1) it does not preclude the bank from seeking a deficiency judgment against the borrowers (a personal judgment that is collectible after the conclusion of the foreclosure)
2) a foreclosure devastates the homeowners credit. . . not good for realtors either as they are effectively removed from your client base.
Solution: Short Sale. Get the lender to accept an amount below the mortgage payoff and waive the deficiency against the homeowner. In most cases, all closing costs are built into the deal where the lender pays the closing costs. On occasion the Seller will need to bring cash to the closing table. Everything is case by case basis. Lenders generally demand fair market value for the property – which in a short sale is significantly below the mortgage balance.
A Short Sale offers a fresh start, eliminating debt, while minimizing damage to credit and avoiding eviction proceedings.
- Prequalifying the homeowner
- Assemble excellent lender packages
- Directly and immediately respond to negotiators’ calls and emails
- Immediately provide well-written market narratives and critical analyses proving price
- Ensure that appraisers and bank BPO agents understand the subject property’s challenges
- Immediately provide additional documentation required by the lender
- Keep the parties well-informed and in the deal
- Document all tasks in detail for transaction-saving reference
- Provide creative solutions to negotiators’ demands such as promissory notes and cash contributions
- Use 12 years of negotiations skills to ensure success
There are many articles out there that say it is extremely important to get an expert to handle your negotiations. Short sales involve a myriad of issues, timelines, and landmines that can kill the deal, and result in devastating consequences for the buyer, seller, and realtor – a home lost to foreclosure. The process of obtaining approval for a SHORT SALE can be quite lengthy. The first step is to prequalify your client/seller. Lenders in most cases pay Kayser & Assoc. as part of the closing costs on the HUD.
Let’s face it – agents need to spend their time putting buyers and sellers together vs. figuring out how to bail someone out in foreclosure. That’s where we come in. For all real estate agents we offer 2 types of services:
1.) If you have a client that is facing a short sale situation, refer them over to us. We cooperate with all licensed realtors. We will handle the process from counseling the homeowner, preliminary assessment, gather and prepare the ‘hardship package’ to submit to the lender, and negotiate the short sale with the lender to a successful closing. We collaborate with you in listing strategies to place the property in a ‘short sale position’.
2.) Many agents come across a situation where they have a short sale contract, but don’t know what to do next. If you have a contract in hand we also will negotiate the short sale on your behalf. Again, all of our fees are negotiated to be built into the deal. This allows you to concentrate on more sales instead of spending hours trying to get one short sale through.
Short sales may take longer to close than more conventional sales, so plan accordingly. However, it is well worth it. Again, the alternative – foreclosure.
- Lenders cannot consider a short sale if the borrower is in an active bankruptcy. The bankruptcy would have to be discharged or dismissed prior to the lender considering a reduced payoff.
- There are many bankruptcies that are filed to save a homeowner from the deficiency judgment or shortage in the sale of their home – when really all they needed was a short sale of their home!
- A bankruptcy stays on the homeowners credit report for 10 years.
- Bankruptcies typically only delay the inevitable. . . a foreclosure. Then the homeowner has both a bankruptcy AND a foreclosure on their credit report. The worst case scenario for anyone.
- Foreclosure is devastating to one’s credit report. Someone who goes the short sale route generally can buy a home in less than 2 yrs, compared 5 yrs + after a foreclosure. Many employers run credit checks on prospective employees and foreclosure is one of the top items that will put a potential new hire in jeopardy. Also, current employers may run credit checks and a foreclosure can put a current position in jeopardy. Security clearances (law enforcement) and government positions can be jeopardized by a foreclosure. Additionally, interest rates will be markedly high on credit cards and any credit with a foreclosure or a deed in lieu on one’s credit report.
- The lender can still pursue the former homeowner with a Judgment for any deficiency after the property sells under foreclosure. This deficiency most likely will tack on attorney fees, costs to sell the property, and many other related fees such as property preservation fees, insurance and the like.
- Foreclosure effectively reduces your potential clients as buyers as it is rare to secure financing for another home for a long time after a foreclosure is reported on one’s credit report. So, not only did you not make a cent off of that foreclosure. . .you just lost another potential client.
- From the lenders standpoint – see Loss Severity Rate above! Enough said.
Up to $2 million forgiven debt of a taxpayer’s principal residence is exempt from taxation due to this Act. It also includes refinancing to the extent of the original debt (not any cash that was taken in the refi). For tax years 07 – 12, the government is waiving any tax liability on this forgiven debt. The lender will send you and the IRS a 1099-C “Cancellation of Debt”. You or your accountant then files a Form 982, which can be downloaded from the IRS website. Be aware, that forgiven debt on vacation homes and rental properties may be taxable, unless you can prove insolvency. Give this information to your accountant when completing your tax returns. This section is not intended to give tax advice. It is advisable to confirm the current tax laws with each case with your tax advisor.