Foreclosure Alternatives - The Short Sale Process
So, your house is facing forclosure... now what? Try to look at the situation without involving your emotions. From a business point of view, you can better analyze which option will best suit your needs and move toward a sensible resolution. You must always remember that when dealing with the foreclosure process, time is of the essence. So exactly what are you options?
Do Nothing - If a homeowner does nothing, they most likely will lose their home to foreclosure. This results in severe credit damage and will make qualifing for future loans or mortages difficult, if not impossible.
Payoff/Refinance - Completely paying off the entire loan amount plus any default amount and fees. This is usually accomplished through a refinance of the debt. New debt is typically at a nominally higher interest rate ant there may be a pre-payment penalty because of the recent default. This option is not for everyone as it typically requires a signinficant amount of current equity in the home.
Reinstatement - Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and other assorted reinstatement fees.
Loan Modification - Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level if they qualify. Although loan modifications have gotten a lot of attentention the past few years, the vast majority of homeowners who apply for them eventually end up getting denied by their lenders.
Forbearance - Lender may be able to arrange a repayment plan based on the homeowner's financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender to show that you are able to meet the new payment plan requirements.
Partial Claim - This is a loan from the lender for a second loan to include back payments, costs and fees.
Deed in Lieu of Foreclosure - Give the property back to the bank instead of the bank foreclosing. Banks generally require the home to be well maintained, all mortgage payments and taxes must be current.
Bankruptcy - This option can liquidate debt and/or allow more time. This option has severe financial implications. If considering bancrupty, it is reccommended that you speak to a qualified bancruptcy attorney to seek advice on your decision.
Chapter 7 (Liquidation) To completely settle personal debt.
Chapter 13 (Wage Earner Plan) Payments are made toward a plan to pay off debts in 3-5 years.
Chapter 11 (Business Reorganization) A business debt solution.
Short Sale - Homeowner may sell the home without lender approval for a conventional home sale. If the property has equity (money left over after all loans and monetary encumbrances are paid), the homeowner will get cast from the sale. At the other end of the spectrum, a Short Sale, also known as a pre-foreclosure sale, can be negotiated with your lender by your real estate professional if what is owed is more than the property's value.
Explanation
A short sale is simply your mortgage holder agreeing to take less than what is owed.
At Silver Canyon Realty, we are experts in the short sale process, and have helped many homeowners successfully short sell their homes. In most cases, we will negotiate with your bank or mortgage holder to obtain a reduced payoff amount that will allow you to avoid foreclosure.
Benefits
1. Keeps a foreclosure off of your credit report
2. No out of pocket expenses
3. Our service is free to you - the bank pays our fee
4. Your closing costs are also paid by the bank
5. The bank pays for most all deficiencies at the closing table
6. You are not locked-in to any agreements - you can cancel at any time
Silver Canyon Realty will focus on 3 specific areas:
1. Obtaining quick authorization to begin communicating and negotiating with the bank
2. Helping you organize all required documents to apply for the short sale
3. Strategically price the home to generate offers & negotiate with the bank to accept an offer
The Process
We quickly get authorization to communicate with the bank
Contact the bank and get their Short Sale requirements
Request from the bank to begin the process on their end (usually an appraisal is completed)
Compile the documents needed for the short sale application
- Letters
- Personal financial statements
- Pay stubs
- Bank account statements
- Tax returns
Submit the short sale pre-requisites to the bank
Submit offers to the bank
Negotiate with the bank to accept an offer that nets them less than what they are owed to Avoid Foreclosure!
What to do next
1. Sign the Authorization form
2. Fill out the Personal Financial Statement form
3. Provide us with the following documents from all of the borrowers and co-borrowers:
a. Signed authorization form
b. Create a letter describing why you are in financial hardship
c. Financial statement filled out and signed at the bottom
d. Copies of the last 2 consecutive pay stubs and/or verification of other income
If self employed, a year-to-date Profit and Loss Statement with a balance sheet must be provided
a. Copies of the last 2 bank account statements from all banks
b. Copies of the last 2 years tax returns or W-2s
c. (if applicable) Documentation substantiating the reason for hardship, i.e., copies of medical documentation, divorce decree, unemployment verification
Email to admin@SilverCanyonRealty.com
Fax - (800) 300-8161
Office - 7495 W. Azure Drive, Suite 227
Las Vegas, NV 89130
Q: Should I Be Aware of Anything Else?
Yes. Beware of scams! Solutions that sound too simple or too good to be true usually are. If you're selling your home without professional guidance, beware of buyers who try to rush you through the process.
Unfortunately, there are people who may try to take advantage of your situation. Be especially alert to the following:
Equity skimming. In this type of scam, a "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or give you a sum of money when the property is sold. The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the lender to foreclose. Remember, signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.
Phony counseling agencies. Some groups calling themselves "counseling agencies" may approach you and offer to perform certain services for a fee. These could well be services you could do for yourself for free, such as negotiating a new payment plan with your lender, or pursuing a pre-foreclosure sale (short sale).
Q: Are There Any Precautions I Can Take?
Here are several precautions that should help you avoid being "taken" by a scam artist:
1. Don't sign any papers you don't fully understand.
2. Check with a lawyer or your mortgage company before entering into any long term agreements involving your home.
3. Make sure you leave your options open. Don't lock yourself into any agreements you cannot get out of.
4. Make sure you get all "promises" in writing.
5. Beware of any contract of sale of loan assumption where you are not formally released from liability for your mortgage debt.
Q: What Are the Main Points I Should Remember?
1. Don't lose your home and damage your credit history.
2. Call or write your mortgage lender immediately and be honest about your financial situation.
3. Beware of scams.
4. Remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation.
Act now. Delaying can't help. If you do nothing, YOU WILL LOSE YOUR HOME and your good credit rating.
For more Information Visit:
http://www.hud.gov/foreclosure
http://www.freddiemac.com/corporate/buyown/english/owning/avoid_foreclosure.html
