Short Sales

Willingness is a most important tool which is used throughout the world for everything people buy, sell, need, produce, and invent. Willingness is also known as the mother of invention and creations. Will or willingness of people for doing any action must have great reasons. In case of real estate mortgage, it’s on parties to go for foreclosure, short sale or any other option. Short-sale is the hot choice of both parties these days. What is a Short-sale and why is it hot these days? When the owner agrees to sell a mortgage property and Lender agrees to sell at a discounted price than the original, that’s a Short-Sale.

In this type of Sale, willingness of seller (a homeowner) and lender (commonly a Bank or Mortgage house) is very important. It is a hot choice for both seller and lender for specific reasons. It is a good choice for buyer as if somebody is behind in mortgage a payment, losing a house is never be a good choice. It allows the person to sell the house for less than the person owe on it. Homeowners, with Short Sale do not need to worry about credit ratings, debt obligations and moreover they avoid foreclosure and bankruptcy.

Lender (Bank or Mortgage Company) also find it a better choice because of some benefits and reasons. When the lenders foreclose, they become responsible for that property and need to get rid of it in any manner.  Most of these lenders already have good number of foreclosed properties and they don’t want to increase the number. Leaving an empty property is again not a good choice because empty properties can have damages, fire and natural disaster by which they can loose everything. Lenders do find Short Sale a good choice for all the reasons and want to get the money in complete.

Short-Sale does require some documentation as for all other types of businesses and people must not be afraid of these documentations. Real Estate staff and companies are always a good choice for this type of sale. They can provide people with documentation help, advice, and legal contacts from where everybody can get satisfaction of the transaction and discuss taxation matters. Banks and mortgage houses are allowing more Short Sales these days than any other time, and the percentage ratio of short sale is higher. Short sale is a type of settlement by which the credit rating is much less affected than to foreclosure.

Short-sale is a time consuming task but is more reward providing than foreclosure and bankruptcy. It is important for sellers to choose a good real estate company or agent for Short sale and work according to their guidance. Willingness of both seller and lender for Short sale is very important as the process may be confusing. Seller must provide the hardship letter against loan and should prove that he / she is unable to pay mortgage loan. It earns much better results for both the parties and both of the parties get something better than any other choice like foreclosure.

For more information please visit: http://www.floridalawattorney.com

Comments (0) Jul 28 2009

Short Sales – Advantages And Disadvantages

Banks aren’t in the real estate business. Their hands are full. It doesn’t benefit them to go through the legal process of a foreclosure, pay the attorneys, kick the homeowner out of the house, worry about vandals breaking in, hire a contractor to make repairs, pay the property taxes, and pay the utilities while it just sits there along with thousands of others, waiting to be sold.

This is GREAT news. Within the past few months banks have been much more willing to modify existing loans and short sell properties. Think about it… If you’re a lender would you rather…

A.) Foreclose on a property, pay all the holding fees (taxes, repairs, utilities, etc.), deal with the headache of managing and selling the property, and still lose money.
B.) Re-negotiate an existing loan, keep a homeowner and family in a house, maintain a monthly payment from the owner, and still lose money.
C.) Short sell a property, save the seller’s credit, avoid taking control of house, getting it off the bank’s books and still lose money.

B and C are the correct answers. The banks are going to lose money and they know it. But, by modifying a loan or short selling a property in foreclosure, they are eliminating the hassle and expenses associated with actually owning the property.

DISADVANTAGES (I’m starting with disadvantages because I always like to end on a positive note!)

Attempting to negotiate a short sale via the conventional method of buying and selling houses is very difficult. There are so many parties involved in the negotiation that the deal usually never works out.

Parties involved:

1.) Seller
2.) Seller’s agent
3.) Prospective buyer (there can be many prospective buyers)
4.) Prospective buyer’s agent (many of those as well)
5.) The first lender
6.) The first lender’s loss mitigator
*sometimes there can be two or even three loans

As you can see there are at least six, sometimes even up to eight or ten interested “parties” all negotiating one deal. I’m a big sports fan and I liken the conventional (when both the buyer and seller each have their own realtor/agent) short sale process to a four team sports trade. Some of you might have no idea what I’m talking about, but the point is that they rarely ever work out.

ADVANTAGES

Enter the investor. When you choose to sell your house via a short sale with an investor, the likelihood that the deal will be accepted by the lender is greatly increased. The reason for this is because there are fewer “parties” conducting the negotiations. Fewer “parties” means fewer concessions need to be made, which means more people are happy, which means deal gets approved.

Now I’m not here to say anything bad about realtors because most of them are excellent and completely professional; it is just very difficult for everyone to agree to a deal. However, when an investor is heading a short sale, rather than a realtor, there are only 3-4 parties involved (seller, investor, and lender(s)).

So how does it work? Let’s say that 30 months ago you purchased a house and got a 30 year mortgage for $250,000. After 30 months of payments you still owe approximately $225,000 but the house only has a fair market value of $200,000. Clearly you owe more than your house is even worth which mean you have no equity.

Now, an investor and a seller will link up and the investor will place an option to purchase the home. This step is when the investor proves him/herself to be a true professional. The investor is essentially doing all the dirty work for both the seller and the bank and is getting paid for it.

The investor will negotiate a purchase price with the bank usually even farther below fair market value. After a round of negotiations, the lender will agree to short sell the property to the investor for let’s say $170,000. The investor walks away with a property purchased for 85% fair market value and the bank no longer has to pay the expenses of moving the property into foreclosure and resale.

What’s in it for the seller? The seller gets to walk away free and clear, nothing out of pocket, WITHOUT A FORECLOSURE APPEARING ON THEIR CREDIT HISTORY. (A good investor always negotiates for Full Relief of Debt owed!) If you’ve never had explained how a short sale works you might be thinking that the seller got screwed. On the surface it can look that way, but let’s break it down. The seller owed $225,000 on a house worth $200,000. If sold in the retail market, the seller, who is already struggling financially, would have to come up with $25,000 at closing plus seller closing costs and commissions!

If the house is on the market for a decent amount of time (4-10 months) before a retail sale, the seller certainly cannot make the payments because he/she has already been given a notice of default and is in pre-foreclosure. If the house is foreclosed on nothing comes out of the pocket of the seller, but a foreclosure will appear on the seller’s credit history. Therefore a short sale is a great option for those who are struggling to make payments, faced with foreclosure, and just want to get out of bad situation.

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For more information please visit: http://www.floridalawattorney.com

Comments (0) Jul 07 2009

Why Short Sales May Be a Viable Option

Unfortunately, there may come a time in our lives where will face the fact that it may be best to ‘cut our losses and run’. This couldn’t ring truer for those who find themselves unable to afford their mortgage and who are on the verge of losing their home. If you find yourself in this position, understand that there is help for you, and it may be in your best interest to consider a short sale on your home to avoid the risk of foreclosure.

In order to proceed with a short sale of your home, understand that it is advisable for you to enlist the help of a real estate agent. He or she will be familiar with the necessary procedures and will be there to guide you through each step of the negotiations for a short sale on your home. The term ‘short sale’ simply implies that they current market value of your home is far less that what you currently owe on it. As a result, it’s important to contact a real estate professional who will assist you in navigating this tricky process.

Don’t feel ashamed if you find yourself in this type of situation. At least three-quarters of well-known housing markets in the US have suffered the same effects of continuing price decreases. As mortgage rates continue to increase, we find that the values of homes are steadily decreasing. In conjunction with rising mortgage rates, home owners also find that other vital items such as food and gas continually rise, leaving them with little money left to pay their mortgage at the end of the month. Usually a short sale is a result of their inability to keep up with rising costs.

As with any short sale, your lender must be fully aware from the beginning that you are putting your house on the market. Furthermore, it’s important to understand that compared to a conventional sale, there will be more paperwork required to be completed during a short sale.

Once you’ve given your permission in writing to sell the home, you lender will communicate with your real estate agent throughout the process. You will be required to document the exact reasons why you cannot continue paying your mortgage, commonly referred to as “proving hardship.” Usually in these cases you’ll be asked to provide not only a letter of explanation, but also copies of your credit card bills, bank statement, W-2s and any other supporting documents to help your claim.

When going through a short sale, do not automatically assume that hardship will free you from the debt you owe. In some cases this has proven true due to the fact that lenders don’t wish to accumulate a mass of homes on their books, however, do not walk into the situation assuming that this will be the case for your situation. Usually a lender will approve a short sale simply because it saves them time and money as opposed to your home going into foreclosure which is even more costly.

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For more information please visit: http://www.floridalawattorney.com

Comments (0) May 29 2009

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