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FORECLOSURES AND SHORT SALES
Short Sales Explained
A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy and the Obama administration have also improved the chances of getting a short sale approved.
But to be technical, here's a more official definition:
- A homeowner is 'short' when the amount owed on his/her property is higher than current market value.
- A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage.
For homeowners to qualify for a short sale, they must fall into any or all of the following circumstances:
- Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
- Monthly Income Shortfall – In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
- Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
This seems simple enough, but it is a complicated process that takes the expertise of experienced professionals. I hold the CDPE® Designation and am ready to identify all possible options and, when possible, assist in the quick execution of a short sale transaction.
If you have questions or feel you may qualify for a short sale, please contact me for a free consultation.
Understanding your options now could mean all the difference in the world.
Contact me at (408) 591-7778 for information on foreclosure solutions.
Foreclosures & REOS
A foreclosure occurs when payments have not been made on a mortgaged property. The lender can legally redeem or take the property away from the owner. In general, lenders will begin the foreclosure process after three months of defaulted payments. Prospective buyers will often try to find foreclosures when purchasing a new property. A home that is foreclosing may be priced way under its marketplace value as the lending institutions are motivated to sell these properties as quickly as possible. In addition, there are those who believe that purchasing a property that is being foreclosed is an excellent investment opportunity. They can resell the property at a later time at a much higher price.
A typical foreclosure goes through three phases. In the pre-foreclosure phase, the lender will initiate a foreclosure due to a default of payments. If the borrower does not (or cannot) pay back what is owed, the property will be sold at a public auction (this auction is phase two). If the property is not sold at auction, the lender gets it back and it becomes a REO (Real Estate Owned). The exception to this process occurs if the loans happen to be insured by a federal agency such as HUD, Fannie Mae, or the Department of Veterans Affairs (VA). In this instance, the agencies will pay the lenders and take over the property, at which point they will prepare to sell it.
REOs are properties that have not been sold at auction and are now in the possession of the lender, who is usually eager to sell them quickly. It helps to follow properties that you are interested in through all the foreclosure phases. Therefore, you will know if it becomes a REO. In addition, many lenders deal directly with realtors so you may want to speak to your local realtor about possible foreclosures.
For more terminology on foreclosures, Click Here.
IMPORTANT RESOURCES FOR HOMEOWNERS
- California has enacted anti-deficiency legislation which is found in Code of Civil Procedure sections 580b and 580d. Section 580b prohibits deficiency judgments based on the character of the loan at the time it is made. Additionally, Section 580b prohibits a seller who has carried back a loan as part of the sales price of the property from obtaining a deficiency judgment against a defaulting borrower.
- The California Foreclosure Prevention Act modifies the foreclosure process to provide additional time for borrowers to work out loan modifications while providing an exemption for mortgage loan servicers that have implemented a comprehensive loan modification program.
- California DRE: Desist & Refrain Orders and/or Accusations for Loan Modification Activities
Before considering engaging the services of any of the persons or entities listed, it would be prudent to inquire about the disposition of the action that has been filed against the respondent.
- The Mortgage Debt Relief Act of 2007 basically allows taxpayers to exclude income from the discharge of debt on their principal residence.
- Beware of Foreclosure Rescue Plans: Scam artists prey on struggling homeowners and often target defendants named in foreclosure proceedings. Don't let them take advantage of you, your situation, your house or your money.
Please feel free to contact me at (408) 591-7778 or LWiseman@InteroRealEstate.com if you would like to receive a list of foreclosures in your area.
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Lisa Wiseman 2010 ®
