Orlando & Tampa Short Sales and Foreclosures
The Real Estate Professionals at Florida Homes Realty work hard to make sure their distressed homeowners understand all possible options. Following is some great information that hopefully will help you all understand the foreclosure and short sale process. The links to the web sites are worth looking at and will help assist you further.If the homeowner's credit allows for a refinance and they meet the eligibility criteria then there is a possible option through HOPE. This program is made available by the Department of Housing and Urban Development (HUD). In addition it is important that homeowners visit the Making Home Affordable web site for valuable information.
Believe it or not, lenders will often work with distressed homeowners so that they can keep their homes by reducing or rolling back interest rates; forgiving back payments; adding back payments to the loan amount at the end; and even recasting the entire loan and wrapping all the fees into a fixed rate mortgage. If you are a distressed homeowner and have not yet tried talking with your lender, give them a call to see if they would be willing to work out any options with you.
If you have any assets such as U.S. Treasury Bonds, IRA's you may have to liquidate some or all of those assets in order to sell, unless you have the necessary cash on hand to cure deficiencies at closing. By curing deficiencies at closing you can avoid some of the credit damage that a short sale or foreclosure can cause. Bottom line PLEASE before making any financial decisions, consult with your finance and tax professionals.
Deed in Lieu of Foreclosure... This is when the homeowner agrees to trade the property to the lender in exchange for the cancellation of their note. This foreclosure alternative works best in those states where there is a long foreclosure timeline. It is beneficial to the lender because they get the property more quickly therefore lessening the probability of property disrepair and negates the lenders costs to foreclose. Lenders appear more cooperative in an appreciating market versus a declining one.
Are you thinking of doing nothing or perhaps walking away? NOT A GOOD IDEA!
If you are unhappy just because your home lost value and you owe more than you paid, you need to contact an attorney. By walking away from the loan or even pursuing a short sale, which may not be a viable option, there will often be additional financial consequences.
Let's Talk About Short Sales...
There are specific qualifications that a homeowner needs to meet before being approved by their lender to sell their home as a "Short Sale". For those of you who are not familiar with the term "Short Sale" listen up; a short sale is a situation in which the seller owes more money on their home loan than what the sale of their home will likely produce and is unable or unwilling to bring money to the closing. When a lender has not yet foreclosed on the home, it provides a window of opportunity for the homeowner to sell the property in order to partially satisfy the amount they owe to the lender. Many are of the opinion that short sales are preferable to foreclosures because they lessen the impact a foreclosure can have on the surrounding community. In addition it doesn't seem to damage the homeowner's credit as much as a foreclosure will. Credit scores can go down by as little as 50 points, if the homeowner is current on his/her other debts. In a foreclosure you would be looking at 200 points decrease.
In the qualifying process for a short sale following is an example of what the listing agents and banks look at:
- The homeowner must have a valid hardship.
- Need to have sufficient time to accomplish the short sale
- It is advisable that the homeowner speak with appropriate finance, tax and legal professionals.
- The amount that is owed on the property.
- Whether or not there are liens on the property in addition to the first mortgage.
Such as tax lien, homeowner association, HELOC (second & third mortgages).
- The condition of the property.
- It will be imperative that the homeowner cooperate in completing the short sale documentation and maintain the home for showings.
We need to be very clear on defining hardship. Hundreds of thousands of homeowners today have lost equity in their home. This is NOT considered a hardship. Lending institutions may consider short sales for homeowners who have experienced any of the following.
- Job Loss
- Business Failure
- Illness & Medical Costs
- Divorce or death of a spouse
- Natural disasters
Consider the U.S. Foreclosure Network (USFN) as a possible source for locating attorneys who specialize in bankruptcy and foreclosures. The knowledge and experience of the attorney you choose is essential.
ALERT...
Homeowners facing foreclosure PLEASE watch out for unethical investors who will try to convince you to sign a quitclaim deed for the property and then lease the property. In such cases, the former owners will still be liable for the mortgage payments, even though they no longer own their home.
Here are the major reasons some short sales fail
- Incomplete short-sale package
- No reasonable chance of closing
- Inexperienced listing real estate agent
- Release of deficiency
- No hardship
- Junior liens (second mortgages)
- Lender
Will you (the seller) have to pay income tax on any forgiven debt? You bet if it's an investment property. Prior to the Mortgage Debt Relief & Emergency Economic Stabilization Act of 2008 being taking effect, any money forgiven by the lender was considered taxable income. Today, in most cases, the forgiven debt is not taxable if it is your primary residence. The new law applies to debt forgiven in 2007, 2008, 2009 and the Economic Stabilization Act of 2008 has extended this forgiveness through 2012.
It is advisable that you still consult with a finance, tax or legal professional to be fully informed and it's important you understand it completely. In addition, finance, tax and legal issues are outside the scope for real estate practitioners.
The Federal Housing Administration (FHA) Pre-foreclosure Sale (PFS) program DOES allow for short sales; however, you must get pre-approval due to eligibility criteria. Be sure to check with your attorney or the HUD office to confirm. Typically with an FHA mortgage the home has to be owner occupied; the existing mortgage must be 31 days delinquent at the time of the pre-foreclosure sale closing; and the homeowner must provide documentation proving a reduction in income or an increase in living expense and verify that the homeowner needs to vacate the property, if applicable. There are features to this program so if you have an FHA loan and you are considering a short sale please verify this information.
All of us at Florida Homes Realty Professional Group hope the information provided here has been of some help and relief. We will be happy to help you with your short sale or foreclose in the sale of your home. If you are upside down in your mortgage or you cannot make your mortgage payments, please give us a call for a free consultation. We cannot give you any financial, tax or legal advice because that would be illegal. We can give you a current market value and help you determine if you may qualify for a short sale versus a straight out foreclosure. A foreclosure should be the very last resort. Contact Us today for a confidential consultation.
Source: The information that we have provided was taken from the Real Estate Buyer's Agent Council of the National Association of Realtors®.
