Monday, September 24, 2007

Steps to a Short Sale

1. Call your lender or give a written agreement to your real estate agent for permission to speak with your lender on your behalf. The agreement, which can be a power of attorney, should specify the property address and loan number. Your agent will also need the last four digits of your social security number for verification with your lender. You or your agent should ask the lender if they will consider a short sale before beginning.
2. Place the property on the market for fair market value. Most lenders will only consider offers that are at least 75-80% of what the property appraises for, based on their independent appraisal.
3. When you get a contract, ensure that it states it is "contingent on seller's mortgage holder's approval". Sign the contract.
4. Send the contract to the bank with the following documents: mortgage pre-approval letter for the buyer, hardship letter which explains why you need a short sale, financial worksheet itemizing all income and expenses (may be provided by lender), last two years tax returns, recent pay stubs, recent bank statements, copy of agent's listing agreement, copy of MLS printout, estimated net sheet.
5. Expect to wait two to eight weeks for final approval from the bank "negotiator". During this time the lender will order an independent appraiser or broker price opinion of the property.
6. If approved, the lender will provide a letter with instructions to the title agent regarding the reduced pay-off amount. Typically, the lender will absorb all closing costs including conveyance taxes and broker fees. Escrow monies, however, may not be returned to the borrower, such as for taxes and insurance, and will be retained by the lender to cover some of the loss.
7. Consult your accountant regarding tax implications of a short sale. The forgiven debt may be considered income, and taxable by the federal government.

Let me know if I may provide assistance in this matter.

Short Sales

Foreclosures and delinquency rates for mortgages are occurring in record numbers, many due to teaser-rate mortgages now adjusting upward after the housing boom of two to three years ago. Investors purchased properties either hoping to "flip" them for a profit in a short period of time, or to earn income from rentals. Higher taxes and insurance costs are making it increasingly difficult for borrowers to keep up with these payments. This is especially evident on the Emerald Coast of Florida. Now that prices have significantly decreased, these owners are in a predicament. Many have negative equity, i.e. owe the lender more on the mortgage than the property is worth. When this is the case, and the borrower needs to sell, one solution is a "short sale". The lender may allow the homeowner to sell the property for less than the mortgage payoff. The loss is either completely written off by the lender, a payment arrangement is made with the borrower, or a lump-sum for a potentially lesser amount is agreed to. The lender will make its determination based on the financial status of the borrower. For example, if the borrower has enough income and has been keeping up with payments, the lender may not be as motivated to make such an arrangement. Or, if the borrower has liquid assets that would cover the loss, the lender may not be amenable to a short sale.

Sunday, September 9, 2007

It's That Time Again

I have about two weeks to complete the required continuing education credit for my Florida broker license renewal. The license is active for two-year periods, then has a deadline of September 30 of odd-numbered years (for me) to pass coursework to renew the license. Again, I have waited until the last minute. I had the option of taking in-room class instruction or reading a book and passing an exam. I usually use the book. I did take one class for renewal this year, about the new Florida Association of Realtors contract for purchase and sale of real estate. I felt the instructor got so carried away with telling stories that weren't relevant, that I didn't get my money's worth, nor was I taught all the changes. I had to read and study the contract by myself. Maybe that's why I like the book and exam method better. In-room courses don't even require a written exam, just simply being in class gives credit for an agent renewing his license. With the study book, I do have to "pass", although it is open book. This year I chose Bert Rodgers as the course provider. The materials are more interesting than in previous years. Currently I am reading about the development process in Florida. The chapter has alse delved into the causes for real estate growth in the United States from a historic perspective from the early 1900's. Did you know the advent of the automobile, specifically the Ford Model T, caused the first major spurt of housing development in our country? I'll write more about that in one of my email newsletters. If you would like to subscribe, email me at itswendy@rulnickrealty.com. Meanwhile, wish me luck in my weekend studies!