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Jennifur & Brent Newell
Platinum Integrity Real Estate

20474 W Canyon Dr
Buckeye, AZ 85396
Phone: 623-826-7968
Fax: 623-218-1241
Email: jennifurshomes@gmail.com
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Short Sale 101

WANT TO KNOW YOUR OPTIONS?

THINKING ABOUT SHORT-SELLING?

 

The current U.S. housing market and financial crisis have caused tremendous stress and heartache for families across America. If you or someone you know is among the millions today affected by the prospect of foreclosure, understand that you are not alone.

Unfortunately, too many of Maricopa County homeowners facing foreclosure proceed without the assistance or advice of real estate professionals. Now more than ever, you need to find an advocate for you and your family's interests, one who is prepared to handle your specific needs.  Every situation is different, every lender is different, with over 18 years of combined experience in the Phoenix west valley, we fully understand the market our clients are facing.

Real estate professionals with the Certified Distressed Property Expert Designation (CDPE) have trained extensively to understand the options, solutions, and effective methods for dealing with homeowners facing hardships. Don't risk your financial future and the potential sale of your home with a real estate agent who does not have all the solutions.  Certified Distressed Property Experts fully understand that saving a home can save a struggling family, which can save a future.

Homeowners regularly proceed without guidance of any kind through the often financially and emotionally devastating prospect of foreclosure. Speaking with a well-informed, licensed real estate professional is the best course of action for a homeowner in distress. Through comprehensive training and experience, Certified Distressed Property Experts have the tools to help homeowners find the best solutions for their unique situations and to avoid foreclosure through the efficient execution of a short sale.

We are here to help and time is of the essence.  It's important to reach out as soon as possible, even if you aren't late on your payments, even if you're not sure what to do...We can help you make the right decision for you and your family.  Our goal and mission is to  help our clients through the tougher times of today's market and get back on their feet as seemless as possible.

Short Sale SolutionsCertified Distressed Property Experts don’t merely assist in selling properties, they serve and help save their clients in need.  According to a 2010 member survey by the Distressed Property Institute, LLC, agents with the CDPE Designation average seven times more listings and four times more closings than the average Realtor.

 

 

Jennifur Newell - info@jennifurshomes.com

Brent Newell - newell.brent@gmail.com

 

Phoenix Short Sale Myths


 

PHOENIX SHORT SALES: MYTHS

Short Sales are Impossible and Never Get Approved

Nothing could be further from the truth!

  • Are short sales more difficult? Yes.
  • Do you need to learn a new process? Yes.
  • Are they impossible? ABSOLUTELY NOT!!!

With Hundreds of Successful Short-Sale Closings behind us, we urge you to contact us as soon as possible, as time is of the essence.

Banks are Not Accepting Short Sales

The reality is that banks (and the government) are trying to do anything they can, within reason, to avoid foreclosing on property. To think that they would deny a Short Sale in hopes that some future legislation will pass and pay them for their loss is preposterous.

The reality is that more banks are aggressively pursuing Short Sales and agents (like the one who gave you this report) who understand how to process them. Freddie Mac recently hosted a national training webinar for real estate agents where they expressly stated the organizational goal of "eliminating distressed assets through modification or short sale".

I'm Embarrassed to do a Short-Sale

It is understandable that you may have reservations about letting the world know that you owe more on your home than it is worth however, understand that according to recent estimates, 1 out of 5 homeowners in the US is in your exact situation. You are to be congratulated for admitting you need help, taking action, and finding a professional who can work with you towards a solution.Listing my Home as a Short Sale is an Embarrassment

With 40 to 60% of the sales in the US predicted to be Short Sales or foreclosures you are not alone!

You Must be Behind in on your Mortgage in Order to Negotiate a Short Sale

While it is true that initially some lenders wanted you to be in default (missed a payment) before they were willing to consider a short sale - this trend has almost all together reversed. Today lenders are looking for verifiable hardship, monthly cash flow shortfall or pending shortfall and insolvency.

If you meet these three requirements and are in a position where you will soon not be able to afford your mortgage, act now! Don't wait until the countdown clock to foreclosure has started and you have even less time left.

Buyers are Not Interested in Short Sales and Avoid Them

This is a myth that potential sellers hear all the time - thankfully the reality is that today it is not. In fact many agents are getting calls from buyers who say "I only want to look at foreclosures and Short Sales!"

Short Sales and Foreclosures have become synonymous - not with issues - but with GOOD DEALS. International buyers specifically are interested in these properties. If you list with the educated CDPE agent who gave you this report you have a very good chance of seeing a contract on your property, soon.

There is not Enough Time to Negotiate a Short Sale Before My Foreclosure

This is a myth that probably hurts homeowners the most. Many don't realize that foreclosure is a process and there is time.

The foreclosing party (in most cases a lender) can stall a foreclosure up to the final day of the process. These days many lenders will stall a foreclosure with as little as a phone call from you letting them know that you are trying to sell. Almost all lenders will stall a foreclosure with a legitimate contract, in our view there is always time until the foreclosure process is complete and final.  We are motivated to represent you as our client and always have our clients needs and concerns met in every one of our transactions.  As you are our client, not the lender.


 

SHORT SALE vs. FORECLOSURE

 

ISSUE

FORECLOSURE

SUCCESSFUL SHORT SALE

Future Fannie Mae Loan-

Primary Residence

(Effective 5/21/08)

A homeowner who loses a home to Foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.

A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 years.

 

Future Fannie Mae Loan-

Non Primary

(Effective 5/21/08)

 

An investor who allows a property to go to Foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years.

 

An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

 

Future Loan with any Mortgage Company

 

On any future 1003 application, a prospective borrower will have to answer YES to question C in Section VIII of the standard 1003 that asks “Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?” this will affect future rates.

 

There is no similar declaration or question regarding a short sale.

 

Credit Score

 

Score may be lowered anywhere from 250 to over 300 points. Typically will affect score for over3 years.

 

Only late payments on mortgage will show and after sale mortgage will be reported as paid or negotiated. This will lower the score as little as50 points if all other payments are being made. A short sale’s affect can be a brief as 12 to 18 months.

 

Credit History

 

Foreclosure will remain as a public record on a person’s credit history for 10 years or more.

 

Short sale is not reported on a credit history. There is no specific reporting item for ‘short sale’. The loan is typically reported ‘paid in full, settled’.

 

 

Security Clearances

 

Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIA, Security, or any other position that requires a security clearance in almost all cases clearance will be revoked and position will be terminated.

 

A Short Sale on its own does not challenge most security clearances.

 

Current Employment

 

Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure in many cases is ground for immediatereassignment or termination.

 

A short sale is not reported on a credit report and is therefore not a challenge to employment.

 

Future Employment

 

Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.

 

A short sale is not reported on a credit report and is therefore not a challenge to employment.

Future Employment

Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge employment.

A short sale is not reported on a credit report and is thereforenot a challenge to employment.

Deficiency Judgment

In 100% of foreclosure (except in those states where there is no deficiency) the bank has the right to pursue a deficiency judgment.

In some successful short sales it is possible to convince the lender to give up the right to pursuit a deficiency judgment against the homeowner.

Deficiency Judgment (amount)

In a foreclosure the home will have to go through an REO process if it does not sell at auction. In most cases this will result in a lower sales price and longer time to sale in a declining market. This will result in a higher possible deficiency judgment.

In a properly managed short sale the home is sold at a price that should be close to market value and in almost all cases will be better than an REO sale resulting in a lower deficiency

 

 

Real Estate Short Sales Facts


What is a Short Sale?

According to the Arizona Association of Realtors®, “The term ‘short sale’ is used to describe a sale in a situation where there is more debt owing against a property than the property’s value. In a loan default situation, (pre-foreclosure) the creditor(s) may be willing to agree to allow the property to be sold for less than the loan amount and/or accept less than (or “short”) the amount owed as payment in full.”

II. Why do Short Sales Work?

Fundamentally, a Short Sale is a bank authorized alternative to foreclosure. It is not an alternative to a sale. The basic idea is that instead of getting foreclosed on, you sell your property at a price and terms and conditions satisfactory to you and your lender. This can usually take place under the following conditions:

  1. You are unable to continue making payments due to some hardship (divorce, death, loss of job, health, etc).
  2. The amount owed on your house is greater than what Buyers are willing to pay in this market.

The bank is often more willing to take a reduced amount in a short sale rather than take the property back through a Trustee’s Sale. The banks are in the lending business, not the property ownership business.

Foreclosure vs. Short Sale

  • A Foreclosure in Arizona usually occurs in the form of a Trustee’s Sale. Because we have Deeds of Trust instead of Mortgages, when a Buyer borrows funds from a Lender, they agree to let the Lender SELL the home if they default. The party entrusted with this sale is a Trustee. When a property is taken back due to default, the Lender attempts to sell the property at a Trustee’s Sale to wholesale property investor/buyers. If the property does not sell, the Lender now becomes owner of the property and must attempt to sell it themselves as a Bank Owned (REO) property on the open market.
  • A Short Sale bypasses this step by allowing the Owner of the property to sell the property BEFORE the Trustee’s Sale takes place. The sale is contingent on the Lender’s approval of the terms and amount of the sale. Because the net dollar amount to the Lender in a Short Sale is usually higher than the net amount in a Trustee’s Sale or REO sale, they are usually more inclined to accept the offer and let the sale take place.

III. Short Sale Stages

One of the most commonly asked questions is whether or not a Seller needs to be behind in payments to do a Short Sale.

Because Short Sale considerations are always as a result of some kind of hardship, Lenders expect that the hardship results in an inability to pay the Lender because they can’t afford to. IF the Borrower is making regular monthly payments, it defeats logic that there is a hardship. The exceptions to this are porce, Death, Incarceration, Deportation or some other event that can’t be remedied and is date certain to take place.

Remember, a Short Sale is for someone who NEEDS to sell due to hardship, but CAN’T sell due to market conditions (property value). The following outlines a typical series of events that take place as a Borrower moves fromHardship to Trustee’s Sale (Foreclosure)

Hardship

Something changed that had effect on the financial health of their household. This could be something temporary (job loss, job change, health need, increase of debt, decrease of income) or something permanent (divorce, death, incarceration, deportation).

Soft Default

Due to the hardship, the borrower begins to fall behind in payments to the Lender. The missed payment will trigger a call from the Lender to remind the borrower that the payment is due and to find out why they are not making the payment.

Workout Solutions

When the Borrower informs the Lender of the hardship circumstances, the Lender may offer a variety of workout solutions aimed at helping the Borrower retain ownership of the house. These solutions can be a revised payment plan, refinance or other solution to help the Borrower bring the account current. If the Lender sees that the hardship is a permanent one, they often will advise the Borrower to pursue a Short Sale with a qualified Real Estate Agent.

Hard Default

After attempting some workout plan with the Lender and either defaulting from that plan or being denied the plan altogether, this will usually trigger more of a hard line relationship with the Lender. Unless and until the Borrower brings the account current, the Lender will turn the heat up with calls and letters demanding repayment and threatening foreclosure and judgments. This can go on for several months.

Foreclosure Department/Notice of Default

At some point the Lender will determine that the Borrower is not able to or not going to remedy their situation. The ONLY solution for the Lender at this point is to move the file into their foreclosure department and issue an official Notice of Default which informs of a coming Notice of Trustee’s Sale.

Notice of Trustee’s Sale

Once a Borrower receives a Notice of Trustee’s Sale, it will state a FIXED date of Auction. The Notice will come in the form of certified mail or even physically posted on to the front of the house. The name of the Trustee will be disclosed and the date and location of the sale. This date is 90 days from the notice as required by law. NOTHING changes that date except the account being brought current or the Lender postponing it because of a Short Sale they are evaluating.

Trustee’s Sale - SOLD

At the sale, the Lender (via the Trustee) attempts to sell the property for some price above their minimum opening bid price. This price is some percentage of value the Lender has determined they are willing to sell for instead of taking the property back for it to become Bank Owned.

Anywhere between Hardship and Trustee’s Sale is where a short sale offer can be negotiated with the bank. The steps for a Short Sale have the same basic steps for all real estate transactions. You List the property, you Contract with a Buyer and then you Close Escrow. The added dimension is the Bank/Lender Negotiations and Approval.

Short Sale FAQ

How long does this take?

The process can take 60-120 days to get a buyer, get approval and get it closed. You can still reside in the property until it closes escrow, and in some cases even rent the home back from the Buyer.

Will the Bank seek to recover the amount of loss?

The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted. In many instances this is not allowed on the 1st position loan for a primary residence. To determine whether a pending foreclosure or short sale is subject to a deficiency judgment, you should talk with a real estate lawyer. Ultimately, your agreement to do a Short Sale is between you and your bank. They will disclose if there is any liability to you.  It is imperative that in a Short Sale the approval letter from your bank to sell the home includes "no deficiency balance is due and all deficiency will be waived". 

Are there tax liabilities?

Some banks will issue you a 1099 tax statement according to bank policy and/or current law showing their loss as your gain. In other words, you may be liable for taxes as if you earned the amount the bank lost. In many cases there is already financial hardship and as a result there is little if any tax impact. You will want to check with a tax accountant to determine how that will impact your tax return/payment. http://www.irs.gov/individuals/article/0,,id=179414,00.html

Will this impact your credit or prevent you from buying a home again?

Your credit will reflect a debt settled, and could be there for up to 7-years. However, unlike foreclosure, this will reduce your credit score but will not impact your ability to obtain credit or buy a house again in the future. You will likely NOT be able to do business with the same bank again, however.

What will it cost me to start this process?

Our goal is nothing out of pocket for all our short sale sellers, as the bank will normally pay most fees associated with selling the home.  Occassionally I do see Lenders asking for HOA payments and fees to be paid for or caught up by the seller.  If at all possible, it's a good idea for sellers to try to maintain the property and stay current on HOA dues.   Of course, we will do everything we can to make sure that no costs are associated to you for the sell of your home.  You may have other choices as well, please feel free to call me anytime to discuss your current situation.  Please remember time is of the essence and we can only help sooner than later.

 

Jennifur Newell (623)826-7968
Brent Newell (623)826-6319
JennifursHomes.com 
info@jennifurshomes.com

*These answers are accurate but not guaranteed due to all Mortgage Companies, Banks, Municipal, City, County and State laws differ

Real Estate Mortgage Anti-deficiency Laws

 

Arizona has two laws which prevent certain lenders from seeking a "deficiency judgment" for certain types of residential loans. The laws are commonly known as "Anti-Deficiency Laws" and may allow you as a real estate owner and debtor to walk away from a property without owing a deficiency judgment amount.

If your house is secured by a Deed of Trust, generally then the lender may not recover any deficiency if (1) the property is 2.5 acres or less; (2) it is used for a single one family one family residence and (3) is sold pursuant to the Trustee's power of sale. In the unlikely circumstance that the home is secured by a mortgage (instead of a Deed of Trust) the same criteria applies. There is one wrinkle in the case of a mortgage or a deed of trust and that involves a home owner who causes a reduction in value of the property by not taking care of it or damaging it. Commercial properties and vacant land are not protected by these laws. VA loans and FHA loans have special considerations and may not be covered by these statutes because of federal law.

The protection of the Anti-Deficiency Laws for home owners apply whether the property is your primary residence or not. As long as the property is 2.5 acres or less and is being used as a single one or two family residence, the owner is often but not always protected from a deficiency.

What happens if, like many homeowners, you took advantage of increasing property values and low interest rates to refinance the loan? Do the anti-deficiency laws apply when there is a default in payment of that loan? Again, it depends. The answer turns on whether the loan is secured by a purchase money security device such as a deed of trust or mortgage.

The leading case in Arizona on this issue is Bank One of Arizona, N.A. v. Beauvais. That case suggests that a typical refinance loan keeps the character of a purchase money loan and is protected. This result could be different if the refinance added funds to the original loan. A consolidation loan where a first purchase money loan and a second loan are bundled together into a single loan, the protection would still apply where the first loan is larger.

What about a home improvement loan or home equity loan? This presents a problem for the home owner. A separate loan that is taken out for a purpose other than to buy the property is not a "purchase money" loan and therefore the anti-deficiency laws do not prevent a lender from waiving its security and suing the homeowner directly.  We at Platinum Integrity Real Estate fight to get all deficiency balance waived in writing on the bank Approval Letter to Short Sale.

If a home owner fears that he or she does not qualify for this anti-deficient exception, one way a deficiency judgment may be avoided is by deeding the property back to the lender prior to foreclosure and securing a release. This is known as a deed-in-lieu of foreclosure. By accepting the deed, the lender is agreeing to accept the property for the amount that the person owes, thus eliminating any potential deficiency.  

This article is a short summary of the law and there are many issues which may affect the application of these laws to the facts of your scenario.  Please feel free to call us directly and we can discuss your personal 



Jennifur & Brent Newell | 623-826-7968 | Contact Us
20474 W Canyon Dr - Buckeye, AZ 85396
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