I am asked regularly by those not involved in our business my opinion about the current foreclosure crisis & how long do I think it may last.  Many are simply curious to know if  their  property value will continue to decline, while others wonder if  an end to this madness is in sight. I share this blog written by my friend Carrie as I could not have put it any better.   For those of you in this business there is certainly "Blood in the Streets" so I ask you:  Are you standing still or will you take advantage of this mess & turn it into a Harvest?

Foreclosure Woes to Plague Industry for at Least Five Years: Survey

By: Carrie Bay 10/03/2011

A new quarterly survey of bank risk professionals from FICO paints a decidedly pessimistic picture of housing's future. The company describes its latest results as a reversal of the growing optimism seen in late 2010 and early 2011.

The survey, conducted for FICO by the Professional Risk Managers' International Association (PRMIA), shows that bankers expect delinquencies on consumer loans to rise, underwriting standards to become stricter, and the housing sector to continue struggling far into the future. Among the 188 risk managers surveyed, 73 percent believe mortgage defaults and foreclosures will remain elevated for at least five more years.

Furthermore, 46 percent of respondents expect mortgage delinquencies to increase over the next six months, while only 15 percent anticipate a decline in mortgage delinquencies over the same period.

The negative sentiment among banks' risk professionals also extended to property values. When asked if housing prices nationally would climb back to 2007 levels before the year 2020, 49 percent of respondents said no. Just 21 percent said yes.

"Housing has been an enormous drag on the economy for over three years as U.S. households lost trillions of dollars in equity," said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. Data from the Federal Reserve shows that between 2005 and mid-2011, Americans lost $7 trillion in home equity.

"While the housing sector will almost certainly gain strength during the next nine years, many bankers clearly believe prices will remain depressed for half a generation," Jennings said. "This puts the devastation of the housing crash into perspective."

 

I left off of Part 1 by stating that the banks are involved in not only knowingly defruading you in order to steal your money and property, they are also committing insurance fraud on the grandest scale, all of this allegedly. Of course everyone in this country is innocent until proven guilty, right? So, when there is a default, who is really the injured party? If anyone, it's the insurance companies.

There is really a lot to this whole thing, more than we can actually fit into the confines of a blog. My intention is to raise some points to give you food for thought, and hopefully you will have direction to investigate and come to your own conclusions. What I have learned about all of this has come from more than 2 years of tracking the papertrail of my own notes, and interviewing countless experts in banking, including present and former banking officials, public officials, and other researchers. And, reading many thousands of pages of documents; banking guidelines, Federal Reserve guidelines, MERS rules, regs and guidelines, UCC and USC codes and laws, the US Constitution, Federal, State, and local laws and statutes, Acts of Congress (HJR's) and more. I am also currently in the process of filing criminal charges (and civil litigation) regarding bank fraud and extortion against the banks, trustees, (and MERS) with the specific evidence that I have uncovered on my own mortgage transactions. The complaints will be filed with my state's Attorney General's office, the US District Attorney's office, and the FBI. 

I want to touch on a couple more issues with this, and if you have questions feel free to message me and I can pass along more info. There's a huge trend of note buying going on right now. I know several gurus who are selling programs to teach investors how to go to the banks asset mangers and purchase their non-performing "notes". If 95+% of the notes that were created since about 2005 are basically destroyed or no longer can be recovered, what are investors getting when they buy the so-called "note" from the bank? They are only getting a simple release of lien, same with short sales, and trustee sales. The problem is the party that is listed as the "lender" (servicer) does not have the right nor the authority to issue such a release. They get away with it because no one questions them. Most judges and attorneys have absolutely no clue about how this transaction works, if you've read Part 1 of this blog and up to this point, you are now more informed than most judges and attorneys! Loan mods don't work; if you know anything about the success rate of loan mods, you know that they go right back into default shortly after they are completed. Again, the lender/servicer has absolutely NO RIGHT to modify a loan, all of that is governed in the prospectus and pooling agreement of the trust. They are blatantly lying to you (9 times out of 10) that your loan can be modified.

Here are some resources with great free information for you to follow up on, if you are in forclosure or you know someone who is about to lose their home, please have a look at these and share them with others. I am not an affilite of any of these sites, I make no money to share these with you and I am also not offering any legal advice what so ever; everyone should always seek competant legal help from an attorney. With the disclaimer out of the way, have a look at these sites, I recommend you download any of the ebooks that are offered for free:
www.consumerdefenseprograms.com (listen to the audio)
www.freeandclearin90.com
www.showmetheloan.net
www.securedassetsgroup.com
www.yourremedyisinthelaw.com

Marketing that Stands Out to Those in Pre-foreclosure

People in pre-foreclosure get a lot of mail. You’re marketing needs to stand out to those in pre-foreclosure.  There is a lis pendens that gets filed and anybody and their mother can find out that these people are behind on their mortgage payments.   Much of this mail ends up piled up on their kitchen tables unopened, along with their mortgage and every other bill. If you’ve never really seen that happen and sat down with somebody who’s like an ostrich with their head stuck in the sand, then you’ve never dealt with most pre-foreclosure sellers.

Many of them are living in denial, thinking that God is going to sweep in and save them.  Although that can happen, it’s likely that any solution they find for their current financial difficulty that’s long-term and enables them to get on with their lives is going to come from their own efforts, because God helps those who help themselves. So put yourself in their shoes, they’re getting a lot of messages.  

They have a whole truckload of stuff they’ve received, some from vulture investors- that’s what I like to call them.  It basically says, “Hey! I heard your mother died…let me buy her house,” and that’s the kind of tone these people send in their marketing messages which is stupid.  

They’re also getting messages from people that are too corporate.  They’re like, “We buy houses out of Jacksonville, FL and have been serving the community for 42 years or ever since Moses came down from the bulrushes.”  That does work but it ain’t the best way to position your marketing in this market either.  

You need to connect with them as human beings first.  Show them that you care.  Stand out from the other marketing you know they’re receiving. 

   A good tip to find out the type of marketing they’re receiving is to sit down with a pre-foreclosure seller and after you close the deal to buy their house that you’re then going to flip and resell to someone else as a wholesaler or a subject-to buyer, just ask them. “You probably don’t need all that marketing material that you’ve received from everybody else trying to buy your house, would you mind if I take it and burn it for you?” 

They may laugh at you, but before you burn it, copy all of it and look at what your competitors are sending out into the marketplace.  Most of it is crap, and you want to make sure that you’re using marketing that stands out to those in pre-foreclosure.

With that being said, what do you do? You want to use what works for that market. The medium in the instance of direct mail letters is less important than the market, the person who’s receiving it.  They are human beings, and the message should clearly identify you as someone who believes in the things I just told you—that they are a person that deserves solutions. 

   How do you do that? What are some cool ways to do that? There are things people have tried, but let me tell you about something I’ve tried with success.  Include a scratch-off lottery ticket or card. Before you tell me that doesn’t sound like a good investment plan, I don’t play lottery.  

   I don’t buy lottery tickets, although my dad, God love him, is completely addicted to them and every once, in a while wins a few thousand dollars. He’s convinced that one day he’s going to win the multi-million dollar mega millions power ball jackpot…and he may but that’s not exactly a retirement plan. 

   I use this tactic, not to tell people they should play the lottery to get out of their problems, but what you’re telling them in your message is something like this: “Dear Home owner, it’s come to my attention that you may have a financial difficulty in your family and I wanted to do something to let you know I care, I want to help and I have solutions for you. But, in case you don’t get a chance to call me, I’ve included a lottery ticket for you that will perhaps win you a million dollars. 

   You can say in your message, “Hopefully, this lottery ticket and the potential winnings solves your financial problems, but if it doesn’t I’d still like to buy your house.”

Why does this work and stand out as a marketing tactic when approaching pre-foreclosure sellers? It’s very simple, very clean, showing them that you care about them as a person, that you understand they have a financial difficulty, that you are looking also to show them solutions and that you’re a human being.  If that isn’t marketing that stands out to those in pre-foreclosure, I don’t know what is.

Quite honestly, who else ever sent them a gift? Most companies don’t think to send you a gift and certainly, not something as funny as a lottery ticket. So, if no one in your local area is sending out lottery tickets to pre-foreclosure sellers who all get the same list from the local courthouse, then you’ll stand out by doing something unique like that. 

Are there other ways you can do it for that market with that medium?  Sure, and maybe I’ll write about some more of the later, but the important thing is to use to not get lost in the pile.  Don’t blend in.  Use marketing that stands out to those in pre-foreclosure or whoever your target market may be, and you stand a chance of getting the call back…and thus, getting the business from your competitors.

Must sell property quickly, this deal will not last very long. Value of home and property $177,000, sell for payoff to free up investment capital.  Will consider owner financing to right company with  downpayment.      
4 bedroom/2bath brick/vinyl  2 story completely updated 3 years ago with new wiring, furnace, heatpump, water heater, lighting, wired smoke detectors, cabled, vaulted ceilings, decks; this home sits on one acre in Floyd County, Indiana which is close to everything. The home is not in a subdivision and has beautiful homes in the immediate area, only 3 miles to awarding winning Floyd Central High School, Highland Hills Middle School, and Greenville Elementary School. Only 12 miles to Louisville, Ky, and all the amenities, with grocery, fire department, restaurants, shopping, and colleges (IUS and Purdue Technology) even closer. Pictures can be found at www.KRFamilyEnterprises.com. Interested parties may contact me at 502-396-7892.

5934 E 21st Street
Indianapolis, IN




3BR/2BA Single Family House $17,000
don't know if it was a crack house but the price is really cheap
3br/2ba with basement, large living room with fireplace, 2 car detached garage, large utility room with washer/dryer hookups, enclosed front porch, large, fenced backyard with more than 20 trees. Needs some siding replaced, kitchen needs repairs. Call me at 317-855-8366 or go to

http://www.hoosierflippers.info

http://www.flickr.com/photos/30889687@N05/sets/72157625152920130/

http://www.youtube.com/watch?v=X7uC1m_5gVQ



Bedrooms 3
Bathrooms 2.0
Floors Unspecified

Sq Footage 1,404
Lot Size 12,000 sqft
Year Built 1940


Condition of sale: Home being sold “as is” – no repairs will be done. Pre-approval letter & earnest money required. Offers made without proof of funds or pre-approval letter will not be considered



Elia Santiago
317-855-8366
Turn key Homes LLC
http://www.hoosierflippers.info

Very Attractive Home with 6 Bedrooms and 2 Bathrooms in Indianapolis, Indiana!  This Property is Located in a Great Rental Area. You Can't Beat this Deal.This Home has Several Nice Features including Two Separate entrances, 3 Bedrooms and 1.5 Bathroom in each unit, Separate utilities, 2 Water Heaters and 2 Furnaces, 2 Basements. (Freshly painted on Lower lever) Newer Vinyl in kitchen, 3 Bedrooms, 1.5 bath upstairs & downstairs .  The 2nd Unit is the same layout (3 Bedrooms and 1.5 Bathroom), All carpet The Property has an attractive exterior There is parking in the rear of the property with separated spaces. This Home's Location is Set for a Cash-Flowing Opportunity! Rent would be from $450-600 a Month per unit.

Bedrooms:	6
Bathrooms:	2
Sqft:	2800
Lot size:	--
Property type:	Other
Year built:	1921

Estimated Home Values: 

View Value Range

ROI:
this is an estimate with a rented price of $500 a month per unit $1000 a month less prop mgt fee which is $100 - $900 for 12 months $10800 dollars a year an selling price $25k

take away annual taxes $1k a year
E.Santiago
We Buy Homes Indianapolis
317-855-8366
Turn Key Homes LLC

Hi!

My name is Kay Jones. I'm a Realtor in the KC Metro area. I  have specialized in short sales and worked with several investors over the last 7 years. I know what kind of margins many of you are looking for!

Right now I have an opportunity in which one investor says "It's a Buy and Hold with a Lease with the Option to Purchase from heaven!" I HAVE ALL DATA AND DOCS READY FOR YOU TO LOOK OVER! I wasn't ready to call it that, but he was. If his cash wasn't tied up, he'd be all over it.  2-3 year hold is needed. You will receive monthly cash flow as well as large deposits over time and a nice final return on your money!! IMMEDIATE RESPONSE IS NEEDED. Cash is not needed immediately!

Working with short sales, I find deals similar to this often - maybe not as good as this one, but I do have them. Most of my homeowners are current on their payments.  I've got buyers who just need smaller house payments, but due to their situations, may not be able to get traditional financing. 

If you or someone you knows wants an opportunity to help others while at the same time, earning some nice income, email me!!

Thank you!!!

Kay Jones
Kay@TheMaherTeam.com 

NOTE:  The following overview is not definitive and, generally, reviews the State of Illinois pre-foreclosure process.  The writer is not a lawyer or professionally versed as an interpreter of the law, nor an accountant.  The “bank/lender” may also denote the “mortgage servicer” who is handling the account for the party/investor which actually holds the mortgage papers.

 

Anyone working with short sales must become well versed in the many aspects of the business.  A starting point is the pre-foreclosure time line.  Whether you are pursuing short sales or just are interested in better understanding the process, the following information is presented to acquaint you with the generalities of the pre-foreclosure time line.  This presentation is based upon the time line as exists in Illinois, a judicial state, which has one of the longer pre-foreclosure time frames.  It is essential to understand the pre-foreclosure process time line of the state in which you are dealing as it varies by state.  With the volume of pre-foreclosures being handled in today’s market, the time line is often considerably stretched in terms of moving from start to finish.  The following information should serve to exemplify the pre-foreclosure time line.

 

When visiting any pre-foreclosure homeowners it is necessary to frame the foreclosure process and time line for them so that they can identify where they are in the foreclosure process.  All too often homeowners have quickly vacated their home because they feared being put out on the street with all their belongings.  The owners didn’t realize that there were options to consider and some time to deal with the situation at hand, be that staying in the home or moving on. 

 

The official foreclosure action typically isn’t filed until after a homeowner has missed two to three payments (30-90 days).  When payments have been missed the homeowner  initially receives late payment notices which are then followed by calls from the collections division.  The lawsuit begins when it is filed at the courthouse but doesn’t commence until the homeowner is served with the “complaint” and other papers.  The homeowner is served the papers by a process server, a sheriff’s deputy, or, sometimes via certified mail.  Someone usually comes to the homeowner’s door and delivers the papers which have a date stamped on them.  That date is “key” as it represents the beginning of the pre-foreclosure time line for the homeowner.  When the lawsuit papers are served the homeowner receives the “complaint” (for lack of payment) and a copy of the promissory note and the mortgage, both signed by the homeowner/borrower.

 

The bank/lender likes to move quickly giving the homeowner 20-28 days to “answer the complaint”.   The homeowner is requested to appear before a judge on a designated date. It is in the best interest for a homeowner to answer the complaint, if not in person then in writing.  When appearing before the judge the homeowner will be asked to bring the loan current, including late and attorney fees.  Attorney fees begin to accumulate once the foreclosure is filed.  When the homeowners are unable to make the payment demanded the judge relays to them that a “default judgment” will be entered in approximately 60 days. 

 

In Illinois the court also provides the homeowner with basic information about the foreclosure process, offers home retention counseling, and lists options available.  Many homeowners I’ve talked with were still not sure they understood the information given to them at the court house; I’d conjecture that they really didn’t understand it, were in denial, or were so overwhelmed that it didn’t sink in.  Other homeowners I’ve dealt with didn’t bother to make an appearance in court to answer the complaint because they didn’t understand the papers served, knew they didn’t have the money, and/or were paralyzed with fear and chose to just do nothing.  Some homeowners use a lawyer that makes sure that the complaint is answered appropriately.  If a written answer to the foreclosure lawsuit is utilized it is filed with the court; copies are also sent to the attorney processing the lawsuit for the bank/lender.

 

The “default judgment” will be set by the bank/lender’s attorney and the homeowner is notified of the sale date by mail.  The sale date is also published in a local newspaper.  Some lenders have stayed relatively close to the “90 days following the serving of the summons” for suit. But, as previously noted, there has been so much going on with banks/lenders these days that this “90 day” window has been on hold for much longer in many cases.  Even a date to process the default judgment can get pushed back on the court docket for a few weeks or a couple of months.  It is always important to know where you are in the time line of the pre-foreclosure process, for your sake and the homeowners.  The bank/lender attorney and the loss mitigation department can update the status of the property as needed with either the homeowner or authorized third party.   

 

Once the sale date has been set the homeowner knows how long they are able to stay in the house if they haven’t already moved out.  If you are the one processing a short sale, you know how much time is left to complete a sale.  There is always the possibility that a sheriff’s sale can be interrupted.  If you are working with the bank/lender’s loss mitigation department on an offer that is already assigned to a negotiator there is a chance they will delay the sale.  However, sometimes, even with a great offer that has been on the table for months waiting for a close date, the lender will allow a property to go to sale.  At other times an offer comes in just before the sale date and the sale is delayed even when there isn’t an assigned loss mitigation negotiator.  There are other methods that can also stop a sale which will not be covered in this discourse. The sale date is typically about 1-2 months after the default judgment has been entered. 

 

At the sheriff’s sale/auction bids are taken on the property.  The bank/lender will have set a minimal bid knowing what they want to net.  If there isn’t a buyer willing to bid what the bank/lender wants they take the property back, resuming control of the property.  It is at this time it becomes a bank owned property, REO (real estate owned).  The actual “confirmation of sale” doesn’t take place for a couple of weeks; this is the actual consummation and transfer of ownership.  When sold, the homeowner is given 30 days before an eviction takes place.  When the bank/lender takes the property back they let the homeowner, or tenant, know when they need to be out of the house by mail (one month, sometimes two).  If the homeowner has already moved on, the property may be immediately assigned to a Realtor who will secure the house for the lender (often before the confirmation of sale).  It usually takes about two months before an REO will come back on the market as an MLS listing.

 

The redemption period expires approximately 7 days prior to the judicial sale.  The redemption period is seven (7) months from the date of service or three months (3) after the judgment is entered (whichever is later).  During this time the homeowner can bring the loan current and stop the foreclosure process.  Note that many states have redemption periods that extend past the sale date of the property. 

 

Illinois does have a longer process than most states, approximately 12 months long.  I’ve suggested to homeowners in pre-foreclosure that this longer period of time is both a blessing and a boon as it provides a longer time to deal with the property yet keeps them (the homeowner) in limbo and under stress longer.  The pre-foreclosure process is complicated at times and it depends on which bank/lender is involved as to how quickly the time line flows.

 

It is imperative that you know the foreclosure process and time line for the state in which you are planning to work short sales.  In the many states that have shorter time lines it necessary to work quickly and apply different strategies to get the short sale completed within the given time frame. Once the pre-foreclosure time line is understood, you should also be clear about the options available to homeowners; these options will be covered subsequently.

 

 

 

Starting a short sale business had only fleetingly crossed my mind until I met a man who would become my broker.  I’d heard a number of speakers address the topic of short sales and was actually signed up for a three day workshop on the topic when a great opportunity presented itself.  I was attending an investor half-day workshop covering strategies on single-family homes.  During the experience-sharing introductory session I noted my pre-foreclosure work in San DiegoChicago suburbs.   The following day I received a call from Steve, the man who had sat next to me at the workshop, asking if I would like to join him in the short sale business. Steve had six plus years of experience in this area.  (NOTE:  showing up, education and networking = opportunity)  This was an exciting possibility! 

 

Steve had become a Realtor to work with short sales, and then became a broker to make it easier to specialize in this area.  He started by assisting a family member with a short sale.  When people at his church found out Steve could facilitate a short sale, he soon had a couple of other homeowners with distressed properties to assist.  Word of mouth was the initial and unintentional medium at play in the growth of his business, later followed by a direct mail strategy.  Experience had been Steve’s best teacher and eventually lead to his being able to replace his “job” and devote full time energy to the short sale business.   He went on to establish a team of short sale professionals to efficiently process short sales with lenders, including an attorney and a title company.  When Steve and I met he was interested in expanding his brokerage coverage and liked that I was already pursuing homeowners in pre-foreclosure.  He offered to mentor me; I’d just need to become a Realtor.  My short sale adventure was launched. 

 

The mentorship started immediately, even as I signed up for Realtor classes and other workshops on the short sale strategy.  I went on client calls with Steve to observe, become familiar with the presentation, and the paperwork that was necessary.  I do believe and profess that learning by doing is very powerful, oft the best teacher.  Having the theory and knowledge is important but it must be applied until it is “owned”.  The short sale business has many facets and each must be understood and successfully implemented; there is a lot to learn.  So let’s get started!  Let’s explore the world of pre-foreclosures and short sales over a period of weeks.

 

Before looking at the current market and all the inherent facets of short sales, let me first present some of the general terminology used in short sales and the pre-foreclosure process.  As we continue, more terminology will surface.

 

Short Sale

 

A short sale is the sale of a home when sales proceeds do not fully pay off the existing loan(s) and the lender accepts a discounted payoff to fully satisfy the loan. The lender virtually pays all the sales costs, including commissions, escrow and title fees and sometimes repair cost.  The home gets sold; the loan(s) are paid off to avoid foreclosure, auction or bankruptcy.

 

REO (www.foreclosureuniversity.com)

 

The term REO (real estate owned) is used to refer to a piece of real estate (property) owned by a bank.  An REO is different from a foreclosure property in the sense that the bank has already tried to sell it at a foreclosure auction and has not been successful in getting bids, and following this, the bank then became the owner of the property because the property was not bid on. As expected, the bank is not interested in keeping the REO for any longer than it has to, therefore making it a good opportunity for an investor. However, it must be remembered that every REO need not necessarily be a good deal, but in general, it has been seen that when it comes to an REO there usually is a lot of money waiting to be made.

 

Short sales become an option for a homeowner, primarily, due the foreclosure process.  So someone dealing with short sales must also understand the foreclosure laws of the State in which they do business.  There are two types of foreclosures, the non-judicial and the judicial foreclosure.  It is important to know which process your State follows.  A link that allows you to see each State’s foreclosure laws is www.foreclosurelaw.org, United Stateswww.all-foreclosure.com, Judicial and Non Judicial: foreclosure laws. The following definitions are referenced from

 

Types of Foreclosures 

 

Non-judicial

 

Non-judicial foreclosures are processed without court intervention, with the requirements of the foreclosure established by state statutes. When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time. If the homeowner does not cure the default, a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder’s office, and published in area legal publication.  After the legally required time period has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recordation of the deed.  Auctions of non-judicial foreclosures will generally require cash, or cash equivalent either at the sale, or very shortly thereafter.

 

It is important to note that each non-judicial foreclosure state has different procedures.  Some do not require a Notice of Default, but start with a Notice of Sale.  Others require only the publication of the Notice of Sale to announce the sale, with no direct owner notification required.

 

 

Judicial

 

Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of lis pendens (suit pending). The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security.  The homeowner will be served notice of the complaint, either by mailing, direct service, or publication of the notice, and will have the opportunity to be heard before the court.  If the court finds the debt valid, and in default, it will issue a judgment for the total amount owed, including the costs of the foreclosure process.  After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale.  The sheriff’s sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps, to in front of the property being auctioned.  Sheriff’s sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale.  Check your local procedures carefully.  At the end of the auction, the highest bidder will be the owner of the property, subject to the court’s confirmation of the sale.  After the court has confirmed the sale, a sheriff’s deed will be prepared and delivered to the highest bidder, when that deed is recorded, the highest bidder is the owner of the property. 

 

Each State does have specific laws.  Some work with both judicial and non-judicial foreclosures, others allow one or the other type.  The length of the foreclosure process also varies by State.  For instance, the consent foreclosure also applies to my home State of Illinois which also has one of the longest time lines from the time of default to the actual sheriff’s sale. 

 

Consent Foreclosure

 

A consent foreclosure will vest all then borrower’s right and title in the lender free and clear of all claims(except liens of the U.S. Government) including rights of reinstatement and redemption of any junior lien holder who was properly joined and who failed to object.  Upon objection, the court may hear such evidence as required and enter an order that title vests subject to the lien, or if the junior lien holder pays the balance on the mortgage plus any additional interest, within 20 days of the entry of a court order commanding the same, then the junior lien holder can redeem the property.  The final judgment in a consent foreclosure must recite the lender’s waiver of right to any personal judgment for a deficiency and will bar a deficiency against not only the borrower, but any co-borrower or other person who is liable for the mortgage.            

 

If you are hoping to work in short sales, or already do, it is essential that you know what is required by the law of the State in which you are doing transactions.   As most State’s are judicial, or a combination of judicial and non-judicial, I’ll focus on the judicial foreclosure as I continue.  The State of Illinois has a judicial foreclosure law and will serve as the platform for my subsequent presentation of the foreclosure time line which illustrates the working parts therein. 

Definition: lis pendens
(lease pen -denz) (1) Latin for "a suit pending." The term may refer to any pending lawsuit. (2) A written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Recording a lis pendens alerts a potential pruchaser or lender that the property's title is in question, which makes the property less attractive to a buyer or lender. After the notice is filed, anyone who nevertheless purchases the land or property described in the notice takes it subject to the ultimate decision of the lawsuit. (http://www.nolo.com/dictionary/lis-pendens-term.html) 
 
Now that you have some intitial information about short sales, join me on this "road to short sales" series.  The short sale startegy is one that will be well worth adding to your arsenal of real estate strategies for years to come.  My next blog will further address the judicial foreclosure process.  Until then... to your success!
 

 

 

Regardless of whether you are in foreclosure, if selling your home will not net enough to pay off your existing mortgages, you may want to consider selling on a short sale. For many years, there were few reasons to sell on a short sale, apart from earning the real estate agent a commission, but times have changed.

 

Why Agents Recommend Short Sales

You'll hear the myth over and over: "Short sales protect credit." That's only partially true. Your credit will tank if you fall behind on your payments. Experts say agents who repeat that mantra without clarification do so out of ignorance or self interest, take your pick.

There is one exception. If you have no 60-day-plus late pays on your credit report, Fannie Mae may still offer you a loan to buy another home. However, most people who sell on a short sale are in default past 60 days, so this exception does not apply to them.

A short sale could ruin your credit rating. It might not happen right away, but sooner or later, unless the bank has specifically agreed not to report the shortage, the bank may report it as a Score Factor Code 22. That score factor relates to delinquencies, derogatory records and collections.

Real estate agents should not give legal advice to clients facing foreclosure nor assure sellers that their credit rating will not suffer adverse affects. Those who insist on this practice may find themselves facing a process server down the road and be praying that their errors and omissions insurance will cover them.

Here are the main reasons why agents encourage sellers to do a short sale:

 

• Agents get paid by the lender to do a short sale.

   

• Agents don't get paid if the seller loses the home to the bank by going all the way through foreclosure.

   

• Even if the home never sells on a short sale, the agent gets free publicity (and new business) through signage, open houses, marketing and posting listings online.

 

Benefits for Foreclosure

Although going through foreclosure is often painful and embarrassing for sellers, there are benefits:

 

• No mortgage payments to make.

   

• Foreclosure proceedings take months to conclude.

   

• The home is still yours until the foreclosure is final.

   

• No strangers are traipsing through your home.

   

• Banks sometimes give cash for keys after the public sale.

 

Drawbacks to Foreclosure

Few people, apart from the sellers who choose to buy and bail, really want to experience a foreclosure. Memories are made in a home, and losing it can shatter future dreams. Here are other drawbacks to foreclosures:

 

• The right of home ownership is striped away.

   

• Homeowners return to the rental market as a renter.

   

• The bank may post a Notice of Public Sale on your front door.

   

• Your credit takes a nose dive, and a foreclosure will remain on your credit report for 10 years.

   

• Under Fannie Mae guidelines, without extenuating circumstances, you will not be eligible to buy another home for 7 years.

 

Benefits for Short Sale

Of course, you will make your real estate agent happy because agents are happy to take listings. But what about you? What do you get out of a short sale?

 

• Retain some dignity in knowing that you sold your home.

   

• You won't suffer the social stigma of the "F" word: foreclosure.

   

• No mortgage payments to make, unless you choose to make them.

   

• You can meet the new owners.

   

• You will be eligible, under Fannie Mae guidelines, to buy another home in 2 years instead of 5 to 7 years.

   

• If your credit report does not reflect a 60-day+ late pay, under Fannie Mae guidelines, you will be eligible to buy another home immediately.

 

Drawbacks to a Short Sale

You may experience some of the same drawbacks as a foreclosure, but they might seem less intense.

 

• Waiting for the bank to respond to an offer is frustrating.

   

• The bank will want to examine personal records such as tax returns, bank accounts, assets and liabilities, in addition to asking for a hardship letter from you.

   

• Accommodating buyers will mean keeping your home in spotless condition for weeks or months until an offer is received and putting up with traffic through your home.

   

• There is no assurance the bank will accept a short sale offer.

   

• The derogatory credit will remain on your credit report for 7 years.

For many sellers, though, the chance to buy another home in two years is the real motivation to do a short sale. Good credit behavior can supplant bad credit after two years, even though the derogatory will remain.

Luis D Roque
www.realdealcommunity.com
www.hisrealestatenetwork.com
by. Elizabeth Weintraub