WHAT IS A SHORT SALE?

A short sale is when a homeowner owes more on their property than the property is worth and the bank agrees to accept an amount less than what the homeowner owes.

A number of life circumstances—divorce, family tragedy, illness, career change, loss of job—that have very little to do with the real estate market can cause a homeowner to unexpectedly fall behind on mortgage payments.With the current real estate market dropping, home values are in a negative equity situation, making it difficult or even impossible for homeowners to sell their home and/or keep up with the payments of an adjustable rate mortgage.This is where a Short Sale could be a solution.

Short Sales provide an excellent, win-win solution for the distressed homeowner and their bank.The homeowner avoids a foreclosure on their record and the bank avoids the effort and expense of the foreclosure process.

The Top 5 Reasons why you should do a Short Sale...

#1 Sense of accomplishment.You would not be walking away from your mortgage obligation.You would be doing the best you can to rectify your situation, which looks favorably to several different entities (to your mortgage lender, future lenders, creditors, employers, landlords, etc) once completed.

#2 You will not have to worry about a future default judgment against you for the difference of the value vs. your mortgage amount owed. With a Short Sale, your bank will erase your negative mortgage debt.

#3 We don't charge you any money to do a short sale.Your bank will pay the Realtors® commissions.

#4 You will have a clear idea on when you will need to move.If you haven't moved already, it can be very confusing on when you should be moving out of your home in fear that the Sheriff will be changing the locks after the "Sherriff's Sale".When we do your short sale, we take that fear away and give you an actual timeframe.

#5 Your ability to purchase a home.Selling your home by short sale does not reflect positively on your credit however, the time it takes to rebuild your credit and repurchase a home is cut down dramatically after "short sale" vs. "foreclosure".Each individual is unique however; we do not guarantee, expressly or by implication, that you will personally be able to purchase a home in the future, you will need to visit with a mortgage lender for details regarding your specific circumstances.

FORECLOSURE TIMELINE

The foreclosure timeline differs from state to state, but generally, the same pre-foreclosure procedures apply in every state. When a homeowner falls behind on his or her mortgage payments, lenders generally follow the same process, which is made up of the following three stages:

 
Default Period

A homeowner is considered to have truly missed a payment 30 days after the expiration of the "grace period" after the first missed payment. The "grace period" is typically the 15-day period that a homeowner has to make a payment after it's due without the payment being considered late. So if a homeowner's payment is due on the first of the month, he or she would be considered behind on payments 45 days after the after the missed payment was actually due. This period is considered the Default Period. The Default period can be anywhere from 45 days to 12 months (in some rare cases) depending on how aggressive that homeowner's mortgage lender is. Some will begin acceleration and foreclosure proceedings after the first missed payment, but others will wait much longer. However, because there is no way to determine how aggressive the lender is going to be on a particular property, it is important for homeowners to contact the Lake & Land Real Estate Team as soon as they miss a payment. The best time to work out a solution like a Short Sale is just after the homeowner misses a payment.

During this period, the homeowner will probably be receiving calls from their lender trying to collect the debt or work out a payment plan. If a homeowner can truly afford a payment plan to make up late or missed payments (i.e. the situation that was causing financial hardship has been resolved), we always recommend this option. However, what some homeowners don't realize is that when they begin a payment or workout plan with their lender, depending on the plan provided, they are still responsible for their regular mortgage payments. This means that their monthly payments to the bank will dramatically increase, which will only exacerbate the situation if they were having difficulty affording your house in the first place. We recommend that homeowners do their homework before signing up for a payment plan or "forbearance agreement."

Many attorneys may also advise the homeowner to file bankruptcy, which will prevent the lender from foreclosing on the house...temporarily. In certain situations, bankruptcy may very well be the best option, but if, for example, the house is the only debt prompting the homeowner to pursue bankruptcy, they may want to reconsider. If the trustee payments associated with the bankruptcy become overwhelming and the homeowner falls behind, the bank can lift the property out of bankruptcy and foreclose on it, and the homeowner will have both a bankruptcy and a foreclosure on their credit report. We find that in most cases, "Short Sales" have no effect on a homeowner's credit aside from the missed mortgage payments that got them there.

Foreclosure Process

If the note is not paid off in the timeframe noted or the homeowner has not worked out a payment plan, a notice will be sent from the lender's debt collection department, or in some cases, from the lender's attorney—that they are beginning the Foreclosure Process, and the homeowner's property will be sold at auction at the "Sherriff's Sale" on a specified date. The foreclosure process differs from state to state. In the state of Michigan, the foreclosure period can be up to 120 days. A "Notice of Default" will also be filed with the county and published in a public place like a newspaper. Because the homeowner's default has now been made public, investors, lenders, attorneys, and real estate agents, many of whom may not have the homeowner's best interests in mind, offering to bail them out. Many homeowners make the mistake of not taking any action to avoid a foreclosure until they receive their Foreclosure Notice. The faster a homeowner takes control of their situation and calls the Lake & Land Real Estate Team for help, the more likely it is that a foreclosure can be avoided.

Redemption Period

The last phase of this process is called the Redemption Period. This stage begins after the "Sherriff's Sale" when the lender has purchased the home for the entire amount of his or her mortgage. All other lien holders, including the 2^nd lien or "Equity Loan" are discharged after this sale. During this period, it is still possible to negotiate a solution like a Short Sale, but the homeowner needs to be aware that the clock is ticking. In the state of Michigan the Redemption Period is 180 days for residential homes on less than 5 acres and 360 days for those on 5 or more acres.It is crucial that homeowners in this situation become educated about their best options. A homeowner may remain in the home during the entire redemption period.The homeowners must vacate the home at the end of the redemption period as the home now belongs to the bank. A lender's agent may make an attempt to communicate with you at this time to alert you to the "take possession date".

WILL I BE TAXED?

We are neither Tax Accountants nor Real Estate Attorneys and must advise you to speak with both, for advice.Meanwhile, you might discover that www.irs.gov has posted the tax laws/rules that pertain to this question.

Also, you might have heard that President George W. Bush, in December 2007, signed The Mortgage Forgiveness Debt Relief Act of 2007.Which "allows taxpayers to exclude income from the discharge of debt on their principal residence? Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for this relief for primary residence."However please consult with your CPA for more details and if this pertains to you.

If your mortgage debt is partly or entirely forgiven during 2007, 2008 or 2009 you may be able to claim a special tax relief by completing Form 982 and attaching it to your federal income tax return for that year.

Normally, debt forgiveness results in taxable income, but the "Mortgage Forgiveness Debt Relief Act of 2007 "allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for this relief for primary residence."However please consult with your CPA for more details and if this pertains to you.

If your mortgage debt is partly or entirely forgiven during 2007, 2008 or 2009 you may be able to claim a special tax relief by completing Form 982 and attaching it to your federal income tax return for that year.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit the IRS Web site at IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. This publication and Form 982 can be downloaded from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

WHY LAKE & LAND REAL ESTATE?

Successfully completing a Short Sale can be a daunting task.Most Realtors®, try to anticipate what the bank wants and simultaneously what you need.They do not have Marketing Systems in place nor the contacts needed for this challenge.This creates a frustrating atmosphere for the agent and homeowner alike, most of the time resulting in failure.The Real Estate Company's experience in "Selling Short" is crucial at this stage in the process.

Our "Short Sale System" creates a more assembly like atmosphere which streamlines the short sale process.The Lake & Land Team Member Realtors will remain focused on the marketing aspects of finding the buyer for your home, while the rest of the Team focuses on the Short Sale aspect and working with the mortgage company to successfully obtain approval to complete the sale.This allows us all to focus our time as necessary to complete the task.

Contact us today for more details.Time is of the essence when dealing with "Short Sales".Please call us now so we can start to work for you before missing your first payment.