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SHORT SELL OR LET BANK FORECLOSE?

  There are several factors to consider when facing foreclosure, owe more on your Mortgage than house is worth or can not afford the payments.  It may seemeasier to throw up your hands and let the bank take your house yet it may not be the wisest thing to do.

Short Sale Benefits Here are a few benefits for doing a short sale that may not have occurred to you:

  • You are in control of the sale, not the bank.
  • You may sleep better at night knowing that bank is not coming to kick you out.
  • You will spare yourself the social stigma of the “F” word, foreclosure.
  • Contrary to popular belief, you can be current on your payments and still effect a short   sale.
  • Your home sale will be handled like any other home sale.

Buying Again After a Short Sale

If your payments have never fallen behind 30 days late and the lender does not require that you pay back the loan, Fannie Mae guidelines may allow you to buy another home immediately. Finding a lender who will fund that kind of loan is very difficult. If you are current on your mortgage, you can qualify for an FHA loan immediately as well, but lender requirements can be weird such as you have to move more than 600 miles away.

If your payments are in arrears yet a short sale is granted by your lender, you may qualify to buy another home with a Fannie-Mae backed mortgage within two years, regardless of whether the home is your primary residence. The wait for FHA is 3 years.

Buying Again After a Foreclosure

With certain restrictions, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years.

If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years.

Affects on Credit After a Short Sale

A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word “short sale” on your credit report. It may say “paid in full for less than agreed” or “settled for less,” among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points.

Major point drops are typically due to being in default, meaning you have fallen behind on your payments.

 Affects on Credit After a Foreclosure

Depending on your credit history and other guidlines, Myfico.com shows 2 examples in which a credit score could fall 105 points to 160 points after a foreclosure. Generally, a foreclosure will remain on your credit report in the tradelines section for 7 years.

Credit Reports After a Short Sale

All lenders report short sales differently, with many reporting “paid in full for less than agreed,” and some report the short sale as a charge off. Negative credit, however, stays on your report for 7 years.

Credit Reports After a Foreclosure

If a prospective employer runs a credit check on you, your job application may be denied if you have a foreclosure on your record.

Deficiency Judgments After a Short Sale

Judgments are often negotiated between the seller and the short sale bank. In some cases, such as California, if the home is your personal residence and was financed through purchase money, there is no deficiency judgment.

Deficiency Judgments After a Foreclosure

Banks are generally unwilling to negotiate deficiency judgments with the homeowner after a foreclosure. InCalifornia, for example, according to the California Association of REALTORS, a deficiency judgment may be filed regarding a hard-money loan if the lender forecloses under a judicial foreclosure versus a trustee sale or if the second loan is a hard money loan and the sale takes place as a trustee’s sale.

Loan Application Questions After a Short Sale

Loan applications do not ask questions about a short sale. You may report that you sold your home.

Loan Application Questions After a Foreclosure

You are required to answer the question: “Have you ever had a property foreclosed upon or given a deed-in-lieu thereof in the past 7 years.” If the bank sees you have had a foreclosure, your loan most likely will be denied. If you lie, you may be subject to investigation by the FBI for mortgage fraud.

Length of Time to Move After a Short Sale

If you’ve had a foreclosure notice filed, you may be able to postpone that action while the bank considers your short sale. The wait for short sale approval can be from 2 to 3 months, or longer.

Length of Time to Move After a Foreclosure

Unless prior arrangements have been made, the bank may want you to immediately vacate the property and can commence eviction proceedings.

Taxation After a Short Sale

A personal residence is exempt from mortgage debt relief until the end of 2012 on a federal level. Some states will still tax you unless you qualify for an exemption. An investor is not exempt from mortgage debt relief, subject to certain conditions.

Taxation After a Foreclosure

Same as with a short sale. Except some lenders immediately send out 1099s, even if the owner is exempt.

In closing, always obtain legal and tax advice before making a decision between a short sale or a foreclosure.

Call me with any questions and/or for a free consultation,

ADRIANA CORDERO
CSSA, Certified Short Sale Agent

Adriana.Cordero@NEMOVES.COM

                                                                       

 

 

 

 

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What in the World is a Short Sale???

 

In a short sale, you sell your home for less than you owe. 

There are several reasons why a Homeowner will benefit from a short sale. The most important one being getting the lender to forgive any remaining debt. This can get especially tricky if there is a second mortgage, but it’s not impossible to wipe out deficiencies on both first and second mortgages. While it would seem to be common sense for a lender to accept a short sale rather than allowing a home to go into foreclosure, where losses could be even greater, it’s not always easy to convince a lender—or lenders—to agree.

There is a  government-initiated short sale program Home Affordable Foreclosure Alternative (HAFA). I have worked with many clients in Massachusetts after the real estate market took a nose dive.  HAFA is making a real difference and is beneficial for those who qualify. If all parties agree, the (remaining) debt will be forgiven and the seller will walk away with $3000 at closing. For those who don’t qualify for HAFA, lenders may still be willing to negotiate a short sale, but it could leave the seller on the hook for a deficiency.

Overall, it is getting easier to get a short sale approved and closed. Many servicing Banks have invested in partnerships with vendors who can assist with processing short sale packages electronically which has improved the pace of short sales and the chances the homeowner’s documents will not go missing. In other banks, the short sales have become easier because of the hiring of much-needed staff to man the phones, review the borrower’s documents, and analyze the files. Some banks are still adjusting to the overwhelming number of  HAFA applications.

Short Sales are definitely not a Do It Yourself Adventure. Short sales involve extensive documentation, and the borrower must be able to document a hardship. All that paperwork can be to the detriment of the homeowner who wants to get out of a bad situation. “Typically a short sale won’t be approved if you have a retirement plan that could be drained, or the income to support the payments on the mortgage,” warns John Maddux, CEO of  Youcanwalkaway.com . The paperwork involved in a short sale should also be reviewed by an Attorney familiar with the process..

Making sure the prospective Buyer is committed to the purchase and willing to wait the extra time it takes for approval is a MUST. Most Short Sales are sold “AS IS” and Buyers should be encouraged to conduct inspections before signing the Purchase contract.  The worst possible scenario is that the homeowner hires professionals, completes all of the paperwork the bank requires, obtains the short sale approval, and then the buyer walks away with the homeowner getting nothing for their efforts and time the property is taken off the market.

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Home Inspection

<h2 style=”text-align: center;” ><strong>Getting A Home Inspection </strong></h2> <p><strong><br /></strong></p> <p><img title=”First-Time Home Buyer Programs” style=”margin: 0px 30px 0px 20px; border: medium outset #49a2de; float: left;”  alt=”getting-a-home-inspection” src=”http://www.firsttimehomebuyerguidance.com/images/stories/getting-a-home-inspection.jpg”  height=”170″ width=”230″ /></p> <div></div> <p>If you are in the process of <a href=”http://www.firsttimehomebuyerguidance.com” >buying your first home</a>, you may be wondering whether or not you need a home inspection. Especially if you have contracted with a real estate agent to act as a buyer’s agent on your behalf or are considering buying a new home, you may have doubts as to whether the expense associated with having a home inspection is necessary. You may also be afraid to ask for a home inspection for fear of offending the sellers or their real estate agent. You may think bringing up the subject of a home inspection might endanger the sale or make the seller less likely to negotiate with you. All of these concerns are common among potential home buyers, and all of them need to be addressed before you move forward.·</p> <h3><strong>An Agent’s Insights Might Not Be Enough</strong></h3> <p>A <a href=”http://www.realtor.com/” >real estate agent</a>, who is working for you, as opposed to a listing agent who legally works for the seller, is called a buyer’s agent and is legally required to look out for your interests and share any negative information they may have about the home. While this is an excellent thing, it doesn’t go quite far enough when it comes to identifying structural defects. Your agent is not trained to recognize problems and won’t be entering the crawlspace or climbing onto the roof looking for problems like a home inspector might. New homes aren’t immune to problems, either, and a home inspector can point out shoddy building practices before it is too late.<br /> <br /></p> <h3><b>What A Home Inspector Might Look For</b></h3> <p>A home inspector can point out defects such as basement leaks, worn-out roofs, rotting floor supports or insect damage that will end up costing you thousands of dollars to fix if you discover them after the closing. Home inspectors can also identify potential trouble spots and make you aware of sub-par construction or repairs that are going to lead to high maintenance costs down the road. Home inspectors often are the ones who identify the presence of dangerous substances or conditions, such as lead paint, asbestos or radon. Sometimes they earn their fees almost instantly by giving you ammunition to use to negotiate a lower sales price based on their findings.·</p> <h3><b>It’s Not Personal</b></h3> <p>Although it may be difficult to mention to the sweet, elderly seller that you suspect defects in her precious home, and even more difficult to bring the subject up with her hard-driving <a href=”http://www.firsttimehomebuyerguidance.com/realtor-directory” >listing agent</a>, the truth is that you can order a home inspection without ever doing either. This is not a social arrangement; it is a business deal, and your buyer’s agent is an expert at handling this part of the transaction for you. He or she will inform the seller that there will be an inspection, and he or she will also handle the negotiations if the report comes back with negative information.·</p> <p>You needn’t worry that requesting a home inspection will make the sellers change their mind about selling the house to you. Your seller is in this to sell their home and make a profit. Few people will allow their pride to cost them the sale of their house, and, in any case, your agent will handle all the face-to-face negotiations. Besides, do you really want to pay too much for a home, however nice it may be? Skipping the home inspection can result in just that, and being upside down in a mortgage is a position no one wants to be in. Your home is your biggest investment, and it pays to know exactly what you are investing in before you put your money on the line.</p>

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Home Inspection

Getting A Home Inspection

If you are in the process of buying your first home, you may be wondering whether or not you need a home inspection. Especially if you have contracted with a real estate agent to act as a buyer’s agent on your behalf or are considering buying a new home, you may have doubts as to whether the expense associated with having a home inspection is necessary. You may also be afraid to ask for a home inspection for fear of offending the sellers or their real estate agent. You may think bringing up the subject of a home inspection might endanger the sale or make the seller less likely to negotiate with you. All of these concerns are common among potential home buyers, and all of them need to be addressed before you move forward.

An Agent’s Insights Might Not Be Enough

A real estate agent who is working for you, as opposed to a listing agent who legally works for the seller, is called a buyer’s agent and is legally required to look out for your interests and share any negative information they may have about the home. While this is an excellent thing, it doesn’t go quite far enough when it comes to identifying structural defects. Your agent is not trained to recognize problems and won’t be entering the crawlspace or climbing onto the roof looking for problems like a home inspector might. New homes aren’t immune to problems, either, and a home inspector can point out shoddy building practices before it is too late.

What A Home Inspector Might Look For

A home inspector can point out defects such as basement leaks, worn-out roofs, rotting floor supports or insect damage that will end up costing you thousands of dollars to fix if you discover them after the closing. Home inspectors can also identify potential trouble spots and make you aware of sub-par construction or repairs that are going to lead to high maintenance costs down the road. Home inspectors often are the ones who identify the presence of dangerous substances or conditions, such as lead paint, asbestos or radon. Sometimes they earn their fees almost instantly by giving you ammunition to use to negotiate a lower sales price based on their findings.

It’s Not Personal

Although it may be difficult to mention to the sweet, elderly seller that you suspect defects in her precious home, and even more difficult to bring the subject up with her hard-driving listing agent, the truth is that you can order a home inspection without ever doing either. This is not a social arrangement; it is a business deal, and your buyer’s agent is an expert at handling this part of the transaction for you. He or she will inform the seller that there will be an inspection, and he or she will also handle the negotiations if the report comes back with negative information. You needn’t worry that requesting a home inspection will make the sellers change their mind about selling the house to you. Your seller is in this to sell their home and make a profit. Few people will allow their pride to cost them the sale of their house, and, in any case, your agent will handle all the face-to-face negotiations. Besides, do you really want to pay too much for a home, however nice it may be? Skipping the home inspection can result in just that, and being upside down in a mortgage is a position no one wants to be in. Your home is your biggest investment, and it pays to know exactly what you are investing in before you put your money on the line.

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What is a Short Sale?

I am sure that most of you have heard the term short sale by now.  It appears to be synonymous with real estate as more home buyers discover the pros and cons of this type of transaction.  

A short sale is when a lender accepts a discount on a mortgage to avoid a possible foreclosure auction or bankruptcy. Instead of buying from a seller, you are purchasing the property directly from the lender for a discount. For example: A homeowner, who is facing foreclosure, has an existing first mortgage of $350,000.  The homeowner obtains permission from the Lender holding the mortgage to list the property at its present market value which is less than the $350,000. A buyer submits an offer to the Listing Realtor for $270,000 and it is submitted to Lender.  The lender accepts the $270,000 as full payment for the loan.  You may wonder why the Lender is willing to take such a discount.  There are several reasons why this makes sense to the lender.  First of all, banks do not like excess inventory and bad loans on their books; therefore, if they see an opportunity where they can sell the property without a huge loss, they will do it. Secondly, lenders know they could lose a lot more money if the property goes to auction. There are so many fees involved if the property goes to auction, that they would be better off taking the discount beforehand and be finished. 

Unfortunately for many homeowners, foreclosures are at an all time high, which basically translates into more opportunities for you. Since foreclosures are increasing, this is the perfect time to pursue a short sale because there will be more and more lenders discounting properties. It is safe to say that most lenders will accept a short sale; however, you may come across one or two lenders who will not discount. If the numbers work out for the lender they will do it.

Short sales are done when the property is in the pre-foreclosure state. After the bank has foreclosed on a property it is no longer a short sale.  The bank will manage the property through their Real Estate Owned (REO) department and place it on the market.  There are two stages within pre-foreclosure. The first stage being those individuals who are behind on payments and the second stage are those who are behind on payments with a notice of default. In order for this to work properly and for you to successfully get a short sale, you must find the homeowners who are in the second stage of pre-foreclosure or more than 3 payments behind on their mortgage. Once the notice of default has been recorded, banks become motivated as well, so you are more likely to get a discount. Until that time, very rarely will a bank ever discount a mortgage that soon.

It does not matter what type of house or condition it’s in, all mortgages can be discounted. The best properties to perform a short sale on are located in an area of high foreclosure rates. Properties that need a lot of work are also a good candidate for short sales. Some Properties have more than one mortgage; therefore approval is required from all Lenders.  It is important to work with an experienced Realtor to assure that all Lien holders are willing to accept a short sale.  Contrary to traditional sales, short sales take much longer but are usually worth the wait for the homebuyer.

 

Adriana Cordero, Your Realtor

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Some money moves make more sense in today’s economy

Turn on any television channel or just pop in to a local convenience store and you will feel the fear contaminating our neighborhoods. The uncertainty of our economy continues to produce job losses, foreclosures, divorces and increased crime rates . My focus always remains in what is the positive aspect of whatever may be going on and I particularly enjoyed the following article.

3 myths of conventional real estate wisdom

by Tara-Nicholle Nelson

Whether you’ve rented your whole life or own a portfolio of properties, you’ve undoubtedly heard the real estate saying, “Location, location, location,” which simply means that a home’s value is highly dependent upon, well, its location!

The timeless truth of this saying is beyond dispute, even in tough times like these for the housing market. The recessionary fates and foreclosure rates of an individual housing market are highly dependent upon the economic and employment prospects of that market, and even the desirability of an individual neighborhood or lot.

However, there are some other age-old pieces of real estate wisdom that haven’t stood the test of time as well as the location adage. Here are three pieces of conventional real estate wisdom that are due for a refresh.

1. Paying off your mortgage is bad. At the top of the market, many an infomercial pusher espoused borrowing against your home to buy more homes, creating an empire. While that worked for some, for awhile, you can see how that turned out.

But even now, traditional and conservative financial advisers still say that paying off your mortgage is not the best use of cash, as your mortgage interest is tax deductible, and the better use of the funds is to invest them for growth.

For folks who can and are inclined to pay their homes off, though, this rule is off-target. Paying off your home is less about making the most assertive financial move possible, and more about creating security, fixing a low set of living expenses, and hedging against economic and job market uncertainty.

The best practice in today’s economy is to make money moves that create maximum sustainability and minimum stress; if that means paying your mortgage off, then do it.

2. Don’t upgrade your house beyond the level of neighboring homes. Real estate insiders have long observed that buyers are hesitant to pay a premium to buy the best house on an otherwise modest block. And I’ve seen this in full effect, especially when the so-called best house is a three-story castle that has been expanded all the way to the fences, complete with turrets, spotlights and cherub statuary, on a street of one-story ranchers.

Customizing a home with bizarre features, beyond all reason, does make it harder to sell later. But adding features and upgrades that make your life in your home mirror your dream life, or create the comfort and lifestyle your family craves? If you can afford it without draining your home of equity or going into consumer debt, go for it, especially if you plan to be in the property over the long term.

It’s your home, not just another financial asset, and one of the major advantages of ownership is your ability to create a comfortable, personalized habitat for your life.

Don’t necessarily expect to get back your investment in upgrades dollar for dollar, and do avoid making bizarre customizations (hot tub in the living room, anyone?) unless you’re OK with reversing them when you do list the place for sale, but don’t hold back on creating a custom home experience for your family and your lifestyle because you heard it’s a bad investment.

3. The bigger the agent’s car/diamond/hair, the more successful she must be. The real estate industry is a-changing. More than 90 percent of homebuyers start their house hunt on the Internet. And that makes it much harder to tell at a glance who has the stuff to be successful at the endeavor of helping you buy or sell a home.

An agent who drives a Toyota and lacks Kardashian-style bling might even be more likely to have the technology skills it takes to market and sell your home in the Web-centric home marketplace, and to communicate with you via email, text and Facebook message — pick your poison — than the flashiest agent in town. Also, the agents who can hang in there and persevere on tough or small deals on today’s market are often the ones who have manageable expenses of their own.

When picking an agent, disregard your agent’s car, shoes and accoutrements (except maybe their tech tools: laptops, tablets and phones are important tools for them to have and use, prolifically).

So what does matter? Her track record of helping buyers or sellers similarly situated to you (e.g., her list-to-sale-price ratio or history of success at getting bank approval on short sales, if you’re selling a home, or her ability to close deals on bank-owned properties, if you’re buying).

Check prospective agents out by getting referrals from people you know that rave about their agent, checking online real estate forums to see if the agent is participating in online conversations about homes in your area, and asking for references from recent clients who can vouch for the agent’s skills.

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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