Tag Archives: Short Sale

Real Estate – DOWN MARKET TIPS – Cleaning the Slate

By Kenneth B. Schwartz – ATTORNEY ADVERTISEMENT

Deficiencies are a big thing these days with values on a steady decline and mortgages staying put or even going up by leaps and bounds, especially when a borrower defaults and interest piles on, together with taxes, late charges and whatever. So … how can you figure the bottom line, that outer most number when all’s said and done? And what might it take to make a deficiency go away,  never to return? Here we go.

To Figure the Deficiency

Like foreign or domestic beers, don’t think you can mouth “deficiency”, swoosh it around and always arrive at one set formula for every single case. It doesn’t work that way.

If we’re talking a foreclosure sale with one mortgage only, then just take what’s due including principal, interest, late fees and whatever – back out property value and there you have it. Lots of issues for everyone to argue about, but the raw math isn’t complicated. Say it’s a subordinate mortgage that gets nothing at the sale – then arithmetic wise it gets even easier, all balances remain and that becomes the deficiency.

On short sales, “deficiency” will mean the amount being due after all’s said and done and your deal closes. On a first mortgage, it’s usually a small portion of the overall balance. As to second mortgages and subordinate liens like IRS or NYS, normally it amounts to a much greater percent.

How Deficiencies Arise

Deficiencies can come about in three ways:

1. Foreclosure – Property goes to foreclosure sale and lender goes back to court within 90 days to say the property wasn’t enough to cover what’s due, so give me a money judgment to cover the balance. Court hears evidence and decides. Ouch. But hey, if 90 days pass and lender lets it go, then you’re off the hook.

2. By Consent – Short sale takes place and lender delivers a release of lien, not a release of liability. Lender then has the option to either seek collection on the unpaid balance – the deficiency – or to walk and do nothing. Lender will have six years to make up its mind. Sometimes its possible to settle with a lender prior to closing on a short sale and to agree upon the terms of repayment, however this would most often happen on subordinate mortgages only, rather than on first mortgages.

3. Lawsuit for Money Judgment – Lender pursues collection under the promissory note by suing for a money judgment – rather than bringing a foreclosure. This might happen most commonly on a second mortgage when the property’s under water and little, if anything would remain after the first mortgage gets paid.

Curing a Deficiency

Fear no deficiency. They are very much curable if you follow our six point plan:

1. Short Sale – Get a short sale done and your deficiency will likely disappear. Your final result will depend upon several things like the sales price, BPO, HAFA approvals and your specific lender.

2. Standing and Other Defenses – Your lender may lack the legal ammo that’s necessary to proceed against you in court.  Will they admit it? Of course not. Though defenses may come in a variety of forms, “standing” has played a huge role over the last few years as lenders scramble for just the right papers to show they own the mortgage which they seek to enforce. If they come up dry – give them a kiss on both cheeks and say goodbye.

3. Compromise – Faced with a deficiency, you can always give in and settle – often for a fraction of what’s due with little or no interest.

4. The Ninety Day Wait – Lenders have 90 days after the foreclosure sale to seek a deficiency judgment. Beyond that – no deficiency, ever. So … should you hold your breadth and count the minutes? Play it safe and settle? Hmm … no rash moves.

5. Chapter 7 Bankruptcy – A complete liquidation in bankruptcy can wipe out all personal obligations, including a deficiency.

6. Bankruptcy Cramdown – A special procedure in a business reorganization to cut the mortgage in two, one being a mortgage for the property’s value and the other an unsecured debt for any excess – the deficiency. The unsecured portion will then get settled along with other unsecured creditors for cents on the dollars.

Income Taxes

From Forgiveness of Deficiency

No income tax if all your liabilities are greater than everything you own – value wise. And if it’s your principal residence and you fit the mold – no reporting to IRS. So, yipee and hip, hip hooray.

Signing off till next time. And here’s to your next closing.

To contact Kenneth B. Schwartz (Law Offices of Kenneth B. Schwartz) regards any Specializing in Real Estate at SchwartzEsq@aol.com or calls him at 516-333-7020. Don’t miss out there is a FREE seminars. Contact them to find out more info.

 

 

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Foreclosure – Rescue Insolvent Homeowner

Are you finding it more and more difficult to pay your monthly mortgage payments on time? Are you struggling and afraid of foreclosure? If so, FEAR NOT, because a SHORT SALE, while not the most desirable, is much more desirable than a foreclosure.

Regrettably, foreclosures often occur due to unexpected events, such as a job loss or serious illness. And if the worst does occur, foreclosures are extremely damaging. Not only does the lender take your home away from you, but the lender has the option to place a judgment lien against you for the debt owed plus costs for the foreclosure auction. Your credit report will take a disastrous hit too. Those foreclosed on will take a hit of 200 to 300 points, depending on the overall condition of credit. This means that a FICO score before foreclosure of 680 could suddenly dip as low as 380. And to top it all off, buyers who want to buy another home after foreclosure will end up waiting at less 10 years before a lender will make a reasonable mortgage offer.

On the other hand, a short sale can save you from the worst of the worst. While a short sale will also adversely affect your credit score, perhaps even lowering it as much as 200 points depending on your credit condition and mortgage payment history, the effect of a short sale on a credit score can be overcome relatively quickly, especially if you keep a few credit cards and keep them current. On average, the short sale only remains on a credit report for up to 7 years. The owner must also keep in mind that they may be subject to a deficiency judgment for the difference between the loan amount and the amount paid. In general, a trustee’s sale wipes out the right to a deficiency; however, the lender does have sole discretion on whether to pursue a deficiency judgment. Probably the biggest advantage of a short sale is that the wait-time before buying another home is much shorter than those who foreclose. In fact, Fannie Mae guidelines allow short sale sellers to immediately apply for a new mortgage if the seller had kept payments current and had no 60-day late pays or greater on record.

Short sales are popular for the number of advantages it has over foreclosures. The biggest challenge you may face is getting your lender to agree to a short sale, though lenders have been more eager to agree as of late. The best solution will be to pursue a short sale as soon as you realize you are falling behind in payments and won’t be able to catch up – the greater the amount you have in arrears, the less likely the lender will agree to a short sale.

To start the short sale process, the owner needs to present: a hardship letter, 2 years of tax returns, 2 year of W-2’s, a financial worksheet, a signed authorization from lender, 2 recent bank statements, 2 recent pay stubs, and a list agreement with a real estate agent.

Because short sale laws and regulations differ from state to state and the benefits of a short sale will depend on your individual situation, it is very important to consult qualified professionals before making a decision. An experienced short sales agent with access to an experienced attorney who will negotiate for you with your lender is important and advised. For past three years I have processed short sales, bank-owned properties and foreclosed properties in Florida. With my success, I have obtained the trust and satisfaction of many customers, prompting them to become loyal repeat customers and reward me with referrals. I hope to do the same with you.

If you are interesting to have a FREE consultation, if you have any question about sell real estate in Manhattan, contact me directly Diana Wu at 516-320-0231 (cell) or email me at diana.wu@elliman.com, I work for The Voda Group, the AWARD-WINNER group from Prudential Douglas Elliman.

To learn more about our custom-designed marketing plans, visit my website at:  http://www.elliman.com/real-estate-agent/diana-wu/4623 to receive a complimentary valuation of your home, or to discuss any real estate related topics, please contact us today.

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New York, Manhattan Neighborhood – some mistakes the 1st time buyers will make

Purchase a home could be very confusing. Sometimes turn a happy time into a stressful, overwhelming experience. Especially, if you are the 1st time buyer, those warning below, could help you to receive a hassle-free real estate purchase process. I can also show you Tips for 1st Time Homebuyers.

1) Forgot to check your credit score
It is very important that you have to check your credit score before your house hunt. If there are any errors on your credit report and you can resolve them right away. Improve your credit or fix your credit in order to get loan interest rate as low as possible.

2) Didn’t talk to a mortgage lender to get pre-approval
Many 1st time home buyers spend a lot of time researching homes without knowing how much they can afford. One of the first things that 1st time buyers need to do is pre-approval loan from the lender. It’s important that you are pre-approval for a loan before you begin your home search. It is not only save your time when you start to search the property in New York City, but also let you understand what kind apartment that you can afford. When you find the home you love, you’ll be able to take action quickly. Sellers will be more likely to accept an offer from a pre-approval buyer.

3) Mistakenly believe short sale or foreclosure property is bargain deal
Some home buyers believe that any properties under short sale or foreclosure would be a great deal. But the truth is those properties are still have to sell under the market value. The lenders always send BPO or appraiser to appraise the properties. Only if the home has significantly damaged, it will sell at cheap price. However, you need put money to renovate the property. Also short sale or foreclosure need lender to approval the sale. Sometimes you won’t hear from the lender for a long time after you offer the property. Usually could take as long as more than 90 days. Today some bank will respond faster than other, but it still could be very frustrating experience for buyer. However, if you buy the home from a motivated seller, you will have good deal and fast closing.

4) Failing to hire the right real estate broker and right mortgage broker
Buyers should rely on knowledgeable Real Estate Broker to help you to find your next dream home. The right buyer’s broker would not only find the right house for the buyer, but also negotiate the bargain price for the buyer. The buyers’ broker will look out for buyers’ best interests. The right mortgage broker will search the best deal loan for the buyer.

5) Failing to consider additional expenses
Home depreciation and property tax should be added to home-buyer’s budget. You should find out what the real estate tax for your property is. And you should have extra money for the home repair.

6) Not realistic
One of the particular mistakes that first time home buyers have is not realistic. Most the 1st time buyer would have big wish list with very limit fund. They usually are very picky on the property. Some others are too emotional when they see the property that they like. They are willing to pay the highest price to get the property. However, after while you would have lived that property, you would gradually find out this property wouldn’t worth the price that you had paid. So don’t discourage if you lose out the home that you make an offer on No matter how much you’ve fallen in love with the home. Today is still a buyer’s market. To get the right price for your dream home.

7) Failing to include a mortgage contingency clause in the contract
Some buyers want to have the home as their own right away. They didn’t put mortgage contingency clause into the contract. They assume that they will get a loan because they have a pre-approval. But that not always a case. If you couldn’t get a loan, you will lose the deposit.

8) Skipping the inspection
In Manhattan, if you purchase co-op or condo, usually you don’t have to do inspection. However, you have do walk-through by yourself. You have to do it very careful before the closing. If you find something wrong before closing, you still can get some deal on the closing table. But if you find anything after the closing, you have to spend your own money to fix the problem. So please be more serious to do the walk-through.

Manhattan Real Estate Market is very unique. The entire purchase process is different than anywhere else in the world. If you are interesting to have a FREE consultation, if you have any question about sell real estate in Manhattan, contact me directly Diana Wu at 516-320-0231 (cell) or email me at diana.wu@elliman.com.  

I have the privilege and pleasure to work with The Voda Group at Prudential Douglas Elliman. The Voda Group has been the top, award winning sales team at Prudential Douglas Elliman since 2003. Our team’s hard working will help your real estate goal extremely successful. To learn more about our custom-designed marketing plans, visit my website at:  http://www.elliman.com/real-estate-agent/diana-wu/4623 to receive a complimentary valuation of your home, or to discuss any real estate related topics, please contact us today.

Reaching out to others in the real estate community and sharing ideas is the goal of this blog, so please do not hesitate to reach out to me. All comments are welcome. Also, please feel free to email me at anytime at diana.wu@elliman.com

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