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

There is wisdom in a multitude of counselors. Dealing with your mortgage(s) should not be done alone as it is an extremely complicated process which naturally causes high stress and will most likely produce unwise decisions. I always recommend finding HUD approved counselors to help you based on your specific situation but whether it is a Foreclosure, Loan modification, Short sale, or filing for Bankruptcy, consulting with an attorney is just as important to safeguard your future. Key point: Find the right attorney to counsel you.

How would an attorney help me?
In America, it is wise to have an attorney on hand. We deal with legal matters more often than we realize even for the little things including overcharges for repairs, speeding tickets, returning defective products, and so on. An attorney will be in your best financial interest if you know when and how to utilize their services.

What about the more serious situations such as dealing with mortgages and deficiencies? Whether you are letting go of your property via foreclosure, deed-in-lieu of foreclosure, a short sale or pursuing a refinance/loan modification, sale/leaseback, or filing for chapter 7 or 13 bankruptcy, any decisions without an attorney can be a detriment to you and your family.

An attorney will be able to guide you to the right decision for your home and whatever route you take, their counsel will be a safeguard for your path. Some examples of the need for an attorney are:
*All laws vary from state to state.

• Foreclosure – Knowing your state foreclosure laws/processes and your rights as a homeowner is very important. Even if you live in an anti-deficiency state and your home is foreclosed on, having a subordinate lienholder will put you at risk of a deficiency judgment. You also need to know exactly what the tax and credit implications are after a foreclosure.
• Short Sale – In a real estate transaction, there are a number of documents you must review and sign. In short sales, you must be very careful in reviewing all the documents especially when you are dealing with the deficiency agreement on the approval letter. If your lender requests you sign a promissory note when closing the sale, you must understand the terms of agreement.
• Bankruptcy – Many homeowner’s have false notions on what all a BK can do for them. In a chapter 7 bankruptcy, you liquidate your non-exempt assets and can discharge unsecured debts. However, this does not eliminate liens as it does not discharge secured debts. Your lender is a secured creditor meaning the debt owed to them is secured by the lien on your property.
  If you have some income, you may file for a chapter 13 BK where you keep assets but rather than discharging your debts (some are dischargeable i.e. fraud judgments), you reorganize them to pay off overtime (3-5 yrs.) according to a repayment plan set by the court. You must still make payments to your lender according to the repayment plan. If you miss any payments under your plan, your case will be dismissed by the court
  Be sure you know exactly what pursuing a Bankruptcy entails and if you even qualify. Your attorney will be able to explain that to you and help you determine whether BK would be in your best interest based on your situation.
• Loan Modifications – Although I do not endorse pursuing a loan modification yourself, your attorney can give you consultation through the process and go through the documents with you.It is a no brainer, if you are in pre-foreclosure status, find yourself an attorney.

What if I don’t have the finances to hire an attorney?
Qualified attorney’s typically charge an hourly rate of $200-300 for legal consultation. With the difficult process of dealing with mortgages, you can easily accrue a staggering amount of expenses that would be difficult to pay especially when you were struggling financially in the first place.

Fortunately, Seattle Short Sale Blog found the solution. We understand the need of an attorney when in pre-foreclosure status but finding a legitimate attorney at an economical rate is nearly impossible to find. We’ve discovered that rather than paying an attorney $200-300 for consultation (which should really be spent for legal representation), we endorse Legal Shield services.

Legal Shield allows unlimited access to multiple attorneys with AV ratings on the LexisNexis Martindale-Hubbell. These attorneys are experts in specific fields such as foreclosures, loan modifications, short sales, bankruptcy and more but only charge at a standard rate of $17 a month. It is on a membership basis rather than an hourly basis which has proven to be an extremely viable choice being in a recession. Click here and find your attorney.

Hope this helps

Peter

The Obama Administration has received its share of criticism over the past few years for a number of issues such as the national deficit, tax cuts, health care and more.  When the Subprime Mortgage Crisis took momentum in 2006, recovery became increasingly difficult though commendable efforts were made to aid struggling homeowner’s. Thus far, the results have not been ideal.

Homeowner’s are constantly seeking help from various programs set by Federal Agencies and Government Sponsored Enterprises(GSE). There are many programs available for those who are seeking but the execution of these programs are not as streamlined as homeowner’s would expect and on numerous occasions, have left homeowner’s in a worse position. Utilizing these government programs even though it takes considerable time and effort may produce great results. However, many homeowner’s are now developing a negative disposition to these government programs.

In response to the Subprime Mortgage Crisis, a number of acts and programs have been implemented: The Housing and Economic Recovery Act of 2008 (aka HERA), Emergency Economic Stabilization Act (EESA) & Troubled Asset Relief Program (TARP), Homeowner Affordability and Stability Plan, Mortgage Forgiveness Debt Relief Act and many more. The primary outlet of the Obama Administration’s efforts to avoid foreclosures and stabilize the housing market is through the Making Home Affordable (MHA) Program. Below is a list of the various options that you may be eligible for:

For those seeking modifications or refinance for your current loan(s)

• Home Affordable Modification Program(HAMP): HAMP, if eligible, helps homeowner’s lower their monthly mortgage payments. Based on recent statistics, there are currently 690,969 active permanent modifications.
• Principal Reduction Alternative(PRA): PRA, if eligible, helps homeowner’s reduce their loan amount by working with their servicers and investors if the home values are significantly less than what they owe. Based on recent statistics, there are currently 10,544 active modifications.
• Second Lien Loan Modification Program(2MP): If your first mortgage was modified by HAMP and you have a second mortgage on the same property, you may be eligible for a modification or a principal reduction on your second mortgage under 2MP. Based on recent statistics, there are currently 35,031 active second lien modifications.
• Home Affordable Refinance Program(HARP): For those who are current on their mortgage payments and have attempted a traditional refinance but was declined due to the reduction in value of your home, you may still be eligible to refinance through HARP.
  
• Treasury/FHA Second Lien Program(FHA2LP): If you have a second mortgage and the mortgage servicer of your first mortgage agrees to participate in FHA Short Refinance, you may qualify to have your second mortgage on the same home reduced or eliminated through FHA2LP.
• Home Affordable Unemployment Program(UP): If you are unemployed and are struggling to make mortgage payments, eligible homeowner’s may be able to receive a temporary reduction or suspension of mortgage payments for at least twelve months while seeking re-employment. Based on recent statistics, there are 11,364 UP forbearance plans with some payment required and 2,629 UP forbearance plans with no payment required.
  
• The Emergency Homeowners’ Loan Program (EHLP): This program can provide eligible homeowners with a 0% interest, forgivable loan that pays past-due mortgage payments (principal, interest, taxes, insurance, attorney fees), as well as a portion of the homeowner’s monthly mortgage payment for 12 to 24 consecutive months, or up to $50,000, whichever comes first, and provided that certain eligibility requirements are maintained.
  Applications to qualify for this program are officially closed as of September 15, 2011. Based on a phone call to their referral center, reinstatement of this program is TBD.  Out of an estimated 100,000 applicants, it is expected that only 10,000 to 15,000 people will qualify for this program due to strict eligibility and mortgage delinquency policies.
• FHA Forbearance for Unemployed Homeowners: Federal Housing Administration (FHA) requirements now require servicers to extend the forbearance period for unemployed homeowners to 12 months. The changes to FHA’s Special Forbearance Program announced in July 2011 require servicers to extend the forbearance period for FHA borrowers who qualify for the program from four months to 12 months and remove upfront hurdles to make it easier for unemployed borrowers to qualify.

For those who believe letting go of your property is the best option:

• Home Affordable Foreclosure Alternatives (HAFA): Please read my previous article on HAFA. HAFA offers incentives for homeowners looking to exit their homes through a short sale or deed-in-lieu of foreclosure.  Based on recent statistics, 15,531 HAFA Short sales have closed. If the homeowner successfully closes a short sale through the HAFA program, they have full release of liability on the first mortgage as well as any subordinate liens. They also are able to walk away with up to $3000 relocation assistance upon closing.

The easiest way to find information on the MHA programs based on your specific situation is to contact a HUD approved counselor in your area or call the Homeowners Hope Hotline at (888) 995-HOPE.

Do these programs really help?
Although these programs may seem promising, please keep in mind that many of the MHA programs have loopholes and strict qualification guidelines. According to the data from the US Treasury website, many programs were started but only a portion of them ended up becoming active permanent modifications.

One homeowner, Terrie, whose story was posted on a Making Home Affordable website, filed a mortgage modification via HAMP. While waiting for a response for the modification, he got a notice from the bank saying they had foreclosed on the property and already sold it to another person. Terrie subsequently received a notice saying his application was rejected for the modification. These types of occurrences are not uncommon. “Homeowners like Terrie do not understand why the government’s program would allow mortgage providers to entice distress homeowners with promises of helping them stay current on their home loans while at the same time, initiating procedures that will put the homeowner out of his or her home.”

Based on the many stories and experiences I’ve heard, I strongly believe that looking into the HAFA program or a traditional short sale would be a much better alternative to foreclosure.  This route would set you up for a better financial position and equip you for a new home in the future. Don’t put yourself at risk of a foreclosure.

Do you have any personal experiences(negative or positive) with any of these programs? Please share in the comments below. Thank you

Peter

2. What is your company’s track record and reputation in the market place?
Track record is an extremely important factor in choosing who you work with. Ask your agent how many homes they’ve sold and what their success rate is. Take two agents for example: One who sells over 50 properties per year and another who sells only 12 a year.  The agent with fewer houses under their belt may be unable to perform well with your property because “…they can’t raise the money it takes to afford the advertising and special programs to give your home a high profile. Also, at this low level, they probably can’t afford to hire an assistant, which means that they’re running around trying to do all the components of the job themselves, which means service may suffer.”

3. What are your marketing plans for my home?
Ask about the agents advertising programs. “How much money does this agent spend in advertising the homes s/he lists versus the other agents you are interviewing? In what media avenues does this agent advertise? What does s/he know about the effectiveness of one medium over the other?” In short sales, you want to make sure that your home is getting the absolute best marketing as it expedites the short sale transaction and decreases the chances of your home falling into foreclosure. 

4. What has your company sold in my area?
Agents should be able to provide you with a “complete listing of both their own and other comparable sales in your area.”

5. Does your broker control your advertising or do you?
“If your agent is not in control of their own advertising, then your home will be competing for advertising space not only with this agent’s other listings, but also with the listings of every other agent in the brokerage.”

6. On average, when your listings sell, how close is the selling price to the asking price?
In short sales, the success of your agents work is determined by the amount of deficiency remaining upon closing the sale. If your agent is not getting you the highest price for your home, you are more likely to walk away with a considerable promissory note.

7. On average, how long does it take for your listings to sell?
This is a big question to ask as there are many agents out there who lack experience and expertise in short sales which produce prolonged short sales and/or foreclosures.

8. How many buyers are you currently working with?
The more buyers the agent is working with, the more likely that your home will be sold. “Ask them to describe the system they have for attracting buyers.”

9. Do you have a reference list of clients I could contact?
Knowing the experiences of previous clients that your agent has worked with could save you from another short sale horror story that is prevalent around the nation. If there is a plethora of negative feedback from clients, it is definitely a red flag that you must avoid.

10. What happens if I’m not happy with the job you are doing to get my home sold?
“How confident is your agent in the service s/he will provide you? Will s/he allow you to cancel your contract without penalty if you’re not satisfied with the service provided?” Be vigilant when reading the long listing contract agent’s present to you. For short sales, an upfront fee is still not allowed in many states.

Hiring a Real Estate agent is like any hiring process. Put yourself in the boss’s position and interview several agents before you choose who you are confident is the right one. If you are pursuing a short sale, working with the wrong agent could be detrimental to you if you do not choose wisely.
The short sale team I personally chose is only available in Washington State. However, if you have additional questions regarding short sale agents, please feel free to contact me at: Peter@seattleshortsaleblog.com

Dave Ramsey is one of the most popular financial advisors in America having helped millions of people who were in financial distress. After many years of experience with homeowners, Dave exposes the costs of homeownership that many people do not realize prior to purchasing a home. Whether you are about to purchase or are already living in your home but struggling with payments and upkeep, these five points are crucial to determine your next steps of purchasing or selling your home.

1. Repair fees
A homeowner is ultimately in charge of any and all maintenance costs. Obviously, these costs are variable depending on the home but I will say most people underestimate all the problems that could and probably will engender upon regular use of the home. The rule of thumb is, maintenance costs are typically 1% of the home’s value but for most of us this is a minimum as something may go wrong with the furnace, kitchen, bathroom(s), siding, roofing, lighting, driveway paving, chimney, septic, windows, carpets and much more. This addition to your monthly expenses on top of your mortgage payments must be considered as a homeowner.

2. Lawn care
Your beautiful lawn cannot stay beautiful without your contribution. You either must buy a lawnmower or outsource this job to someone who will cut your grass. Need landscaping work done? It will be another considerable addition to your maintenance cost.

3. Taxes
If you have not read my article on over-paying your property taxes, please read it at your earliest convenience. Property tax is tax based on the appraisal value of your home and the tax rates of the taxing jurisdictions in which the property is located. The amount of how much you pay could be staggering but it is easily overlooked as it comes only once a year. Dave highly recommends that you factor in these yearly costs when in the market for a new home – “make sure the payment (including taxes) is no more than 25% of your take-home pay.”

4. Time
Anyone who has owned a home understands the time required to keep up the home. The majority of your weekends are spent repairing, maintaining your backyard, cleaning and etc. Even if you are not necessarily struggling to pay off your mortgage(s), the opportunity cost merely in terms of time can make renting or downgrading to a smaller home more desirable.

5. New Stuff
The temptations of making your residence more aesthetically pleasing exponentially increases when you own a home. For existing homeowners, remember when you first moved in? All of a sudden, your old furniture didn’t fit too well in your new home and buying new furniture to make your home look more like “you” suddenly became a requirement. Several thousands of dollars are easily spent upgrading your furniture even if you were unable to afford it. Dave is not prohibiting homeowners from buying new furniture. Rather, he recommends taking it slow by saving every month and paying for it when you have cash.

These points are just a fraction of the expenses that come with owning a home. Contrary to what many believe, homeownership is not the same as renting as the differences in cost and time are substantial but often overlooked.  For those who are looking to purchase a home, Dave recommends proactively preparing a budget with 3 to 6 months of household expenses saved, and actually sticking to the budget.
If you are currently a homeowner and feel it would be a better option to rent or downsize in this season of life, please make an inquiry under the short sale tab above for free consultation or feel free to email me at Peter@seattleshortsaleblog.com

Hope this helps

Peter

According to a recent article from the Wall Street Journal, half of all homeowners could be paying too much on their property taxes. As home prices continue to decline, your property taxes may not have been adjusted accordingly due to inaccuracies in assessments on your home. They may be basing their appraisals when the market was healthier and according to the congressional budget office, “property tax adjustments lag behind changes in home prices by an average of three years.”

The National Association Of Home Builders conducted a study in April finding an increase in property taxes by nearly 20% in 2005, up from, 2009. A great example of this is Lynne Weaver, who noticed that her neighbor’s homes were assessed for as much as 205,000 less than her own property. After doing some investigating and research, she found out the assessor had incorrectly claimed that a room, used as an office, was 300 square feet larger than it actually was. What were the results of finding these details in her assessment? She appealed the claim and successfully lowered her property assessment by 45% to $390,000 in 2010 from $709,715 in 2009. The lower assessment cut her 2010 property-tax bill to $3,257 from $5,597 in 2009

Fortunately, like Lynne, you are able to appeal to your local assessor which may lead to a lower tax bill. Although the degree of discrepancy in assessment adjustments may not be as staggering as Lynne’s, it is worthwhile to see whether you really are paying much more than what you should be for property taxes. The full article and instructions are here.

Be very careful how you execute this because it can backfire. I always recommend using a professional to handle these types of transactions as it would be in your best financial interest to do so.

Hope this helps!

Peter

Are you eating into your savings/emergency fund to keep your home? Are you sacrificing important things in your life to continue payments on your home mortgage(s)?
For many homeowners, I endorse letting go of their property because in most cases, it would be in their best interest to get this considerable debt off their hands, start rebuilding credit and financial situation, then purchase another home that they are able to afford in the future. Why short sale your home? It would be a LEAP toward your financial recovery.

The Subprime Mortgage Crisis
It happened to the best of us. To simplify, mortgage lenders gave subprime(etymology: sub=under, prime=first) mortgages to borrowers who had less than prime credit for the advantage of enforcing higher mortgage interest rates on them. Concurrently, many borrowers purchased the home to rebuild their credit and refinance to more favorable terms once their credit score improved.
Basically, it was much too easy for borrowers to qualify for a mortgage(they couldn’t afford it to begin with) and although the housing market was expected to flourish, it turned out to be a catastrophic downward spiral. When the house prices began to fall, the subprime borrowers suffered. Now, not only are they unable to pay their existing debt, they are now stuck with having to pay a much larger mortgage payment.
It was a mistake we all had a part of and even those who didn’t partake in subprime mortgages have felt the effects as this incident severely affected the US economic system.

So Why Short Sale?
Short sales are basically giving the homeowners the opportunity to walk away from their home with minimal repercussions. A short sale is an option for homeowners to avoid foreclosure and sell their properties for less than what they owe to the banks. Albeit, this can only be accomplished with an expert negotiator, a short sale is a better alternative to foreclosure mainly due to better verbiage on your credit report and reduction or possible elimination of deficiency.

Rent To Win from Dave Ramsey
“Most people miss the positives of renting. They feel like they’re throwing money away. The truth is, people who truly cannot afford a home should not buy real estate—even if rent is the same amount as a monthly mortgage payment. Renters avoid hidden costs for repairs and maintenance that add to a monthly mortgage payment. Another plus—renters can simply move if their circumstances change. Owners can be stuck with a property with no equity that takes too long to sell.”
Dave Ramsey, a popular financial expert, recommends the “100% down payment plan-paying cash for the whole house.” If this seems too farfetched for you, then he believes you must at least have an emergency fund of 3-6 months of expenses and have saved at least a 10% down payment or a 20% down payment which is preferable to avoid Private Mortgage Insurance (PMI) payments. The overarching recommendation is, buy real estate when you are financially ready. Until then, RENT.

Still questioning whether you should keep your home or not? I know letting go of your property may be a daunting decision to make but the reality is, the mortgage is probably not right for you.

It is pivotal that you find the best agent possible for this type of transaction. A short sale without an expert negotiator greatly increases the difficulty of closing the sale, trust me. I know countless Realtors who conduct short sales but I am very specific when it comes to choosing the best ones for the job. I have handpicked my team of agents and have yet to find another team with a higher rate of success. Please feel free to contact us.
Hope this helps

Peter

We’ve established that awareness of our current situation is a crucial step for financial recovery.  Now, there must be a change in our mindset and old habits. We may begin by identifying some practices in our life and alter them for the betterment of our future. Proper guidance to the path of recovery may only be obtained by trustworthy financial experts. What can these experts offer? Here is one sample: Should I pay my debt before saving? Emergency fund vs. Paying off debt

Emergency fund or Paying off your debt.
According to a recent study by CNNMoney, most Americans can’t afford a $1000 emergency expense. This is absolutely shocking especially with the high percentage of emergencies that are bound to happen. An emergency fund as cushion is unquestionably crucial to have as it allows you from getting deeper into debt or put you into a crisis situation (if you’re not already in one).

*The intention of this part series is to inform homeowner’s of the gravity of our recession and to give guidance on how to adjust to our economic conditions. This part series will include portions of the US economic status, financial advice from well-known experts, and the importance of Short sales.

Optimism is greatly encouraged. However, if optimism becomes delirium and delays the steps towards you and you’re family’s financial recovery, then it is problematic. Whether it is your home loan(s), car loan, student loan, credit cards and etc., the reality is, you are in debt and this debt will not magically disappear unless a plan of action is executed. Let’s establish one very sobering reality that many people are trying to remain oblivious of, we are in a recession and we cannot afford to remain in the same standard of living(SOL) that we had in our previous years.

You’ve had an unfortunate story: Divorce, medical issues, unexpected repairs on your vehicle or home, bad investments and etc. Sound familiar? Money magazine said 78% of you will experience a negative financial event in any given 10-year period of time. I am aware of these unexpected events and I have personally experienced a good portion of them. I hear hundreds of tragic stories that put homeowner’s in the difficult positions they are in today. My heart truly goes out to you which is the reason why I do what I do today.

What is the current reality and direction of the US economy? Watch This: US Debt Crisis – 2012 is only for America

Some of you may take this with a grain of salt. However, we can agree that headlines on the news have not brought hopeful projections for our near future. What have we heard recently? Slow housing market recovery, US S&P’s credit rating downgrading from AAA to AA+, sharp declines in our stock market, our ever weakening U.S. dollar, slow job recovery and many many more. These kinds of headlines are prevalent in our country yet I don’t see enough drastic changes in homeowner’s decisions to adapt to our current economic conditions.

Who is to blame for our economic crisis? Let’s try not to revolve around this question anymore. Rather, we should focus our efforts on what we can do about it and what can I do about my situation right now?

Part Two (8/31/11): Survival Mode: How do I stay alive and set myself up for recovery during our economic instability?

Short sales are unquestionably becoming a viable option for most homeowners and are rapidly becoming popular in our country today. The Federal Trade Commission (FTC) recently cancelled rules set by the Mortgage Assistance Relief Services (MARS). Their reasoning was they did not want to “inadvertently discourage real estate professionals from helping consumers with these types of transactions.” The rules that were cancelled for those trying to assist consumers in obtaining approval of a short sale from their lender or servicer were required disclosures, recordkeeping requirements, and the legal option to charge upfront fees. However, there has been a huge debate on whether it is fair for brokers to charge upfront fees to homeowners who are pursuing a short sale.

*Email received from staff in the Bureau of Consumer Protection:
The FTC’s stay means that the mars rule does not prohibit real estate professionals who assist consumers in obtaining short sales from charging advance fees. However, the mars rule does not preempt state law. This, in turn, means that if a state law bars such advance fees, real estate professionals who operate in that state continue to be prohibited from charging them.

The basic premises of the debate amongst Realtors are:

• There are realtors who believe charging an upfront fee to sellers who are already struggling financially is unethical and even unlawful in their respective states. It exposes homeowners to realtors who are not experienced in short sales but are hungry enough to take on the transaction knowing there is a considerable chance of failure. If the short sale transaction falls through, the homeowners will be put in a position worse than where they started.
• On the other hand, there are numerous brokers who are experts in the field of short sales having successfully closed hundreds under their belt that advocate charging an upfront fee is fair because of their many hours put into the transaction.  If the seller simply decides to walk, the brokers do not receive any compensation for all their efforts put into the deal.  Remember, we are not talking about inexperienced, unsuccessful Realtors. The “stay applies only to real estate professionals who: 1) are licensed and in good standing under state licensing requirements; 2) comply with state laws governing the practices of real estate professionals; and 3) assist or attempt to assist consumers in obtaining short sales in the course of securing the sales of their homes.”

Is it wrong for them to charge a small upfront fee for their legitimate services? Some realtors claim that they had sellers who were excited for the upfront fees and hired them because of it. The upfront fee establishes a commitment in a transaction that is a prolonged process and requires many hours of effort dealing with banks/servicers, sellers, and buyers.

What is your opinion on this matter? Do you believe upfront fees are justified and even beneficial for the short sale or is it unethical for Realtors to charge prior to closing a short sale because of the detriment it may have on the homeowner in case of failure. Homeowner’s opinions are greatly encouraged.

Our team of agent’s stance is to not charge an upfront fee for any given short sale transaction.

Peter