Seattle Short Sale Blog engendered with the knowledge that short sales were the best possible exit strategy for homeowner’s who are struggling due to the down economy. Back in 2008 when the blog first started, it was a novel concept to most people and it received its share of criticism as it began familiarizing itself to the housing market. Much of the criticisms were in fact correct yet even if flawed, it still stood to be the best option for the majority of homeowners. Now, it is rare for homeowners not to know what a short sale is as it has become the most popular choice for struggling homeowners. The nation began understanding the value of short sales and took into consideration these criticisms and all parties including banks, governments, realtors, and homeowners, have worked to hammer out these flaws making the decision for homeowners to short sell their homes an easy one. Short sales have now officially surpassed foreclosures and continue on the rise.

Recent data from Lender Processing Services have shown that short sales accounted for 23.9 percent of home purchases in January compared to 19.7 percent for sales of foreclosed homes. Just a year earlier, 24.9 percent involved foreclosures and 16.3 percent involved short sales.

If you still do not know what a short sale is, it is an option for homeowners to “short sell” when their properties are worth less than what they owe to their bank(s). For example, your house is worth $500,000 but you owe your bank(s) $550,000 in loans, home equity lines of credit, etc. If you qualify for a short sale, you may be able to sell your property for less than what is owed, avoid foreclosure and walk away from the property with little to no remaining debt. For a more comprehensive explanation on short sales, please read our previous series on The Anatomy of Short Sales

It boggles my mind when people say that a foreclosure is the “easy way out.” What does that even mean? Just because you walk away from your home does not mean you have escaped the bad situation. In fact, allowing a foreclosure would only exacerbate the situation and leave you with severely damaged credit status in terms of your reputation to future lenders, a high chance for lenders to pursue and sue you for deficiency, and ravage your chances of being able to purchase another home for a very long time. Yes, you may be able to walk away but the sting will follow you for several years to come.

A short sale may take longer but it would be the better choice to make as you are essentially working out a deal with your lender so you can walk away from your home with minimal damages. Short sales are now more streamlined than ever before as banks have vastly improved their short sale departments. As an example, please read our previous article on Bank of America’s progress in short sales.

One very important factor that must be considered is the agent you choose to work with to handle your short sale transaction. Although banks have improved their side of handling the short sale, it is just as important if not more to have an expert short sale agent handling your file. A large reason why Seattle short sale blog was created was because numerous homeowners were experiencing short sale horror stories due to the inadequacies of their agent. Although many agents may be more familiar with the short sale process, it is important for you to find the BEST agent who have years of experience in short sales, hundreds of successfully closed liens, and are fully licensed (Mortgage loan originators license). In Washington state, we have found the best short sale team who are currently negotiating hundreds of liens and have a stellar track record of closings. Through our blog, we can get you connected with them for a free consultation. Input your info here and they will contact you within 24-48 hrs.

Peter

If you have heard anything about short sales, you probably have heard that short sales take a long time to close. The typical timeline for a short sale is about 30 to 90 days to close. However, there have been numerous cases of short sales taking more than 2 years. This could result from a number of different reasons and is avoidable. The question is, is a short sale successful if it closes quickly?

The length of time it will take to close a short sale is contingent upon a homeowner’s specific situation. Factors that are out of the homeowner and agents control which affect the duration would include whether you have a 2^nd mortgage or not (or even 3^rd or 4^th) and your lender/bank/servicer.  Factors that are under the homeowner’s control would be choosing the right agent(s).

You must pick the right agent(s) to work with to achieve optimal results on your short sale. We have seen and heard many stories of prolonged short sales mainly due to inadequate agents and/or the absence of a 3^rd party negotiator. Why is choosing the right agent and having a negotiator important for a short sale to close? I highly recommend reading our previous articles about finding the right agent:

How to Find the BEST Short Sale Agent in Your Area

What is the KEY factor for a good Short Sale Agent?

10 Things to Ask a Real Estate Agent.

To summarize, if agents are lazy, unorganized, inexperienced, have weak marketing skills, and have issues with proper communication, you can count on your short sale being at best delayed if not already rejected and foreclosed on. A great agent and a negotiator will undoubtedly expedite your short sale as they specialize in communications, short sale marketing, negotiations, and organization (using the right short sale technology).

Now the point of this article is not endorsing that closing quickly equates to a successful short sale. On the contrary, we have had an influx of emails from homeowner’s who had executed their short sale but walked away from their home with terrible situations subsequent to closing. I would read my article are you inadvertently hiring the wrong short sale agent which gives an example of a bad agent who only closed 4 out of 60-80 properties that he worked on. One of our team members recently received an email from a negotiations company who claimed that they are there to get the job done and get deals closed. They deemed themselves not a Nordstrom’s of the short sale world but more a “Costco.”

Negotiators like these do exist. They focus more on getting the deal closed quickly rather than obtaining a successful short sale. I consider our partnered agents to be the Nordstrom’s of short sales as they have rejected many approvals if they were not completely satisfied with the terms on the approval letter. They have negotiated hundreds of liens and they aim to leave homeowner’s with the best possible terms rather than trying to simply close as soon as possible.

If you wish to connect with our local agents in Washington State, submit your info here and you will be contacted with 24-48 hours.

Hope this helps

Peter

Being in a severe recession, almost everyone in our nation has had a reduction of income. Many who have incurred this reduction find that their monthly income is less than their monthly expenses thus forcing them to take from their savings and/or borrow money from family members or creditors in order to compensate interim hoping that the circumstances of the U.S. economy will improve. Homeowner’s are now under much stress knowing that they won’t be able to afford all of their expenses but are wondering where they should put their money.

*Resources from DSnews.com by Esther Cho

What are other homeowner’s doing? It has been known for the majority of homeowners to prioritize paying their credit cards above their mortgage payments but according to reports from TransUnion, consumers surprisingly have been more apt to pay their car payments rather than their mortgage. In a sample of approximately 4 million consumers in each quarter of 2011, 39.1% were delinquent on their mortgage(s) while current on their auto loans and credit cards. Ezra Becker, who is the VP of research and consulting in TransUnion’s financial services, says that, “A few reasons why auto loans have become the preferred payment to make include the need for an auto to get to work or look for employment, and the fact that an auto loan is not a revolving loan – the impact of repossession is greater than the loss of a credit card.” Becker also added that consumers may have equity in their cars after several years of payments, which is not the case with homes right now.

So why do we feel more obligated towards paying off our vehicles rather than our homes? One big reason is the housing market was so volatile in the past that many are reluctant to put in more money into something that they might end up losing anyway! People purchased homes to build equity even though it cost more each month. However, if equity isn’t built but rather the home goes underwater creating negative equity where you end up owing the bank after years of hard working payments, would anyone be ecstatic to continue these payments? At least vehicle payments have left you with some equity without a large loss of value due to the economy.

So out of your expenses, which one should you prioritize over the others? How do you determine this? First off, it is important that your expenses are reduced to the 4 walls Dave Ramsey states: food, utilities, transportation, and shelter. Anything outside of this budget, unless absolutely necessary, should not exist in these difficult times. Shelter is a necessary expense but it is a large expense and it can and should be downsized in order to adjust to our national financial situation. If you are barely making it from paycheck to paycheck and still have a home that is out of your budget, it would be your wisest decision to move into a more affordable place asap.

If you are struggling to pay off bills and other payments, ask yourself these questions:

What could you do with a couple months’ worth of mortgage payments?
Should you sacrifice meals and other daily necessities to pay your mortgage even if that mortgage is not right for you?
Is it smart to spend money on money that has clearly no return on investment?

The answer: Get the facts and trust your instincts.

I highly suggest, at the very least, that you find out more about short selling your home. If you are delinquent on your payments (although not a requirement for a short sale) and are struggling financially, you may be eligible for a short sale where you can sell your home for less than what is owed with little to no remaining debt. We have local experts in Washington State that can inform you more about the process of short sales. Submit your info here and I will have our experts contact you within 24-48 hours.

Hope this helps

Peter

Americans are still in a struggle to survive this tough economic situation on our hands. Many are either unemployed or underemployed and have bills and payments that exceed what they can comfortably afford. Various debts such as credit cards with high interest rates induce a sense of desperation in which they may ask themselves, should I pull money from my retirement funds to pay my mortgage and other bills? This decision, if mixed with emotion, will most likely end up unfavorable for you in the long run. It must be a sober and wise decision.

Again the question is, Should I take from my nest egg to save the nest? Let’s consider a couple of factors:

• Penalties for prematurely withdrawing from Retirement funds:

Assuming that you haven’t reached 59 ½ years of age, the penalty for withdrawing from your 401k (a common retirement vehicle) is 10% additional tax and other taxes and penalties (interest). You must also consider the compounding interest lost on the money you withdrew from. This could add up to a substantial amount.

On September 22^th of 2011, the Home Act bill was proposed to the congressional committee. This bill would allow the taxpayer to withdraw funds (50K lifetime cap or one-half of the present value of one’s 401(k) account) from a qualified retirement plan penalty free (but not tax free) to make mortgage payments toward their primary residence. This act was in response to the growing number of individuals who were struggling to continue with mortgage payments and survive during this season of being in a recession. Unfortunately, the bill never made it past the congressional committee and is not likely to reach the House or the senate as a whole.

• Risk of putting money into a sinking home.

Why put money into a home that might lose more value? Although the housing sector’s recovery is looking more optimistic with the decreasing unemployment rates (8.3% current/ 8.0% projected for latter half of this year/6.9% projected 2014) and investors decreasing the supply as they are rapidly purchasing these cream of the crop deals, as we have learned over many years, there are no guarantees with the housing market. There is still an influx of short sale and foreclosed properties increasing the bank’s shadow inventory thus slowing the home price recovery. If your home does not increase in value or even decreases, you are basically putting money into another’s pocket at uncompetitive interest rates!

In conclusion, it is in most cases not wise to dip into your retirement funds to pay your mortgage. As emotions get involved, you may lean toward the quick fix but it won’t be the long term remedy. Dave Ramsey exclaims that, “Short of avoiding bankruptcy, never, ever, ever dip into your 401(k). Just pretend like that money doesn’t even exist until you are 65.” It will hurt later, guaranteed.

One of the best remedies to adjust to the current economic recession is a short sale. Lowering your monthly payments by temporarily downgrading will give you a solid start for your future. The economy will rebound! And those who make the right moves now will reap the rewards in the future. Short sell your home before pulling from your retirement funds.

If you would like more information on short sales, contact our team of agents in Washington State. Our local agents have been extremely successful and have hundreds of closings under their belt. If you submit a consultation request here, we will have our director of the short sales department contact you within 24-48 via phone and email.

Hope this helps

Peter

What do you think? Should a homeowner dip into their 401k or other retirement account(s) to save their home? Feel free to comment below.

The Obama Administration recently announced significant updates to the Home Affordable Foreclosure Alternatives program which was created in 2009 by the government to provide financial incentives for servicers and borrowers when in pursuit of a short sale or a DIL (deed in lieu) of foreclosure. These updates will provide more assistance to homeowners and will be in effect June 1, 2012.

For more information on HAFA, please read my previous post: HAFA Possible or Impossible.

According to the Making Home Affordable report from Treasury.gov, there have been 30,538 completed HAFA short sales and 843 Deed-in-Lieu transactions. Although this is under par from what we hoped it would bring, as stated before in my previous HAFA post, more modifications to the program make the option seem more viable. Fortunately, the recent changes address key issues, mainly, the compensation to the 2^nd lienholders. Here are the new changes for the Home Affordable Foreclosures Alternative:  *Info from ShortSaleGuide

• The deadline for HAFA has been extended. A borrower now has until December 31, 2013 to submit a Short Sale Agreement or a written request for a consideration for a Short Sale Agreement to be eligible for HAFA.
• There are no longer any occupancy requirements for HAFA eligibility. (Before the update the property had to be occupied as the borrower’s primary residence at some point within the prior 12 months).
• 2nd liens can now get up to $8,500. (It was $6,000).
• Servicers can now accept a full payment, if the borrower requests to make a full contractual payment in order to stay current on the loan.

*A caveat for those whose loans are owned or guaranteed by Fannie Mae or Freddie Mac is that this supplemental directive does not apply.

One point to note is, the homeowner may stay current on the loan while executing a short sale thus allowing the homeowner’s credit to have minimal damages after closing the sale. This will benefit the homeowner’s chances of acquiring another loan for their next home purchase.

For those who qualify, the HAFA program is an excellent program as it leaves homeowner’s with no possibility of a deficiency judgment and/or promissory note. The government also gives $3000 of relocation assistance once the short sale has closed. With these new improvements from the Obama administration, the HAFA program may be advantageous to those who qualify for the program. If you would like more information on HAFA short sales or would like to speak with our local experts, contact us here or feel free to email me at Peter@seattleshortsaleblog.com with additional questions.

Hope this helps

Peter

Banks Disposition
Economists have recently found three changes:

• The average credit score required to obtain a mortgage loan is 700. These standards are similar to last year’s standards.
• Banks are now lending amounts up to 3.5 times more than the borrower’s earnings.
• Banks are loosening their loan-to-value ratio. A loan-to-value (LTV) ratio expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. For instance, if a borrower borrows $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000/$150,000 or 87%.(LTV). Banks are now lending at 82% LTV which is an increase from a low 74% LTV in mid-2010.

Fannie Mae 2011 Waiting Guidelines are as follows: *info from homeownershipuniversity.com

• Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your bankruptcy has been discharged for FOUR (4) years.
• Foreclosure – You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure.  Additional qualifying requirements may apply,
• Short Sale / Deed in Lieu of Foreclosure - UPDATED 12/16/11  
  TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment
  FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
  SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
• Credit must be re-established with a minimum 660 credit score.

Points to consider Now

You must be prepared to explain your short sale circumstances to the bank(s). If you’re story involves walking away from your property because there is no equity (aka strategic default), the banks are most likely to view that negatively. However, if you show a legitimate hardship such as a job loss, income reduction, and other circumstances leading to the inability to pay, then this will alleviate the negative view of your recent short sale. It would be optimal if you had no other late payments besides the late mortgage payments. You must be prepared to answer honestly what happened and show that you put much effort into working with your bank to resolve the difficult situation.

A bank’s decision to lend is always a judgment call so it is important for you to give them confidence in you that the loan will be a safe decision for the bank.

After a short sale, a ding on your FICO score is imminent. You may be concerned about the minimum requirements needed to acquire another loan especially if you are delinquent on payments prior to pursuing your short sale. The damage can be remedied via a legitimate credit repair company who are able to legally dispute negative items off your credit report. We’ve found that Lexington Law has been the best company to work with to reestablish your credit status and strongly believe it is 101% worth the investment for any and every homeowner.
If you haven’t begun your short sale, contact our expert agents by submitting your info here and you will be contacted within 24-48 hours for a free consultation.

Peter

Federal aid has offered various programs via Making Home Affordable (MHA) to help American citizens all across our nation who are struggling through the recession. Although it has been helpful, foreclosures are still increasing leaving many in difficult situations. Acknowledging this widespread dilemma, several state governments have implemented a “Foreclosure Mediation” program that allows homeowners to speak directly with their lender to formulate an agreement on the issue of their delinquent mortgage payments. Is this a remedy option worth pursuing? Studies in Washington State have shown improvement in halted foreclosures.

This bill that the Washington State Legislature passed is called the Foreclosure Fairness Act of 2011. Seeing the staggering statistics of foreclosures in Washington which was over 132,000 foreclosed homes between 2009 and 2012, Washington decided to aid its citizens by funding HUD counselors to help distressed homeowners all throughout Washington. Through the HUD counselor or an attorney, the homeowner is able to request a foreclosure mediation where they are able to speak directly with their lender, with a mediator’s assistance (HUD counselor or attorney), to reach a “fair, voluntary, and negotiated agreement.”

Who qualifies for this program?

*For Washington Residence

Homeowners are covered if they are in owner-occupied properties and have either: (1) received a Notice of Default on or before the effective date of the Act and their house has not yet been sold at foreclosure sale; or (2) after the effective date, have not yet received the Notice of Trustee’s Sale. Any lender or servicer who did 250 or more foreclosure sales in Washington during the previous year is covered. The Act is effective on July 22, 201 1. The Department of Commerce will administer the Mediation Program.

Benefits to the Mediation Program

The main benefit of this program is reaching a consensus between the homeowner and the lender. The possible outcome may grant the homeowner:

• A loan modification which will reduce the interest rate and extend the mortgage period.
• An agreement to conduct a Short Sale which is selling the property for less than what the homeowner owes.
• A Deed-in-Lieu of foreclosure which is a voluntary transference of the deed to the mortgage company that has the homeowner’s loan.
• Cash for keys program which may provide monetary incentives for homeowners to vacate the home.

The other important benefit of this mediation program is if the lender agrees to participate, the homeowner is able to obtain an extra 45-60 days after the 15 days for the meeting to be approved and scheduled once requested. This act gives homeowners more time to figure out what the best move is to make when in danger of foreclosure.

How do I utilize the foreclosure mediation program?

The cost of using the mediation program is $200. If the homeowner qualifies, it can be obtained by speaking with a HUD approved counselor or an attorney who will send a request for mediation to the lender.

Will the foreclosure mediation program ACTUALLY be beneficial for me?

Click here to see if your state is participating in the foreclosure mediation program.

This mediation program has the potential to be beneficial. Lenders typically try to forgo the foreclosure process and are willing to work out a solution with homeowners. However, the results have been variable from state to state. Some states such as Florida have brought dismal results bringing only 4% of the referrals to the program ending in an agreement. The State of Washington have had better results having halted over 600 foreclosures in just 3 months after the program started in July.

If anything, the real incentive to use this program is the delay of the foreclosure process. It gives the homeowner more time to plan and make an informative decision for their home rather than being foreclosed on and evicted which could be emotionally and financially detrimental.

If you are in a position where you received a notice of default or are already in foreclosure, this may be an extremely helpful tool for you. I suggest you call a HUD counselor in your area immediately, even if you aren’t in default but struggling to keep up with your mortgage payments. If you live in Washington, I highly suggest you contact our short sale specialists to learn more about the process and consult with our certified distressed property experts as a short sale is in most cases, the best option for homeowners. Submit your information here and I will have our experts contact you within 24-48 hours.

Hope this helps

Peter

Will there be a rebound in the housing market for 2012? Many are becoming more optimistic about this year’s housing situation as homes have reached unprecedented lows in interest rates and prices thus increasing demand. Concurrently, rent prices are rising and more people are apt to buy which will decrease the excess of supply in our market (many of which are short sales and REO properties) and ultimately, bring the prices back up. What does this mean for current homeowner’s who are struggling with their mortgage(s) and considering a short sale?

As evidenced from past experiences, the fluctuation in the housing market is so variable that even experts are unable to guarantee which direction it will go. There are expectations of stabilization or possibly a slight shift in the direction of prices in the latter half of 2012. Even then, the expected prices are definitely not 2004 prices but more at the 2008 price levels.

The rebound is largely contingent on various factors such as the strength of employment, builder activity, investor activity, and other changes in the general economy. Experts opposing the optimistic predictions of the housing market say, “Distressed properties have the lowest prices for any category of home sold. To a large extent, that’s why we’ve seen continuous home prices drop over the past three years and why those drops are likely to go on.” – Guy Cecala of Insider Mortgage Finance. An influx of short sales and foreclosures entering the market is not going to slow down soon. Even in the case that these great deals fly off the market and prices halt its decline with a slight rise, should a homeowner stay in their homes or short sell right away?

The important question is, are you able to amply afford your mortgage payments in the upcoming years? If you are struggling with payments, then this year would be the most opportune time for a short sale. Suppose the homeowner stays in the home while barely making it by with the mortgage payments. He/she doesn’t only stay at risk of defaulting and foreclosure but the home will likely build little to no equity, if not stay underwater. If the home falls into foreclosure or the homeowner decides to pursue a short sale later, the homeowner may be liable for income tax from the sale of the home which is currently forgiven via the Mortgage Forgiveness Debt Relief Act set to expire December 31, 2012.

A more reasonable option would be to short sell your current home, negotiate the deficiency owed to lender(s), stay within the mortgage forgiveness debt relief act timeline, and purchase another home that makes sense for your financial situation at the lowered interest rate the market offers. It is a good time to buy but for how long will it last? If the housing market slowly rebounds in the next few years, then promptly short selling would give the homeowner enough time to reestablish their financial situation, rebuild credit, and purchase another home within 2 years (typical after a short sale) that is within their means and at a superb price/rate. It may be delayed gratification but keeping up with the Joneses now will only precede an exacerbated financial situation on your hands.

If you would like more information on short sales or would like to speak to one of our Certified Distressed Property Experts, submit your information here and write a brief description of your home situation.
Hope this helps

Peter

Stop trying to simply increase your income to solve your financial problems. Rather, focus your efforts more on stabilizing your financial situation with the income you are already receiving. We recommend Dave Ramsey’s Babysteps program as we have found Dave Ramsey has been one of the best financial advisors having helped millions of individuals achieve financial freedom. He helps individuals get out of the system of perpetual debt, learn how to budget, save, invest, build wealth, give, and much more.

When should I purchase another home?

We do not recommend purchasing another home until you are financially ready. During this financial rebuilding, there will be the temptation where right after you save enough money for the down payment, you’ll want to buy another home immediately. Although you may enjoy the purchase of the new home momentarily, you will be right back where you were and possibly worse depending on the situation. Make sure you get financial wisdom prior to purchasing your next home and make it a goal to get a 15-year fixed mortgage or do a 100% cash down on your next home.

What is your goal? If it is to purchase another beautiful home, then there needs to be planning or expect to rent for life. Now that you have freed yourself from the costs of homeownership, use that money to work on eliminating your debt, building your assets and savings, and living in a beautiful home financially free. If you haven’t done a short sale yet but are struggling with your mortgage payments, we highly recommend you talk to HUD approved counselors and find out all the options for your home. If short sales are a viable choice for you, submit your information in the short sale tab above and we will provide you with a free consultation with one of our experts.

Hope this helps

Peter

If you pursue a short sale or any other route of letting go of your home, you will inevitably have a ding on your credit score. Although the amount varies depending on which route you take or whether you are late on your mortgage payments in a short sale, having a ding on your credit score will make it difficult for you to utilize your credit especially when purchasing another home. What are mortgage companies looking for in your credit? How quickly can you purchase another home after a short sale? We will review these questions and a solution.

What are mortgage companies looking for in your credit?

As you may have already guessed, the dramatic changes to the housing market due to the subprime mortgage crisis have made lenders and investors much more stringent on their lending practices. The three areas lenders look at when considering financing your mortgage are credit score, income, and your overall ability to repay the mortgage. Large agency investors such as Fannie Mae changed their minimum credit score requirement from 580 to 620. Anything under 620 is considered high risk. Your local bank may require a credit score of up to 660 or higher which shows you how important credit scores are in your ability to obtain another mortgage.

How quickly can you purchase another home after a short sale?

Based on the numerous cases we have seen, homeowner’s are able to purchase another home much quicker in a short sale than after a foreclosure. As far as the time it will take to purchase another home, really depends on each specific situation. Our team has personally seen homeowners purchase another home within the first year if they’ve made all of their payments.  Multiple clients have bought their home within 2 years and more clients inside three years all without missing payments.  If you miss payments (per rumor), it is understood that Freddie and Fannie won’t finance you for 2 years before you are able to start shopping again.  Whether or not they finance will depend on how many missed payments and how good/bad your credit is.  The timeline in which you are able to purchase another home greatly depends on you and your proactive decisions from this point on.

How can I rebuild my credit after a short sale?

Seattleshortsaleblog have been endorsing Lexington law credit repair for some time now. It has proven to be the best credit repair company having removed 1,297,226 negative items from credit reports in 2010 including short sales, foreclosures, and bankruptcies. This company helps individuals rebuild their credit score to good standing which will expedite the process of being able to purchase another home. I suggest all homeowners whether they are thinking about a short sale, currently executing a short sale, or have finished a short sale, to call and get consultation regarding their credit.

Next Post 1/13/12 Friday

Peter