Jeff Duneske's Blog

There is still much confusion in the market about Short Sales and the recent bill, H.R. 3648 the President signed into law, The Mortgage Forgiveness Debt Relief Act of 2007 on December 20, 2007.

This is the law that retroactivleyl back to January 1, 2007 eliminates an IRS tax liability for forgiven debt relating to mortgages setteled ‘short'.

Prior to the signing of the bill by President Bush, negotiating with lenders NOT to report the forgiven debt to the IRS was always one of the strongest benefits to pursuing a short sale.  Now thqt the governemnt has waved it's majic wand...people want to know more about why they should consider selling their home as a short sale, rather than letting it go to foreclosure. (Of course you need to check with your own tax professional to see how this applies to you.)

Good Question - lets look at the services I strive to provide a homeowner that is either behind on their mortgage or will be as the payments continue to ecsulate.

Perhaps the strongest motiovation today to complete a succesful negotiation with your lender todday is to avoid a defiicinecy balance.  Although we have not yet seen many lenders pursuing the deficinecy they are entitile to if cash was taken out of a home in a refinance, I have a very strong suspecison those days are not far off.

I know that deficiency balances get bundeled and sold for pennies on the dollar and at some point there will be investors buying these pools of bad loans.  These investors will be relentless at pursuing every legal remedy available to collect these debts.

By succesfully negotiating a short sale now, it is possible for me to have the bank wave their right to pursue a deficieny balance.  This means they will not sue you nor assign the right to anyone else.  They are voluntarily agreeing to the decision to accept less than the balance due.

Damage to the Homeowners Credit can be reduced.  By the time a Short Sale is initiated, the Good Credit Train has already left the station.  Now we have to work at minimizing the impact of the negative credit.  After a bankruptcy, about the worst thing that yo can have reported against your credit is a foreclosure.

The negotiation process in a short sale can be very complex.  Asking for the mortgage lender to report the account as Paid in Full typically will not happen.  However, there is a status, Paid as Agreed (or sometihng similar) that can usually be succesfully negotiatied with the completion of a short sale for your property.

Paid as Agreed will let other creditiors know that you worked out an acceptable plan and that you made it easy on the creditor and did not make your dificult situation even worse.

A common complaint Homeowners have when they are losing their home to foreclosure is the Constant Harassment the Bank Collection Departments pursue.  Now, you must realize that every bank and mortgage lender is different and unique unto themselves, so there is no set policy that I can recite.  However, most banks will lighten up the collection activities once they know you are working through the process.

If you ignore the banks and just allow the entire foreclosure process to continue you can be assured that you will receive some of the most hardcore collection efforts on behalf of your mortgage bank in an attempt to collect any amount of money they can from you.  Their hardball tactics may include a barrage of auto-dialer "important message" phone calls; they will contact every reference on your original credit application - including your employer, family and friends; not to mention that they just may show up at your front door at the most awkward of moments.

The bottom line is the more trouble the bank has to go through to collect their money, the more aggressive they will be with you.  When I am negotiating a short sale for my clients, I always ask the homeowner to defer all collection calls to my office phone.

Time is of the essence.  Once you fall behind on your mortgage, there is stress coming in all directions.  Most people just want to move on with their lives and put this chapter behind them.

By cooperating with the bank the short sale process can typically shave up to 6 months off of the process.  If you can get me the documents I need for my short sale package to the bank and everyone is cooperative there is so much less stress and the homeowner can move on in dignity.

So if you are a Homeowner . . .or any where else for that matter, and you can no longer afford your home...or perhaps you have already fallen behind in your mortgage, then you need to know that the worst thing you can do is to do nothing.

I am not saying that a short sale is your only option, but it is one that can work if handled properly and professionally.

The much needed and welcome economic stimulus package is now in the hands of the U.S. Senate. But the Senate must include new loan limits on FHA and Fannie Mae and Freddie Mac loans. America's housing market needs this help.

REALTORS® are real estate professionals who are experts in marketing and negotiation. REALTORS® can help a seller set a realistic price and ensure the proper paperwork and various disclosures and inspections are handled correctly. REALTORS® know best how to prepare a home and maximize value, provide broader exposure to the market and are more likely to generate multiple bids than a seller on their own.

In addition, REALTORS® are experts in attracting qualified buyers. A professional can show a home more objectively than can a seller who may be emotionally attached to the home, and who might become unnerved by prospective buyers’ critical comments. The real estate pro also checks the financial capability and bona fides of buyers before allowing them onto a seller’s property.

Slower markets can offer rich opportunities for investors: real estate sellers are more open to negotiate and lower home prices — and combined with low interest rates — can help you get properties at bargain levels. Yet, some buyers are reluctant.

The market may not look perfect. This is why prices haven’t taken off yet — and why you want to get in before they do! Here are some tips:

1. Timing is everything. Enter the market cycle early. When it’s quiet, when the media isn’t saying ‘record levels of appreciation,’ that’s when you want to jump in. As billionaire oilman J. Paul Getty once said: “Buy when everyone else is selling and hold until everyone else is buying.”

2. Get financially ready. Before you buy, consider holding costs, tax implications, and cash flow potential. Many things can go wrong when buying investment properties — such as a vacant rental or a property that won’t sell. Have cash reserves (get a partner if you don’t have any) and you’ll be prepared to ride out any market cycle. Identify your risk level and what you want: For example, an investor who wants to turn a quick profit with low holding costs would want to sell their new-home property before construction is complete. On the other hand, an investor looking for a bigger return with less capital gains tax would want to hold the property until after construction is complete and keep it as a rental property for at least one year.

3. Buy and hold. In a distressed market, this can be a smart move. A buy-and-hold strategy can help give the property an opportunity to appreciate over time. Buy at the right price, though. Compare the home’s price to what homes are selling for over a reasonable time period in that community and what you expect is the lowest price the market will reach. Get in at that price. Consider lease option investments so you can rent the property to cover payments, having the property practically pay for itself each month. Also, continue to pay down the mortgage and eventually you may even have the home paid off — an ideal position for an investor!