AC Home Maintenance Tips

What is a Short Sale

What is a Short Sale?

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.

 

Process

In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. Neither side is "doing the other a favor;" a short sale is simply the most economical solution to a problem. Banks will incur a smaller financial loss than would result from foreclosure or continued non-payment. Borrowers are able to mitigate damage to their credit history, and partially control the debt. A short sale is typically faster and less expensive than a foreclosure. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.

Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majorities have pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal, Broker Price Opinion (abbreviated BPO), or Broker Opinion of Value (abbreviated BOV).

Lenders may accept short sale offers or requests for short sales even if a Notice of Default has not been issued or recorded with the locality where the property is located. Given the unprecedented and overwhelming number of losses that mortgage lenders have suffered from mortgage failures that in part triggered the financial crisis of 2007–2011, they are now more willing to accept short sales than ever before. For "under-water" borrowers who owe more on their mortgage than their property is worth and are having trouble selling, this presents an opportunity for them to avoid foreclosure as a result.

Additional parties

Multiple levels of approvals and conditions are very common with short sales. Junior lien-holders - such as second mortgages, HELOC lenders, and HOA (special assessment liens) - may need to approve the short sale. Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even when unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the e short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender's loss in the short sale. The wide array of parties, parameters and processes involved in a short sale makes it a relatively complex and highly specialized real estate transaction. Not surprisingly, short sales have a high failure rate and often do not close in time to prevent the home being foreclosed or repossessed. Short Sale transactions should be handled by a knowledgeable and experienced professional who has successfully completed several short sale transactions and is located nearby the property since real estate is a very hands on business. Experienced Real Estate Brokers will typically handle all the short sale negotiations and this activity should be done by a licensed real estate broker or attorney when the property is in foreclosure. Unlicensed practitioners will fall into the category of foreclosure consultants and may require a fidelity bond in order to negotiate a workout solution with the lender such as a short sale or loan modification. Realtors who are SFR (Short Sale and Foreclosure Resource) or HAFA Short Sale Certified will have been trained on the US Treasury sponsored program under the Making Home Affordable (HAMP Program) which offers homeowner benefits including a relocation incentive and protection against deficiency judgment for second lien holders. It is important for the real estate broker to determine eligibility for this program as it may give the homeowner a better option than a traditional short sale.

Consent

Short sales are different from foreclosures in that a foreclosure is forced by a lender, whereas both lender and borrower consent to a short sale. However, this consent may be revoked at any time as short sales are entirely voluntary transactions for both parties. The borrower may decide to remain in the property and attempt a refinance or modification of their mortgage loan, or may refuse to cooperate with the lender's demand for financial documentation or a cash contribution, and thereby ensure foreclosure. Similarly, lenders can refuse to evaluate or approve a short sale offer, generally due to disapproval of either the buyer's offer amount or high closing costs, which reduces the lender's net proceeds. All short sale contracts should include a contingency clause specifying that the contract is contingent upon approval of the seller's lender(s).

In the state of California, short sales can be tricky in that it is important for the party handling the deal to advise the seller to seek the advice of an attorney and a CPA. There could be tax consequences if the loan(s) on the property are not purchase money (all the funds needed to purchase the property). On the other hand, if the loan(s) on the property are purchase money, then the loans are considered "non-recourse" and the debt is generally forgiven and satisfied at the end of the short sale.

Changing consent can present a perilous situation for potential buyers. It can waste considerable time and money for a prospective buyer who anticipated a sale. Typically, deposits with the bank will be refunded but money for paid inspections or other services cannot be.

There are several defenses against this. If the seller has moved out of a property, that is a clue that they have no intention of staying or negotiating further with the bank. "Bank Approved Short Sales" are advertised by real estate advertisements, indicating that a real estate broker has verified the selling bank's position. This still does not guarantee acceptance, and it often does not take junior lien holders into account, but it is better than situations where the bank holding the mortgage has only been lightly involved in the borrower's decision.

Credit implications

Short sales (AKA pre foreclosure sales) are a type of settlement, and they adversely affect a person's credit report. Under Fannie Mae Guidelines (Conventional Loan), Seven years from the date the foreclosure sale was completed as reported on the credit report or other foreclosure documents provided by the borrower before the borrower may be eligible to buy a home. Template:(Source: FNMA Selling Guide, 6-30-10 at 426 After a "pre foreclosure sale", a consumer can be eligible to obtain credit to purchase a property after two years from the date the pre foreclosure sale was completed, but the consumer is limited to a maximum loan-to-value ratio of 80 percent. After four years, the consumer is limited to a maximum loan to value ratio of 90 percent. Template: Source: FNMA Selling Guide, 6-30-10, at 427

Unlike bankruptcy line items, short sales DO show on a credit report like Experian, TransUnion, or Equifax. Short sales are identified on a credit report as "paid in full" with a "settled for less than owed" remarks code, and the mortgage tradeline would indicate any recent delinquency. Template: Source: FNMA Announcement 08-16 Q&A, 8-13-08

Approval timeline

Short sale time frames vary from state to state, bank to bank and file to file. Each lender has their own process for review of a short sale and the amount of documentation that is required. Response time will depend on the amount of files being handled, how adequately staffed the department is and how much follow up is done on behalf of the borrower. The borrower’s financial situation will be reviewed by the lender to determine if there is a documentable hardship, determine occupancy status of the property, and determine if it will be a traditional or a HAFA Short Sale and if the homeowner has any available funds to cure the delinquency. Other factors that can significantly affect the approval time frames include the complexity of the homeowners financial situation, number of lien holders, the investor that owns the loan, if there is Mortgage Insurance (MI) company who needs to also approve the short sale.

To help provide Short Sale Resources to homeowners and Realtors, California Association of Realtors has released a website that focuses on short sales. Additionally the US Treasury Department has created the HAMP Solution Center which handles complaints or escalations for homeowners in any of the programs which fall under the Making Home Affordable Plan. These include the MHA loan modification, HAFA short sale, deed in lieu, and others. Homeowners who wish to file a complaint or see if they have a valid reason for a lender or servicer complaint should first determine who the investor is since that will determine how and where you will file the complaint.

Business

Short sales are common in standard business transactions in recognition that creditors are not doing debtors a favor but, rather, engaging in a business transaction when extending credit. When it makes no business sense nor is economically feasible to retain an asset, businesses default on their debt. It is common for commercial debt to trade on the secondary market for a small fraction of their face value in realization of the likelihood of these future defaults. This is known as distressed debt.

Fraud

In 2011 CNBC reported on a story from entrepreneur Jeremy Brandt that some lenders have been accused of engaging in fraud during the short sale process. The fraud involves lenders in second position demanding kickbacks in the form of cash payments from the home buyer or real estate agent, and that are not disclosed anywhere on closing documents or HUD-1 statement. This is in violation of RESPA rules, which require disclosure of such payments.

Deficiency judgment

By nature, all short sales will have a deficiency balance. Laws governing the right of the lender to pursue a borrower for the deficiency balance vary state to state. There are three main factors determining if there is lender recourse on a loan. The first is if the foreclosure action is a judicial or non-judicial foreclosure. This will vary from state to state. The second factor is if the loan is a purchase money loan or non-purchase money loan. For a residential 1-4 unit property, the third factor is whether the property is owner or non-owner occupied. Lastly, if the loan is a senior loan or a subordinate or second lien is also a factor.

Effective Jan 1, 2011 California passed SB 931 which says "Unless otherwise exempt, no judgment shall be rendered for a deficiency for a first trust deed lender of one-to-four residential units if the borrower sells for less than the amount owed with the lender’s written consent. A first trust deed lender’s written consent shall obligate the lender to accept the sale proceeds as full payment and to fully discharge the remaining debt on the first trust deed." This protection, however does not apply to junior lien holders and still allows the lender to require cash contributions as a prerequisite for approving the short sale. If a lender can legally pursue the deficiency and does not specifically waive its right to pursue the deficiency, the borrower is at risk for a deficiency judgment.

Nevada law potentially grants lenders a six year window of time to sue for the deficiency based on breach of contract in contract law, not foreclosure law. Other states may differ.

Borrowers considering a short sale should be aware of this risk and ask every party involved in the process (Realtor, lender, third party, ...) what can and will be done to protect against a deficiency judgment. Consult an attorney in the state where the property resides to determine specific risks.

Once a short sale has been completed, a Chapter 7 bankruptcy is a possible remedy that the borrower can use to remove the risk of the deficiency judgment or to discharge the judgment itself.

One way in which a borrower or homeowner may eliminate the deficiency judgment is by completing a HAFA Short Sale which is under the Making Home Affordable Program. This option is the next step for homeowners denied for a loan modification should they not be able to afford their home. Incentives for homeowners, servicers and investors are given by the US Treasury. Eligibility is limited by loan size, must be owner occupied, and other restrictions apply. The HAFA short sale program is more beneficial than a traditional short sale because of the government subsidy from the US Treasury Department.

5 More Things You Didn't Know Could Get your Home Sold

1. Your neighbors. Most homeowners contemplating selling their homes understand the importance of well-kept neighboring homes.  Many a buyer has pulled up to an amazing house, viewed it, and left shaking their head with woe because they just can’t cotton to buying the place on account of the shoulder-high weeds, car in the yard or crumbling ruins of the house next door.  

On the flip side, your neighbors themselves - not just the homes, but the people - can actually help sell your home.  Many homeowners know people who want to live in their neck of the woods; this is one reason many seasoned real estate professionals hold their listings open to neighbors and send out postcards to neighbors announcing the listing - the neighbors might know people who are interested in your home!   Also, neighbors who are out and about chatting with each other, laughing and playing with their kids, mowing their lawns or painting their fences, or even who just offer a smile and helpful area knowledge to the buyer-to-be they pass on the street can make a very favorable impression on prospective buyers.

It’s a good idea, if and when you decide to list your home for sale, to touch base with neighbors you know and let them know; it’s in their best interests to get good new neighbors, so they might be able to go the extra mile in showing the neighborhood’s biggest asset - themselves - off to its best advantage.

2.  The right sights, smells and sounds.  It’s no news flash that the view of a used car lot; stinky foods or animal smells; and the siren song of a fire station next door could be deal-killers. What might surprise is some of the right sights, smells and sounds that can help seal the sale of your home.  My experience has been - agents, chime in here! - that the more natural beautiful sights, smells and sounds are, the more favorably they’ll be received by the largest population of prospective buyers.  

For example, playing a soundtrack of classical musical is fine, but will cause some skeptical buyers to wonder what noises you might be trying to cover up - especially if you’re in a condo or other potentially thin-walled property where neighbor noise might be an issue. On the other hand, birdsong can be attractive to some buyers. Artificial air fresheners?  Not so much.  The scent of the jasmine or lavender that grows in your yard?  Even allergy victims can appreciate that.

You might be desensitized to the amazing views of trees, mountains or even water outside your window, but pulling back the curtains so prospective buyers can see for themselves is an absolute must.

Home buying is a multi-sensory experience - visual staging of the property itself is no longer a plus, it’s a must. But homes which create pleasant impressions that fire on all of a buyer’s sensory cylinders definitely have the edge on their competition.

3.  Your dog. The New York Times ran a piece a few months ago about sweet, well-behaved dogs (and cats!) who reportedly helped sell their owners’ Manhattan apartments.  In a departure from the conventional wisdom that dogs should be removed and every trace of their presence erased from the home during showings, the article featured several buyers and brokers attesting to their belief that the presence of a particular cat or dog “help[ed] sell a property by making the place seem warmer or more appealing.”  And I’m sure you’ve all heard me tell the story of the San Diego buyer who fell in love with a tract home listed at a price higher than all the nearly identical comparables he’d seen and wanted to make a full-price offer immediately - so long as the deal included the dog!

Definitely consult with your agent before you decide to implement leaving your dog at home for showings as part of your plan.  I’m a dog lover, and would be concerned that someone might inadvertently let one of “my girls” out, if I left them there while my house was being shown; as well, would-be buyers or their agents may have allergies your pet could set off.   Lately, it seems like I’ve seen many brokers attempting to capture the best of both worlds by making sure that the family pet or even the broker’s own pet is captured in a charming tableau in 1 or 2 of the listing pictures, even if they’re not present at the home during showings.  

4.  Your happiness.  Video and even written love letters that extoll all the virtues for which you love your neighbors, your neighborhood and your property are contagious to buyers.  I’ve seen sellers help buyers see their homes through their own loving eyes by posting videos on YouTube and including the link on the listing flyer or even by putting a binder containing a letter plus menus and flyers from their favorite neighborhood restaurants, dry cleaners and other local merchants out on the counter during showings.

Wide-open curtains that let light stream in, light and bright paint and decor colors and other home features that science has proven make residents more happy and functional also create this thought process in a buyer’s mind: “Hmm, these people seem happy here. I could be, too.”

Similarly, indicators that you invested a lot of love in your home, by keeping it in immaculate order and pristine condition, by tending a well-cared for kitchen garden, lovingly furnishing and making comfortable (if not overly customizing) your kids’ rooms, all create the feel that a home was happily lived in  - it’s like staging your home with a life well-lived, not just paint and tile.

5.  The freeway or subway you thought was too close.  There is such a thing as a freeway or elevated train tracks being too close to your home; if your place rattles or roars, for example, every time the train passes, chances any buyer will view that as a selling point are pretty slim.  However, homebuyer attitudes toward being located near freeways and subways or bus lines are a-changing.  Every upward click of gas prices renders buyers a tiny bit more interested in a location that is more commutable.  

Where yesteryear’s buyers were all about the posh exclusivity of far-out suburbia, today’s buyers are more interested in financial and ecological efficiency and convenience. I’ve never heard so many homebuyers looking to own homes that will allow them to ditch their cars entirely as I have in recent years!  

What might once have been seen as too close to the freeway has gotten a new spin, lately, as a highly convenient, commuter-friendly location.  

Posted by Trulia.com 06-07-11

Information on FHA Short Sale

If you have gotten an FHA loan on your home then you have some relatively good news concerning your short sale.

For starters, the banks typically follow the guidelines on what to do with your short sale.  However, the difficulty will come from Bank of America, or Suntrust who know less about whether you have a FHA Loan or not.
According to the FHA website:
Your lender must follow FHA servicing guidelines and regulations for FHA-insured loans.
If your lender is not cooperative, contact FHA’s National Servicing Center toll free at (888) 297-8685  or
(888) 297-8685      

Express an interest to participate in the program.

1. Must have FHA Loan
2. Must be at least 31 days behind
3. Must have property listed with a licensed real estate agent
4. Home Must be owner occupied
5. Home owner must be able to prove that they are unable to make the payments in a written document also known as a hardship letter.

What does the bank have to do?

1. They must appraise the home with an FHA Certified Appraiser – with or without an offer to purchase!
2. Pull Preliminary Title Work
3. Delay the foreclosure proceedings up to 4 months
4. Review the marketing of the listing agent
5. Allow the Sale to close in up to 8 months
6. Provide a tiered structure to allow the homeowner to adjust price if necessary

You can read more about it by clicking here

Ten Reasons to Avoid Foreclosure

1. Foreclosure Follows You – Homeowners will always have to disclose that they have had a foreclosure on any mortgage application and many job applications they may complete in the future. This can also have an adverse affect on their future mortgage rates. Foreclosure is an item that is asked about specifically in credit inquiries. There is no seven-year time limit on this credit item.

2. Credit Score Negative Impact – Credit scores will be lowered significantly. Although it is impossible to predict with certainty, it is likely that the credit score impact of a short sale will be significantly less than in a foreclosure. Along with bankruptcy, a foreclosure is one of the most devastating credit issues you can have in relation to/future credit availability.

3. Ineligibility for a Government Insured Loan – The homeowner will be ineligible for a government insured loan for 5–7 years (only two years in a short sale). A foreclosure is the one credit report item that is almost impossible to have repaired.

4. Possibility of Deficiency Judgment – Your lender can seek a deficiency judgment against you and collect any amount they do not recuperate at bank sale.

5. Negative in Employment Credit Checks – Many employers run credit checks on prospective employees. Foreclosure is one of the top items that will put a potential new hire in jeopardy.

6. Potentially Damaging in Current Employment – Many current employers run credit checks. A foreclosure can put a current position in jeopardy.

7. Negative on Security Clearances – Security clearances and government positions—including but not limited to military and law enforcement—can be jeopardized by a foreclosure. Revocation of security clearance can result in job reassignment or loss.

8. Lower Tax Liability than Foreclosure – The e tax liability in a foreclosure may be much higher than in a properly negotiated short sale since canceled debt will be higher in a foreclosure.

9. You Have Alternatives – As your expert, I will explore every option with you and work toward the best resolution.

10. Do Everything You Can – While it may not seem like it now, there will come a time when you’re current financial troubles will pass. You will feel much better knowing that you did everything you could to avoid this devastating financial consequence that so many people face today.

How To Remove Textured Popcorn Ceilings

Since you will be using a far amount of water in thpis project, first be sure to turn of the electricity and check it with circuit tester. Remove all ceiling light fittings. Remove furniture and items in the room.

Seal off the entire room by hanging two millimeter plastic sheets from the crown molding all the way to the floor. Put a window fan in the window for added ventilation. Add a drop cloth with a waterproof backing to the floor.

If the popcorn was added before 1979, get it tested for asbestos by either wetting down a small area with a sponge and scraping off a little to place in a small bag, or by having a professional come out and test it.

Use a basic garden sprayer to wet down the ceiling. This will soften the ceiling texture and help to break down the adhesive bond making scraping easier.

Work in an area about 5 feet square. It’s better to make several passes than to over apply water and allow the popcorn ceiling to absorb too much water which could damage the paper surface and the wallboards underneath.

Wait 10-15 minutes for the water to soak in and then start scraping it off with a ceiling texture scraper.

Use a smaller putty knife to scrape the corners and the crown molding.


Re-cover any Bare Joints Using Joint Compund an Joint Tape.

Mix joint compound in a tray and apply along the joint lines. Dip joint tape into water, sqeeze of excess and use a putty knife to press the tape into the joint compound. Smooth off excess

Things you will need

• Pole Sander
• Drywall Sandpaper
• Drop Cloths
• Clear Plastic Sheeting
• Joint Knives
• Drywall Joint Compound
• Sprayer

Provided By:

Wes Roberts

R & M Industries

405-238-0410

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