Aaron Armstrong

If you are exploring the idea of a Nashville short sale, you may be wondering, "can I do a short sale on a home that is an investment property or a home that was my primary residence, but is now rented."

There are many people in Nashville and Middle Tennessee that bought investment real estate but now find themselves with a cash flow shortage and a property that is worth less than they originally paid. Others bought a home as their primary residence but suffered some sort of financial hardship (job loss, death of a family member, mandatory relocation, marital separation etc.) and were forced to lease their home for a period of time. I frequently get calls from these Sellers asking if they qualify for a short sale.

The answer is "Whether or not you qualify for a short sale on your investment property depends on the type of mortgage you have and the guidelines of the investor behind that mortgage." Many conventional mortgages will allow for a home that was purchased as an investment to go through the short sale process. In my experience, the bank is more likely to ask for a promissory note or a cash contribution from a Seller on an investment property.

FHA and many other government backed mortgage have vey strict guidelines on homes that were rented. FHA mortgages are intended for owner occupants. In Nashville, the borrower is almost always asked to sign an affidavit at the closing of an FHA mortgage stating that he or she intends to occupy the property as their primary residence. Therefore, a short sale on an FHA mortgage where the owner has not resided on the property (or has had it rented) for more than 18 consecutive months is often not possible.

As always, there are exceptions to every rule. If a borrower dies, must relocate for work and can not sell the property, loses a job and rents the property while trying to find another job, the investor will sometimes make exceptions. These exceptions must be well documented with letters explaining the documentation. Every investor and every mortgage is different. If you are considering selling a property via short sale, consult with a competent real estate agent that specializes in short sales!

Visit us online for more information about the nashville short sale process: www.Avoid4ClosureTN.com

Call or e-mail us directly for help with your short sale or general questions about the process: info@ArmstrongRealEstateGroup.com / 615-425-3610

Click Here to search for great deals on Foreclosures and Short Sales in Nashville and Middle Tennessee

If you are a home owner considering a short sale, you may be wondering "why would the bank approve my short sale instead of foreclosing?" This is a common question among my Nashville Short sale clients. The fact of the matter is, statistically banks recoup more of their money with a short sale than they do with a foreclosure.

Make no mistake, banks do not approve short sales to help out sellers or because they are compassionate towards your financial hardship. They are in business to make money and they will do whatever they think will recover the largest percentage of the unpaid mortgage balance. If that happens to be foreclosure, they will proceed with the foreclosure.

A short sale expert can generally prevent a foreclosure from happening, because in most cases it is more profitable to approve a short sale. In a foreclosure situation, the bank incurs higher legal expenses. They also have to maintain the property and pay the bills (i.e. property taxes, utility bills, HOA association fees if applicable) during the time the bank owns the home. Why would they take on this hassle if they can sell the home at fair market value by approving a short sale and forgo all the additional expenses?

It is the job of a qualified short sale Realtor to convince the bank that the offer being presented is the best the bank can expect in the current market. The agent must also prove to the bank that if they don't accept the short sale, the only other option is foreclosure. I have seen different research that suggests that banks recoup as much as 30%-40% less on a foreclosure than on a short sale.

If you are considering buying or selling a Nashville home via short sale, contact a short sale specialist to greatly increase your chances of avoiding foreclosure. I successfully close over 90% of my short sale listings. If you need help or have more questions about Nashville and Middle Tennessee short sales, call or e-mail me today!

Aaron Armstrong, Short Sale Specialist

615.545.8676 / aaron@armstrongrealestategroup.com

For more general info about the Nashville short sale process, visit us online: www.Avoid4ClosureTN.com

It is not uncommon for sellers to have more than one mortgage on their home. Sellers often ask us "Can I do a short sale if I have two mortgages?" The simple answer is yes!

Sellers attempting to do a short sale with more than one mortgage on their property fall into two categories.

1) Those that have a first mortgage that will be paid in full but a second mortgage that will be deficient. This occurs when the market value (what a ready, willing and able buyer will pay in the current market) of the home is enough to pay off the first mortgage and costs associated with the sale (i.e. Realtor commissions, pro-rated property taxes, title insurance and attorney's closing fees), but not enough to pay off the second mortgage.

2) Those that have two mortgages, neither of which will be paid in full by a market value offer.

Regardless of which category you fall into, a qualified short sale Realtor can navigate the process of negotiating with one or both lenders to successfully complete a short sale.

The bank that holds your second mortgage is often very motivated to complete the short sale. They understand that if the property goes into foreclosure they may get NOTHING. Therefore, they are more likely to accept the short sale even if they are only receiving a small percentage of the deficiency. I have seen second mortgage holders accept as little as a few thousand dollars in a short sale situation, although they prefer to get at least 10% of the outstanding mortgage balance. It is important to keep in mind that every lender is different and their policies are constantly changing.

Sometimes the investor that holds the first mortgage has strict guidelines as to what they will pay a second mortgage holder in a short sale situation. In the event the first mortgage holder isn't willing to give the second mortgage holder anything (this rarely happens) or they are only willing to give the second mortgage holder a small amount, it is up to the second mortgage holder to determine if they are willing to approve the short sale. If they think they stand to recover more of their proceeds by letting the property go to foreclosure, they may decide not to approve the short sale and take their chances on a foreclosure sale. However, banks statistically recover over 30% less from a foreclosure than a short sale. Therefore, they are motivated to make a short sale work!

Make sure you contact a Realtor who is a short sale expert to help you successfully complete the short sale process whether you have one or multiple mortgages.

To find out more about the short sale process or set an appointment to further discuss short sales, visit us online at www.Avoid4ClosureTN.com or e-mail info@armstrongrealestategroup.com.

To search all properties listed in Middle Tennessee and find amazing deals on short sale listings and other great homes, visit www.TNRealEstateSearch.com

One of the most common questions I get asked when discussing short sales with a prospective seller is, "How much will a short sale affect my credit?" This is a loaded question and there is no definitive answer. A quick Google search for this query yielded responses that ranged from "not at all" to "over 250 points."

So which is it? What effect will the short sale have on your credit? While there is no all encompassing answer to this question, the following items will play a roll in the credit consequences of your short sale.

A short sale is not a specific credit event. The major credit reporting agencies do not have a specific credit event for a short sale. Therefore, when you successfully complete a short sale on your home it does not show up on your credit report as "short sale." The majority of the short sales I have worked on are reported as "settled." This means the lender accepted less than originally agreed upon to settle your loan balance.

In my experience, this, in and of itself, does not have a dramatic affect on your credit score. In fact, it is no different then settling any other balance you owe (whether it be on a credit card, personal loan, car loan etc.) I have seen credit drops of fewer than 50 points for a "settled balance." The settled balance can also fall off your credit report in as little as 12-18 months.

I have on a few occasions seen lenders report a short sale as paid satisfactory or paid in full, which has no effect on your credit. This is more common if the Seller agrees to sign a promissory note or agrees to pay a percentage of the remaining balance at closing.

Late mortgage payments during a short sale have a dramatic affect on your credit. Distressed sellers attempting a short sale are often behind on their mortgage payments. Not paying your mortgage for 30, 60, 90 120+ days will have a cumulative negative effect on your credit. Somebody who has not paid their mortgage in 4+ months is likely to have more credit damage from their late payments than from the short sale itself.

Has the lender filed a "Notice of Default" or made you aware of their intent to begin foreclosure proceedings? If you are behind on your payments the lender may file a notice of default. This is a public filing that alerts you and your creditors that the lender is starting the foreclosure process. Some lenders will file this notice almost immediately after you miss a payment and some lenders will wait as much as a year before proceeding with the foreclosure process. Just because the notice is filed and a foreclosure date is set, does not mean a successful short sale can not be completed. It just means it must be done quickly! Even if a short sale is ultimately completed, the filing of the notice of default will negatively affect your credit.

In conclusion, all short sales are not created equal. They can affect your credit as little as 0 points or as much as 250+ points. If you have no late payments and the lender agrees to report the sale as "paid in full" (which rarely happens) you will not suffer any damage to your credit. However if you have not made your mortgage payments in several months, the lender files a public notice of default and the final short sale is reported as "settled" the credit consequences will be significantly worse. The Certified Distressed Property Expert (CDPE) Institute reports that on average a short sale affects a borrower's credit between 50-100 points.

If you are interested in learning more or want to explore the possibility of selling your home via Short Sale visit me online at www.Avoid4ClosureTN.com or e-mail me at aaron@armstrongrealestategroup.com.

To search all properties for sale in Middle Tennessee and find some amazing deals on Nashville Short Sales visit www.TNRealEstateSearch.com.

Many of my short sale clients want to know if the bank will require them to sign a promissory note as a part of their short sale approval.

A promissory note on a short sale is an unsecured note requiring the Borrower to pay back the deficiency (or a portion of the deficiency) over a period of time, often with no interest charged.

Example: You owe $200,000 on your home. You sell the home for $180,000 and there are $15,000 of commissions and closing costs. The bank receives the remaining $165,000. This leaves a $35,000 deficiency between what the bank is owed and what they actually received. Let's assume the bank requests a promissory note for 80% of the deficiency ($35,000 x .80 = $28,000) at 0% interest, amortized over 30 years. This promissory note would yield a payment of approximately $77 per month.

In many cases the bank accepts the remaining net amount as "settled in full for less than amount owed" and the Borrower is released from the debt (although there may be tax and credit consequences which you should be aware of). However, in some cases the bank will only approve the short sale if the Borrower agrees to sign a promissory note.

When beginning a short sale, there is no way to know for certain whether or not the bank will request a promissory note. Certain banks always request a promissory note and others almost never request them. In my experience they are more common on second mortgages, Home Equity Lines of Credit (HELOC), and bank held portfolio loans. However, this is a negotiable term and the Borrower must agree in writing to the promissory note.

While promissory notes are not ideal, they are almost always better than foreclosure. I have heard several clients say, "I'm not signing a promissory note, I will just let the bank foreclose." I always remind them that in the state of Tennessee the bank can still sue for a deficiency judgment on Foreclosures and Deeds in lieu of Foreclosure. Therefore, if your short sale realtor is unsuccessful at negotiating a short sale with no promissory note, and the terms of the bank's promissory not are reasonable, it may be your best option.

If you would like to further discuss a Middle Tennessee short sale or if you need a specialist to help you navigate through a short sale, contact us today! We successfully negotiate over 90% of our Nashville area short sales. Less than 15% of our short sale Sellers have to sign a promissory note.

aaron@ArmstrongRealEstateGroup.com

www.Avoid4ClosureTN.com

O: 615-425-3610