Another Great Reason To Live In Idaho

Another great reason to live in Idaho. Boise State Broncos 2010 BSC Champions.. Today our beloved Broncos start their march towards the top-BSU 20 VT 17.  As a native Idahoan I have had the opportunity to grow up with what used to be a state college with  blue turf and tail gaiters. Over the years that team has become bigger than that  blue  turf and the tail gaiters have become BRONCO NATION!  Enjoy the video highlights.

Mortgage Rate Even Lower

Those of you looking to purchase a home here in Idaho mortgage rate even lower now…. If you are waiting for the bottom of the market I feel that we are scraping it about now barring giving away homes it is getting awfully tempting make a splash in this home market. Now there is always going to be winners and losers but now with so many Idaho short sales and Idaho REO’s (bank owned) properties there is a very good opportunity to come out ahead. Investors are picking up properties for pennies on the dollar, first time home buyer’s are jumping into some great homes in desirable areas while people that can sell with some equity are having the chance of a lifetime to get their “it” home the one they have always dreamed of. For Help in Boise,Eagle,Meridian,Nampa,Caldwell,Star,Middleton,Kuna call Josh 208-353-7131

Mortgage rates have hit a new record low for the 10th time in 11 weeks as investors continue to turn to Treasury bonds as a safe haven; the shift in money is cutting yields, which mortgage rates tend to follow.

Freddie Mac reports that 30-year fixed loans averaged 4.32 percent, down from 4.36 percent a week ago; and the 15-year fixed rate fell to a new low of 3.83 percent, down from 3.86 percent.

These rates are outstanding now combine that with low home prices: BUYERS BEWARE YOU MAY JUST FIND THE HOME YOU HAVE BEEN WAITING FOR!

Joshua Groesbeck or josh@homeswithjosh.com and of course 208-353-7131

Idaho Short Sale Agent For You

Our First Response Team Is Here For You. New programs are being implemented Now! Advocate that is specially trained to help you sell your home for short of what is owed. Stop Foreclosure and stay in your home longer at no cost to you.  Hardship comes in many different forms.. Divorce, loss of income, untimely death and oh by the way HOME WORTH LESS THAN OWED. Our goal is to help you find the best solution whether that is a modification, short sale or died in lieu…

Goal:  Avoiding Foreclosure

The following are the steps that you as a homeowner can anticipate in the short sale process.  This is a general outline of how the process occurs, however please note that lien holders can change the order of some of the steps.  Detailed below is the process our team uses to process a short sale.  For a brief overview please see. www.homeswithjosh.com and look under Short Sales or Call 1-800-290-1076 Ext#3000

Pre-Listing

1.
Please contact Josh’s office for a brief consultation about short sales.  Josh or one of his team members will collect some basic information about your situation.
2.
A tentative appointment will be scheduled to answer questions and/or list the home for sale in the short sale process.
3.
Josh and his team will prepare a short sale packet which will be sent to you either via FEDEX, regular mail or email.  We provide a thorough packet of information in advance of the appointment so you have the opportunity to evaluate our process and have your questions answered in advance.  If what we send you and what we discuss prior to the appointment makes sense and you feel comfortable and confident to go forward with the short sale process, our appointment will be confirmed. The packet will include:
*
Information about the short sale process.
*
Market data on the value of your home in today’s market.
*
Recommended short sale pricing.
*
Listing contract and related forms.
*
Property detail report from the county assessor’s office.
4.
The appointment.  Josh will either come to your house to receive the documents or they can be returned via fax or email. We can do listing appointments via telephone or email if necessary.
5.
Once we receive a signed listing agreement we will begin the short sale process.
6.
An authorization form will be submitted to your lien holder(s) enabling us to speak to them on your behalf.  Unless previously provided, the lien holder(s) will provide their short sale requirements when the authorization is received.

Marketing

1.
Your home will be listed immediately on the Multiple Listing Service.
2.
We will market your home through various affiliated web sites and all other applicable marketing strategies.
3.
During the marketing period we will receive offers and present them to you as they are received.
*
Offers will be presented to you on an offers spread sheet.
*
You will be able to see the net offers as they come in.  We highlight, in yellow, the current highest net offer.
*
You will sign the purchase offer of your choosing.  We will advise you as to what appears to be the strongest offer.  We will encourage you to consider two important factors; price and the willingness of the buyer to wait for the short sale process to complete rather than back out in the middle of the process.
4.
You will select and sign the offer that is most likely to meet the lien holder(s) criteria for a short pay off of your loan.

Short Sale Processing

1.
After you select an offer it will be signed by you and presented to your lien holder(s).  This is the official beginning of the short sale processing phase.
2.
You can track your short sale offer, as it is processed, online at Short Sale Status.
3.
The offer and all documentation required by the lien holder(s) is submitted by our office to the lien holder(s).
4.
Documents go through a processing period and are assigned to a negotiator.  The lien holder(s) assign a negotiator to your file.  The negotiator will ultimately make the final decision about your case.  The negotiator will review your offer and present the offer to any investors into your loan.
5.
A BPO (Broker’s Price Opinion) or appraisal will be ordered by the negotiator.  This BPO is used to determine the value of your home and whether or not the net proceeds of the offer are sufficient to satisfy the investors and thus provide a short pay off of the loan(s).
6.
The negotiator will evaluate your financial situation to determine whether or not you qualify for a short sale.  The offer will be presented to the investors who are invested into your loan.  They will decide if your short sale is approved or not.
7.
The negotiator will report the response of the investors.  There will be one of three options:  Short Sale Approval, Short Sale Approval with Conditions or Denial.  If any other answer then Short Sale Approval is provided we will negotiate further on your behalf.
8.
After all negotiations are complete you will either accept or reject the terms of the short sale.
9.
Written short sale notification is delivered to the buyer’s agent and Escrow begins.

Escrow

1.
Escrows in short sales generally follow the same process as a regular escrow.  One difference is that the short sale approval has a “good through” date by which time the short sale must be finalized and escrow must be closed.
2. When escrow begins you will need to make plans to be moved out of the house by the close of escrow.

Josh Groesbeck

208-353-7131 or josh@homeswithjosh.com

Idaho Short Sale Process

Goal:  Avoiding Foreclosure

The following are the steps that you as a homeowner can anticipate in the short sale process.  This is a general outline of how the process occurs, however please note that lien holders can change the order of some of the steps.  Detailed below is the process our team uses to process a short sale.  For a brief overview please see. www.homeswithjosh.com and look under Short Sales

Pre-Listing

1.
Please contact Josh’s office for a brief consultation about short sales.  Josh or one of his team members will collect some basic information about your situation.
2.
A tentative appointment will be scheduled to answer questions and/or list the home for sale in the short sale process.
3.
Josh and his team will prepare a short sale packet which will be sent to you either via FEDEX, regular mail or email.  We provide a thorough packet of information in advance of the appointment so you have the opportunity to evaluate our process and have your questions answered in advance.  If what we send you and what we discuss prior to the appointment makes sense and you feel comfortable and confident to go forward with the short sale process, our appointment will be confirmed. The packet will include:
*
Information about the short sale process.
*
Market data on the value of your home in today’s market.
*
Recommended short sale pricing.
*
Listing contract and related forms.
*
Property detail report from the county assessor’s office.
4.
The appointment.  Josh will either come to your house to receive the documents or they can be returned via fax or email. We can do listing appointments via telephone or email if necessary.
5.
Once we receive a signed listing agreement we will begin the short sale process.
6.
An authorization form will be submitted to your lien holder(s) enabling us to speak to them on your behalf.  Unless previously provided, the lien holder(s) will provide their short sale requirements when the authorization is received.

Marketing

1.
Your home will be listed immediately on the Multiple Listing Service.
2.
We will market your home through various affiliated web sites and all other applicable marketing strategies.
3.
During the marketing period we will receive offers and present them to you as they are received.
*
Offers will be presented to you on an offers spread sheet.
*
You will be able to see the net offers as they come in.  We highlight, in yellow, the current highest net offer.
*
You will sign the purchase offer of your choosing.  We will advise you as to what appears to be the strongest offer.  We will encourage you to consider two important factors; price and the willingness of the buyer to wait for the short sale process to complete rather than back out in the middle of the process.
4.
You will select and sign the offer that is most likely to meet the lien holder(s) criteria for a short pay off of your loan.

Short Sale Processing

1.
After you select an offer it will be signed by you and presented to your lien holder(s).  This is the official beginning of the short sale processing phase.
2.
You can track your short sale offer, as it is processed, online at Short Sale Status.
3.
The offer and all documentation required by the lien holder(s) is submitted by our office to the lien holder(s).
4.
Documents go through a processing period and are assigned to a negotiator.  The lien holder(s) assign a negotiator to your file.  The negotiator will ultimately make the final decision about your case.  The negotiator will review your offer and present the offer to any investors into your loan.
5.
A BPO (Broker’s Price Opinion) or appraisal will be ordered by the negotiator.  This BPO is used to determine the value of your home and whether or not the net proceeds of the offer are sufficient to satisfy the investors and thus provide a short pay off of the loan(s).
6.
The negotiator will evaluate your financial situation to determine whether or not you qualify for a short sale.  The offer will be presented to the investors who are invested into your loan.  They will decide if your short sale is approved or not.
7.
The negotiator will report the response of the investors.  There will be one of three options:  Short Sale Approval, Short Sale Approval with Conditions or Denial.  If any other answer then Short Sale Approval is provided we will negotiate further on your behalf.
8.
After all negotiations are complete you will either accept or reject the terms of the short sale.
9.
Written short sale notification is delivered to the buyer’s agent and Escrow begins.

Escrow

1.
Escrows in short sales generally follow the same process as a regular escrow.  One difference is that the short sale approval has a “good through” date by which time the short sale must be finalized and escrow must be closed.
2. When escrow begins you will need to make plans to be moved out of the house by the close of escrow.

Josh Groesbeck

208-353-7131 or josh@homeswithjosh.com

Avoiding Foreclosure In Idaho

I have posted a very helpful video to my website www.homeswithjosh.com for those of you who are having trouble making your house payment. Find out how you may qualify for the Making Home Affordable Program and what to consider if you do not.  Avoiding Foreclosure In Idaho Is Your Goal!

After watching the video please feel free to post questions that you may have.

It is not uncommon to think that while you may be having problems making your payment, the future will be different. Isn’t that the idea many shared with the adjustable mortgage loan? I am making $40,000 this year but in the next year or two I should be making $55,000 a year. The downturn in the economy has burst the bubble for millions who expect the best but in turn get what exists in “Today’s Economy”.  Don’t get me wrong we all want the best but I am trying to remember the last report about  the average worker getting the “Big Bonus” or “Generous Unexpected Raise”-

I was talking to a wise man the other day and he said “Josh, don’t we always want things we can’t afford? It seems to me that when I suddenly can afford those things, I no longer want them. Does that make me crazy?” I paused for minute and thought this guy probably has money for a rainy day and isn’t that what we all truly want??  I am willing to bet that he is not trying to figure out whether or not his house payment alone is eating up 31% of his gross pay and then what does that leave him to pay utilities, credit cards, car payment, student loans, entertainment, etc… And finally will his bank help  him modify a loan payment enough (?)  And/OR wipe the principle down to market value (?)   Probably not-

I encourage all of you who may be having a problem making the house payment to first look at all of your options to avoid foreclosure- If you want to and can get your home loan modified-Awesome- But if you can’t and need assistance please call– I have been specializing in Short Sale Properties before and after the housing boom- A Full-Time specialist with the knowledge and systems to help you!

By applying at www.IDshortsale.com you can count on a fast response with options to AVOID FORECLOSURE

Always feel free to call direct 208-353-7131 or josh@homeswithjosh.com

Short Sale Tip When BK Involved

Short Sale Tip: When a BK is involved, file for abandonment ASAP. In Idaho, it takes about 3 weeks to complete and then the short sale may proceed regardless if it was a Chapter 7 or 13 bankruptcy filed.

source:titleonecorp

HAFA Guideline Update

As we expected, the HAFA Guidelines are being improved…

Translation: HAFA = Streamlined, fast close- Help for troubled home owners

Here is an update from DSNews.com

The Treasury is also bumping up payouts for short sales and deeds-in-lieu under its Home Affordable Foreclosure Alternatives (HAFA) program set to take effect April 1. Servicer incentives for each short sale or deed-in-lieu have been raised from $1,000 to $1,500.

There is also a new second lien payoff schedule that allows servicers to increase the amount paid to subordinate lien holders who agree to extinguish the borrower’s secondary loan when a short sale or deed-in-lieu is reached on the first mortgage. Second lien holders will receive up to 6 percent of the outstanding loan balance, double the previous 3 percent cap. In addition, the incentive reimbursement available to investors for subordinate lien payoffs has doubled from $1,000 to $2,000.

Agents, this is huge. When HAFA was first announced we were all a little skeptical because there wasn’t any real financial incentive for the second mortgage lien holders. Now, with this recent revision…the seconds will certainly want to participate. Remember, if the home goes into foreclosure 99% of the time the seconds are wiped out….so, now they can actually recoup part of their investment.

Relocation assistance payments to homeowners who receive a short sale or deed-in-lieu have also doubled, to $3,000.

That revision was also expected..be sure to make it clear to you potential Short Sale sellers…they can now receive UP TO $3,000 to do a short sale (or DIL). If any of you aren’t 100% convinced that lenders (and the government) have made 2010 the year of the short sale the fact that sellers/ borrowers are literally being PAOD to do a short sale should convince you!

All these program enhancements come on the heels of new consumer protections that the Treasury announced this week would be incorporated into HAMP on June 1, including requiring servicers to evaluate all borrowers who’ve missed at least two payments and prohibiting foreclosure proceedings until it’s determined borrowers are HAMP-ineligible.

The Treasury noted in its policy FAQs that it will take time to get these new initiatives up and running. Some pieces, such as increased payments for short sales and deeds-in-lieu, will be put in place in the coming weeks, with the full set of new program initiatives available by fall.

Officials said no additional taxpayer dollars will be needed for the new program enhancements or the increase in incentive payments. It will all be fully funded through the Troubled Asset Relief Program (TARP), more specifically, with the $50 billion in TARP funds that has already been set aside for HAMP.

According to Diana Farrell, deputy director of the National Economic Council, with the add-ons announced Friday, the program will stem enough foreclosures to meet the president’s target of helping 3 to 4 million struggling homeowners through modifications, refinanced loans, and foreclosure alternatives.

NOTE: Most predictions expect there to be upwards to 15,000,000 foreclosures….so, best case if this program hit President Obama’s goal of ’saving 3-4 million from foreclosure’ its quit literally…a small drop in the bucket. Its going to be a long time before we actually see any sort of market recovery.

Farrell concedes that it’s not enough to avert foreclosure for all, with foreclosure risk estimates now climbing to 10 to 11 million, but it’s significant enough to “have a real material impact on the marketplace,” she told reporters.

“The purpose here is to deal with just enough of the overhang … to provide real help to those people for whom we believe foreclosure is preventable and not just kicking the can forward,” Farrell said.

IF YOU ARE FACING FORECLOSURE OR YOUR HOME IS WORTH LESS THAN WHAT IS OWED DON’T DELAY THIS PROBLEM IS NOT GOING AWAY ANYTIME SOON- YOU DO HAVE ALTERNATIVES TO FORECLOSURE AND WE CAN HELP!

Joshua Groesbeck 208-353-7131 or josh@homeswithjosh.com

Latest information about the real estate market www.homeswithjosh.com

If you have already missed payments or the writing is on the wall apply for your foreclosure alternatives at www.idshortsale.com

Don’t Foreclose Do A Short Sale

Don’t foreclose! Do a short sale

Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.
“Banks have ramped up short sale approvals,” said Duane Legate of House Buyer Network, which connects short sellers with buyers. “They’re hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales.”
These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.
And Bank of America (BAC, Fortune 500), the country’s largest mortgage servicer, has more than doubled the number of short sales it processed in recent months.
Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. “Bank of America approved it in 24 days,” she said. “That flipped me out.”
This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.
“In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete,” said Chris Saitta, CEO of Equator, which produces short sale software.
“Things would just fall into a black hole and not come out again,” added Weintraub.
And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.
In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there’s usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.
But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. “The lenders lose 50% on a foreclosure and only 30% on a short sale,” said Glenn Kelman, founder of the real estate Web site Redfin. “And short sales offer a way to get distressed properties off their books quickly.”
And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.
Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and servicers will get $1,500 for handling a short sale.
The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.
Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.
Equator’s Saiita anticipates a short sale explosion in response to the new program. “The challenge will be handling all the volume,” he said.
The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.
The boom in short sales may accelerate the end to the  foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.
Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.

For more information about the Short Sale process visit www.homeswithjosh.com or call Josh Groesbeck direct 208-353-7131 and josh@homeswithjosh.com

Apply for Short Sale at www.idshortsale.com

Year Of The Short Sale 2010

Reasons why 2010 may be the Year Of The Short Sale-  Please read below and I hope this answers some of your questions about how you may qualify and what to expect. Of course feel free to call Josh Groesbeck 208-353-7131 or josh@homeswithjosh.com

Short sales – when a lender sells a property for less than the full amount owed on the mortgage – are notorious for being long and painful. Some realtors even refuse to touch short sales because of the uncertainty involved. In spite of the growing backlog of distressed homes, banks have been taking up to several months to respond to short sale  offers, often because they lack the staffing and know-how to process such sales faster. That is leaving many homeowners and their real estate  agents in an interminable waiting game.

But homeowners who are underwater and struggling to offload their homes through a short sale may get relief soon through Home Affordable Foreclosure Alternatives (HAFA). Part of the government’s Making Home Affordable program, HAFA is designed to incentivize borrowers and  lenders to avoid foreclosure. It takes effect April 5, lasts through Dec. 31, 2012, and is aimed at homeowners who are eligible for a loan modification but unable to complete the process.
What banks are doing

Already, some banks appear to be working to facilitate the short-sale process, perhaps in anticipation of HAFA. A JP Morgan Chase spokesman says the bank doubled its short-sale staff during 2009. And in response to the rise in volume, a Bank of America spokeswoman says the bank “increased the number of associates working in short sales to keep in line with the increased demand for short sales.”

Indeed, short sales jumped to 15.9% of home purchase transactions in January, from 12.4% in November, according to a monthly survey by research firm Campbell Surveys and Inside Mortgage Finance, a trade publication. Just in the last 30 to 45 days, some banks have significantly increased their staff handling short sales and the amount of short sales they’re approving, says Rob Lattas, a real estate attorney in Chicago who handles short sales. Typically, it’s taken anywhere from four to six months – and sometimes more – to complete one of these transactions. “We’re seeing short sales now come out between 30 and 60 days, which is crazy. We’re seeing banks being more cooperative,” Lattas says.
The realtor’s perspective

Realtors are echoing that sentiment. Jackie Hillman, a realtor with ReMax Premier Group in Tampa, Fla., says the short-sale transactions she handles are getting a bit easier, in part because lenders are more proactive. Last week Hillman sent a short sale listing agreement a client’s lender, usually the first step in the process. It usually takes a few days for the lender to even acknowledge they received the agreement. “But they called me the very next day and assigned me to a negotiator, which normally takes a couple of weeks,” she says.

“As soon as you tell [the bank] your client is interested in a short sale, they want to get the ball rolling. They realize they can’t make people wait around for six months – the owners might walk away,” Hillman says.

Read more: It’s Looking Like the Year of the Short Sale at www.homeswithjosh.com

HAFA changes

Under the HAFA guidelines, borrowers receive preapproved short-sale terms before listing the property (including the minimum acceptable net proceeds). Before, sellers submitted a buyer’s offer without knowing if the lender would accept the amount. “Now we will know what the bank’s threshold is before we go through this whole rigmarole,” says Lattas.

The loan servicer must respond within 30 days of a homeowner requesting a short sale. And they must respond within 10 days of receiving a sale contract as to whether they’ll approve or deny it.

The new rules also require the lender to forgive the seller’s mortgage debt (on their first mortgage). This is a promise that the bank will not pursue the seller for the outstanding balance on the mortgage.

And financial incentives include $1,500 for the borrower for relocation assistance and $1,000 for servicers to cover administrative and processing costs.

Real estate professionals are hopeful the new guidelines and incentives will make short sales easier to accomplish. “If the HAFA guidelines are actually followed, it’s a great thing for the short-sale marketplace. The biggest frustration I have as attorney is clients saying ‘I’m still waiting to hear from the bank.’ Now banks have 10 business days to say whether they’ll approve or deny the sale,” Lattas says.
Obstacles remain

Of course, even with the new regulations, things may still get held up.

One possible obstacle: If the current buyer for a short sale decides to terminate the purchase – say, because it’s taking too long – often the real estate agent involved in the sale ends up back at square one. They have to re-submit the short-sale package to the lender and are given another negotiator (the person who negotiates the sale on behalf of the lender) – essentially forcing them to start all over again, says Stephanie Fix, a realtor with ReMax Professionals in Denver.

Another potential snag involves second-lien holders. Typically, short sales are made additionally complicated when sellers have more than one loan on their property. HAFA requires second-lien mortgage holders to drop financial claims against borrowers exceeding $3,000 (they are often owed many times more than that).

These lenders must agree to release the lien for the transaction to close. But even with the $3,000 limit, they may hold the deal ransom and demand more from the first-lien holder or seller in exchange for releasing their claims. “A lot of these short sale deals have fallen through because of the second lien,” says Fix. “It will be interesting to see how the banks – the ones participating in HAMP – will follow these guidelines.”

Read more: It’s Looking Like the Year of the Short Sale www.homeswithjosh.com

Q & A Idaho Short Sales

Q: What is a Short Sale?

Answer: In a short sale, the lender agrees to settle the debt owed on the property for less than the full amount. “Settled” means that the lender is writing off the debt (which is why you get a 1099 after a short sale for the amount of debt forgiven) and that they are not going to go after you for the money they lost by filing a deficiency judgment in the future.

Q: How will I know if I will qualify for a short sale?

Answer: Simply go to www.idshortsale.com and fill out your Free Confidential Short Sale Application and we will immediately begin the qualification process. We have a very high close ratio with our short sale clients and will help you qualify.

Q: How will a short sale affect my credit?

Answer: This is a great question as there is a lot of misinformation on the internet about this topic. A short sale is recorded on your credit report as “debt settled for less than the amount owed”. This typically will result in a relatively minor hit on your credit compared to a foreclosure or late payments on your mortgage. I say ‘”typically” because it affects everyone’s credit differently. The more established your credit, the less of an impact it will have on your score.

The reason you often hear and read that a short sale will drop your credit 100 points or more, is that, many people, when they do a short sale, stop making their mortgage payments. If you stop making your mortgage payments for 4 months, regardless of whether you do a short sale or not, 4 months of missed mortgage payments will have a significant negative impact on your credit. In other words, it is the missed mortgage payments that have the big impact on your credit, not the short sale itself.

With this said, if you are already behind on your payments, you have already incurred the majority of the hit that a short sale will have on your credit. Doing a successful short sale at this point will insure that your debt is settled with your lender.

If you are current on your payments and can stay current throughout the short sale process, you will save your credit to a large extent.

Finally, if you do stop making your mortgage payments, there are various credit repair agencies that can repair your credit by removing late payments from your credit report after a short sale.

Q: Will I have to pay federal taxes on the money my lender loses in the short sale?

Answer: There are several different scenarios with regard to whether or not you will owe federal income taxes on the loss the lender takes in a short sale.

When you do a short sale, your lender is agreeing to settle the debt on the property for less than the amount they are owed. The IRS therefore allows them to write off this loss, which is why your lender will send you a 1099-C after the short sale.

The IRS considers “debt relief” to be income for tax purposes. In other words, if your lender writes off $50,000 on your short sale, they will send you a 1099-C for that amount, and you would include that when you file your income taxes. The “C” stands for “Cancellation of Debt” and the law says cancelled debt is taxable as income.

There are however a few exceptions that most people who do a short sale qualify for that exclude them from having to pay taxes on their short sale.

Thanks to the Mortgage Tax Debt Relief Act that George W. Bush signed into law in January of 2008, homeowners who do a short sale on their primary residence, and have a purchase money loan (in other words, they have not pulled cash out of their home with a cash-out refinance) pay no taxes on the loss that their lender incurs in a short sale.

Homeowners who have pulled out cash from their home but have put that money back into their home to “substantially improve” their home, also are excluded from taxes on the short sale.

All other short sale scenarios – if you pulled cash out on your primary residence but spent it something other than upgrading your home or if you are doing a short sale on a second home or investment property – result in a taxable event unless you qualify for the “Insolvency” exclusion.

The IRS does not require you to pay taxes on the loss the lender takes in a short sale if, at the time of the short sale, you are insolvent. Insolvency means your debts (including your mortgage) exceed the value of all your assets. In other words, if, at the time of the short sale, you have more debt than you do money or assets, you are considered insolvent.

Many people who find themselves facing a short sale are in exactly this situation and are thus excluded from paying taxes on a short sale. We recommend you check with your CPA or accountant or go to the IRS website and look up IRS Form 982, which is the IRS form for debt relief and short sales. The IRS gives an explanation of “Insolvency” on this form.

Finally, the time period for The Mortgage Tax Debt Relief Act was originally only slated to go until the end of 2008, however it has now been extended to the end of 2012.

Q: Can my lender go after me for the money it loses in the short sale?

Answer: The point of a short sale is to get out from under the debt of the mortgage. This is why your lender will send you a 1099-C after the short sale. The “C” in “1099-C” stands for “Cancellation of Debt.” Your lender cannot write off their loss on their corporate taxes, send you a 1099-C so you have to pay taxes on the loss, report the short sale as a “settled debt” on your credit and then turn around and go after you for the money.

If you hire and inexperienced short sale agent or negotiator who does not negotiate a full release from your lender, then, yes, you could be liable for the money the lender loses in a short sale or end up being forced to sign a promissory note to close the deal.

We do not ever recommend that our clients sign a promissory note or close escrow without a full written release from their lender(s).

Q: What if I have a first and a second loan on my property with 2 different lenders (or the same lender)?

Answer: Most people that we do short sales for have a first and a second loan, often with 2 different lenders. For the short sale to reach a successful close of escrow, both lenders have to approve the short sale and agree to settle the debt.

It is important to note that both lenders have a vested interest in doing this. The lender with the first loan does not want to foreclose, and therefore is willing to give a little money to the second in order to get them to agree to the short sale.

The second lender will get nothing if the first forecloses, so with the attitude that something is better than nothing, they will agree to take a fraction of what they are owed in order to avoid getting absolutely nothing.

Q: What is the difference between a recourse and a non recourse loan?

Answer: In general, a purchase money loan is considered to be a “non recourse” loan, while a “cash out” loan is considered to be a “recourse” loan.

The difference between these two loans is that in a “recourse loan” the lender technically has recourse to go after the borrower for the money they lose in a foreclosure. I say “technically” because, for this to happen, the lender has to file a judicial foreclosure.

Q: How will I know that I am being released from the debt?

Answer: It will be stated clearly on the bank’s short sale approval. Your lender will state in plain English (though in different verbiage depending on the lender) that they are “releasing the lien”, “accepting a short payoff to satisfy the lien”, “reporting the sale as a settled debt to the reporting agencies”, “issuing a full satisfaction of the mortgage”, “not pursuing a deficiency judgment”, or some other variation that states they are settling the debt for less than what they were owed.

Further, your bank will issue a 1099-C to you, the borrower, after the short sale, confirming that the debt has been written off and is settled. Your lender cannot write off the debt, issue you a 1099-C & then go after you for the deficiency.

Q: What are the advantages of a short sale vs. letting my home go to foreclosure?

Answer: The primary advantage to doing a short sale vs. walking away and letting your home go to foreclosure is that in a short sale the debt is settled and you no longer owe the bank any money. If your home goes to foreclosure, you may still be liable for the deficiency in the event that the bank files a judicial foreclosure.

A secondary (but still very important) advantage is that in a short sale, your credit takes much less of a hit compared to a foreclosure. The impact on your credit will vary depending on how established your credit is at the time of the short sale or foreclosure.

Finally, Fannie Mae & Freddie Mac revised their guidelines in August of 2008 with regard to how they view borrowers who have filed bankruptcy, gone through foreclosure or done a short sale. Through these new guidelines, they are in effect severely penalizing those who go the route of foreclosure or bankruptcy, and rewarding or encouraging those who do short sales, which they view as the borrower doing the responsible thing in light of the circumstances.

Per recent Fannie Mae / Freddie Mac guidelines, borrowers who file bankruptcy or go through foreclosure have to wait up to 7 years to buy another home.

By contrast, the new guidelines stipulate only a 24 month waiting period after a short sale, so borrowers who do a short sale can buy again in just 2 years.

Q: Are there any advantages to letting my home go to foreclosure vs. doing a short sale?

Answer: I have yet to hear a coherent argument for letting your home go to foreclosure vs. doing a successful short sale. Depending on whether you have a recourse or non-recourse loan, when you let your home go to foreclosure you either run the risk of being liable for the deficiency amount or liable for the income taxes on that loss.

Secondly, your credit will drop up to 400 points and you will not be able to buy a home or get any decent credit for up to 7 years.

Compare this with a short sale, in which the lender agrees to SETTLE the debt for less than the amount owed. If you have recourse loan, you may be liable for income taxes on the lender’s loss (just as in a foreclosure) but you will not be liable for the deficiency (and if you qualify for the “Insolvency” exclusion, you will avoid the income taxes as well).

Further, the loss that the lender takes in a short sale will be MUCH LESS than the loss the lender takes at the end of the foreclosure process. The foreclosure process takes months & months, at the end of which the lender has to process the property through its overwhelmed system (another 3 -5 months) and then put the property back on the market, all while the market continues to drop.

Finally, the impact on your credit from a short sale will be significantly less than with a foreclosure and you will be able to buy again within 2 years, compared to up to a 7 year waiting period to buy a home after a foreclosure.

Q: How much will a short sale cost me?

Answer: A short sale costs the seller nothing – the lender pays all closing costs, escrow fees, commissions etc. The lender may also pay any outstanding property taxes.

Q: How long will a short sale take?

Answer: The short sale process typically takes about 4 months, start to finish. It can take longer depending on how backlogged the lender is. You can live in the property for the entire duration of the short sale or you can move out whenever you wish.

Q: Do I need to be behind on my payments to do a short sale?

Answer: No. This is a common misconception. You do not need to be behind on your payments or have been late on a payment to do a short sale although the lenders are more motivated to do the short sale if you are not making payments.

Q: Should I file bankruptcy? Will it allow me to keep my home? I’ve heard the lender cannot foreclose if I file bankruptcy.

Answer: There are 2 types of bankruptcy commonly used by individuals – Chapter 7 (“Fresh Start”) and Chapter 13 (“Wage Earner”). Chapter 7 can enable individual filers to wipe away debts such as credit card and medical bills so they can continue to make their mortgage payments.

Chapter 13 involves setting up a 3-5 year repayment plan to repay your debts. Chapter 13 requires that you are earning a steady income, as you will be repaying all of your debt. Both have a very negative impact on your credit and remain on your credit report for 10 years.

Because of the new 2005 bankruptcy law, which raised the bar for people to qualify for Chapter 7 “fresh start” bankruptcy proceedings, fewer and fewer people pass the “means” test to qualify for Chapter 7 and for this reason can only qualify for Chapter 13 bankruptcy (a 3-5 year repayment plan).

While both Chapter 7 and Chapter 13 can temporarily delay foreclosure proceedings, neither will allow you to keep your home unless you can bring your mortgage current.

If you would like more information on whether a bankruptcy is right for you, we recommend you consult a competent bankruptcy attorney, as we are not attorneys and do not dispense legal advice. Call our office – we can recommend several.

Joshua Groesbeck 208-353-7131 or josh@homeswithjosh.com

www.homeswithjosh.com

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