The Short Salessr.snphom.es/.../2013/08/Short-Sale-Presentation.pdfWhen a mortgage servicer I...
Transcript of The Short Salessr.snphom.es/.../2013/08/Short-Sale-Presentation.pdfWhen a mortgage servicer I...
The Short Sale:
A Graceful Exit
Hint: It has nothing to do with the length of time the sale
transaction takes!
When a mortgage servicer I investor (like Bank of America)
agrees to accept a discounted payoff in order to
accommodate a real estate sale. In all cases, the value of the
property is less than the amount owed.
How does a homeowner benefit from a
short sale?
• Less negative impact on the borrowers credit
• Eliminate or reduce their mortgage debt
• Can possibly qualify for a Fannie Mae home
loan in 2 years with 20%down
What is a Short Sale?
A short sale minimizes their losses in comparison to a foreclosure.
Who is eligible for a short sale?
• Borrowers that can prove a hardship that has caused them to either become
delinquent on their mortgage or delinquency is inevitable.
• Borrowers whose mortgage debt is greater than the value of the property.
• Borrowers who are insolvent (debts exceed their net worth and bills are more
than their income).
Why would a mortgage servicer or
investor agree to a short sale?
Step 1. Talk to a reputable, experienced real estate professional
about your situation. Only work with a company that is experienced
in short sales.
Step 2. If short sale is an option, list the property for sale at near fair
market value.
Step 3. Procure an offer near fair market value with a qualified buyer.
Step 4. Submit the offer, settlement sheet (HUD-1 ), the financial
disclosure, last 2 bank statements, last 2 pay stubs, last 2 years tax
returns, hardship letter, and third party authorization to the mortgage
servicer I investor.
Step 5. Wait way too long for the mortgage servicer/investor to
approve the short sale in writing. If there are multiple loans, all loans
need to approve the short sale.
Step 6. Study the verbiage in the short sale approval letter and
consult a real estate or bankruptcy attorney and a tax professional
about the potential consequences of the terms therein.
Step 7. Assuming the borrower decides to go forward, the real estate
professionals and the buyer work toward closing the transaction in
the time specified by the mortgage servicer I investor and mortgage
insurance.
What is the Short Sale Process?
How long does it take for a home
to be foreclosed in Nevada?
In todays market, a short sale usually takes anywhere from 4- 6 months depending
on the circumstances (i.e. foreclosure status, buyer commitment, types of mortgage
loans, etc.).
Do mortgage servicers or investors always approve
short sales? No. In some rare cases the mortgage servicer I investor I mortgage insurance will not
agree to a short sale. Many times it is the 2nd mortgage or an HOA lien holder that
does
What does a short sale CO$T the homeowner? Generally, nothing. However, in very few cases, the mortgage servicer I investor will
request a cash contribution from the borrower in order to agree to the short sale.
Will a borrower be responsible for the deficiency
balance (forgiven amount) after the short sale closes? On the approval letter, the mortgage servicer I investor can either agree to release
or fully satisfy the deficiency debt. Release means the debt may be collected via
deficiency judgment or third party collection company. Full satisfaction disqualifies
the debt from ever being collected.
How long does a short sale
usually take start to finish?
Yes. On recourse loans, (purchases, refinances and non purchase HELOCs) the in-
vestor may attempt to pursue collect of the deficiency. My goal as your agent is to
achieve full satisfaction on any and all liens.
Does a homeowner have to pay taxes to the IRS on the
forgiven amount? The mortgage investor is required to send the borrower a 1099-C for the forgiven
amount. This forgiven amount is considered income to the borrower. However, two
major exclusions exist. First exclusion: HR 3648 The Mortgage Forgiveness Debt Relief
Act Under HR 3648, if the amount forgiven was on a mortgage loan that was used to
buy, build, or substantially improve a primary residence, the borrower will more than
likely not have to pay taxes on this amount.
Note: Please consult a tax professional about the specific details of this exclusion.
Second Exclusion: Under108 (a)(1)(B) The insolvency exception: Under 108(a)(1 )(B) a
borrower may not have to pay taxes to the IRS on the forgiven amount if they are
deemed insolvent at the time of the debt discharge. This is not a real estate specific
exclusion and is not restricted to a borrowers primary residence.
Note: Please consult a tax professional about the specific details of the exclusion
Can a distressed homeowner initiate a short sale as a
backup while waiting for a loan mod to be approved?
Most loan servicers I investors will not permit a borrower to attempt two foreclosure
relief options at the same time. This is why it is very important to have a strategy in
place in the event the loan mod is not approved or takes too long to gain approval.
Is Nevada a deficiency a recourse state?
Features:
• Borrowers receive $3,000 relocation incentive
• Short sales gain a uniform and streamlined process
• Loan servicers I investors pre-determine the list price
• Investors waive right to pursue deficiency (on all liens)
• Loan servicers I investors participation is voluntary
Eligibility Requirements:
• Must be on primary residence
• Loan amount must be $729,750 or less
• Loan investor must be participating in program
• Monthly mortgage payment must exceed 31o/o DTI
• Must be in default (60 days late +)or default is eminent
What about junior liens? 2nd mortgages (junior liens) can receive up to 6o/o of their outstanding loan balance
up to $6,000 total, in exchange for releasing their liens (optional participation also).
Example: a $50k second mortgage would receive $3,000 to fully satisfy under HAFA
HAFA - The Home Affordable Foreclosure Alternative
Launched April 5, 2010
Is your loan owned by Fannie or Freddie? Lets find out
now...
www.FannieMae.com/1oanIookup www.FreddieMac.com/corporate
• Borrowers cannot have cash reserves more than $5,000 or 3xs the total
mortgage payment amount.
• HAFA short sale may not be considered if the borrower is not 60 days
late. (Freddie)
• HAFA short sale may not be considered if the property is within 60 days
of foreclosure. (Fannie)
• Borrowers must consider and apply for all other home retention options
first (i.e. loan modification).
• More differences between the Treasury version and the
GSE versions exist.
Fannie Mae and Freddie Mac’s HAFA
A short sale is very similar to a traditional sale in many ways. Actually, the only major
difference is that the loan servicers I investors must agree to the terms of the sale
(i.e. sales price, commission, closing costs, etc.) in order for us to complete the
transaction. If foreclosure avoidance is a priority, and a loan modification is out of
the picture, a short sale is a great way to move on and start on the road towards
financial recovery.
Final Thoughts
I would like the opportunity to help you with a short sale
in order to solve your current mortgage situation
• I have the experience, the training, and the resources to help
you cross the short sale finish line!
• Have I clearly explained the short sale process?
• Do you have any questions about the short sale process?
• If a short sale is right for you, may I have the privilege of being
the listing agent for your property?
Short sale in a nutshell
• Go over listing contract and disclosures
• Go over the short sale submission package
• Go over a custom strategy for your property
• Take pictures of the property
• Take notes on property amenities, details, and facts for the MLS
• Discuss showing instructions
• Discuss my marketing strategy
• Walk you through an estimated timeline of your short sale
• Explain the escrow period and how I deal with offers
How long does a short sale
usually take start to finish?
Additional agenda items
The following are suggestions for attorneys and CPAs to contact for
information.
Michael D. Bosma, CPA
The Bosma Group, PC.
5575 Kietzke Lane
Reno, NV 89511
775-786-4900
Ron Avery, CPA
450 Marsh Avenue
Reno, NV 89509
775-333-9922 ext. 102
Jason Morris, ESQ. Woodburn
and Wedge
6100 Neil Road, Ste. 500
Reno, NV 89511
775-688-3000
Paul C. Deyhle, Partner
McDonald, Carano, Wilson, LLP
100 West Liberty St. 10th Floor
Reno, NV 89501
Time Nelson, CPA
Evans, Nelson & Company
50 Continental Drive
Reno, NV 89509
775-825-6008
Resource Directory
Mark G. Simons
Robison, Belaustegui, Sharp & Low
71 Washington Street
Reno, NV 89503
775-329-3151