Avoid Foreclosure With a Short Sale
Avoid Foreclosure With a Short Sale
So you’re caught up in the wave of foreclosures like a lot of other people? It’s now becoming the new Negative Status Symbol Know that you are not alone, it is a tough place to be and unfortunately it may get worse before it gets better There is a stigma that goes along with losing something, especially when it’s your home Also, the financial mess it creates can stick with you for years to come Unfortunately there are not a lot of solutions; regardless of what you hear in the media and from your lender So it’s a bitter pill to swallow, and in order to succeed you have to get quality information & move forward quickly with your decision . .You may be considering a Short Sale to relieve you of your problem? Short Sales are a good solution, but you need to know what to expect . .1 Short Sales usually take a long time . .This is a double edge sword, because on the one hand you get many weeks, or more likely many months of free rent while waiting, but the roller coaster ride can be agonizing And you won’t know for certain if it will succeed or just be a lot closer to foreclosure, until you near the end of the process . .2 Avoiding foreclosure is really the only benefit you should expect . .Don’t expect to receive proceeds from the sale Most lenders (with the exception of FHA insured) don’t want the owner to receive any benefit at all In fact lenders stipulate that the seller/owner must not receive any proceeds from the sale of the property, as one of the agreements to doing a short sale . .3 Hopefully the person working on your short sale really knows what they are doing . .Realtors are still getting up to speed on how to do a Short Sale Some know how to do them, but most do not (not effectively anyway) Realtors are not usually ecstatic about doing them either It takes roughly 6 times the amount of work compared to selling a regular property Whoever does the negotiating needs to keep consistent pressure on the lender to work on the file and get it done In my experience this is where negotiators fall down on the job They are not proactive in their pursuit of pushing the file along to get a payoff approval . .4 What is the basic anatomy of doing a short sale? . .The property should first be listed for sale to find a buyer Once a buyer is found and an offer is made, all the necessary paperwork from the owner; which pretty much includes all the information that was provided to get the loan in the first place, must then be submitted in the right order, and in the right way to the lender Submitting it the right way can mean the difference of it ending up on top of the stack, or the bottom Once an offer is submitted the bank will call for a BPO Once the BPO is done, you then find out if the buyers offer was within their guidelines and will be accepted Assuming it is, the bank will then issue the payoff approval good for 30 to 45 days They will usually give extensions if it is needed to close, but never rely on that . .5 What is a BPO and why should you care? . .A BPO is a “Brokers Price Opinion ” Usually done by a local real estate agent The bank orders the BPO which is basically a comparison of the value to other properties, in order to gauge whether the offer made by the buyer will be accepted, rejected, or countered Whoever you have doing your short sale, they must understand how to effectively set up a fair and accurate BPO It is a must for the banks BPO agent to be met at the property with your realtors BPO report and knowledge of the property (yes your real estate agent can do their own BPO too) The whole objective is to influence the value of the property down, in order to insure that the bank will take the least price possible Because values are always subjective anyway, do not leave this important key of the whole short sale process to chance If you get nothing else out of this article, know that the BPO IS the Key difference between selling your property or not . .6 There are three main financial issues that are worth knowing about . .* Property taxes usually become delinquent, because when you don’t have enough money to pay your mortgage, then the property taxes are most likely not getting paid either In order for escrow to close, the property taxes must be paid These will most likely be paid by the bank or indirectly by the buyer, and be included as part of the short sale payoff . .* Income taxes are based on what’s called the phantom income from the sale of a property For instance if you originally bought your property for $300,000 and this was the amount of the loan (100% financing for this example), say the loan was paid down to 290,000 then if the home lost value and was sold via short sale for $150,000, you could be taxed on the $140,000 cancelled debt ($290,000 - $150,000) Even though you lost the house too This is a very simple example because you have to take into account your personal situation in regards to other income and expenses in other areas of your life Special note: there are many ways to lower or completely extinguish the tax burden if you do a short sale, or end up getting foreclosed on The Mortgage Forgiveness Debt Relief Act (H R 4638) of 2007 provides relief from debt forgiveness taxation for certain owner occupants now until December 31, 2012 This is specifically for Owner Occupied properties (limit of 2 million dollars) If it is an investment property there are other alternatives available, one being insolvency (if your debts are more than your assets), there may be other options too Get a good tax professional or CPA, they are worth their weight in Gold Do not let someone talk you out of a short sale simply because it will be better off to let the property go to foreclosure, this is not the case Note: We are NOT giving you tax advice, because we are NOT tax advisors . .* Deficiency judgments’ can be requested by the lender for accepting a short payoff (or when a foreclosure takes place too) More and more lenders are insisting on an agreement or promissory note by the owner to pay a portion of what was originally owed, usually over a number of years, and usually at no interest This requested deficiency is usually calculated from the 2nd mortgage, at about 10% to 40% of that value If it would be a hardship to pay back, and you are planning on doing bankruptcy anyway, then you could simply agree to the installment which would subsequently be wiped out by the bankruptcy Or if your plans do not include bankruptcy then maybe the short sale along with this payment, would still be better than the alternative .
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Miami Real Estate - The L Steps: 6 Steps of Investing
Real estate investing in Miami real estate is now becoming popular again as there are many properties in foreclosure, short sale, bank reo’s, and government foreclosures. With such an overwhelming inventory of homes available for sale a real estate investor must be able to determine which one to purchase. Investors must follow six steps in order to learn, understand and achieve Miami real estate investment success. These are the six L steps to Miami real estate investing: 1. Location - Location, location, location is still the key of buying Miami real estate. Buying Miami real estate just because the price is low in a declining area is big mistake that should be avoided. Look for homes in an excellent location like, good schools, economic stable and growing neighborhoods, near shopping centers and malls, near bus stops and metro rails, near hospitals and restaurants. Sometimes it is better to pay a little more for a property in a good location than getting a bargain in a place where it is very hard to sell or rent the asset. Location is often overlooked in purchasing real estate as many investor think they can overcome a bad location if the price is low enough. Out of two homes that are exactly the same, the one in the best location will command a much higher sales price and rental income. Location is the number consideration when purchasing Miami South Florida real estate. 2. Long Term - Real estate investing is a long term proposition. Don’t think you are going to be a millionaire over night. It takes years of hard work and dedication in order to succeed. Hold any property at least one year before selling it. Capital gain taxes will be greatly reduced. Consider renting the property for at two or three years. The rental income generated will help you to properly repair and renovate the property. Many investors purchased properties in the middle of real estate boom with no money down and no equity. These investors were thinking of flipping the homes fast and make a killing in the process. Many homes now in foreclosure are due to investors that were caught in the middle and now realize that real estate investing is very hard to time. Long term Miami real estate investing is the secret to a successful real estate career. 3. Lease Option - Never rent a property with a lease option to buy. Either sell or rent it straight out. A lease option usually is a disaster for both buyers and sellers. The tenant will demand a large discount of the rent to go towards the down payment and closing costs. The problem is that tenant will not buy the property at the end of the lease and the landlord/seller will have wasted a lot of money in rebates given to the tenant/buyer. Demand a 20% or 30% deposit from the tenant/buyer and a clause in the contract that if they default on the purchase they will lose the deposit. This technique will force the tenant/buyer to purchase the property or lose the deposit. The risk of losing the deposit will eliminate the tenant from taking advantage of the landlord by walking out of the contract after receiving a monthly rental discount. 4. Local - Buy real estate close to where you live. Don’t buy real estate in another state or in another country. Keep real estate investing local. Buy in your own county and in your city. The more you know about the area where you are buying the better the decision will be. The investor should always be close to the investment property. The Miami real estate investor should inspect the property often to determine any repair, roof and other problems. The landlord must inspect the property every month when collecting the rent. Check for the number of tenants actually living in the property, check for damages and destruction of the property and overall condition of the place. The investor/landlord will not be able to inspect and determine the condition of the property if it is located far away. Keeping real estate local is an essential step in real estate investing. 5. Leverage - Most real estate books and seminars tell you to use other people’s money when purchasing real estate. This technique is not the best and buyers should try to buy the property in cash if at all possible. Buying a house in cash will help you get a better deal and allow you to negotiate from a position of strength. A cash buyer will always have the upper hand in negotiating with banks, property owners, and other sellers. Cash buyers will not suffer and go into foreclosure if the market turns and they are unable to sell or rent the house right away. Like Dave Ramsey always says “cash is king and debt is dumb”. Buying an investment property in cash is an excellent way to avoid Miami real estate investment mistakes. 6. Learn - Research the property and learn everything about it before you buy. A mistake in Miami real estate investing can be very costly. Usually you make your money when you buy not when you sell. Buying the property at the wrong price the wrong place and at the wrong time could be detrimental. One mistake could wipe you out and put you out of business before you start. Ask questions to the experts, real estate agents, appraisers, mortgage brokers, and other real estate investors. Learn, research, educate yourself in all aspects of real estate investing before you purchase the asset. It is definitely a buyers market in Miami-Dade County. Miami real estate investors have more choices than ever before when it comes to real estate investing. Investors must follow the L steps, the 6 steps real estate investor guide to successful real estate investing in order to achieve their investment goals in the Miami real estate market. Hector Lesende is owner/licensed real estate broker in Miami, Florida and creator of the (Lesende) L Steps. Please visit <a href="http://www.lesende.com/">Miami Real Estate </a> We will sell your home fast. We offer a Foreclosure List. Search <a href="http://www.lesende.com/blog">Miami Real Estate Blog</a> Search <a href="http://www.lesende.com/coral-gables-real-estate.php">Coral Gables Real Estate</a>
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