While the overall goal of a Loan Modification is to lower your payment, it may not be beneficial in the long run. The Banks sometimes structure Modifications that are similar to the loan that resulted in your foreclosure. As a result, the Homeowner may find themselves in the same situation. It is important that a Homeowner understands that the process is lengthy. In addition, it can decrease the time that they could be applying for a Short Sale.
Kowal, PA. It is clear that Foreclosures no longer control Florida Real Estate as they did in While many Homeowners still face the threat of Foreclosure, they have discovered that a Short Sale helps them losing their home to the Bank. If the Bank accepts a Short Sale offer, they usually waive the amount that they are owed. In addition, they will dismiss the Foreclosure. Sign In. Social Media. View More. Starting Your Career. Being a Broker. Being an Agent. Smart Growth.
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These vary widely. Some states use court proceedings to effectuate foreclosures. Some states, such as California, utilize both. The most obvious difference is that non-judicial states have a much shorter timeline to foreclosure, but generally offer a right of redemption, while states utilizing judicial foreclosures usually take longer to complete the foreclosure process, but the former mortgagor did not generally have recourse after the sale.
An informal survey of foreclosure timelines suggests that a foreclosure can take as little as 90 days, and as long as a year or more.
It is critical that you understand the procedures and timelines in your state, even if the property you are dealing with is not yet in foreclosure.
Be aware that there are a number of illegitimate, ineffective and illegal approaches to short sales that are being heavily promoted to sellers and real estate agents alike. Be mindful that your fiduciary responsibility to your seller applies in a short sale situation just as it applies in any other sale. Research and read online articles and advice on short sales so you will be prepared for seller questions based on those materials.
Sellers can become badly misinformed by relying solely on online short sale advice. Seek out other reputable agents and brokers in your area who are doing short sales. What have they learned? What are their best practices? What are the pitfalls? Speak with local attorneys and CPAs who are proficient in short sales. Gather Information from the Seller and Other Sources It is important to be aware of how much is owed on the property and whether the seller is in default on any mortgage liens, taxes, or association dues.
Ask the seller for copies of the most recent mortgage statement s including second mortgages and lines of credit. Ask for the most recent property tax statement and association dues bill.
Check with the tax assessor, title company, and association, if necessary, to verify the total debt and any arrears and penalties. Know that the seller is not always aware of the total debt, and may minimize or misstate it if you simply rely on a verbal conversation.
Is the seller in default on any liens? If so, has any legal action been taken by the lienholder s? This is where it will be important to know what the local procedures and timelines are. If you see that action has been taken, inform the seller in writing. Sellers do not always know they are about to lose their homes. Is the seller aware that there may be insufficient equity? This can be important because the seller may believe that the value of their home is higher than it actually is.
It is especially important to be as accurate as possible in your market value assessment. Be realistic about the value. Short sellers cannot usually afford to try a high price first then adjust down over time. Include all costs of sale, such as commissions, closing costs, any interest and penalties on loans or taxes in default. In your best judgment, will there be positive proceeds or does the seller owe more than the property is currently worth after all selling costs?
In a recourse loan, the borrower retains personal liability for any deficiency after a sale or foreclosure. In a non-recourse loan the lender is limited to whatever funds are available from its security interest in the property itself, and cannot force the borrower to repay any deficiency.
Each state has its own rules and in some states a loan can be either recourse or non-recourse depending on factors such as whether it was a purchase money loan or a refinance.
These are legal questions. Do not try to answer them yourself. Always recommend professional legal, credit, and tax advice. Meet with the Seller to Discuss and Evaluate the Options Assume you have concluded the seller owes more than the property is now worth. It is important at this point that you advise the seller, in writing, to obtain separate legal, credit, and tax advice.
The decisions the seller will be making all have legal, financial, tax, and credit implications. A short sale should never be the first choice because it carries with it serious negative credit and, possibly, tax consequences.
Potential short sellers should always be advised that any action they take other than full payment of the mortgage note will have negative credit consequences. Sellers should be encouraged to consult with a HUD-approved credit counseling agency prior to making any decisions. Sellers should be cautioned that when selecting a credit counselor to carefully check the credentials of the agency as not every credit counselor or foreclosure rescue specialist is going to be HUD-approved.
What are the options available to the seller? If the seller is unhappy that the property value is less than the loan balance, but is otherwise under no pressure to sell, keeping the property can be the best solution. Even if there is some short term financial distress, it need not result in loss of the property. Ask if there are family or other resources that can carry the seller through if there is some financial stress.
The various programs change frequently. If the sellers must move, could they rent the property even at a negative cash flow and sell it later in a better market? This might not sound appealing, but it can be a good choice for sellers who are in a financial position to pay a deficiency from other liquid assets.
This approach avoids the credit damage that even a successful short sale will cause. An alternative in some circumstances is for the seller to agree to convert any deficiency into a personal note, or a note on another property owned by the seller.
Lenders advise NAR that they must speak with the borrower directly about all options before it will consider approving a short sale. Lenders are increasingly interested in helping financially distressed homeowners stay in their homes, and are required to do so if participating in the Making Home Affordable programs 3. In some cases, they have been willing to reduce or roll back interest rates, or reduce the allowable payment, to help sellers avoid short sales and foreclosures. It is not generally advisable for the agent to take the lead in representing a property owner in a workout.
Workouts are not real estate transactions. They are complex contract modifications, and to date, relatively few homeowners in distress have been able to come to a permanent agreement with their lender. The homeowner should be advised to consult an attorney if this is the option they choose. Note that new laws and emerging policies and procedures by the Obama Administration, Fannie Mae, Freddie Mac, the VA, the FHA, and private lenders make the workout option more complex, but also present greater opportunities for financially distressed homeowners.
If the seller owes more money than the property is worth, is unable to make payments, and is likely to lose the property in foreclosure in the near future, offering to trade the property to the lender in exchange for the cancellation of the note might make sense.
Foreclosure can happen to anyone for a number of reasons. If you may be heading toward a foreclosure, or even if you've received a foreclosure notice, there may be alternatives. Find local resources through HUD's homeowner counseling services and understand your foreclosure prevention options. Update on additional home loan payment forbearance and deferral extensions Learn more. Help is available in English, Spanish and many other languages. If you're looking to settle your home loan debt and prevent foreclosure, you may want to consider a short sale — selling the property for less than you owe.
Please call us to discuss your options. If you come to us with an offer without prior approval, we may be required to evaluate you for all programs, including a loan modification, before you can be eligible for a short sale.
If you're unable to sell your house through a short sale, your next option may be a deed in lieu of foreclosure. We can evaluate you for many programs to see if there are options that may help you stay in your home.
If you do not qualify, you may be eligible for a short sale. In a traditional short sale, you advertise and show the house and receive an offer before you contact us. We recommend working with a real estate agent experienced in short sales who understands the process.
Once you have received the most competitive offer you can get and before we can consider it, we'll need a completed Second-Lien Release for any home equity loan, lines of credit or other debts against the property. We can't move forward until we receive this document. If you have a Bank of America home equity loan or line of credit, we'll take care of getting approvals for your short sale.
If your loan or line of credit is with another lender, contact that lender and request a Second-Lien Release. The lender needs to provide this document and send it to you. If you're eligible, you may be able to start the short sale process right away.
However, in most cases, it is required we evaluate whether you are eligible for a loan modification or other home retention options first. Here's what you'll need when you call: Loan and property information Information on any foreclosure notices or dates you've received Details of the offer and a copy of the signed purchase contract Information on any home equity loan or line of credit on the property, if applicable Information on a loan modification, if you were considered for one Details about your financial hardship.
You'll be paired with a Customer Relationship Manager who will work with you throughout the process. When you call, we may verify that there are no other options available that would allow you to keep the property. If we authorize you to start the short sale process, you can expect to hear back from us about your offer in approximately 90 calendar days after your real estate agent has submitted the offer and all documents to us.
Please contact your Customer Relationship Manager at any point for an update or with any questions about the process. During that time, we'll arrange an appraisal of your house at no cost to you to determine its current fair market value. Once that's determined, we may make a counteroffer. It's not unusual for potential buyers to withdraw offers all the way up until the closing, so during this time, we encourage you to keep the house up for sale.
When all necessary parties have accepted the offer, we'll provide you with an approval letter releasing the house for purchase.
When the offer is accepted, final documents will be prepared and a closing deadline will be provided in the approval letter.
Once the sale is finalized, your mortgage and any other loans against the house are settled from the proceeds of the sale. Depending on who owns the loan, if the funds from your traditional short sale don't cover the amount owed on your loan, you may be responsible for paying the difference also known as the deficiency.
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