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| * The information here is not to be construed as legal or tax advise. |
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| short sale information for BUYERS, SELLERS and REALTORS |
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( INFORMATION IS SUBJECT TO CHANGE WITHOUT NOTICE )
HAFA ( FREE to seller and all commisions paid by Banks )
HAFA is an acronym for Home Affordable Foreclosure Alternatives, which is a government-sponsored program that helps individuals and families who are having difficulty selling their homes.
In conjunction with the Home Affordable Modification Program (HAMP), the U.S. Treasury Department under the Obama Administration initiated HAFA to revitalize the national housing market.
HAFA helps people sell their homes by giving them pre-approved short sales terms before listing the property. They are fully released from future liability for the first mortgage debt, and can receive $1,500 for borrower relocation assistance. Investors and servicers can also receive financial assistance through the program for administrative costs, processing fees, etc. The program sounds simple, but is actually quite complex with many guidelines and rules.
Although the program was initiated in November 2009, it officially began on Monday, April 5, 2010 and will end on Monday, December 31, 2012. Experts say that if the program is successful, it will likely be extended and the terms may be adjusted for more to qualify.
HAFA is primarly aimed at helping those risking the foreclosure of their primary residence whom after having gone through a loan modifiction attempt they have been turned down. The program is done with the approval of the major banks and under stricht rules and specific guidelines to follow per HAFA. Call 954-531-8100 for more information on this program
Tips for selecting your broker/agent for HAFA or for a regular Short Sale
The selection of the right agent to sell your property in a short sale is an important decision especially if you are doing it under HAFA the short sale government program.
Many factors should be taken into consideration in making the this decision. You should find an agent who consistently has closed short sales without major problems and who knows his business inside and out. The agent has to have knowledge of the bank’s valuation methods used to determine if a short sale is attractive to them or if a foreclosure is most likely the outcome if you are outside of those parameters. The sophisticated negotiation strategies used by banks are not what you expect and your agent better know how to deal with them effectively.
Certified Short Sale Agent
Agents who have taken the time to become certified in this discipline have demonstrated a commitment to excellence and are prepared to provide home owners with some knowledge of who these deals are done.
It is equally important to choose an agent who works full time and is an expert in valuation pricing.
Experience
Agents who have closed more short sales than what they have lost are skilled in recognizing the key elements of contracts that have the greatest potential for success with banks. Experience must be in the specialized field of listing and selling short sales rather than as a buyers agent.
DEFINITION OF A 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.
Buyers looking to purchase under a 'short sale' need to know that a bank may take anywhere between 45-90 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.
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!
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 n 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 gainst 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.
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 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.
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 POSSIBLE LEGAL 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. There are some rules for the property that is the primary residence whereby there is none or little tax liability after the short sale.
Also, the lender(s) may still persue a deficiency judgement on the money they lost under a short sale (especially on investment property) as a result of them being paid less than the full amount of the loan at closing. In some cases a bankruptcy may be the only way out of this liability unless you can negotiate some type of unsecured note before closing whereby the lender gets paid some sum of money at al later date and under certain terms in exchange for a total release of lieablity. Your real estate professional needs to be very experienced to negotiate these types of notes on your behalf.
Keep in mind that a bankruptcy (with also a home foreclosure) although it can wipe out all debt completely, it will absolutely destroy your credit for a very long time. Banks will pay little or no attention at unpaid unsecured debt (credit cards) in the future after your bankruptcy. However, they will want to see your primary home was sold -even in short sale- rather than forelclosed on. The worst hit in the credit report will be a 'foreclosure' of a primary residence whether it ocurred before or after bankruptcy. For this reason, you are better off to shor sale your property even if you go through bankruptcy.Lawyers in general will walk you into bankruptcy without advising you of this fact. They charge anywhre from $2,000 - $10,000 fee for a bankruptcy and care very little about short sales.
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. We will participate the commission to you... see westonshortsales.com
You will be dealing with a professional who knows the word integrity, professionalism and who will present offer to the lende how they want it...
CAN ANY REAL ESTATE AGENT SUCCESSFULLY DO A SHORT SALE?
Would 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 geting 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 knows what is the coorrect protocol for a short sale negotiation.
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 uncle got a real estate license attracted by easy money. The term 'short sale' was foreign to them and it is still up to this day.
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, lawyers (they only know legality not the short sale protocols with lenders), scam artists, however, experience with lenders in 'short ales' only comes with lots of '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 ABOUT BRINGING A BUYER TO HAS BECOME THE 'BLACK HOLE' OF REAL ESTATE SALES, ETC., OTHERWISE YOUR AGENT WILL BE LEARNIG BY MAKING MISTAKES THAT WILL BE COSTLY TO THE HOME OWNER AND, IN THE END, THE 'SHORT SALE' MAY BE DISQUALIFIED BY THE LENDER! |
