Short Sale

Short Sale -  where the home owner sells the property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes in full satisfaction of the debt. The lender would have the right to approve or disapprove of a proposed sale. Many banks are willing to take a loss in a short sale avoiding an even bigger loss in a foreclosure. Some short sales leave a deficiency balance for which the seller is still liable. Short sales are rising sharply. Many homeowners are currently underwater, many of them are owners of the deluxe homes. The buyers can have a great deal on a short sale. But it is a complicated and time consuming process that can take between two and six months, in some cases up to one year.

What you should know as a short sale buyer:

- You will be dealing with three parties: the seller, his real estate agent and his lender.

- Find the experienced real estate agent who works on short sales. Don’t go without him. It will be a pain in the neck.

- Find a mortgage broker and obtain a pre-qualification letter.

- Avoid homes where the seller has other offers or/and more than one mortgage. It will increase the amount of time negotiation takes, and less chance for a short sale approval. 

- Find out the  rules of the seller’s lender. Many of them can ask you to sign a sales contract, to get a pre-approval for your mortgage, etc.

-  Ask your agent to search comparable sales in the area and determine the home’s fair market value. Make your offer lower than that. Your agent will help you to set the right price.

- The seller’s agent will submit a completed package along with your offer to the seller’s lender. This package can include the seller’s Hardship Letter, Employment / Income Verification, Bank Statements, Financial Evaluation Form , IRS Tax Returns, Settlement Statement or HUD 1, Broker’s Price Opinion, etc.

- Don’t do an appraisal or inspection of the property until the offer is approved. Try not to put down more than $1,000 before the approval unless the seller’s lender requires you to make a bigger deposit along with the contract.

- When the bank finally sends its counter offer, you have a chance to send yours if you can prove the declining market value.

- Once you have the lender’s approval, obtain your mortgage.

Making Home Affordable Program – eligibility details for Refinance and Modification

Refinance:

- Your loan must be owned or guaranteed by Fannie Mae and Freddie Mac.

- You must be current on your mortgages, have an acceptable mortgage payment history. You haven’t been more than 30-days late on your mortgage payment in the last 12 months.

- You have been unable to refinance because your home has decreased in value pushing your current loan-to-value ratio above 80%. Your first mortgage is about the same or slightly less than the current value of your house. In some cases an appraisal will not be necessary.

- Only for the owner occupant of a one to four unit home.

- Refinance only into a 30 or 15 year, fixed rate loan.

- Your current mortgage was originated with a loan-to-value ratio of 80% or less.

- Only the first mortgage is eligible for refinance. The new first mortgage (including any refinancing costs) will not exeed 105%  of the current  market value of the property

- Borrowers who have more than one mortgage (1^st and 2^nd) may be eligible. You must obtain an agreement by the lender that has your 2nd mortgage.

- The rate will be based on market rates at the time of the refinance.  Rates may vary across lenders and over time.

- Borrowers are responsible for paying lender fees, points and other closing costs.

- Refinancing will not reduce the loan amount.

- You can not get cash out to pay other debts.

- Only for full documentation loans. You must have a stable income sufficient to support the new mortgage payments.

- Loans will have no prepayment penalties or balloon notes.

- You should call your mortgage servicer or lender and ask about the Home Affordable Refinance application process.

- The Home Affordable Refinance program ends in June 2010.

 

Modification:

- Only for loans originated on or before January 1, 2009.

- You can be current or behind on your mortgage payments.

- You may be eligible if your income is not sufficient to continue to make your mortgage payments. Every borrower  must be screened for financial hardship.

- Only for primary residence properties with unpaid principal balance up to $729,750 for single family residence, $934,200 for a two-unit home, $1.129 million for a three-unit home, and $1.403 million for a four-unit home.

- Only the first mortgage is eligible for a modification

- There is no minimum or maximum loan-to-value ratio.

- Lender will reduce the monthly payment (principal, interest, R/E tax, insurance, condo fee) to no more than 31% of gross monthly income (DTI)

- The modification sequence requires first reducing the interest rate (as low as 2%), then if necessary extending the term of the loan up to 40 years.

- At your lender’s discretion modifications may include upfront reductions of loan principal.

- Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt. For every month you make a payment on time, Treasury will pay an incentive.

 

- Lenders will keep the modified payments in place for 5 years.

- After five years, the rate increases 1 percent per year up to a cap that is intended to reflect market rates at the time the loan was modified.

- There is no cost to borrowers for a modification. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance. 

- Your lender is not required to modify your loan. Lenders participate in the program on a voluntary basis.

- Lenders will send letters to potentially eligible homeowners.

- If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer.

- Loans can be modified only once under the program.

- Modifications can start from now until December 31, 2012.

Source FinancialStability.gov 

House-Selling Tips

 1) Find the value of your home at current market. There is a free website www.zillow.com, but they have not entirely correct value. You can check the home value on Realty Trac. You can order an appraisal of a house on US Search Property Reports for a small fee. Or you can ask the appraiser to make the verbal appraisal.

2) Find an experienced real estate agent. He also helps you determine the price of the house. As they say: “There is no homes that can be unsold, it is incorrect price, for which no one wants to buy.” If you want to make a short-sale, and if your bank allows it, it is best to find an agent who deals with short-sale and is in this experience.

 3) Prepare your home for sale. Make your house clean, organized, and attractive to potential buyers to submit themselves living in it.

А  few simple tips, how to sell the house faster:

-Old and neglected front door makes your house less attractive for potential buyers. Paint, refresh the main entrance. You can hang a new, more attractive fixtures.

-Fresh neutral paint creates a feeling of novelty home. Wash all interior doors or paint them. Dirty doors will not help you quickly sell the house. That doors do not discolor and look like new long-term, they can be protected by polycrylic. “A clear finish topcoat in a water-based formula that offers protection along with fast-drying times. Can be used over bare wood, oil- and water-based stains, paint and wallpaper.”

-Wash all windows and put the window blinds or curtains. If the windows are narrow , the rods with the curtains should be much wider than the window. This visually expand a window.

 -Remove all of your family photos. They make people feel like they’re invading your space.  And you need them to feel at home.

-Remove all toys, extra books, small items, large flowers, etc. This will create a feeling of bigger space. Leave just a vase of flowers and a couple of small sculptures on the coffee table and mantel.

-Make your space more warmer and inviting. Add some colored pillows, a picture (do not overdo main), lighting. Properly placed lighting creates a cozy home.

-Too much furniture, or vice versa, making the room is not appealing – too busy or too empty.

-Organize your closets. Piles of clothes make your closet visually smaller.

-Clear off countertops.  Messy coutertops and tables left no room for food preparation or eating.

-Get rid of moldy caulk in bathrooms. The entire room is sparkling-clean, bottles and jars are tucked away. A bathroom with everything in view made even a fairly clean bathroom look disorganized.

-Organize your basement. Even if the basement is unfinished, disorganized piles of junk are a huge turnoff to potential buyers.