligations thus facing imminent foreclosure. If the property is sold at market value there will not be enough money to pay the loan amount nor the closing costs in most instances. At this stage a bank may be willing to discount the amount of the loan that is owed so that the home owner can sell the property at a lower price rather than to go through a foreclosure. For a buyer this is a good opportunity to pick up their dream home at below market price.

To buy under a 'short sale' agreement with the lender of record for a property in distress a buyer needs to be fully pre-approved for a loan and ready to close on the property immediately. The offered amount has to make sense to the lender or else the property will end up being foreclosed upon and buyer loses any chance of getting it at all in pre-foreclosure. Since all offers at this point are subject to the bank's Loss Mitigation Department's approval buyer may not actually receive a counter from the bank if offer makes no sense to them. Therefore, it is important to try your best offer the first time out or some one else will and scoop the deal right from under you before you get another chance.

Buyers looking to purchase under a 'short sale' need to know that a bank may take anywhere between 45-60 days to finalize a short sale approval. Some times, especially if the offer is too low it could sit at the bank's asset manager's desk without a response for weeks. For this reason you need an experienced Realtor to handle the short sale negotiations and be on the banks case to respond as soon as possible. The procedure to present the offer is simple yet it needs to meet the bank's criteria.

If you do not have the time to wait and need to be in a home by a specific date you could be losing valuable time waiting around for a bank's approval. In that case you are better off finding another home among the many to be had in this market.

WARNING:

A 'SHORT SALE' IN NO WAY IS A MEANS BY WHICH SELLER CAN DEFRAUD THE BANK OR BUYER CAN EXPECT TO LEGALLY ROB IT EITHER. IT IS A COMPROMISE WHERE THE PROPERTY, THE QUALIFIED HOME OWNER AND A SAVY BUYER STRIKE A BALANCE IN A SALE PRICE THAT JUSTIFYS TO THE LENDER NOT TO FORECLOSE AND WHERE THE BUYER GENERALLY GETS A GOOD HOUSE AT A VERY GOOD PRICE! --

BANKS, HOWEVER, ARE NOT INCLINED TO ACCEPT ABSURD OFFERS NOT MATTER WHAT A BUYER MAY HAVE HEARD FROM REAL ESTATE AGENTS OR THE MEDIA.. A 'SHORT SALE' IS NOT AN AUCTION SALE AT THE STEPS OF A COURT HOUSE BUT A WAY TO MITIGATE THE LOSS FOR THE BANK WHICH IN TURN RESULTS IN A GOOD DEAL FOR THE RIGHT BUYER!

SHORT SALE INFORMATION FOR SELLERS

FORECLOSURE Vs. 'SHORT SALE'
Before a notice of default is filed which could lead to a foreclosure there is a step which if done correctly can technically save the home owner a lot of trouble and in some instances even the impact on the credit. This step that you can take before foreclosure is called a 'Short Sale' in the lingo of real estate mortgages.

If you cannot meet your obligations and decide to sell your home to avoid foreclosure, the way to handle a 'short sale' depends upon whether or not you have equity in your home. You have equity in your home if there will be enough money to pay off your mortgage in full after all the expenses are paid when you sell. If not, you must then apply for a short payoff at your lender to avoid foreclosure and a bigger damage to your credit. When a property is foreclosed the lender reports it to the credit bureaus and you better believe this is the last thing you want if you ever need to purchase another home again in the future. A 'short sale', on the other hand, is reported as SETTLED DEBT, and is much less harmful to your credit

CAUTION:

Foreclosures show up as FORECLOSURE, and can stay on your record for seven years. Anytime you apply for a new loan or have your credit run, the foreclosure will show up and is usually a required disclosure you must make on most credit and job applications. A short sale is listed as SETTLED DEBT, and is much less harmful to your credit. Please consult a credit company for more information on this matter. In a short sale, it is possible the bank could 1099 you for the difference in what you sell your property for and what you owed.

This means the IRS could consider the difference as income, and you could be taxed on that income IF YOUR PROPERTY WAS EVER REFINANCED OR IS A RENTAL PROPERTY. The bank MAY also ask you to pay a portion of the difference back in the form of an unsecured note, which is similar to an I.O.U. It is a negotiation, and we employ tactics to have the bank consider the debt settled. In a foreclosure, your house is sold at an auction, which typically causes the difference of the total amount you owe and the foreclosure sale price to be much greater. This means you have a higher potential tax liability.

Additionally, the bank may come after you for a Deficiency Judgment. A Deficiency Judgment is a claim against the debtor BY THE LENDER when the sale of foreclosed property does not yield sufficient proceeds to pay off the mortgage(s), accrued interest, legal fees, etc. - (Some states MAY limit or restrict deficiencies). A successful short sale should eliminate a deficiency judgment, minimize your tax liability, and keep the foreclosure off your credit. According to some banks the 'exculpatory clause' does not allow the lender to obtain a deficiency judgment at foreclosure. This is known as non-recourse financing.

CAN YOU QUALIFY FOR A SHORT SALE?
Depends on the lender and how you handle the matter from the very beginning. You'd think banks want to avoid foreclosing on a property at all costs and prefer getting as much of their loan paid back as possible. You bet they do! - A foreclosure, unfortunately for the bank, does not guarantee they will get their money back in full. In fact, more often than not, the bank takes a real beating financially by foreclosing on a loan. Their loss mitigation policy often allows for a possible short pay rather than foreclosing if they see it will benefit them at all. However, you must contact them immediately once you see that the property is upside down.

WHAT EXACTLY IS A 'SHORT SALE'?
A 'Short Sale' means that the lender ends up 'short' on the money they are owed by the home borrower when the loan is paid back. In other words, instead of foreclosing on the property the bank agrees to a lesser amount of the loan to be paid back instead of foreclosing thus risking even a larger loss. Banks are in the business of lending money not of owning residential real estate. Foreclosed property is a big headache for them and a huge loss for any bank. Furthermore, many home owners, anguished over the loss of their homes often walk away with walls, toilets, sinks, you name it, creating an even bigger headache for the lender as they now have to fix any damages and prepare the property for resale which in the end costs them even more losses.

Banks must avoid foreclosure at all costs – and here’s why. When a bank forecloses on a home it becomes a non-performing loan. This affects the amount of money a bank can borrow from the Federal Reserve. Since banks only make money by borrowing from the Fed and lending to the public, they must borrow as much as they can. Every non-performing loan reduces the amount the bank can lend to the public, affecting their bottom line profits. The cost of carrying unsold property in their books after foreclosure is something they rather not have to face. A 'short sale' mitigates the damage and gets their money back a lot sooner sooner plus they can see the extent of their loss up front. However, a short sale may or may not be approved in time if the foreclosure is well under way. For this reason it is very critical that paperwork be started as soon as possible to get all the lenders requirements met and to have time enough to secure financing for the buyer and close. That a buyer must be ready with his loan to purchase the house under a short sale goes without saying.

WHEN DO YOU CONTACT THE BANK TO REQUEST A SHORT SALE?
Yesterday is too soon. HOWEVER, it is essential that you know what to do as if it is done incorrectly the lender may disqualify you even at the last minute and you end up in foreclosure after all. They have a strict criteria as for whom they allow the 'short sale' which is based on the review of your hardship situation and other mitigating factors regarding the property. Therefore, it is better to let some one, like a Realtor with experience in short sales and in dealing with banks, assist you with all the paperwork and the steps that will give the lender a clear picture why they should wait for you to sell the house and for them to receive a lot less money than what you owe them.

CAN ANY REAL ESTATE AGENT HELP ME WITH A SHORT SALE
ONLY iF THE AGENT HAS EXPERIENCE WITH SHORT SALES AND WORKED IN A DOWN MARKET SUCH AS WE HAD IN CALIFORNIA DURING THE LATE 1990s WHEN THOUSANDS OF HOMES NEEDED TO BE SOLD IN 'SHORT SALE' TRANSACTIONS.

THE FLORIDA MARKET for SHORT SALES IS JUST BEGINING AND THE GREAT MAJORITY OF AGENTS HAVE HAD NO EXPERIENCE AT ALL WITH SHORT SALES OR SELLING DISTRESSED PROPERTY!

AGENT NEEDS TO KNOW HOW TO SPEAK TO BANKS TO SHOW THAT THE PROPERTY AND CLIENT'S SITUATION MAY JUSTIFY A SHORT SA LE... AND THE AGENT NEEDS TO HAVE A CLEAR VISION OF HOW TO HANDLE THE SALE AND MARKETING OF THE PROPERTY TO MEET LENDERS DEMANDS OTHERWISE YOUR AGENT WILL BE LEARNIG AT YOUR EXPENSE.. OR WORSE YET BE DISQUALIFIED!

HOW ABOUT OTHER COMPANIES ADVERTISING TO HELP THE OWNER IN TROUBLE?
Most want to charge you a fee up front and some are not even local. Banks want to minimize their loss and that is not likely if you hire an outsider to negotiate with the bank or obtain an offer that in the end makes no sense to the lender. Banks to consider a short sale want an experienced Realtor on their corner... they may not trust any one else.

Be careful to allow a mortgage company, a title company or even a lawyer to handle the short sale. Lawyers tipically will hire low wage inexperienced help to make the calls to the banks... attorneys have to go to court on other cases and will not drop those to make calls to banks on your behalf.. plus good luck trying to reach them on the phone!

Mortgage companies were the source of the trouble to begin with an to find a reputable one is like looking for a needle in the proverbial hey satck. They want to get you to refinance if possible but as far as negotiating a short sale what do they know about market conditions, market pricing and buyers demands when they sit behind a desk pushing paper? Besides, lenders are a bit uptight, to say the least, with the mortgage industry they now see and blame (justifiably or not) for the mortgage meltdown we are experiencing across the USA.

CAN YOU DO THE SHORT SALE BY YOURSELF?
Why would you take a chance dealing direct with lenders when you have no money left in the deal for you? By the most part, the lender needs to know and quickly determine they will benefit from the short sale as their motivation is to save as much of their investment as possible. Besides, you may have to deal with a bank's attorney which complicates matters if you have no experience speaking to lawyers or the know-how regarding a short sale. Only an experienced Realtor can give you and the lender the proper care to carry out the transaction with the least of trouble and losses to both.

WHO PAYS FOR THE COMMISSION and CLOSING COSTS?
It is included with the contract presented to the bank and paid out of the proceeds to the lender at the closing which in the majority of the cases has no money left for the homeowner. If you were to have any equity in the property but not enough for the closing either the bank accepts a short pay and pays for most of the closing expenses, including commissions, or asks home owner to come to the table with extra funds. This is why lenders want to know what is your financial situation prior to accepting a short sale.

WILL YOU HAVE A TAX CONCEQUENCE OR OTHER LIABILITY AFTER THE 'SHORT SALE'?
The short sale or forgiveness of debt by the lender may have a tax liability to you. You need to consult an accountant regarding this matter. Also, the lender(s) may still persue a deficiency judgement on the money they lose under a short sale especially on investment property as opossded to primary residence. In some cases a bankruptcy may be a better exit strategy to pursue than a short sale or allowing property to be foreclosed.

HOW LONG DOES IT TAKE TO DO A SHORT SALE?
It depends on certain variables such as how many loans are against the property and how late are you with your payments. It takes a few weeks as you need the approval of the lender under their criteria for a short sale and then they will entertain an offer on the property that may be accepted in order for the forgiving of the debt to you. If done right the time may be about the same or a bit longer than a regular sale unless there is more than one mortgage against the property or the lender has a back log on their desk. Every lender is different and when the investor is Fannie Mae or Freddie Mac you may experience even longer times.

INFORMATION FOR REALTORS WHO WANT TO SELL OR LIST A SHORT SALE

With the market today a lot of buyers will be attracted to properties offered under a short sale negotiation with a lender. Problem is, if you deal with an incompetent listing agent who has no clue regarding short sales you risk wasting your time and maybe losing your buyer. On the other hand if you need to take a listing that will be a short sale, call us, we will do it for you and get it closed for you... see westonshortsales.com

Call us if you have a truly qualified prospect buyer who can wait up to 60 days and is looking to purchase a good property at a discount over present market values. We are true professionals experienced in different types of short sale negotiations with lenders... We understand this market as we lived it in Southern California during that state's real estate melt-down of the late 1990s.

You will be dealing with a professional who knows the word integrity, professionalism and who will present your offer to the lenders packaged how they want it... this is very important so that you get a positive response in a reasonable time. A word of caution: be careful to create false expectations in you buyer regarding price. Lenders for the properties in desirable areas such as Weston are less likely to accept a low ball offer than if property is in less of a desirable neighborhood. It is all a matter of math. Good areas will have higher bidders when it comes to foreclosed or 'short sale' property.

CAN ANY REAL ESTATE AGENT SUCCESSFULLY DO A SHORT SALE?

Woould you get into a plane with some one just got his license a few months ago?... very few agents have had experience with short sales in the past. The agent is key in gettng the approval... although it seems simple, a short sale needs to be handled properly or may cause the bank to decline the short sale approval on the basis of erroneous, incomplete, untimely or right down fraudulent information. Since we in Florida did not have a serious down market in more than two decades hardly any agent here ever did a short sale negotiations.

The great majority of real estate agents in Florida are relatively new to the business or are part-timers. Most obtained their license in the past 3-7 years when every one and their cat got a real estate license attracted by easy money. The term 'short sale' was foreign to them!

Many agents are listing property and calling themselves experts at short sales. How can they be experts if it is only now that we see the need to do short sales in Florida? You can go to a seminar and hear the basics from some title company or scam artist, however, experience with lenders in 'short sales' only comes with, you guessed it, ... 'experience'.

YOUR AGENT NEEDS TO KNOW HOW TO SPEAK TO BANKS, PRESENT A PROFESSIONAL PACKAGE DONE IN CERTAIN MANNER AND HAVE EXPERIENCE IN LOSS MITIGATION PROCEDURE AND REQUIREMENTS IN ORDER TO SHOW THAT THE PROPERTY AND THE YOUR SITUATION JUSTIFY A SHORT SA LE.

PLUS THE AGENT MUST HAVE A CLEAR VISION OF HOW TO HANDLE THE SALE AND MARKETING OF THE PROPERTY TO MEET LENDER'S DEMANDS,OTHER AGENTS FEARS, ETC., OTHERWISE YOUR AGENT WILL BE LEARNIG BY MAKING MISTAKES THAT ARE COSTLY TO THE HOME OWNER AND THE 'SHORT SALE' MAY BE DISQUALIFIED!