Common Questions Short Sale Sellers Should Never Be Afraid to Ask.
1. What should I do if I can no longer make my mortgage payments?
2. How can I find out what my home is worth today?
3. Who can qualify for the government-sponsored Making Home Affordable
4. Can I qualify for a lender-approved short sale?
5. How can I determine the best listing price for my home?
6. Would a lender-approved short sale damage my credit?
7. How would a lender-approved short sale affect my income taxes?
8. Must I be behind in my mortgage payments to negotiate a short
9. Do you work with all banks?
If you’ve missed payments or foresee that you won’t be able
to make payments in the future, contact your lender immediately and explain
your situation. The longer you put off notifying your lender, fewer options
will be available to you. Not only will contacting your lender early offer
you more choices in terms of keeping your home, you’ll avoid the penalties
and fees that add up as missed payments accumulate.
Remember, it is in your
lender’s interest to help you find a way to stay in your home if at all possible.
Your lender is not interested in owning your home; they simply want repayment
of your loan. And because foreclosing is an expensive process for lenders,
your lender may be willing to make changes to your loan or repayment schedule
if the problem you’re having is likely to be temporary. Don’t let time run
Although you could order and pay for a professional appraisal
to find out what your home is worth in today’s market, the easier and less
expensive way to determine your home’s value is to call on us. We’ll conduct
a Comparative Market Analysis (CMA) to determine what your home is likely
to sell for based on recent sales prices and current list prices of comparable
homes in your area, along with other factors such as your home’s age, condition,
location, style, amenities, etc.
Bear in mind, the sale
of your home involves not just paying off your first mortgage, but also satisfying
other lien holders (perhaps a second mortgage or equity line of credit) and
paying selling expenses such as attorney fees, brokers fees, unpaid taxes,
etc. Although your home’s value might equal of slightly exceed what you owe
your primary lender, net proceeds from the sale might not be enough to repay
that lender — meaning your home sale would be a short sale.
The Making Home Affordable Program offers two opportunities
for struggling homeowners to keep their homes. Following is a summary, but
for complete information about these nationwide federal-government programs,
including participating lenders/servicers, go online to www.MakingHomeAffordable.gov/about.html or call 888-995-HOPE (4673).
1. Home Affordable Refinance Program
The objective of the refinancing option is to help qualified borrowers refinance into safer,
more-affordable fixed-rate loans. Refinancing may be an option for you if:
- You have a conforming mortgage (guaranteed or owned by Fannie Mae and Freddie
Mac) on a qualified principal residence, second home or small rental
property (up to four units).
- You are
current on your mortgage payments. (Current means not more than 30 days
late making your mortgage payment in the past 12 months.)
- You have
been unable to refinance to a lower interest rate because your home
has decreased in value to the point where your equity is less than 20%.
- You have
an unpaid first-mortgage balance of $729,750 or less (for a single-family
- The balance
of your first mortgage does not exceed 125% of the home’s current market
value. (The home’s current value is determined by appraisal after you
apply for refinancing, but we can give you an estimate.)
- You have sufficient income to make the new payment after refinancing
2. Home Affordable Modification Program
This program aims to help "at risk" homeowners who have high mortgage debt compared
to income and/or who have a combined mortgage balance higher than the current
market value of their home. The primary objective of the plan is to help borrowers
avoid foreclosure by modifying unaffordable loans to achieve a payment the
borrower can afford.
seek a loan modification under this program from their participating lender
(or loan servicer). Note that this is a voluntary program for some lenders,
but mandatory for loan servicers of financial institutions who receive money
from the second distribution of federal-government bailout funds.
are considered on a case-by-case basis. You may qualify for this government-assisted
loan modification program if:
- The home in question
is your primary residence.
- You took out your current
mortgage before January 1, 2009.
- Your monthly mortgage
payment (principal, interest, taxes, insurance, and homeowners association
dues, if any) is greater than 31% of your monthly gross (pre-tax) income.
- The amount you owe
on your first mortgage is $729,750 or less.
- You are having difficulty
making your mortgage payments due to a significant increase in your payment
or a loss of income since you took out your mortgage or a hardship such
as increased medical expenses. Being delinquent on mortgage payments is
not required for eligibility.
- You have sufficient
income to make the new payment after refinancing.
Here’s how it works:
- If you have more than one mortgage on your home, only the first mortgage is eligible
have total "back end" debt (which includes housing debt plus
other debt such as car and education loans and credit-card debt) equal
to 55% or more of your income, you will be required to agree to enter
a HUD-approved counseling program (at no cost to you) as a condition
for the loan modification.
- The participating
lender voluntarily lowers the interest rate so the monthly mortgage payment
is no more than 38% of your gross income. The government will then match
with the lender any further reductions in interest payments, dollar-for-dollar,
to bring your payment down to 31% of gross income. (Lenders could also
bring down monthly payments by reducing the principal owed on the mortgage,
with the government sharing in the costs.)
- The lender
must keep the new lower interest rate in place for five years, after which
it could gradually be stepped up to the conforming loan rate that was
in place at the time of the modification.
- To provide
extra incentive for you to keep paying on time, the initiative provides
a monthly balance reduction payment that goes straight toward reducing
the principal balance of your loan. As long as you stay current on your
loan, you can receive up to $1,000 each year for five years. The government
also provides a number of incentive fees to lenders and loan servicers.
If you think
you might benefit from either of these two programs, contact your lender (or
loan servicer) or a HUD-approved housing counseling agency for more information.
A key requirement for
securing a lender-approved short sale is hardship. That is, you must prove
to your lender — through a hardship letter and supporting financial documents
— that you are unable (not simply unwilling) to pay your mortgage.
The hardship letter should
clearly explain what happened that resulted in your inability to meet your
financial commitments. Perhaps you or your spouse lost a job, or your family
faces major medical expenses, or your loan’s interest rate rose making mortgage
payments unaffordable. In addition, supporting financial documents must prove
that you do not have other resources — investments, savings, etc. — that
could be used to pay your mortgage (rules vary but often retirement funds,
such as 401(k), IRA or pension accounts, are not pursued). However, if you
have other assets or you are current on your other bills for credit card,
cable, phone, car payments, etc., a lender may require a cash payment or promissory
not at closing before the lender approves the short sale.
Of course, your lender
will also look at other factors in making their decision, especially the net
proceeds they would accrue should the contract with your buyer go to closing/settlement.
Setting the right listing price for your home is crucial to winning
lender approval of your short sale. It’s a delicate balance. We call it "Goldilocks
Pricing." On the one hand, the listing price must be low enough to quickly
attract a buyer who is willing to endure the complexities of the short-sale
process. (Offering your home in the best possible condition is added motivation
for buyers looking at today’s bargain-priced properties, some of which are
in less-than-ideal shape.)
On the other hand, the
higher the price offered by the buyer, the more likely it is your lender will
approve the short sale. Lenders agree to short sales when they believe the
proceeds are likely to be higher than expected proceeds from foreclosing on
the same property. For example, say a lender can expect to recover only 40%
to 60% of a home’s market value through foreclosure. That lender may be willing
to accept a short sale that nets 80% to 85% of value after all settlement
costs are subtracted. While some lenders will negotiate, responding with a
counterproposal if they do not like the initial offer price, others will not.
To find the perfectly
balanced listing price for your short sale, we’ll prepare a thorough Comparative
Market Analysis (CMA) that factors in the sales prices of comparable, recently
sold homes in the area along with the area’s pricing trends — which we keep
a close eye on — in addition to other factors. Getting the listing price
of a short sale right serves all parties involved.
Both short sales
and foreclosures can damage your credit. However, the difference between a
foreclosure and a short sale is the difference between broken credit and dented
A foreclosure is a court
settlement process, involving legal action and possibly attorney fees, that
will appear on your credit report for years and dramatically lower your credit
A lender-approved short
sale, on the other hand, is a negotiated settlement with the lender. While
it is likely to show up on your credit report, a lender-approved short sale
will not lower your credit score nearly as much as a foreclosure.
If you have a lender-approved
short sale on your credit report — rather than a foreclosure — you’ll have
much better options sooner in terms of buying another home, qualifying for
loans or credit cards, securing reasonable interest rates, finding rental
housing, even applying for insurance.
mortgage debt forgiven by a lender was considered to be part of the borrower’s
taxable income — meaning the taxpayer would have to pay income taxes on the
That rule changed on December
20, 2007, when President Bush signed into law the Mortgage Forgiveness Debt
Relief Act of 2007, which excluded forgiven mortgage debt from taxation —
within limits. The exclusion applies to a taxpayer’s principal residence,
with the excludable amount limited to $2 million. Initially, this relief was
available only for qualified indebtedness forgiven in calendar years 2007
through 2009. However, the Emergency Economic Stabilization Act of 2008 extended
the relief time period by another three years, through 2012.
Some other restrictions
apply; be sure to consult a knowledgeable tax professional for all the details.
While it was true earlier in the foreclosure crisis that some lenders
before they were willing to consider a short sale wanted a borrower to be
delinquent (late payments) or in default (notice sent of formal foreclosure
proceedings), that trend has almost entirely ended. Today most lenders are
looking for verifiable hardship, monthly cash flow shortfall or pending shortfall
and insolvency. If you meet these requirements and you are running out of
money to continue paying your mortgage, a short sale may be your best option.
Don’t wait until the foreclosure clock has counted down before you have even
less time left to act.
Yes, we have experience working with many different banks and lenders
both locally and across the United States. Because our short sale sellers
have mortgages with a wide range of institutions we do not limit which lenders
we work with and which we do not.
Avenel Short Sale
Monroe Township Short Sale
New Brunswick Short Sale
Elizabeth Short Sale
Basking Ridge Short Sale
Best short sale negotiator
short sale realtor Somerset County
Liberty Corner Short Sale
walk away New Jersey
short sale free reports
New Jersey Short Sale Team
Short Sale Agent
New Jersey Shorts Sales
List my home
Best REO buyer agent Somerset County