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Decision 2008: The Current Real Estate MarketLet’s all get honest here, the real estate market
right now is very bad. The
U.S. economy, if not the global economy, is in even worse shape.
Let’s all just accept it, and deal with it. What I am about to discuss will include both buyers and
sellers as well as anyone that is associated with them. At this time in the U.S. economy and U.S. real estate market,
we have three major problems that need to be solved immediately to make
this real estate market healthy and run smoothly again. Problem #1: We have far too many vacant homes and inventory. Solution: We need to move the vacant inventory RIGHT
NOW! Problem #2: Tough Lending Standards, Money is hard to access Solution: Get easy FHA loans or buy with seller
(owner) financing Problem #3: Many very poorly loans were written Solution: Sell the houses or rewrite and modify those
loans There are many potential buyers on the sidelines
right now that want to help buy these vacant homes, unfortunately the
potential buyers feel their hands are tied due to tough lending standards
currently. It’s time that
those in Minnesota and the U.S. real estate market start to make some very
tough decisions. FHA financing: Yes, lender’s guidelines are much tougher, but
there are some extremely easy guidelines out there right now through FHA
financing programs. Unfortunately
most real estate agents and loan officers may not yet know about FHA, or
how easy the standards are right now, and the reason is either they
haven’t heard about it, or they don’t know it became popular again
around the end of 2007. I
won’t go into all of the FHA guidelines right now, but many buyer’s
are qualified with only a 600 credit score, in fact I have heard it’s
being done even as low as a 550 credit score.
Through the end of September 2008, there are still ways to get down
payment assistance from a seller for 100% financing. At this time,
interest rates are extremely low still, and competitive. FHA qualifying Standards: Current FHA standards allow for your credit report to reflect a foreclosure as recent as 2 years ago. It can show a bankruptcy from 3 years ago, and a job (same line of work) for only 2 years. I think you’ll agree that these current standards are pretty easy on buyers. Fannie Mae and Freddie Mac are the alternative to FHA financing, and as we know after watching the news that these two companies may need a bailout, and their new guidelines may require someone to wait 5-7 years to get a loan after a recent foreclosure. Many future loan guidelines are expected to get tougher, so take advantage of the easy loan standards today. How bad is it going to get? It’s now time I get very honest with the current and future real estate and economic situation. The problem is that the housing market has very poorly written financial instruments (loans). Without getting to technical here, we have loans written that aren’t worth anyone keeping or holding onto. Not all loans are like this, but adjustable mortgages were not a good idea, and we’ve all had this confirmed by watching the news and the growing rate of foreclosures. The problem lies in the fact that many were written just a few years ago, and are on 2-5 year cycles before they will adjust on the homeowners. What that mean’s is that maybe only one half have adjusted and run their course already. Many of the loans will just keep adjusting well until the year 2010 at the very least. I would suggest that everyone stop worrying about which president will be in office in 2009, or which new laws are going to save you. It’s bigger than just a new president, or some new mortgage laws, this is more complex. It includes many businesses, real estate law, etc. For example, there are those servicing the loan, there are also those that originally invested and put up all of the money with the bank. They would have to agree to the mortgage modifications and other changes in rewriting the loans. How the Timeline will play outAs these loans adjust and the sellers try to hang on to the higher payments, eventually many won’t be able to hang on and they will end up in a 9-12 month foreclosure process. This will keep inventory piling up well into the year 2010-2011. That doesn’t mean as a buyer you can’t get a great deal right now, as a buyer it’s a good time to buy, we all know that. As a nation we need to re-write much better loans this time around and clear out, move, and sell this inventory. Few banks remain and we have to take advantage of the current loan programs while we can. I’ve recently heard that Fannie Mae and Freddie Mac who are doing up to 80% of all of the nations loans are in pretty bad shape right now, and may need a bailout. That is according to the numerous news sources out there. We all need to move this inventory now regardless of what happens to Fannie Mae and Freddie Mac. For now, we can still do FHA loans, and the qualifying standards are even easier anyways than with Fannie and Freddie. I don’t think FHA standards will remain this easy for too much longer, so those buyers who are trying to get loans should come off the sidelines right now. Time for us all to work togetherLet’s all deal with the bad economic news and make
the most of it. We have to
all work together on a state level, and a national level.
We need to move all of this inventory as a team.
Property owners will have to face tough decisions, some will need
to sell, some will need to rent out their properties and become landlords,
others will need to sell in foreclosure, or on a short sale (due to owing
more than the house is worth).
As a buyer if you are not able to qualify for at least FHA
financing in this current market, please do look into renting some of this
inventory, or buying with the help of seller financing, so that we can
decrease all of these vacant homes from this market. Vacant homes aren’t
good for any one of us. We need to correct this problem, so that
everything can get back on track again.
There are tough decisions for buyers and seller’s to make due to
the current economy, rising inflation, rising fuel prices, rising food
prices, and annual incomes that don’t seem to be keeping up with
inflation. Due to increasing
job losses we have families with less income, and many people need to cut
back and downsize their current residence.
Let’s all make the tough decisions, and move forward with this
economy and housing market and keep things moving again. What decisions do we make?If you can qualify for FHA financing with little money down and a 550-600+ credit score, like discussed earlier, than you should get a FHA loan. On the other hand, if you have less than the equivalent of 1st months rent and a deposit right now, you are really considered a renter. I would recommend that you check the newspapers and rentclicks.com to find a place to live as your best option. If you have more than 3 months of rent to put down, some seller’s will allow for you to rent with the option to buy, also known as a rent to own. If you have over 5% to put down on the house, often that will allow enough money to pay a buyer’s agent and a seller’s agent, so that you can buy a house on a contract for deed for right now and get financing in the near future, possibly 1-3 years from now. Before you do commit to any of the seller financing decisions discussed above, while having poor credit, you should be aware that many current laws by Fannie Mae and Freddie Mac are ruling that you need 5-7 years to pass before someone can finance a house who has very recently lost a house to the foreclosure process. This is very important to know before you get into a contract that states you to need to get financing in a short period of time. Your future chance at qualifying is also important to know before you put a lot of money down, or years of time into something. Even
a recent short sale or foreclosure on your credit report can limit you to
when you can finance your next house.
If you are going to sell your current house on a short sale, or
possibly lose it to the bank you should know these rules ahead of time, I
can email you the recent Fannie Mae/Freddie Mac guidelines in regards to
short sales and foreclosures. Property Owner Decisions As
a property owner, you have some very tough decisions to make today. Let me
give you some ideas to put property owners in the right direction. If the payment on your current house has adjusted, or is
about to adjust and you can’t afford the payment now, or even if you
were to rent out your property, you would have a significant negative cash
flow that you can not afford. In
this situation, you will need to sell the house, or do a mortgage
modification with your bank. If
you owe too much on the house, you will want to sell sooner than later to
avoid falling behind on payments and eventually lose the house to
foreclosure. How do you know
if you owe too much? If you
put little to nothing down and bought a house after 2003, there is a very
likely chance you owe too much, but you never fully know until you get the
house listed and on the market to test the price.
A local real estate agent who I probably know may know your market
well, and can run some comparable sold houses for you before you decide to
list your house. Before
you list your house, or sell on a short sale you would need to provide
some information about your loan to get started.
If your current house has a good loan attached to it, meaning a
good interest rate, and a fixed rate for a few years, it may make sense to
rent out the house for now, or sell on a contract for deed.
The point is for all of us to fill up some vacancies and move some
of this inventory, so we can keep this market inventory moving again.
Everyone needs to stop waiting on the sidelines, whether you are a
buyer or a seller, and make some tough decisions today. I have heard of just about every scenario good or bad with
housing, so nothing you can tell me will surprise me. Some situations are
more challenging then others, so let’s work these more complex housing
situations together, and let’s have buyer’s and seller’s move on
with their lives and not let real estate or their own house hold them up
from moving forward. I
am sure everyone today has a lot of unanswered questions based on their
own unique situations. Take Action NowI would need you to call me and leave a message 763-300-1648, or email me ron@minnesotainvestors.com. If you do call, please don’t hang up, please leave a message. You could also email me your housing situation, or tell me it by phone, whatever makes you more comfortable. I usually can tell you within minutes which direction to go, as I have heard almost all situations. I have many associate investors and agents ready to assist you, but it’s important I hear from you. Do me a favor and be one of the brave ones and take a small step to help others in the overall scheme of things and the housing market. The real estate market “can” still move forward without banks. You can refer me whomever you may know that needs help. To end my article, I will use a sports analogy. The team’s time clock is still moving, for those of you that want to play in the game with the team, contact me and let’s keep things moving, for those who want to sit on the sidelines and watch the team work hard, be my guest. When you are ready to come off the sidelines and join in and help the team, please contact me. The entire state of Minnesota is in this together, we are a team, let’s work together as a team and keep things moving. We need some team players to step up. Let’s go over some very common situations that many are in right now and how you can overcome them: Ron, I owe too much on my house and I am not behind on payments Ron, I owe too much on my house and I am behind on payments Ron, I owe too much on my house, behind on payments, & the house doesn’t show well. Ron, I don’t have much equity or money to pay an agent’s commission so I can sell Ron, I have an adjusting ARM, and I will soon be behind on payments Ron, I want to buy another house, but I can’t seem to sell this house I live in Ron, my lender told me they won’t modify the loan, or do a short sale for less than I owe Ron, I live in another state now, and am not near my property Ron, my credit is terrible, I am losing my house, I don’t know what to do Ron, I can no longer afford my current loan, it’s only going to adjust and get worse Ron, my credit is decent, I have some money, but won’t a short sale affect my credit? Ron, I am in foreclosure, and just filed for bankruptcy, what can I do? Ron, I just got divorced, and I am losing my house I have heard most of these scenarios many times. Did you know national stats say that 40%+++ of all listed homes are with the help of the lender adjusting the balance? Did you know national stats show that 25% of those who have sold in the last 12 months have lost money when selling. These are in the national headlines, you are not alone. Let me answer all of the situations and questions above with one simple paragraph: All of the problems above are really two problems.
Your first problem is what to do with the property you live in.
The second problem is what do you do for your next property that
you want to move into. First
off, it’s very tough to sell in this market, but that doesn’t mean you
can’t sell, you probably just can’t sell for the price you need.
The solution is we will have our agents talk directly with your 1st
and/or 2nd lender directly and negotiate with them to get the
balance owing down enough so that you can list the house for a much lower
price and get the house sold. I
can tell you this is called a short sale, and If done correctly we have
options to negotiate with the bank to stop any future deficiencies, in
addition a short sale may slightly ding your credit and prevent you from a
future loan for 2 years, but giving the house back to the bank can stop
you from purchasing with a loan in the future up to 7 years in some cases.
Go with the short sale option, get your house sold for a smaller
amount. I have associate agents to help with that.
It doesn’t matter to me if your house is in bad shape, or good
shape. Most likely your house
will eventually sell, it just needs to sell at a lower price, that’s why
we need to do a short sale with your lender. If you are decide to not make payments and save up your
payments to buy a house on a contract for deed now that you have bad
credit, please keep in mind that 5-10% down will work for a contract for
deed much better than a few thousand dollars. If you have only a few
thousands dollars you should rent or do a rent to own, and just look on
rentals.com I would suggest that anyone that is not yet behind on
payments, but owes to much, I would suggest you work on getting the
property rented, or sold on a contract for deed, so you can offset the
payment, so the lender is happy when you buy your next property. Do not go
behind on payments, so that you can do a short sale, let’s work on the
short sale right after you buy.
If you feel stuck and have a house you live in, let’s work on
that transaction and coordinate it with your next purchase also. Let’s
get some money saved up either way. Please contact me and we can start working on your situation.
If you are beyond the sheriff sale already it will give us limited
time on the short sale, less than 90 days and probably not enough time.
Bankruptcies before the short sale will slow the process down some.
Please contact me with your situation. When you want to look at a
house, or sell, please let me know that you aren’t working with an
agent, and if you are looking to buy please tell me if you are
pre-approved. If you aren’t
yet pre-approved we can have a loan officer talk to you about how much
house you can afford and get you pre-approved.
To get pre-approved I would recommend 580+ credit score, no
foreclosures in the past 3 years, no bankruptcies in the past 2years, and
for your bills to be close to 1/3 of
your gross monthly income. Contact
me and let’s work together. Ron Orr, Jr
What is the
difference between a real estate short
sale vs. foreclosure home and what does it
mean and how does it work? This is a popular and important
question in today’s national economy. I
will define a short
sale for you later in this article, but first I want to
tell you why their seem to be so many short sales going on right now, so I
will get into the definition of short
sale in just one moment, but first please let me go over
some of the common reasons and situations on how a homeowner gets into the
situation and then on how to save your home from foreclosure
through what’s known as the short sale process.
I believe some of the most common situations that the homeowner gets into
resulting in pre-foreclosure, is that they get behind on payments, and
soon they are facing foreclosure, they soon learn that due to the current
real estate market and how home
values are going down quickly It’s then, that the
homeowner realizes they have little or no equity and therefore they
can’t afford to even pay real estate commissions. If
it’s an investor or burnt out landlord they may get into a situation
where it needs too many repairs, of which they can’t afford, and then
the property becomes a vacant house due to many reasons like a job
transfer, or a sudden need to move. Here is where the
homeowner needs help and at this point we will call upon a short
sale specialist as we now have an owner with a mortgage
with a lender like Countrywide or a bank
like Wells Fargo with a short
sale house situation. The
definition of a Real Estate Short
Sale is:
A lender’s agreement to accept less than is owed (short
payoff), as an alternative to foreclosure. A message to all of my readers, I am going to try to keep updating this article over a period of time as I learn new ideas and information to help homeowners, investors, buyers, and anyone related to real estate with this popular subject. Let me now get into some short sale information and see if I can help answer a lot of the questions about the process and how shortsales work in Minnesota, let’s go over why a lender would even do a short sale. Why Would a Bank do a Short Sale? Banks are not in the
real estate business and what I mean by that is the banks do not want your
house back through the foreclosure process, they don’t want to own the
property, they want to only lend money. Banks are in the
lending and interest business. The reason a bank is willing
to do a short
sale is that the entire foreclosure process in addition to other costs
can equal $50,000+ easily by the time the bank sells the house they get
back through foreclosure. The lender offering the property
for less than the underlying debt,
or anything under $50,000 discount could be worth it to them. For
example, let’s say a home owner owes $200,000 on a house and it’s now
worth only $175,000 and the seller found a buyer for the $175,000. In
this scenario, there is $200,000 owing on the property, so therefore it
would take a “short payoff” on the banks part, just to get the deal
done. Sometimes lenders will even count the loan as paid in
full even with the discounted difference, but not always, it’s a
negotiable item. The
Four parties that are involved in a short
sale are: What is the
Timeline for Foreclosures in Minnesota? Let’s
first go over the original loan that the buyer (borrower) at the time
received when they initially purchased the property at the closing table.
During the initial loan
process, the 2 items the buyer signed at the actual closing with the title
company were: 2: The Mortgage:
After the promissory note is signed, the borrower then gives the bank a
mortgage and he/she(buyer) becomes the mortgagor and the bank becomes the
mortgagee. This mortgage document will contain the following provisions:
What then is considered default status? The mortgagor is
required to make the agreed upon payments on a monthly basis; however, a
typical real estate mortgage would include terms requiring the mortgagor
(borrower) to do more than just make the agreed upon payments. Such as,
the mortgagor is required to maintain property insurance on the property,
pay all real estate taxes that become due, and maintain the property for
the benefit of the mortgagor and the mortgagee (lender) which was just
stated above. In addition, the mortgage may include a provision that would
prohibit the sale of all or of any portion of the property without the
prior written consent of the mortgagee. These provision, as mentioned
above, would be the due on sale clause. If the mortgagor would fail to
abide by any of the terms in the mortgage, he or she (by definition) is in
default status. Most real estate mortgages would have a “Power of Sale
Clause” that would give the mortgagee the ability to legally take
possession of the property. Under Minnesota law,
there are two methods of foreclosing a real estate mortgage: Foreclosure by Advertisement
(Non Judicial) (most common method) To initiate a foreclosure by
advertisement in Minnesota, the creditor(lender) would need to prepare
what is referred to as a “Notice of Mortgage Foreclosure Sale”. This
notice must specify in writing, the name of the mortgagor, the mortgagee,
as well as the original principal amount that is secured by the mortgage,
the date the mortgage was originated, the amount the lender claims to be
due on the mortgage including taxes paid by the mortgagee, when and where
the mortgage was recorded, a description of the mortgaged property, the
time and place the sale will take place, and the time that will be allowed
by Minnesota law for redemption by the mortgagor. When this notice has
been prepared by the creditor, it must be published in a “qualified”
newspaper in the same county in which the foreclosing property is located
for a period of at least six weeks prior to the sheriff sale. After the
foreclosure notice has been prepared and the publication (advertisement)
has now begun. The debtor may have the right to reinstate the mortgage.
This right the borrower(debtor) has to reinstate is. to be guaranteed by
actual Minnesota law even though the creditor/lender may have already
accelerated the balance due under the mortgage prior to the initiation of
foreclosure proceedings. For the borrower to reinstate the mortgage, the
borrower must pay to the mortgagee the amount of the default
at the time the mortgage foreclosure proceedings were first initiated plus
all accrued costs of foreclosure up to the date of reinstatement, this
would include half of any attorney’s fees allowed by law or $150,
whichever is greater. If the borrower were to reinstates the mortgage that
they are behind on, the foreclosure proceeding would stop at that point,
but to reinstate the mortgage, the required back payments in arrears must
be paid prior to the sheriff’s sale taking place. I wouldn’t recommend
waiting until the last minute on this. 2) Foreclosure
by Action (Judicial) (Very rare method in Minnesota) To initiate a
foreclosure by action in Minnesota, a summons and complaint would need to
be served according to the “Minnesota Rules of Civil Procedure”. The
complaint would name as it’s defendants, all current owners of the
property, any other lien holders, and those with any right to possession
of all or even a portion of the premises. If no party were to defend the
action, then the mortgagee may obtain from the court that it be deemed a
valid mortgage. If any of the defendants object, a trial may be necessary
to establish the right of the mortgagee to whom will foreclose. Once the
court has made its decision, the sheriff would then publish a notice of
sale for a six-week period of time. If the debtor
(borrower) is a resident of the county in which the mortgaged property is
located, a copy of this judgment of the court and in addition the
sheriff’s notice of sale must be served to the the one in debt
(borrower). After serving the notice of sale on this debtor, the sheriff
must post the notice of sale for the six weeks. At the sheriff sale, the
sheriff may sell the property only to cash bidders, except for the
mortgagee, which can bid (pledge) its total mortgage and debt.
Following this sheriff sale, the sheriff would report the sale to the
court, which would then confirm the sale. Once the court has
confirmed this sale, at that point the statutory period of redemption for
the debtor would then begin. The time periods for redemption of a
foreclosure in Minnesota are the same as for foreclosure by Advertisement.
Under either method of foreclosure in Minnesota, any junior lien holders
may redeem at the foreclosure
sale if the mortgagor fails to redeem. These junior lien holders may
redeem if, before the expiration of the mortgagor’s redemption period,
they have filed for record, a “notice of intention to redeem”. The junior lien
holders are each given a period of five days within which to redeem the
property, and this is based on the priority of their claims or liens on
the property (the recorded order) in most all cases, against the property.
If the amount that is realized at the sale turns out to be less than the
amount due on the underlying debt,
the creditor may then be able to obtain a deficiency judgment against the
mortgagor, but if the statutory redemption period is six months (very
standard) a deficiency judgment can be obtained against the mortgagor
“only” if foreclosure was by action. No deficiency judgment can be
obtained against a mortgagor, if the “redemption period is six
months”, and “foreclosure was by advertisement”. If the redemption
period is twelve months, a deficiency judgment could be sought after the
borrower. The Redemption Period: -The mortgage was executed prior to
July 1, 1967. • The amount claimed due and owing as of the date of the
notice of foreclosure
sale is less than 66-2/3 percent of the original principal amount
secured by the mortgage. • The mortgage was executed prior to July 1,
1987, and the mortgaged property, as of the date of the execution of the
mortgage, exceeded ten acres in size. -The mortgage was
executed prior to August 1, 1994, and the mortgaged property, as of the
date of the execution of the mortgage, exceeded ten acres but did not
exceed 40 acres in size and was in agricultural use as defined by
Minnesota statute. • The mortgaged property, as of the date of the
execution of the mortgage, exceeded 40 acres in size. • The mortgage was
executed on or after August 1, 1994, and the mortgaged property, as of the
date of the execution of the mortgage, exceeded ten acres but did not
exceed 40 acres in size and was in agricultural use, as defined by
Minnesota statute. What is the Authorization
to Release Form? Here
is an example of the language you would see in a Authorization to Release
info: Borrower/Owner: Social
Security Number: Property
Address: I/We
hereby authorize______________________ and
it’s agents to obtain any and all information with respect to the
following items: 1.
Any and all information on my existing loan, including but not limited to: My
mortgage loan with (Lender)_______________________________ Under
Loan Number:________________________________________ 2.
Any and all information on any existing liens against the above named
property, including but not limited to information for any lien holder/and
or their attorneys 3.
This document may be reproduced by the individual or company to obtain
information from multiple sources as needed Please
provide________________________________________ with
any and all information requested on our behalf {Borrower’s
Signatures} {Co-Borrower’s Signatures} How Does a Short
Sale Hurt or Affect Your Credit Score or Report? This is a very common question asked all the time as far as what effect it will have, how a short sale on your record will affect your credit score and credit report. A short sale in general will affect your credit report less than a full foreclosure or deed in lieu of foreclosure. You can have a “settlement paid in full” negotiated with the lender, and obviously this will show better than simply doing nothing. No one may know exactly to perfection what the difference is in points on how your credit score would be affected whether you do a short sale vs. a foreclosure. If you are behind in payments and you owe too much on the house, what choices do you really have anyways, you are over financed. If you have lots of money, assets, reserves, and a high net worth and you just don’t feel like making payments or feel like paying down your principle balance, your lender won’t want to do a short sale. They will first want to get financial info from you, and a written hardship letter. This will make it quite clear to the bank that your only option is some help from the lender. This is where you see a seller that has a property listed on the MLS reading as “subject to bank approval”. A full foreclosure can stay on your credit for up to 7 years. I recently heard that Freddie Mac was trying to pass some new laws for their company that would not allow some borrowers to finance a home for up to 5 years through them. This was more in the cases where people were just walking away, and didn’t have a true hardship case. Currently you can get a FHA loan where your last foreclosure was only 3 years ago. That’s how it is in the current market. You can always just go buy on a contract for deed, get into a rent to own, or rent a property while you are improving your credit. As a general rule you can still get loans with 30 day late payment on your record, it becomes less likely with a 60 day late, and very hard with 90 day late mortgage payment, etc. Also in today’s market you can get a lender and the loss mitigation department to agree to a short sale without being behind on payments. In the recent past you had to be behind up to 90 days. It’s slowly been easier and easier as the lenders want to solve this currently large problem with foreclosures. You will probably have many questions about credit, credit repair, bankruptcy, and how all of this affects you and works together, the guy you will want to talk to locally is: Todd Rooker 763-383-0959, he is the owner of Armor Financial Services Credit and Debt Specialists. He is good to talk to about credit repair, financial planning, and he can even refer you to a specialized bankruptcy attorney that understands short sales and a tax specialist on how the “short payoff”, 1099, or deficiency judgment could affect you as it relates to your taxes. There are situations where you, as the seller, are “insolvent” as the definition put forth by the IRS. Please consult a tax advisor on this. You should check out the new Fannie Mae guidelines for foreclosures and short sales. I am going to refer this over to Todd Rooker 763-383-0959 a specialist mentioned above with credit repair knowledge, Todd can refer you to an attorney that specializes and understands the affect of bankruptcy and the foreclosure process. As a general rule a bankruptcy doesn’t stop a foreclosure, and in some cases it can only slow it down. Situations where a bankruptcy is done before the sheriff sale could slow down, or postpone the sheriff sale, whereas if it happens during the redemption period it would just take place within that redemption window, so my understanding is that before the sheriff sale would be where you are slowing it down. Being in foreclosure prior to the sheriff sale and prior to the foreclosure being filed by the bank would be considered a pre-foreclosure. Also the lender must file a motion asking for the foreclosure to proceed. I would highly suggest that you go over this with a bankruptcy attorney who does this every day for a living. You will be getting a letter known as an “Affidavit of Abandonment for Real Estate & Asset”. How Do I Buy a Short
Sale? There
are REALTORS®
that do specialize in short sales and foreclosures. That is
the type of real
estate agent you should work with. They are going to understand the
paperwork, the short
sale process and all of the timelines that are involved. The
agent will meet with the homeowner and they will go over the paperwork,
have you sign it, collect it and get it into the negotiator, so that they
can submit it with the package to the lender. The agent could
put a sign in the yard if the seller agrees as well as get the property
listed, and start getting showings on the property, make phone calls,
return phone calls. The listing agent can review purchase
agreements, write up purchase agreements, sometimes can even work with the
buyer’s also. The listing agent works very hard along the
way to keep the homeowner informed throughout the entire process. How Do I Get Additional Short Sale Classes and Training? One of my favorite training classes I have taken is a Saturday class based on the program Secrets of the Short Sale created by Steve Dillon also presented by Curtis Brooks. This is a short sale course that these two came up with that they spent a lot of time and research on from their experiences, and someday I hope to check it out myself. There is a popular course out there by Tom Butler called Short Sale Magic. I see it advertised online everywhere. Either of these programs are perfect for those investors that want to get into the business and start there own short sale company. It’s important that you learn the proper requirements and procedures in the business, proper forms, laws, tips and how to properly service your clients after you have sent in the initial short sale full packet. Please remember when listing your properties for sale to put in the “agent remarks” online that the sale is “subject to a short sale”, so that the buyers know it’s not a conforming traditional sale. One of the things you will get from the many training books and classes out there is how to really be an expert at how to do negotiations with the bank and their loss mitigation department. Soon after doing many transaction and calls in which you have spoken to this department at the bank, after enough times you will be known as the loss mitigation specialist! When you first meet with your seller(clients) you will be collecting a lot of their personal information (this is listed at the bottom of this article) and after you gain all of this info and decide that you can move forward with their situation, you will be getting some contracts signed for the short sale. One of the many items you will need from the seller is what’s referred to as a “hardship letter”. This is best presented to the bank if it’s hand written by the seller describing their current situation and why they are not able to make the payments in the coming future. This will be one of many items in your package that you will send into the lender before you would get an approval later on. Your goal would be to eventually build up a lot of referrals and leads and create a very efficient short sale system.
Being that I am not
a tax advisor I will not get into this question and topic too deeply, and
also I have attached numerous great articles from the IRS, and
attorney’s below for further reading about short
sale taxes and the 1099 the
homeowner could receive in the future. We will want to make
sure that the short
sale expert negotiator does his/her best to help you
out. I have listened to many experts and been to many short
sale seminar and training,
and they all seem to have a different view, or at the very least explain
it in a different way. As a general rule in Minnesota, when
you go through the foreclosure process, that lender who does go through a
standard 6 month redemption by the way of advertisement has in effect
relinquished their rights at coming after the borrower for a deficiency
judgment on the short
sale. However, you are looking to sell the property for
less than what is owing before it would go back to the bank. Therefore
with this situation, when the short
sale negotiator talks to the bank they will need to get a letter
approved by the lender to waive any future deficiency judgment against the
seller and consider it a “full settlement paid in full”. Please
keep in mind that lenders can still come after anyone that signed on the
original promissory note that guaranteed and signed this note. In
addition the other lien positions didn’t initiate the foreclosure, so
they still have the right to come after the seller for a deficiency
judgment. Also many lenders will do what’s called a “partial
release” where they detach the lien (mortgage) from
the property so that the property can be sold and clear title can be
passed to the next buyer. Depending on the negotiations with
the lender, this promissory note can become a judgment and the lender can
later come after the homeowner for that amount they guaranteed. Also
please keep in mind if you sell it on a short
sale, or the bank ends up with it back, eventually their will be a
“loss” showing to the lender of which the lender will take that
difference (amount owing – amount sold for) and even if they don’t’
come after you for a deficiency judgment they can always pass that
information onto the IRS, and at the timing and choice of the lender can
1099 the homeowner possibly 1, 2, or 3 years later when it would make
sense for the IRS, to show it as a loss on their tax records for that
year. This part of the transaction can get pretty
complicated, so I think you should seek advice of a tax advisor, I would
also recommend you talk to Todd Rooker on this as well as he can put you
in touch with the right tax advisor.
How
to Find My Next Property Now That I Have Bad Credit? Now
that you feel that you have bad credit currently or know that you soon
will have bad credit, you need to plan on your next property that you will
live in. You will want to consider the fact that the
foreclosure process in Minnesota is long, and during negotiations with the
bank it takes some time, so you will have to make a decision if you are
able to make future payments, if you are going to save that money up, or
what you decide to do. Currently I can recommend our site
here: http://www.minnesotainvestors.com/propertyneeded/
where you can choose between renting, rent to own, contract for deed, etc.
All of them allow for bad credit and previous foreclosures,
bankruptcy, etc in almost all cases. The more money you have
to put down, the more rights you’ll have on the home, and the closer to
ownership you’ll be. Check this site for updates, and as of
right now, for only 6% down you can buy and own a house on a contract for
deed, allowing yourself a few years to get your credit better and qualify
for a home in the future. There are plenty of properties out
there for those even with not so great credit, so please don’t worry
about that, there are plenty of vacant properties. CONCLUSION: Let
me first say that I always appreciate the opportunity to educate everyone
on the short
sale and foreclosure process here in
Minnesota, and how I can answer everyone’s questions in this article.
Let me say I am a real
estate agent and broker and I am not an attorney and not a tax
advisor, so I please ask everyone to seek guidance in regards to those
topics as there are many foreclosure laws as well as many important tax
consequences to consider when doing a short
sale. Please see my disclaimer at the bottom of this page. I
also would like to add that I am more than happy to talk to homeowners
that decide to get help to do the short
sale procedure. In addition, also short
sale and foreclosure agents that want to refer their leads
for negotiating a short
sale. I will only be able to take leads for the state of
Minnesota for right now, possibly on the border of Wisconsin. I
welcome all leads of yours. Please read below as I let you know which
questions I will need the answers to. You may fax the answers
to these questions to 763-390-0011, you may email the answers to ron@minnesotainvestors.com,
or I can email you a form and you can fill it out, which could save us all
some time. Before working with myself or a short
sale agent please read Minnesota’s agency
disclosure. Please
contact me at
the following info: LEAD INFO
NEEDED FROM SELLER: Co-Borrower Info: 1st
Lender Info: 2nd
Lender Info: Property Info: Short Sale
Documents
that we will need soon from the homeowner are: Related Articles: Excerpts from IRS publications 544 and 507 Regarding Form 1099-C Seller’s
Legal and Tax Liability in Short Sales April 22, 2008 Disclaimer: MinnesotaInvestors.com, Inc. is a licensed Minnesota real estate broker. Minnesotainvestors.com, Inc. handles the marketing end of short sales, provides education and answers questions. Our affiliate short sale specialist will later assist you. The information on this page and the website are for information and educational purposes ONLY and cannot be deemed as legal or tax advice. Please consult your attorney for any legal advice regarding your foreclosure process, your CPA and/or account for tax related questions.
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