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IT IS ALMOST ALWAYS
MORE BENEFICIAL FOR SELLERS TO ATTEMPT A SHORT SALE VS LETTING YOUR
HOME GO TO FORECLOSURE OR DOING A DEED-IN-LIEU.
CALL US TODAY 480-451-3318 FOR A
FREE/NO OBLIGATION CONSULTATION.
28 IMPORTANT SHORT SALE SELLERS TIPS (ARIZONA)
1. BANKS PREFER BORROWERS DO SHORT SALES!
Many offer incentives ($30,000 is largest we’ve seen) to do a short
sale.
2. SHORT SALE SELLERS MAY RECEIVE UP TO $3000 FROM H.A.F.A.
Home Affordable Foreclosure Alternative, a government program, offers
sellers who qualify up to $3000 in relocation assistance.
3.SHORT SALES GIVE SELLERS OPPORTUNITIES TO REDUCE DEBT
Borrowers can negotiate away outstanding liens. With foreclosures you
cannot.
4. With the exception of certain types of bankruptcies, short sales
are almost always the more beneficial way to go if you are under water
in your home.
5. CREDIT SCORE TYPICALLY LESS AFFECTED DOING A SHORT SALE VS
FORECLOSURE.
6. CREDIT SCORE WILL GENERALLY RECOVER MUCH FASTER DOING A SHORT SALE VS
FORECLOSURE.
7. REVIEW THE ENTIRE PROCESS AND WHAT CAN BE EXPECTED WITH YOUR
AGENT/ATTORNEY PRIOR TO MOVING FORWARD
8. THE BANK APPROVAL LETTER AKA ‘THE AGREEMENT NOTICE’
The most intense part of the negotiation process with the banks is just
prior to the issuance of their approval letter. Many times agents will
need to negotiate out deficiency waivers for sellers – (more info on
this below – CALL US TO DISCUSS) This may come at a price. Agents will
approach Buyers and the lien holder(s) to see if a ‘settlement of debt’
can be reached. MOST TIMES IT CAN. Sellers must remember a few thousand
to relieve tens of thousands in most cases is worth it.
9. RECOVERY TO OBTAIN CONVENTIONAL FINANCING
To obtain conventional financing will in some cases be faster doing
short sale vs foreclosure. (if you have 20% down, its typically 2 years
for short sale vs 3 years for foreclosure)
10. REMAINING CURRENT ON PAYMENTS
Some banks are now allowing short sellers to continue making their
payments if they so choose to further minimize the hit on credit score.
11. HELOC (home equity line of credit) SHORT SALE VS FORECLOSURE
2nd lien holders (HELOC’S) typically have recourse, meaning they can
pursue deficiency judgments against borrowers whether they foreclose or
not. Short sales give sellers the opportunity to settle those debts in
full and get those outstanding loan balances (deficiencies) waived,
foreclosures do not. No guarantee, just an opportunity to settle these
debts.
12. MYTH – SHORT SALES TAKE FOREVER
The prevailing myth is that short sales take forever (6 months or
longer). Today, many banks are much more adept closing these files. Most
are averaging 1 to 2 months from receipt of contract. We’ve closed them
in as short as 2 weeks. It mostly depends on the lender.
13. ANTI-DEFICIENCY STANDARDS (ARIZONA)
If your property has any of the following characteristics it likely does
not meet Arizona’s anti-deficiency requirements meaning lien holders
have recourse if you go to foreclosure. By attempting a short sale, you
have the opportunity (not the guarantee) to negotiate those deficiency
judgments away. CALL US TO DISCUSS
a. Sits on more than 2.5 acres
b. Is not a single family or duplex (Triplex or more)
c. Has not been financed with purchase money. Refinances generally fall
outside the scope of purchase money and DO NOT meet deficiency
requirements. Hence, short sales are much better option.
d. Home has not been lived in for at least 6 months
e. Home has VA financing
14. BANKRUPTCY
Many are not aware properties can be removed from bankruptcies with a
Notice of Abandonment filed with court and then short sales performed.
This is an obvious LEGAL matter and needs to be reviewed with a
bankruptcy attorney.
15. EVERY SELLERS SITUATION IS DIFFERENT. EVERY SHORT SALE IS
DIFFERENT.
While outcomes cannot be guaranteed, one thing all short sales have in
common – they give sellers the opportunity to negotiate. If you do not
like the result, you can switch course and choose the foreclosure/
deed-in-lieu route.
16. INVESTMENT PROPERTY
You may be subject to a 1099C tax event – which is a tax on the
remaining deficiency whether you foreclose or not. Not all of our
clients have received 1099’s, but some have. The advantage to the short
sale is you can negotiate down the deficiency making the potential tax
liability smaller. There is no negotiation option in a foreclosure. This
is an obvious tax matter and needs to be confirmed with your CPA.
17. HARDSHIP
You need to show a hardship to obtain approval for a short sale. This is
outlined in a Hardship Letter and is not limited to financial. We’ve
done short sales with Rolls Royce’s in the garage. Here are some
hardship examples:
a. Unemployment
b. Reduced Income
c. Divorce or Separation
d. Medical issues, illness, expense
e. Debt – other financial situations
f. Death of Spouse/Relative
g. Military Service
h. Loan Payment Increase
i. Business failure or reduction in business
j. Job Relocation
k. Damage to Property
l. Incarceration
m. Other
18. CONTACT YOUR LENDER
See if they will allow you to do a short sale and still make your
payments (this of course is optional but it may reduce the hit to your
credit score. Many sellers will discontinue making payments on a home
that is under water.
19. IF YOU HAVE RECEIVED A TRUSTEE NOTICE
You typically have 90 days from receipt to get the sale date
postponed/extended or your home will be foreclosed. To do this you need
a valid offer on your property OR bring the loan current.
20. PROMISSORY NOTES, 3RD PARTY SERVICERS, MORTAGE INSURANCE, 2ND
LIENS (HELO’S), REFINANCED LOANS, CHARGE-OFFS, LOANS WITH DIFFERENT
BANKS AND OTHER WILDCARDS
CALL US TO DISCUSS
21. LENDERS MAY HAVE DIFFERENT LEVELS OF SHORT SALE NEGOTIATION BASED
ON DELINQUENCY PERIOD
CALL US TO DISCUSS
22. FHA GUIDELINES THAT MAY ALLOW PURCHASE OF NEXT HOME WITH FHA
FINANCING IMMEDIATELY UPON COMPLETING SHORT SALE – GUIDELINES CHANGING –
CALL US TO DISCUSS
a. Must be Primary Residence.
b. Must be current on Mortgage and other installment debts at time of
Short Sale
c. Proceeds of Short Sale must serve as payment in full.
d. Not eligible if pursued Short Sale to take advantage of a declining
market and purchased similar property at reduced price.
e. Visit http://www.usa.gov/Agencies/Federal/Executive/HUD.shtml
23. THE SHORT SALE PACKAGE (AZ)
A. Letter of Authorization (for 3rd Party agent to negotiate with lien
holder(s) on your behalf.
B. Financial Information
a. 2 most recent tax returns – 1040’s
b. If self-employed – 2 most recent 1099’s
c. 2 most recent pay stubs
d. 2 most recent bank statements
e. Profit & Loss statement (Net Sheet) if self-employed or small
business owner
f. lienholder short sale package.
C. Hardship letter (as outlined in 15 above)
D. Purchase Contract, Counter offers, Other addenda
E. Any Broker listing agreements
F. Title/Escrow company – HUD-1 breakdown
G. Buyer’s Pre-Approval letter (LSR) or if ALL CASH - Proof of Funds
letter.
24. SHORT SALE FEES AND COSTS ARE TYPICALLY FREE TO SHORT SALE
SELLERS. THERE ARE EXCEPTIONS. CALL US TO DISCUSS.
a. Listing Brokers negotiate their commissions with the lien holder(s).
b. If Short Sale fails, Broker does not get paid.
c. The 1st Lienholder USUALLY covers most of the closing costs and taxes
and lien release to 2nd, but MAY NOT COVER delinquent Home-owner
association costs/fees.
25. COSTS SELLER MAY INCUR – CALL US TO DISCUSS AS THERE ARE OTHER
WAYS TO POSSIBLY GET THESE COSTS COVERED OR PARTIALLY COVERED
a. Delinquent HOA dues (though sometimes they are covered by first
lienholders)
b. HELOC deficiencies
c. 1st lien deficiency waivers
d. Loans that have been ‘charged off’ to 3rd party servicers, loans with
Mortgage Insurance, HELOCS.
e. Seriously delinquent loans may require seller/buyer participation to
settle.
***IMPORTANT***AN EXPERIENCED SHORT SALE AGENT
WILL ATTEMPT TO NEGOTIATE TO HAVE BUYER PAY SOME OR ALL OF THESE COSTS.
NO GUARANTEES OF COURSE. WITH FORECLOSURE THERE IS NO SUCH OPTION.
26. SHORT SALE SCAMS
A. The Reverse Flop – Short sale agent attempts to make the home look as
terrible as possible to influence a negative appraisal and reduce value.
Agent may be the buyer or there will be a ‘Straw Buyer’ used to complete
the transaction. Home then cleaned up and put back on market at higher
value. This is fraud.
B. The Straw Buyer – any transaction in which the buyer is not
transparent or arms length and whereby a lowball offer is written and
then a 2nd higher offer is obtained much closer to value and the
property is flipped simultaneously at the higher value at close of
escrow. Many times sellers are not aware. This is fraud.
27. WE HAVE NEGOTIATED MILLIONS IN DEFICIENCY WAIVERS AND HAVE CLOSED
OVER 98% OF OUR SHORT SALES
28. SHORT SALES ARE COMPLEX. EACH ONE IS DIFFERENT. PLEASE CALL US
FOR YOUR FREE, NO OBLIGATION SHORT SALE CONSULTATION TODAY.
480-451-3318
DISCLAIMER
The information provided on this website is for general informational
purposes only. We are not qualified to give Tax or Legal or Credit or
Financial advice. It is strongly recommended the User verify with a
professional/expert, including, but not limited to, certified public
accountants, tax advisors, real estate, bankruptcy or tax attorneys and
licensed mortgage brokers, to review the ramifications and potential
liability prior to entering into a Short Sale,
Deed-In-Lieu-Of-Foreclosure, Foreclosure or Bankruptcy. The authors of
this site are based in Arizona and much of the information, while
general in nature, may apply more directly to Arizona than other states.
The User understands Elton Realty, LLC and its agents or affiliated
brokers cannot guarantee a satisfactory outcome from any negotiations
with Users lenders. Further, the User expressly releases and holds
harmless Elton Realty, LLC, its agents and any affiliated Brokers from
any liability User may incur as a result of the any processes named
herein.
IMPORTANT SHORT SALE BUYER TIPS
1. Find out foreclosure date. If no offers on property – the closer to
this date without an offer, agent more likely to present a discounted
offer to bank to get date postponed.
2. Let the bank decide what the value is. If you can get the listing
agent to submit your offer – anything can happen with an appraisal
3. Find out how many loans the seller has. If home equity line of credit
it could make negotiations more difficult as the 2nd will have recourse.
Still if price is right, might be worth a try
4. Submit multiple offers. This some listing agents will take small
earnest deposits up front to hold the property during the negotiation
period with bank. It still may be worth it – as a buyer to submit a few
offers and see which deal is best
5. Have your agent find out if the Seller’s loan has mortgage insurance.
If so, they generally will have stricter settlement requirements that
may make closing more difficult, but certainly not impossible we have
closed many deals with mortgage insurance and 2nd liens (HELOCS)
6. You still have your rights under the purchase contract. Not only can
you obtain a great value but you can inspect the home to help make sure
you’re not purchasing a nightmare – which can happen down at the
courthouse steps very easily as there is no inspection period when you
buy down there
7. Review the entire process and what can be expected with your
agent/attorney prior to moving forward.
8. The most intense part of the negotiation process with the banks is
just prior to the issuance of their approval letter. Many times agents
will need to negotiate out deficiency waivers – this comes at a price.
Sometimes buyers need to decide if it is worth it to them to ‘pitch in’
to get the deal done. Many times it is. Remember keep your eyes on the
big prize.
SHORT SALES ARE COMPLEX. EACH ONE IS DIFFERENT. PLEASE CALL US FOR YOUR
FREE, NO OBLIGATION SHORT SALE CONSULTATION TODAY. 480-451-3318
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