Wednesday, July 27, 2011

Need to Avoid Foreclosure? Follow 10 Common-Sense Guidelines!



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Here’s a fact that may surprise you – lenders hate foreclosures almost as much as you do! After all, they’re losing money and have to follow a complicated legal process to take the property back. This tells you, if you’re facing the possibility of foreclosure, that it’s in your best interest to work with your lender. 

So, if you’re having trouble keeping up with your mortgage payment, contact your lender immediately and inform them of the situation. Also, you can contact a HUD-approved Housing Counseling Agency or call them Toll FREE (800) 569-4287 or TTY (800) 877-8339 

Now, if you’re unable to make your mortgage payment, I recommend you follow the guidelines below. They’re straight from HUD with some additions on my part. 

Guideline 1: Definitely Don't Ignore the Situation! 

With foreclosure, there’s a natural tendency to hope the whole situation will just go away if we ignore it. This is not a wise choice because the farther behind on the payments you fall, the more difficult it’ll be to re-instate your loan and the more likely it’ll become that you’ll lose your home. So, take the foreclosure “bull” by the horns and deal with the situation right away. 

Guideline 2: Contact Your Lender Immediately! 

As I said earlier, lenders hate foreclosure nearly as much as you do. So, most have options to help you through tough financial times. It depends on the lender, but such options may include: 

• modifying the mortgage length or interest rate. 
• waiving fees or penalties. 
• deferring payments through temporary forbearance.
• increasing monthly payments to cover past due amounts.
• modifying an adjustable-rate mortgage to a fixed rate, etc.

Guideline 3: Open and Respond to All Lender Mail Right Away!

Normally, the first notices you receive from a lender will give you one or more of the options listed under Guideline 2. So, definitely open that mail immediately because those options can help you through a rough time. If you don’t open the mail or toss it out, you’re only making matters worse because they may include notices of pending legal action. And, believe me, foreclosure courts don’t accept any excuses regarding failure to open mail! 

Guideline 4: Know Your Mortgage Rights!

Always learn the specifics of your loan documents so you know what your rights and those of the lender are under the terms of the contract if you can’t make the payments. If you don’t understand the contract provisions, talk to a counselor or a real estate attorney. Also, remember that foreclosure laws and time frames vary by state. This means you need to contact the appropriate state office to learn what’s involved in the foreclosure process.

Guideline 5: Understand Foreclosure Prevention Options!

HUD has free and valuable information on options for preventing foreclosure (also called loss mitigation). These options can be found on the internet at http://portal.hud.gov/portal/page?_pageid=33,717348&_dad=portal&_schema=PORTAL.

Guideline 6: Contact a HUD-approved Housing Counselor! 

HUD funds free or very low cost housing counseling nationwide. The counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.

Guideline 7: Evaluate Your Spending and Budget. Budget, Budget!

After healthcare, your first priority should be keeping your house. So, that means you need to look at where your spending goes and “cut out the fat.” By that, I mean zero in on “optional” expenses – cable TV, memberships, daily trips to the coffee shop, eating out, etc. If you’re not careful, these expenses can tear the heart of your budget, and they’re easily avoided! All the money saved by foregoing these items can go to making your mortgage payment. Also, delay payments on credit cards and other "unsecured" debt until you’ve have paid the mortgage.

Guideline 8: Employ Your Assets!

You may well have assets that you can sell for cash and apply to your mortgage payments. These could include items like a second car, jewelry, a whole life insurance policy, etc. Also, if anyone in your household can get an extra job, it’ll bring in additional income. Even if that income isn’t great, the effort demonstrates to the lender that you’re willing to make sacrifices to keep your home

Guideline 9: Avoid Foreclosure Prevention Companies!

I repeat – avoid these companies! Some are legitimate; some are scam artists. In either case, you don’t need to pay them hefty fees for foreclosure prevention! Sometimes those fees can amount to two-to-three months’ worth of mortgage payments! Why do this when, for free, you can work with a counselor or with the lender?

Guideline 10: Don't Lose Your Home to Foreclosure Recovery Scams!

You may be contacted by firms claiming that they can stop your foreclosure right away if you sign a document appointing them to act on your behalf. If that’s the case, tell them to get lost! This is a scam where you end up signing over the title to your property and becoming a renter in your own home! 

Never, ever sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD-approved housing counselor! Want to talk more about options for preventing foreclosure? Contact us right now at and we can provide you with that information!

Wednesday, July 13, 2011

Exploring the Main Differences That Makes a Short Sale a Better Choice Than a Foreclosure



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Just a couple years ago, most people usually thought they had to give up their home in a foreclosure when they faced a financial stonewall. However, since then the phenomenon of short sales has been on the rise, leaving homeowners a bigger, better and brighter option for the present and future. In this article, we explore the comparative differences between the two so you can gain an edge when deciding which is better for you.

Purchasing Power

After walking away from your mortgage through a foreclosure, you can expect to feel the negative impact of it for five years, in terms of being able to purchase another home. Even then, like a bankruptcy, a foreclosure is something you will perpetually have to report no matter how long it has been since the home went into foreclosure. 


Though these days you see a lot of talk about the financial and credit impact foreclosures have on homeowners, the unseen part of it is something to be dealt with. Going through this process can leave a lasting emotional hole in people who otherwise were law-abiding citizens, going about their normal lives when all of a sudden they are faced with severe financial hardship and must resort to extreme measures. That, or if the value of their home has dropped well below the amount they paid for it and they see very little hope for the future.

Short sales are much simpler. They will affect your purchasing power for a mere two years, often just the amount of time it takes to get back on one’s financial feet. Not only that, there is no requirement to report a short sale transaction.

Credit Outlook

There are two main areas that are of concern when it comes to your credit – your credit score and your credit history. In case of a foreclosure, credit scores drop a whopping 200 to 300 points. This can have a significantly negative impact on your ability to purchase big-ticket items or secure loans in the future. Not to mention it takes years to rebuild a credit score that has dropped that low. In terms of credit history, a foreclosure remains visible on your credit report for anywhere from ten years or more, rendering each future potential lending transaction either useless or very hard-pressed at getting approved. The overall impact you will see on your credit will be for about three years.

Short sales are far easier on your credit outlook, in that the point drop is only about 50 on average and the transaction itself will impact your credit profile for as relatively little as 12 to 15 months. The one thing to keep in mind is that if you have defaulted on any payments or if you already have a weak credit profile, the post-short sale point drop on your credit report can be more than just 50. Also, there is no formal reporting or declaration of a short sale on your credit report like a foreclosure although the transaction will show up as either settled or not paid in full.

Amount Still Owed

Usually there is a gap in the amount owed after owners walk away from a property and the bank assumes responsibility. In case of a foreclosure, given the amount of processing time and resultant vulnerability and exposure of the property, the value can and often does drop greatly after vandalism and from sitting there unused. The Deficiency Amount (also called Judgment Amount) is the difference that remains after the bank calculates what was owed on the property at the time of foreclosure and when they sold the home. Because of this vandalism and vulnerability, the amount of value drop is far more than with a short sale, when the homeowners are still residing in the property during processing. The bank has the legal right to pursue homeowners for the amount difference. 

Short sales differ in that not only is the deficiency amount much less but also, your Realtor can negotiate a waiver of that amount so you don’t have to pay for it.

Friday, July 1, 2011

Top 3 Short Sale Mistakes Most Commonly Made



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As common as short sales are, they are equally a mystery. Many people have heard the term but have no idea what a ‘short sale’ actually means. Does it mean that the contract is shorter? Or that the length of time in which the loan has to be paid off is less? Neither. A short sale is basically a solution that homeowners have been tapping into lately, designed to ease the burdens of the present economy’s negative impact. By doing a short sale, people are able to save their home from going into foreclosure – and in the process soften the impact on their credit and future home-buying capability.

How Do I Know If a Short Sale is Right for Me?

Not everyone qualifies for a short sale but if it IS right for you the benefits will have a long-lasting and ultimately positive impact on your financial outlook, as opposed to losing your home to foreclosure. People in dire financial situations are usually the ones to have their applications approved. The most common reasons people seek short sales are:

• Loss of employment
• Relocation or insufficient equity
• Health circumstances 
• Divorce
• Unseen sudden increase in living expense

How Does a Short Sale Measure Up Against Foreclosure?

There are three areas where the difference is felt between a short sale and a foreclosure – and these areas weigh heavily in homeowners’ decision on which route to take when facing difficult financial circumstances. Your credit score, credit history and eligibility to purchase another home are each impacted by both decisions.

Credit scores for a short sale are affected significantly less than as with a foreclosure. Choosing the former will only result in a drop of 50-90 points, whereas a foreclosure will lower your score by as much as 250-300 points.

Purchasing another home after you’ve been through a short sale is relatively easier, since you can start that process as early as two years from the date of the short sale. Foreclosures hinder your ability to venture into a new home for at least 7 years.

Whenever your credit suffers a blow there is always a recovery period that goes along with it. The time it takes to recover from a foreclosure is typically ten years and it can go even longer than that. A short sale is unreported, giving you the added benefit of having a “paid in full” status showing on your credit report.

What Would Make a Lender Accept LESS Money?

Given the choice, less money is better than no money and with a short sale the lender is at least coming out somewhat on top. Clearly, the options for homeowners in a financial bind are either a loan modification or a foreclosure. Here are some of the things lenders have to deal with in foreclosures that they are otherwise spared by going the “less money” route:

• The cost of legal proceedings for eviction or repossession
• Loan payment loss during foreclosure proceedings and until the home is resold
• Maintenance and repair of home prior to resale
• Government penalties in terms of loan-freezing when reselling in the market

Commonly Asked Questions about Short Sales:

If a property needs work, can I still do a short sale?

Lenders are more motivated to do a short sale on a property that needs work than on one that doesn’t because they know the risk of loss is heightened with foreclosure when much work is needed on the property.

How long does it take to complete a short sale?

Several factors affect the time required to complete a short sale, including the number of mortgages tied to a property since it would take longer to negotiate with two or more lenders. It takes about 8 to 15 weeks for the lender to receive and evaluate the proposal. Home buyers and sellers should keep in mind that this is a lengthy process. Also, working with a specialist who knows how to manage the transaction is extremely useful. Sometimes, the buyer may get cold feet at the last minute causing the transaction to fall through.

Why do lenders accept less than they are due?

On average, they lose tens of thousands of dollars less on a short sale versus a full foreclosure. When faced with the situation of a failing loan, lenders opt for the lesser of the two evils and choose to accept a short sale.

What is a Short Sale Packet and What Needs to be in it?

A short sale package it used to determine whether a homeowner can afford the property. Our team will work with you and your realtor to gather the information needed to meet the bank guidelines and streamline the process as efficiently as possible. Below are some of the standard items needed to complete a short sale proposal:



  1. The Listing Agreement
  2. Authorization to Release form (to allow agent to discuss with bank)
  3. Mortgage Coupon of First loan (and Second loan if applicable)
  4. Hardship Letter (see “How to Qualify” above)
  5. Financial Statement
  6. Two months of current Bank Statements
  7. Tax returns and or W2’s or 1099’s
  8. Seller Net Sheet (a copy of the HUD form with offer)
  9. Contract (when offer is accepted)
  10. Buyer’s Proof of Funds (with offer)

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One very simple way to look at this entire process, which will also help to understand the lender’s perspective: You applied to get the mortgage and you will have to apply to get out of it. Just like with the original application, you will have to supply ample documentation explaining why they should accept your reasons to do a short sale.

Lenders lean favorably toward those applications that fulfill all documentation requirements. Pricing your property competitively, your undivided cooperation during the proceedings and transaction plus working with a quality, experienced short sale specialist are all excellent ways to achieve success in your quest to save your home from foreclosure.

Final Thoughts about a Short Sale

Your bank is not in the real estate business and does not want to own your property. However, you originally applied to get a mortgage and you must also apply to get out of one--the process requires you to submit documentation just like you did when you bought the property. Failure to comply with your lender's guidelines is a recipe for prolonging the process or getting your short sale application rejected and being foreclosed on. The best way to speed your path to the finish line is to fulfill all document requirements quickly and completely, price your property competitively, work with experienced people and cooperate with everyone involved in the transaction.

For more information on Short Sales, please click here and visit my website.