How to Use a Short Sale to Stop Home Foreclosure and Protect Your Finances - Softcover

Irwin, Robert

Softcover

ISBN 10: 0071635580 ISBN 13: 9780071635585

Verlag: McGraw-Hill, 2009

Inhaltsangabe

Don’t lose your ho me toforeclosure! Do a short sale!

Robert Irwin, one of America’s most trusted real estate experts, providesthe tools you need to avoid foreclosure—and protect your credit, yourwealth, and your peace of mind.

How to Use a Short Sale to Stop Home Foreclosure and ProtectYour Finances removes the complications and stress often associatedwith short selling a property. Using real-life success stories, Irwin explainshow a short sale works and walks you through the process step by step.You’ll learn how to:

• Convince lenders to engage in a short sale
• Deal with a loss mitigation committee
• Get a loan modification
• Find an agent
• Manage issues with the IRS
• Beat the deadlines that can doom a short sale

It contains all the paperwork you’ll need to execute a short sale, along withlistings of helpful outside resources.

How to Use a Short Sale to Stop Home Foreclosure and ProtectYour Finances provides everything you need to get out from under—without spending a dime of your own money.

Über diesen Titel

Über die Autorin bzw. den Autor

Robert Irwin is among the nation’s premier real estate experts.He has written more than 20 books covering all areas of real estate, includingthe bestselling Tips & Traps series. Learn more about the author atwww.robertirwin.com.

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How to Use a Short Sale to Stop Home Foreclosure and Protect Your Finances

By ROBERT IRWIN

The McGraw-Hill Companies, Inc.

Copyright © 2009 The McGraw-Hill Companies, Inc.
All right reserved.
ISBN: 978-0-07-163558-5

Contents

Chapter One

How a Short Sale Works

Areal estate broker once told me, "Short sales aren't hard to put through—they're impossible!"

She was, of course, reflecting only her own poor experiences with them. Since then I've talked with brokers who specialize only in short sales and claim a success rate of from 30 to as high as 90 percent. And I've met individual sellers who have successfully handled their own short sales. All of which is to say that while the common perception is that short sales are very difficult, if you know what you're doing, they can be quick and relatively easy.

What Is a Short Sale?

When you sell your home (whether directly or through an agent) for less than the balance you owe on your mortgage(s), it is called a short sale or sometimes a short payoff. Many lenders are willing to accept a short payoff (less than they are owed) when the owner cannot make the mortgage payments. The reason a lender will forgive all or a large portion of the unpaid amount of the loan is that a short sale saves it time and money by avoiding a more costly foreclosure procedure.

For example, you bought your property for $200,000, putting nothing down; hence you borrowed $200,000. But, the collapse of the real estate market means that the value of your home has plunged. Today it's worth only $150,000. That means that you're upside down (under water) to the tune of $50,000. That's how much more you owe on your mortgage than the value of your home.

Now a triggering event occurs. For example, your mortgage resets to a much higher interest rate and monthly payment, which you cannot afford. Because you owe $200,000 and your house is worth only $150,000, you have negative equity. This precludes you from being able to refinance (no lender will offer you a mortgage when you owe so much more than your property's value), and you can't sell in the traditional manner (unless you come up with $50,000 out of your own pocket—something I've yet to see a seller willing and able to do!).

You stop making payments, and you face foreclosure. You can't refi, and you can't sell (in the usual way). What can you do?

One good alternative is to get the lender to accept less than you owe; in this case, instead of $200,000, only $150,000. If you can get your lender to accept $50,000 less (plus transaction costs), you can still sell your home—and without spending a dime of your money.

That's the big trick, of course. Getting the lender to take less. When you're successful, it's called a short sale.

Who Needs a Short Sale?

In a difficult real estate market, short sales can be a positive force, especially when you're facing foreclosure. They are extremely useful and can do the following.

What a Short Sale Can Do for a Seller

Here's what a short sale can do for a seller:

• Allow you to sell when you're "under water." (In some areas as many as a quarter of all homeowners owe more than their homes are worth.)

• Avoid or stop foreclosure. (It's a short sale—the foreclosure process ends the moment you no longer own the property.)

• Preserve your credit. (There's almost nothing worse on a credit report than a foreclosure. The short sale prevents it.)

• Safeguard your finances. (This will stop you drawing down your reserves by making payments you can't afford.)

Many millions of homeowners are facing foreclosure as this is written, and many more are likely to join their ranks. Figure 1.1 shows where most of these foreclosures are coming from. Do you find yourself there?

How a Short Sale Works

The following are several examples of how a short sale has worked to help sellers.

Note: While the examples in this book are taken from real life, because of their financial circumstances, the people mentioned have requested anonymity, and hence their names and some of their circumstances have been changed.

The Liar's Loan

Peta was recently divorced and was now supporting four children all under the age of nine. She worked as a waitress in a coffee shop, and her income, with tips, was under $36,000 a year. She owned a very small two-bedroom, one-bath house that she had earlier bought with her husband. She desperately wanted to move into a bigger place, preferably a house of her own.

One day she was at work in the coffee shop when she met a businessman who struck up a conversation with her. Stan said he was a real estate investor. She spilled her story out to him, and he seemed sympathetic. Stan said he had a home that he wanted to get rid of that would be perfect for her. It was on a bluff with a beautiful view of the mountains, it was more than 3,000 square feet in size, and it was in great condition. He said they might be able to help each other out. It all depended on her credit. Did she have good credit?

Peta's parents had emphasized the importance of always paying back debts. She had worked hard to maintain excellent credit, even paying off all the debts her husband incurred before the divorce. She had several credits cards, and since she usually paid cash, the amounts owed on them was very low. She had also borrowed to buy a used car and meticulously made her payments on time. And though it was difficult, the house payments were made promptly every month. She said her credit was excellent.

Stan smiled and said, "Good, good, that will work." Then he drove her to the property and showed her the house where he was living. It was huge with all the modern amenities including three bathrooms and had a bedroom for each of her children. It was, indeed, perfect.

Then Stan told her that the price of the home was $700,000. He said that the house used to be worth a lot more, but the market had turned soft (it was in 2007) and that the fair market price was down a bit. Plus, there just weren't any buyers out there for that price.

Peta was a stunned by the price. Certainly she'd love to move into such a beautiful big home in such a nice location. But, she couldn't imagine that she could afford the place, not on her meager income.

Stan, the real estate investor, told her not to worry; he said he'd handle everything.

Stan said that all that he needed from her was a commitment to buy the place. She didn't need to be concerned about the payments. He just needed someone to buy and get a new loan so he could get his own money out. He realized that the payments would be high, so he'd take care of them. He'd said he'd make her payments for the first two years. And he'd also handle the down payment (there wasn't any because he was getting a 100 percent loan) as well as the closing costs. It wouldn't cost her a dime to move in.

On the day the deal closed, he'd said he'd even give her $25,000 in cash to help her get started!

Stan came in for lunch about every other day from then on and kept talking about the deal. Peta was tempted, but she wasn't sure. She couldn't put her finger on it, but something didn't seem right. When she mentioned it to her friends, most of them also were wary. One said, "Peta, it's just too good to really be true!"

However, Peta couldn't see how she could lose. So, after several weeks, she agreed to move forward on the deal with Stan. He seemed very happy about it and had her fill out a...

Details zur Ausgabe

• Verlag: McGraw-Hill
• Erscheinungsdatum: 2009
• Sprache: Englisch
• ISBN 10: 0071635580
• ISBN 13: 9780071635585
• Einband: Taschenbuch
• Auflage: 1
• Anzahl der Seiten: 208
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Libri GmbH; gpsr@libri.de; ; Europaallee 1; Bad Hersfeld; Hessen; Deutschland