Simply put, they’re NOT happening.  At least not to the tune of anything that would make sense for a homeonwer in Jumbo-land.  In a small neighborhood in Southern California those who bought during boomtime paid as high as $1,700,000.  Many who bought these homes brand new at the start of the boom at 1/2 that price still took out high equity loans and are now upside down.  For most a loan modification with a permanent principal balance reduction on average of $400-600k would be the minimal amount for it to make sense.

Here’s a good link to the details regarding the Making Homes Affordable Plan.

http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf

Page 3 is especially important to read if your 1st loan balance is greater than $729,500.  Although under this plan, homeowners with balances higher than this amount cannot qualify.  The bank that your mortgage is with may possibly do a principal reduction, however as stated above, they’re not reducing balances by any near enough for it to truly make sense.  $100k principal reduction when current fair market value says it should be reduced by $400-600k just isn’t helpful.

Solution:  Short sale your home.  Wait 2yrs or less, then buy again,  in the same neighborhood & then hold a block party to celebrate that your mortgage is $600,000+ less than it was before!

For detailed information on the Mortgage Debt Forgiveness Act of 2007:

http://www.irs.gov/irs/article/0,,id=179073,00.html

Watch this great video on the Credit Crisis & how we got there.  It’s an animated video from a college student in Pasadena:

www.crisisofcredit.com

Help For Homeowners Plan, the real truth:

http://www.thetruthaboutmortgage.com/hope-for-homeowners-program-has-helped-just-one-borrower/

Emily S. Knell – Main Street Realtors

562-430-3053 cell

emilyknell1@yahoo.com

]]> http://emilysellshouses.com/?feed=rss2&p=47 0 http://emilysellshouses.com/?p=8 http://emilysellshouses.com/?p=8#comments Mon, 13 Oct 2008 19:06:10 +0000 Emily http://emilyknell.wordpress.com/?p=17

A short sale is a unique transaction that allows a homeowner to sell their property for less than they owe on it to avoid a Foreclosure Sale.

A short sale requires a trained professional who has experience negotiating with your bank(s). You may have 1, 2 or even 3 different loans on your home. Being a CERTIFIED Short Sale Expert, I can negotiate with the banks so they will Release your mortgage liens and allow you to close escrow.

My team has the experience that convinces lenders that they will net more money if they take less than what is owed NOW, rather than taking the property back through foreclosure and trying to sell it later. Not all lenders will accept short sales or discounted payoffs, if it would make more financial sense for them to foreclose.

Example of a Short Sale:

A homeowner has an unpaid home loan balance of $600,000. We will complete the short sale package with you. Once an offer is received, we negotiate with the lender on your behalf. We get the lender to agree to accept an offer of $500,000 as payment in full. The home is sold to the new buyer and the your credit shows loan paid in full. You may also have a 2^nd or 3^rd loan on the home as well. We negotiate with secondary banks and convince them to take a small payoff, since if the home were to go into foreclosure they would get nothing at all.

What is a Certified Short Sale Specialist?

A Short Sale transaction is very different from just a normal sale. It is imperative to hire an agent who is specially trained to handle this type of transaction. I have gone through 6 months of specialized training through Harris Real Estate University and am constantly being updated with new bank procedures, government bills, regulations and laws.

Who Pays Our Commission?

We negotiate directly with the bank for our fee. Usually the bank pays about 1% Less than usual for the marketing and negotiation responsibilities associated with the transaction. This is why most other real estate agents don’t want to take the time necessary to become experts in short sale transaction. It requires quadruple the work at lower pay than they’re used to. I am in this business to deliver the best service to you. This is a difficult time for homeowners and I am here to help you get through it.

How Long Will it Take?

The short sale negotiation process can take between 40-90 days before a lender and homeowner can agree on acceptable terms. It is a lengthy process of bureaucracy, insurers and investors that we will have to maneuver through in order to get your short sale approved. We understand how painful your original situation may be, so we make a special point to communicate with our sellers on a regular basis as we go through this grueling process.

My Home Is Already In Foreclosure, Can We Close The Short Sale In Time?

Just starting the short sale process will not automatically stop the lender from initiating the foreclosure process. However, we have successfully convinced lenders to postpone a foreclosure and any auction dates that may already be set, while we negotiate a short sale. While there are no guarantees, we will do everything that we can to get your home sold before the lender follows through with their foreclosure. We have already been successful in getting auction dates postponed as far back as 90 days to successfully close the short sale.

Can I Stay in the House or Do I Need To Move Out Now?

Technically speaking, you are still the owner of record until the home closes escrow. If for financial reasons you are unable to move out right away, just make sure you can make your home easily accessible for potential buyers to see it. By successfully closing a short sale, your credit report will say that your debt was settled, which will help you to get into another home at a lower monthly payment. We work with a great team of property managers who can help you locate a rental home..

Will I Get Any Money From the Sale?

No. The lender is taking a loss on the property and they will have you sign documentation accepting that you will earn $0. It is better for the bank to work out a short sale with you as it will cost them more money to take the property back and resell it as a foreclosure.

I Heard That I Will Get a 1099 At The End Of The Year – Is This True?

If you purchased the home as your primary residence, No. On December 20th, 2007, “The Mortgage Forgiveness Debt Relief Act of 2007” was passed into Law. This allows homeowners a 3 year window to avoid paying taxes on the loss the lender takes. Before this act took affect, “If the value of your house declined, and your bank or lender forgave a portion of your mortgage, the tax code treated the amount forgiven as income that can be taxed.” According to “The Mortgage Forgiveness Debt Relief Act of 2007” if you sell your home as a short sale by December 20th, 2010, the loss the lender takes will not be considered taxable income by the IRS.  You will also need to file Form 982 from the IRS.

If you purchased the home as an investment property, you will receive a 1099 at the end of the year for the negative amount. If the lender forecloses on your home, they will still send you a 1099. So, in either a short sale or a foreclosure on investment properties, the bank will still send out a 1099 for the difference. Please speak to your accountant for details. The amount you are liable for will depend on your tax bracket. The IRS is allowing people a payment plan option.

What type of paperwork do I need?

The lender will require a view of the financial package that usually includes:

(2) Months’ bank statements (just your checking acct.)
(2) Months’ pay stubs

(2) Years’ IRS tax returns

A Hardship Letter

How Will A Short Sale Affect My Credit?

One of the most IMPORTANT benefits about doing a Short Sale, is that it will not hurt your credit as bad as letting the home go to foreclosure. After completing a short sale you WILL be able to purchase a home again at a favorable rate in 2(TWO)yrs. Your credit report (FICO score) will drop approx. 75-125 points and will show as “Debt Settled”

If you let your home go into foreclosure, your credit report will show that you had a Foreclosure. Your points will drop as much as 250 points. You will not be able to buy another home for 5 (FIVE) years.

If you file bankruptcy you will not be able to buy a home again for 7(SEVEN) years.

Is There a Light At the End Of Tunnel?

YES. This is not the bottom for you, things will turn around. For the majority of homeowners this market downturn was unexpected. Many thought that their ARM loans could easily be refinanced and that real estate prices in general wouldn’t have gone down as much as they did.

With my seller’s After Care Program, I can assist in putting you into position to take advantage of this down market and Buy Again! My team can help you REMOVE the late payments that are probably on your credit in as little as 6 (SIX MONTHS).

Sincerely,

Emily S. Knell

Main Street Realtors

562-430-3053 – emilyknell1@yahoo.com

**Hit the HOME button at the top of the page to see my Categories**

# 10

I can’t make my house payments but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score…is a short sale right for me?

Probably, not. In cases where the seller can pay back all or part of the negative equity (usually to the 2^nd lien holder) it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.

# 9

If I pay mortgage insurance and default on my loan, why wouldn’t that cover the deficiency amount?

The mortgage insurance is not there for your protection, just the mortgage lender’s.

# 8

Do I have to have my home ‘Approved’ by the lender prior to offering it for sale as a short sale?

No. Technically speaking there is no such thing as being ‘Short Sale Approved’. The actual approval only happens after you have accepted an offer from a buyer and after the banks review.

# 7

I just missed a payment and I know I will miss more….how long does the foreclosure process take and is there time to do a short sale?

The foreclosure process takes differing times depending on your state. In the Midwest a foreclosure can take over a year. In California and in Nevada it’s taking 6+ months. Generally speaking a well priced short sale being processed by a well trained short sale listing agent will sell and close in between 40-90 days, depending on the banks involved.

# 6

Will I still have to pay property taxes or HOA dues if I do a short sale?

Property taxes will always have to be paid as part of any accepted short sale. Whether it’s you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale. Of course, if you’re unable to afford your regular mortgage payment, chances are you are late on your taxes and possibly HOA dues as well. Most banks will start to keep your taxes current.  As far as HOA dues, ultimately the banks will pay all or most of your late balance at the time your short sale closes.

# 5

I owe more than my home is worth and I can’t make the payment, do I have to somehow qualify for a short sale?

The simple answer is NO. If someone can’t make their payment and they are otherwise insolvent they qualify for a short sale. Note: insolvent simply means their total debts are greater than their assets. The banks are inundated with foreclosures and short sale requests and are willing to work with you to avoid having a foreclosure on their books.

# 4

Do I have to pay income taxes..I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me..the seller..is this true?

It WAS true, now it’s NO. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due. The home must be your primary residence to qualify under the “Mortgage Forgiveness Act of 2007″.

# 3

How do you, my listing agent get paid..who pays you commission?

The bank will pay the commission along with all the other usual closing costs.

# 2

Do I have to miss a payment to do a Short Sale?

No. Late in 2007 most major lenders started accepting short sale offers from sellers who have never missed a payment. Please call me for more details about this.

# 1

I want to do a short sale and have a 2nd mortgage, does this make me ineligible?

No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then your listing agent will just negotiate the terms with the second lender. Most short sales do involve 1^st and 2^nd lien holder. I have successfully closed short sales with as many as 3 loans.

Sincerely,

Emily S. Knell

Main Street Realtors

562-430-3053 – emilyknell1@yahoo.com