Central Florida Real Estate Pre-Foreclosures & Short Sales & Bank Owned Homes

Central Florida Real Estate
Pre-Foreclosures & Short Sales & Bank Owned Homes

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Pre-Foreclosures  and Short Sales....  783 Homes
 
current leinholder (bank) will hopefully accept less than amount owed on loan.  These usually take between 3 to 5 months to close. 

10 Trouble Spots to Consider When Purchasing a Foreclosed Home.
"Buyers need to educate themselves about the potential pitfalls of purchasing distressed property

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Bank Owned/ REO/   (261 homes)...rather quick closings




Read about Short Sales at bottom of this page

Understanding Short Sales

How to Close a Short Sale

Foreclosure Timeline Day 1 through Day 415

Find in this list foreclosures, short sale, bank owned, bankruptcy for sale at really great prices...some of the best Florida homes real estate at rock bottom prices. MLS listings search

Article:Four Common Solutions for Homeowners Looking to Avoid Foreclosure
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What is a short sale?

A short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers´ mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner´s commission. The seller is unwilling or unable to cover the difference.

Some - although by no means all - short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.

NOTE:  Sellers must understand that if they have assets, such as stocks or a high-salaried job, a lender is not going to let them just walk away from a short sale without signing a note to repay what they owe.

Who must be spoken to about possible short sales?

If there are a first and second mortgage or a home equity line of credit, there may be a need to talk to more than one lender to get approval for a short sale. In addition, you may also need approval from the entity that holds the pool of loans if the mortgage has been securitized.

"The presence of two lenders makes a short sale more complicated since it´s often the lender holding the second, or junior, mortgage that has to absorb most of the loss," says White, who with Gina Covello, e-Pro®, broker associate at Keller Williams Realty, Studio City, Calif., teaches a course called "The Anatomy of the Short Sale."

Opinions differ, but most experts suggest that you let the lender involved know as soon as possible of the potential short sale. Others say you should wait until you have an offer because you´ll get no action until then. "Without a viable purchase offer, your deal won´t be considered by mortgagees," says Margot Cole-Murphy, broker with RE/MAX Equity Group, Portland, Ore.

Tip: Realtors must contact the bank´s loss mitigation department, which will be the group to decide whether to accept a short sale, rather than the collection or customer service department, which is only interested in recouping past due loan payments. "Finding the decision maker is often one of the biggest initial challenges in a short sales," says Thomson.

What information will the bank need to decide whether to accept a short sale?

The sellers´ submission package should include W-2 forms from employers (or a letter explaining the seller is unemployed), bank statements, two years of tax returns, and other financial documents outlining income and debt obligations. The bank will also need comps or a broker´s price opinion showing your estimate of value.

In addition, the sellers should submit a "hardship letter," explaining the circumstances that make it impossible for them to pay the full amount of the loan. The seller needs to be able to show true financial hardship. Someone with the assets or the income to pay is unlikely to be considered, say most interviewees.

Tip: In preparing the package, be careful about discrepancies between the seller´s income and the income used to obtain the loan, cautions Lance Churchill, an attorney and instructor on short sales and REOs with FrontLine Seminars. A big gap may indicate mortgage fraud, unless employment circumstances have drastically changed.

What are the options besides a short sale?

Thanks to programs such as those proposed by Fannie Mae and Freddie Mac to assist subprime borrowers, many lenders are more willing to offer loan modification options. This option can extend the term of the loan, add on delinquent payments to the loan principal, and/or reduce the interest rate to make the loan more manageable for the home owner.

Another option is a repayment plan that requires home owners to increase their monthly payments until the loan is current, says Loni Parmelly, a real estate practitioner and consultant who specializes in short sales. Parmelly also is author of Success in Short Sales (2004), a book she sells on her Web site. It may be possible to refinance an adjustable rate loan with a Federal Housing Authority or conventional fixed loan. Note that lenders will not postpone a foreclosure just because a property is listed in the MLS, although they may postpone if a reasonable offer is in the works.

Tip: The ideal candidate for a short sale is still making loan payments and has a credit rating worth preserving. Otherwise, it may not be worth going through the complicated process, says Steve Pierce, broker and operating principal of Keller Williams Benchmark Properties, Fremont, Calif.

How should a short sale property be priced?

In general, most short sale experts say to price the property at or near fair market value, although a few will begin with the total payoff amount owned by the seller. How frequently prices are dropped will depend in part on whether the property is in preforeclosure. Most banks have a formula for what percentage under market value they will accept, say interviewees. Figures cited vary from 8 percent under to almost 20 percent under. 

It is important for buyers to understand that the bank will not give away the property..

Tip: Most lenders will want to get a broker´s price opinion or even an appraisal to see what the property is worth before you and seller set a list price. One way to help ensure that the bank´s estimate of value is realistic is to offer comps of recent sales - both traditional and REO, says Churchill, who is also the author of The Foreclosure Specialist: A Real Estate Agent´s Complete Guide on Working in the Foreclosure Market (Valco Press, 2007).

"Practitioners who do BPOs are rated in part on how close their estimates are to the final sale price, so they usually welcome information on legitimate comps," he says.

How is a short-sale property disclosed to prospective buyers?

Opinions vary on this topic, although most experts favor disclosing that a property is a short sale in the comments section of the MLS listing. Others suggest waiting to disclose the need for lender approval of the sale until a buyer is ready to make an offer.

Tip: Watch out for unethical investors who will try to convice an owner facing foreclosure to sign a quit-claim deed for the property, and then lease the property, warns Jim Cacioppo, broker/owner of Grand Realty Group. Grayslake, Ill. In such cases, the former owners will still be liable for the mortgage payments, even though they no longer own the house.

How long does it take to complete a short sale?

Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. That´s why it´s critical that buyers and their representative understand and accept that time frame before they make an offer.

An addendum to the California Association of REALTORS® purchase contract includes a provision allowing either party to cancel a short-sale contract within a set period if the seller hasn´t gotten the deal approved, says White. Properties with securitized loans (which are the majority these days) may require a longer time to get an approval of a short sale because of the possible need for approval from the entity holding the pool of securities, says Churchill.

Tip: Keep in mind that the purchase contract on a short-sale property is a legally binding agreement once the earnest money has been deposited. Without language in the contract stating that the lenders must approve the offer and release all liens on the property, the seller may face a legal problem for failing to execute the contract if the short sale is not approved, says Hollingsworth.

What can a seller do to make a short sale more attractive to a lender?

Getting a lender to approve a short sale is primarily a question of economics. You have to provide hard numbers to show that the amount of money a bank will realize on the short sale is better than the amount it may recoup from foreclosing on the property and selling the property as an REO, says Todd Ruckle, ABR, RE/MAX Associates Inc., Newark, Del.

A 2002 study by Craig Focardi of the Tower Group estimated that the entire cost of a foreclosure was $58,759 and took 18 months. Other factors that can influence a bank´s decision include the liability risk it assumes by owning the property after foreclosures, the money tied up during the holding period for a foreclosure and REO resale, additional costs associated with an REO such as attorneys´ fees, and the additional reserves it will need if REOs rise in the bank´s portfolio.

Tip: A buyer that is willing to close in 30 days and who can make a substantial down payment may make the deal more attractive than a buyer who wants 95 percent financing, notes Michael Termine, GRI, CRB, associate broker, Prudential Rand Realty, New York City. All buyers should be preapproved for a mortgage before submitting the offer.

However, to avoid unnecessary costs, buyers should wait on having a home inspection and an appraisal for the loan until after the bank has accepted the short sale proposition, say Cole-Murphy. Genuine hardship, such as a lost job or high medical bills from an illness may also have an influence, says Covello.

What are the seller´s options if a short sale is rejected by the lender?

There are a variety of reasons a bank will reject a short sale - from too low a price to too many files on the loss mitigator´s desk. You can look for another buyer or even try resubmitting the same contract. "Banks don´t want to take properties back in foreclosure, so they are going to do everything they can to make it work," says Pierce. A seller needs to be prepared in advance for the possibility of foreclosure if a short sale fails, says Parmelly.

Tip: A short sale might be rejected if the loan is less than a year old. In such cases, the servicer that´s bought the loan can often require the original lender to buy it back, says Hollingsworth.

What financial or credit liabilities will a seller have as a result of a short sale?

Many lenders ask sellers to sign a promissory note for all or part of the difference between the proceeds of the short sale and the debt obligation as a condition to a short sale. In such cases, the note gives lenders the right to sue a seller and attach other assets if the note is not paid when due.

It´s particularly important to understand this distinction if you work in states such as California that have a nonrecourse mortgage, says Churchill. In such states, the lender cannot pursue a deficiency judgment against a seller for any deficiencies after a property is foreclosed. Because of this distinction, sellers who are already in default on a mortgage and do not have the resources to pay off a separate promissory note after a short sale might be better off letting the lender foreclose, he says. If you are working in a state in which mortgage loans are nonrecourse,  seller-clients should be aware of this distinction.

Tip: Having a portion of a loan forgiven may have an adverse affect on the seller´s credit. Encourage your client to try and sign a lease on an apartment before credit is further damaged, suggests Roberta Murphy, an associate broker with Windermere Exclusive Properties, San Diego.

What tax liabilities will a seller have as a result of a short sale?

One often overlooked aspect of short sales is that a seller must count any amount forgiven by the lender as income and pay taxes on that income, even if no actual money was received. The IRS requires lenders to submit a Form 1099 stating the forgiven amount. Sellers who meet the Internal Revenue Service definition of insolvency (either in bankruptcy or with debts exceeding assets) will not have to pay taxes on the forgiven amount.

Tip: The U.S. House of Representatives has introduced the Mortgage Cancellation Tax Relief Act (H.R. 1876), which would eliminate taxes on any debt forgiven on a principal residence through either short sale or foreclosure. The NATIONAL ASSOCIATION OF REALTORS® has been working to support this bill.


Avoiding Foreclosure
 
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Another Article on Short Sales:

What is a Short Sale?
A short sale, defined as an "agreement" to allow a home to be sold for less than the amount that is owed, can be a helpful compromise for everyone involved. For debt-ridden homeowners or those who owe more than the house is currently worth, a short sale could save them some of the enormous pain, embarrassment, and major credit challenges associated with bankruptcy and/or foreclosure. For lenders, it helps avoid some of the hassle and expense of seizing and auctioning off delinquent real estate. Lastly, for potential homebuyers and real estate investors, a short sale offers a great opportunity to purchase property at a significant discount in today's tight-fisted credit environment.

And, while short sales are not by any means common or easy, inventory levels of unsold homes are now exceeding a 36-month supply in some parts of the country. Add to that the increasing number of foreclosures, and lenders are much more eager to negotiate with borrowers who are having trouble paying their mortgages.

Short Sale Requirements
It's important to note that short sales occur at the sole discretion of the existing lender or servicing company. This is not like negotiating the price of a home under normal circumstances. Would-be buyers need to accept and understand this concept completely prior to entering into any purchase agreement on a short sale transaction. While a buyer and seller may come to some sort of agreement on their own, the lender in a short sale will ultimately have final approval of this legally-binding arrangement.

Remember, lenders are not looking to bail out borrowers who simply overextended themselves during the recent real estate boom. In most cases, a lender will only consider a short sale if a borrower has clearly suffered a serious financial hardship that directly caused him or her to default on the mortgage. This means the loss of a job, a serious illness, or the death of a loved one ? something devastating and "unforeseen" that can justify such a state of financial disrepair. If you're a "flipper" with 2 or 3 homes that you weren't able to unload before the market turned, or if you have other assets or income that could easily cover your mortgage debt, it's not likely that a lender will accept a short sale proposal.

A written declaration and supporting documentation demonstrating financial hardship and an inability to make payments will definitely be required by the lender in order to even consider a short sale. This may include pay stubs, tax returns, and liquid asset statements ? including those for retirement accounts ? among other documentation. In addition, the borrower must be at least 91-days delinquent before a lender will even discuss a short sale.

In some cases, the lender's hands may be tied, depending on how the borrower's loan was sold into the open market through mortgage-backed securities. If the mortgage in question was not sold by the lender, but rather retained in its own portfolio, the lender may have more flexibility. However, don't expect a lot of help from the lender without first providing a sales contract from a qualified buyer and all the information required by the lender's loss mitigation department. This is where an experienced real estate professional becomes invaluable to your cause. A good real estate agent has not only successfully negotiated short sales in the past, he or she will also have access to qualified investors who are well-versed in the substantial risk and reward involved in this extremely complex and often drawn out process.

Important Additional Considerations:

  • The lender will likely issue a 1099 to the seller for the difference between what is owed and the final amount the lender collects after the costs of the sale, including real estate commissions and possibly other charges. This means that the "deficiency" (the difference between the short sale price and the original loan amount) can be considered as taxable income to the borrower. Some lenders may even attempt to get the existing homeowner to sign a note for the remaining amount due.

  • If there are currently multiple liens against the property, all lien holders will have to be involved in the negotiation process, not just the first lien holder. Therefore, communication and patience are essential components of any short sale.

  • There is no guarantee of success. With several parties involved, it's difficult to please all sides all of the time. Short sales require expert advisors who know precisely what is to happen at every stage.

  • A number of scams resembling short sales currently exist and, because of the obvious intensity of emotion involved with this process, borrowers can quickly become vulnerable to new scams.

In other words, be proactive. If you have an ARM that is scheduled to reset in the near future, or if you're facing foreclosure because of unexpected life events, don't wait until a short sale is your last viable option ? and don't count on the Fed to "bail out" the real estate market any time soon.

Contact the professional who provides you with your subscription to YOU Magazine and get the latest information you need. A short sale may represent your best opportunity to avoid foreclosure or to get a great deal on your next home or investment property.



Four Common Solutions for Homeowners Looking to Avoid Foreclosure

Posted By Paige On December 18, 2007 @ 3:20 pm In Home Buying 101, Consumer News and Advice | Comments Disabled

RISMEDIA, Dec. 19, 2007-The recent agreement by federal regulators and mortgage lenders to freeze interest rates for five years on certain subprime, adjustable rate mortgage loans is intended to help many homeowners avoid foreclosure.

However, for homeowners who have missed mortgage payments and may not qualify for the program, working with a credit counseling agency will allow them to explore alternatives to foreclosure, more commonly known as "workout solutions."

"The agreement announced in early December is an effort to help people with adjustable rate loans stay in their homes," said Suzanne Boas, president of Consumer Credit Counseling Service of Greater Atlanta, Inc. "However, most of the people who are turning to us for help are currently delinquent on their loans, having missed payments for a variety of reasons, ranging from reduced income to large medical expenses. We are working every day to find ways to help these families stay in their homes, too."

Under the agreement announced Dec. 6, borrowers with interest rates scheduled to adjust between January 2008 and July 2010, who are no more than 60 days late and would be unable to afford their new mortgage payments can have their rates frozen for five years.

At CCCS of Greater Atlanta, Inc., certified housing counselors work with homeowners to analyze their current financial situation, communicate with their mortgage lender and outline a variety of options that may allow them to keep their home. If the homeowner has the desire to stay in their home, there are four common plans that CCCS counselors typically explore with their lenders.

Here are four recommended options:

Repayment Plan - This is the most common workout plan for any household that is 1-3 months delinquent on their mortgage payment.

Under this scenario, a homeowner sends in their normal payment plus an additional amount each month that is agreed upon by the mortgage lender. Repayment terms typically span from 3-24 months and the terms of the loan are not changed.

Loan Modification - A loan modification is a written agreement between the servicer and homeowner that changes one or more of the original loan terms, such as the interest rate, term of the loan or type of mortgage.

Under a loan modification, the monthly payment often is not reduced, though the interest rate usually will not "reset" to a higher rate or will be rolled back to the initial rate. This can be a solution for a family with an adjustable rate loan where the rate has recently increased, or is about to increase.

Forbearance - A forbearance is similar to a repayment plan, but this agreement usually applies to people who have experienced a major financial setback, such as one-time medical expenses or a temporary loss of income. The borrower must be able to prove that they have a new job or a new source of income to resume making their regular monthly payments in the future

A forbearance allows the homeowner to send in no payment or a reduced payment for a collected during the plan by either doing a reinstatement, a repayment plan, or a loan modification.

Partial Claim (FHA) - In effect, this is a second loan for anyone with a loan guaranteed by the Federal Housing Administration (FHA). The mortgage loan is brought up to date by securing up to 12 months of past due principle, interest, taxes and insurance in a separate, interest free note that is payable when the original mortgage is paid off.

To qualify, a homeowner must be at least 4 months delinquent on their mortgage loan, but no more than 12 months. The new loan enables them to pay off the amount they are "in arrears" and immediately brings their mortgage loan up to date. There are no extra payments or extra interest. A lien is placed on the home and the amount needed to make the loan current is deducted when the home is sold.

For more information, visit [1] http://www.cccsinc.org.

Article printed from RISMedia: http://rismedia.com