Tuesday, May 25th, 2010
Many Utahns falling behind on their house payments are being scammed by companies claiming to provide assistance in helping negotiate a loan modification with the mortgage companies. (more…)
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Monday, January 26th, 2009
As more and more homeowners find themselves facing foreclosure, government and lenders are working to make it easier for people to pay their mortgages. We have helped a few of our clients negotiate a loan modification with their lender, but not all lenders will modify the loan. Especially if the loan is not currently past due.
Here is a great article describing some of the efforts and challenges associated with loan modification.
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Monday, January 19th, 2009
SOME COMMON MISCONCEPTIONS ABOUT SHORT SALES
Many homeowners and agents alike don’t fully understand short sales. Here are some common misconceptions about short sales to help you wrap your mind around it.
Misconception: Lenders will not accept a short sale unless the homeowner is behind on their payments.
This simply isn’t true. As long as you can show the lender that you absolutely will eventually start to go behind, they will consider cutting their losses sooner than later. The reason’s may vary, just as long as you show them that is the case, you can make the nightmare be over sooner than later.
Misconception: Lenders will not accept an offer that is below fair market value….
Fair market value is what a buyer is willing to pay and a seller is willing to accept. Regardless of the final price, that is considered the fair market value. The amount owing on the loan has no bearing on fair market value. As long as it is in the lenders best interest to move forward with an offer, they will. It is definitely in the best interest of the lender to sell the home now to the buyer that is ready, willing, and able then it is to try to wait for a higher offer.
Misconception: Lender’s won’t except pennies on the dollar…
It depends on the situation, but it is definitely plausible to get a lender to accept 50 cents, or even 40 cents on the dollar. Again, it falls to the lenders best interest.
Misconception: A second mortgage will sign off on the short sale even if you don’t give them anything….
Not true. It takes employee time and money to sign off on paperwork. Would you do work for free? No. You must structure the short sale so that the second lien holder has incentive to participate.
Misconception: The bank will not accept an offer once they have turned it down…
Bank’s are often very large. One hand doesn’t know what the other hand is doing in many cases. Because they are so large they have many employees. Every employee has a manager. Manager’s can always override a decisions by their subordinates. If you can get through to someone who can override the original answer, you can get the sale approved. Remember, it’s all about what is in the best interest of the bank.
Misconception: Banks won’t pay for your agent….
Bank’s know there are selling costs. If they foreclose, they will have to pay an agent to sell the home. They would rather pay an agent now and sell it to a buyer that is ready. It’s all about cutting their losses.
Misconception: Lender’s would rather foreclosure than do a short sale….
Absolutely not! Lender’s generally have a much more significant loss by having to pay for foreclosure, maintain the property, and pay for another agent to sell it. The reason many short sales fail is because the agent is inexperienced and doesn’t know what they are up against. A good brokerage like Utah Full Service Brokers can help assure that your sale is almost always approved.
Misconception: A HELOC is just like any other second mortgage….
A Home Equity Line of Credit (HELoC) is nothing like a traditional mortgage. A HELOC functions more like a revolving credit card. It’s tied to the property. But it is also separately tied to the borrower. A HELOC can obtain a deficiency judgement and can collect payments for up to 20-years after the property has been foreclosed or sold. A HELOC lender will simply look at how much they can hope to collect over 20 years. If the offer has room for them to collect that much now, then they will most likely accept. If it doesn’t, then they will take their chances over the next 20 years.
Misconception: The property must be listed at full market value to get a short sale approved….
Lender’s aren’t monitoring the market. Market value is a relative term. They don’t know what market value is. Listing at market value and then having to reduce well below value at the end is more detrimental than listing slightly under market value (as defined by your agent) and getting an offer to the bank sooner.
Misconception: Lender’s won’t let you submit your “hardship package” until you have an offer….
Most lenders want you to believe this. They won’t want to have to spend time, energy, and money until they know they may get paid. However, as mentioned earlier, if you get past the initial droid that tells you that and move to their manager, you can often get them to review your hardship package even without an offer. Why is this important? Because it takes several weeks to review a hardship package, plus another few weeks to review an offer. If you can get half of the battle taken care of before the offer comes in, you will shorten the length of time required to complete the sale.
CONCLUSION
The conclusion is this. If you are in default of your loan or you know you may be in the very near future based on your current situation, a short sale is the cleanest, fastest, and most comfortable way to end your problems. Call me and find out why I am so good at helping homeowners negotiate with their banks to get the homes sold and the bank off the homeowners back.
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Friday, January 16th, 2009
…Continued from Short Sales Part 2
OPTION #2 – THE HOME IS FORECLOSED
As a result of either the inability to bring the loan current, or because the bank will not allow you to modify your loan to keep the home, the bank will continue into foreclosure. Once this happens, there really is no way to stop foreclosure without getting into a situation mentioned previously. It’s time to face the fact, the home is no longer going to be yours. It’s tough, but the sooner you accept it, the sooner you can put yourself into a position to make the most out of it.
The foreclosure process takes several months. That is beneficial to you because it gives you time. If you use the first few weeks wisely, then that time in turn gives you options. Ultimately the country Sheriff will post an auction notice on the door. The home will be sold to the highest bidder (the bank opens the bidding at the loan amount). You will want to be completely moved out of the home by the time the auction occurs. Shortly after the auction the Sheriff will appear at the home and have all the locks changed and remove people from the home.
Once the home is foreclosed the bank (or highest bidder) owns the home. Any equity you may have had in the home is now gone. Even if you put down a large down-payment when you purchased the home, you will lose it, and the equity the home may have gained.
A foreclosure is long and stressful, and there is an easier way.
OPTION #3 – YOU RECOVER WHAT YOU CAN
Once a homeowner comes to terms with the fact that they will be losing the home, they can start making arrangements to get the most out of a bad situation. No, that does not mean you can start taking valuable items such as the dishwasher and kitchen sink and sell it. That is against the law and you could find yourself in jail. It means you can sell your home — one way or another — and walk away in a much better situation than the alternative.
If you have enough equity in the home, you can sell the home. You may even walk away with some money. But what happens if you don’t have enough (or any) equity in the home? Can you still sell? Absolutely. It’s called a short sale. A short sale occurs when the total sales price of a home is less than the amount required to 1) pay off the mortgage, 2) pay the selling costs, & 3) cover any liens or any other expenses. It is called a “short sale” because the bank is going to “short” themselves in order to keep from having to complete foreclosure.
Why would the bank do this? Because the cost of going through a foreclosure, plus the cost of owning the home, plus the cost of reselling the home is going to be much greater than the cost of taking a loss and agreeing to sell the home for less than what is owed. They are cutting their losses so to speak, not to mention saving months of work for many employees.
A short sale is the best option for any homeowner that is heading towards foreclosure that wants to avoid months of pain and torment. The best part is they are easy. You just need to find a good agent, such as Utah Full Service Brokers, and they will take care of the rest. They will work with the bank (assuming you provide some information to the bank) and all you have to do is show the home and sign offers. The agents earn their commission, and the bank pays it. Your out of pocket expenses? Nothing.
Unlike trying to get a new loan, or dealing with an unscrupulous investor that cost you money, a short sale can put money back into your pocket. Since you are in foreclosure you are not making payments. And since you don’t have some tricky investor taking your money from you, that money is better put to use by you elsewhere. It’s a no brainer.
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Thursday, January 15th, 2009
OPTION #1 – BRINGING THE LOAN CURRENT.
Most homeowners don’t have the means to bring the loan current. Out of desperation they look for alternatives to foreclosure or short sales. They want to remain in the home. They dive head first into untamed infested waters carrying a raw, bloody piece of meat on their back and hope that sharks won’t attack. But they do. Here are a few standard scenario’s as to how a homeowner might incorrectly try to bring their loan current.
Borrowing the Money
An investor will loan you the money to bring your loan current, often at an outrageous interest rate. If you couldn’t afford your mortgage payment in the first place, what makes you think you could afford that same payment plus a second payment to another party? You can’t. Therefore you will default with them, and their contract will allow them to take over your position on your mortgage. They just ended up with your home and your equity, and you have to move out. Your cost? The loan fees you paid them just to ultimately end up in the same situation as you would have anyway.
Renting Your Own Home
Another course of action a homeowner might take to bring their loan current is to sell the home to someone and rent it back with the hopes of one day being able to re-purcashe the home. An investor will offer to buy the home from you. You will be allowed to rent from them and even build in a re-purcahse agreement if you want. Of course your new rent payment is going to be higher than your mortgage payment which you couldn’t afford in the first place. You will default. They will evict you, cancel your future purchase and sell the home for a nice profit taking all of your equity and putting it into their pocket. Your cost? Your higher than necessary payment and any equity which you might have hoped to get out of the home. All that to end up in the same situation anyway.
Refinancing
Many homeowners think “Oh, we’ll just refinance” once they get a notice of default. However, once the NOD is recorded on your credit, you will NOT be able to get a mortgage loan for at least 3 years. End of discussion. Game over. The End.
However, there will be plenty of mortgage loan officers promising to have a special solution just for people like you. All you have to do is apply. The application fee? Starting at $500 or even more…non-refundable. Why so high? Why non-refundable? Well, a credit report costs $20 and once they see a NOD on your credit, they know they can’t help you. So they take their time getting back to you just to tell you that it looks like it can’t work out in the end. They keep your steep application fee. They are out $20 and 20 minutes. You are out a large sum of money that would have been better spent as a rent deposit or paying another bill.
Honestly, the unscrupulous loan officer knew when you told them your situation that you weren’t going to get approved by a lender. But they wanted your application fee. They wanted you to “apply” so they could “officially” tell you “declined”. Oh, and if a loan officer does magically come up with a “lender”, it’s probably a “hard-money” lender. Which means a much higher interest rate than you had originally, payable over a much shorter time than you had originally. That means a higher monthly payment. And let’s face it, you couldn’t afford your current payment, so how is a higher payment going to help you?
The Solution to Bringing the Loan Current?
All of the approaches above will result in the same thing. You end up having to list your home for sale and moving out. Whether it is immediately or over several months after lots of valuable money lost is up to you. The only way to bring your loan current is to figure out first how to keep your loan from getting behind again and having a game plan to keep that from happening. Then you must get the money from a source that is not going to require repayment anytime soon. This includes a salary bonus, or a withdrawal from a 401K, savings account, investment account, or other retirement account. Without those resources, Option #1 isn’t going to fan out well. Sorry.
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Wednesday, January 14th, 2009
Being so prevalent in the market today, I am going to write several pages about foreclosure’s and short sales.
Foreclosures are nothing new in the real estate industry. True that there are a higher than normal amount, it still seems like many analysts and members of the media make it sound like it’s a terrible new phenomena that we have never seen the likes of before. The truth is, foreclosure’s have been around almost exactly as long as the first mortgage was issued many many years ago.
Foreclosures happen for a myriad of reasons. A major unexpected expense in a household such as a medical emergency or family emergency. A sudden loss of employment within a household. A change in the lifestyle of a family such as a new family member being welcomed in. And many other reasons. However, the reasons for the sudden increase over the past two years can be attributed to probably one or two items. Either a family buying and/or living outside their means. Or perhaps an uncontrollable adjustment in the mortgage rate causing the payment go sky rocket, in some cases due to a poor or uninformed financing decision.
At any rate, the one constant is the pattern in which foreclosures occur. First, the homeowner will start to realize that they are going to struggle making their mortgage payments. They talk to the bank and try to work out alternate arrangements. In some cases, this is successful and solves the problem, often due to another changing factor such as a raise in income. However, if they are unsuccessful, then once the homeowner comes to the conclusion that they can not make their mortgage payment in full, they generally decide to stop making the payment altogether and putting the money to better use. Typically that means either saving it up for use as a down payment on a rental, or paying off other bills that are also long overdue.
Once your payment becomes 90 days late, the bank will file a “Notice of Default” also known as an “NOD” with the county recorders office.
It is at this point your life really starts to change. The phone calls start coming in. Not from the bank. But from attorney’s, real estate agents, and investors far and wide that up until the very second that the NOD was filed, had no idea you ever existed. Now you are the most important person in their life. You will be bombarded with mail pieces, phone calls, and personal visits. There really is no way to avoid it.
Or is there? Yes there is, but that discussion is for later. Once the NOD is filed only 1 of 3 things can possibly happen, and that is what we are going to discuss.
ONE
If the lender allows, you bring the loan current within 30 days. Or you pay off the balance of the mortgage. In either case you can move on with your life.
TWO
The home will be foreclosed and taken over by the bank in which case you will have to move. You will also lose any equity you have gained unless you have enough to fall under the Homestead Act.
THREE
You sell the home. If you have enough equity, you sell it and either break even, or make a little money. If you don’t have enough equity, you sell it as a short sale. Either way, you move out of the home and on with your life.
These are the ONLY options. Any course of action you take will fall into one of these three categories. Logically nobody wants to lose their home or be forced to move, so the most common course of action for people is to try and make Option #1 work.
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