Is Your Home Underwater?

You’re not alone. Over 75% of Las Vegas home owners are in the same boat. In today’s Las Vegas Real Estate market most homes are “underwater” in value, meaning homeowners owe more than their house is worth. Who would have known that the Las Vegas housing market was going to crash? Are you struggling to make mortgage payments on a property that is worth half the value of what you purchased it for? This is far from the american dream. No one wants to lose their home and there is no need to drown in the sea of debt and foreclosure. Stop feeling overwhelmed and powerless, get rid of that fear in your stomach. Take action and get your life back on track. We are Las Vegas Short Sale Specialists that have the power, knowledge and experience to short sale your property and minimize the damage to your credit. You may even be able to walk away with no deficiency to the bank. The best part of all is that it our services are FREE. The bank pays us. You pay no commissions or closing costs associated with a short sale!

What is a short sale?

A short sale is when your home sells for less than the debt you owe against the property and the lender(s) agrees to accept a short payoff. This means the lender(s) agrees to accept less than what is actually owed on the mortgage. Foreclosure is the legal process in which a lender(s) seizes and sells the property due to a borrower being in default of loan payments. The lender(s) seizes the property that the loan is secured by through the foreclosure process, which consists of a notice of default, notice of sale, and the sale of the home known as the trustee sale.

Why do a short sale?

If you owe more than your home is worth and are about to fall behind on your mortgage payment or know that you will be unable to pay your mortgage in the near future, contact us right away. A short sale may be the best possible option for you and your family to try to avoid foreclosure. Time is of the essence and doing nothing will assure a foreclosure which is your worst possible option. To short sale a home that is worth half of what you owe and be relieved of any deficiency to the bank is simply the way to go. Life is too short to have any unnecessary stress on your shoulders weighing you down. Please read the “advantages of a short sale” in the paragraphs below.

Loan modification vs short sale?

The bottom line is that banks may agree to modify your monthly payment and interest rate for a certain time frame, but they will NOT lower your principal balance to your home’s current market value. Banks are not legally obligated to change the terms of your loan and government assistance programs are strictly voluntary, if you qualify. Legal fees, foreclosure costs and interest will be added to your new modified loan and principal balance which were incurred during the modification and trial modification process.

You will have a higher principal balance than what you started with and will still be “underwater”. You are basically putting a small band-aid on a massive wound hoping to stop the bleeding. A short sale allows a homeowner to sell their home at current market value making it a win for all situation for all parties involved. The bank avoids costly foreclosure procedures, the seller gets out of a bad situation, and the buyer gets a good deal in todays market.

Lets just cut to the chase. You will become a renter instead of a homeowner. The only difference in renting from the bank (loan modification) is that any maintenance or repairs will come out of your pocket. After we have negotiated and closed on a successful short sale for you and you rent from a landlord, they are responsible for maintenance and repairs such as an AC unit giving out in the middle of the summer.

Why would the bank accept a short sale?

Foreclosure costs are an expensive and lengthy process. If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. Banks are not in the business of holding onto non-performing assets declining in value daily. Keeping properties maintained, making repairs, keeping utilities on and the administrative costs attached to these activities are all costs the lender would prefer to avoid. If a foreclosed property becomes vacant or vandalized, it will cost the bank time and money to remedy. A successful short sale eliminates most of these costs.

What are the tax consequences of a short sale?

After a successful short sale has been approved and closed, your bank is required by law to provide you a Form 1099-C (cancelation of debt). The 1099-C will show the IRS the amount of debt which was cancelled or forgiven. Debt that is cancelled or forgiven by a lender must be included as income on your tax return and is taxable. This amount must be reported on Form 982 and must be attached to your tax return.

The Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the cancellation or forgiveness of debt on their principal residence. This provision applies to debt cancelled or forgiven in calendar years 2007 through 2012. Up to $2 million of cancelled or forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

For more information please see The Mortgage Forgiveness Debt Relief Act as it appears on the IRS web site.

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Can the bank come after me after a short sale?

Yes, unless your short sale was negotiated so that the bank(s) releases you from any future liability discharging the “deficiency balance” (The difference between what you owed and what the home sold for). Each short sale is unique and varies per its individual circumstances. Las Vegas Realty Specialists have the experience and knowledge to negotiate with banks on you behalf and produce real results.

After closing on a successful short sale, the bank(s) will issue you a 1099-C (cancelation of debt) You no longer have an obligation to repay the bank(s). Banks cannot legally come after you to collect a deficiency balance. However, this may not be the case for everyone, the bank(s) may or may not choose to discharge the debt owed and could come after you for a deficiency judgement.

Should I hire an attorney to short sale my property?

Yes, if you want to pay top dollar for a service that we as licensed Realtors provide FREE of charge. With all due respect to attorneys, they do not work for FREE and do not negotiate your short sale transaction themselves. They hand off your short sale to their assistants and get updates from time to time. People tend to pay for a false sense of security hiring attorneys. Are they going to refund your money if they cannot produce a successful result? We handle your short sale transaction from the time you list your home to the close of escrow.

How will a short sale affect my credit?

Every individuals credit history before a short sale is different and results will vary. A short sale can affect your FICO score for up to 24 months. On a credit report there is no reporting item for a “short sale” and it is generally reported as “Paid in Full” or “Settled.” This minimizes the damage to your FICO and allows you to begin rebuilding your credit. A home owner who has negotiated and closed a successful short sale may be eligible for a Fannie Mae mortgage after 24 months. Investors who have done likewise are also eligible for a Fannie Mae backed investment mortgage after 24 months.

How will a foreclosure affect my credit?

A foreclosure will remain as a public record on a persons credit history for 10 years or longer. Your FICO score can be negatively affected for up yo 4 years and may be lowered anywhere from 200 to over 400 points. Home owners who lose their homes to foreclosure are not eligible for a Fannie Mae backed mortgage for 5 years. As for investors who lose their property to foreclosure, they are not eligible for a Fannie Mae backed investment mortgage for 7 years. On a future Uniform Residential Loan Application (Form 1003) a borrower will have to answer “Yes” when asked, if have they ever been foreclosed upon or given title or deed in lieu thereof in the last 7 years. This will have a definite impact on any future interest rates.

Advantages of a short sale:

  • You pay no commissions or closing costs!
  • During the short sale process you can live in your home for FREE until it closes.
  • Avoid a “Foreclosure” on your credit report.
  • Avoid being sued by the bank for a “deficiency judgement” after foreclosure.
  • Avoid public notification of your debt, default and loss of property
  • Avoid “Bankruptcy”
  • Save your credit.
  • Sell your home for less than you owe.
  • You may be able to walk away free and clear without owing the bank a dime.
  • Stop the stress you are under (life is too short)
  • We negotiate with the banks and debt collectors for you.
  • You will be eligible, under Fannie Mae guidelines, to buy another home in 2 years.
  • Give yourself a fresh start.

How long is the short sale process?

This process is a lengthy one so please be patient. From the time an offer and short sale package are submitted to the bank, it can take 3-4 months or possibly longer to close the transaction. Each short sale is unique and all the circumstances involved as well.

Do I have to be behind on my payments?

Each bank works differently when it comes to this subject. While some banks might not require you to be late in payments, others will before they will consider a short sale. Generally, the files that get priority are those that are behind on payments.

What if I have a 2nd mortgage?

No problem. Most homeowners have two mortgages on their properties. We negotiate a short sale with the second lender as well as the first. If the 2nd loan is with another bank, they will need to approve the short sale separately. We have the experience and knowledge of being in the short sale trenches to negotiate and close these transactions successfully.

Can I sell my home to a relative?

No. Most lenders will ask all parties to sign an Affidavit of “Arms Length Transaction.” This means that no party to the short sale transaction is a family member, business associate, or shares a business interest. There cannot be any hidden terms or special agreements amongst the buyers, sellers and/or agents such as money, kickbacks, gifts and/or arrangements, to move back in or ever regain title to the property after closing on a short sale.

What if I have a Notice of Default?

Don’t panic! This is not a notice of any legal action towards you. Creditors and lenders are legally obligated to advise you in writing that you have missed payments. We can still help you with a successful short sale. However, the clock is ticking and time is of the essence. The short sale process has many steps. Please contact us immediately so that we may get started right away.

What if I receive a Notice of Sale?

Depending on the lender(s) we may be able postpone the trustee sale date and complete a successful short sale if there is an approved offer on the property. If there is not an approved offer on the property and the Trustee Sale date is less than 7 days away, it is highly unlikely that anything can be done.

What Does The Bank Consider a Short Sale Hardship?

Generally that depends on the lender(s) considering the short sale request. A “hardship” is considered an unexpected form of a financial crisis. Lender’s accept short sales for two specific reasons: the seller has a hardship, and/or the seller owes more on the mortgage than the home is worth. The more proof of a hardship which a borrower is able to produce, the better chance they have of getting a short sale granted.

Some examples of “hardships” that are accepted by lenders are:

  • Job loss
  • significant income loss
  • Job relocation
  • Military relocation
  • Divorce or split of domestic partners
  • Unforeseen increase in living expenses
  • Payment adjustment (adjustable rate mortgage)
  • Death of principal mortgagor
  • Death of mortgagor’s family member
  • Inability to sell due to no equity
  • Unable to rent property
  • Incarceration

Should I keep my HOA dues current?

If your financial situation allows you to do so, it is best to keep the HOA dues current and paid. You don’t really know whether the short sale lender will approve any money towards the HOA. If the seller decides to stop paying the HOA and the short sale lender does not approve any funds from the proceeds to go towards the unpaid HOA balance, the seller will be required to pay the HOA plus any late fees and attorney fees (if the HOA has begun court proceedings to file a lien). Long story short, this could be a real deal killer if the HOA is not paid off and satisfied.

  • This information is meant for general information purpose only is not to be construed to as tax or legal advice. Please consult your CPA or Your attorney for legal counsel.

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