Do I Owe Money After I Have Been Foreclosed On?
When the lender or bank forecloses on the property and they eventually sell the property for less than what was owed, then a deficiency exists with the loan. The deficiency is the difference between what the homeowner owed and the amount the property sold for.
Will the bank come after me for the difference?
During the short sale process, we can negotiate with the lender to not seek a deficiency judgment against the homeowner. Some lenders as a matter of policy, will not seek a judgment against the homeowner. They feel they have waived their right by accepting a short sale. We have them acknowledge it in writing that they will not seek a judgment. There is a second issue as it relates to the deficiency and that is the 1099. The lender will issue a 1099 to the homeowner for the difference. In my dealing with lenders, I have found that they generally will not seek a deficiency judgment when doing a Short Sale because of the hardship. We negotiate with your lender to report your loan as payment in full. Here is an important note. The lender, if they issue a 1099 cannot then sue for a deficiency judgment. The lender can only pursue one or the other. It is obviously in the best interest of the homeowner to be proactive and deal with the foreclosure NOW. At least there is a chance that I can negotiate on your behalf.
What About My Credit?
The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is the most damaging event your credit status can encounter - worse than bankruptcy. In the course of getting your short sale approved you may miss your mortgage payments, and these will show on your credit. By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods and such) relatively quickly. Your credit will recover much quicker from the credit dings of a few late mortgage payments, if you keep your other accounts current. Always stay on top of your consumer credit. So, consider allocating your funds to meet basic necessities (food, utilities, household needs, auto expenses and such) first. Beyond paying for necessities plan to pay other bills to keep as many accounts current as possible. Keep “necessary” Accounts Current when deciding which credit bills to pay. If you are using a credit card to temporarily pay for necessities, you want to be sure to not jeopardize the availability of that account. A Short Sale may be just one part of a larger effort to get through a tough period. I want to help make it possible for your credit to recover quickly. YOU need to avoid foreclosure – and that’s where I can assist you.
Is a Short Sale right for me?
Mortgage lenders are becoming increasingly willing to work with borrowers faced with a financial hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship, and are unable to meet your obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking the property through foreclosure. As you consider the option of pursuing a Short Sale, remember your lender is looking to limit any potential loss on your loan. By completing a Short Sale, your lender has arrived at a solution that is, for them, much better than a foreclosure. Bottom line, your lender wants to work with you.
If I do a Short Sale, how much will I have to pay to sell my home?
Nothing. It’s true, NO OUT OF POCKET EXPENSE. When your lender approves the Short Sale, all commissions, title and escrow fees, and even most repair expenses are paid by the lender as part of the Short Sale approval. We will include the *following clause in the contract. "Seller’s agreement to sell is subject to approval by existing lender of a Short Sale at no cost to Seller. Seller shall not be required to deposit funds to close escrow." Remember, lenders approve Short Sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.
How do I get started on a Short Sale?
It’s easy. If you would like to get pre-qualified for a Short Sale, set an appointment now. There is no charge to you to get started. It is as simple as contacting us and we will get to work. If you later decide you don't want to do a short sale, that is okay too.
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. Secondly, 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 an attorney.
What sort of hardship would my lender consider legitimate?
To some extent, that will depend upon the mortgage company considering the Short Sale request. Generally, as long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the Short Sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter. The hardship letter sets the tone for the entire file. Below you will find a list of hardships that are common and frequently accepted by mortgage lenders:
· Family illness or injury
· Illness or injury in the extended family particularly if it forces relocation
· Job relocation when the property is equity deficient
· Job loss or significant income loss
· Divorce or split of domestic partners
· Adjustment in mortgage payment or unforeseen increase in living expenses
I am current on my mortgage, will my lender consider a Short Sale?
The answer is, maybe. 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. From my experience, you should wait. If you are current on your mortgage, the likelihood of your lender believing your hardship is SLIM and will get denied.
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.
Do lenders approve all Short Sales?
NO. That is why it is critical to work with an agent that has extensive experience at getting Short Sales approved. From the presentation of the Short Sale package to the lender to working with the lenders Loss Mitigations Department, I know how to keep the file moving towards approval. 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 1st and the 2nd loans) to put together a Short Sale transaction. Even if the value of your home is below the balance of the 1st 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. If you find you are a candidate for a short sale, please don't waste anymore time.
My brother(niece, daughter, friend, etc) is a Realtor, Can't I just use them? ?
I can completely understand why you may want to list with them, however it is very difficult to sell a home in which the seller owes more money than the property is worth. I am specially trained to deal with your lender and negotiate with your bank to accept less money for your house than you owe. If it is already listed with someone you know I would be happy to offer them a Referal fee.
I don't really care anymore, can't I just walk away from the house?
Just because you walk away from your house doesn't mean you walk away from the debt. If your house goes through foreclosure, the bank will send your house to auction. You will be at the mercy of the bidders and they start low. You could be stuck with the difference. Walking away from your house means you lose control. With a short sale we try to minimize the damage. We market the house to get the best price for your home in TODAY's market. Then we negotiate with your lender so you hopefully walk away with out a deficiency judgment (owing the bank money still). Long after your foreclosure (2 Years, 5 Years, 10 Years), a foreclosure can still be affect you credit. You may not care today, but down the road you will when you are trying to buy a new car, refrigerator, or your next house.
How will a does this all effect my credit score?
A Short sale can drop your credit score 50 to 100 points. Late mortgage payments will be reflected on your credit report for seven years, but the negative impact on your FICO score will decrease as the late payment recedes into the past. When you sell your home for less than you owe on it and your lender writes off the debt, your FICO score will drop between 80 to 100 points. It will take approximately 18 months of consistent on-time credit payments to restore your credit score to a level where you will be able to get a new mortgage with good interest rates and terms. If your home is lost to foreclosure or you give it back to the lender via a deed in lieu of foreclosure, your credit score will go down by 250 to 280 points. A short sale minimizes the damage done to your credit and allows you to get back to good credit faster.
How long will it take to sell my house?
In any market it takes time. The key is to get your house on the market as quickly as possible. The sooner the better. Location, condition, and price can affect how long it takes to sell. If you have missed one or more payments or are about to miss a payment, contact us quickly so we can help you with your options.