Sun City Grand Real Estate & Arizona Retirement Communities

The original concept of a short sale is when a home sells for less than the mortgage(s) on it and the homeowner does not sign a promissory note or bring money to closing. Many homeowners in Orange Park and Fleming Island have not one, but two or three mortgages, including a home equity line of credit.  You may be considering a short sale, but the question is - Do You Qualify for a Short Sale? Not every Clay County homeowner does. Here's the thing:

The rules for short sales keep changing

If a home is not sold as a short sale and goes into foreclosure, all the liens are wiped out except first mortgage, so any second or third mortgages are a total loss to their respective bank.  Second and third mortgages are often held by different banks from the first mortgage. A year ago a second mortgage would accept from zero dollars up to $1000 payment and sign off on a short sale. So would home equity lines of credit. Not now.

Today, the second lienholder usually demands $3000-5000 from the first mortgage bank to agree to a short sale, and they may demand sellers sign a note agreeing to pay back a portion of the loan. Banks have figured out a way to recoup some of their huge losses by demanding some cash now and a promise to pay later. Additionally, some homeowners are also required to bring money to the closing if the bank determines they are in a financial position to do so.

So who qualifies for a short sale?

Homeowners with a genuine hardship who owe more money than their home is worth due to: job loss, medical reaons, divorce, or relocation that deplete a homeowner's assets are considered by banks to be genuine hardship. In this instance, a bank will typically agree to a short sale and not demand cash at closing or a promissory note.

 

So who does not qualify for a short sale?

1. Homeowners who realize their home is worth less than what they paid and they just don't want to make the payments anymore.

2. Homeowners who have significant assets and income.

3. Homeowners who have bought a second home.

4. Investors.

Homeowners who qualify for a short sale as of now will usually not be asked by the bank to execute promissory notes for any balance owed. Homeowners who do not qualify for a short sale will either sign promissory notes or the property will go into foreclosure.

What should you do if you are behind in your payments?

If you are behind in your payments, call your bank(s) and keep communications open. Ask to speak to someone in the Loss Mitigation Department. You may qualify for a loan modification or another program. Seek the advice of your financial advisor, accountant and attorney to give you all the information about your particular situation.

Contact an experienced short sale real estate professional to determine what your home may sell for. You may contact us for a consultation to discuss your options.

So should you do a short sale or not?

It depends. Short sales affect your credit for two years. After two years, you may buy a home again. Foreclosures impact your credit for five years. Bankruptcy has a more negative impact than a short sale also.

About 20% of homes on Fleming Island on the market are short sales or bank owned and 38% of homes in Orange Park are short sales or bank owned, so you're not alone in the decisions you are facing. Once you speak with the bank and other advisors, including an experienced short sale real estate agent, you will have enough information to make a good decision. You will know whether you qualify for a short sale and if you should consider one even if you do not qualify. Give us a call at 904-673-2308 if you want to get together to see if we can help you navigate whether or not you qualify for a short sale.

 

 

 

 

Has it worked?

The objective of the original $750 Billion Troubled Asset Recovery Program, passed by Congress at the insistence of the Bush Administration last fall, was to jump start lending at the largest banks in the U.S.  According to an analysis by the Wall Street Journal, as reported by David Enrich, Michael R. Cittenden, and Maurice Tamman in last Monday's Journal. it didn't work!

Indeed, the total loan volume by lenders who received the most TARP money dropped in three of the four months covered by the U.S. Treasury Department Survey.  Only three of the 19 lending institutions at the top of the TARP list originated a greater volume of loans at the end of the period, as compared to October.

The findings could fuel a fire of discontent over the Bush bailout program, as well as the one put into place in the early days of the Obama Administration, at the perceived lack of funding coming from major banks, combined with the public backlash over executive perks and bonuses at the same financial institutions who took the most Federal Bailout Money.

Last weekend, speaking in Trinidad, President Obama called for greater lender "accountability" with the TARP Bailout Funds. 

Why? 

Many experts feel bank lending levels will portend how quickly the U.S. Economy will rebound.   It also has a direct impact on the U.S. Housing Market, as consumer loans, especially mortgage financing and re-financing, make up nearly half of all loans written to consumers.  Excluding mortgage loans and re-finances, however, consumer lending dropped  by roughly 33% between October and February.  Lending to businesses dropped about 40% over the same period, according to U.S. Treasury Department Data.

Of the 19 banks leading the TARP Funds Received List, only three originated more loans in February than in October, 2008 - BB&T Corporation, a regional bank based in NC, major Wall Street brokerage house Morgan Stanley, and State Street Corporation, a major institutional lender based in Boston MA.

The bank with the steepest loan decline is the top retail bank Chicago and the Chicago Metro Area - J.P. Morgan Chase.  That bank made $61.2 Billion in total loans last October.  In February, that figure fell to $39.7 Million - a falloff of 35%.

See the WSJ Story for more details, graphics, and relevant quotes.  Also, read our post via BlogChicagoHomes.com.

DEAN & DEAN'S TEAM CHICAGO

Those of us living in the Valley of the Sun know just how much we rely on our air conditioners to keep us cool in the summer.

SRP is offering rebates ranging from $200 to $400 for customers who replace existing heat pumps or air conditioners with “qualifying”  high-efficiency central cooling systems. The rebate starts May 1, 2009.

In addition, qualifying new systems placed in service from January 1, 2009 through December 31, 2010, may be eligible for a federal energy efficiency tax credit of up to $1,500.

Rebate applications are due by October 31, 2009. As always, for more details regarding SRP’s rebate or the federal tax credit, log on to www.srpnet.com/coolcash, or call: 602.236-9644.

 

Mesa, Arizona Real Estate. Call me at: 480.216-3334 for information on purchasing or selling a home in Mesa, Arizona or surrounding towns. OR email me: Teri@TeriEllis.com. Feel free to visit one of my websites: HomesAzRE.com, ServingMesaArizona, MoveToMesaAz.com or MoveToSunnyAz.com. Or stop by my blogs at: MesaAzRealEstateVoice; or Phoenix Valley Real Estate Blog

                                                                                                                                                     

In a recent article I wrote about buying a foreclosed home or potential foreclosure property, I discussed the various ways in which you could obtain ownership of a foreclosure. Here is a quick summary of the three scenarios:

• A pre-foreclosure where you buy directly from the home owner before the bank takes over.
• At an auction where you may be in competition with other buyers.
• From a Real Estate company or the bank itself. This is known as an REO aka Real Estate owned.

Here is what you need to know about scenario #3 ~ buying a bank owned home.

The opportunity to buy a bank owned home is one that many buyers often consider due to the fact that there is a prevailing belief that you can buy them for 50 cents on the dollar or less. While as a general rule many bank owned properties do represent a good Real Estate value, you are more likely to be able to purchase one for around 5-20% less than the going rate for a similar comparable property.

Buying a foreclosed home however, is not for the timid at heart and there are many things that buyers need to be aware of going into a REO transaction.

One of the 1st things you should investigate when you become interested in an REO property is the present market value. This is something a skilled local buyer's agent can do to help you.

A Realtor that knows the local inventory and recent sales data should be hired to help you with the transaction. While a banks goal is to get rid of their inventory as fast as they can, don't expect the bank to consider silly low ball offers especially when the home is 1st listed for sale.

In my experience while working as a Massachusetts Realtor for the past 23 years, I have never seen a bank accept anything less than 10% under the asking price. In many cases the price has already been set aggressively to begin with. Like every other seller the banks goal is to maximize the price they receive for a property.

What most people fail to understand is that banks have to demonstrate to shareholders, investors and auditors that they attempted to get the highest price possible.

It is not uncommon for a bank to reduce the price of a home in their inventory after it has been on the market for a while. A bank after all is not in the business of holding Real Estate.

Do not make the poor assumption that banks are desperate sellers and will do anything to clear out their properties. This is rarely the case!

In order for a bank to consider accepting your offer you are going to want to make sure you have been pre-approved by a lender. Most banks will not even consider an offer without proper financial documentation. If you are making a cash offer with no financing contingency be prepared to show the bank proof that you have the funds in an account somewhere. Most banks will require this as well.

Some banks may also ask you to get pre-approved through them as well although it can not be a requirement to do so due to RESPA laws. RESPA stands for Real Estate Settlement Procedures Act as is designed to protect consumers.

Often times with a bank owned property patience is a virtue. In many cases the bank will take days to respond to your offer. Also remember that on weekends banks do not conduct business so you are losing a few days in the week. The process can be even longer if you find yourself competing with multiple offers on the property.                                                                                                                      

When you buy a bank owned property be prepared to be buying it "AS IS". Most banks will not make repairs to a property unless it would effect the buyers ability to finance the property. Some of the things that more than likely a bank would be willing to remedy could include:

• Termite or other insect problems
• Mold issues
• Plumbing or heating system issues
• Electrical issues especially if it involves a safety hazard
• Septic systems ~ some states require a passing inspection in order to close, including Massachusetts
• Structural issues

While these are things many banks would consider remedying, don't assume that it would happen in all circumstances. Every bank is different in how they operate and make decisions. Do not expect a bank to make ticky tack repairs - it is not going to happen! You may be able to possibly get a credit for some repairs  at closing but do not expect it.

Most banks have their own contracts that they use. You will be expected to sign their standard form and in most cases you will not be able to make any changes to it! I have seen attorneys try and more often than not they are rebuffed.

Massachusetts is different than many states in that we have a two part contract including an offer form and a purchase and sale agreement.

The purchase and sale is a more detailed version of the terms and conditions found in the offer. With a bank owned home you will just sign the banks form and that will be considered the Purchase and sale.

In most circumstances you will be given the opportunity to conduct inspections even though the property is being sold "as is".

It is important that your Realtor makes sure that you have proper contingencies in place that cover your ability to inspect the property for such things as the structure, pests, mold, radon , water, and others.

You will want the right to terminate the contract if these do not meet local or national standards. Be aware that the bank is going to want these inspections to be done immediately.

Lastly, banks will prefer that the closing will be sooner rather than later. You will not see the same flexibility that you could possibly get with some traditional home sellers. As a rule of thumb, most banks will want the closing to take place in 6 weeks or less.

One really important clause that you find in many bank owned contracts is the penalty if you do not close according to the stated contract date. In most cases there is a $100 dollar a day penalty for not closing on time! You better make sure your ducks are in order when buying one of these properties.

One little known issue that most consumers would not think of but that has hit close to home with me is the lack of great representation of the part of Realtors working with bank owned homes. Honestly, I have seen some of the worst Real Estate agents representing banks as listing agents. The issue starts with the fact that banks have not divvied up the business well. There are far to many Realtors that have a stranglehold of all of a particular banks REO business.

As an example I just completed a transaction working as a buyers agent on a bank owned property in which the Realtor did not return calls, changed the commission without notification, misrepresented something the bank did not agree to repair, did not check to see if the home was winterized properly, and did not attend any of the inspections.

I never met the agent during the entire transaction!! She did not even bother to attend the closing. It was a nightmare throughout and the communication frankly SUCKED!! Most of my time during the process was complaining to her about not getting back to me with answers to simple questions.

It got so bad during the process I had to call her broker owner to complain. He apologized sheepishly but made the excuse that she was too busy.

She was the biggest Real Estate clown I have ever seen in twenty three years in the business. The perfect example of an agent that sullies our industry. A quick check revealed she had 31 bank owned properties!!

There has been some talk about banks breaking up the monopoly that some Realtors have on the bank owned inventory but so far that has not happened.

So while many banks owned properties can offer exceptional values there is quite a bit to know. Having professionals in your corner who can guide you and protect your interests is very important. I always recommend to my buyer clients that they use a good Real Estate attorney, especially when buying a bank owned home.

______________________________________________________________________________________________________

About the Author: The above Real Estate information on Buying a bank owned home was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356. 

Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise! 

For Metrowest Massachusetts Real Estate and homes see Metrowest Mass Real Estate. Want to have MLS access to beat other buyers to your dream home? Sign up with no obligation at my MLS Property Finder Site.

I service the following towns in Metrowest Massachusetts: Hopkinton, Milford, Upton, Southboro, Westboro, Ashland, Holliston, Mendon, Hopedale, Medway, Grafton, Northbridge, Uxbridge, Franklin, Douglas, and Framingham MA.

Click here to view Bill Gassett's Real Estate profile.

 

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LOAN MODIFICATION - The government's failure to help home owners is an open invitation to scam artists to swindle home owners out of what little they have left.

George Souto post an interesting article today about mortgage modification spam by e-mail.  Of course, that's not the only venue for companies offering mortgage modification services these days.  These scam artists are crawling out of the woodwork. 

There are about 15,000,000 home owners at risk of losing their home due to mortgage default.  Fannie Mae will not assist a home owner whose mortgage balance is more than 105% of the market value of their home.  Let's see.  In many counties in many states, property values have dropped by 25-75%. 

Case #1.  Buyer financed their home purchase in 2005 with 80/20 conventional loan sold to Fannie Mae. 

• The purchase price was $350,000.
• The first trust is about $280,000. 
• The market value of their home is now about $225,000.

Clearly, the mortgage balance (first trust) is more than 105% of market value.  In fact, it's about 120% of market value.  This home owner and millions of others are ineligible for loan modification help from Fannie Mae.

I've tried and tried to figure out or find the answer to why this requirement was included in the Fannie Mae Mortgage Modification Plan.  It is completely nonsensical since it serves only to exclude millions of home owners in need of mortgage modification. 

This isn't the first time Fannie Mae has failed the home buying consumer and home owners.  See, Hey Mom, Where's Fannie Mae?

Case #2.  Buyers financed their home in 2006 with an 5% down mortgage sold to Fannie Mae. 

• The purchase price was $400,000.
• The mortgage is $360,000. 
• The market value of their home is now about $240,000. 

Clearly, these buyers will have no relief from Fannie Mae. 

ENTER THE MORTGAGE MODIFICATION COMPANY. 

                        "STEP RIGHT UP FOLKS.  GET YOUR MORTGAGE MODIFICATION HERE"

• We'll talk to your mortgage company.  You don't have to.
• You don't need good credit!
• No mortgage payments until your mortgage is modified!
• We can stop foreclosure.

We can perform this magic for you with a modest up front fee of only $1,500 (often one months mortgage payment) to offset our expenses to set up your personal loan modification plan.

Method of payment:  cash, cashiers check, check by phone, money order.

In some areas, the "mortgage modification companies" are conducting seminars with fees as high as $2,000 - $3,500 up front.  Conducted by "motivational speakers" similar to "self improvement" gurus, the distressed home owners are persuaded that the presenters can solve all of their mortgage problems.  These programs are highly organized, well presented and are praying on the naivete of the average home owner who is faced with the loss of their home.

               $ $ $ $  TRILLIONS FOR BANKS but MEAGER RESOURCES FOR HOME OWNERS $ $ $ $

THE FEDS TO THE RESCUE??  While the FBI is aware of the problem, with about 2,000 cases under investigation, their report is that they do not have the resources to track, investigate and refer cases for prosecution due to a lack of resources and manpower.

In the mean time, the distressed home owners whose morgage balance is more than 105% of the market value of their home just wait for the money to run out, the registered letter from the mortgage company to arrive.

When they log on to check their e-mail tomorrow morning, they may receive a persuasive spam offering to solve all of their problems and save their home. 

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail. 

 

                         

                                         "Honey, can Fannie Mae help us save our home?"

                            "No Dear, we owe too much, but look at this e-mail I got this morning."

                                      

If you are a first time home buyer and have not purchased your home yet you should consider filing an extension. By filing an extension you can claim your $8000 first time home buyer tax stimulus credit on your 2008 tax return.  Why wait till 2009 to get your $8000 tax credit?

Don't know what the $8000 tax credit is? Don't know if you qualify? Get all the information you need right here.

Now that you have your $8000 tax rebate information Click Here to start searching for homes

2009 The Russell Home Team, your Johnson County Homes experts. Please consult your tax consultant to see if you qualify for the $8000 tax rebate and if extending your tax filing is right for you.

The Arizona Republic reported today that the developer of Centerpoint Condominiums, the two high rise towers off Mill Avenue in downtown Tempe, is closer to finding a financial solution to its bankruptcy and the bankruptcy of its construction lender Mortgages Ltd.

The plan calls for the developer to borrow another $43.3 million to complete the two towers over the next three to five years.  I assume that the reason for the extended completion period is due to the current slow real estate market and an intention to only spend the $43 million as the real estate market improves.  I would think that the developer would complete the first high rise tower and begin selling and/or leasing condos while "warehousing" the second tower until the real estate market improves enough to warrant completing and opening that tower.

The AZ Republic reports that the developer "plans to reprice the units and renegotiate contracts with existing buyers".  This clearly makes sense as any developer would hope to maintain as many existing contracts as possible.  Everyone knows prices have gone down so in order to "keep" existing buyers the contract prices will have to be renegotiated.

The question will be how low will the prices go?  After all, with what's going on at the other "boom" high rise buildings and the pending foreclosure/failure of a couple major buildings how low will Centerpoint have to slash prices.  My guess is 50 - 60% discounts.  Sounds steep?  Then consider this.  M&I Bank, the construction lender for Century Plaza originally funded approximately $70 million dollars to the developer of that high rise condo building.  When the developer could not perform the note was written down to $39 million with the hope that the developer would then be able to survive.  When that failed to happen M&I Bank auctioned the $39 million note to the highest bidder.  Although several parties made bids the note, to date, is still for sale.  It is my guess that the note is worth less than $20 million, perhaps much less.  Let's say that the note ultimately sells for $10 million.  That means that the 130 remaining condos at Century Plaza will "sell" for $77,000 per condo.  If the new owner of the note decides to sell the condos then he/she will be able to make great profit and sell the condos at 1/3 of what they originally "sold" for.

When (and I don't mean "if") this happens then there will be tremendous downward pressure on prices at Centerpoint Condominiums and 44 Monroe High Rise.  Does the developer of Centerpoint expect to drop prices to $250 per foot in order to compete?  If he does then I assure you that the current investors/lenders at Centerpoint will lose tons, if not all, of their money.  Stay tuned....

Short Sale Primer For Brokers, Sellers and Buyers

A Primer -

Since I wrote the Short Sale Primer the short sale methodology used by lenders has morphed several times.  It is a different animal than it was almost 10 months ago.  The passage of time requires that the original article, which was very popular (thank you) be revised to reflect new policies by the lenders.  I have also added several pertinent links to more detailed discussions on the various subjects in this article.

Short sales are nothing new.  When I represented a few national lenders for all of their foreclosures in the State of Florida several years ago, we negotiated "loan workouts" which are now called "short sales".  Since loan workouts have been around so long, I did some digging with my old pals that were the executives I worked with in the loan workout and REO department of these national lenders (one of the lenders has since been merged into Bank of America).

I found one in Atlanta, one in Texas and another in Washington.  Our discussion about short sales showed that nothing was new under the sun - the formulations and decision making processes were unchanged from 15 years ago - and only some of the terminology had changed.  Another executive of that lender was found in Florida and she now works with me in the client management and lender negotiation of our client's loan workout situations.

Short Sale Defined -

First, understand that there are two elements to a mortgage.  The first is a promissory note.  The promissory note is a financial instrument that is an of itself an enforceable contract to repay a debt for money loaned to the borrower.  A mortgage is a security instrument.  It acts as the security or collateral for the promise to repay the money loaned which is described in the promissory note. Usually it cannot be enforced if the promissory note is paid off or cancelled.  We are seeing 2^nd mortgage lenders that whose mortgages have no equity value in the home skip foreclosing on the mortgage and instead just sue the borrower on the promissory note.  For a more detailed discussion of this process and results see link A LAWYER'S EXPLANATION OF THE FORECLOSURE PROCESS.

Short sales are a process of "shorting" the debt (the mortgages) encumbering a parcel of real estate (the house or investment property).  Shorting the debt means that the person holding the debt (the lender) agrees to release its lien on the real estate for less than the amount the lender is due according to the promissory note. Last week I sent a fax to the Associated Press because they keep writing that a short sale includes the forgiveness of the deficiency on the note and mortgage.  That statement is completely false.  A full explanation of the various types of short sale scenarios - some with and some without forgiveness of debt - is in my article link LENDER SHORT SALE ACCEPTANCE LETTER EXAMPLES - READ WITH CAUTION!

The explanation is simple.  The execution and the details of a short sale are highly complicated.  The chemistry of each short sale situation is not identical and quite often the goal you want to achieve is a moving target seemingly and frustratingly impossible to reach.  More detail in some of the methodology to a short sale is in a previous article (see link - What do I do? - I can't pay my mortgage).

Who Qualifies - And Why A Lender Would Want The Loan Paid Off -

You can read discussions on who qualifies for a short sale in a previous article (see this link  Some Sellers Think They are Entitled to a Short Sale and Economics 101).  Technically, everyone can qualify for a short sale.  To understand this we need to become more, well, "technical".

Logically, a lender is not going to want to keep a secured loan on its books where it has evidence that the security has decreased in value dramatically and the loan to value ratio under which the loan was originally made is now "upside down", meaning the current market value is less than the amount of the loan.  The portion of the loan that is not in compliance with the original loan to value ratio is, for bank auditing purposes (or investment valuation purposes if the loan is not a portion of a mortgage backed collateralized security) a liability and therefore is not considered secured.  That is bad since it makes the lender set aside reserves of cash for the lack of value in the loan.  The lender needs to do something to change that situation.

Depending on the language in your mortgage or your promissory note, the valuations being upside down could be reason to put your loan into breach and accelerate the promissory note.  I have not seen this done as of yet by any residential lender.  But technically, if a property is in this upside down situation, the loan could already be technically in default even if it is "current" in payments.

Often, the desire to unload the upside down property is made based on economic calculations made by the owner of the property.  Those calculations usually show that it is better to take a loss now of a known amount of money rather than continue to pay interest, insurance and taxes in excess of the income from the property for an unknown period of time until rental or property values increase so the economic cash drain is reversed.  I call this "quantifying the economic cost of ownership of the property".

In any event, the lender would prefer to have the loan right side up or off its books.  In some cases the property owner has excess cash laying around and can just sell the property (if that is their plan) and pay the amount to the bank that they are "short" at the closing so the loan is paid off in full.  This is also a "short sale" but it does not involve the lender making any concessions - the property owner has to pay the shortage at the closing.

Financial Indigestion -

In other cases, usually where the borrower has become financially distressed but also where the borrower is asset rich but presently is lacking liquidity (I call it "financial indigestion" or "real estate rich - but cash poor"), other arrangements satisfactory to the lender can be accomplished.

These other arrangements usually come in two flavors: (1) providing alternative secured collateral to the lender, such as a first or second mortgage on another borrower owned property that has equity value, or (2) having the borrower sign a new or modified promissory note that is unsecured and payable over a fixed period of time, usually 3 to 10 years from the date of the short sale.  Depending on the financial circumstances and the lender -borrower relationship, interest can be at market or even at zero.

Where the borrower is experiencing extreme financial hardship and there is no horizon (projected end) to that hardship a third alternative can occur - actual forgiveness of the unpaid amount due the lender.

Short But Important Reminder On The 1099 -

This leads us to the issue of the unpaid portion of the short sale.  Many lenders will not provide a release of the balance due.  This causes some good and some bad issues for the borrower.  The good part is that without a final disposition of the unpaid portion, the borrower has not received any phantom income (i.e.: that 1099 stuff).  This good news does not last forever.  Once the statute of limitations on enforcement of the promissory note expires, then the borrower has that income to report to the IRS.  The bad news is that the lender very well may sell the unpaid promissory note to some investor for 5 or 10 cents on the dollar and then that investor will definitely come after the borrower for as much as they can get above that 5 or 10 cents on the dollar.  The small element of good news here is that as long as they are trying to collect on the unpaid portion, that unpaid portion is not income that the borrower has to report to the IRS.

As a short reminder, the big deal about 1099's is really an illusion.  1099 or no 1099, if the debt is forgiven the borrower has income to report to the IRS.  No exceptions!  Too many people come to me and say they want me to negotiate with the lender so that they don't get a 1099.  I ask them why?  They tell me that if they don't get a 1099, they don't have to report the income they would get on the debt they did not pay.  The next question is why does the bank get to decide what the IRS usually has jurisdiction to decide?  The answer is of course that the lender giving a 1099 means squat - unless the borrower is intent on committing tax fraud by not reporting income.  There is relief available to the borrower are two opportunities to not recognize up to all of the income.  These are discussed in detail in my article called (see link) Sellers Always Have Income and include the 2007 Mortgage Debt Relief Act.

Loan Modification -

Beginning in March 2009 a new government incentive involves "financial encouragement" to lenders to reduce the principal obligation of a mortgage under certain circumstances.  This reduction in principal will trigger a 1099C cancellation of debt.  However, since the program targets primary homes, those whose borrowing qualify under the 2007 Mortgage Debt Relief Act will be able to use the exemptions in that Act to exclude the income generated by the debt forgiveness.

Modification of a mortgage loan is a fast developing part of the housing recession resolution solution.  Not everyone is entitle to a modification and even someone with a high interest rate that cannot refinance in this current financial market may not be qualified for a loan modification.  Numerous factors are in play in determing if a loan modification is justified and chief among them is ability to pay - not desire to pay.  Generally speaking, if your total housing expense is more than 38% of your household income, you should speak to a professional to discuss if you are a modification candidate.  Yesterday an attorney who has a housing expense of $25,000 called me to modify his mortgage.  He told me the $25,000 was about 10% of his household income, but the mortgage debt was about 110% of the value of the home.  That lawyer is not a modification candidate.

Short Sale "Bookends" -

Note that these are the general parameters that we have seen over several years of dealing with loan workouts.  There are always exceptions where the decision of the lender is simply without logic.

Illogical example #1 - The borrower is without a job, has moved out of the house and is living with one of the spouses' parents out of state.  The house is now valued at $190,000 to $210,000 and the loan is at $350,000 and has been on MLS at $200,000 for 3 months.  One quarter of the homes in the neighborhood are in some kind of pre-foreclosure or distress.  The lender refuses to accept a contract at $178,000.

Illogical example #2 - The borrower owns two businesses and shows annual gross income of $500,000.  Borrower has 4 homes all investment and lives in another (5 altogether).  Lender accepts a short sale on one investment home at 10% under value, leaving $70,000 short on the mortgage payoff.  Borrower asks for a letter of release from the lender that it will not pursue the shortage on the promissory note and the bank gladly provides that letter, letting the borrower off from every having to worry about the shorted promissory note.

I call these the "bookends" to the short sale definition of what fits the parameters of the banks.  As you can see, even the bookends can be moving targets, since neither makes any sense.  Fitting everything else in the middle leaves a really big gray area on the fringes of the middle!  For more examples of how it is impossible to reliably predict the determination of the lender on the status of the shortage, see link SHORT SALE DEFICIENCY DEMANDS AND DEFENSES - The Interstate Highway Analogy

No Science To The Short Sale -

There is no set course to the successful short sale presentations to the lender.  We have seen 5 page packages and 50 page packages get approved.  Sometimes it takes 12 days (we have done it twice so far) and sometimes it takes 6 months (don't ask!).  It depends on the lender.  It depends on the borrower's situation.  It depends on the property. It depends on the contingencies and price in the purchase contract.  Notwithstanding, we find that the best opportunity for a short sale to be successful is to provide a simple yet complete package to the lender - keep it simple - but back up the assertions made in the presentation.

You have probably heard about the one, two or even three months to get the bank to even start to move on a short sale application.  Again, this is hit and miss.  This winter we made two presentations to the same lender, one in early March and one in mid April.  Same neighborhood.  The April package got a BPO call from the lender in only 2 weeks.  We are still waiting on the March package! (Yes, we confirmed that the lender has it and they confirm that they are working on it).

Lender Overload -

When I first wrote this article it appeared that most lender loss mitigation department personnel are carrying 500 to 600 files per person.  Some lender loss mitigation departments have cut that down to 200 files per person.  We feel the best opportunities for success should be on the packages that are clear cut, summarized, and organized.  But each package must be accompanied by someone that will call the lender to get status reports on the package at least weekly. I was amazed with one lender when we called them to ask why the lender had not even acknowledged that they received the package.  Incredibly, the answer was that they take no action on any package received until someone calls to find out the status on the file!

Short sales have a long history of being in the arsenal of lenders for loss mitigation and loan workout issues.  Used properly, the short sale can be a tool to the lender and the borrower and an opportunity for a buyer with patience to obtain a relative bargain in the marketplace.

Copyright 2009 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make.  This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE   561 689 6660  

RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide!  Shortsales@Florida-Counsel.com  New Website www.Florida-Counsel.com.  See our easy to find articles at Need Short Sale Information? - These Articles Probably Answer Your Question

I wrote an announcement here in July 2007, Crescent Crown Distributing is now open in Surprise. This enterprise distributes Miller and Coors as well as many boutique and exotic beers.

Perhaps more important, the huge (250,000 square foot (that's over 5 acres folks)) warehouse is only the first to occupy the Surprise spur of the Burlington Northern Santa Fe Railway. This opens the doors to many more national and regional distribution, and is an important contributor to an economic recovery of the area.

Jim Little, your Sun City REALTOR®

Please visit my Web Site, suncityneighborhood.com where you can search the MLS with no registration for free.

Your reputation in the Real Estate Industry (or life in general) takes a LIFETIME TO BUILD... and your online presence can enhance your reputation...or tear it down.  That's totally up to you in how you handle yourself and what you desire to achieve for your online presence.

Why are you here?

We the people, the members of ActiveRain, write with the intent to give information to the public (and our peers) about our local areas and Real Estate, Loans, Staging, Home Inspections and so forth. We write with sincerity as if the people that are reading are walking right along side of us.

We follow  the ActiveRain Community Guidelines and hold our heads high with integrity, honesty and respect.

Do you?

*Definition of Opinionated- -adjective - Obstinate or conceited with regard to the merit of one's own opinions; conceitedly dogmatic  Synonyms:  prejudiced, biased, bigoted, stubborn.

As I see it there are two questions and choices.

• Be opinionated with a closed judgmental mind and what will you accomplish?
• Be honest, sincere and open minded without harsh criticism and bashing and what will you accomplish?

A professional (a good human being) is mindful and respectful of the next person's opinion. If one does not believe in the same religious faith or your political views it does not give one the right to  disrespect them. If you choose to believe that siding with a view and bashing another is cool... then that's your choice.

It's definitely not my choice.

I dictate who I am and I am responsible for my own keyboard.

Remember, everything you write will hang around for quite awhile online. In fact, it could be a lifetime as well......so the legacy you have left behind will follow.

You WILL Be REMEMBERED. 

Which path will you choose?

 

CEO -Chief Embezzlement Officer.

 

CFO- Corporate Fraud Officer.

 

BULL MARKET - A random market movement causing an investor to mistake himself for a financial genius.

 

BEAR MARKET - A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.

 

VALUE INVESTING - The art of buying low and selling lower.

 

P/E RATIO - The percentage of investors wetting their pants as the market keeps crashing.

 

BROKER - What my broker has made me.

 

STANDARD & POOR - Your life in a nutshell.

 

STOCK ANALYST - Idiot who just downgraded your stock.

 

STOCK SPLIT - When your ex-wife and her lawyer split your assets equally between themselves.

 

FINANCIAL PLANNER - A guy whose phone has been disconnected.

 

MARKET CORRECTION - The day after you buy stocks.

 

CASH FLOW- The movement your money makes as it disappears down the toilet.

 

YAHOO - What you yell after selling it to some poor sucker for $240 per share.

 

WINDOWS - What you jump out of when you're the sucker who bought Yahoo @ $240 per share.

 

INSTITUTIONAL INVESTOR - Past year investor who's now locked up in a nuthouse.

 

PROFIT - An archaic word no longer in use.

 

It's LOL FRIDAY on The Optimist Group.  Come join us and post something funny!