Posts Tagged ‘Short sale’

Short Sale Clients – Pay your HOA dues to Avoid Complications and Collections!

Tuesday, December 8th, 2009

Home owners associations have become very aggressive in trying to collect past due HOA dues. The high delinquency rate has pushed HOA’s to the brink of bankruptcy.   Many short sale clients are finding that after a period of time the hoa is filling in small claims court and passing the account on to collection attorneys.

In the recent past hoa collection laxity gave us time to negotiate with the bank and buyer to pay past due HOA dues.  However today, aggressive collections tactics are complicating and over encumbering the short sale process.   In order to insure that you are not pursued for past due balances, late fees, and attorney fees, you should make your HOA payments.

I have seen people who have been foreclosed that are still being pursued for legal and HOA fees.  If you can not afford to make your HOA payment, we will do our best to try and negotiate with the bank and or buyer to pay these fees.  However, results vary and the more aggressive your HOA becomes, the more problems that could entangle this process and cause it to fail.  Our advice is to consider paying your HOA dues as a cheep insurance policy against future problems.  If you have any questions, please call me.  While we have a very good success rate at negotiating for you the seller, the length and complexity of this process make the outcome regarding HOA actions uncertain.

This notice is not to be considered legal advice with regard to your rights..   This article is notice of possible consequences brought by non payment of your legal obligations.

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How will a Short Sale Affect My Credit?

Monday, October 19th, 2009

What a great question!  If you have been thinking this, you are not alone.

A good thing about short sale is that it represents the opportunity to lift the heavy burden of carrying an overpriced home off of your shoulders and a chance to start fresh.  But the one thing shorts sale sellers want to know is – “coming out of this short sale, what will my credit look like?”

So here is the scoop.   I want to tell you that no 2 short sales are the same.  What I mean by this is that there are variables that change the effect each and every short sale has on your credit.

1. Are you going to be making your payments?  Late payments make your score go down.  You can actually make your payment and still request a short sale.  But lets face it, it puts more pressure on the bank if you are delinquent.

2. How long is the bank going to take to make a decision.  Your guess is as good as mine.  The longer they take, the more mortgage lates that show up on your credit.  Generally the bank will take about 6 months.  But every bank moves at different speeds and according to different policies.  To make matters even more unpredictable, short sale negotiators usually have a 30 t0 60 day window just to pick up the file and start to process it.  So even within the same bank, the time frames on the exact some type of loan can vary depending on the negotiators work load.  What type of loan is it?  If it is owned by the bank they can make a quicker decision, but if it owned by entities all over the globe and securitized things can get more complicated and take longer.

3. What is formula will be used to score my credit.  There are 3 different bureaus and nobody really knows what their secret formulas are. It is common to have different scores at each of them.

After considering these 3 things.   Howard Clark has gone out on a limb and given this general rule.    This weekend he posted the following guideline on his television show and website.

According to Howard,  you can expect a short sale to yield the following effects to your credit score.

• A short sale may lower  your credit score by 120-130 points.
• A foreclosure may lower  your credit score by 140-150 points.
• Bankruptcy may cause the largest hit affecting your credit score by 365 points.

Clearly it is in your best interest to do a short sale as opposed to other solutions.  And there are other benefits as well.

The next most common concern short sale sellers have is – “How long can I stay in my home?”  Since it takes on average 7 to 8 months to close a short sale escrow, That is how long you have.  Nearly 3 to 4 months longer than foreclosure.  And sometimes it can be much longer.  So if you want to stay.  Short sale is a great option to buy some time.

Again, I want to caution you that these are general guidelines.   There are a lots of variables that can effect credit scores and individual results can vary.

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Bankruptcy Attorneys – 5 Great Reasons your Client Should Short Sale Their Home!

Monday, July 20th, 2009

I have spoken with a lot of Bankruptcy attorneys about why their clients foreclose rather than short sale their home pre/post bankruptcy.  The answer I get is typically along the lines that it is a complex process that includes many legal and tax ramifications and it is just easier and more certain to Foreclose.  While this may be true, I still think that short selling your clients home could be more beneficial to your client and here is why.

1. Fannie Mae will let your client re buy in as little as 2 years with a short sale! If they have a foreclosure even after the bankruptcy they will be taken out of the market for 5 to 7 years minimum.  This could mean tens of thousands of dollars in lost opportunity and enjoyment.  Yes, I realize that after a bankruptcy your clients credit is typically damaged.  Most credit repair experts claim that they can have clients credit rehabilitated in 6 months to 2 years  after bankruptcy with simple techniques for rehabilitating credit.  This is perfectly in line with Fannie Mae guidelines.  They can get back in the game a whole lot faster!  And its worth it and worth the effort now that the housing market is at a low point.

2. Your client can potentially stay in your home longer for an additional 1 to 9 months for Free! Yes with foreclosure your bankrupt client stays in the house for 4 months for free during the foreclosure proceedings.  And all of the short sales that we have successfully completed have taken minimum of 6 to 12 months.   The bank will actually stall the foreclosure up to 4 times in order to complete the transaction.  The bottom line is that it saves them time and money for us to find a buyer ready and willing to pay and for them to not have to take the home back into reo inventory.  At $2,000 to $3,000 per month that is a lot of extra cash that your client may be able to save.

3. This process if FREE! Yes we get paid, and it typically comes out of the banks net proceeds.  Your clients does not have to pay to have us working on their side to help them clean up their housing situation.  This is a value added process with nothing for them to lose.  If we are not successful, they owe us nothing and the worst that can happen is foreclosure which is what was planned anyway.

4. We actually will pay up to 10% of commissions earned to help your client move! Its guaranteed with every successful short sale referred from an attorney.  That could be up to a couple thousand dollars towards moving expenses.  It is a huge bonus that helps pay the actual cost of the bankruptcy.  That is a great gift to give your clients.  I am sure they need it.

5. Its the right thing to do. Avoid the stigma of Foreclosure! When I talk to potential landlords and home sellers, I can get them to understand the need to work with a client that has short sold their home and or filed bankruptcy.  But its really difficult if not impossible when my buyer client has a foreclosure on their record.  There is just too much stigma attached to foreclosure. So much that we don’t even take them as clients.    Its the difference between having a D on your report card vs. an F.  If you can avoid it, don’t do it.

I know that every client has different circumstances and some have second trust deeds and more complicated tax scenarios.  And that is OK.  With every short sale we do, we have the client consult with their CPA and or an attorney and work it with a unified game plan that is best for the client.  We always negotiate with the lenders in the best interest of the client and at the end of the day, if we don’t present them with a better win, then they can cancel with nothing to lose.  We are that certain that what we are doing adds value that we are willing to work on the cum.  Now that’s putting your money where your mouth is.  Give us a try, you will be glad you did.  We have an outstanding short sale record.

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What Bob McCormick at KCAL 9 News says about Short Selling your Home

Wednesday, July 15th, 2009

Check out what Bob McCormick at KCAL 9 News says about short selling your home.  This report is from 7/13/2009 news cast.  He talks about considering how long it will take to get back to break even on your loan, other issues around short sales.  His report reflects the issues we walk you through with regard to our real estate program for short sale and loan modification.

http://www.cbs2.com/video/?id=108588@kcbs.dayport.com

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Posted in Orange County Real Estate, Short Sales | 1 Comment »

Loan Modification and Refinance – A Practical Guide

Tuesday, July 7th, 2009

For homeowners that find they would like to keep their home but need to restructure their loan, the government has offered new programs for loan modification and refinance.

The program offered by HARP is designed to allow for a refinance at normal market interest rates for individuals who fully qualify for a loan but who’s home is upside down by up to 125% in value.  Normally, individuals would need approximately 20% equity in their property in order to get a lender to approve the refinance.  This program will allow you to refinance up to negative 25% equity.  This is a good step in the right direction.  Previously the program had capped out at 105% LTV or negative 5%.

In the Orange County real estate market, this is still a big problem as most homes purchased from 2004 to 2007 are upside down by 30% or more.  Those who find themselves in this situation, and are suffering from a hardship may also be able to apply directly with their lender under TARP guidelines for Loan Modification.   The basics of this program is that you also have to qualify for the loan with sufficient fully documented income.  The program offers a stepped approach that includes lowering interest down to a floor of 2%, increasing loan amortization period up to 40 years, deferring principle for a time and lastly principle forgiveness (at the lenders discretion). The goal of the program is to reduce the total house payment including taxes and hoa to 31% of the borrowers total income.  Sounds pretty good right?

I agree.  But here is the catch.  First notice that you have to make enough money to qualfiy for the new loan.  Make too much and you won’t qualify, make too little and they will decline to work with you.  Second, your loan typically needs to be a freddie mac or fannie mae loan and the lender is only obligated to participate if they recieved TARP bail out money.  Sounds easy enough, but in reality a lot of loans are owned by investors and simply managed by the banks.  As a result, I have seen a good number of declines and less generous terms.  Third, you are not supposed to be required to be late in order to recieve help.  But in reality, those that are not delinquent are put at the back of the line and it can take 6 months just to get a decline.

I have seen many loan modification successfully completed.   All of them were only temporary loan modifications, meaning that they are 5 year deals with escalating payment schedules.  And most importantly, none of the packages included debt forgiveness.  In some severe cases, they removed principle and recalculated the loan payment but put the principle on the back end of the note as a balloon payment.  These packages will help people temporarily, but in the long run, I fear that they are just prolonging the agony that eventually, they may need to short sale their Orange County home.

Before you approach your lender to do a loan modification, I recommend you review the TARP guidelines for the Home affordable modification program.  Armed with this knowledge, I believe you will have the best chance at getting the terms you need.  However, if in the end you find that these terms do not serve your long term interest, we should discuss the possibility of a short sale.  With a short sale, fannie mae guidelines will let you rebuy in as little as 2 years.  In some cases, investors may even allow you to rent back your home after you sell to them.  This may give you time to get ready to go shopping for a new home with little or no debt and in a great buyers market.

Making Home Affordable – Program Description

Loan modification program guidelines

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8 Great Reasons Why you Should Short Sale your Home!

Wednesday, June 17th, 2009

Reason Number 1 – Because You Can!

Several years ago short sales were unheard of.  Asking a bank to do a short sale would have resulted in a laugh and a click at the other end of the phone.   But banks now realize the scope of the problem.  Heck, even they needed a bail out.  And you may too!  Do you want to be the guy taking all the arrows and holding up the weight of the universe like Charles Atlas, or does it make sense to restructure now while you can.  I guarantee when all of this mess is over, if you have not taken advantage of the tools the government has given you right now, you will be too late.   If your payment is too high, and your property is severely upside down, procrastination is your biggest enemy.   We have had a 100% success rate helping our clients dig themselves out of the whole (and most of the time our services are free!)

Reason 2 – Keeping this House is Going to Bankrupt your Retirement

If you find yourself -$50k, -$100k, -$200k upside down on your homes value, I have news for you.   It is probably going to take 10 to 20 years just to dig yourself out of that hole and get to break even (that’s zero on the wealth scale).  Yeah, yeah, yeah, I know property values will come up again.  But lets face it, they are not going to do what they did before!  How can I be so sure of that?  Am I just being cocky?  Well think about it.  Its common sense.  If they do what they did before, then we will be back in this mess again.  The whole point is that they were giving loans to people who didn’t qualify and creating artificial demand and speculation.  (The banks, government and consumer greed conspired to drive up the price to unrealistic and unsustainable levels)  Don’t count on that happening again in your life time.   At a normal appreciate rate of 3 to 7 percent per year, its going to take you a long time to dig out.  Hope you want to be in that house a long time and don’t mind being broke.  No I am not a heartless *****.  But somebody has to level with you.  I have talked to many people in denial that just want to do the easy thing and do nothing?  Wow, that is an irresponsible way to plan your future.  Can you really afford to do nothing? Remember, those who fail to plan, plan to fail.  A short sale plan that works can catapult you financially 10 to 15 years ahead!

Reason 3 -  Your payment is way to High for your income and for the house you are in!

During the boom people were buying real estate they could not afford.  Banks let people go to 57% of their total income on their house payments.  Even worse, Alt A loans let people over state their income.  That was like putting the fox in charge of the hen house.  All with the promise that real estate values would go up for ever.  Wrong!

A manageable payment should be between 28% to 35% of your total income for your house payment.  If you are higher than that, then you are house poor.  Now that Orange County real estate is on sale, its a good time to recalibrate your payment.  It would be a lot better to own more Orange County homes for less money.  Its just common sense.

Reason 4 – You can own a new Orange County home in as little as 2 years from short selling your current home

Fannie Mae guidelines state that if you short sale a home you can qualify for another Fannie Mae loan in as little as 2 years.  And there are so many deals around that you could probably lease to own or do creative financing much earlier.  So just because you short sale, doesn’t mean you can’t own.  This is in stark contrast to foreclosure.  Foreclosure will mark your record and block you for 5 to 7 years according to sources.  I don’t know anybody that wants to sell a home to someone with foreclosure on their record.  So don’t let that happen to you!  We are talking about the difference between a D and an F on your credit report.  Its a lot easier to rehabilitate a D.

Reason 5 – President Bush gave you a huge tax break you are not taking advantage of “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation“

Normally when you short sale or foreclose on a home, you are obligated to pay tax on the debt relief.  That means that if you are forgiven $100k, you might owe as much as $25k in taxes.  Wow that really stinks right?  I mean, you are broke, and you just lost your home, and then the government is going to come and take your future earnings?  Not between 2007 to 2012.  Under this act, if you occupy your home as your primary residence and your short sale your home, you are forgiven.  That is right, you do not owe any tax. (see the IRS website link for specific rules and regulations and consult with your CPA) There is a form f982 that your CPA needs to file, and this is a huge tax break for many distressed owner occupant home owners.  It is a gift from uncle Sam worth tens of thousands of dollars.  Sweet!

Reason 6 – Loan modification is a temporary fix for most people.

9 out of 10 of the loan modification packages that I have seen are 5 year deals that revert back to the borrowers original terms at expiration.  For most people their loan will spike again in 2013.  Guess what, the tax break above expires in 2012. Don’t miss your chance to get out from under it! Its very possible that delaying a short sale (or worse case foreclosure) could cost you $25k to $50k in taxes.  Ouch!  Well that seems really silly right.  If you don’t plan to own that home for 10 to 16 years, then you better get out now while you can.

Reason 7 – You don’t have to trash your credit to short sale your home

One of the biggest objection I get to short selling a home is that people don’t want to ruin their credit.  Good point. And you don’t have to.  I am not saying that it wont affect you at all.  It will negatively affect you.   But if you follow the link in reason 4 above, About.com will explain to your that it is mortgage lates that hurt your credit the most.  You don’t have to be late to request  a short sale.  This is especially true if you have a loan from a lender that accepted TARP money.  (That is the federal bail out money given to banks. ) Their guidelines state specifically that people don’t have to be in default to request assistance. Furthermore, you can pay all of your other bills.  I have talked to many credit repair people that claim they can bring a score back up into the mid 650 range within 6 months of a short sale.  That’s not bad. (note that individual results vary, please consult a credit expert)

Reason 8 – You may not have to pay any fees or commissions to sell!

Normally, if you sell a home you may pay as much as 7% of the sales price in costs.  That typically results in $35,000 in cost of sale that comes out of your pocket (for an average $500k home).  But in a short sale, it comes out of the banks nets proceeds.  So in effect, the bank is paying for the cost of sale.  Furthermore, my company offers a guarantee. In the event the bank is not cooperative and we are not successful in short selling your home, you owe us nothing.  So you have nothing to lose and financial freedom to gain.

This is a challenging time for most home owners.  But all of the doors are open.  You just need to walk through them.  The government has done everything it needs to to help you take the steps to fixing your situation.  Contact me for a personal interview at no charge.  Its Free.  We can discuss your options and you can decide which is best for you.

While I realize that may people are not proactive about their future, this article is a plea to help people who really care and want to fix  their housing  and payment problem.  Call me now so I can help.  We have had a 100% success rate in helping our clients fix their future.

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