The most common question I get now has to do with short sales and foreclosures.

As a Professional real estate agent I am asked many questions as I am out meeting people. Lately one of the most common questions that I am asked is "Which is better for me Foreclosure or a Short Sale?" Generally speaking a Short Sale is slightly better than a Fore Closure, or even a deed-in-lieu of foreclosure. It should be noted that all three options Foreclosure, Short Sale or Deed-in-Lieu of foreclosure have a derogatory affect on your credit score ( FICO ). Foreclosures and Short Sales all require seasoning. Meaning that a certain amount of time must elapse before you will be able to purchase a home, with a bank loan. The seasoning of a foreclosure is 5 years and that of a short sale is only 2 years. Once a property is foreclosed on, that fact is kept in public records for a period of 10 years, this is known as a "derogatory public record" which is one of the three categories that can greatly lower your score. The other two are Serious Deliquencies and Collections filed. Many home owners who are facing foreclosure, are either seriously behind in their mortgage payment or anticipate that they will soon be unable to pay as required. This alone will also affect your credit report. : When applying for credit anyone who has been foreclosed on must attest to that fact by answering the following two questions:

• Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years? (Y/N)
• Have you directly or indirectly been obligated on any loan which resulted in foreclosure, transfer of title in lieu of foreclosure, or judgment? (Y/N)

It is likely that after a short sale, foreclosure or deed-in-lieu of foreclosure that the home owner will receive from the bank a 1099C. This is because most home loans are loans without recourse meaning that if the home owner defaults on the loan, the bank an only take possession of the property. In short - no pun intended, someone has to pay the taxes on the money. The money that the bank has forgiven the home owner is considered "earned income" and therefore it is reported using form 1099-C, otherwise referred to as Cancellation of Debt. A short sale may provided the home owner with a smaller tax liability than a foreclosure.

The IRS has this to say about foreclosure: "The IRS urges struggling homeowners to consider their options carefully before giving up their homes through foreclosure."

Sean Schroeder, REALTOR
The Real Estate-XChange
cell: 757-839-3954
ofc: 757-277-9779

Equal Housing Opportunity ( EHO )
The Real Estate-Xchange 517 Baylor Ct. Chesapeake, Va. 23320

Virginia Beach and Chesapeake Short Sales Frequently Asked Questions

Throughout the day I am contacted by home owners who are, or soon be, behind in their payments, unable to sell their home because they are "upside down" or are facing family issues such as a divorce or loss of a job. These home buyers, like you are looking for options. One option is a Short Sale, this is a list of questions that I receive and some general answers to those questions.

1. What is a Short Sale?
   
   A: Simply put a short sale is when you the home owner offers your home for sale below what you owe on it, asking the bank to take a loss.
   
2. I am not behind on my payments, but I can't sell my home because I owe more than the house is
   worth. Will the bank approve me for a short sale?
   
   A: We can list your home below what you owe on it making any purchase agreements "contingent"upon the banks approval. There is no such thing as "Short Sale approval"
   
3. When I purchased my home, the bank required PMI how will this affect a short sale?
   
   A: First the bank required the insurance to protect their interest in the property not to protect you. Once a ratified contract is received it is sent to the bank for bank approval. The bank will not give permission until the Insurance Company approves the short sale.
   
4. How will short sale affect my credit score?
   
   A: In general if you are behind in your payments these rolling lates will show up on and lower your credit score. It is easier to recover from a short sale than it is from a foreclosure.
   
5. I recently missed my mortgage payment, and know that I will miss my next payment as well. How long do I have before the bank forecloses on my home?
   
   A: The foreclosure processes can begin at anytime that the bank feels it is necessary. However, generally it can take up to 6 months before the bank actually does foreclose. In some cases by listing the home, and actively working to find a buyer, the bank may be less likely to foreclose.
   
6. I am ready to get out from under my house, what should I be prepared to do to?
   
   A: Your agent will ask you for your financial information when you have a ratified contact including pay stubs, bank statements, purchase agreement, listing agreement and most importantly a hardship letter.
   
7. I am living paycheck to paycheck and don't plan to walk away from this sale with anything. How can I afford to pay your brokerage fee?
   
   A: First as a short sale, the bank will not approve the sale if you receive any funds or contribute any monies to the buyer. Further, any existing escrows or monies owed to you from the taxes will go directly to the bank. As for the brokerage fee, this is paid by the bank.
   
8. Do I have to claim the short sale on my taxes as income?
   
   A: Once the bank approves the short sale, they issue a letter outlining the conditions of the short sale. Due to the fact that the bank is losing money, and the money was loaned to you the home buyer, you will receive a 1099C for the deficiency
   
9. Will I still be responsible for the property taxes?
   
   A: The home sale must transfer free and clear of all liens, including taxes. Yes, you will still be responsible for the taxes, unless the bank has agreed to bring them current.
   
10. How long should it take for my home to sell?
    
    A: The great news is that because you are selling your home short, we can price and market your home to a larger audience and to a group of home buyers that are looking for a great deal, or as I like to call them "wholesale" buyers. This will result in a quicker sale, after all price is King!
    

My name is Sean Schroeder, a REALTOR and member of the National Association Of REALTORS ( NAR). My job is to help you, my client, with your real estate needs. In this case, my job is to help you sell your home, to help you start over, everyone deserves a second chance.

If you find yourself in a situation where your mortgage payments have gotten out of control due to interest rate adjustments, loss of employeement, family changes or other situations please call me today to discuss your options and how I can assist you.

Sean Schroeder, REALTOR
The Real Estate XChange
757-839-3954

seanschroeder@757realproperty.com
www.HRSHORTSALES.com

The Real Estate XChange 517 Baylor Ct, Chesapeake Va. 23320

Selling or purchasing a home shortprovides a great solution for the home owner who finds himself over extended in a mortgage that he can no longer afford. Short Sales, are also excellent opportunities for home buyers looking a great deal.

Short sales are not without their share of problems, for starters they are generally anything but "SHORT", we should start calling them Long Sales. In a short sale we market the home below what the home owner originally mortgaged the property for. When, negotiating the sales deal the bank must approve the final sales amount, brokerage fees, closing costs assistance, repairs etc. The bank also orders an appraisal of the property, just as they would with conventional financing. In general, most banks are allowing up to 40% of the appraised value.

Prior to ordering the appraisal, the bank will require that the property owner also disclose to the bank his current employement, bank statements, last W2's, and a preliminary HUD that show the negative, or short amount, due from the seller.

In addition, when the home owner purchased the home originally chances are he was required to also obtain Private Mortgage Insurance (PMI) to protect the banks interest. As a result, not only does the bank have to accept the short sale, the bank must also ask the insurance company who holds the policy to accept, and cover the difference. All of this takes allot of time, with very little communication between the bank with any of the interested parties.

Ok, on the news almost every night, and all day we hear the stock market averages are sufering from the teeter-tooter affect, that is up down up down... While the market is going up and down, we also hear about the bail out that is being argued over by the Senate, House and Executive branch.

700 Billion dollars is a lot of money, and to hear our elected officials pushing for this bailout is leading the average American to believe that the Banks are broke, that there is no money to lend!

I have talked to many loan officers, and it would appear that there is money to be lent, alot of it! One loan officer has been told that she needs to sell one million dollars every month, and this bank has been purchased by CityGroup, and still they have this requirement.

I know that there is money to be purchased, I see the daily sales in my area, and I doubt that each of these buyers are using cash. Instead they are going to a bank, and purchasing the only real product that banks have to sell MONEY. Interest rates are low, just under 6%, and home prices have bottomed out. As they say on the stock market buy low, sell high. Folks it is time to act.

There are three factors to purchasing a home:

1. Interest rates
2. Purchase price
3. Down payment

Interest rates are LOW right below 6%, Home prices are low, the lowest they have been for years and of course bank owned properties can be had for almost 30 to 40 percent below market value. While both interest rates and purchase prices are low, the only big change is the fact buyers have to invest a little 10 to 20 percent. Folks, it is time to act, 2 of the 3 points are low and there are many great deals to be had out there.

I have been in the real estate profession for several years now, and I believe now as I believed when I got into the business, that home owner ship isn't a right it is a privilege and yes, it is "the American Dream". Over the years, the government, mortgage companies, real estate agents all were saying the same thing:

Don't rent, your flushing your money down the toilet, buy a home.

With the availability of what seemed to be an endless supply of money, and through creative financing which sometimes meant crossing the gray line by going stated, using 125% loans, pick and pays or an ARM, and lets not forget "No Down Payment" loans! The home buyer could even role all closing costs into the loan! So, those who once only had the option to RENT could now OWN a home, Yippy everyone could achieve the American Dream!

I remember that Wells Fargo even had the Million Home Challenge, its goal was to get one Million people into homes using their great products. I need to see what ever happened to it, I wonder, did they every achieve their goal?

Home buyers are always amazed that owning a home comes with responsibilities. First they find out that not only are they paying towards principle and interest, they also have to pay taxes and insurance. Further, if a hot water heat leaks, or the HVAC needs to be replaced they can't call the landlord because they ARE THE LANDLORD. Home ownership is something one must strive for, but it doesn't suite everyone.

Owning a home is allot different than renting one.

• First big different is that the owner has a vested interest in the property, assuming he only received a loan at 80, 90, 95 percent of the actual value of the home and having put down up to 20 percent to close his deal he has a substantial interest in the property.
• Second the owner of a property has to worry about maintaining it, painting, roof repairs, cutting, fertilizing and watering the lawn.
• Making the mortgage payment on time, otherwise not only will he lose the property, but he stands no chance of ever getting his down payment back.

Over the years, I have come to believe that there are those who should buy and those who should rent. Home ownership is a privilege that has with it many responsibilities. Unlike a tenant who only needs to pay his rent ( ON TIME ) and not destroy the property the home owner must protect his investment by maintaining his asset. Once upon a time, when owning property meant something, only land owners had the right to vote due to the fact that they had a vested interest in property,and the majority of taxes where than as is the case now paid the majority of the taxes!

If you are currently renting a home and considering buying, please do some soul searching, then pick up your phone call me for a buyers consultation.