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Certified Short Sale Professional
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I am a certified Short Sale Professional. This means that I have the experience and knowledge to handle any short sale with the bank. I have the knowledge to know how to get the banks to accept the short sale and get them to forgive any balances. Note that there are situations where the bank will ask for a promissary note from the seller for the amount shorted. Call me and we can talk about how to stop the bank from taking your home.
If you are a buyer, know that short sales can take months to complete. REO's are reap the same savings in less time. I also have the experience in REO's and how to deal with the banks to get you the most that you can. |
Definitions of SHORT PAY
- A short sale is the sale of real property where the fair market sale price is less than the loan balance
Short Pay is Sign of the Times
In this case, “short pay” refers to what most folks call a “short sale”. Usually, people think of a short sale as a situation where the market value of the property is lower than the amount owed to the lender(s). In this case, “short pay” refers to a situation where the total indebtedness, including costs of sale, may be larger than the likely selling price of the property. For example, the loans might be $540,000, but the loans, plus the back taxes and penalties, might be $567,000, whereas the sale value might be $540,000 – equal to the loan amount, but less than the debts that must be cleared. For the most part, this is semantics: a short pay, or short sale, occurs when there is more owed than the property is worth.
No one likes a short sale – neither the lender(s) nor the borrower. So why do they happen? Generally, for both parties it may be preferable to a foreclosure. To the lender, it may be a business decision. They will lose less by accepting a short pay than they will by foreclosing and going through the costs of resale. To an owner, it is more likely to have a personal appeal. At least owners avoid the public stigma of foreclosure; and in some cases it may be better for future credit ratings.
The short pay addendum created by CAR provides advice to the seller in six areas.
First, there is general advice that sets forth in writing that this is likely to be a short sale, and that “In order to sell the Property, Seller may be required (1) to deposit his/her own funds into escrow, or (2) seek an agreement with lender(s) or creditor(s) (“Lender”) to reduce the amount of indebtedness secured by the Property (Short Pay) or both.”
Secondly, there is “Tax Consequences”. (a) The seller is advised that debt forgiveness of debt by the Lender may result in taxable income to the Seller. (b) In some cases, their may also be capital gains taxes due. Capital gains? How could this be?! Suppose you bought your house a long time ago, and had a basis of $200,000. Further, suppose you had refinanced it recently for $450,000. Now, you are in a short sale situation, and you can only get $400,000 for it. Guess what? Your sale gives you a capital gain of $200,000.
Third, there may be “Credit Consequences”. Just because your lender(s) will forgive a portion of the debt, and allow the sale to occur, doesn’t mean they will not report you as failing “to pay as agreed” and showing a charge off. Even without a foreclosure, a short pay seller may have serious credit dings.
Fourth, there is “Lender Consideration”. It is pointed out that, for the lender to approve of a short sale, it may be necessary for the borrower to demonstrate “hardship”. They won’t accept, “Life is tough; I can’t make the payments.” The lender may require, “…Seller to provide copies of financial statements, tax returns, pay stubs, or other financial in formation…” For many, providing this financial information may be emotionally difficult, but something that can be done. However, there is that large class of people who are finding themselves unable to make payments on loans that they qualified for by providing “stated income” without documentation. Guess what? Much of that income was overstated. People committed fraud on their loan applications. And that is a felony. They are unlikely to have a short pay approved.
Next, there is a “Broker Authority” section that advises the seller that (a) the broker may contact the lender regarding the feasibility of a short sale (Any broker who doesn’t would be a fool), and (b) that the property will be advertised as a “short pay”. Thus, it will be public.
Finally, there is the boiler-plate notice that brokers can’t give tax or legal advice; and that sellers should seek such advice from competent providers
Short pay sales. They aren’t pretty; but they are part of our new reality.
The information above was gathered from sources deemed reliable and is intended for informational purposes only. Please consult official assessment records. State and county terms and policies may vary so consult your local bylaws.
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About Foreclosures
Foreclosure Terminology Definitions Notice of Default (NOD): The initial document (non-judicial) filed by a trustee that starts the foreclosure process, usually after the occurrence of a default under the deed of trust, or mortgage. Both LIS and NOD are part of the PRE-foreclosure process. Lis Penden (LIS): Notification of pending lawsuit. The initial document (judicial) filed by an attorney or trustee that starts the foreclosure process after the occurrence of default under the deed of trust or mortgage. Both LIS and NOD are part of the PRE-foreclosure process. Notice of Trustee's Sale (NTS): A filing by notice announcing a public auction. Notice (Judgment) of Foreclosure Sale (NFS): An order signed by a judge, directing a “ Notice of Sale” be published and that a referee (trustee) sell the property at public auction. Real Estate Owned (REO): “Real Estate Owned” by the lender; the final step in foreclosure process. This document conveys property ownership back to lender. Government-Owned (GOV): A foreclosed property offered for sale by the government. When a property purchased with a federally insured mortgage (i.e., FHA, VA) is foreclosed by the lender, the federal government pays the lender what is owed, takes possession of the property, and offers the property for sale. Sale Pending: One of two transition periods between documented filings of foreclosure, (either between NOD/LIS and NTS/NFS or NTS/NFS and REO) when a property has satisfied the time requirement specific to the most recent phase of foreclosure, but RealtyTrac has yet to receive any information that the property has entered the next stage of foreclosure. History of Notices: Listing of other foreclosure notices posted on RealtyTrac for the same property. Glossary of Terms Foreclosure: A legal procedure by which mortgaged property is sold, upon default, in order to satisfy a debt. Foreclosures generally are governed by state law, and rules may vary between States. For more details, visit our Foreclosure Overview of the foreclosure process, including links to relevant State Law. Deed of Trust: A type of security instrument where the borrower conveys the property’s title to a third party (trustee) to be held “in trust” as security for the note. Mortgage: A conveyance of an interest in real property, given as security for the payment of a debt. An agreement between two parties: borrower and lender. Assignment of Deed of Trust or Mortgage: Assumption by a purchaser of liability for payment of an existing mortgage, or deed of trust. May or may not be accompanied by a release of liability of the original borrower. Novation: The substitution of a new contract between the same, or different parties; a substitution, by mutual agreement, of one debtor for another, or one creditor for another. The result is that the old contract is extinguished, and a new contract is created, usually with the same content, but with at least one different party. Declaration of Default: a document instructing the trustee (usually appointed by a bank) to prepare and record a Notice of Default (NOD), and if necessary, to sell the property at auction in order to satisfy the unpaid obligation or lien. Full Reconveyance: a document prepared by a trustee, when an obligation secured by a deed of trust, or mortgage, is paid back in full. Once recorded, this reconveyance eliminates the lien from the property’s title. Junior Lien: a legal claim upon real property recorded subsequent to (after) another claim or legal obligation (for example, a senior lien would have priority in most cases). Postponement: a verbal announcement made at the time and location of the scheduled trustee’s sale, resetting the auction for a later date. Publication Letter: a letter, when signed by the beneficiary (lender), authorizing the trustee to prepare, publish and record the Notice of Trustees Sale (notice of auction). Publication Period: a period beginning at the expiration of the default period, and ending when the trustee’s sale has been conducted. During the publication period, the Notice of Trustees Sale is published, posted and recorded. Recession of Notice of Default: After an amount in default has been cured, or paid-back, this document, when signed by the lender and recorded by the trustee, removes the burden of the previously recorded Notice of Default. Reinstatement Period: The time period beginning when the Notice of Default is recorded, and ending five business days before the trustee’s auction sale. The default may be cured, or paid-back, at any time during this period by paying all delinquent amounts, including the trustee’s fees and costs.
Foreclosure Timeline Day 1: Notice of Default (NOD) recorded. The defaulting property owner has 3 calendar months to cure, or payback the default amount, either by paying off the lien, or by negotiating a payment plan Within 10 days: Notice of Default mailed. Within 1 month: Notice of Default mailed. 3 Months Later: Trustee schedules a Trustee's Sale (auction). 21 days later: On the date of sale, trustee sells the property to the highest bidder. This sale is usually held at the trustee's office, or at the County Courthouse (call trustee for updates on time, date, place). How to Finance Foreclosure Properties Foreclosure properties, REO (Real Estate Owned) property owned by banks and other lenders, and properties threatened with imminent foreclosure all represent great investment opportunities for property buyers. They are the most popular source of affordable deals for those seeking bargain homes, because foreclosures often sell at or below wholesale prices.
Anybody can buy this kind of property. Basically all you need is some money and a willingness to bid. But be aware that if you attend a property auction, you may wind up bidding against professional foreclosure investment specialists who are also looking for cheap houses. If you are unsure about how the foreclosure real estate game is played, learn as much as possible ahead of time in the Learn Section of Bargain Homes, so that you are not at a disadvantage when making your purchase offer.
Before stepping into the foreclosure property arena, it is important to educate yourself. You’ll want to know as much as possible about such things as the pitfalls of hidden costs. For example, when purchasing a house that has a lien against it, the buyer may be responsible to pay back that debt. Such strings-attached baggage can include huge amounts of money owed to the IRS.
And you will want to explore various ways to come up with the money necessary to finance your purchase of a foreclosure. Some lenders don’t lend money for foreclosure property mortgages, while other lenders are eager to make loans to help you buy. To find out more, do some homework ahead of time, so that you can approach the foreclosure auction with confidence and adequate financial backing.
Use knowledgeable resources like Bargain Homes to find answers to your foreclosure questions. Be patient, and don’t rush into the first opportunity that comes your way. Foreclosure properties are everywhere and more come onto the market each day. As you study how the process works, continue your hunt for the right investment to suit your needs, by dedicating some time each day to searching through real estate foreclosure listings in your area.
While you peruse the listings on sites like Bargain Network, also look for information, leads, and advice on financing.
Here are five powerful tips to help you finance foreclosure property:
Pre-qualify for a bank loan
Money talks. If you want to walk away with the property, show cash up front. Sellers respond when they have confidence that you can support your offer with prompt financing, so pay a visit to your mortgage lender before you shop for houses.
You can get pre-qualified in a matter of minutes, by showing a few documents and submitting to a credit check. And if you want to really up the ante, go ahead and get pre-approved for the loan, up to a certain amount. With a pre-approval letter in hand, you can open doors and have a distinct advantage over other competing bidders.
Assume the seller’s loan
If the terms of the loan allow it, you can take over the existing payments and solve two problems at the same time. 1) The strategy is good for the seller, who avoids foreclosure. 2) And as the buyer, you are able to simply cure the default and take over the existing loan without significant loan processing fees or delays. Veteran’s Administration (VA) loans are great in this respect – if you find an assumable VA loan you should definitely take advantage of the flexible option it represents.
Owner/Seller financing options
Owners who are faced with the dreadful possibility of foreclosure are usually happy to work with you, if it means they can save their credit from ruination. If you are able to take over their loan, it is a big help to them. In return for being rescued from a sea of debt, sellers will often accept terms that are very attractive to buyers.
For example, if you don’t have cash for a down payment, you can work out a deal with the seller so that they can stay in the house, rent free, for a certain period of time, in lieu of a down payment. Or you could offer them reduced rent, in exchange for their labor to help you fix up the place before you sell it, which reduces your remodeling costs.
Home Equity Loans
Sometimes the financial capital you need is right beneath your feet. If you own a home with accumulated equity, you might be able to find a great source of investment money without ever leaving home. Lenders will usually charge a slightly higher rate of interest for a second mortgage or home equity loan, but the interest and many of the closing costs are tax deductible, which offers extra savings over time. And once you secure the loan and buy your foreclosure property, you can always leverage the new piece of real estate as collateral and refinance to a lower interest rate.
Private lenders or investment partners
One of the most common arrangements in the real estate foreclosure business is partnership with lenders who have money to invest, but are not interested in doing the day-to-day work required to buy and sell property. You may have a colleague, friend, or family member with investment capital, and you can sit down and iron out an agreement to share the profits of your joint venture. They put up the money so that you can bid on foreclosures, and then you pay them back with a share of the proceeds when you sell the property and reap a capital gain.
You can also get funds from professional investors who lend money for a cut of the action. And if you have trouble getting a traditional loan from a bank, there are plenty of legitimate lenders who specialize in providing “hard money” loans, or loans with higher interest rates made to people who would otherwise be turned down.
Find a reputable lender through resources like Bargain Network, and you may discover that professional partnership can double your potential for success. The information above was gathered from sources deemed reliable and is intended for informational purposes only. Please consult official assessment records. State and county terms and policies may vary so consult your local bylaws.
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