Posts Tagged ‘short sale’

Understanding Real Estate Short Sale

Thursday, August 6th, 2009

Foreclosure is a major problem in the real estate market nowadays with lots of people losing their jobs. A short sale can help a homeowner in foreclosure. When a homeowner cannot keep up with his or her mortgage payments, a real estate short sale may be a sound solution for the homeowner. You do not have to wait until you are late on your mortgage payments to start the short sale process. Find out what is a short sale and ask your Realtor early about doing a short sale when you know that you might not be able to keep up with your mortgage payments soon.

Understanding What a Short Sale is

A short sale is a sale of real estate in which the proceeds from the sale are smaller than the mortgage balance on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a mortgage balance because of an economic or financial hardship on the part of the mortgagor. This negotiation is all done by the bank’s loss mitigation department.

Stopping Foreclosure

A short sale is often done to stop foreclosure. Often a bank will allow a short sale if they think that it will result in less financial loss than going through with the foreclosure process as there are carrying costs associated with a foreclosure. A short sale is often faster and less expensive than a foreclosure. In short, a short sale is just a process of negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. The process does not wipe off the remaining mortgage balance unless the bank expressedly states it in writing.

Learning about Short Sale

There are plenty of books written about short sale. Some books are for homeowners facing foreclosure. These books explain to them what a short sale is and how it can help them save their properties from foreclosure. There are also books aimed at real estate investors wanting to take advantage of the foreclosure market. Foreclosed homes are often cheap so new home buyers and new real estate investors can buy them fairly easily. Examples of books on short sale are The Art of the Short Sale, Short sales: An Ethical Approach, Doctor Foreclosure: The Secret to a Successful Short Sale, and Short Sale: A Practical Approach.

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Biggest foreclosure mistake

Sunday, July 26th, 2009

More tips from Alex Speak: One of the biggest mistakes you can make after getting served with foreclosure papers is to do nothing, figuring you’ll ‘just let the house go’. Not only is it probable you’ll lose your home, but the bank will most likely get a deficiency judgment against you; that is, a judgment awarding the bank money for the difference between what you owe on the loan, and what the house sells for after foreclosure.

Since you may owe more than your house is currently worth, you’re looking at a big judgment against you. Were you aware that in your state a Judgement of Deficiency may be good for twenty years? The bank’s going to make your life miserable for a very long time – taking money from your bank accounts, re-routing income tax refunds, and persuing any assets that you might accumulate.

What should you do? Either engage the services of a lawyer, or file an answer yourself. (a ‘hardship letter’ isn’t an answer!) When answering a complaint, the lawyers may admit that the borrower (you) owns the property, but deny the rest of allegations of the complaint. In their answer, lawyers also typically raise certain defenses, such as, since the original note has been lost, and the plaintiff (the company suing you) doesn’t have a complete copy of the original note, the plaintiff cannot maintain the foreclosure action.

For adjustable rate mortgages that have interest-only payment periods, and/or the option of making a variety of payments such as a minimum payment, interest only, or interest and principal, and/or have a prepayment penalty, many lawyers say in their answer that the loan violated state unfair and deceptive trade practices laws because the originating lender didn’t explain to the borrower that negative amortization and payment shock would result from the structure of the loan.

Those same lawyers also file a written request asking the court to refer the case to mediation. The advantage of mediation is that you get an opportunity to sit down with a representative from the lender who has the authority to settle the case without a foreclosure. Before going to mediation, you should know exactly which solutions are available to you. Do your homework. To find the best solution for you, make sure you research all of the options.

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