Ways to Avoid Foreclosure

We came across this interesting piece that discusses options to avoid foreclosure. It's a great summary of your options when faced with the hardship of foreclosure. If a short sale is an option you'd like to explore, please don't hesitate to call or email. We've completed many successful short sales and are more than happy to try to help you!

Source: ELocal.com

Fabulous Foreclosure Deals!

Incredible Foreclosure Deals!

This market is something crazy! Sometimes I come across deals that absolutely blow my mind! I'm not sure whether to be more suprised by today's market or the crazy market that existed prior to the bubble burst in 2007. Take the house above for example:

355 Vista Creek Drive in Monarch Village (Stockbridge, GA) - it is approximately 2413 square feet with 4 bedrooms and 2 full bathrooms. It has a spacious kitchen with breakfast area, formal dining room, family room, plus a sunroom and a privacy fenced backyard! It previously sold for:

• 2002: $191,900
• 2005: $189,999
• 2007: $197,500

It is now on the market as a Fannie Mae foreclosure for $106,900! Now, I know your first thought would be that it's a foreclosure and probably in horrible condition - but it's not. I've shown the home and from what the naked eye can see, it needs a good cleaning, paint and carpet. Here are some interior photos:

If you're looking for a fabulous foreclosure at a great price, let us help you! This isn't the only great deal out there -- there's plenty. You just need a great agent to help you locate them!

Short Sale vs. Foreclosure - 10 Myths Busted

It's likely you've heard the term "short sale" thrown around quite a bit. But what, exactly, is a short sale?


A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.

To be eligible for a short sale you first have to qualify!

To qualify for a short sale:

■ Your house must be worth less than you owe on it.

■ You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc... also qualify.

Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. We take the most common myths surrounding both short sales and foreclosures and give a brief explanation. LET'S BUST SOME MYTHS!!

1.) If you let your home go to foreclosure you are done with the situation and you can walk away with a clean slate. The reality is that this couldn't be any farther from the truth in most situations. You could end up with an IRS tax liability and still owing the bank money. Let me explain. Please keep in mind that if your property does go into foreclosure you may be liable for the difference of what is owed on the property versus what is sells for at auction, in the form of a deficiency balance! Please note this is state specific and in most states you will be liable for the shortfall, but in some states the bank may not always be able to pursue the debt. Check your state law as it varies widely from state to state.

Here is an example of how a deficiency balance works

If you owe $200,000 on the property and it sells at auction for $150,000, you could be liable for the $50,000 difference if your state law allows it.

Not only could you be liable for the difference to the bank, but in some situations you could also be liable to the IRS! Although there are exemptions (mostly for principle residences) under the Mortgage Debt Forgiveness Act, there are times when you could be taxed on both a short sale and a foreclosure, even in a principle residence situation. Since the tax code on this is a little complicated and I am not a CPA, I advise always talking to a CPA when in this situation as you are weighing your options. Hard to believe? Well, believe it or not, the IRS counts the difference between the sale and the charged off debt as a “gain” on your taxes. That’s right-you lost money and it’s counted as a gain! (I didn’t make that rule, that's a wonderful brainchild of the IRS). Banks and the IRS can go as far as attaching your wages. Not to mention if you let your home go to foreclosure you will have that on your credit, as well.

Guess What? A short sale can alleviate your liability to the bank, in most situations. There are also exceptions to this, but in most cases banks are releasing homeowners from the deficiency balance on a short sale.

2.) There are no options to avoid foreclosure. Now more than ever, there are options to avoid foreclosure. Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option. Either way, there are more options today than there have ever been to avoid foreclosure.

3.) Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale. Banks would rather perform a short sale than a foreclosure any day. A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money. Banks have more foreclosure inventory than ever before, and certainly do not want any more. Banks more than ever welcome short sales. Qualifying for a short sale is easier than you think, you need to have a true financial hardship, or a change in your finances and your house has to be worth less than what you owe on it. Not only do consumers, but banks also now have government incentive to participate in short sales.

4.) Short sales are not that common. At this present time, short sales range from 10-50 % of sales in various markets and it is predicted that in 2012 we will have more short sales than any other year, to date. Due to economic changes in the last few years, this is something that is affecting millions of Americans. Short sales are in every market, and are not just limited to any particular income class. This has affected everyone from all facets of life. A short sale should be looked at as a helpful tool, not a negative stigma. That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.

5.) The short sale process is too difficult and they often get denied. Though the short sale process is time consuming; it is not as difficult as the media would have you believe. The problem is that most short sales are denied because of a misunderstanding of the process. It is true that if the short sale process is not followed correctly there is a good chance of getting denied. An experienced agent knows how to avoid this. Short sales require a lot of experience, and a special skill set. If you are looking to go the option of a short sale make sure your agent is skilled and experienced in this area.

6.) Short sales will cost me money out of pocket. A short sale should not cost you any out of pocket money. In fact, you could get between $3000-up to $30,000 to participate in a short sale. In many ways, a short sale may put you in a better financial position than prior to the short sale. Almost every short sale program now has some type of financial incentive for the home owner, as long as it is a principle residence, and we are even seeing relocation money being paid on some investment/second homes. As a seller of a property you should never have to pay for any short sale cost upfront to any professional service. Realtors charge a commission that is paid for by the bank. In most communities there are also non-profits and HUD counselors who can help you with foreclosure prevention options for free. The only potential cost you could incur is if the bank would not release you from a deficiency balance in the short sale, which is happening less and less now.

7.) If I am behind on my payments, I can perform a short sale any time. The farther you get behind on your payments, the harder it is to get a short sale approved. The closer a property gets to a foreclosure the harder it is to convince the bank to perform a short sale. As they get closer to a foreclosure sale more money is spent, thus deterring them from doing a short sale. If you think you need to perform a short sale, time is of the essence; the sooner you start the process, the better. Waiting too long can trigger the ramifications of a foreclosure, losing the ability to do a short sale as a viable option.

8.) I have already been sent a foreclosure notice so I can't perform a short sale. For the most part just because you received a foreclosure notice or notice of default it does not mean that you do not have time to perform a short sale. The timeline and specifics do vary from state to state, but having done short sales all over the country, I have seen banks postpone a foreclosure to work a short sale option as close as 30 days prior to the scheduled foreclosure auction, but the longer you wait the less chance you have. If you have received a legal foreclosure notice, please reach out to a professional right away. The longer you wait, and the closer you get to foreclosure, the fewer options you have. If you have received a notice to foreclose this means the bank is filing paperwork and starting the process to take legal action to repossess the house. You still have time at this point to prevent foreclosure, but do not hesitate! The closer you get to the foreclosure date the harder it becomes to negotiate with the bank for whichever option you choose.

9.) I was denied for a loan modification, so I know I will get denied for a short sale. Short sales and loan modifications are handled by two separate departments at the bank. These processes are totally different in approval and denial. If you got denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification, as some loan modifications are denied because they cannot reduce the loan low enough based on the consumers income.

10.) If I go through a short sale I cannot buy another house for a long time. The time to buy another house depends on your entire credit picture and can vary from 12-24 months. There are even a few FHA programs that allow for a purchase sooner than that. I have worked with clients who went through a short sale and bought another house in less than 12 months.

These are just a few of the common myths surrounding short sales and foreclosure. With the options available today, no homeowner should ever have to go through foreclosure, and hopefully this information can help a few more homeowners think twice before walking away from their home not realizing the possible long term ramifications a foreclosure can have.

Rebekah and I understand short sales and foreclosures. If you need personal guidance, or you're looking into buying either a foreclosure or short sale, don't hesitate to call, email, or text to discuss your options.



Source: KCM Blog - Steve Harney

Four Foreclosure Myths for 2012

Carl Medford, a Realtor with Prudential California Realty, recently wrote a blog addressing myths and rumors about foreclosures and bank owned properties. I love what he had to say and thought it was great information to pass along. Here are four myths regarding foreclosures:



1. You can go directly to a bank to buy a foreclosure.

Every few weeks I’m asked how to buy foreclosures direct from a bank. Someone knows a friend being foreclosed on and they want to step in and grab the house before it hits the market. Don’t we all? In reality, banks have a simple system – they first offer properties on the courthouse steps. The rest they assign to asset mangers who then hire local real estate agents to put them on the market along with all the other homes. Want an REO? Pay cash at the courthouse steps or get in line witheveryone else when they hit the local MLS (Multiple Listing Service).

2. You can get a killer deal by submitting lowball offers on foreclosures.

You would think this myth would be dead by now. Unfortunately, like Elvis sightings, it just won’t go away. Here’s the truth: Banks want REOs sold in 30 days or less, so they typically appear on the market priced slightly under comparable properties. If the property doesn’t sell quickly, the bank will lower the price after about 30 days. Lowball offers are ignored and are, quite frankly, a waste of everyone’s time and effort. You might get a deal by offering a lower price on a foreclosure that’s been sitting on the market for more than 90 days, but remember that there are good reasons it’s gone unsold for so long. And even if you have cash, your lowball offer won’t be accepted —seriously.

3. You can’t use foreclosures when doing an appraisal.

Or short sales, for that matter. That is no longer true. In fact, in many neighborhoods, that’s all that’s there. Therefore, foreclosed or distressed sales represent the actual value of homes in the area and HAVE to be used to appraise other properties. Don’t like it? Get over it. Times have changed and the ways neighborhoods are valued have changed as well.

4. Foreclosures are only affecting the bottom end of the market.

This used to be true. However, while foreclosure rates on the lower end of the market have actually decreased, they’re actually increasing on the upper end. According to Daren Blomquist, vice president of RealtyTrac, the market share of foreclosed homes under $1 million is shrinking, but those among properties valued over $1 million are rising – up 115% since 2007. And foreclosures on properties valued upwards of $2 million have increased by 273%. While some well-known jet-setters have melted down and lost everything, others are choosing to strategically default. They see it like liquidating a poorly performing portfolio – they have enough resources to cut their losses and move on. Historically, banks have been reticent to foreclose high-end homes and absorb a large loss, but defaulters are now forcing their hands and mansion foreclosure rates are moving on up.

Myths control behavior, and this has never been truer than in the housing market. Savvy agents will work hard to educate their clients, debunk myths, explain market trends, educate with solid facts – and actually close transactions