Short Sale, Foreclosure or Loan Modification Options – Procedures

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Short Sale, Foreclosure or Loan Modification Options – Procedures

Before you decide whether a Short Sale, Foreclosure, or Loan Modification for your Bryan College Station home is the best choice for you, hopefully you will have researched and read my previous posts (links shown below). Be sure you know what the long-term effects will be for your decision.

For this post, let’s assume that you have decided that a Short Sale is your very best option.  What steps do you need to take?

Find a Qualified Real Estate Professional – Realtor!

Discuss a Short Sale with your agent. Are they familiar with how it works? Has the agent ever processed a Short Sale? Do they know how to work with lenders to get you through the process? Do they also handle foreclosures? Do they regularly do BPOs? (Broker Price Opinions)

Investigate Documentation and Eligibility

Each lender has his or her own set of rules concerning who will qualify for the Short Sale. Normally, the lender will require proof that you are not financially capable of repaying the loan. The lender needs to be convinced that it would be better to agree to let you sell for less than what is owed on the loan than to foreclose on the property.

How Much is still Owed on the Property?

All costs should be considered before you decide whether a Short Sale will work. What is the outstanding balance? What are the late fees? Do you have additional liens against the house through a 2nd lien, home equity loan, or tax lien? Have you paid your property taxes? What about the costs of sale such as escrow fees, legal fees, real estate marketing fees, title insurance, etc.? Remember that if you have more than 1 loan on the property, all lenders will probably be involved and approvals from all of them will be required.

What is the Estimated Fair Market Value?

Before the property sells, proof will be required to show that the home is worth less than the unpaid loan balance. Keep in mind that you may not get anything when it sells! Your Realtor should help you estimate the value of the property.

Legal Advice

Finding competent legal advice is very important if you think you may need it or have any questions. An attorney can give you advice on the best option for you.  The Realtor can help you through the Short Sale process, but due to licensing issues, we are unable to provide any legal advice.

A Short Sale May Not Discharge the Debt

Even if everyone agrees to the Short Sale, you may still owe the difference between what is owed and what the lender gets when the property sells. It doesn’t matter if you are working with the FHA, the VA, or another lender – they are under no obligation to forgive the debt. The lender could agree to accept a Short Sale and release the lien rather than agree to accept the purchase price as “full and final settlement of the debt.” Be sure you know what you are agreeing to before you make your decision. You may want to contact an attorney to find out if the lender may pursue a deficiency judgment. Request any debt forgiveness agreements from the lender in writing!

Tax Advice Needed

A Short Sale where a debt is forgiven is a relief of debt, which could be treated as income on your income tax.  The Mortgage Forgiveness Debt Relief Act of 2007 created some exemptions where some homeowners do not have to pay any taxes on the debt forgiveness. But, only certain loans and people will qualify for this relief. Make sure you get more information from a tax professional!
http://www.irs.gov/individuals/article/0,,id=179414,00.html

Credit Score Issues

The level at which the Short Sale affects your credit score will depend on several factors – how many payments did you miss? How many payments were made late? Did you get a full release or just a release of lien?  The Short Sale may be reported on your credit report as “pre-foreclosure redemption,” “paid in full for less than full balance,” or something similar.

Possible Waiting Period Before You Can Buy Again

There may be a waiting period before another lender will loan you money to purchase another home.

Home Affordable Foreclosure Alternative (HAFA) Program

Fannie Mae’s HAFA Program – This program was set up to give homeowners several alternatives to foreclosure. For more information:
www.makinghomeaffordable.gov/hafa.HTMLOptions  for which you are eligible :
www.makinghomeaffordable.gov/eligibility.HTML

Which lender participates in HAFA?
www.makinghomeaffordable.gov/contact_servicer.HTML

National Association of Realtors HAFA Brochure
www.realtor.org/wps/wcm/connect/3400520042baa210a512b4db880d7c/HAFA+consumer+brochure+6.3.10pdf?MOD=AJPERES&CACHEID=340052004baa210a512b5d4db880d7c

Guidelines and Forms
Www.hmpadmin.com/portal/programs/foreclosure_al
ternatives.HTML

Fannie Mae’s HAFA Program
Www.efanniemae.com/sf/servicing/hafa/index.jsp

I hope everyone who reads my posts on Short Sales in the Brazos Valley is able to make their house payments or sell for a profit, but if you can’t please call and let me help you through this process!  I work for several lenders who have asked me to meet with homeowners who are behind in their payments and see how I can help them stay in their homes. The number one problem I encounter when I meet with homeowners is that they will not work with me to get information to the lender. Please talk with me as soon as you begin to get behind – don’t wait! Short Sales occasionally take months and months to process, and some lenders will not wait or put off the foreclosure that long.
Susan Hilton College Station Real Estate

Susan Hilton
Century 21 Beal, Inc.
979-764-2100

 

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