FORECLOSURES AND SHORT SALES… WHAT YOU SHOULD KNOW

Do you have a family member or friend who is delinquent on their mortgage? You don't need to be a  expert to help a distressed homeowner. Here is some simple advice you can share with them…

• Open your mail and call your lender. Delinquent borrowers are often worried or embarrassed about telling the mortgage company about their financial troubles. Let them know that the lender wants to help. Lenders would rather work out a payment schedule than let the borrower get further and further behind.
• Put your house payment first. Encourage distressed homeowners to cover their primary needs first, even though other creditors may be calling often and putting a lot of pressure on them to pay.
• A sheriff's sale does not mean you have to move right away. After the Sheriff's Sale is a redemption period that is six months long. Homeowners are allowed to remain in their home during this time.

Beware of those offering a quick and easy fix. Unfortunately, there are many dishonest companies around that will try to take advantage of the situation. The Don't Borrow Trouble help line is available for people who have questions about solicitations. The number for Don't Borrow Trouble is 612.312.2020 or toll free 866.462.6466.

The Impact of Short Sales

Sellers may wonder whether letting a property go into foreclosure would be easier and smarter than going through a short sale. With a foreclosure a seller could stay in the property, essentially rent free, for a few months before being forced to vacate. But that fact alone does not mean a foreclosure is better.

• Whereas a short sale involves offering the home for sale, generally listed through MLS. Potential home buyers will make appointments to view the home, some will make lowball offers, agents might hold open houses and, in general, a seller's life will be disrupted, all in the hopes that a buyer will buy the home.

Basics of a Short Sale

• Short sales happen when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of sale.
• Not all lenders will negotiate a short sale, and that is why a real estate agent or a lawyer can be a tremendous help by contacting the lender's loss mitigation department to find out.
• You can't just wake up one morning and decide you're going to sell your home at a loss by asking for a short sale. Typically, lenders won't even consider a short sale if your payments are current. Lenders will be more agreeable to negotiation if your payments are in arrears. Plus, if you have cash assets, the lender might try to tap those accounts. Doing a short sale is not for the faint of heart.

Short Sale / Foreclosure Deficiency Judgments

• The bad news is a seller could be subject to a deficiency judgment for the difference between the loan amount and the amount paid. Some states have laws regarding personal guarantees, which could also result in a deficiency judgment, if the home owner is held personally liable for loan repayment.
• The lender has sole discretion whether to pursue a deficiency judgment in those instances when the judgment is permitted. To determine whether a pending foreclosure or short sale is subject to a deficiency judgment, talk to a real estate lawyer.
• If you're a seller trying to decide whether to let a home go through foreclosure versus attempting a short sale, salvaging your credit may not be an advantage to doing a short sale. Seek legal and tax advice before making that decision.

Carole is flying solo…

Just a note to let you know that I am now flying solo with my real estate business.  Doug & I have decided to part company. You still can reach me at (218) 969-8855 or at (218) 259-6600. So, look for my new billboards that will be up shortly.