NO SPOOKY SHORT SALES
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Friday, October 29, 2010
Friday, October 22, 2010
SHORT SALE FAQ'S
1. What is a real estate short sale?
A real estate short sale is a term of art and not necessarily a legal term. A short sale is an agreement between a borrower and their bank to accept an amount less than what is owed to them in exchange for allowing the borrower to sell their home. The mortgagee would accept less than the loan amount to avoid a foreclosure proceeding. This process is a legal solution available to borrowers that are not able to make their agreed upon monthly payments and would otherwise be unable to sell their home since their loan balance(s) may be more than the value of the home.
2. How long does a short sale take?
The short sale process can be lengthy and time consuming. The lender will require the borrower to provide detailed financial information to ensure a short sale is appropriate. While each situation is unique, it is not uncommon for the short sale process to take between 60-120 days to complete from the time an offer is submitted on the home.
3. What documents are necessary to proceed with a short sale?
The documents required to proceed will vary by lender, but most lenders will require a hardship letter in which the borrower outlines the specific circumstances as to why they cannot afford the mortgage payment. Lenders will also require copies of bank statements, pay stubs, prior year tax returns and a financial worksheet, among other things.
4. Will the seller’s credit rating be affected if they do a short sale?
It is up to the individual lender to decide what is reported to the credit bureau, and there is not a legal requirement as to how the lender must report it. With that said, it is advantageous to negotiate with the lender a s to how they will report this event to the credit services so that the negative impact to your credit score is minimized. This is one big advantage of a short sale over a foreclosure.
5. Will the lender allow the seller to make a profit on the short sale?
By the nature of the transaction, the lender is typically losing money, and so the lender will rarely allow a seller to make a profit. There are exceptions, such as if you qualify for Home Affordable Foreclosure Alternative (HAFA), which may allow the seller to receive some profit from the sale to assist with moving expenses.
6. If the seller is in Bankruptcy, will that affect the short sale process?
Yes, as most lenders consider the short sale process a collection activity being negotiated which is prohibited under bankruptcy, however, it is possible to continue to list the property while in bankruptcy, subject to some restrictions.
7. What is a Deficiency Judgment, and how will it affect me??
The difference between what a borrower owes their bank and what the bank agrees to accept as part of the sale of the property is the deficiency. Some lenders will waive all or a portion of the deficiency, which may create tax implications (see below). Other lenders may require the borrowers to pay a portion of the deficiency, either by bringing money to the closing, or by signing a note and making payments.
8. Are there tax implications in the short sale of real estate?
Again, this varies by lender. If a lender chooses to waive the remaining balance owed by a seller, the lender will most often issue a 1099-C on the debt forgiveness. This may result in tax liability. See IRS publication 4681
9. Why would a lender approve a short sale?
Foreclosing on a property is very costly for a lender. There are delays and expenses associated with the foreclosure process, and once complete, the lender will still have to sell the home. A short sale allows the property to be transferred to a buyer without the extra time and expense.
10. What if I am already in pre-foreclosure?
There may be time to still request a short sale option from you bank, but it is important to act quickly and not delay. The professionals at lawAvania stand ready to assist you, and offer a free, initial consultation to help determine if a short sale is right for you. Simply contact us to find out more.
A real estate short sale is a term of art and not necessarily a legal term. A short sale is an agreement between a borrower and their bank to accept an amount less than what is owed to them in exchange for allowing the borrower to sell their home. The mortgagee would accept less than the loan amount to avoid a foreclosure proceeding. This process is a legal solution available to borrowers that are not able to make their agreed upon monthly payments and would otherwise be unable to sell their home since their loan balance(s) may be more than the value of the home.
2. How long does a short sale take?
The short sale process can be lengthy and time consuming. The lender will require the borrower to provide detailed financial information to ensure a short sale is appropriate. While each situation is unique, it is not uncommon for the short sale process to take between 60-120 days to complete from the time an offer is submitted on the home.
3. What documents are necessary to proceed with a short sale?
The documents required to proceed will vary by lender, but most lenders will require a hardship letter in which the borrower outlines the specific circumstances as to why they cannot afford the mortgage payment. Lenders will also require copies of bank statements, pay stubs, prior year tax returns and a financial worksheet, among other things.
4. Will the seller’s credit rating be affected if they do a short sale?
It is up to the individual lender to decide what is reported to the credit bureau, and there is not a legal requirement as to how the lender must report it. With that said, it is advantageous to negotiate with the lender a s to how they will report this event to the credit services so that the negative impact to your credit score is minimized. This is one big advantage of a short sale over a foreclosure.
5. Will the lender allow the seller to make a profit on the short sale?
By the nature of the transaction, the lender is typically losing money, and so the lender will rarely allow a seller to make a profit. There are exceptions, such as if you qualify for Home Affordable Foreclosure Alternative (HAFA), which may allow the seller to receive some profit from the sale to assist with moving expenses.
6. If the seller is in Bankruptcy, will that affect the short sale process?
Yes, as most lenders consider the short sale process a collection activity being negotiated which is prohibited under bankruptcy, however, it is possible to continue to list the property while in bankruptcy, subject to some restrictions.
7. What is a Deficiency Judgment, and how will it affect me??
The difference between what a borrower owes their bank and what the bank agrees to accept as part of the sale of the property is the deficiency. Some lenders will waive all or a portion of the deficiency, which may create tax implications (see below). Other lenders may require the borrowers to pay a portion of the deficiency, either by bringing money to the closing, or by signing a note and making payments.
8. Are there tax implications in the short sale of real estate?
Again, this varies by lender. If a lender chooses to waive the remaining balance owed by a seller, the lender will most often issue a 1099-C on the debt forgiveness. This may result in tax liability. See IRS publication 4681
9. Why would a lender approve a short sale?
Foreclosing on a property is very costly for a lender. There are delays and expenses associated with the foreclosure process, and once complete, the lender will still have to sell the home. A short sale allows the property to be transferred to a buyer without the extra time and expense.
10. What if I am already in pre-foreclosure?
There may be time to still request a short sale option from you bank, but it is important to act quickly and not delay. The professionals at lawAvania stand ready to assist you, and offer a free, initial consultation to help determine if a short sale is right for you. Simply contact us to find out more.
Wednesday, January 20, 2010
Law Avania is pleased to announce a new process we have instituted to assist Listing Agents and their clients in navigating the Short-Sale process.
Many of you no doubt had to deal with the extra hard work and frustration that comes with Short-Sale listings. Many of you are also discovering that in addition to the extra work, delay and frustration, there is potential liability for you, as the agent, that you may not be aware of.
* Deficiency Judgment filed against your client that was not disclosed
* Tax Liability resulting from the debt forgiveness that was not disclosed
* Client unable to secure financing on another home for three or more years following the short-sale based on the trade language used on their credit report
* Attempting to negotiate the above items with your clients lender, which could be construed as the unauthorized practice of law
Law Avania will-
* Perform a preliminary title search to determine what liens affect the property
* Gather and submit the documents required by the lender to approve the sale
* Prepare a preliminary HUD 1 Settlement Statement
* Request a pre-approval from the sellers lender in order to shorten the process, and complete the sale faster
* Negotiate the terms of the Short-Sale
By allowing Law Avania to provide this service for your seller, you are able to focus on SELLING PROPERTY!!!
PLEASE CONTACT US FOR FURTHER DETAILS!! 1-877-LAW-AVAN
Many of you no doubt had to deal with the extra hard work and frustration that comes with Short-Sale listings. Many of you are also discovering that in addition to the extra work, delay and frustration, there is potential liability for you, as the agent, that you may not be aware of.
* Deficiency Judgment filed against your client that was not disclosed
* Tax Liability resulting from the debt forgiveness that was not disclosed
* Client unable to secure financing on another home for three or more years following the short-sale based on the trade language used on their credit report
* Attempting to negotiate the above items with your clients lender, which could be construed as the unauthorized practice of law
Law Avania will-
* Perform a preliminary title search to determine what liens affect the property
* Gather and submit the documents required by the lender to approve the sale
* Prepare a preliminary HUD 1 Settlement Statement
* Request a pre-approval from the sellers lender in order to shorten the process, and complete the sale faster
* Negotiate the terms of the Short-Sale
By allowing Law Avania to provide this service for your seller, you are able to focus on SELLING PROPERTY!!!
PLEASE CONTACT US FOR FURTHER DETAILS!! 1-877-LAW-AVAN
Monday, January 18, 2010
Moving beyond STATISTICS to a SOLUTION
A recent article in the Charlotte Observer reported that there were 3,045 final foreclosures in Mecklenburg County in 2009. That same article went on to report that foreclosure filings in the county were up 52% over the previous year*, which means that number will most assuredly increase this year.
These figures are not surprising to most of us in the real estate profession. We have seen the drop in home values due to these sales and have watched home after home become empty and unoccupied as REO inventories rise. This, along with tightening credit markets, has helped to create a slow down in the housing market, one that we have all experienced.
While we have been affected from this slowdown, we may have not have ever been witness to the devastating effect these foreclosures have on a family that has been forced to leave their home. Many of these families end up living with friends, family, or far too often, a homeless shelter.
Right now in Charlotte, it is estimated that nearly 8,000 individuals are homeless, with nearly 3,000 of those being children. These are more than just numbers; these figures represent neighbors, co-workers, class mates, fellow Charlotteans, each with a name, each with a face, each with dreams and aspirations.
For 2010, Law Avania has committed to donating a portion of its attorney fees for all residential purchase transactions to help eliminate homelessness in Charlotte. These donations will be provided to the W.I.S.H. Program (http://www.wishprogram.org/), which operates under the care of Crisis Assistance Ministry. The WISH program is designed to rapidly re-house homeless families into vacant units, which in turn reduces the trauma that engulfs them during this traumatic ordeal, while at the same time, creating a holistic social network and planning that helps ensure financial stability for the that family for the future.
Many of you in the real estate profession are also involved in combating this issue, either through financial contributions, or by volunteering your time to one of the may wonderful organizations in existence that are committed to ending homelessness.
As real estate professionals, we have a unique opportunity to both help our friends and neighbors, who have been rendered homeless, and to assist in strengthening and stabilizing our own industry. By involving ourselves in activities and organizations that are helping families, not only are these families benefited, but our industry as a whole is strengthened as these families progress back to becoming homeowners.
Law Avania's marketing approach is to invite real estate professionals and their clients to "EXPERIENCE THE DIFFERENCE" we offer in a real estate closing transaction. We want to extend and broaden that invitation and invite all members of the real estate profession to get involved and "EXPERIENCE THE DIFFERENCE" that will be made when we join together as a profession. It takes a home to end homelessness, and that is what we all are in the business of providing.
For those interested in finding out more about ways to get involved with the other projects that Law Avania is involved in including THE FREE STORE, or in sharing your ideas or experiences, please contact us at our TOLL FREE HOTLINE at 877-LAW-AVAN.
These figures are not surprising to most of us in the real estate profession. We have seen the drop in home values due to these sales and have watched home after home become empty and unoccupied as REO inventories rise. This, along with tightening credit markets, has helped to create a slow down in the housing market, one that we have all experienced.
While we have been affected from this slowdown, we may have not have ever been witness to the devastating effect these foreclosures have on a family that has been forced to leave their home. Many of these families end up living with friends, family, or far too often, a homeless shelter.
Right now in Charlotte, it is estimated that nearly 8,000 individuals are homeless, with nearly 3,000 of those being children. These are more than just numbers; these figures represent neighbors, co-workers, class mates, fellow Charlotteans, each with a name, each with a face, each with dreams and aspirations.
For 2010, Law Avania has committed to donating a portion of its attorney fees for all residential purchase transactions to help eliminate homelessness in Charlotte. These donations will be provided to the W.I.S.H. Program (http://www.wishprogram.org/), which operates under the care of Crisis Assistance Ministry. The WISH program is designed to rapidly re-house homeless families into vacant units, which in turn reduces the trauma that engulfs them during this traumatic ordeal, while at the same time, creating a holistic social network and planning that helps ensure financial stability for the that family for the future.
Many of you in the real estate profession are also involved in combating this issue, either through financial contributions, or by volunteering your time to one of the may wonderful organizations in existence that are committed to ending homelessness.
As real estate professionals, we have a unique opportunity to both help our friends and neighbors, who have been rendered homeless, and to assist in strengthening and stabilizing our own industry. By involving ourselves in activities and organizations that are helping families, not only are these families benefited, but our industry as a whole is strengthened as these families progress back to becoming homeowners.
Law Avania's marketing approach is to invite real estate professionals and their clients to "EXPERIENCE THE DIFFERENCE" we offer in a real estate closing transaction. We want to extend and broaden that invitation and invite all members of the real estate profession to get involved and "EXPERIENCE THE DIFFERENCE" that will be made when we join together as a profession. It takes a home to end homelessness, and that is what we all are in the business of providing.
For those interested in finding out more about ways to get involved with the other projects that Law Avania is involved in including THE FREE STORE, or in sharing your ideas or experiences, please contact us at our TOLL FREE HOTLINE at 877-LAW-AVAN.
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