What An Amazing Report!

Even CBS NEWS supports the use of Short Sales as a viable alternative to foreclosure. As stated in the CBS NEWS report, a Short Sale is a great technique that allows you to profit in the booming foreclosure market and assists the homeowner save their credit and move on with life.

As a real estate agent, investor or mortgage broker, you are the professional homeowners in distress will turn to. You are leaving quite a bit of potential income on the table if you are not working the foreclosure market.

Are you seeing these reports and reading the news and wishing you could capitalize on the booming foreclosure market? Do you want to increase your income dramatically, while at the same time helping an unfortunate homeowner out of financial jam? Do you ever wish you could have all the deals you ever wanted just flowing into your real estate business?

If so, we at Florida Home Options have some exciting news for you. I will educate and train you to seize the many opportunities available to real estate and mortgage professionals. Are you looking for strategies that will keep you on top of the pre-foreclosure business and ELIMINATE nearly all of your competition?

Are you a seasoned real estate professional looking for the latest in information and techniques to grow you existing real estate or mortgage business? Then you can not miss this event.

This is an exert from CBS News, The Early Show

As Foreclosures Rise, More Sellers and Lenders Consider Short-Selling

The headline news recently was that the number of mortgages entering the foreclosure process rose to a record level. Of the nearly 44 million mortgages, about 0.58 percent — that's 254,590 — or one out of every 172 loans, are now officially in foreclosure.

Foreclosure occurs when borrowers have not made two or more payments and lenders respond by filing a legal notice and commencing a legal proceeding to take possession of the home.

The record number of foreclosures does not appear to be evenly spread around the country. According to the Mortgage Bankers Association, the rate of mortgages in foreclosure would have fallen if not for big jumps in foreclosures in local markets of California, Florida, Nevada and Arizona, where investors who bought on speculation that values would rise are walking away from property that is now worth less than they owe. Also, in regions of Ohio, Michigan and Indiana, areas marked by large job losses in manufacturing are seeing big increases in foreclosures.

A Foreclosure Alternative

The prospect of foreclosure is difficult for a homeowner, but there is another option.

A little-known alternative, once more commonly used in the real estate downturn of the early '90s, is the "short sale," which works like this: A homeowner falls behind on his or her mortgage payments, usually due to a job loss, rising debt payments, or both. Facing a situation in which the home value has fallen and cannot be sold for the amount of the mortgage owed, the homeowner works out a deal with the lender to sell the home for whatever the market will bear. If the amount of the sale is for less than the amount owed on the mortgage, the lender gets the proceeds and discharges the remaining debt. The homeowner will have to leave the house as soon as it is sold.

Alternatively, with a foreclosure, homeowners who can no longer make payments are served with a notice of foreclosure, which essentially informs them to either bring the loan current or face the home being taken over and sold at a public auction, after which the homeowner will face eviction proceedings. While this process is going on, the homeowner can live in the house rent-free for up to a year, depending on that state's foreclosure and eviction laws. But this fact alone does not mean the foreclosure is better; in fact, it may be worse.

Lose the House, but Not Your Credit

According to sources in the mortgage industry, people who agree to a short sale with the lender do far less damage to their credit rating than those who go through foreclosure.

While in both cases, short sale and foreclosure, the delinquent mortgage will negatively affect their credit rating, at least short sellers avoid having a "debt discharged due to foreclosure" on their credit reports. Mortgage and credit experts say that, after bankruptcy, having a foreclosure on your credit report is the worst result and will reduce your credit score by over 250 points. You could also have to wait up to three years to qualify for a mortgage at a reasonable rate.

Short sales show up on a credit report as a "pre-foreclosure in redemption" status and can result in a credit score reduction of 100 points or less. After the sale, the mortgage may show up as "discharged." People who successfully complete a short sale may also qualify for a mortgage at a reasonable interest rate in as little as 18 months. So, if buying a home is a future goal, then a short sale is the better option for many.

Homeowners cannot simply decide that they want to unload a home with a short sale; the lender must agree to it. The key to getting a lender to go along is to demonstrate two things: that you have no other financial resources to pay the mortgage, and that the sale price the buyer is willing to pay is the fair price the market will bear. If a lender believes it can get more for the house by taking possession of it and selling it themselves, then they will not go along with a short sale.

To begin the process of a short sale, you first need to call the lender and speak directly with the person in the loan workout or short sale department. At GMAC ResCap, a large residential mortgage lender, there is a "foreclosure prevention department" with people trained to work with homeowners in exactly this situation. Their motivation is summed up by Steve Nelson at that company: "We pretty much know what our loss is going to be if we foreclose. If a short-seller results in a payoff that's better than that number, we're talking all day long with people who want to put a short sale together." Some lenders report a three- to four-times rise in the number of short sales over the past year.

People who want to go this route should contact a local real estate firm and ask to work with a real estate agent who has actual experience with short sales. These specially trained agents will know the process and deliver the documentation that the lender requires to authorize the short sale. The agent can also find a buyer that is qualified to complete the transaction.

If all goes as planned, the lender will receive all of the proceeds, typically not enough to pay off the loan. The remaining balance of the loan is discharged. But a homeowner agreeing to a short sale should also get legal advice to protect his or herself from future claims of the lender. In some states, only purchase mortgages are fully discharged. For all other types of debt (equity loans, refinancing, etc), the homeowner can be held personally liable for repayment in the future. For this reason, a lawyer's advice will include getting the lender to agree to fully discharge all mortgage debt involved in the short sale.

Buying a Short Sale Home

Buyers who can find a short-sale can get a good deal. The advantages of buying a property through a short sale include buying at a discounted price and buying a house where the sellers are still motivated to sell the home and may take care of it until it is sold.

Some buyers think they can get a better deal by waiting to buy a house when it goes into foreclosure, but buying a house through foreclosure is risky business and not for first-time buyers or inexperienced real estate investors. You should get advice from an experienced professional. Hire a lawyer to help you with the eviction process if the home is occupied. Sometimes, tenants who are sued for eviction can retaliate. When sellers realize they will lose their home to foreclosure, they often stop caring for it. Many states require buyers to make certain disclosures to the owners, and failure to do so on the proper forms and in the required timeframes can result in fines, lawsuits, and even cancellation of the sale and loss of your money.

It's typically advised to work with a realtor with experience in short sales, because they can help you research the market to find the properties where foreclosure notices have been filed as well as how much is owed by the lender. Typically, this can be done at the county registrar of deeds. They can also approach these homeowners for you to let them know that they are aware that the foreclosure notice has been filed and that, if the owner is interested, there is a buyer who could work with them to complete a short sale.

Even if you find a home where the owner is willing to work out a short sale, don't assume the lender will go along with it. Once the seller agrees to your offer, your agent will need to send it to the lender for approval, and you will not have a deal until the lender OKs it.

Expect a lender to negotiate a higher price; they will want to know they are getting paid the most they can get for the house. Since the lender is paying the realtor's commission, it will likely ask your agent to lower his commission, or you to pay some of it. Typically, the lender will not bear the cost of items that are typically paid for by sellers, such as inspections, and the lender will agree only to sell the property if the buyer agrees to buy it in "as is" condition. This makes it all the more important for a buyer of a property through a short sale to make an offer contingent upon approving a through home inspection.

 Now you're in the public comment zone. What follows is not CBS News stuff; it comes from other people and CBS does not vouch for it.

If you are going towards that path, you need to be ready for war and defend yourself and your rights as a consumer. Educate yourself on the subject immediately. (If you want to try to keep your house that is)

The best thing to do is being prepared and act as quickly as possible!

God Bless anyone in that situation (I have been there myself). Hang in there!

Posted by patriot75 at 07:40 PM : Jun 21, 2007

They will play ball with you eventually, but they don't want you to know that if they can bleed you dry in ignorance.
Posted by random_radar at 12:26 PM : Jun 21, 2007

random_radar: I have 13 years in the mortgage lending industry, and I am here to tell you to count your blessings! - You just got lucky with the lender your lender! (you prob went with a major reputable lender) Most lenders do not act this way. Consumers have to fight tooth & nail to get this unscrupulous lenders to observe their rights!

If you got your loan from a smaller lender (local bank) or a loan broker, chances are that you will encounter the opposite of random_radar's experience. They will not play ball (if the law doesn't make them, they won't) Depending on where you live (specific state law) a foreclosure can be the worst experience of your life! Especially if you have small children. States like FL and CA are particularly vicious about their collection practices.

My advice to anyone in this situation is to act immediately! Let your lender know about your difficulties, call their workout departments if they have one. Contact consumer protection agencies, and even do what this article recommends. It's good advice.

Hoping or expecting that the lender will "play ball" with you or "hear you out" is the worst single mistake you can make!

Posted by patriot75 at 07:37 PM : Jun 21, 2007

"What does Race have to do with it?

Posted by gomanny1 at 06:34 PM : Jun 21, 2007
 

Get Real...I don't understand how some people especially African-Americans can be so blind when it comes to most Banking institutions who often study and analyze political ways to affect the economy with inflation and to deflate our finances as a people...How can you afford a $350,000 loan or mortgage even with a consistent income with utilities including: payment of taxes and insurance on the $350,000 loan, lights, gas, water, car payments, car insurance, cell phone, home phone , food, and don't leave out the expenses for the kids...It's common sense people, don't just buy into a real estate market that does not break it down for you as a buyer...I don't feed off of negative energy but for every day the sun shines it must rain and a lot of people just don't take the time to stop and think about what could come around that curve and leave you blind sighted because some of us are to stupid to accept that we should be little more cautious with our investments and with our money...don't just think of today while the sun is shining think about tomorrow, for rain is coming literally.

Posted by tbraiwes at 03:06 PM : Jun 21, 2007
 

I was unemployed and couldn't make my mortgage payments. Heck, I couldn't pay any bills...

The first month the bank said "You better pay or you'll be sorry!"

The second month the bank said "Please pay the money you promised when you bought your house."

The third month the bank said "We have three special programs to assist you..." One of them was doing a short sale to avoid foreclosure.

The moral of the story is that your lender is going to play hard ball until you are three months behind (or more), so don't kill yourself paying a mortgage if you really can't. Especially don't fall for the ploy of using a credit card to pay your mortgage--that is the fast lane to bankruptcy and foreclosure.

They will play ball with you eventually, but they don't want you to know that if they can bleed you dry in ignorance.

Posted by random radar at 12:26 PM : Jun 21, 2007
 

One of the features of the recently ended real estate boom was the building of "McMansions", vastly oversized homes which carried price tags well above the median income for the local market (heck, well above THRICE the median income in my local market) and staggering heating, maintenance, and tax liabilities due to their square footage. When markets collapse for these monstrosities owners are left upside down by orders of magnitude more than their income and lenders face such a staggering loss on the property that accepting a short sale would be a disaster for the lender and a huge bonus for the borrower. These situations may fester for years beyond the current cycle as lenders hope for time to cure the market...

Posted by razzl at 12:14 PM : Jun 21, 2007