Category Archives for "For Sellers"
Short Sale information for Sellers
Short Sale information for Sellers
Because of current economic conditions, mortgage rates have been on the decline, however did you know that the 30-year fixed-rate mortagages have hit an all time low? Continue reading the DSNews.com article below to find out more information about this situation:
“The weekly mortgage rate reports released Thursday by Freddie Mac and Bankrate were mixed. But one thing was certain: the average rate for 30-year fixed-rate mortgages hit a new record low.
According to Freddie Mac’s Primary Mortgage Market Survey, 30-year fixed-rate mortgages averaged 4.57 percent with an average 0.7 point for the week ending July 8, 2010, inching down from last week’s average of 4.58 percent. Freddie Mac said this rate marked yet another all-time low in its 39-year survey.
In the current real estate market, the purchase of a home by a short sale transaction can make a lot of sense. Buying the home at a less inflated price can save you money. If you really want to succeed, you might want to consider working with a Realtor when completing a short sale in NC.
If you were not going to work with a Realtor, what other options would you have? You may or may not get lucky enough to find a home owner smart enough to negotiate such a deal on their home, but they will NOT be looking out for your best interests. It is not necessarily going to be an easy task. At best, you will still need some legal representation.
You might also end up talking to a real estate investment company or specialist. In this case, you may be working with someone who has the expertise to negotiate with your lending company, and guide the transaction through to closing. You gain some legal and technical expertise here, but there is a catch. The real estate investor is not required to be licensed, and therefore does not have to abide by the same code of ethics as a Realtor. These folks are strictly in the deal to turn a quick profit. They can have a buyer waiting for your house, as the property is closed. The REI route has also become quite the “get rich scheme.” There are lots of people that teach the basic concepts of real estate investment to anyone. Chances are, you may end up working with someone with little to no experience negotiating a short sale transaction.
The final thing to consider is that, most of the time, banks like working with Realtors for short sale NC transactions. They realize the Realtor will be paid a fairly consistent commission for their work, versus the type of profits that real estate investors can often turn. If they know they are working with someone licensed, with a good reputation in the local community, you will often get a better deal from the bank. Working with a Realtor during short sale can make the transaction a win-win for you and your lending institution.
In this difficult economic environment, many Charlotte homeowners find themselves underwater on their mortgage. Many homeowners have heard about a short sale, and ask if this is a better option than a foreclosure.
The simple answer is Yes. A short sale is a much better option for a homeowner than a foreclosure. Here’s why:
1) Credit: If your house goes into foreclosure, this could negatively impact your credit for up to 10 years. A short sale on the other hand is less severe. A short sale may only impact your credit for up to 2 years. If you short sale your home and maintain your financial worthiness, then you can re-establish good credit in a shorter amount of time.
2) Another consideration is how long you need to stay in your home. If your house if foreclosed upon, then you will be forcibly removed by local law enforcement. Yet, with a short sale, you can remain in the house during the sale negotiations. Clearly a short sale is a much more practical option.
3) There are additional financial considerations of a short sale versus foreclosure. In a foreclosure scenario, you will get a deficiency judgment for the entire amount you owe. This amount will need to be declared on both federal and state taxes. If your lender agrees to a short sale, you might have to pay income tax on any resulting deficiency. But there are some exceptions that will allow you to avoid paying this tax. According to the Mortgage Forgiveness Debt Relief Act, you may qualify for an exemption if the loan was secured by your primary residence. Under this act, you can exclude up to $2 million in forgiven debt. In this scenario, you do not have to pay income tax on the deficiency.
It is best to get the most amount of money for your property in a short sale to cover any deficiency judgments. One way to do this is to work with an experienced real estate professional who can get you multiple offers on your property.
Now is a great time to consider a short sale if you are a homeowner. The Home Affordable Foreclosure Alternatives Program (HAFA) aims to make short sales easier for homeowners and the banks involved in structuring the loans. Not only will HAFA make it easier to complete a short sale, but borrowers can get a $3,000 “relocation incentive” and servicers (ie- banks) will get $1,500 for handling a short sale. This program will go into effect on April 5th, so if you are a Charlotte homeowner behind in your mortgage, this could be a great time to consider a Charlotte short sale.
Disclaimer: For all financial issues or concerns, it is advisable to consult with a tax attorney and/or CPA. Content in this article is not tax advice, and is only a representation of possible outcomes during a short sale or foreclosure situation.
A short sale may be your best alternative if you have financial trouble and a house that will not sell for enough money to pay off all the debts associated with the home. It is not for everyone. It is not for people who do not have a financial crisis, because they will not qualify with their lender. Lenders will not let you fail to pay back a loan just because you do not feel like it, it has to be impossible for you to pay it back.
Realtors used to say they could not help homeowners who were “underwater” where their home would not bring enough to pay off the liens and the homeowner did not have the money to pay the balance. Short Sales are a tool just for this situation. Price the house so that it will sell, and negotiate with the lender to pay everything possible on the loan.
You need to evaluate the alternatives. You can let the bank foreclose. But, that has worse effects on your credit and the image of the sherrif evicting you from your house may be something you do not want your children and neighbors to see. If you have only one lien (only one loan and no other secured debts), you might consider giving the bank a deed in lieu of foreclosure. That may work for some people, particularly if you negotiate a full release form the rest of the debt. However, it has worse consequences on your credit. You can try a loan modification. With the new legislation and regulations, there may be a way where you can get your payments in line with what you can afford so that you can keep the home.
A short sale is not an easy process. You have to get the buyers to be patient, as the lenders may take a while to review the offer. You need to realize that you might pay income tax on the amount you do not pay back, as discussed in a complete post on this site about tax consequences. You may qualify to pay no income tax if it is your primary residence being sold and you meet other requirements. You need to look into whether the bank will accept the payoff in full settlement of the debt, or whether they are going to chase you for the balance owed after the sale closes.
Some people will tell you that you have to be behind in your payments to do a short sale. That is not true, although some banks have some odd rules.
Some people will tell you that you cannot do a short sale on an investment property. That is not true, but you stil have to show financial hardship.
One oddity of this process is the real negotiation is done with the bank and lien holders. Normal negotiations in real estate sales are between the buyer and the sller. But, if you are not paying income tax on the amount you are not paying back to the bank, you may not care what the house sells for. Also, a lower price will make it sell quicker and elmininate your pain faster. However, the bank will only accept a sale that is close to market value, so you have to price the home well. Just like Goldilocks, the price cannot be too high so that the house does not sell and it cannot be too low so that the bank does not approve the sale. Pricing has to be just right.
If you have a Realtor who sent you to this website, you have found someone schooled in short sales, so read what you need here and listen to their counsel. If you do not have a Realtor to quide you through this complicated process, contact us using the form below, because our mission is to get more short sales done by properly trained Realtors throughout America so we can get out of this financial crisis.
If you would like to sell your house in the Char/Meck area of North Carolina, or be referred to a short sale expert anywhere in America, use this form. It is secure and we keep your information confidential.