SELLERS SHORT SALE INFORMATION

MICHELE HAS EARNED HER (CDPE)-CERTIFIED DISTRESS PROPERTY EXPERT DESIGNATION AND IS CERTIFIED AS A SHORT SALE AND FORECLOSURE RESOURSE (SFR).

If you have a need to sell your Boca Raton, Delray Beach, Boynton Beach or surrounding area home for less money than you owe the bank presently, the following information will be helpful. Please be sure to consult with an attorney and tax advisor.

WHAT IS A SHORT SALE?

A short sale occurs when a property sells for a price that is insufficient to payback the loan(s) secured against it (or any other liens against the property, such as delinquent property taxes, Homeowners/Condominium Association Fees, etc.) as well as standard sales closing costs. In such a case, in order to complete the sale, you, as a Seller, must either: (1) come to the closing with sufficient cash from other sources to cover these shortfalls; or, (2) your lender(s) must agree to forgive all or a portion of the amounts you are "short" or make other arrangements for repayment (such as execution of a promissory note). This second alternative is commonly known as a Short Sale. Your lender will generally not allow you to receive any proceeds or otherwise obtain any monetary benefit as part of a Short Sale.

WHAT OTHER OPTIONS MAY BE AVAILABLE OTHER THAN A SHORT SALE?

Depending upon your financial condition and other factors such as other liens against the property and available interest rates, you may be able to negotiate a modification of your loan(s), refinance, deed the property back to the lender(s) in lieu of foreclosure, or declare bankruptcy in lieu of attempting a Short Sale. Other options may also be available depending upon your individual circumstances and you should consult with a bankruptcy attorney, tax, credit or financial advisors to help you evaluate these options and determine whether any others may exist and be more appropriate for your circumstances.

WHAT IS THE PROCESS FOR GETTING A SHORT SALE APPROVED?

There is no universal set of rules or regulations that determine whether you are eligible for a Short Sale or whether your lender(s) will approve a Short Sale. Each lender is different and each has established their own criteria, which may or may not be available to you. Some lenders will not communicate with anyone but you or your real estate attorney regarding a possible Short Sale and others may not discuss the possibility of a Short Sale unless you are in default, or until a contract offer is presented. The basic general steps in the Short Sale process after listing the property for sale are:

• Proving Financial Hardship: You must typically prove to your lender(s) that you are experiencing financial hardship and will unable to continue making loan payments. In some, but not all cases, you may already be in default of your payment obligations. Most lenders will require you to provide specific information such as a financial affidavit, tax returns, bank statements, and pay stub in order to prove financial hardship.

• Determining Property Value: Once you have proven a financial hardship, you must be able to demonstrate that the property is worth less than the total amount owed to your lender and any other lien holders. Frequently, your lender will require a Broker's Price Opinion (BPO) or Comparative Market Analysis (CMA) from a Realtor, and it will also usually order an appraisal of the Property from a licensed appraiser of their choosing. In some cases, you may be responsible for the expense.

• Finding a Buyer: A qualified buyer must submit an offer to purchase the property, which is then submitted to the lender for approval. Each lender with a mortgage or lien against the Property must approve of the potential purchase to the extent that their loans will not be paid in full at closing. Many lenders will not even consider a Short Sale, review the Property's value or evaluate your financial hardship until a bona fide offer to purchase is received.

• Final Approval: Once your lender acknowledges your inability to continue your payment obligations and the fact that the Property is not worth as much as the loans(s) secured by the Property, our office, must convince the appropriate decisions makers at each lender that it is in their best interest to approve the Short Sale. We will provide your lender(s) with an estimated closing statement (or HUD) to show them the approximate amount that will be available to them in payment. Most lenders have a specific department that handles these requests which is commonly referred to as either the Loss Mitigation, Preforeclosure, or Loan Workout department.

HOW WILL I KNOW IF MY LENDER HAS APPROVED A SHORT SALE?

In all likelihood your request for a Short Sale will be subject to different levels of approval by your lender. At various times throughout the process, you (or our office) may be told or otherwise get the impression that your lender views your request favorably or believes that it will be approved. However, you should not assume that a Short Sale has received Final Approval unless and until you have written confirmation from the lender setting forth its approval and all of the specific terms of the compromise. Your lender will in all likelihood have the ability to withdraw its approval up until that time. If your Short Sale is approved, the written approval should be provided to our office so that we can prepare the appropriate documents needed for the closing of the transaction.

HOW LONG WILL IT TAKE TO GET A SHORT SALE APPROVED?

Every Short Sale situation is different, depending on your individual circumstances, the nature of the loan(s) and other liens against your Property, and your lender's criteria and staffing. If your lender will consider a Short Sale prior to the submission of an offer to purchase, the process may take less time because you should be able to provide your lender with all of the required documentation in advance and the lender may order an appraisal of Property sooner. Even if your lender will not consider a Short Sale prior to submission of an offer, you should have all of your financial information (mortgage documents, bank statements, pay stubs, tax returns, etc.) organized immediately available to avoid unnecessary delays. In the current market environment where Short Sale requests are occurring with much great frequency, your lender may not be able to respond to your inquiry or evaluate your request as quickly as you would like. While some lenders are able to review and approve Short Sale requests quicker than others, many lenders take at least 3-4 weeks, if not longer. In addition, it is important to understand that there is no assurance that your lender will approve of your Short Sale request and until you have written confirmation from the lender that they approved, and the specific terms to which they agree, you should not assume they have given approval, regardless of what you may be told verbally. You should begin to consider any and all other options available to you now in the event your request is denied.

WHAT SHOULD BE DISCLOSED TO PROSPECTIVE BUYERS AND BROKERS?

Because only your lender will have the ability to approve a Short Sale, your Broker will disclose in the Multiple Listing Service (MLS) and other advertising the fact that the sale of the Property and payment of the offered brokerage commissions is subject to lender approval. Any contract that you accept should be an "As Is" contract and should have a provision making the contract contingent on lender approval. If the lender approval provision is not included in the contract, you may be obligated to close the transaction and pay off your loans in full from other sources of funds if you not obtain Short Sale approval. We will provide your Broker with an addendum to the contract regarding a Short Sale.

WHAT ARE SOME NEGATIVES THAT MAY BE ASSOCIATED WITH A SHORT SALE?

If a Short Sale results in the reduction or "forgiveness" of part of your loan balance, as a condition of approving a Short Sale, some lenders may require you to sign a promissory note for the difference between the total amount you owe and the amount the lender is receiving from the Short Sale (the "Deficiency"). Even if your lender does not require a promissory note and is forgiving the Deficiency, the IRS may treat the amount of the loan being forgiven as imputed or “phantom income” if the property being sold by Short Sale is NOT your primary residence you may be required to pay taxes on that amount. (If the home is your primary residence and the mortgage you signed was for the acquisition of the home, there may not be any income tax consequence.) An exception to this rule is if you can prove that you were "insolvent" - that your debts were bigger than your assets- before your mortgage lender agreed to a short sale of your property. A tax advisor will be able to tell you for sure whether you'd be considered insolvent by IRS standards and also if there will be “phantom income”. Also, even if you are not in foreclosure, a Short Sale may adversely affect your credit rating as it is a reflection of your inability to satisfy this financial obligation.

This information was provided by Kupfer, Kupfer & Skolnick attorneys at law.

RE/MAX ADVANTAGE PLUS is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.

Foreclosure Solutions

The current U.S. housing market and national financial crisis has caused untold stress and heartache for many American families. Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to Palm Beach County-area residents for foreclosure are many. Following is a brief explanation of these solutions, including their benefits and drawbacks:

Reinstatement
A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender's approval and will 'reinstate' a mortgage up to the day before the final foreclosure sale.

Benefit: Does not require the mortgage company or lender's approval.
Drawback: Requires that a homeowner be able to pay all back payments, fines and fees.

Forbearance or Repayment Plan
A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

Benefit: Allows the homeowner to make back payments over time.
Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to 'qualify' for forbearance.

Mortgage Modification
A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan
Drawback: Requires that a homeowner 'qualify' for the new payment and will often require full documentation. Lender has to be actively pursuing modifications.

Rent the Property
A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage.

Benefit: Allows homeowner to keep property indefinitely.
Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance.

Deed in Lieu of Foreclosure
Also known as a 'friendly foreclosure', a deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property. Only 1 in every 20 or more pre-foreclosures result in a Deed in Lieu.

Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.

Bankruptcy
Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

Benefit: Does not require lender approval.
Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall—not stop—the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.

Refinance
If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

Benefit: In some cases, this will lower payments.
Drawback: In today's market, a refinance will almost always raise mortgage payments, and is an expensive process.

Servicemembers Civil Relief Act (military personnel only)
If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.

Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.
Drawback: Must be active military to qualify.

Sell the Property
Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.

Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.
Drawback: In many cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).

Short Sale
If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual's public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.

This represents only a summary of some of the solutions available to homeowners facing foreclosure. Please call me today for a free confidential evaluation of your individual situation, property value, and possible options.

The above brokerage assumes no responsibility nor guarantees the accuracy of this information and is not engaged in the practice of law nor gives legal advice.
It is strongly recommended that you seek appropriate professional counsel regarding your rights as a homeowner. The above brokerage is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.

Frequently Asked Questions

It is understandable to have questions when coping with a new and challenging situation, especially when a home is at stake. The reality is that millions of homeowners across the country are finding out that they have more questions than answers. We hope that the following information will help you better understand the circumstances. If you have further questions not addressed below, or would like additional information resources, feel free to Contact Us.

Do I qualify for a short sale?

The qualifications for a short sale include any or all of the following:

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.

What is a mortgage modification?

A mortgage modification is a process through which your mortgage lender changes any or all of the following:

Your interest rate
Your principal balance (through a reduction)
Your loan terms (example: from an adjustable to a fixed rate)

This process can allow borrowers to stay in their property when they can no longer afford their current mortgage payments.

Why would a lender modify my mortgage?

Lenders have realized that in some cases it is better for them to work with current borrowers to lower payments or possibly improve terms in order to keep homeowners in their properties. The average foreclosure can cost a lender from 35-50% of the value of a property, so keeping borrowers in their homes is a good option for everyone.

What do I need to qualify for a mortgage modification?

According to the Making Home Affordable Web site (www.MakingHomeAffordable.gov), you will need the following information for your lender to consider a modification:

Information about your first mortgage, such as your monthly mortgage statement
Information about any second mortgage or home equity line of credit on the house
Account balances and minimum monthly payments due on all of your credit cards
Account balances and monthly payments on all your other debts such as student loans and car loans
Your most recent income tax return
Information about your savings and other assets
Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources

If applicable, it may also be helpful to have a letter describing any circumstances that caused your income to reduce or expenses to increase (job loss, divorce, illness, etc.)

How do I qualify for a mortgage modification?

The first call you make should be to your lender, have the information above ready to discuss with them and call your customer service line to ask them what options you have available. If the person you speak with does not understand what you are asking, you can ask to be referred to one of the following departments (different lenders have different names for these departments):

Loss Mitigation
Mortgage Modification
H.O.P.E.

Prior to contacting your mortgage lender you can quickly complete an eligibility test at www.MakingHomeAffordable.gov. This test will let you know if you are eligible for a modification through the government-sponsored Home Affordability and Stability Program (HASP). For a list of mortgage lenders and servicers, visit www.HopeNow.com.

What if I don’t qualify for a mortgage modification, can’t afford my home, and owe more than it’s worth?

You are not alone and foreclosure is not the only option. If your mortgage lender or servicer will not work with you to reduce your payment, you may want to consider a short sale. Agents like me, with the Certified Distressed Property Expert® Designation, have undergone extensive training in how to process and negotiate short sales. A short sale allows you to sell your home for less than what you owe and avoid foreclosure. Speak to your market expert to see if you may qualify.

What is a Home Affordable Refinance?

If Fannie Mae or Freddie Mac owns your mortgage, you may be eligible for a Home Affordable Refinance. This will allow you to refinance your home and often lower your payments.

What are the qualifications for a Home Affordable Refinance?

According to the resources released by the government, following are a list of qualifications:

You are the owner occupant of a one- to four-unit home
The loan on your property is owned or securitized by Fannie Mae or Freddie Mac (see Useful Links)
At the time you apply, you are current on your mortgage payments (you haven’t been more than 30 days late on your mortgage payment in the last 12 months, or if you have had the loan for less than 12 months, you have never missed a payment)
You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house
You have income sufficient to support the new mortgage payments, and the refinance improves the long-term affordability or stability of your loan

MICHELE STEELE, P.A.

CERTIFIED DISTRESSED PROPERTY EXPERT (CDPE)

561-251-7252