I would like to inform you about Short Sales, their process and what they entail.
Currently, most all banks are wanting to double their amount of short sales to avoid foreclosure.
The process of a Short Sale could take up to 6 or 7 months and during this time you will remain in your home at no cost to you.
There are many benefits to you, the seller. Saving your credit, staying in your home and maintaining your home are just some of the reasons I encourage those in your position to look into a Short Sale.
I want you to know that help is here for you.
-Maggie Moore
HOT OFF THE PRESS!! 4/13/2010
Learn about Making Home Affordable http://makinghomeaffordable.gov/
"The Obama Administration’s Making Home Affordable Program includes opportunities to modify or refinance your mortgage to make your monthly payments more affordable. It also includes the Home Affordable Foreclosure Alternatives Program for homeowners who are interested in a short sale or deed-in-lieu of foreclosure."
Above is a statement from http://makinghomeaffordable.gov/
Check out the website above, it has a lot of helpful information.
"Making the right decisions on how to resolve a mortgage problem requires good information. Whether you are looking for help on how to hold on to your home, or the safest way to let it go or sell it, we have built this site to provide you with tools to help you make an informed decision."
SHORT SALE PRESENTATION by Maggie Moore
REALTORS & SELLERS: This video could be very beneficial for you!
ONE avenue for escaping foreclosure may be getting a little easier to navigate: the so-called short sale, through which distressed owners sell their homes for less than the mortgage amount and are forgiven the remaining loan balance.
As the credit crisis deepened, short sales became harder to complete. Among other things, people who had second mortgages, including home equity lines of credit, found that the second lien holders often balked, fearing they would be left with nothing, or close to nothing, after the holder of the first mortgage was paid off.
Homeowners in these situations would typically stand by while lenders argued about how to divide the proceeds from a sale, and the impasse would frequently result in a foreclosure.
But mortgage executives say they are now working more cooperatively on short sales, and proposed changes in the industry could increase the number of these transactions.
“Without a doubt, lenders are more willing to work through short sales,” said Andre L. Mitchell, the executive vice president of the Lynx Mortgage Bank in Westbury, N.Y. “In this marketplace if the lenders can negotiate in any way to get rid of a bad loan, they’re going to do it.”
The Treasury Department said last week that it would increase incentives for lenders to work out short sales when borrowers fail to keep pace with their loan payments. The department did not release details about those incentives.
Lenders have been eager for direction from the government, especially when more than one loan is involved. “To be able to systematize the negotiation would be a big plus,” said David Sunlin, Bank of America’s real estate management executive.
In the meantime, Mr. Sunlin said, Bank of America has shifted its own policy to encourage more short sales.
In the past, the bank followed the recommendation of Fannie Mae, the government-sponsored mortgage finance business, and gave second lien holders about 10 percent of the second mortgage balance in a short sale where Bank of America held the first lien. When Bank of America held the second lien, it also required first lien holders to forfeit that amount in a short sale.
Now, when it holds the second lien, Bank of America will accept 5 percent of the net proceeds of the short sale, Mr. Sunlin said. When it is the first lien holder, it will offer the same to holders of the second lien.
Banks encourage short sales because they lose less money on such transactions than they do in foreclosures, where they must sometimes carry the house for months before selling it.
Homeowners who are considering short sales can often make the process smoother by involving the bank early in the process.
For instance, if a home is worth $375,000, but has a first mortgage of $390,000 and a second mortgage of $20,000, the borrower might contact his or her first mortgage holder and raise the possibility of a short sale. If that lender knows it can negotiate successfully with the second lien holder, it can start those negotiations and put the borrower in touch with a real estate agent with experience in short sales.
The borrower would then list the home for its appraised value, and the agent, after conferring with the lender, usually accepts any offer close to that amount. After the house sells, the bank pays the agent’s commission of around 6 percent, and pays the second lien holder a portion of the proceeds. Both lenders then forgive the remaining debt.
The borrower is not off the hook completely, since after the short sale his or her credit score is likely to fall. But even then, the credit score would probably be far better than it would be after a foreclosure.
Mr. Sunlin said that homeowners who are considering short sales do not necessarily need to involve the bank early on. He said they can contact the bank within five days of getting an offer on the house and still expect good results.
That is especially true, he added, if documents are presented showing that the offer is in line with others in the local market, as well as pay stubs and other paperwork demonstrating the borrower’s financial hardship.
Mr. Mitchell of Lynx says short sales are often the best approach, even for homeowners considering a new loan to save the home.
“It’s gotten to the point where people understand that sometimes you have to start over,” he said. “A loan modification might help you in the short term, but sometimes what people need to do is get out completely.”
More Articles in Real Estate »A version of this article appeared in print on May 17, 2009, on page RE6 of the New York edition.
Benefits for the Seller:
Not having a foreclosure.
Avoiding the humiliation of a public sale.
Completing original commitment with integrity.
Saving Credit
Maintaining home
Short Sale Requirements:
2 years tax returns (signed)
2 most recent pay check stubs with YTD (Year To Date)
Financial Statement
2 most recent bank statements with a bank logo
Hardship letter
Authorization filled out and signed/dated
Order oayoffs on mortages
Get a PR to see any additional Liens
Who Negotiates The Offer?
The agent & the homeowner (you), WE negotiate the best possible offer. Then you, the homeowner, have an option to reject or counter unreasonable offers.The servicer (bank) expects a fair market value on the property.
Fees The Bank Will Consider Paying
Property Taxes
Owners Title Policy
County Documentary Transfer Tax (if applicable)
Escrow Fee
Commission (May be reduced and is negotiable)
Junior Lien Holders (Must be negotiated for release)
Fees Not Paid
The following fees will generally NOT be paid:
Repairs, because property is Sold "AS IS"
Inspection Fees, Pest Inspection Fees, Pest Repairs
Fees normally paid by the buyer including tax service fees.
Survey costs
Junk fees
Utility bills/Unless a Lien on the property
Buyer closing costs in excess of 3%.
Last, but not least, the GOOD news!
Banks really DO want to participate in more Short Sales and have the same goal that you do!
I will represent you, and I too have the same motive as the bank, for you NOT to experience a foreclosure.
Even though this time may be hard, just know I am here to help.
PRESIDENT SIGNS MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007
TAX RELIEF FOR SHORT SALES
As many of you may know, one of the big impediments to short sales was the fact that the taxpayer would be charged with ordinary income for any debt which was forgiven by a lender in the short sale. So the taxpayer might get out from under the property but was left with a big income tax bill. The long awaited tax relief from this provision has now been signed into law. On December 20, 2007, President Bush signed into law the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) which greatly reduces the negative tax implications of a short sale if the debt being forgiven meets certain criteria. Under this new law, there is a permanent exclusion for discharges of debt of up to $2,000,000 (which was forgiven by the lender after January 1, 2007) if the debt was secured by a principal residence and was incurred in the acquisition, construction or substantial improvement of the principal residence. Instead of including the amount forgiven as income, the basis of the individual’s principal residence will be reduced by the amount excluded under the bill. This new law does not change existing law as it relates to forgiveness of a debt which was used for purposes other than acquisition, construction or improvement. So lines of credit and home equity loans which were used for paying off credit cards, buying second homes, boats, etc. will still be treated as ordinary income if forgiven by the lender.
December 17, 2007 - In a move to address the subprime lending crisis and to help struggling home loan borrowers, the Senate on Dec. 14 approved legislation that would eliminate any taxes home owners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage debt. The change in the tax law would cap untaxable forgiven mortgage debt at $2 million and apply only to principal residences.
“This legislation will play a central role in helping American families avoid foreclosure and stay in their homes,” said Brian Catalde, president of the National Association of Home Builders (NAHB) and a home builder from El Segundo, Calif.
Existing tax rules under Section 108 of the Internal Revenue Code impel many struggling home owners to seek foreclosure over restructuring their loan with lenders because forgiven mortgage debt is taxed as ordinary income.
S. 1394, the Mortgage Cancellation Relief Act of 2007, would remove this tax burden on mortgage indebtedness, encourage market-based restructuring between lenders and home owners and discourage foreclosures, said Catalde.
Sponsored by Sens. Debbie Stabenow (D-Mich.) and George Voinovich (R-Ohio), the bill would provide a temporary, three-year change to the tax code to eliminate taxes on forgiven mortgage debt.
For example, to keep a struggling borrower with a generally solid credit history from losing their home, a bank could elect to reduce the amount of the loan by 20 percent – from $250,000 to $200,000. While substantial, the $50,000 reduction would still be considerably less than the 30-to-50 percent loss that would be likely if the home were repossessed. The outcome, obviously, would be better for the home owner, who otherwise would lose the property.
Under current tax law, the $50,000 in forgiven mortgage debt is considered taxable income. That’s a deal-killer for the home owner who is already fighting just to stay afloat. “That’s why we need to change the law,” said Catalde.
S. 1394 also includes an NAHB-supported provision that extends the deductibility of mortgage insurance for three more years. Mortgage insurance is especially critical for low- and moderate-income first-time home buyers, many of whom may not qualify for a market-rate mortgage.
Catalde also urged the Senate to continue to address the housing crisis by quickly reconciling its FHA reform legislation, S. 2338, which passed last week, with its House-passed counterpart, H.R. 1852, and passing legislation to reform Fannie Mae and Freddie Mac and allow them to purchase mortgages in high-cost markets.
“These three pieces of legislation are critical to help the housing and credit markets to stabilize and recover,” said Catalde. “We are hopeful that the House will take up and pass the Senate debt forgiveness bill and send it to the President this week before the Congress adjourns for the holidays.”
