The new exit strategy: A short sale

The IRS will treat this as income and tax you on it. Even if you can afford it, short sales and deeds in lieu of also stay on your record. Bankruptcy can clear the slate at least if no workout is possible.

It's interesting to hear your comments, about banks trying to recapture some of their home loans when markets are this weak, because I remember in Alberta in the 80's home forclosures were at an all time high, as house prices fell below morgage values. This resulted in what was refered to as a "Quick Claim". The banks let you walk from the margage and home, if you turned the home ownership over to the banks. This saved the banks the cost of recovery. There was literally pages every week in the newspaper announcing 2nd. morgage forclosures. I wonder if this is about to occur in America. A side note: when home owners find their single most important asset being devalued on a monthly basis, they tend not to be stock market bulls..ab

Do banks negotiate a reduced realtor fee for sale if that is too much for seller to pay given appropriate means test? If the realtor fee is the only cost issue for seller, will bank work out a deal to pay realtor commissions?

Hi Dean:
You're obviously quite experienced in general matters of finance (and undoubtedly able to teach me volumes), but I don't know what would lead you to think that short sales are new. I've been negotiating them for years. I don't know their history, but they definitely didn't just appear as an option.
Short sales have been a staple for investors for some time. (The following doesn't pertain to you, but) I'm surprised to see quite a bit of incomplete, or misleading information on short sales in the various media, given that they're straightforward and simple procedures (simple of course, doesn't imply easy). The worst thing about short sales isn't that they're complicated...it's that the buyer rarely has a chance to affect the decision-makers. We make the pitch, and no matter how reasonable it is, no matter how well we argue the merits of the offer, we wait for a response from someone we rarely get to speak to. Then the lender sometimes drops the deal in midstream, to sell to someone else. We can talk until we're blue in the face, but we almost never get to keep a relationship with the people in charge. Good people skills are important, but at some point, the door usually shuts on you, as the decision-making process goes to a closed room with anonymous number-crunchers. That's why the success rate in short sales is 50% 0r less, even when the offers are fair. But, as I'm sure you and many people suspect, the short sale process would seem likely to get a bit more expedient and user-friendly, as bank-owned inventories rise, available lending capital dries up, and the regulatory agencies loom over all these lenders who are going upside-down.
Thanks,
Alex Ben-Kori

I negotiate short sales since 1991. It is the best solution for the lender and the borrower in any case which the value is upsite down. It is the best chance for the borrower to save somehow his credit and rebuild it later. For the lender it means cash now vs. long after. Also, if lender forecloses on the property and not willing to work out a solution than it is a very common knowledge that they will net way less once they take back the property.

I have a couple of clients now that are facing a short sell situation. We are aware of the 1099 tax situation, but have to clear one thing up. Are the costs to sell a home figured into the 1099 tax situation? Example, if the house balance is $440K and the sale is $400K, and the cost to sell is 11%, is the 1099 tax on the $40K difference? Or the $40K + 11% together? Please help.

Anthony,

I teach Short Sale classes in SoCal and am setting up a new real Estate Agency specializing in these issues, so like a couple of the previous posters I am very familiar with the laws.

In regards to your question about the amount of the potential tax bite, it is based on the total loss to the lenders. In your example above, if the lender is paying the 11% for closing and commision costs that will be factored into their loss. They will send a forgiveness of debt 1099 at the end of the year for their total loss. This will include legal fees, arrearages, actual loss on the loan, etc. So your clients could easily end up with a bill that is double the $40k difference.

Short Sale negotiaters will attempt to have this waived as part of their negotiations. If they are insolvent, or have a zero net worth they can also fill out a tax form and eliminate this obligation. It is not an easy form to fill out and will probably require some specialized tax expertise, however it is well worth it if they think it would apply.

Congress is looking into the issue and it may well be that by the end of this year, foreclosures and short sales will be exempted from that provision. Good luck John

I am looking at short sale as an option to get out of the sticky situation I got into with my condo. The investor that I am working with mentioned 20,000 being what she was going to attempt. What amount of tax will I be required to pay on that? If any? She did not mention that to me.

Hi I'm 14 days late on my mortgage payment.for a spec house. I am going to do a short sale. The lender just called today. I haven't returned the call yet. What are the steps I should be doing to accomplish this?

I am a real estate broker. What are the laws or implications for me buying my clients house in a short sale?

You cannot do a short sale on your own house. You should get a qualified investor to look at your situation.

We are selling our house.The house payment is due on the 1st of the month and closing is on the tenth. what will happen if we dont make the payment on the first?

Regarding the 1099 forgiveness of debt, does anyone know anything more about "ghost income"? My understanding is that even if you did receive a 1099 from the lender, you still don't have to necessarily pay taxes on it at the end of the income, as long as you show that it is a "ghost income", or not "real" income to you. (you never received the bag of cash, in other words, it's just on paper that you made money)

Sheila, do not worry about not making the payment on the 1st, if you are selling the home on the 10th. Most of the Sellers don't pay the last month if they are tight on money, it's normal, and that would not affect your credit since 30 days late is usually the minimum late that gets reported. Even in case of 30 days or more, usually there are no consequences besides the fact that your principal and interest from the missed payment will affect the payoff of the loan and thus might reduce the expected income from the property you are selling by the amount of the missed payment, in case that the closing agent calculated your payoff based on you making that last monthly payment.

Derek,

I assume you mean "you cannot buy your own house on a short sale", right? Since you can actually sell your own house on a short sale, as long as you find someone that wants to buy it? You can definetely negotiate with the lender yourself...

Help... What happens to a renter of a house that the owner has posted a short sale for sale sign on? Do they have any rights if the house is sold ?

Is it better to have my realtor talk to my lender about agreeing to a short sale or should we do it. We just put our house on the market to try and sell and we are a few months behind on our mortgage. We just want out and the mortgage company just doesn't seem to really want to talk to us. They haven't started foreclosure yet. We just need advice.

I have taken a series of Short Slae course for the Austin, Tx areas and have found with a system a short sale can be smooth and clean. The banks are more willing to help when the agent is educated with short sales. I am willing to help if anyone needs it 512-923-5214

Let's say the original purchase price of a home is $1,000,000 and a short sale is completed for $800,000. Is the individual that purchased the home at the "short sale" price taxed on the $200,000 as if it were some sort of income? or at all?

Will a short sale effect your credit like a disclosure? I have recieved conflicting information.

How does the VA view a short sell that was not on a VA loan? And how long must a buyer wait before being able to buy their next property using a VA loan? I have heard one year or two years? What is correct?
Bill

I was in a tough situation and contacted a company to help me get through this. They helped me find a realtor, collect the financial paperwork, and get an offer on my house. They weren't investors, which was good for me because it made the amount I owed the bank less. The company was National Short Sale Center - www.shortsalecenter.com

Check them out if you're in the same position I was!

So I have seen a lot of questions regarding the tax that may be due, but not a % or # pertaining to how much. I may have a debt forgiveness of $70 to $80k max on a short sale. How much would I owe if I cannot waive the taxes? Thank you.

I have submitted a short sale package- with exactly everything requested by the lender. We are investors and the house was not listed, so the bank will not owe commission. The sell date is July 3rd. We are offering 92% on the first loan. I call the bank every day and cannot get a negotiator on the phone. Please let me know what the "secret" is in getting the negotiator on the phone.

Thanks!

HI I AM REALTOR IN FLORIDA WHOM IS DOING ALL SHORT- SALES IS THERE A BETTER WAY OF GETTING THE LENDERS TO SEE THE MARKET AND THAT THE VALUES ARE NOT IN THESE PROPERTIES AT THIS TIME, IS THERE A BETTER PROCEDURE TO GETTING THEM TO EXCEPT AN OFFER?HELP I WANT TO QUIT.......COLLEEN MARKONIOS

HELLO WHAT HAPPENS IF YOU JUST file chap 7 bk and i want to do a short sale?

Colleen it is wise of you to seek help - You are correct banks seem to be taking too much time with many of these short sales. Lawyers have more tools with which to hold the banks feet to the fire

I would suggest you get your homeowner in contact with a lawyer who may devise a comprehensive strategy. All situations are different but the negotiations should be set up so that the homeowner feels little or no further pressure. It should be the bank pushing the short sale through not the homeowner.

I live in California, and I have a 1 bed 1 bath condo in Boynton Florida. It's in good condition, and I would negotiate on the price, this short sale seems more complicated and longer than I would like.

Thanks, Chuck

I am a Florida Mortgage broker and what I have been seeing here is a lot of short sales and pre-foreclosures. Many folks are getting excellent deals on real estate at below market prices with the short sales in Florida.

Hi, I have found a property that the sellers agent is selling thru a short sale to cover off on bank liens. In this process, what is required from the sellers bank in terms of title since the seller and the bank potentially have title in the home? As a purchaser, what does the purchaser need to do different to consummate a short sale? Are their issues with the borrowers lender?

I was told by a RE agent that I need to list the house on MLS (through him) in order for the bank to take it seriously. Then, another investor dealing with short sales, said he would submit an offer (buying it himself) without listing it - do you think they would take it?..or should I trust the RE agent? I can't get anyone knowledgable on the phone from Wa Mutual. Also the RE Agent said not to pay on a house with zero equity so regardless of where to turn, it looks like we'll be 60 days late after July. I don't know who to trust - any advise is appreciated. We owe $200k, market assessment by 3 brokers said it was worth $165k and we already put 25k into house renovations over the last 5 years. We're tired of money out the window and husband relocated and I'm unemployed - Help...anyone?

I tried selling my house in a short sale to no avail, the bank is now foreclosing on my home and the auction is taking place August 3rd. After that will the bank keep digging into things to try and sue me or will they usually just let it go. I just want ot be done with this and not let it carry on. Any knowledge on this.

I live in CA and we just put our house on the Market, we owe 504k and listed the house 499k, my lender says that i need to at least show that Iam trying to sell the house and after one month, if nothing, to call them back...so does that mean I do the "short sale" process with them directly and my other concern is.... we have another property also in CA and its an "investment" property, we have tenants living in it....i know i will be short and dont have the money up front to pay on the house i am living in, will the lender put a lien on my investment house

I live in CA and we just put our house on the Market, we owe 504k and listed the house 499k, my lender says that i need to at least show that Iam trying to sell the house and after one month, if nothing, to call them back...so does that mean I do the "short sale" process with them directly and my other concern is.... we have another property also in CA and its an "investment" property, we have tenants living in it....i know i will be short and dont have the money up front to pay on the house i am living in, will the lender put a lien on my investment house

We made a short sale offfer on a condo that has been on the market for awhile. We want to purchase it for our son. We made a fair offer, our real estate agent submitted the package to the listing agent right after Memorial Day. We still have not heard back from the seller lender - the seller entered foreclosure at the end of June. This is the most frustrating process - I can't understand why the lender won't get back to us...

Hi
My wife and I made an offer on a foreclosed house. It has been over three months no and we have not heard anything from the bank. Since then we told out of the three offers that were submitted there are two left, ours and one other person. Our realtor has been communicating with the saler's realtor. First we were told that the Bank said that it takes 30 days then 45 days then now we have been told business days. Is any time limit on when the bank should get back to us? Is there anything we can to get an answer?

Great discussion. We are working to help owners sell their homes who are facing foreclosure.

Many lenders are willing to work with us but this is a time consuming process. Banks have lots of guidelines & procedures that must be followed.

It has been our experience that when the owner calls themselves they are told to try to sell the house through a Realtor. Then some banks will start working with us right away while others want an offer first.

Each bank is different. Some won't work with us at all.

Also, for the question posed as whether to work with an investor or a Realtor...I know a few investors doing this in our area also and they are still using Realtors to list the house so the bank can see that they have been listed.

If anyone needs some help in the SW Florida area let our team know.

as far as banks getting back to you, banks are slammed with short sale requests so if they deny your offer they will not call you but close the file,
Short sales are along process and getting the bank to give you a call back is like pulling teeth from a running horse. You will need someone really experienced to pull it off if you opr your client are facing foreclosure.

For those who can no longer pay their mortgage, a short sale is much better than a foreclosure when it comes to credit reporting. We can work with the buyers of the short sales. It's a longer process because of the negotiations with the mortgagee but the rewards can be great for the buyers who have the patience.

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By far, I am no expert on short sales but, as a SC Realtor I can tell you that I have had some experience with banks and REO (foreclosed) properties. Banks don't like to own property. They deal with money and are very unemotional about it. The best way to get a timely response from a bank is to make a fair market offer on a property you're interested in. Too many people make a 'lowball' offer on a property and wonder why they don't get an immediate response from the bank. Many banks also operate "by committee". At a given point in the review process there may not be one person who can answer or resolve questions about the offer until that review process is complete. Your best option is to use a professional, knowledgeable REALTOR(C) to assist you in making a purchase offer and doing the negotiating for you. Usually, the seller will pay all of the agent fees/commissions also.

Reading the comments above it is clear there is a lot of misinformation and confusion regarding Short Sales. Although they have been around for a long time the curent market situation, particularly here in South Florida, is creating a flood of them.
I would advise anyone to discuss their situation with an experienced Realtor. Short Sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable commission, usually 5%, and even a Loss Mitigation fee of $1,500 to whoever completes the required paperwork, so Realtors have an incentive to get involved in Short Sale situations.
The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and comps supporting the offer. The way mortgages are sold, the lender can be anywhere in the country and certainly not aware of local real estate conditions.
If the package is complete, the Lender will order a BPO, or Broker's Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company.
The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. There can be tax consequences but if the Seller is truly in a difficult finacial situation they can be avoided - an accountant should certainly be involved in that question.
This does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalised, even if the Lender accepts the first offer. If they do not, the price can be negotiated, IF you can get hold of anyone at the Mortgage Company to talk about it.
I am a Realtor, a Broker Associate in South Florida and am involved in short sales. It is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don't want to own.

True, the banks are slammed with short sales and foreclosures, but they often rely on misinformation or don't do what is in their own best interests. We have seen them take so long to make a decision, the buyer backed out and found another house. We have seen them refuse to accept an offer that netted them everything back except for a large prepayment penalty! And lastly, we have seen them refuse our offer of 174K, because a misinformed agent did a BPO on the home, and set the value @ 185K, so the bank would not accept less than that! Well, now the bank owns the home, and it is languishing on the market @ 165K. A prudent person or organization would feel foolish, but not this bank! They are quickly becoming a major property owner in our county, due to foolish antics such as this!

dave ramsey talks about them quite a bit... he says if your behind on payments a short sale is better than a deed in lieu, and certainly better than a foreclosure.

Good discussion on short sales. I used to do lots of them 10 years ago here in Southern CA and now they are back. My advice to potential short sale sellers: go with an experience real estate broker whom has done them in the past. Remember that is worthwhile do get your situation evaluated to see if you qualify for a short sale.

I am in the process now of purchasing a property in Tampa, Florida through a short sale. The property was 100% financed in 2006 with a 70% 1st mortgage with WaMu and a 30% 2nd mortgage with Ocwen. The owner is 8 months with no payments and facing foreclosure. We offered Ocwen 25k on a balance of 170k and they accepted almost immediately. We offered WaMu the original loan amount (with late fees and unpaid payments the balance is 20k higher). It took WaMu 30 days to assign a negotiator (just found out her name and phone number). But I still haven't heard from WaMu. Anyone have any advice??? If WaMu makes a counter-offer I think I can make up the difference with a reduced offer to Ocwen (since they will take 0 if it goes to foreclosure). The foreclosure has been filed, but the auction date probably won't be scheduled for several more months. Anyone done this type of deal before and have any advice? If WaMu likely to accept an offer for the original loan amount. It seems to me like that is in their best interest.

I am a RE broker in SW Florida and I am interested to learn about Short sale and foreclosures.Who is teaching and where?Prefer close to Naples area.Thanks.
Mirela

We own a condo in SE florida it we just can't afford anything, mortgage, taxes, HOA, ect. We are interested in a short sale. we owe 215K and we think our place would only sale for 175K at the most. We can not afford any costs associated with closing. we want to just walk away from this? we have also thought about forclosure. how does a short sale affect your credit score? down 200 points? down 100 points??

thx

Our tech support guy's mother is mentally ill and is facing foreclosure. Last year she tapped her equity with a neg amortized loan. My business partner and I want to help this guy by offering the bank a short offer and ask them give us a better loan w/o closing cost. Then we want to have our guy rent to own and fix the place out of his own pocket. He should be able to qualify for a loan in 2 years...Do you think the bank will go for our offer. I'm trying to be creative without putting out much cash or closings costs. Any thoughts?

SHORT SALE – Are the REAL! – Let me be direct. Yes lenders will do short sales. The question how to get into their minds to know what amount they will short sale the home for.

I’ve been doing short sales in Florida and been finding home after home I’m trying to discount are being denied by the lender and taken back by the lender at the Auction. One would think if the owner owes $ 250,000.00 on house and the market says the house in today’s market is valued at $ 190,000.00 to $ 200,000.00. So you offer the lender
$ 140,000.00 which is 30% of the Fair Market Value. You would think the lender would be happy with this offer and this would be a done deal.

But it’s not because one thing that is not discussed in your forum on short sales is the BPO (Brokers Price Opinion) or appraisal the lender orders. Most of these are drive bys. This is were they person doing the BPO drives by and pulls up comps on that house and gives this information and report to the lender.

It’s important to get this person INSIDE the home to show them the defects or problems of the house. The PROBLEM is most people and even those doing short sales don’t understand what’s going on behind the scenes. The lenders controls the entire process and if they don’t like the BPO they will pressure that BPO agent to increase the price or they may not accept the BPO price and the lender will mark it up any way.

So really the success of the short sale is based on this BPO or appraisal. So, using the above numbers the BPO comes back on this house at $ 210,000.00. Your offer was $ 140,000.00 the lender may decline your offer because they want you to be close to THERE NUMBER.

Now remember the market says this house will sell for $ 190,000.00 to $ 200,000.00 and the lender wants you to counter. So you counter in small amounts over time and finally come to an offer to the lender for $ 165,000.00, which is about 20% of the $ 210,000.00 BPO.

First in Florida or other places this house may not sell at $ 190,000.00 to $ 200,000.00 the market may be so bad that the home may only sell if listed to sell or in this example lets say that price is $ 180,000.00. Now your offer still looks good, but the lender may still decline the offer and your wondering why.

In their MIND they’re looking to get close to THERE NUMBER of $ 210,000.00. I’ve tried to build a case that the market doesn’t call for that it calls for this house selling at $ 180,000.00 and you go on building your case on why but yet they turn you down. So one would think let’s increase my offer to $ 170,000.00 but if the house isn’t selling at $ 180,000.00 and the lender doesn’t see that even with pulling comps or comparables your not going to WIN because the lender has there own agenda. The lender is set on thinking they can get $ 210,000.00 no matter what you try to document and show. Now what I don’t understand is why ANY LENDER would not take the $ 165,000.00 instead of taking the home to AUCTION. One would think this was and is a good offer to the lender. One would think that if you could buy this and sell this to someone for $ 180,000.00 you made good money.

One would wonder why the lender would not accept this offer and be willing to take this to AUCTION and take the property back. One would think taking the property back would COST the lender more money in the LONG RUN, taxes, up keep, holding cost, lost of interest, lost of monthly payments, they have to set 2x to 6x the amount of this asset aside in a reserve they can not use, etc…

I’m getting to long here. Bottom line is this the PEOPLE need to know these LENDERS play so many games and continue to victimize the people that they really don’t care. The other problem is the over inflated prices the BPO are giving to the lender and if the lender doesn’t like that price they will order another one until they get the price they feel is right, the lenders will tell the BPO what price they want so your already beating your head against the wall because the LENDER is paying for this and they often dictate what they want.

What I have found is more and more of these homes are being taken back at the AUCTION than they are being short sale because the other problem is there are so many people out there trying to take advantage of the market that have NO IDEA WHAT THEY ARE DOING.

You can blame the GURUS for this. They continue to market How to be rich in buying Foreclosures. These GURUS offer courses that are so vague and offer NO SUPPORT or help when you buy their course. Yes they will provide support if you pay them more money to mentor you. I’ve brought deals to them and told them if they help me I will give them 70% of the deal. I’m just looking to get a start because I don’t have $ 4,000.00 or $ 20,000.00 to have you coach me and every one of those GURUS I spoke to refuse to help me unless I put up more money for there help. If you want names I’ll give them to you.

It’s best to STAY AWAY from these GURUS and find someone out there like my self in your area to work with you and help you with support and direction and in return split the profits with that person. You might even get hands on training.

The GURUS are the BLAME for teaching people and flooding the market with people that DON’T KNOW what they are DOING and these people can not close causing the LENDERS to become more SKEPTICAL of the so called SHORT SALE person doing the SHORT SALE.

In FACT I head this is why most of the lenders are taking homes back because of those people that are trying to do SHORT SALES after buying a course or attending a work shop that could not close on the deal.

The GURUS are putting person after person out in the market that doesn’t have a clue what they are doing making it harder for those that do. They lack teaching you how to submit or put the documents together, how to negotiate with the lender, what the lender is looking for in the short sale package.

They LACK a lot of STUFF that is important for you to understand and know about the short sale process. I’m being direct and HONEST. They make it sound so EASY and have someone stand up and say I made $ 40,000.00, but what you don’t find out is what that person had to pay for coaching or mentoring. I’ve been kicked out of one seminar because I was trying to net work and share courses so I can get a start in this business. They didn’t like the idea of me networking with others because they wanted me to spend $ 20,000.00 on their coaching program.

How many more people are these GURUS going to produce that have no idea what they are doing that in the long run may cause changes in the law that effect the honest person trying to make a living.

I think these GURUS are making MORE MONEY putting on training events, selling their courses than they are doing in ANY SHORT SALE. I bet there not even doing short sales themselves.

I would like to CHALLENGE ANY GURU out there to come to FLORIDA and show me they can do a SHORT SALE.

I know NOT ONE OF THEM will take me up on my offer because their making so much money off of us STUPID people like my self that bought into their gimmicks.

Not one of them I believe any more are HONEST and ETICAL. If they were HONEST, ETHICAL and concern about your SUCCESS and making sure the SHORT SALE process is done right and that your successful they would provide the needed support.

After all they claim to be MILLIONARS and one would think they could afford to help with providing the right information to see us succeed. At least ONE would THINK that. But that’s not the case.

I am the principal broker for WorldSelect Real Estate in NY. My firm started doing BPO's three years ago and within the last 12months we have been retained to list and sell REO properties throughout the Hudson Valley of NY.

My advice to newcomers is to find the best mentor in your area. Even if you have to give up some of your commission, it is well worth the sacrifice to learn from a pro.

Patrick F. Fleming
Managing Partner
WorldSelect Real Estate
800.790.0939
www.wselect.com

I'm currently in Chapter 13 for the next five years- Every month is a struggle to pay the mortgage and the plan payments. Will a short sale help me to still keep the house to lower my monthly payment or do I lose the house? Who do I talk to first about a short sale on the property?--I'm confussed!

LOL...so many ? and so many answers.
1. find out the laws that pertain to foreclosures and short sales in your state.
2. banks won't negioate until in default.
3. call loss and migtigation department..speak to the person in charge of your default and keep in contact with this person once a week.
4. ask for a short sale packet...send the info. they ask for
5. you negiate ONLY! not your realtor...you put the offer in and let the bank counter back. dont let the realtor control the listing.
6. sorry realtors but listing with an realtor isn't always good but the bank will take you serious if it's on the mls...pay the fee to list and mention it's a short sale!
7. don't exspect any offers until a month before court (california)...find out the laws in your state.
8. know your LAWS...in California non-judicial they can't come after you if you have a conventional loan...equity YES for the difference
PRIVATE sale is the best in California...try to short.
9. most banks won't short sell because they have insurance with the mortgage companies and the insurance will cover theirs losses...that's why they reject loans but as the rates grow higher less want to carry the homes.
10. why do i know so much? I have dealt with realtors, lawyers on both matters and this is what i've learned.

I own a house in Florida. I could have sold my house a year and a half ago for atleast $200,000. I wanted to sell but I was talked out of it by most people I discussed it with. The market has dropped so much that I can't even sell my home for what I owe $128,000 now. My fiance moved out leaving me to pay the bills 100% on my own and I no longer receive child support from my ex-husband who is ordered to pay. He is out of the country so there is no way to make him pay. I can no longer afford my home and am 4 months behind on payments. The mortgage company has not started foreclosure. I am reaching out for help and found out about a short sale. It seems to be a very slow process but if I am going to lose my home to foreclosure anyway, do I have anything to lose? The short sale company did not mention owing taxes on the money that is a loss to the mortgage company. How would I possibly pay taxes on $40,000 or $50,000? Anyone with advice, please contact me!

WOW, I so agree with Steve Wagner!!!! There are many people who "try to HELP". They charge you to get to the middle of the lake then leave you with no direction! Most of the phone calls I get and people I hort sales you are doing and ask nation wide what "is really going on"!

For Cindy- and anyone facing foreclosure. As Cindy says, there is one very important alternative to avoid the foreclosure and that is the Short Sale. A Short Sale is a proven way for a homeowner who owes more than the house is worth to avoid a foreclosure and the subsequent credit hit.

I would advise anyone facing foreclosure to discuss their situation with an experienced Realtor. Short Sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable selling commission so Realtors have an incentive to get involved in Short Sale situations.

The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship Letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and the Comps, or comparative home prices supporting the offer. The way mortgages are sold, the lender can be anywhere in the country and certainly not aware of local real estate conditions.

If the package is complete, the Lender will order a BPO, or Broker's Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company.

The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. There can be tax consequences but if the Seller is truly in a difficult financial situation they can be avoided - an accountant should certainly be involved in that question. This does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalized, even if the Lender accepts the first offer. If they do not, the price can be negotiated.

I am a Realtor, a Broker Associate in South Florida and am involved in Short Sales. It is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don't want to own and that would negatively impact their ability to make more loans.

What are the legal implications...what if you have assets that you do not want to put to make payments on investment property...Can the lender go after that? Should all assets be put in a trust?

Short Sales Are Complicated and not as easy as everyone here makes them sound. Here is the truth ,you can't even get the real loss mitigation people on the phone.

I am a realtor and investor. So I teach realtors , investors and homeowners that need help. My best advice get some
info first,the bank likes to deal with professionals.

Does any of this apply to manufactured homes? We are both in our golden years and illness has forced us into a bad position. The hs. pymnt is doable, but the cost of rental lot has gone up and we an no longer afford it. We both became "un-hinged" due to failing health. We put house up for sale last yr and had to get through
the winter. We again put house in hands of park salespeople and altho it shows beautifully, we haven't sold it...
We just need to get out of here, and the bank has gone along with us by giving us a 2 month break and bringing %rate down by 1% over the past 5 yrs.
What's the worst thing that can happen? Banker told us to keep it in the hands of park salespeople (they get 10%) aand to try to sell it for less than we paid for it and then some. Even if the salesperson sells it, we will be in a situation of making no $$ whatever. They have brought no one here in past 3 weeks and are selling new models that differ very slightly from our own...I KID YOU NOT, EVERY OTHER HS IN THE AREA OF 1 BLK. IS UP FOR SALE oops. This is a lovely park, but they aren't going to sell our house when they can move the new ones. We are at a loss as to what we can do. It's 1653 sq. ft. and I can no longer keep it up, nor afford it...any suggestion from you will be much appreciated.
Thank You
Kay in IL.
p.s. I know this differs slightly from real estate, but we cannot move this, as it has an attached 2 car garage..we owe 66,000. and paid 84,000. it has been professionally decorated with faux painting also(another bit of useless information.)

We may be looking at a short sale. My husband is full time military and we are moving to California since , so far, he cannot get re-stationed in DC. So we have to sell----some how.... So the short sale,, our mortgage lender is willing to deal. But my questions are simple but no one thus far can answer them, Katie Couric we need your investigative expertise PLEASE:) and your contacts to assisst us
One: Exactly what happens to your credit when you short sale?

Two: Can the mortage company choose not to report it as a short sale to the credit bureau?

Three: Can the mortgage company tell the credit bureau not to report it or only to take it off in x number of years?

Four: This "ghost money" that the seller doesn't actually receive and the bank forgives, why would a person owe taxes on it?

Five: If the federal government requires taxes on the money on the short sale isn't this going to push homeowners to foreclosure instead and REALLY ruin the market as well ruin our lenders?

Six: How do you prove you do not have the ability to pay the taxes? People have made references but people are in need of exact information.

Seven: Has anyone thought about taking legal action towards a Real Estate agent, or appraiser or lending institution who allegedly pushed prices, appraisals and loans through for higher than market value assuming the market was going to continue to sky rocket? And not have based their information on fact?

I am calling the IRS tonight and ask the ins and out at leat as far as taxes go
There are more questions............
Seriously Katie---help---see if you can straighten all this out for the people who are partially informed, and put it out there for everyone to understand so our economy doesn't become any worse.

I know this is long, but the housing market is a serious issue,

Take Care Everyone and Good Luck to all

It sounds like we need a detailed explanation on how one in default attempting a short sale who avoid having to pay tax on forgiven amount and claim insolvent.. What would be the criteria to be insolvent.. Must a bankruptcy be filed to be insolvent.. or just expenses exceeding income.. what wording can be used in P&S agreement to make sure they wouldnt come after homeowner with 1099..?

Who wants to learn more about real estate investing in pre foreclosures, forclosures, REO's and short sales.. drop me an email..

I have submitted an offer on a home listed as a short sale. My offer was for $130,000 which was list price for the property and I made it contingent on the seller paying closing cost. My offer was submitted in June and it is now August. I found out today that the seller bank just received in the title and is awaiting the appraisal. There are 2 comps on the same block currently listed for about $146,000.

My question is do you think I beat myself out by offering asking price? Is it normal for the buyer to get the seller to pay closing when it is a short sale? Also, is there something else that my realtor should be doing to speed this process up?

Our double wide mobile home on an acre is in an area where there are many foreclosures. The house is in excellant condition but we owe $51,000 and other homes are selling for $35,000. A realtor suggested a short sale to get out of the house. We are not behind on any payments so is this the option we should use to get out of the home? We are financially able to purchase another home but would this prevent the purchase of another home>

What is the Real answer on the anti deficiency laws out there concerning a SHORT SALE? especially for 2nd's or home equity's. it's such a grey area. not even attorneys can give me a straight answer.

I am looking for someone with experience to guide me through this short sale process. I have a property in Illinois and I am currently living in Massachusetts. I am 2-3 months behind in mortgage payements on my Illinois property. It is now rented but that does not cover the whole monthly mortgage.

I am looking for someone who has extensive experience. Any advice on how to find someone? I am also going to call a short sale company that I found on the internet. Any advice or recommendations would be appreciated.

Brian Holden, how can I get in touch with you?? I am just now beginning to explore the possibility of doing a short sale on my home.. I live in East Fort Lauderdale and am approaching a situation where I need to figure something out quickly. I have a realtor already, (someone who I trust and have used in the past) and he knows about short sales, but he's not overly experienced with them. He suggested I talk to my lender (rather, the people who I got the mortgage through, the brokers..) and see what advice they offered first. How can I get in touch with you? I need to find out as much as possible to see if this is even a feasible option for me.. you can reach me at sterlina@gmail.com thanks!!!!

I am a Real Estate Agent doing Short Sales in South Florida. It is sad to hear what people are going thru. It is like a bad dream, I get calls everyday from people that donot know what to do. I am here to help anyone. Just should me an email I will have one of my team members help you out. To the INVESTORS out there, remember that if you have Equity in your Primary Property, the lender may not accept your short sale request. I would suggest you get a line of credit and get some of that chas out. Here to help.

GOD, please give direction and wisdom to anyone in problems due to a financial situation. Onyl thru you we can get out of troubles. We give you our all problems GOD you are in control. GOD bless everyone

I have a question regarding a short sale. My husband and I are getting divorced, and it was my husbands solution to opt for a short sale. I was really against this because the reality was that we had no problem making the payments, and I felt that we should hold out until the market got better. However he wants to expedite the divorce process so I am faced with allowing him to do a short sale. Our situation is that he took out the loan to build the house last year and I am only on the title to the house. I am listed on the Mortgage as his wife, but did not sign the promissory note. I have three questions:

1. Will the short sale affect my credit?

2. Could the lender come after me for the balance of the mortgage?

3. Will I face any tax liabilities?

My husband wanted me to sign over my portion of the house to him, and the real estate brokers that he consulted with said that I should to avoid any liability in connection with the mortgage and short sale. Is this accurate? I met with a divorce attorney to stated that she did not see how I would be liable if I am not on the note. I just need some clarification on this. If it helps we live in Palm Bay, FL.

I am looking for a good realtor in the Naples, Florida area who is very up on the "short sale". Please contact me. Sunnut5@hotmail.com thanks

Tengo menos de 20 dias para vender mi casa, no tengo mucho conocimiento en como funciona el Short Sale y si yo misma como dueno puedo hacerlo.
Tengo un comprador potencial que me ofrece 170,000 pero la casa me costo 245,000 como hago la negociacion con el banco y si tengo que parar los taxes fantasma a la venta
Gracias por la ayuda que puedan proporcionarme

Iam doing a short sale, I bought house a year and half ago for $333000 and lender wants for a house $320000 (CHASE), I got offer for $307000, just one and house was listed for over 100 days. Lender is being unreasonable and doesn't want to taje the offer. What can I do? My agent told him there is no way we can get better offer. House is currently listed on MLS for 299000 but noone is buying it, only this one offer I have and lender turned it down. What can I do, where can I ger advice what to tell lender. Should I file bankrupcy?

Hello. I am a real estate agent in Minnesota. Sounds as though there is much confusion and many questions about short sales. I deal with many short sales and have calls daily regarding these. It is important to have an experienced Realtor to help negotiate these for you with the bank.

Typically, it is easier to attain a short sale if: the market value of your home has decreased AND you have a case of hardship such as: job loss, pay cut, family hardship such as divorce or health issues AND you have depleted (or never had) significant assets.

The lender does not want to own your home. They have significant costs to reclaim and resell your home....attorney fees, holding costs, taxes, utilities, expenses related to an increase in foreclosures within the banks portfolio, reselling fees (yes, they have to hire and pay a realtor too), etc. They would rather YOU sell your home.

You cannot do a short sale without a valid purchase agreement. So, you need to list your property (preferably with a realtor). You need a purchase agreement from a buyer. Your agent negotiates with the buyer. You sign the purchase agreement but it is contingent on "lender approval."

The realtor does a net sheet (showing the bank what they will get) and negotiates with the bank for you (you must give this approval in writing to the realtor or they cannot do this). The realtor must "plead your case" and tell the bank why they should accept this agreement. The realtor must be factual and accurate on property condition and seller circumstances.

The bank accepts the deal and sends a letter detailing what they have agreed to. This acceptance has taken me 24 hours to 2-3 weeks total. The realtor must be savy and adept at this negotiation or it will take months. The realtor must call the contact in loss mitigation daily (or several times a day until there is acceptance).

The realtor then get the letter and gives this to the closer to process the closing. The letter should detail: 1. the amount the bank is accepting 2. how the bank with categorize this (ex. paid in full, satisfied, settled and satisfied, etc). These different options will affect your credit differently. 3. it is VERY IMPORTANT that the letter state the bank is accepting this as a final settlement of the loan. If that is not stated in some form in the letter the bank can seek the remainder of the deficiency from you later. In that case, they are only releasing the title but NOT YOUR OBLIGATION. Please, make sure you have this IN WRITING from the bank.

Yes, there are taxable consequenses to a short sale. You will get a 1099C at the end of the year from the lender for the deficiency. This is considered income even though you did not recieve it. There are talks of changing the law on this but as of right now, it is income. Please seek tax advise regarding your situation with an accountant.

Good luck everyone! Anyone in MN feel free to contact me for selling (or buying) short sale properties.

Kimberly Sperling
www.KimberlySperling.EdinaRealty.com
KimberlySperling@EdinaRealty.com

P.S. LISA F (AUG 28) I agree with your attorney. If you are not on the note, the mortgage is not on your credit. Tax liability would be subject to your states laws on marital liabilities. I would seek legal and tax advise for that and get any agreements with your husband IN WRITING. I would also suggest getting your own realtor to give you a market evaluation BEFORE you sign over any interest you have in the property. Good luck! Sorry to hear about the divorce!

I invite you to view my interview with CPA Manuel Alvarez on my television show "Let's Talk Real Estate!" as we discuss the tax consequences of a Short Sale and Foreclosure. You can view the show online at:

http://www.letstalkrealestate.com/ltretelevision.htm

It is also available in Spanish. Best of luck!

Robert Aldana
REALTOR and Host of TV & Radio's "Let's Talk Real Estate!"
www.letstalkrealestate.com

Since I posted my Blog here on Short sales several people have been trying to contact me for more information. I think between my post (copied here) and Kimberly's we pretty well cover Short Sales. I've seen first hand how difficult a foreclosure situation can be and am happy to talk with anyone facing that situation. I can be contacted at RealBritFL@aol.com or at 561-818-1017 anytime.

Anyone facing foreclosure should be aware that there is one very important alternative to avoid the foreclosure and that is the Short Sale. A Short Sale is a proven way for a homeowner who owes more than the house is worth to avoid a foreclosure and the subsequent credit hit.

I would advise anyone facing foreclosure to discuss their situation with an experienced Realtor. Short Sales are not a part of real estate basic training but there are a number of educational seminars a Realtor can take to get up to speed. Lenders will pay a reasonable selling commission so Realtors have an incentive to get involved in Short Sale situations.

The basic requirements for a Short Sale are a Listing Agreement with a Realtor and a Sales Contract from a Buyer which are submitted to the Lender along with a Hardship Letter from the Seller explaining why they cannot continue to pay the mortgage and supporting documents such as tax returns, bank statements, information and photos of the home and the Comps, or comparative home prices supporting the offer. The way mortgages are sold, the mortgage holder can be anywhere in the USA or even overseas and certainly not aware of local real estate conditions.

If the package is complete, the Lender will order a BPO, or Broker's Price Opinion, from an independent Realtor. Ths BPO is the key to the whole process. If it is too high, the Lender will not accept a low offer. Your Realtor can meet with the Agent doing the BPO and offer information supporting the offer, such as the average time on market of comparable homes, recent selling prices and point out any defects in the home. Most Lenders will accept an offer lower than the BPO, but usually not much more than 10% lower, though that will vary depending on the company.

The sales contract should specifically state that the offer is contingent on the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. There can be tax consequences but if the Seller is truly in a difficult financial situation they can be avoided - an accountant should certainly be involved in that question. This does all take time and Lenders are swamped, expect at least 2-3 months before a sale can be finalized, even if the Lender accepts the first offer. If they do not, the price can be negotiated.

I am a Realtor, a Broker Associate in South Florida and am involved in Short Sales. It is a detailed but fairly straightforward process that can work to benefit Buyer, Seller and even the Lender. The Buyer gets a good price on a home, the Seller gets to avoid the disruption and credit hit of a foreclosure and the Lender avoids the delay and expense of foreclosing on a property they don't want to own and that would negatively impact their ability to make more loans.
All this information and more is available at the web site www.foreclosuresfloridaforeclosures.com

I just need to know how or approximately how much one needs to pay on a short sell deficiency balance of about 45K? Does the Irs work with you? I know it's considered additional income, but how does that affect your taxes? Also, could the lender let this deficiency go? And if I still worked out a payment plan with the lender, does it still get reported to the irs?
sorry...just confused and scared.

I just need to know how or approximately how much one needs to pay on a short sell deficiency balance of about 45K? Does the Irs work with you? I know it's considered additional income, but how does that affect your taxes? Also, could the lender let this deficiency go? And if I still worked out a payment plan with the lender, does it still get reported to the irs?
sorry...just confused and scared.

I closed on a new house before I could sell my old one. I got caught up in this housing fiasco and nobody is looking to buy at the moment. The old house has been in the market for 6 months already. I will be paying two mortgages in about two months which I cannot afford. Can I short sale the old home without implicating the new one? What is the tax implication on the old one? I need advise or whare can I go for advise

So many questions and so little time. Please drop me a note for more specific info..
About me:
I'm a Realtor in Southern California with Century 21 Superstars and C21 Award, the #1 C21 brokerage in the world. I have been designated by my company as the listing agent for a division of agents and staff specific to selling Short Sale properties.
I can be contacted at help@ShortSaleAdvocates.com, or though the web site.
A few bits for general advice:
- a shortsale is usually much better for a home owner/borrower than a foreclosure.
- Taxs: a 10-99 form (income) will be filed regardless of short sale or foreclosure. See a CPA or Tax Attorney to determine your actual liability. However, the tax liability should be less for the short sale vs. the foreclosure for numerous reasons.
- Bankruptcy: is a seperate but intertwined issue. This may be neccessary for some going into short sale. This will commonly stop the foreclosure process until the bankruptcy is resolved. Again, speak with an attorney for your situation.
- Short sale with other properties: can possibly occur provided the property for sale is a purchase money property. No refinancing.
- A short sale should only be considered if the other final alternative is foreclosure.
- A short sale will typically do far less damage and for far less time than a foreclosure. This saves the borrower untold barrels of cash in higher interest fees and denied credit.
- A short sale settles the debt with the lender, so there is no right for 'deficiency judgement' for the lender. They can't sue the borrower for their loss.
- A home owner that is on time with their payments may still be able to do a short sale.
- A home owner considering doing a short sale should hire a realtor and brokerage that has specific knowledge, resources and dedication for managing short sales. Choosing a realtor wisely will mean the difference between a very unpleasant outcome and a good likelyhood of a much better outcome. This should not be a learn on the job opportunity for your cousin Vinny.
- Investors: I'm not big on investors and short sales for either side. The bank owned properties, probates and other discounted properties fullfill the need for the investor. For the seller, an investor in California means that both the listing and buyer's agents have to sign off on non-representation agreements with the investor. Well meaning legislation that removes the professionals that carry big E&O policies from the situation. So, it can raise the risk for the sellers with an investor involved. Perhaps the state will adopt a better way to work with investors for these properties.
- Please, please, please act as soon as you realize there is a problem. I would much rather help a future client be able to avoid losing their home altogether by giving free advice on getting a loan modification from their lender or some other alternative than taking a short sale listing. However, as a client told me a few weeks back, I am like the bankruptcy attorney of real estate. I help people get through a bad situation in life with the least amount of damage to their finances, marriage and emotions.
Take care,
Ken Wagner
ShortSaleAdvocates.com
800-935-7887

Sorry but short sales are generally bad for homeowners. I'll admit that investors do like them but I have yet to see an investor live up to the claim of "saving the borrower's credit". Once a loan is 90 days delinquent, the mortgage company usually reports "forclosure process started", which is the same thing as a foreclosure to most lenders in the mortgage arena. Even if the homeowner isn't behind at the time of the short sale, most lenders report the loan as "settled for less than amount due", which is roughly translated to "foreclosure" by the rest of the mortgage industry.

I have been in the mortgage business for 28 years and have actually helped negotiate short sales. The seller has ALWAYS come out on the short end. Not only do they get taxed on the write-off portion of the mortgage (regular income), they lose any chance of regaining their equity when the market comes back. Their credit now sucks, they have a whopping tax bill (usually turns into a tax lien), and they lost any chance of getting some appreciation in the future. And they're on the street 2-3 months sooner than if they just went through the foreclosure process. For the most part, they're locked out of home ownership for another 3-4 years.

The loan modification (aka "forbearance agreement") is a much better process but be aware that this still usually affects their credit in a derogatory manner. At least it allows them to keep their equity and interest write-offs. I expect that more lenders are going to be willing to work with modification agreements. Just be aware that this is a detailed process. They don't just grant a modification because someone says, "pretty please".

If the modification doesn't work, they should consult a bankruptcy attorney, especially if they have a dependable income and some equity in the property. In most cases a wage-earner plan (chapter 13), they get to keep their home and can pay back the arrearages in small payments over several years. Of course, bankruptcy doesn't help their credit but, believe it or not, it's better than a foreclosure when it comes to mortgage lending. One other little bit of positive news is that a bankruptcy eliminates the taxability of the write-off and totally eliminates the possibility of a deficiency judgment if the property goes through to foreclosure.

Another option available as of September 4 is an FHA fixed rate loan. If they have fallen behind strictly because their interest rate went up on a variable rate mortgage, FHA allows them to refinance even with the arrearages. I'll admit, this stop-gap measure isn't terribly practical but it may help some folks in a bind.

The final option is foreclosure. In most states, it takes at least 120 days for a mortgage holder to foreclose. In most cases, it actually takes longer. At least the homeowner can save a little cash for their rental deposit while they're waiting for the process to finish. In this scenario, the longer it takes, the better. The homeowners just need to be resigned to the outcome and make appropriate plans. And real estate professionals NOT TO WORRY. The property will become available shortly and you may be able to represent the homeowners in a rental transaction. Even more valuable is potential referral business you could get from these folks by doing the very best thing for them.

Finally, in most trust deed states, deficiency judgments are extremely rare. Unless the lender forecloses judicially (usually takes 6 months, costs a bundle, and requires an additional 6 month right of redemption), the basic assumption by the courts is the lender gets the property, the borrower gets to walk. This is the idea behind the trust deed. I know there are cases showing that deficiency judgments occur, they are just extremely hard for the lender to win and rarely result in any gain so they usually don't pursue them.

Just in case someone wants to argue with me about the damage of foreclosure vs. bankruptcy, here are some underwriting guidelines:

FHA:

Borrower is eligible IN a chapter 13 bankruptcy after 12 months of on-time payments. If the borrower has a foreclosure process, it is typically a 3 year waiting period.

Sub-prime:

Most lenders will consider a borrower between 1 day and 12 months after a bankruptcy. All but the "hardest" of lenders want 3 years to pass from a foreclosure.

Conventional "A" paper:

FNMA / FHLMC will consider a borrower with at least 2 years of good reestablished credit after a bankruptcy in special circumstances and 3-4 years in any other circumstances. Most of the automated approvals I have worked with pretty much kick out anyone with a foreclosure within the last 5-6 years.

My focus has been primarily sub-prime most of my career so I'm intimately familiar with these issues. In some cases, it was my own money hanging out in the loan. I know this isn't good news for short sale advocates but it's the truth. In my opinion, short salers should focus efforts on offers to the bank or purchasing the property at the courthouse steps. It's actually less effort and turns out better for most involved.

My husband and I are working with a lady in foreclosure. We have offered her bank a short sale. We have already gotten together a huge packet of info. the bank needed. They sent someone to appraise the home and the appraiser told us that our offer is very fair. The bank lady told us that they are just waiting on the title to come back. We now have been waiting for about a month and a half. How long does this process usually take?

Can someone tell me what the difference on credit reports are for:
Deed in Lieu
Short sale (before foreclosure sale)
Short Sale (during redemption period)
Full Foreclosure
Bankrupcy
Thanks
Georgia
AddedValueRealty.com

To MWM: Each state is different and therefore homeowners need to get legal and tax advise on their specific circumstances.

I disagree strongly that short sales are bad. They can be a Win-Win for buyer, seller and lender.

Typically, homeowners are late on payments and in the foreclosure process already when a short sale takes place. There is no "additional" derogatory notes regarding a short sale other than how the bank chooses to categorize it. The loan is paid (maybe not in full). It is better than a completed foreclosure.

"Regaining" equity may never happen or could be years in the making. If purchasing a home is as easy as you say, homeowners could also just buy another home later and "regain" equity with that house. If someone can't make payments, they can't make them.....no matter if or when they could get a "regaining equity" payoff from their house.

Forbearance agreements buy time. They stop payments or decrease payments for now (short period of time) and then repayments start up again later, sometimes with a higher principle balanced owed or larger payments to make up the missed ones. If there is no equity (which is why you are doing a short sale in the first place), there is no need to "keep the equity." Forbearance agreements are an "okay" short term fix for a short term problem. It IS best to try to work with your lender as a first avenue though.

The FHA loans you speak about have drawbacks. Homeowners have to qualify for them and need 3% equity in their home. This new program only is available for SOME of the people needing it because of the qualification guidelines.

In Minnesota no one usually goes to buy a property at the court house steps. The lender is the only one that shows up. Our redemption period here is 6 months! You can't mortgage the property, don't have title (only the sheriff certificate), the homeowners still live there and you end up with who-knows-what-shape house in 6 months!

To homeowners: Real Estate Attorneys are the most impartial advise givers, in my opinion (and no, I am not one). They can most effectively explain the pros and cons of your circumstances and options. Sometimes bankruptcy is the better choice. Most often it is not.

To Jodie: The only thing I can think of for the "title to come back" would be that the bank can not convey title because the redemption period is not up (therefore the owner still owns the home). Unless the seller agrees to sell to you during this time, the bank cannot sell it to you until the redemption is over or the owner conveys title in some other way to the bank.

Title searches and updates typically only take a few days in my state and are completed by a closing agent or attorney prior to closing.

For anyone who is interested, here are the FHA Loan guidelines for the new program to help homeowners:

"To qualify for FHASecure, eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
2. Interest rates must have or will reset between June 2005 and December 2009;
3. Three percent cash or equity in the home;
4. A sustained history of employment; and
5. Sufficient income to make the mortgage payment."

GMAC refused to make and adjustments to my mortgage despite a $700 monthly increase in property taxes and homeowners insurance, said the investor wanted his money. Then Washington Mutual (who I've never heard from or had contact with) filed foreclosure, asking court for reinstatement of a lost note.
I filed a response asking for dismissal: no note, no foreclosure.
My Realtor is suggesting a short sale, but I can't afford additional taxes or closing costs.
Am I better off letting the two mortgage companies figure it out, hope for a market change or try short sale?
Single working mom just trying to keep a family home and get a decent credit score back, so I can carry on.
We didn't make this mess. It seems that the mortgage companies should take some responsibility, not just throw us out of our homes.

I've had my home on mls and with 3 different realtors over the past year with no success in selling. At this point I'm behind on 1 1/2 payments and have no way of paying especially since I live in another property,(this one is now vacant). I discussed short sale with my realtor and bless her heart she's trying, but isn't experienced in the area. The bank states they refuse to let us know whether they will consider a shortsale or not. They simply state to "find a buyer and submit an offer". Well, this is all fine and good exept without having some idea of what the bank might except its difficult to find the proper listing amount. Any advise on what I can do at this point. I'm very worried that foreclosure or bankruptcy is in my near future if I don't get this sold now.

Everyone,

The information here has been really helpful.

Kimberly Sperling, Im located in Shakopee with property in Woodbury and will be contacting you soon to get more advice.

I live in San Diego County and have my condo up for a "short-sale" we are 45 days past due on housepayment. Notified lender we are up for sale, so far no problem or harrassment. My question is regarding HOA fees. We are relocating before our credit is too bad to rent and avoid the higher deposits or embarrassement and difficulty in explaning our live to people. Since we are on the market and moving, do we need to continue the HOA payments, and if we miss or don't pay, what can we expect? thanks

Situation:
I am in the market for a condo in Florida and need to move quickly due to a job situation. I found a unit, my agent asked the seller's agent directly if it was a short sale situation because I do not have the time to deal with a short sale process and they said no. I made an offer, we went back and forth and have come to an agreement and have a signed contract. We were set to close at the end of the month when "Out of nowhere" the sellers agent comes up with some story about how the seller owes more and may not have the money for the difference in costs. Now I am unsure of my rights. What kind of timeline am I looking at and what rights do I have in this situation.

This article and its comments have been very informative, thank you. My parents purchased an investment home in California about 2 years ago--at the time they were both employed and able to hold steady jobs. Their financial situation has changed substantially: They are depending solely on social security income, their original loan was an ARM (so the mortgage payments have risen), the bank would not enter into a forbearance agreement, the value of the property has declined substantially since the purchase--a comparative propery was valued at 400k+ 2 years ago and has been on the market (falling in value) for the past 2 years to 275k (at current asking price). Dad is currently talking to a morgate broker who is pitching short sales.

I have a few questions/concerns:

1. I know they will not have the income or the credit to turn around and repurchase the property--so the property will be lost, correct?

2. If the bank does aggree on a short sale then they will have to report the debt forgiveness as income on next years tax return. Well, they are only allowed to earn $12,960 before their benefit is reduced by 50% of the amount over the limit. Will reporting the debt forgiveness on a tax return affect their social security benefit?

3. In a situation like this are they better off filing bankruptcy?

4. The same mortgage broker is also asking dad to sign for a short sale on the broker's behalf. The mortgage broker has some condos he bought at the peak of the market and can no longer afford to carry them, he is now asking dad to turn around and purchase his property thru a short sale. There is something fishy about his offer I just don't have the expertise to tell what it is. Can anyone tell what this guy is up to or if he is genuinly trying to help my folks out?

All your help is appreciated, thank you.
em805@juno.com

I'd like to add to my previous post:

Is my parents primary residance in any danger? Can the bank or the IRS attach any kind of debt to their primary residence? Are they in danger of becoming homeless?

Does anyone know of a reliable course for Realtors in Short Sales in North Carolina?

This so called post from TO sounded good at first so I called. Then I spoke to a guy named Travis. I did some research online and found out that Travisd Olsen is the president of the short sale center. Obviously he posted his own comment acting like a homeowner. What a scam. Is there any real help out there for us homeowners?

I would like to know just how an "agent" get's involved in this short sale- does the homeowner in this type of problem need to sign the title or deed over to this "agent" even to a trust? a little explanation regarding this would be very helpful.

A little about my situation: we are coming close to forecluosure for our home in central Florida.We have been in touch w/ an agent who has explained the short sale process but in his case he wants us to sign the title over to a trust under his company's name. Has anyone heard of this? How does it work?

I have done training for the real estate industry on short sales and own a company that does lender negotiations for realtors. I'm doing a 3 day boot camp for real estate agents on short sales. I have a turn-key marketing, lender negotiating and deal evaluating program for Realtors that can be purchase. I have spoken to 3,000 real estate agents in the last 8 weeks about short sales and distress real estate. I beleive that the short sale is the only card left to play that can stem the tide of foreclosures and save the lenders, consumers and the real estate industry. You can get more information at shortsale support.com or paydirtseminars.com. I have been trying to educate lenders and realtors to the benefit and in fact their responsibility to be part of the solution here. If the present course of the market and mood persists the weight of foreclosures are going to crush the market. Interesting statistic in California. foreclosure rates have increased just over 200%, yet during the same time period the volume of loans taken back by the lender at the foreclosure sale has increased from $500 million to $3.5 billion. Most of these properties have not yet hit the market. And then the adjustments of ARMS - $1.3 trillion in the next few years. If you are a realtor with a skillset to be part of this solution, you will be in the wrong business in the next few years.

I HEAR AND AGREE W/ STEVE WAGNER AND I WAS WONDERING IF THERE IS A SHORT SALE COURSE YOU WOULD RECOMMEND. I AM A REALTOR AND LIVE IN SOUTH FLORIDA- WEST BROWARD AND I AM SEEING SO MANY BUT I JUST CAN'T SEEM TO FIND ONE THAT IS NOT A MONEY MAKING SCHEME, ANY SUGGESTIONS?
MY EMAIL IS IMAGINEHOMES@YAHOO.COM
THANK YOU

There is a lot of information on here. I have tried to come out here and periodically read what people are writing.

If I was someone trying to short sale I would be very confused. A Short Sale is not a perfect solution, but if you are facing forclosure it is the closest thing to it.

As for the Taxes do a search for "Mortgage Tax Relief". That will answer a lot of those questions.

As for the banks won't talk to you or negotiate, this goes back to either find an agent who knows how to do them or your not asking the right questions.

I do short sales nation wide, outside of Texas I find an agent who is willing to be trained. I don't do short sales because they are making me rich. I am learning and doing short sales, because THAT is where the market is going.

Short Sales are long, hard, and frustrating. Sometimes the banks work with you sometimes they don't. If you know what your doing you get more success than failure. In the end of the day if you saved someone from forclosure and able to help them repair their credit, it is all worth it.

I have gotten many phone calls and I have helped MANY people from Florida, California, Arizona, and in my home state Texas. I only charge 30% of your 1st successful short sale (the bank pays this) to coach an agent through a short sale. Most companies want to be paid upfront. For non-realtors, I can even help you Short Sale through my Short Sale consulting company. Feel free to call or write: 512-923-5214 or buyfromsandy@pieceofaustin.com Even if you just have questions!

I'm in the beginning of a short sale of my property in Northern CA. First, Melissa in Florida you have to have a buyer to buy your property before you can have a short sale.
None of the realtors here seem to REALLY know anything about short sales, including my agent, I guess because they have no experience? I've learned a lot here...Thank You. I'll tell you what's happened for me. First contact your lender and tell them you might be going into foreclosure, they'll send papers wanting to know all about your financial situation, taxes, income and how and when did this happen to you. You submit all the information they want, called a short sale package, and your realtor submits information including the purchase agreement, pre-qualification letter from the buyer, listing agreement, etc. The bank who owns your mortgage sends someone out to appraise your property (this is where my short sale is now). So the rest is just what I've heard and read. Depending on the apprasial and the buyer's qualifications the bank okays it or not. Then if they ok it, the deal goes through and you're issued a tax statement with the amount they forgave you (short sale) as income to you, so you have to pay taxes on that amount besides selling your home for cheap and getting dinged on your credit. Peachy isn't it? Supposedly it's better than a foreclosure. There is something called a deed in lieu of foreclosure, you're not behind on your payments yet, but expecting you will be, so somehow the bank will buy the house from you, but my bank said they only do that as a last resort. The banks don't want all these houses, because then they have to sell them and I think this is just the beginning of a bigger mess that Dan explains above. Melissa I haven't heard of what you're writing about and it sounds suspect to me...beware, call your lender and good luck to everyone. Oh there is a web site 995HOPE.org that was helpful to talk with a counselors who can help you out with the lenders and creditors, but after one talk I could never get them again, they're probably overwhelmed.

Does anyone have an idea what impact shortsale would have on one's credit history? On an average, does anyone know how may points are normally deducted from your credit score in the event of a a) shortsale, b) foreclosure, and c) bancruptcy?

Is there any help for the BUYER of a short sale? Any advice? We sold our home in 5 days to make a noncontingent offer on a "short sale" home. We were told that it could take about 2 weeks to hear an answer. .. well its been 9 1/2 weeks and still NOTHING! We went from living in a 4 bedroom house, 2 baths and almost an acre...to living in a grandparents basement with our 3 year old! Last week we heard that the lender told the seller that everything is being forwarded to an attourney. Does this mean its going into foreclosure? The seller is now 3 months behind his mortgage. We have VIP status through our mortgage company, yet we are the ones living like we never paid any bills! All the while the seller gets to live in the house. Please help, we get no relief and barely any answers that make sense. Where would you assume we are at in this process? Are we getting close to an answer? The house is listed at 182,900 and we bid $179,000. We are the only offer, for the other offer walked after 4 weeks. Where is the buyers rights? HELP PLEASE!!

Sarah,

Are there realtors involved with your purchase? If so, ask them to cut their fees to make up for the $3,900 difference in the short sale.

Is there any bank insider that can step forward and give some serious information how the banks handle the short sale cases internally and what are the criteria for the seller to get qualified with the best prospects. Thank you.

I have an informational website with lots of information regarding short sales. My goal is to provide information regarding short sales that you would normally have to pay for for free.

Please let me know if there's something that you'd like to see on the site that isn't discussed.

-Eric Linder
www.ericlinder.com
ericlinder.com

Sarah,

You singed-off your rights when you entered a contract with lender approval contingency and without time limit. I suspect the listing price is low. Because in a short sale, seller has no interest in the price, only in a quick sale. In other words, in listing low, the seller recruited you to help to push the lender to forgive his/her loan and to do it quickly.

The argument that yours is the only offer so the lender appears to be unrealistic about market conditions has some merit. But how many sellers, after months even years on the market without an offer, are still hoping for a turn-around? Lenders are people, too, and they, after all, may have other resources to tough it through.

I am a real estate broker in Ohio, affiliated with Keller Williams Advantage Real Estate, Dayton, OH.

In answer to Drew's comment: My understanding and experience has been that a short sale falls on the credit report as a "deficient payoff/settlement" and takes about 40 - 50 points off of the score. In one year, that falls off the report (you may have to call and ask for them to remove it). Unlike a foreclosure or bankruptcy that is on your report for 7 - 10 years and up to 200 points gone.

In response to Sarah: It could take up to 45 days to receive an answer. Banks are in NO HURRY to "give money away" in this situation. The banks created the mess we are in by loaning money to people who, under "normal" circumstances would have NEVER qualified for a loan or at least the loan amount they received; however, the banks seem, at this point to want to do nothing to repair the situation except STOP loaning money to people, which is what they have done by pulling the sub-prime and Alt-A markets. Now, that is not saying you will get it through, however, you should make sure whoever is negotiating with the bank is proficient in the short sale process and proficient in the rules of banking. The last thing a bank will do is speak with or negotiate with someone who does not speak their language or someone who hands in an incomplete file. We do these regularly, and our files range from 60 - 100 pages on each home. Does the bank read all of it - NO, but if they need something and have to look for it, you can bet the deal is off. We give them everything up front and they could make a decision on the spot, (but won't!) The bank will sometimes wait until the last hour to let you know, hoping that another offer comes in that may beat yours or drive the price up a bit - it is ALL ABOUT THE MONEY for a bank, but the reality is that the decision is still made by a human being, so there is always room for emotion and error - don’t forget that point.

In response to Robin: Asking the agent to cut his/her fee is not a "Bad" idea, but should not always be the first idea. Banks understand the cost of doing business, as most consumers do not. Many banks have made it a policy NOT to cut the commission of an agent as they feel that agents are their allies in helping to take care of the mess that is oput there with pre-foreclosure properties right now - after all, if you were an agent and had to do twice or three times the work (as a short sales is) to get the deal closed, you would want paid. Does your boss cut your pay when your company is not doing all that well? More than likely not, but the suggestion sounds good, so many people make it. The bank will see a full commission agent, with a complete packet submitted as a professional that they do not have a 2-week learning curve with and WANT to do business with them. Banks will typically always pay the average commission in a short sale, which, nationwide happens to be at 5.1% right now. Many agents, such as myself, ask for a full commission at 7% or even 8% due to the extra work involved, and many banks will pay it, but if a bank comes back with 5%, the agent should take it.

There are several consideration in a short sale and each lender has its own specific process. You can see more info at www.contactherrrick.com

mwm
September 10, 2007 07:00 PM
Sorry but short sales are generally bad for homeowners.

Sorry to disagree but your wrong, short sales give a 80-100 point hit, most people facing foreclosure are insolvent and won't have to pay taxes anyways, A bank will give them a very good rate with a clean credit report of 12-18 months after the sale. I have no clue where you get your info from. Also instead of a foreclosure, a short sale shows a future lender the party tried to do something instead of walking away, take a few credit counselling courses and apply for a new house loan and I guarantee most banks will give you a rate as good as someone with 700+ CREDIT.

As to Sarah's situation: Sarah indicated that it has been 9 1/2 weeks since she made the offer on the house, and she does not know where the situation now stands. I agree with John from Ohio in that Sarah needs someone who is experienced with "short sales" to handle her situation. However, if only $3,900 stands in the way of the sale, and if the banks have not agreed to reduce their payoffs, then asking the realtors to reduce their fees is a way to resolve the matter. If the realtors are able to negotiate a "short sale," then I can see where they might feel they deserve the full fee. But, someone has failed in his/her negotiations here, and, as such, should not be rewarded for work that didn't produce the desired result. John, would you pay full commission to an employee who did not do his job successfully? Or, even if a realtor negotiating a "short sale" does everything right, but because the final decision is in the hands of the bank who refuses to cooperate fully, there is no sale... does your realtor still get paid for his/her work? No sale, no commission. And yes, a lot of companies do reduce the pay of their employees when the company does not do that well...by cutting bonuses, delaying pay raises, etc., regardless of fairness. In Sarah's case, due to lack of more specific information, I assumed that a realtor and seller/client had intelligently set the sales price at $182,900, an amount which would have covered all costs (payoffs incl.) associated with the sale, and that the acceptance of Sarah's offer of $179,000 created the short sale issue: difference $3,900. At 6% commission, the realtor (or realtors) makes $10,740. If realtor reduces the fee to cover the $3,900 (if two/$1,950/per), then the commission is still $6,840. I don't want to realtor bash, but a realtor makes a set percentage on a house whether it has been on the market for a day, or for 100 days, whether it has been shown 1 time or 100 times, whether there has been expensive advertisement or little advertisement, whether it is a $179,000 house or a $1,000,000 house (@6=60K), no matter how much or how little the realtor actually works for the fee or spends on listing it.
As for the lenders, they are not completely to blame for the current state of affairs. Yes, the zero interest loans implemented a few years ago, as well as other alternative financing, are causing problems now. But many who qualified for them at the time were able to read the fine print and were not cheated in that respect... some buyers were just as greedy as the banks. Other, buyers qualified for the loans/purchase/refi based on their incomes, credit score, and house value. They may have had a good financial situation when the got the loan. However, save for a few insulated markets in the country, the U.S. economy is in deep, deep trouble. I know of many borrowers who had great jobs, excellent credit, and high property values... until their companies closed or moved or "downsized." Additionally, many people who worked hard all their lives for a company, now retired with a "guaranteed" pension, find themselves without that which they had earned due to to corporate "restructuring," etc. Add in credit card interests, hidden fees, change at will contracts, depreciated car and property values, and the increased cost of health care... the current foreclosure situation is a result of all these factors and more... "a perfect storm."
Sarah, you need to have a talk with your realtor and the sellers' realtor to ask what they are doing to close on the house. If you do not believe they are capable of closing on the deal, you need to consult someone who can. Also, I know you feel pressured about your living situation, but have a little sympathy for the home owners... they may have no place to go. Keep calling your agent until you find something out. Good luck.

I have been in the process for a short sale for months now. I put my condo in Southern Cali up for sale back in June and it is just now closing. I agree with everyone else that says you need to get a good Real Estate Agent to help with the short sale. My agent has been awesome in selling the condo and getting us a buyer as well as back-up buyers just in case the first one fell through.
My agent has done a great job at marketing and working with the lenders on my behalf to get the short sale approved. It took weeks to get a negotiator for the short sale. At first my short sale was denied, but my agent was very persistent and got it approved.
As far as the buyer is concerned...because they are getting a home at below market value, they are getting a good deal and are expected to wait it out knowing that it is a short sale and the lenders are very swamped with foreclosures and short sales. One of the contingencies is that it will take a lot longer than the normal 30 day escrows.<