What about Short Selling My Home?

To view Short Sale Information in Spanish.

Are you facing a situation where you need to sell your home for less than is owed and you just don't have the financial ability to pay? In most cases the goal is to prevent a foreclosure. A foreclosure will have a greater impact on your credit score and ultimately the cost of many services that depend on credit to establish the amount you pay for these services. By selling your home at a price that will be acceptable to the lender you can escape a foreclosure and have the lender give debt forgiveness. 
Many of us today are facing this big problem and few have any experience to know what to do. As unfortunate as this experience is, you still need to arm yourself with information to make the most of it. This article will provide some basic information on what to do and how to work with your Realtor® to achieve your ultimate goal. A Realtor who has the knowledge and time to work with the lender or servicing agent of the lender can be invaluable to your success.
An experienced Realtor is going to want to know the answers to some questions to determine what your current situation is.
  • Is there a foreclosure notice and date?
  • Is there a second mortgage or line of credit? Also was the 2nd or line of credit used to purchase the home or additions to the home (this has a tax implication which the seller should look into with their tax pro or CPA).
  • Are the loans with the same or different lender?
  • The seller will need to fill out a hardship letter and submit it to the lender? They must be willing to do this to have the lender accept a short sale.
  • Has the seller contacted the lender(s) to see if there is a loan modification is possible or desirable to avoid a short sale. A seller that can get the loan modified or adjusted in some other way changed to remove the need for a short sale can be far more beneficial.
  • Note that hardship reasons include job relocation, medical or family issues not just financial from job loss or reduction of income or changes in the loan.
  • Has the seller talked to their tax professional or CPA on tax consequences of Debt Forgiveness?
  • Is everyone on the home loan(s) in agreement on the short sale?
  • Has the seller received notices from the lender and what do they indicate? Is the seller being considered for government assistance under the Making Home Affordable program (ie., HAMP, HAFA, DIL, etc)
  • Copies of loan statements available? Foreclosure notices?
Once the seller and Realtor have reviewed the current situation, the seller needs to make sure the Realtor has the experience to negotiate the sale and the list price for the property. When an agreement has been reached to list the home, both the Realtor and Seller now have to begin the work of getting the property marketed, initiate contact with the lender and finalizing the process to complete the sale. Let’s start with initiating contact with the lender.
This is a critical step in determining if the seller is qualified for the Making Home Affordable (MHA) program or will the seller fall under the lien holders default loss mitigation programs. This can significant impact the sellers outcome in the selling process. As a seller, only work with real estate agents that have experience in MHA type of negoiations. You need to determine if you are eligible for the MHA program first. Contact me at 623-606-8861 to see if you qualify for the MHA program. This can provide real monetary benefits if you are eligible.
If you are not available then you will want to work with the lenders default program. In general most default program require the following:
First you must contact the lender's "Loan Mitigation or Short Sale Department” to get their contact information. Typically this department will need the following information:
1.    Letter to the department from the lender indicating the Realtor is authorized to help you in the sale of the property. You should have the property address, loan number, agent (brokerage, name, address and contact information) on the letter to complete the authorization. In some cases the lender may have their own form to use.
2.    A hardship letter which indicates why you can't make the payments. This does not have to be long or wordy, just a statement of the facts of your financial distress. You may want to include major bills like medical, dental or changes in job or other information to support your expense claim. (Why, Short or Long term, What has changed, How Much). Be sure to sign this page.
3.    The last 30 days of paystubs to show income.
4.    The last two months of bank checking statements and make sure you have the whole statement. (Lien holders may require additional information later on cash assets)
5.    Budget of Financial statement so the income and expense can be compared. Your lender may have their own form, but in essence you will have one column with expenses and one column with regular income (don’t include income that is occasional). Be sure to sign this page.
6.    Two previous years of tax returns (1040 only).
This material can be submitted to the lender at this time and typically at the beginning of the process. More than likely, the lender will hold on to it until a contract has been submitted. If the evaluation takes more than 2 months, the financial information may have to be updated with the latest information. It may take from 2 to 10 business days to have the information scanned into their systems and ready to be viewed by the Short Sale department.
Now you (or your Realtor) are ready to execute on your marketing plan and get a buyer. Don't forget to make it very obvious that this is a short sale in all your marketing materials. I would suggest that you make sure the buyer’s agent has their buyer fill out the short sale disclosures so that everyone knows that the process may take much longer than a normal sale. Patience is the key word. Many lien holders require a short sale certification such as the National Association of Realtors acreditiation - SFR (Short Sales and Foreclosure Resource) to insure the home owner or buyer is getting a high level of representation.
Once there is a contract in hand and it is complete with all counters and addendums, it’s time to begin working with the lender to make sure they have all the information needed and ready for the time a processor will be assigned. If the package is incomplete in anyway, it will not be assigned to a processor. This can take 10 to 30 business days.
When you (or your Realtor) has the contract and supporting information, the agent should prepare their price opinion letter to support the contract price that is to be submitted. A price opinion should have the following information:
  • Description of the property - MLS document from current listing or previous would help.
  • Condition of the neighborhood and is it declining, stable or growing.
  • Photographs of the property and of any special situations that can be observed.
  • Maintenance that might be needed and estimates of the repair or deferred maintenance.
  • Current market conditions
  • Net sheet or HUD (with contract price)
The information you have put together should be faxed or emailed to the Loan Mitigation (ie, Loan Negotiation, etc) department. It is important that the loan number be placed on each and every page that is faxed to the lender. Pages that cannot be quickly identified to a specific loan may be shredded. This can delay the whole process since a negotiator will put aside the short sale documentation if it is not complete. It is also important to realize that each lender has a specific process. Some lenders may use one negotiator for the whole process, what is becoming more common are multiple negotiators who are responsible for different stages in the process.
Working with a negotiator requires that you fit your communication style to fit their needs. Flexibility is the key to success. Once a negotiator has reviewed the materials you have sent, they will make up a demand letter that is sent through their system for approval. When you receive the demand letter it will reflect how much they are willing to take, expenses they are willing to pay and any other condition(s) that must be adhered to in order to complete the sale.
The demand letter can make or break a sale. As an example, if the buyer wants to have their closing cost paid from the seller, the demand letter may state an amount for all expenses that does not support the estimated HUD statement under seller paid expense. At this point the parties have several options. The buyer can decided not to accept the deal and cancel. The owner and seller of the property can make up the difference (don't count on this happening). The buyer can change their offer to bring the seller's cost in line with the demand letter by picking up the costs themselves. This is not uncommon. Buyers should expect to pick up some of these additional expenses. It does not always happen, but knowing that it could reduces the emotional feelings when it does. Note that this will create another HUD statement which must be sent back to the negotiator and could create additional delay. The Negotiator may have to do a new demand letter adding days or weeks to the final approval.
Finally, when all parties have a contract and resulting HUD that meets the needs of the lenders demand letter, escrow is opened and we are finally on firm ground with an executable contract. The last step of the process is to send the final HUD showing all final payoffs with the demand letter to the negotiator to show that all conditions have been met. The Negotiator sends back final approval, the deed is recorded and now the buyer is ready to move in to their new home.
Sounds complicated, it can be. I have not been fortunate enough to have every step go smoothly. Everyone seems to have at least one major glitch and some minor ones. That’s why you need someone who is willing to work the system, be considerate of all players in the highly emotional process, and be flexible enough to keep the deal moving. No one wins when the purchase is not completed.

Give me a call if you have any questions or comments on the short sale process. Everyone I do is a new learning experience. Let me help you through this period as your representative.

This information is provided to help distressed home owners understand their options in dealing with mortgage issues. For more information be sure to contact your legal, tax, and credit professionals.

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 Spanish - Short Sale information was translated using Google Translation Widget. The web master does not take responsibility for errors in translation. This information is provided to help distressed home owners understand their options in dealing with mortgage issues. For more information be sure to contact your legal, tax, and credit professionals.
Vender su casa como Residencial Venta Corta

¿Está usted frente a una situación donde usted necesita vender su casa por menos de lo que se debía y simplemente no tienen la capacidad financiera para pagar? En la mayoría de los casos el objetivo es evitar una ejecución hipotecaria. Una ejecución hipotecaria tendrá un mayor impacto en su puntaje de crédito y en última instancia, el costo de muchos servicios que dependen del crédito para establecer la cantidad que paga por estos servicios. Al vender su casa a un precio que sea aceptable para el prestamista puede escapar de una ejecución hipotecaria y tienen el prestamista dar el perdón de la deuda.

Muchos de nosotros hoy en día se enfrentan a este gran problema y pocos tienen la experiencia para saber qué hacer. Como lamentable como esta experiencia es, tiene necesidad de armarse con información para hacer la mayor parte de ella. Este artículo proporcionará información básica sobre qué hacer y cómo trabajar con su Realtor ® para lograr su objetivo final. Un agente de bienes raíces que tenga los conocimientos y tiempo para trabajar con el prestamista o agente de los servicios de la entidad crediticia puede ser muy valiosa para su éxito.
Un agente de bienes raíces con experiencia va a querer saber las respuestas a algunas preguntas para determinar cuál es su situación actual.

 ¿Hay un aviso de ejecución hipotecaria y la fecha?
 ¿Existe una segunda hipoteca o una línea de crédito? También fue el 2 º o línea de crédito usada para comprar la casa o adiciones a la casa (esto tiene una implicación fiscal que el vendedor debe estudiar con sus programas de impuestos o de la CPA).
 Son los préstamos con el mismo prestamista o diferentes?
 El vendedor deberá llenar una carta de vida difíciles y lo presentará a la entidad prestamista? Ellos deben estar dispuestos a hacer esto para que el prestamista acepta una venta corta.
 ¿Ha contactado con el vendedor del prestamista (s) tan pronto como sea posible para ver si el préstamo puede ser removida en una forma que eliminan la necesidad de vender como una venta corta. Un vendedor que puede obtener el préstamo modificado o ajustado de alguna otra manera ha cambiado a eliminar la necesidad de una venta corta puede ser mucho más beneficioso.
 ¿Ha hablado con el vendedor a su profesional de impuestos o de la CPA sobre las consecuencias fiscales de la deuda Perdón?
 ¿Están todos en el préstamo hipotecario (s) en un acuerdo sobre la venta corta?
 ¿El vendedor ha recibido avisos de la entidad crediticia y qué indican?
 Las copias de las declaraciones de préstamos disponibles? Avisos de ejecución hipotecaria?

Una vez que el vendedor y el agente de bienes raíces han revisado la situación actual, el vendedor necesita asegurarse de que el agente de bienes raíces tiene la experiencia para negociar la venta y el precio de lista de la propiedad. Cuando un acuerdo se ha llegado a la lista de la casa, tanto el agente de bienes raíces y tienda ahora tienen que empezar el trabajo de conseguir los bienes comercializados, iniciar el contacto con el prestamista y finalizar el proceso de completar la venta. Vamos a empezar con iniciar el contacto con el prestamista.
En primer lugar debe ponerse en contacto "de la entidad crediticia de préstamos o de mitigación a corto Venta Departamento" para obtener su información de contacto. Típicamente este departamento se necesita la siguiente información:

1. Carta al departamento de la entidad crediticia que indica el agente de bienes raíces está autorizado para ayudarle en la venta de la propiedad. Usted debe tener la dirección de la propiedad, el número de préstamo, el agente (de corretaje, nombre, dirección e información de contacto) en la carta para completar la autorización. En algunos casos, el prestamista puede tener su propia forma de usar.
2. Una carta que indica las dificultades por las que no puede hacer los pagos. Esto no tiene que ser larga o muchas palabras, sólo una declaración de los hechos de sus dificultades financieras. Es posible que desee incluir proyectos de ley importantes, como médicos, dentales o de cambios en el trabajo o cualquier otra información para apoyar su reclamación de gastos. Asegúrese de firmar la página.
3. Los últimos 30 días de recibos de pago para mostrar los ingresos.
4. Los dos últimos meses de estados de cuenta bancarios y asegúrese de que tiene toda la declaración.
5. Presupuesto de la declaración financiera para los ingresos y los gastos se pueden comparar. Su prestador puede tener su propia forma, pero en esencia tendrá una columna con los gastos y una columna con los ingresos ordinarios (no incluyen los ingresos que de vez en cuando). Asegúrese de firmar la página.
6. Dos años antes de las declaraciones de impuestos (1040 solamente).
Este material puede ser presentado a la entidad crediticia en este momento y por lo general al comienzo del proceso. Es más que probable, el prestamista aferrarse a ella hasta que un contrato ha sido presentado. Si la evaluación toma más de 2 meses, la información financiera puede tener que ser actualizado con la última información. Puede tomar 2 a 10 días hábiles para tener la información escaneada en sus sistemas y listo para ser visto por el departamento de venta corta.

Ahora usted (o su agente de bienes raíces) están listos para ejecutar en su plan de marketing y conseguir un comprador. No te olvides de dejar muy claro que se trata de una venta corta en todos sus materiales de marketing. Yo sugeriría que se asegure el agente del comprador tiene su comprador rellene las revelaciones de la venta corta de manera que todo el mundo sabe que el proceso puede tomar mucho más tiempo que una venta normal. La paciencia es la palabra clave.

Una vez que existe un contrato en la mano y se completa con todos los contadores y los anexos, es el momento para comenzar a trabajar con el prestamista para asegurarse de que tienen toda la información necesaria y listo para el momento en que el procesador se le asignará. Si el paquete es incompleto en cualquier caso, no será asignado a un procesador. Esto puede tomar de 10 a 30 días hábiles.

Cuando usted (o su agente de bienes raíces) tiene el contrato y la información de apoyo, el agente debe preparar su carta de apoyo a la opinión del precio del precio del contrato que se presentará. Un dictamen de precios deben tener la siguiente información:

 Descripción de la propiedad - el documento de la MLS lista actual o anterior ayudaría.
 Estado de la vecindad y es decreciente, estable o en crecimiento.
 Las fotografías de la propiedad y de las situaciones especiales que pueden ser observadas.
 Mantenimiento de que puedan ser necesarios y las estimaciones de la reparación o mantenimiento diferido.
 condiciones actuales del mercado
Hoja de Net  o HUD (con contrato de precio)

La información que han reunido deben ser enviadas por fax a la mitigación de préstamo (es decir, la negociación de préstamos, etc) del departamento. Es importante que el número de préstamo está destinado a todos y cada página que es enviada por fax a la entidad crediticia. Las páginas que no se puede identificar rápidamente a un préstamo específico puede ser rallado. Esto puede retrasar todo el proceso desde que un negociador dejen a un lado la documentación de la venta corta si no es completa. También es importante darse cuenta de que cada prestamista tiene un proceso específico. Algunos prestamistas pueden usar uno de los negociadores de todo el proceso, lo que es cada vez más comunes son los negociadores múltiples, que son responsables de las diferentes etapas del proceso.
Trabajar con un negociador requiere que se ajuste a su estilo de comunicación para satisfacer sus necesidades. La flexibilidad es la clave del éxito. Una vez que el negociador ha revisado los materiales que han enviado, se hará una carta de demanda que se envía a través de su sistema para su aprobación. Cuando reciba la carta de demanda se refleja cuánto están dispuestos a asumir, los gastos que están dispuestos a pagar y cualquier otra condición (s) que deben cumplirse a fin de completar la venta.

La carta de la demanda puede hacer o deshacer una venta. Por ejemplo, si el comprador quiere que sus costos de cierre pagado por el vendedor, la carta de demanda podrá indicar una cantidad para todos los gastos que no es compatible con lo que si en la declaración de HUD estimadas vendedor paga los gastos. En este punto, las partes tienen varias opciones. El comprador puede decidió no aceptar el acuerdo y cancelar. El propietario y vendedor de la propiedad puede hacer la diferencia (no contar con esta ocurriendo). El comprador puede cambiar su oferta para que el costo del vendedor de acuerdo con la carta de demanda por recoger los propios costes. Tenga en cuenta que esto creará otra declaración HUD que debe ser enviado de vuelta al negociador y podría crear una demora adicional. El Negociador puede tener que hacer una carta de demanda añadir nuevos días o semanas para la aprobación final.
Por último, todas las partes tienen un contrato y como resultado de HUD que satisface las necesidades de la carta de los prestamistas de la demanda. El último paso del proceso es enviar el HUD final que mostrará todos los pagos finales con la carta de demanda al negociador para demostrar que todas las condiciones se han cumplido. El Negociador envía su aprobación final, se registra la escritura, y ahora el comprador está listo para su nuevo hogar.
Suena complicado, que puede ser. No he tenido la suerte de tener a cada paso sin problemas. Todo el mundo parece tener al menos un fallo importante y algunos otros menores. Es por eso que usted necesita a alguien que esté dispuesto a trabajar el sistema, sea considerado de todos los actores en el proceso altamente emocional, y ser lo suficientemente flexible para mantener el negocio en movimiento. Nadie gana cuando la compra no se ha completado.

Llámame si tienes alguna pregunta o comentario sobre el proceso de venta corta. Todo el mundo que hago es una nueva experiencia de aprendizaje. Déjame ayudarte a través de este período como su representante. Llámame al para obtener información sobre la compra o venta de su casa.

When will we return to a normal real estate market?

Defining what a normal real estate market is a challange for anyone! Real estate is local and impacted by global events. So for this discussion, I just want to look at what is happening to residential real estate on a US wide basis and focusing on distressed property. The first thing we need to do is to look at some definitions of the types of loans we are going to be facing on distressed properties. In this case we have ALT-A, subprime, prime, option arms, agency  (fannie mae and freddie mac) mortgages.

An Alt-A loan is not really a loan type. Alt-A is a a way lenders have of grading or categorizing a loan. For many lenders, Alt-A would be synonymous with A-minus. The definition of an Alt-A loan is somewhat fuzzy, however. A-minus has traditionally been used to designate borrowers whose credit scores are somewhat below those of A grade borrowers, typically under 680 (credit scores range between 300 and 850). The traditional definition of Alt-A has been loans that have less than full documentation, also referred to as low doc/no doc loans.

The two definitions have morphed together somewhat. Alt-A has also come to mean loans with other "transgressions" such as not meeting standard underwriting guidelines for property type, debt ratio or loan-to-value ratio, as well as documentation requirements.

What does all of the mean to the borrower? It is important for the borrower to understand that they and the loan they are applying for has a grade. The best place to be is "A". "A" means the the borrower's credit score is very good and the deal is straight forward without anything out of the ordinary. "A" loans get the most advantageous interest rates and terms.

The next best place for a borrower to be is in the Alt-A/A-minus category. This means that the borrower's credit score is not quite where it should be, or they are not fully documenting their application, or there is something a little out of the ordinary with the deal. Borrowers in this category will pay slightly higher interest rates and have somewhat more stringent qualification criteria. While these borrowers will get somewhat less than the "best deal", they will fare far better than individuals in the sub-prime categories (typically credit scores of less than 580). The credit scores used in these definitions are not exact, they change with each lender to some degree.  

When we look at a chart from Credit Susse showing the need for new mortgages which implies more foreclosures  (it was generated in 2007). It is easy to see that the distressed property problem is going to continue until some time around 2014 or even later. The subprime loan problem we have heard so much about is past its peak now and will lessen significantly in 2010.

In 2010 we are faced with new problem of the Option Adjustable rate (lots of 5yr arms) and Alt-A. This in my opinion, means we will still see distressed properties until 2013. The fact that we have these properties will hold the market price increases to small amounts. Because of significant pressure from the number of buyers in the market, I don’t see significant further price erosion. So stable prices with a potential slow increase in prices is what my crystal ball says.

Tell me what you think about this market condition? If you are thinking about buying a house now (a great time to buy) what do you think will happen to house prices 4 or 5 years from now.

If I can help you in your real estate buying or selling, give me a call at 623-606-8861 or email at info@mikehortonrealty.com. I look forward to working with you.

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FAQ on Distressed Sales From Valley Legal Professionals

This FAQ on Distressed Sales is taken from various legal specialist articles with in the Phoenix Valley. It is an example of scenarios that are often faced by sellers and buyers in the short sale process. Often the answer is not cut and dried and in some cases different legal specialist may take different positions on a topic, so it is very important that you use this information only as possibilities for your personal situation. You should consult your own legal representative for your specific issues. This is not legal advice. Only your legal representative can provide that.

1. Homeowner Cannot Replace Expensive Fixtures Prior to Foreclosure
When the owner built the home, the owner installed an expensive chandelier in the living room. The foreclosure sale is scheduled for next month. The owner wants to replace the expensive chandelier with a cheaper chandelier. Can the owner replace the expensive chandelier?
Answer: No. When the expensive chandelier was installed in the home, it became a fixture. The general rule is that a mortgage lender has a secured interest in not only the home, but in all of the improvements and fixtures in the home. Therefore, the mortgage lender acquired a security interest in the expensive chandelier at the time of installation. The removal of the expensive chandelier would be the criminal defrauding of the mortgage lender. A.R.S. §13-2204. In addition, the owner would have civil liability to the mortgage lender for the value of the expensive chandelier.
2. Anti-Deficiency Statutes Protect Homeowner from Deficiency after Foreclosure of Home
After more than twenty years of mortgage payments, the homeowner paid off the mortgage loan on the home. The homeowner then borrowed $250,000 under a home equity line of credit (“HELOC”). Due to financial difficulties of the homeowner, the $250,000 HELOC has scheduled a foreclosure. If there is a foreclosure, will the homeowners be liable for a deficiency?
Answer: No. If there is a foreclosure of any mortgage loan on a home, there can never be a deficiency claim against a homeowner because of the protection under the anti-deficiency statutes. This protection applies not only to owners of principal residences and to purchase money loans, but also to investors who own homes and to HELOCs and other non-purchase money loans. A “home” is defined under the anti-deficiency statutes as a single-family or duplex, on 2.5 acres or less and utilized as a dwelling. A.R.S. § 33-814 (G). Therefore, even though the $250,000 HELOC had not been used to purchase the home, there can be no deficiency claim against the homeowner after the foreclosure of the $250,000 HELOC.
Note: Inasmuch as the $250,000HELOC was not used to purchase the home, the HELOC lender could have elected to sue on the $250,000promissory note rather than foreclose on the deed of trust.
3. Buyer Not Entitled to Cancel Contract upon Learning of Suicide in the Home after Inspection Period Had Expired
The seller committed suicide in the home. The personal representative of the seller’s estate did not disclose in the SPDS the seller’s suicide in the home. After the inspection period had expired, the buyer learns from a neighbor that the seller had committed suicide in the home. Can the buyer cancel the contract?
Answer: No. Although a suicide in the home is probably a material and adverse fact, the personal representative of the seller’s estate under A.R.S. §32-2156 has no liability for failing to disclose in the SPDS that the seller had committed suicide in the home. Therefore, when the buyer learned of the seller’s suicide after the inspection period had expired, the buyer was not entitled to cancel the contract.
Note: Inasmuch as no disclosure of the suicide is required, the seller is not required to update the SPDS.
4. Protection for Homeowner Has Not Changed under the Arizona Anti-Deficiency Statutes
An investor purchased several homes three years ago. All of the homes are “upside down” and facing foreclosure. Have there been any changes in the protection for investors under the anti-deficiency statutes?
Answer: No. Although there was legislative activity in 2009 regarding the amending of the anti-deficiency statutes to attempt to eliminate the protection for homes owned by investors, no permanent amending occurred. In the 2010 legislative session, there was no activity regarding the anti-deficiency statutes. Therefore, the “bottom line” is that the Arizona anti-deficiency statutes (primarily A.R.S. § 33-814 (G)) currently afford the same protection to all homeowners, including investors, that has existed since the enactment of the Arizona anti-deficiency statutes more than 30 years ago.
5. Lender Cannot Sue Borrower on a Loan Used to Purchase the Home
The owner of the home borrowed $300,000 to purchase the home. The home is now “upside down” and only worth $200,000. If there is a foreclosure of the $300,000 mortgage loan, is the owner protected from a $100,000 deficiency claim after the foreclosure? Is the owner of the home also protected if the mortgage lender files a collection lawsuit for the $300,000 mortgage loan rather than doing a foreclosure?
Answer: If the $300,000 mortgage loan was used to purchase the home—and the home is a single one-family or two-family dwelling used as a residence on 2.5 acres or less—the $300,000 mortgage loan is a non-recourse loan. In other words, the homeowner has no personal liability for the loan, including no personal liability for any deficiency after foreclosure. The mortgage lender’s only “recourse” is to foreclose and acquire title to the home. (The homeowner after the foreclosure will be personally liable, however, for any excessive damage to the home such as vandalism or flooding, i.e.,” waste” to the home.) Therefore, after default of the $300,000 purchase money loan, the mortgage lender can only foreclose on the home with no claim for a deficiency, and the mortgage lender cannot waive foreclosure and sue to collect the $300,000 mortgage loan.
Note: If, however, the loan was not used to purchase the home, e.g., a home equity line of credit (“HELOC”) taken out after the purchase of the home, the lender can waive foreclosure and sue to collect on the amount of the loan. For example, if the homeowner after purchasing the home borrows $50,000 under a HELOC, the lender can waive foreclosure of the home and instead file a lawsuit in civil court to collect on the $50,000 promissory note.
6. Homeowner Has No Personal Liability for Second Purchase Money Loan
The homeowner purchased the home three years ago with 80/20 financing. Both the 80% first purchase money loan and the 20% second purchase money loan are now in default. Both lenders have approved a short sale. Although the second purchase money lender has agreed to the short sale, the second purchase money lender is conditioning the approval of the short sale upon the homeowner paying the short sale difference in monthly payments over five years. The homeowner will not agree to these monthly payments and has told the second purchase money lender that the homeowner will simply lose the home to a foreclosure sale by the first purchase money lender. If the homeowner loses the home at a foreclosure sale by the first purchase money lender, can the second purchase money lender file a collection lawsuit against the homeowner for the amount owed on the loan?
Answer: No. Any loan used to purchase the home, whether in first position or any other position, is a non-recourse loan. In other words, the lender has no recourse against the homeowner for the amount owed on the loan and can only foreclose on the home. The lender has no claim for a deficiency judgment after foreclosure. In addition, the lender cannot bring a separate collection lawsuit against the homeowner for the amount of the loan. Baker v. Gardner, 160 Ariz. 98, 770 P.2d 766 (1988).
7. Theft After Foreclosure
The lender foreclosed on the home and became the new owner of the home. When the previous owners of the home moved out after the foreclosure they removed all of the fixtures from the home, including vanities, sinks, toilets and light fixtures. Did the previous owners of the home commit a criminal offense by removing these fixtures after foreclosure?
Answer: Yes. The previous owners’ removal of the fixtures constitutes criminal theft pursuant to A.R.S. §13-1802. The lender should be able to file criminal charges against the previous owners.
Note: The lender may also be able to file a civil lawsuit against the previous owners for “waste” due to the wrongful removal of the fixtures.
8.No Disclosure to Lender of Sale of Personal Property to Buyer
The lender has approved the short sale. Two days before close of escrow, the listing broker learns that the seller and the buyer have entered into a “side” agreement that the buyer will pay $10,000 to the seller outside of escrow for expensive bedroom furniture and for three high-definition televisions. Does the listing broker have to disclose to the lender that the seller is receiving $10,000 cash from the buyer?
Answer: Probably not. The lender’s security interest does not extend to personal property owned by the seller. Therefore, if the seller and the buyer enter into a contract to sell any of the seller’s personal property to the buyer, e.g., car, boat, or furniture, this sale probably does not have to be disclosed to the short sale lender.
If you are having questions about the legal issues dealing with personal property, mortgages, liability or contracts during the short sale process, it is important that you contact your legal specialist. Give me a call and I can provide the names of several different legal companies that specialize in helping homeowners or buyers of distressed homes.
9. The buyer and/or seller of a short sale home cannot arrange for an additional contribution to what is provided by the first mortgage to payoff the 2nd mortgage without full disclosure on the HUD1.
The primary lender has approved the short sale and agreed to give the 2nd mortgage $3000. The 2nd mortgage has agreed to release the lien and settle for $6000. Can the seller contribute to the 2nd outside of the HUD1 and full disclosure to the first mortgage?
Answer: The primary lien holder may approve of the buyer or seller giving additional contribution to other lien holders. However, this must be fully disclosed to the primary lender on the HUD1 and approved by the primary lien holder.
10. No Liability of Seller after Short Sale if HELOC Lender Releases Lien Without New Agreement
The seller bought the home with a $100,000 purchase money mortgage. One year later, the seller borrowed $50,000 from another lender for a home equity line of credit (HELOC). Both lenders approved a short sale and recorded releases of their mortgage liens without requiring a new agreement from the seller to pay any portion of the purchase money mortgage or the HELOC. The short sale closed. Can either the $100,000 mortgage lender or the $50,000 HELOC lender sue the seller for any portion of the unpaid mortgage balances?
Answer: No. First, under Arizona law, the $100,000 purchase money mortgage was a non-recourse loan, i.e., the seller had no personal liability, and the mortgage lender is prohibited from suing the seller for any unpaid balance of the loan. A.R.S. § 33-814(G); Baker v. Gardner, 160 Ariz. 98, 770 P.2d 766 (1988). Second, the $50,000 HELOC loan was not a non-recourse loan, and the seller had personal liability to pay the $50,000. The HELOC lender could have sued the seller for the $50,000. When the HELOC lender recorded the release of the mortgage lien, however, the HELOC lender no longer had any claim against the seller. Tanque Verde Anesthesiologists v. Proffer Group, Inc., 172 Ariz. 311, 836 P.2d 1021 (App. 1992) (no claim against borrower after recording release of first and second loans unless borrower entered into new agreement to pay).
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Tips In Buying Foreclosures

The West Valley including Surprise, Waddell, Whitmann, Avondale, and Goodyear have many foreclosures to choose from to find your next home. I have listed 10 tips that may help you out in buying a foreclosed home.

  1. Prepare yourself for some sights and smells that may be tough for the sensitive side of you. Dirt, dead bugs, mess, missing appliances, missing cabinets, etc are not unusual. You have to picture it later, when you have had a chance to work your magic on it.
  2. Be prepared to go through the complete inspection and verification of facts process. REO properties (bank owned) are sold AS-IS. However, you don't want to be surprised by a problem after you close. There is no or limited recourse at that point. Plus you will want to establish a base line house condition. After the contracts are final and before close of escrow, if something happens the bank maybe willing to restore the house to the condition it was in at the inspection.
  3. Check out the neighborhood carefully to determine how many foreclosures are in the area that have not sold, condition of the neighborhood, parks, etc. Think about how long to plan to stay in the home and will that give you the time you will need for market recovery so that you will be able to sell your home when needed.
  4. List prices on REOs are not always at market. Make sure you have a good comparative market analysis to use when deciding on the purchase price. Depending on the information the bank is working with (their own price opinion) it could be lower than market. This could mean a bidding war on a very nice property.
  5. Banks will negotiate. Low ball offers are frequently rejected and can be a waste of time and emotional energy. They can be rejected outright.
  6. Repairs may be fiananced. If your chosen home needs work or appliances, you will want to consider a FHA 203K program which will let you roll repairs, etc into the home loan. It's is a great way to keep your cash flow from being higher than you may want.
  7. Use smart negotiation technicques. It will take 2 to 5 banking days to get a response. Consider what your next purchase proposal would be before you get their counter. Your under less stress and can make better decisions when the time comes.
  8. The bank may have specific requirements for you to buy the home. As an example, you may have to qualify with their lending arm. This does not mean you have to use them as a mortgage broker. See the best deal both in mortgage rates and in closing costs. With most all lenders having the same rates, you out of pocket expense from closing costs maybe your most important comparison.
  9. Use a Realtor. There are many pitfalls along the way. Pick someone who can help you through these. The bank pays the commission so they are free to the buyer. Use their expertise and a second set of eyes to guide you through a successful purchase.
  10. Don't Be Greedy. You are going to buy a house that may have been previously purchased for $100,000 to $150,000 more than you are going to buy it for. Allowing a few thousand dollars of list price to break the deal doesn't make sense. $5000 difference in price can be as little as $35 dollars a month. Is loosing the home worth that much? Instead think about your monthly payment, what you can comfortably afford, and what the house may look like in the future for resale.  Over the years what you pay per month will be more important than the upfront price.

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FHA mortgage after a Short Sale?


Some mortgage companies will allow a home owner that is going through a short sale to purchase a new home right after they have completed a short sale. The home can’t be a similar or superior property. Not all mortgage companies or bank lenders will offer this type of program. For a lender that does, the request is always evaluated on a case by case basis.
Borrowers are considered eligible for a new FHA-insured mortgage if from the date of loan application for the new mortgage:
·         All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale and,
·         All installment debt payments for the same period were also made within the month due.
·         NOTE: Some lenders will not consider your short sale unless you are late with payments. Fannie Mae negotiators as an example can’t tell you, the home owner and seller, directly that you have to be late to be considered, but from experience they have told the listing agent that the financial paperwork from the seller will not be evaluated until the seller is 31 days late. 
Borrowers who are in default at the time of the short sale are not eligible for 3 years from the date of the short sale or if the seller is participating in FHA Pre-foreclosure program they are not eligible from the date FHA paid a claim associated with the short sale. BE sure to talk to your lender to see if you qualify.
There are exceptions when the seller is in default. These are typically conditions out of the sellers control such as the death of the primary wage earner, and long term illness. Credit reports are carefully considered in this situation for an understanding of past history.
In some cases FHA can also help refinance the short sale within the new home’s FHA –insured mortgage. Again talk to your lender for more guidance and the latest set of qualifying conditions.
Many thanks to Century 21 Mortgage for the information contained in this article. Call me at 623-606-8861 to help you sell your home; work with a specialist in short sales to get the best results.
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Costs of Home Foreclosure

MND News Wire

NOTE: While the numbers used in this article do not reflect the depth of the problem we face in Arizona, it does show the problem. If you want to get an Arizona problem add some big bucks to the loan deficiency.

Foreclosures Cost Lenders, Homeowners, the Community, and You Big Bucks
by Glenn Setzer

Earlier this month a reader, Pamela Norvell, wrote a suggestion for lessening the foreclosure crisis. She suggested a freeze and/or a rollback of interest rates to their original levels. In making her suggesting Ms. Norvell wondered what it was causing lenders to foreclose on properties rather than do a workout or a restructure. Made us curious too.

The cost of a foreclosure, it turns out, is pretty staggering and we wonder why lenders and the investors they represent aren't jumping at a solution, any solution, that would allow them to avoid going to foreclosure whenever possible.
According the Joint Economic Committee of Congress, the average foreclosure costs $77,935 while preventing a foreclosure runs $3,300.

The cost of preventing a foreclosure is not easily categorized. We assume that it includes the staff costs of talking to the borrower, collecting financial documents (a task we have noted seems unreasonably difficult for the borrower) reviewing the documents, ordering and reviewing the appraisal, the cost of that appraisal (more likely to be a less expensive brokers price opinion or BPO) and the preparation of a justification to decision makers for any workout plan.

We have seen figures from non-profits that the cost of averting a foreclosure through the use of credit counseling from a non-profit agency approved by the Department of Housing and Urban Development can range from a bit under $1,000 to $14,000 and we don't quite know what to do with that large and disparate range. We do know that counseling programs vary greatly and we assume that those on the high side include programs that provide emergency funds to homeowners to bring loans current while those on the low side are primarily advising and educating their clients.

But the $77,934 cost to foreclosure figure seems fairly easy to document and, compared to others that are widely bandied about ' from $58,000 to 30 percent of the pre-foreclosure value of the house ' seems reasonable.

First of all, the cost does not accrue totally to the lender. The homeowner has a typical loss of $7,200 which includes loss of equity in the property, moving expenses, and perhaps some legal fees.

Those neighbors living in close proximity to the foreclosed house suffer $1,508 in losses from the decrease in the value of their own home as the neighborhood begins to deteriorate.

The local government loses $19,227 through diminished taxes and fees and a shrinking tax base as home prices decrease. This is a hard number to justify. First of all, only a portion of the declining tax base is due to foreclosures. A big chunk of it is based on falling prices community wide. And we'll bet that even as we talk about it local governments are busy adjusting assessments and mill-levies to keep total revenues close to pre-housing crisis levels. This means that the neighbor's share of the costs should be higher as they absorb increased tax levels.

Also, while the cities and towns are permanently losing some income from fees such as trash pick-up and water and sewer charges, if and when the house is sold they will collect back property taxes or, if they remain unpaid, they will become the owners of the property through tax title. (That opens a whole new area of concern, but one for discussion on a different day.)
That leaves us with total costs of $50,000 for the lender under the numbers produced by the Joint Economic Committee of Congress. The Committee does not break out these figures but a new study from Standard & Poor's (S&P) does. While there is not a total match between the two sets of data, they are close enough.

The Committee includes the following in its list of pre-and post-foreclosure expenses:
Loss on property/loan
Property maintenance
Legal fees
Lost revenue
And S&P breaks them down as follows:
The largest component of the $50,000 is cash loss on the property. S&P pegs this number at $40,000 for a typical loan of $210,000. Investors who buy short sales tell us that the big lenders are unwilling to sell property or take payoffs for more than a 15 to 20 percent discount so these numbers are closely in sync. S&P however includes only the actual decline in property values in that 19 percent loss figure.

S&P assigns a staggering 26 percent of the loan amount for the costs of foreclosure. This category wraps up the remainder of the list above and include paying property taxes (3 percent, although many ignore this obligation, hoping to pass accrued taxes on to the eventual buyer), maintaining hazard insurance, legal fees (1 percent), an appraisal (although most lenders are choosing the far less expensive alternative of a brokers price opinion or windshield appraisal,) lost revenue (an estimated 13.6 percent of the loan amount) 6 percent marketing fees (broker's commission) and 3 percent spent on home maintenance.

There is a figure that is usually not taken into account ' cash reserves. Bank regulations require that lenders put aside a percentage of their capital to cover potential losses. That amount, whether $100,000 or $500,000 is that much less that the bank has to loan to others and means more lost revenue.

It is obvious that no one is a winner in the foreclosure game. But we wonder if lenders and their real estate agents are not exacerbating the situation for all involved through their property management and marketing policies.

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News For Short Sale Owners

Buy a home after a Short Sale. It’s Possible!

If you were forced to Short Sale your home, you may still qualify to purchase a new home based on changes in FHA guidelines. This new program will not fit everyone because of the strict guidelines. However, take a look at the following and keep in mind that your lender will have all the latest details. If you fit give me a call and we can talk to a qualified lender on how you might qualify and keep the American Dream.

·         Borrowers must have a true hardship. Selling to take advantage of declining market conditions and purchasing a home at reduced price similar to or a superior property within a reasonable commuting distance would not probably qualify.

·         Borrowers are considered eligible for a new FHA insured mortgage if from the date of the loan application, all mortgage payments due on the prior mortgage wee made with the month due for a 12 month period preceding the short sale and all installment debt payments for the same period were made within the month due. In other words, no 30 day late payments.

In general, borrowers in default on their mortgage at the time of the short sale are not eligible for a new FHA insured mortgage for a period of 3 years from the date of the sale. There some exceptions that would be considered and remember that this is always on a case by case basis. The exceptions would typically be based on the following:

·         Documentation is provided to show the default was due to circumstances beyond the borrowers control like a death of the primary wage earner, long term un-insured illness, etc.

·         A review of the credit report shows satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default.

There is much more to the program and this information contained in this write up is only to provide you with the background you need to be able to ask questions of your lender.  If you don’t have a lender, I can give you the names of several that you could speak with to get specific data for your situation. Call me at 623-606-8861 or email to info@mikehortonrealty.com for the contact names of lenders that can help you out.

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