Wednesday, April 29, 2009
Foreclosure Options
1. SELL YOUR PROPERTY: If you can find a buyer before the house is auctioned, you can sell it and keep whatever equity still exists.
2. WORK OUT A DEAL: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.
3. FILE CHAPTER 7 BANKRUPTCY: If you can't get caught up in time, you will not be able to keep the house -- but you'll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.
4. FILE CHAPTER 13 BANKRUPTCY: If you can afford to make the future mortgage payments and the delinquent payments, too, file Chapter 13 bankruptcy. This is different from Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three- to five-year plan.
5. SHORT SALE/DEED IN LIEU OF FORECLOSURE: A short sale takes place when the bank allows you to sell your property even though their mortgage won't be paid. Be careful -- the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. Why might a bank agree to either of these? Lenders spend $30,000 or more to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.
6. WALK AWAY FROM THE HOUSE: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You'd be wise to speak to an attorney before taking this step.
Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.
BEWARE OF THESE SCAM OPTIONS.
1. SIGNING OVER YOUR PROPERTY TITLE TO ANOTHER COMPANY: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.
2. HIGH-INTEREST SECOND MORTGAGE: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70% of the equity available. The interest rate could be as high as 18% and the fees can be exorbitant. They are hoping that you'll blow the money and default -- which allows them to take the property from you.
When facing foreclosure, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.
2. WORK OUT A DEAL: Your lender may be willing to work with you, rather than lose money at a foreclosure sale.
3. FILE CHAPTER 7 BANKRUPTCY: If you can't get caught up in time, you will not be able to keep the house -- but you'll generally be able to delay the foreclosure sale a month or even several months. Any remaining debt to the lender will be wiped out.
4. FILE CHAPTER 13 BANKRUPTCY: If you can afford to make the future mortgage payments and the delinquent payments, too, file Chapter 13 bankruptcy. This is different from Chapter 7, in which assets are liquidated but debts are wiped clean. With Chapter 13, you keep your assets and, under court supervision, you repay your debts under a three- to five-year plan.
5. SHORT SALE/DEED IN LIEU OF FORECLOSURE: A short sale takes place when the bank allows you to sell your property even though their mortgage won't be paid. Be careful -- the bank may allow the sale to go through, but only on the condition that you repay the deficiency. In a deed in lieu of foreclosure, the property is signed over to the bank in exchange for the bank giving up its rights against you. Why might a bank agree to either of these? Lenders spend $30,000 or more to foreclose on a property. Most lenders will consider these options to avoid foreclosure costs.
6. WALK AWAY FROM THE HOUSE: Pack your things and leave. The only issue remaining is whether your lender can sue you for any deficiency still owed after the sale, and that depends on the state you live in and the type of mortgage you have. You'd be wise to speak to an attorney before taking this step.
Any sale or transfer of property has tax consequences, including a foreclosure sale or a deed in lieu of foreclosure. Seeing an accountant is probably a good idea, as well.
BEWARE OF THESE SCAM OPTIONS.
1. SIGNING OVER YOUR PROPERTY TITLE TO ANOTHER COMPANY: Some companies say that after the mortgage is current they will re-sign the property back over to you. This rarely happens. Instead, the company is likely to pull out equity, not make any mortgage payments and allow the property to be foreclosed. You will not be able to save the property from future foreclosures because the property is no longer in your name.
2. HIGH-INTEREST SECOND MORTGAGE: When a property has equity, there are companies that will give you a second mortgage, in an amount as high as 70% of the equity available. The interest rate could be as high as 18% and the fees can be exorbitant. They are hoping that you'll blow the money and default -- which allows them to take the property from you.
When facing foreclosure, you have options, but you need to avoid the scams and act quickly if you want to have the best outcome. Delaying only makes foreclosure inevitable.
Wednesday, April 22, 2009
WHAT IS A SHORT SALE
A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lenders will release the lien that is secured to the property upon receipt of less money than is actually owed. A short sale means the sellers’ lender is accepting a discounted payoff to release an existing mortgage. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales. As a real estate agent, I am not licensed as a lawyer or a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim. Although all lenders have varying requirements and may demand that the borrower submits a wide array of documentation.
Sunday, April 19, 2009
FREQUENTLY ASKED QUESTIONS ABOUT SHORT SALES
1. Will I have to pay capital gains taxes if I sell a property as a short sale?No. If your bank suggested that, they are ridiculous. Capital gains would indicate that you are in some way "better off" financially because of money you have made. In a short sale, you lose and owe money. The only thing the bank could possibly mean is that the deficiency will be reported as 1099 income and you WILL have to pay taxes on that, but not as capital gains.
2. We are about to buy a short sale from the bank and are wondering if the bank is responsible for ridding the house of mold or are we?First of all, if you are buying a house from the bank, it's not a short sale. Second of all, in almost every case where there is a bank-owned property, it will be sold AS-IS. Check the verbiage of your purchase agreement with the bank (or seller). Any purchase agreement should contain a clause referencing who is liable for what. If you signed a purchase agreement that didn't reference the mold or "items required by the home inspection to be completed," then you will be liable.
3. If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?In some cases it will and in some cases it won't. It depends on the amount of the deficiency. Usually the mortgage insurance only covers a certain amount. Moreover, the lender will try to collect from you before they file a claim with the mortgage insurance company. The mortgage insurance is not there for your protection, just the lenders.
4. We had a first and second loan and went through foreclosure. The first was paid off and we were told the second would be forgiven. Now a collection company is coming after us for the second, what do we do?First of all, read this article. The bank will never forgive one dime of debt unless it is explicitly stated in writing and you have it reviewed and confirmed by an attorney. The fact is they probably lied to you verbally. You're only recourse now is to engage in a legal dispute against them or file bankruptcy.
5. What are the implications of unpaid judgments?Worst case scenario, your wages can be garnished.
6. How long does the foreclosure process take?Complicated question depending on what you consider the start of the "process" to be. Generally, the Bank will send and NOD (notice of default) to the Title Company and trustee. From that time it takes between 3-9 months for the house to go up for auction, during which, you can pay the delinquent amount to "cure" the foreclosure proceedings.
7. Will I still have to pay taxes if I do a short sale?This is a broad question depending on whether we're talking about property taxes or federal income taxes. You'll always have to pay extra income tax if the bank sends you a 1099 for the deficiency. SOMEONE will always have to pay property taxes. Whether it’s you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale.
8. I made a loan to a person buying a house as a second mortgage. Now that person is going through foreclosure. Do I have any way of getting paid?You Bet! You have just as much right to get paid as the lenders referred to in my article about short sales and you have all the same legal recourses they do. You can write off the loss as 1099 income. You can hire a collection company to obtain the debt. You can file a judgment against them. If they file chapter 7 bankruptcy, there are some cases where you would not get paid, unless the attorney did not include your lien in the bankruptcy. 1099 is the worst case scenario.
9. I owe more than my home is worth. Am I eligible for short sale or is my only option foreclosure or bankruptcy?Always consult your lender as to what your options are. They are usually short sale, deed-in-lieu of foreclosure (basically an accelerated voluntary surrender), and foreclosure. The banks like to prevent foreclosure when at all possible. They've even been known to lower people's rates and payments because of all the new defaults in '06 and '07. Either way, your first stop should be to get information from you lender on what options they provide.
10. Does a good credit score help the seller trying to do the short sale?Only inasmuch as their credit score will stay high as long as they don't make any late payments leading up to the short sale. Some lenders may call the deficiency a judgment though, which will hurt the score a bit.
11. Where can I get information on investing in short sales and foreclosures?First of all, there is no magic listing place for short sales. If a seller has gone to the trouble of asking their lender if they can do a short sale and the lender has given them a verbal approval, then the short sale will show up much the same as any other property for sale, only it will take you five times as long to close it.Foreclosure investing is a whole different ballgame. There are numerous theories, books, websites, and other forms of media often that charge you for their knowledge. It's mostly garbage. The only real way to get a leg up in the real estate investing marketplace is to align yourself with other people that are doing the same thing and are successful at it.
You have to ask yourself, if there are secrets to making money in foreclosure investing, why would someone give them away? Offer yourself as an apprentice to real estate investors. The good ones start to get overloaded and could use the help. Then you have better education than any book or article could ever give you. I could tell you exactly how a client of mine built her net worth by 2 million dollars in two years, but there is no guarantee the same strategy would work for you. Furthermore, if I really do know strategies that allow people to increase their net worth 2 million dollars in one year, I wouldn't sell my course, or eBook, or whatever for $39.99. I'd charge well over $1000.
Bottom line. Learn by doing. Expect mistakes. Try to connect with PEOPLE not with books and articles. Just be sure the people you connect with really are successful. That's why I suggest the apprentice pitch. No one could afford to hire an apprentice unless they were making enough money to do so.
12. Is a short sale still an option if a foreclosure has taken place?By definition, no. However, if depends what you mean by "taken place" and whether you are the owner or the buyer. If you are the owner and you haven't been evicted yet, there is always a dollar amount called "cost-to-cure" that, if received by your lender, will cure you default. If you're a buyer, it's all the same to you. All you do is make an offer.
13. How can I get referrals from lenders that have clients wanting to do short sales?As an investor, it doesn't make sense to browse short sales. If the owner has had to ask the lender for approval on a short sale, it's usually not going to give you a very big equity position if you come in to buy it. Again short sales are usually situations where the owner owes more than the market value. A short sale is not a distressed enough situation to get a good enough deal for an investor. You're looking for foreclosures, distressed homes, bank-owned properties, etc.
14. How does a realtor profit from a short sale?When formally requesting a short sale commitment from the bank, realtor commissions are usually included if a realtor was involved in the deal. The bank may counteroffer to lower the commissions. Realtors can also "hunt" for short sales by talking to clients that have had their homes listed for a long time with no success. The realtor can explain the short sale process and help the owner negotiate with their lender to get it sold and the realtor gets their commission.
15. Will I have a higher interest rate on future mortgages or will they be harder to obtain?It all depends on the arrangement between you and the lender. If you pay them a promissory note for the deficiency, then the damage to your credit will be minimal and you shouldn't have a problem obtaining loans in the future. If the lender shows "settled for less than the amount due" on your mortgage trade line, some future lenders will look at that as a foreclosure. Some lenders even report short sales as foreclosures. Here's what to do: Obtain, in writing, your lenders policies on short sale credit bureau reporting. Then ask your mortgage broker how that affects your ability to qualify in the future. Generally, when you get a new mortgage, as long as you don't have a foreclosure, bankruptcy, or unsatisfied judgment, your ability to qualify will be the same as it is now (and your credit score needs to stay the same).
16. I'm interested in this house, owners divorced and walked away. The bank that holds the second is trying to short sale the house. 2 offers have been placed (500k, 550k). I planned to offer a bit more than the offers, but the realtor called and said the lender (countrywide) will not take any less than the appraised amt that just came in (approx 750k). What next? Does it go to auction? I'm confused why the second mortgage company is doing the short sale and not the primary? Suggestions?First of all, if the bank owns it, its not a short sale. Furthermore, if they already own it, chances are it has already been up for auction and they bought it back. Second of all, if the bank says they won't take less than the appraised value, they are lying. If their lien is only for 620k for example, they would take it in a heartbeat, unless some loss mitigation manager at Countrywide is absolutely convinced that the house will fetch well over appraised value at auction (which it won't). So make an offer of $560k. Or make an offer of "$10k higher than any other offer up to a s specified amount." The second mortgage company handles the sale because the first mortgage company will be paid off (most likely) by the sale or auction of the home. If Countrywide doesn't agree to any offers by a certain time, and it hasn't already then yes, it goes to auction. The people that bid won't show up, but a representative from Countrywide will. They will bid what they owe on house. If they already own the house, there won't be an auction, it has already been foreclosed, and Countrywide will just try to sell it for as much as they can.
17. 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 you just negotiate the terms with the second lender.
18. I have a home that is worth $560,000.00. 1st is $442,000.00, 2nd/HELOC is $130,000.00. Taxes say $10,000.00. Broker fee $10,000.00. Net $540,000.00. $572,000.00 less $540,000.00 $32,000.00 Short. What will happen? Can it happen? What will the 1st lender take and what will the HELOC lender take? Looking forward to your response!Yes it can happen. The first lender will be paid off completely and then you and the 2nd lender must make an "arrangement" for the deficiency. Best case scenario is they write off the deficiency and simply report it as 1099 income to you or a satisfied judgment. Read my article on short sales as my own personal example is very similar.
19. I purchased a new home in February, with a first loan of 80% and a second loan of 20%. I listed my old home with the plan of paying my second loan as soon as the old home sold. This home has been listed for over six months and has not sold and the price has been reduced substantially. I have been paying for mortgages on both homes. I am using my savings and I cannot afford to keep paying both. I cannot afford my new home without paying my second loan. Can I short sell it?You and the rest of the country! Yes! You can do a short sale. The problem you face now is time constraints. Talk to the lender on your old house about their options such as deed-in-lieu of foreclosure. Find out what their short sale requirements and policies are.
20. I have put an offer in on a home that is a short sale. It took months to get a preliminary acceptance from Wells Fargo, but they said it doesn't have final approval yet. We are 2 weeks from closing and no one from Wells Fargo will call me or my agent back. Any suggestions to get an answer, so I know if my family has a home?Great question, and a common problem. It takes a long time for these things to go through usually. You are only two weeks away from closing if Wells Fargo has all their stuff taken care of by then. The only way to get more information is to call the department of Wells that handles short sales and request the information. They probably won't talk to you unless the seller authorizes you to talk to Wells. When my wife went through a short sale, we called up our lender and authorized the buyers to talk to them. Then our lender gave them all the info they wanted and they buyers were actually able accelerate the process. So ask the appropriate party if the sellers will add you as authorized to discuss the progress of the short sale with Wells Fargo.
21. Hello, I am interested in purchasing foreclosures for investment reasons. I have been warned of second mortgages being what is foreclosed, not the original mortgage. How can I tell which mortgage is being foreclosed?Don't buy anything until you get a preliminary title report or Lien and Encumbrance report showing who all has a claim to the property. This way you will know who is expecting to be paid off before you can own it.
22. Does the mortgage company HAVE to 1099 us on our short sale? Is it a law? What is the difference in a 1099 and a 1099A?The answer is no, the mortgage company does not HAVE to do anything when you have a short sale. It is very likely however, that they will not simply "charge off" or write off the loss of deficiency money. They can account for this in several different ways, one of the most popular of which being a 1099a. 1099 is a blanket term used to refer to non-tax-withheld income. A 1099A is likely what the lender will file as it pertains specifically to the acquisition or abandonment of secured property.
2. We are about to buy a short sale from the bank and are wondering if the bank is responsible for ridding the house of mold or are we?First of all, if you are buying a house from the bank, it's not a short sale. Second of all, in almost every case where there is a bank-owned property, it will be sold AS-IS. Check the verbiage of your purchase agreement with the bank (or seller). Any purchase agreement should contain a clause referencing who is liable for what. If you signed a purchase agreement that didn't reference the mold or "items required by the home inspection to be completed," then you will be liable.
3. If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?In some cases it will and in some cases it won't. It depends on the amount of the deficiency. Usually the mortgage insurance only covers a certain amount. Moreover, the lender will try to collect from you before they file a claim with the mortgage insurance company. The mortgage insurance is not there for your protection, just the lenders.
4. We had a first and second loan and went through foreclosure. The first was paid off and we were told the second would be forgiven. Now a collection company is coming after us for the second, what do we do?First of all, read this article. The bank will never forgive one dime of debt unless it is explicitly stated in writing and you have it reviewed and confirmed by an attorney. The fact is they probably lied to you verbally. You're only recourse now is to engage in a legal dispute against them or file bankruptcy.
5. What are the implications of unpaid judgments?Worst case scenario, your wages can be garnished.
6. How long does the foreclosure process take?Complicated question depending on what you consider the start of the "process" to be. Generally, the Bank will send and NOD (notice of default) to the Title Company and trustee. From that time it takes between 3-9 months for the house to go up for auction, during which, you can pay the delinquent amount to "cure" the foreclosure proceedings.
7. Will I still have to pay taxes if I do a short sale?This is a broad question depending on whether we're talking about property taxes or federal income taxes. You'll always have to pay extra income tax if the bank sends you a 1099 for the deficiency. SOMEONE will always have to pay property taxes. Whether it’s you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale.
8. I made a loan to a person buying a house as a second mortgage. Now that person is going through foreclosure. Do I have any way of getting paid?You Bet! You have just as much right to get paid as the lenders referred to in my article about short sales and you have all the same legal recourses they do. You can write off the loss as 1099 income. You can hire a collection company to obtain the debt. You can file a judgment against them. If they file chapter 7 bankruptcy, there are some cases where you would not get paid, unless the attorney did not include your lien in the bankruptcy. 1099 is the worst case scenario.
9. I owe more than my home is worth. Am I eligible for short sale or is my only option foreclosure or bankruptcy?Always consult your lender as to what your options are. They are usually short sale, deed-in-lieu of foreclosure (basically an accelerated voluntary surrender), and foreclosure. The banks like to prevent foreclosure when at all possible. They've even been known to lower people's rates and payments because of all the new defaults in '06 and '07. Either way, your first stop should be to get information from you lender on what options they provide.
10. Does a good credit score help the seller trying to do the short sale?Only inasmuch as their credit score will stay high as long as they don't make any late payments leading up to the short sale. Some lenders may call the deficiency a judgment though, which will hurt the score a bit.
11. Where can I get information on investing in short sales and foreclosures?First of all, there is no magic listing place for short sales. If a seller has gone to the trouble of asking their lender if they can do a short sale and the lender has given them a verbal approval, then the short sale will show up much the same as any other property for sale, only it will take you five times as long to close it.Foreclosure investing is a whole different ballgame. There are numerous theories, books, websites, and other forms of media often that charge you for their knowledge. It's mostly garbage. The only real way to get a leg up in the real estate investing marketplace is to align yourself with other people that are doing the same thing and are successful at it.
You have to ask yourself, if there are secrets to making money in foreclosure investing, why would someone give them away? Offer yourself as an apprentice to real estate investors. The good ones start to get overloaded and could use the help. Then you have better education than any book or article could ever give you. I could tell you exactly how a client of mine built her net worth by 2 million dollars in two years, but there is no guarantee the same strategy would work for you. Furthermore, if I really do know strategies that allow people to increase their net worth 2 million dollars in one year, I wouldn't sell my course, or eBook, or whatever for $39.99. I'd charge well over $1000.
Bottom line. Learn by doing. Expect mistakes. Try to connect with PEOPLE not with books and articles. Just be sure the people you connect with really are successful. That's why I suggest the apprentice pitch. No one could afford to hire an apprentice unless they were making enough money to do so.
12. Is a short sale still an option if a foreclosure has taken place?By definition, no. However, if depends what you mean by "taken place" and whether you are the owner or the buyer. If you are the owner and you haven't been evicted yet, there is always a dollar amount called "cost-to-cure" that, if received by your lender, will cure you default. If you're a buyer, it's all the same to you. All you do is make an offer.
13. How can I get referrals from lenders that have clients wanting to do short sales?As an investor, it doesn't make sense to browse short sales. If the owner has had to ask the lender for approval on a short sale, it's usually not going to give you a very big equity position if you come in to buy it. Again short sales are usually situations where the owner owes more than the market value. A short sale is not a distressed enough situation to get a good enough deal for an investor. You're looking for foreclosures, distressed homes, bank-owned properties, etc.
14. How does a realtor profit from a short sale?When formally requesting a short sale commitment from the bank, realtor commissions are usually included if a realtor was involved in the deal. The bank may counteroffer to lower the commissions. Realtors can also "hunt" for short sales by talking to clients that have had their homes listed for a long time with no success. The realtor can explain the short sale process and help the owner negotiate with their lender to get it sold and the realtor gets their commission.
15. Will I have a higher interest rate on future mortgages or will they be harder to obtain?It all depends on the arrangement between you and the lender. If you pay them a promissory note for the deficiency, then the damage to your credit will be minimal and you shouldn't have a problem obtaining loans in the future. If the lender shows "settled for less than the amount due" on your mortgage trade line, some future lenders will look at that as a foreclosure. Some lenders even report short sales as foreclosures. Here's what to do: Obtain, in writing, your lenders policies on short sale credit bureau reporting. Then ask your mortgage broker how that affects your ability to qualify in the future. Generally, when you get a new mortgage, as long as you don't have a foreclosure, bankruptcy, or unsatisfied judgment, your ability to qualify will be the same as it is now (and your credit score needs to stay the same).
16. I'm interested in this house, owners divorced and walked away. The bank that holds the second is trying to short sale the house. 2 offers have been placed (500k, 550k). I planned to offer a bit more than the offers, but the realtor called and said the lender (countrywide) will not take any less than the appraised amt that just came in (approx 750k). What next? Does it go to auction? I'm confused why the second mortgage company is doing the short sale and not the primary? Suggestions?First of all, if the bank owns it, its not a short sale. Furthermore, if they already own it, chances are it has already been up for auction and they bought it back. Second of all, if the bank says they won't take less than the appraised value, they are lying. If their lien is only for 620k for example, they would take it in a heartbeat, unless some loss mitigation manager at Countrywide is absolutely convinced that the house will fetch well over appraised value at auction (which it won't). So make an offer of $560k. Or make an offer of "$10k higher than any other offer up to a s specified amount." The second mortgage company handles the sale because the first mortgage company will be paid off (most likely) by the sale or auction of the home. If Countrywide doesn't agree to any offers by a certain time, and it hasn't already then yes, it goes to auction. The people that bid won't show up, but a representative from Countrywide will. They will bid what they owe on house. If they already own the house, there won't be an auction, it has already been foreclosed, and Countrywide will just try to sell it for as much as they can.
17. 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 you just negotiate the terms with the second lender.
18. I have a home that is worth $560,000.00. 1st is $442,000.00, 2nd/HELOC is $130,000.00. Taxes say $10,000.00. Broker fee $10,000.00. Net $540,000.00. $572,000.00 less $540,000.00 $32,000.00 Short. What will happen? Can it happen? What will the 1st lender take and what will the HELOC lender take? Looking forward to your response!Yes it can happen. The first lender will be paid off completely and then you and the 2nd lender must make an "arrangement" for the deficiency. Best case scenario is they write off the deficiency and simply report it as 1099 income to you or a satisfied judgment. Read my article on short sales as my own personal example is very similar.
19. I purchased a new home in February, with a first loan of 80% and a second loan of 20%. I listed my old home with the plan of paying my second loan as soon as the old home sold. This home has been listed for over six months and has not sold and the price has been reduced substantially. I have been paying for mortgages on both homes. I am using my savings and I cannot afford to keep paying both. I cannot afford my new home without paying my second loan. Can I short sell it?You and the rest of the country! Yes! You can do a short sale. The problem you face now is time constraints. Talk to the lender on your old house about their options such as deed-in-lieu of foreclosure. Find out what their short sale requirements and policies are.
20. I have put an offer in on a home that is a short sale. It took months to get a preliminary acceptance from Wells Fargo, but they said it doesn't have final approval yet. We are 2 weeks from closing and no one from Wells Fargo will call me or my agent back. Any suggestions to get an answer, so I know if my family has a home?Great question, and a common problem. It takes a long time for these things to go through usually. You are only two weeks away from closing if Wells Fargo has all their stuff taken care of by then. The only way to get more information is to call the department of Wells that handles short sales and request the information. They probably won't talk to you unless the seller authorizes you to talk to Wells. When my wife went through a short sale, we called up our lender and authorized the buyers to talk to them. Then our lender gave them all the info they wanted and they buyers were actually able accelerate the process. So ask the appropriate party if the sellers will add you as authorized to discuss the progress of the short sale with Wells Fargo.
21. Hello, I am interested in purchasing foreclosures for investment reasons. I have been warned of second mortgages being what is foreclosed, not the original mortgage. How can I tell which mortgage is being foreclosed?Don't buy anything until you get a preliminary title report or Lien and Encumbrance report showing who all has a claim to the property. This way you will know who is expecting to be paid off before you can own it.
22. Does the mortgage company HAVE to 1099 us on our short sale? Is it a law? What is the difference in a 1099 and a 1099A?The answer is no, the mortgage company does not HAVE to do anything when you have a short sale. It is very likely however, that they will not simply "charge off" or write off the loss of deficiency money. They can account for this in several different ways, one of the most popular of which being a 1099a. 1099 is a blanket term used to refer to non-tax-withheld income. A 1099A is likely what the lender will file as it pertains specifically to the acquisition or abandonment of secured property.
Thursday, March 26, 2009
Foreclosure vs. Short Sale
FORECLOSURE VS. SHORT SALE
FORECLOSURE
FORECLOSURE
In order for your lender to foreclose on you in Illinois they will have to take you to court and if you are foreclosure on you will have a judgment against your credit. This judgment can remain your credit record for up to ten years and also in most cases you will have a deficiency judgment against you. A deficiency judgment is another lien against the borrower whose foreclosed sale did not produce sufficient funds to pay the mortgage in full. In other words when your mortgage company eventually sells your property and it did not cover the cost of foreclosure and your remaining balance of what you owed on the property they have the right to go after you to get the money. Your credit score will also drop 300 point because of the foreclosure in most cases but that does not include the multiple 30 day lates that occur during the foreclosure process. You will also have to wait around 7 years before you can purchase another property again.
SHORT SALE
There is not a judgment against you when you do a short sale however some lenders may ask to reserve the right of a deficiency judgment against which is negotiable in some cases. If you have been late on your mortgage, that will affect your credit but you do not have to be late on your mortgage to do a short sale. I encourage you to try and stay current with your mortgage especially if you are concerned with how a short sale will affect your credit. Typically your credit will drop around 100 points when you do a short sale. After you do a short sale you can purchase a property right away if you are not trying to do a Fannie Mae loan which requires you to wait 24 months.
Sunday, September 30, 2007
FORECLOSURE OPPORTUNITIES by Yahoo.com
Pre-Foreclosure:
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with the equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.
Public Auction:
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.
Bank-Owned (a.k.a. REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually re-sell the property to recover the unpaid loan amount. The lender will typically clear the title and perform needed maintenance and repair; however, the discount for these REO homes is typically less than a pre-foreclosure or auction property discount. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with the equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.
Public Auction:
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.
Bank-Owned (a.k.a. REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually re-sell the property to recover the unpaid loan amount. The lender will typically clear the title and perform needed maintenance and repair; however, the discount for these REO homes is typically less than a pre-foreclosure or auction property discount. Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property
Monday, September 17, 2007
Foreclosure Overview by Yahoo.com
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:
1. The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These properties are also known as bank-owned or REO properties
1. The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
2. The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
3. A third party buys the property at a public auction at the end of the pre-foreclosure period.
4. The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure or by buying back the property at the public auction. These properties are also known as bank-owned or REO properties
Thursday, January 18, 2007
The Historic Chicago Bungalow Initiative
Launched by Mayor Richard M. Daley in September of 2000, the Historic Chicago Bungalow Initiative is designed to foster an appreciation of the Chicago Bungalow as a distinctive housing type, encourage sympathetic rehabilitation of Chicago bungalows, and assist bungalow owners with adapting their homes to current needs, which in turn helps to strengthen Chicago bungalow neighborhoods.
The Historic Chicago Bungalow Association is the non profit organization that administers the Initiative. The program offers a variety of financial resources, from grants to loans, and technical resources, from special permit assistance to "how-to" seminars. Certifying your bungalow with the Historic Chicago Bungalow Association is the first step in accessing these financial incentives and benefits.
The Historic Chicago Bungalow Initiative offers grants and other resources for all Historic Chicago Bungalow owners. Unlocking the door to benefits is easy. All that is required is that your bungalow is certified with the Historic Chicago Bungalow Association. Certify your bungalow today.
The Historic Chicago Bungalow Association is the non profit organization that administers the Initiative. The program offers a variety of financial resources, from grants to loans, and technical resources, from special permit assistance to "how-to" seminars. Certifying your bungalow with the Historic Chicago Bungalow Association is the first step in accessing these financial incentives and benefits.
The Historic Chicago Bungalow Initiative offers grants and other resources for all Historic Chicago Bungalow owners. Unlocking the door to benefits is easy. All that is required is that your bungalow is certified with the Historic Chicago Bungalow Association. Certify your bungalow today.
