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Frequently Asked Questions Concerning Foreclosures and Loss Mitigation
Who should consider putting their property up for short sale?
How long should the short sale process take?
How important is it to use an experienced Real Estate Agent that specializes in Short Sales?
How important is it to set the house price accurately?
What does the home owner have to gain from arranging a short sale on their property?
Does some sort of hardship have to be present for a short sale to occur?
Do all lenders do short sales?
What sort of hardship would a lender consider legitimate?
Do Owe Money After I Have Been Foreclosed on?
Will the bank come after me for the difference on a short sale?
Will I have to repay any of the difference between the lender’s net and my mortgage balance?
But my lender told me it wouldn’t work with me.
If I do a short sale, how much will I have to pay to sell my home?
How do I get started on a short sale?
Can I simply deed my property to someone else and avoid the hassle?
I am current on my mortgage, will my lender consider a short sale?
Can I sell my property for any price?
Why would a mortgage company agree to accept a short sale?
What about turning to those investors who buy houses?
Do lenders approve all short sale requests?
I have two loans, can I still do a short sale?
My property is in rough shape and needs work, can I still do a short sale?
Can the buyers pay me money for doing the short sale?
Can you help me if my property is already listed?
But I want to stay in my house. Can you help me deal with my lender?
A: A short sale is when a homeowner contacts realtor, Loss Mitigation Company or lender directly requesting “short sale” of their property to avoid foreclosure. The property must first be listed and the Real Estate Agency will provide Current Market Appraisal (CMA) of the property’s value and price the home according to the current market value. The homeowner prepares a ‘Hardship’ letter and provides their negotiator (be it Realtor, Loss Mitigation Company or Lender directly) with their financials, hardship letter and past taxes or profit and loss statement as directed
Q: Who should consider putting their property up for short sale?
A: Homeowners who cannot afford to pay their current mortgage because of hardship or who have to move and cannot sell the property and liquidate the mortgage. If your ARM has reset and you now cannot afford to pay, you may be able to get this handled with a more direct forbearance plan and loan modification. Right now, if you want to stay in your home you should be able to. The HOPE line helps homeowners to stay in their home. FFN helps homeowners through whatever steps are needed to determine if they can take advantage of the programs that exist out there in today’s economy, such as the new H4H HUD product. Even income property owners can qualify for special arrangements today, to help to keep their investments. Our motto is no foreclosure without representation! Having to go through this alone is too complex and it is likely you will fall short of what you could achieve with us on your side.
Q: How long should the short sale process take?
A: If the owner cooperates with the real estate broker by signing the listing agreement to place the home on the market, the process can move forward surprisingly quickly. The first step is signing the Agreement and Authorization Form, sending us the $250 payment (non refundable) administrative set up fees and providing the financial documents necessary to prepare the Short Sale package. showing the lender the reasons why the homeowner can no longer afford to stay in the home. Once the lender approves the Short Sale the Real Estate Agent will work to find a buyer to complete the sale. When an offer is presented IMC will negotiate with the lender if needed to get approval to finalize the sale.
Q: How important is it to use an experienced Real Estate Agent that specializes in Short Sales?
A: Of the ultimate importance. If the Real Estate Agent appointed is ineffective in handling the short sale, does not have the necessary experience in appraising of the property’s current market value is either too high of too low, has little or no access to potential buyers, then the process can take a very long time or not go through at all. This will leave the lender with no option but to foreclose on the property. You need a real estate broker who can effectively mediate with the mortgage lender and potential buyers.
Q: How important is it to set the house price accurately?
A: Very important. If the Real Estate Agent sets the price too high, and the house does not sell then the implications of this for the property owner is foreclosure. If on the other hand, the price is set too low, then there will be a shortfall still needing to be paid by the former owner.
Q: What does the home owner have to gain from arranging a short sale on their property?
A: In the simplest of terms, a last chance opportunity to extricate themselves from a very unpleasant situation in as good shape as possible. The short sale option gives you some control back over your finances, life and future financial health. Avoiding the necessity of foreclosure and bankruptcy and keeping your credit record intact enables you to retain your dignity and avoid the enormous strain on your physical and mental well-being that a foreclosure brings.
Does some sort of hardship have to be present for a short sale to occur?
A: Yes. The economy of the entire country is collapsing at this moment. In order to partake of one of the programs you do need to have a hardship, however this can be something known of a few months away, such as retirement, contract ending, progressive illness which is worsening to a point of work loss.
Do all lenders do short sales?
A: No. Lenders aren’t required to do Short Sales. The law allows them to simply Foreclose, unless there are extenuating circumstances and these may need dictation by a Court to enforce. Lenders, however, can see where they have had flaws and will usually soften up if otherwise adamant, if there is reasonable doubt regarding dishonest lending practices.
What sort of hardship would a lender consider legitimate?
A: This can vary and there is no crystal ball for this, but obviously the hardship has to be monetary - unless the situation is laced with lender fraud in which case there would likely be special consideration given. In addition to the monetary hardship it is always good to tell about yourself and give the lender a viewpoint of your general worthiness prior to this hardship.
Do Owe Money After I Have Been Foreclosed On?
A: In deficiency States the Lender can (and usually does) sell the Judgment at some point later to a Collections Company of some sort. Depending on your specific Lender this may be better or worse than prior to this sale, however my prediction is it will be worse, as the purchasing agency will want to make good on the purchase and get as much money as they can. If you aren’t planning Bankruptcy it is far better that you work it out somehow with the Lender. Once the Lender writes the loss off, they are in a much more negotiable position. It’s all a matter of money. If your offer doesn’t beat what he can sell this Judgment for on the open market then he’ll sell it. We help with these along with everything else.
Will the bank come after me for the difference on a short sale?
A: See the above. All lenders are different.
Will I have to repay any of the difference between the lender’s net and my mortgage balance?
A: See the above. All lenders are different. I want to emphasize here that the answer to this is as good as your negotiator. This is where having a good and experienced negotiator who is persistent and doesn’t hear the word ‘no’ can come in handy.
A: There is another issue as it relates to the deficiency and that is the 1099. The lender will issue a 1099 to the homeowner for the difference, and this amount is reported to the Internal Revenue Service and is treated as income unless you show insolvency - See IRS Form 982.
A: This is another thing that can be assisted by a good agent working for you. If there is any evidence of lender fraud (and a good consultant can find this), the lender is much more likely to place your file in ‘dispute’ versus in ‘default’, which will help your credit somewhat.
A: If you cannot afford to stay in your home but want to, we can help you to stay in your home, as many credit counselors can. There are good products out there if your ability to pay has really been reduced - such as the H4H product. Make sure your consultant understands this product and knows how to approach this.
But my lender told me it wouldn’t work with me.
That’s because you were dealing with the debt collections arm of the mortgage company. The loss mitigation and workout arms of lending companies deal with cutting losses, not collections.
If I do a short sale, how much will I have to pay to sell my home?
When your lender approves the short sale, the lender as part of the short sale approval pays all commissions, title and escrow fees, and even most repair expenses. In deficiency States or where a huge shortfall exists the lender will sometimes request some contribution from the homeowner. When this happens it is possible they will simply go with a higher offer to cover that added value and often this can be countered with something acceptable. Never give up.
Remember, lenders approve short sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.
If your lender asks you to pay anything, you are always in control of whether to accept what is offered.
How do I get started on a short sale?
It’s easy. If you would like to get pre-qualified for a short sale, call me and set an appointment now. It is as simple as contacting me and I will get to work.
If you later decide you don’t want to do a short sale, that is OK, too.
What do National Association of Realtors and Florida, California and other States Association of Realtors have to say about short sales?
They have said time and time again that these are a viable solution for some homeowners. They’ve even said these may ultimately help cure the housing slump. Here are some recent articles:
realtytimes.com/rtcpages/20070917_shortsale.htm
www.floridarealtors.org/FLRealtorMagazine/2007/September/0907Rescue.cfm
I’ve never been in trouble like this before. Should I continue to use my cards to try to keep up with this hopeless situation?
Don’t throw good money after bad. If you knew how many people are going through the same situation as you, it would amaze you. The number of pending foreclosures is staggering. People from all economic classes, and all walks of life, are in similar circumstances.
Can I simply deed my property to someone else and avoid the hassle?
Deeding your property to someone without paying off the loan is nearly always a bad idea. In the first place, the lender still considers you primarily responsible for payment on the loan. If loan payments do not get paid, or if the lender ultimately forecloses, this will show on your credit.
Second, when you deed your property to someone else, you give up control of the property. Along with the deed goes the ability to control the property.
Do not deed your property to someone without paying off the loan unless you have consulted with a qualified attorney and have been advised to do so.
Deeding the property to the lender (and sometimes the lender won’t take it, at all) is an option, but it can have implications nearly as bad as a foreclosure.
I am current on my mortgage, will my lender consider a short sale?
Possibly. Some lenders will accept a short sale file for approval on loans that are not delinquent. Other lenders will not accept the file until the loan is delinquent.
Can I sell my property for any price?
NO. Lenders are looking for specific ratios in comparison to market value, and lowball offers have nearly zero chance of working. If your lender believes it is better off financially to foreclose, they will do so. And they WILL ultimately do so if you do nothing, or give them incomplete short sale packets, or goofy lowball offers.
Why would a mortgage company agree to accept a short sale?
There are actually several reasons why a mortgage company would approve a Short Sale payoff, including the following:
· Legal Concerns: Mortgage lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.
· Wall Street is Watching: Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender’s ability to sell their loans on the secondary market. A successful short sale gets the loan payoff resolved quickly.
· Asset Management Expenses- If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage real property assets - homes - spread throughout the region, the state and possibly even the nation. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful short sale eliminates most of these costs.
· Reserve Requirement- Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful short sale lets the lender put more money to work.
What about turning to those investors who buy houses?
That might be an option if you have equity. Remember that these investors are looking for a deep-discounted deal. If you don’t have equity, or enough equity, they probably won’t be interested. Also, some of these investors seek to tie up homes with no intention of closing, but assigning them for a profit to a third party in the two or three months before the closing date. If they can’t find someone to take the deal, they cancel the contract with the seller. Wasting two or three months to be back at Square One increases the chances you’ll get foreclosed on. You need to make sure that any potential buyer is qualified and sincere.
Do lenders approve all short sale requests?
NO. That is why it is critical to work with an agent that has extensive experience at getting short sales approved. The chances of it working when dealing with an agent who is not trained in this area are slim. No one can truthfully guarantee a short sales effort will work.
From the presentation of the short sale package, to ways to communicate with the loss mitigation departments, I know how to keep the file moving towards approval. I can put the odds in your favor. It’s a matter of giving you the best shot in a tough situation. The first step is to get pre-qualified for a short sale.
I have two loans, can I still do a short sale?
Yes. We can work with both lenders (many times the same lender hold the first and the second loans) to put together a transaction. Even if the value of your home is below the balance of the first mortgage, we can normally get the two lenders to cooperate.
In the end, neither lender wants to own another home through foreclosure.
My property is in rough shape and needs work, can I still do a short sale?
Absolutely. In fact, lenders are more motivated to do a short sale on a property that needs work than on a property that doesn’t. The lender knows the risk of loss goes up when they foreclose on a property that needs lots of work.
Aside from expense of completing the work, lenders are simply not set up to get the work done. They are in the loan business, not the fix-it business.
Can the buyers pay me money for doing the short sale?
NO! If the bank finds out the buyer gave you money later on, you could have the bank coming after you for FRAUD. It is your obligation to tell the lender the truth about your situation, and to follow all laws and regulations. Some lenders, however, are allowing the sellers a small amount back to help with a rental deposit. It’s another sign times are changing in lender loss mitigation.
Can you help me if my property is already listed?
I can answer general questions, but you should talk to your real-estate agent about the possibility of doing a short sale using us as the facilitator. We must be paid and only receive a small amount of money up front, with all profits and some working expenses coming once the short sale concludes. These fees are paid from the Realtors commission. We work with Realtors all over the Country but not all Realtors want to split their commissions and give up the control of short sale negotiations. These are complex transactions that take a lot of time and effort on the agent’s part, so some agents do not want to deal with them, or simply don’t know how. If that’s the case, have your agent call me and I’ll work out a referral so we can get the process started.
But I want to stay in my house. Can you help me deal with my lender?
Absolutely! There are products out now that most homeowners can qualify for, to be able to stay in their home. Give us a call.
Why would you do that?
Our goal is to keep the homeowner in the home if they want to stay there. Key products available allow the homeowner to stay in the home and get a new mortgage for 90% of the current market value of the home. We do charge a fee for this loan modification service of $250 initial administrative expenses and $750 once the new loan is approved. To prepare for and get this through could take dozens of hours and we don’t work for free, however we are very resourceful and - unlike Realtors who don’t charge and offer only some bits of advice - we have specialized with this and are very diligent and don’t take no for an answer. Where someone doesn’t qualify initially for this we go for getting a temporary (6 mo. forbearance) program that can be done to get back on your feet and try again.
Give us a call (we service all 50 States) at:
Foreclosure Freedom Network
12661 Gain Street
Pacoima, CA 91331
(818) 890-0131 Office
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