This signifies that I have received specialized education and training to be recognized as a Certified Distress Property Expert (CDPE).
This signifies that I have received the National Association of Realtors Short Sales & Foreclosure Resource certification. One of the designations that the Arizona Department of Real Estate suggests that you seek when looking for a Realtor to assist with a Distressed Property.
I also spend numerous hours in continuing education, seminars by real estate Lawyers, and Tax professionals, all to sharpen and keep updated on the ever continuing changing practice of Distressed Properties real estate. It is very important you use a Realtor that understands, practices, and continues to stay current with the best practices and standards of Short Sales along with other options for Distressed Properties.
If you are investing in these types of properties, it is extremely helpful and efficient to use a Realtor that specializes in Distressed Properties and can bringing that knowledge to the equation to filter out the higher potential success Short Sales and REO (Lender Owned) properties. Also I maintain the connections needed to tap into the Foreclosure market in Pinal and Maricopa counties.
What is a Short Sale?
When you sell your home for LESS than the amount owed to satisfy the outstanding balances on ALL your mortgage loans, which are loans in which a Lender has used your home for security of the loan.
What is a “Strategic Default”?
Not paying your Mortgage Payment by choice!
“Strategic Default” is a new term that defines those homeowners who recognize a tremendous financial disadvantage of retaining their home and continuing to make mortgage payments when their home is greatly “up sided down” or meaning the current value and foreseeable future value is determined to be significantly LESS than the existing mortgage loan. In other words, they CAN make their mortgage payment, but perhaps struggling to do so, yet choose to use Short Sale first and if not successful, then allow a Foreclosure of their home as a financial decision.
As you can imagine there has been great controversy regarding the use of Short Sales and Foreclosure to effect a Strategic Default. Even many traditional Realtors are resistive to Strategic Defaults and simply will not help homeowners if this is the case. The controversy has produced many debates and discussions but perhaps the best clarity of the matter can be summoned up by a UofA professor Brent T White in his paper titled “The Morality of Strategic Default” a very good documentary called “Inside Job,” and then taking a look at what your tax dollars are doing in the following short video about OneWest Bank. This video actually caused a Media storm and Congressional concern! So take a look at the video that captured the attention of the Media and Congress and got average Americans really…..really…. I mean REALLY…..upset!
If you really want to know the details of how this past booming real estate market got rolling and subsequent crash, grab the best selling book by Michael Lewis “The Big Short ” and read the Harvard Thesis written by Anna Katherine Barnett-Hart dated March 19, 2009, titled “The Story of the CDO Market Meltdown: An Empirical Analysis .” After reviewing these writings, you may never trust Wall Street again. You may also wonder why everyone seemed to make huge profits then when things crashed, got bailed out by our government with many that would seem responsible then went on to receive high paying jobs to clean up the mess!
Why do I feel guilty about doing a Short Sale or even possibly allowing a Foreclosure?
Usually you are struggling with the stigma broadcast by Lenders, Wall Street, Media, and possibly moral teachings that may or may not apply in this case.
Brent T White, law professor at the University of Arizona, stated it best as quoted….”Underwater homeowners who keep making their payments have received little help , even though the only mistake that most made was to buy a house at the wrong time. Major banks, on the other hand, were bailed out for grossly irresponsible behavior. Many of them are now, as a result, raking in billions of dollars in profits again. Yet they have still largely refused to help underwater homeowners by voluntarily modifying mortgages – despite the great benefits doing so would provide for the homeowner, the economy, and society. Banks, which were shown great mercy in the bailout, have shown little mercy for underwater homeowners.” (pg.38 Underwater Home by Brent T. White)
OneWest Bank
So Should I do a Short Sale?
Maybe! Each person and family situation may not be the same.
Before deciding to do a Short Sale, make sure you know ALL your options! The Arizona Department of Real Estate now requires Realtors to provide Short Sale candidates and Clients with a lengthy disclosure document that provides you with a number of resources and assistance sites to help in your decision. You can review that document called Short Sale Seller Advisory I personally recommend my Clients also seek competent legal advice and frequently refer them to the Buck Law Firm PLC located in Gilbert. I DO NOT receive any financial or other gain if you use them or any other referral from my sight! I also recommend you seek tax advice from a CPA or similar professional especially in light of the Mortgage Debt Relief Act of 2007 (that runs through 2012) passed by Congress to help alleviate the tax consequences of Short Sales and Foreclosures.
There are a number of reasons that Lenders usually allow as a basis to grant a Short Sale. The most frequent is of course a Financial Hardship. There are a number of other allowable reasons and if your thinking Strategic Default then it gets much more difficult to justify. This is where you really need a consultation with a Realtor who has the experience and dedication to help you find a solution.
Obviously the note holder will want to see as much information as needed from you to justify allowing you to Short Sale. Things such as a Hardship Letter, Current Financial Statement, past TWO years Tax Returns, W-2s, recent Bank Statements, Pay Stubs, and if possible, evidence that you had tried to obtain a Forbearance, Loan Modification, or other program to relieve your financial mortgage stress.
When should I do a Short Sale?
As soon as you decide this is the proper solution! Do not WAIT!
Congress passed a Debt relief act in 2007 that runs through 2012 (The Mortgage Forgiveness Debt Relief Act and Debt Cancellation) which can have a huge impact on your ability to Short Sale and not have to declare the loan deficiency difference as INCOME!!! The last thing you need is then to have the IRS asking for taxes on the amount of the loan you finally got out from under and did not pay back! So you might qualify to take advantage of this limited time tax break, as most people do.
If I do a Short Sale, what other concerns or things should I know?
One of your biggest concerns will be how the Deficiency (the difference from what you owe and the price a Buyer is willing to offer for your home, or the LOSS) will be handled by your Lender(s) if they accept a Short Sale offer. Will the Lender want to retain the right to seek this loss from YOU at a later date (possibly up to 6 years in Arizona) or will the Lender be willing to waive the right to seek this loss from you in the future? As your Realtor I will ALWAYS seek a full release from pursuit of deficiency as a condition of a Short Sale approval by the Lender.
A fairly recent program to encourage Homeowners to use Short Sales as a solution, and the most recent one from your Federal Government, is called HAFA (Home Affordable Foreclosure Alternative) which is an extension of a previous and still existing program called HAMP (Home Affordable Modification Program) or better know as a Modification, which has not worked out too well. The following video gives a quick overview of the HAFA program and it’s benefits for those Mortgage Loans and Homeowners that qualify.
Whichever program your Short Sale runs under, HAFA or Traditional, you will have to understand that Lenders are under a heavy Short Sale workload and thus it takes sometimes 60 to 90 days from the time you actually get an offer on your home, just to get an answer or acceptance from a Lender. These times are getting quicker but it is very important to make sure that the Buyer we choose to accept, and his Agent, has a clear understanding and ability to wait out the results without pulling the offer. This again is where your Realtor comes in and will advise you in the terms and conditions required of your Buyer so as to hopefully hold them to the Short Sale process long enough to reach a conclusion.
What if my home goes to Foreclosure before I can Short Sale?
This is always an issue in any Short Sale. Lenders will NOT usually stop any foreclosure already in motion just because they have been informed that you have decided to do a Short Sale. They will usually postpone, or re-schedule a foreclosure date, if they receive an OFFER on your Short Sale. There is no requirement for them to do this but most will. Even if your Lender does postpone a foreclosure date due to an Offer on your Short Sale (this assumes the Offer came to them not too close to an existing foreclosure date), some will not even admit to a postponement (only that they have requested it) as this limits their exposure to liability if a mistake is made and your home is actually auctioned! Having your Realtor keep on top of this can be extremely important! One recent development was FHA coming out and stating that if you did NOT try to Short Sale before a FHA loaned home went to Foreclosure, as in walked away, then FHA is threatening to not allow you an FHA loan for 7 years!
What will it COST ME to do a Short Sale?
My professional services to consult, advise, and run your Short Sale will not cost you anything! Your Lender will pay me to help you!
I have been told by some of my Clients that some Agencies are charging upfront thousands of dollars, asking for payments, or picking up “negotiating” costs! A number of Agents actually just list the property then send your Short Sale to a “Team” or some Title Agency service for various levels of handling and will get updates to send to you. There may be some additional fees paid at closing either by you or your Lender for these additional services. Most home owners do not know that their Mortgage Lender will compensate all the Realtors involved, and usually pick up a portion of the Buyer’s closing costs. Though there is an enormous amount of paperwork, follow up, and time that Short Sales require of a Seller’s Agent who provides this service, I only receive payment from your Mortgage Lender upon a successful Short Sale of your home and require no payment from you!
Again, since the Lender pays me, not YOU. That keeps me and my group highly motivated to work for your Short Sale success and stay really focused on results!
Recently there has been a trend in Lenders asking for the Homeowner to bring some cash to closing, or take back a promissory note that is greatly reduced from the original loan your getting out of. I do ask my Clients to please use whatever portion of their mortgage payment they are not making, or decide not to make, be placed in an account they do not use so as to have some funds for any cash at closing that their Lender might demand.
