After about 4 months of not paying your mortgage, most banks have an automatic button that gets pushed to start the foreclosure process. You will know when this happens as they will “serve” you papers.
Being served foreclosure papers is not fun. The first thought is that you must move by morning….which isn’t true.
You will have to move, but not for some time. The average time in Florida is 12-18 months for a bank to file suit and finally auction off the house. You have time on your side.
Important items to know:
When served papers, Lis Pendens, you have 20 days to respond to the suit. Talk with an attorney immediately. Just about every attorney on the planet will tell you that you need to respond to the suit. If you don’t, it gives the go ahead for the bank to move forward.
What’s your plan? Obviously you are planning on leaving the house at some point. Know your options! At all cost, avoid a foreclosure. There are too many good options available to get rid of the house vs just walk away from the home and letting the bank take it back. Avoid Foreclosure Options
Don’t wait too long to take action! If you decide to do a Short Sale (which you should), don’t wait until the last minute. It’s a buyers market so homes are selling much slower. We need time to get the home on the market and get it sold.
Work with Professionals. Most REALTORS are staying away from Short Sales as they are much more difficult and have many potential pitfalls along the way. Make sure to work with a Specialists team like the Brad Officer real estate team. Working with the Brad Officer real estate team, you will work with a prominent Short Sale attorney who will represent you in negotiations with the bank and the transaction.
A few years ago, if you mentioned a Short Sale, most people would look at you with a puzzled look on their face. Today, many are becoming educated on exactly what a short sale is…first hand. It’s becoming a common term in every household.
I predict over the next 12 months the term “Short Sale” will be used almost as much as “Foreclosure”.
The driving factor:
The banks are increasingly more willing to allow a seller to sell a home for less than is owed = A Short Sale. The banks would obviously rather sell while an owner is keeping up with the property trying to get it sold vs. a Foreclosure where an owner has usually bailed out months if not years before the bank puts the property up for sale.
HAFA which stands for Home Affordable Foreclosure Alternatives program. This is the Treasury Department releasing guidelines for lenders to follow when completing a short sale. “Guidelines” being the key term as it is completely voluntary. This program kicks into gear on April 5th, 2010. If nothing else, it’s sure to help streamline the system to some extent. You can read about HAFA here.
An almost daily question: Should I keep paying my mortgage with my house being so far upside down or should I just let it go?
The real answer is: It’s up to you.
Some things that may help you decide:
Pay or Go . Com: Handy tool for doing an actual cost basis/financial approach to the decision making process. Make sure to read some of the links to national stories on the subject.
Watch this ABC prime time news story. It not only talks about the growing trend of strategic defaults, but also the irony of the Mortgage Bankers Association recent Short Sale of their own corporate building.
What ever you decide, know that you have several options including a Short Sale. None of the options are “pain free” as most will come with some form of a either extended terms in mortgage or hits to your credit score. If you need help to sell your home, Contact the Brad Officer Real Estate Team.
Jacksonville RE/MAX Specialists Agent – Short Sales
One of the many issues with loan modification is that you must “qualify” for the modification. A modification is complicated with a good amount of red tape. Many home owners sit and wait, not knowing their housing status fate, just to find out that they get denied due to one of many factors including but not limited to: “not enough income”.
When your Loan Modification gets Denied, you have Options
You basically have 3 options after a denied loan modification:
Find a way to Pay the Mortgage and stay put. Many go this route if they still have the income to support the mortgage, albeit barely enough income.
Short Sale and move to something Cheaper. If you just can’t pay and you value your credit score, do a Short Sale. Move to a rental house that is probably nicer than your house for less monthly expense and then buy a home at the new values in a year or two when you get back on solid financial ground.
Don’t pay and Walk Away = Foreclosure. Unfortunately, this is happening way too often. Don’t go this route! You can most likely do a Short Sale which is far better on your credit report than a Foreclosure.
The Mortgage Banker Association has completed a short sale on their office building after owning it for a very short period of time….less than 2 years.
Not a big deal, other than the fact that they represent an industry that has made it very very verydifficult for struggling homeowners to complete a short sale or do loan modifications.
Funny thing about all this: the cheif executive of MBA, John Courson, was recently asked about owners walking away from homes or stopping payment after trying to do the right thing by reaching out to the mortgage bank via a loan modification or a short sale. He responded with, “What about the message they will send to their family and their kids and their friends?”.
And now they just did a Short Sale which resulted in a nearly $30 million dollar deficiency. Deficiency is the difference from the amount they owed and the amount the property sold closed for. It gets better: They also defaulted on a lease and owe more than $1million in that debacle.
I think they just sent the clear message: they understand and fully agree that sometimes you need to sell while owing more than the property is worth.
Looking at a home owners options to sell a home is difficult when their home is worth less than they currently owe on the mortgage. Many owners have decided that being upside down in a home is not worth it, and they decide to stop paying the mortgage. This is known as Strategic Default.
Without arguing the “ethical” dilemma that many face in a Strategic Default, it’s better to just acknowledge that it is happening in every neighborhood in Jacksonville and Ponte Vedra.
Avoid Foreclosure: Do a Short Sale
If you are in the situation where you need to stop making payments on your home, it is inevitable that at some point the bank will choose to start the foreclosure process. This can all be avoided by completing a Short Sale. Check out Short Sale Information for Jacksonville home owners.
Strategic Default or not, if you decide to go the Short Sale route vs. Foreclosure, you will need a Hardship Letter. A hardship letter is simple, it’s your hardship that has caused your inability to continue making mortgage payments.
Examples of a hardship are:
Job Loss
Loss of Income
Transfer to another city
Divorce or Seperation
Medical emergency or Illness
Death of Spouse or Partner
Military Duty
Failed business
Etc.
Strategic Default is a tough decision, but a Foreclosure is bad news on your Credit Score. A short sale is a much better alternative as it has a much less impact to your credit score.
This annual event always pulls a large crowd of boaters from every walk of life. Food and entertainment surrounded by every boat imaginable from sea kayaks to yachts. Check out the official Jacksonville Boat Show here.
Hot Question of the week: When should I list my home for sale?
I’ve been getting this question a lot more recently. There have been many home owners who would like to sell their current house and buy a new home but they have been waiting for the market to turn.
Before you put your home up for sale, have the proper expectations for the current real estate market:
Competition: There are still a lot of homes on the market. Check out this Google Real Estate Map to see a birds eye view of just how many homes are on the market in Jacksonville, FL.
Pricing: If you purchased your home between 2004 and 2008, you most likely paid more than what it is worth today. You can read about the value drops in a CNN Money magazine article. If you are attached to what your neighbor sold for in 2006, it’s time to get over it and realize yours is worth less in 2010.
Who is Buying: The main buyers on the market are first time home buyers. If your house is above $300k or is in need of repairs, it won’t match what the majority of the current buyers are looking for in their first home purchase.
The Good News for selling a home Now:
Mortgage Rates are very attractive: Your potential buyers will see 5% as a standard 30 year fixed principal and interest APR rate. That is low and bringing many people into the home market! If you are able to sell and buy another home, you will most likely get a better rate than what you have today.
Good ones sell fast!: I’ve had several recent listings that have sold within 15 days of putting them on the market. The key for selling fast was pricing them aggressively from the beginning, very clean houses and yards, great pictures syndicated out to all the major house hunting search engines.
Multiple offers: Several homes I’ve sold in the past few months have had multiple offers within a very short time frame on the market. Again, they were great homes at great values.
Lots of people looking: Listening to the news you would think there isn’t anyone out shopping for homes. To the contrary, I’ve had so many showings in the same day that realtors and their customers where in the home at the same time….during the slow weekdays! That’s old school 2005 scenarios!
Back to the original question of “When should I list my home for sale?”.
The correct answer is that it’s a tough market to sell your house. If you need to sell, have the right expectations, price it right from the beginning, and keep it in great shape while on the market. The tax credit is helping to drive the market and that stipulates that the home buyer must be under contract for their new home by April 30th and closed by June 30th. Don’t wait until April to get it on the market if you can help it. Now is the best time!
If you would like to see information about selling your house, check out our Marketing and Selling Plan. If you find yourself in the tough situation of owing more than the home is worth, make sure to read about Short Sales.
RE/MAX Short Sale Specialists – Waterfront Homes and Properties – Jacksonville and Ponte Vedra, FL
Double lot on Trout River. Complete with boat dock and boat lift. From Trout River you have access to some of the best fishing and water sports in North Florida via the St Johns River, the Intracoastal, and the Ocean. House is well cared for and ready for move in. Contact Brad Officer if you would like to see this house or have your REALTOR schedule a showing for MLS# 514438.
Brad Officer – Short Sale RE/MAX Specialists – Jacksonville and Ponte Vedra, FL
As home values have dropped by 20-30%+ in Jacksonville and Ponte Vedra, FL, many of the real estate transactions taking place are Short Sales. The only thing short in a short sale is the amount of money to cover the existing mortgage. By nature, short sales are Long Sales interjected with frustration, happiness, frustration, and back to happiness. They take forever.
So why do Short Sales take so long? I’ve attempted to answer this question in a 2 part answer:
Answer Part 1:Understand the volume. After all the red tape and big bank shenanigans to try and get you to make just 1 more payment, there is a person at the end of the line that is the “negotiator”. This persons job is to look over the Short Sale Package and make a decision one way or the other. You will never have anyone from the bank give you this persons contact info, just won’t happen. Your contract for purchase of your property must sit and wait in line behind 499 other bonafide real estate purchase agreements waiting for an answer on their short sale. This part takes forever.
Answer Part 2: Understand the Financial impact to the bank. If a bank can put together systems to check your credit and send you junk mail offering all kinds of credit card offers every 3 days, they can surely put together a system and processes to flush thousands of short sales through every day. Obviously they have the resources to do this. However, they choose not to.
When your mortgage is $300,000, they have an asset on their books worth $300,000. Even if you stop paying, it’s still an asset. Once they agree to take $200,000, they are instantly worth $100,000 less. So in essence, they are strategically taking calculated losses by accepting short sales every month….but not too many as they would be instantly worth much less. Stock holders would panic and the bank could potentially collapse.
Conclusion: Once your Short Sale has a contract, it takes the bank 60+ days to give us an answer. The banks are being pressured to speed up the process, but that’s risky business (see answer part 2 above). The best way to make sure your short sale goes through without any issues: Work with an agent that has a lot of knowledge in Short Sales. If you are reading this, you found one. Meet Brad.
Horror stories are now floating around everywhere about failed Loan Modifications. I’ve witnessed many of these first hand as friends have attempted to get modifications and they flat out fail.
Several Major Concerns with a Loan Modification:
You agree to “modify” a loan on an over valued house that could take YEARS/DECADES to break even. Bad idea. So now you are pretty much payment over priced rent to a bank on a property that you won’t have basically any ownership in until WAY OFF In the future. Just a bad idea.
70% of loan modifications result in HIGHER Payments! Check out the Loan modification article from Wall Street Journal. This is not 50/50 but instead a very high likelihood that you will get a higher monthly payment when you jump through all the hoops.
You will NOT get a principal reduction. Principal is the balance of what you owe the bank. See the article above.
Crazy amounts of frustration, red tape, and bank shenanigans will be your path. Need a story of what it will look like. Read this persons experience with a loan modification process. If you need more stories, ask around in Jacksonville, Ponte Vedra, and Orange Park, FL. Many of your friends and neighbors are going through this first hand.
Only 7% of those who applied for a modification actually received a permanent mod. 7% is a tiny fraction.
If you are one of the very few lucky ones who actually get approved for a permanent modification, it’s a 25% chance that you will fall behind on payments again. Read this article from Bloomberg about loan modification recipients fall short.
If you have faced a financial hardship and find it difficult or impossible to make your mortgage payment, You should face reality that your house needs to be sold. Get out of there and move on to the next chapter.
Short Sale, Deed in Lieu of Foreclosure, and Foreclosure are your next options to get rid of the house. A short sale is the banks preferred option and will almost always be recommended when you do not get a loan modification.
Step 1: Get pre-approved before shopping for your Waterfront Home
Human nature dictates that we must always go shopping for a new waterfront home before we line up financing. It’s a fact of life. Rarely have I ever met anyone that gets their financing lined up first before they started shopping. I’m guilty as well.
The current mortgage market has made it increasingly difficult for home buyers of luxury homes, waterfront homes, and vacation homes to get financing. CNN Money covered the issue very well: $8mm in assets and can’t get a mortgage.
The worst hit is the vacation home market. Many of my contacts throughout the vacation home developers have stated that the only buyer is a cash buyer. Most of the buyers who would normally qualify for a million dollar property are being turned away despite having 50% to put down on a piece of land.
All the more reason to find out if you can get a loan first, before you get emotionally attached to a new home. Contact Brad and ask for a Mortgage Broker referral to get started!
Waterfront Homes and Properties For Sale – Jacksonville – Ponte Vedra – Florida
I have many articles within this website advising clients to go down the path of a Loan Modification before they go for a short sale. I recommend this as many times the banks will want you to try a loan modification before they would want you to short sale. It’s typical bank red tape.
Realistically, a Loan Modification is a BAD IDEA! Here is why:
Modify the current Balance PLUS: Your bank will attempt to Refinance your current balance including closing cost and any late payments. This will ADD to your current Balance. Your current balance is more than the home is worth. Bad Idea.
NO Reduction in Balance: Your bank will not agree to reducing the balance you owe them. You may think they will, you may have read something on their website, you may have a friend who is telling a white lie, but it will not happen.
Affordability: End of the day, you can’t afford the house. Most likely a hundred or a couple of hundred dollars reduction in monthly payment will not help you in the affordability area.
Limited Success thus far: A tiny fraction of people going for a loan modification actually get one. The problems are well documented within every real estate and news source in the country. Just Google “Loan Modification problems” or any other string of keywords. The stories will give you a small glimpse in to your future modification struggles.
Credit Score implications: Most banks will not work with you on a modification unless you stop paying your mortgage. Once that happens, you will start getting dings to your credit. 3-4 months into it, you will still be getting the run around from your bank. Around 4 months of non-payment many banks have an automatic foreclosure button that gets pushed and you may end up getting served papers. Now you are in a bigger problem.
Bad Investment: Your house is your home but it is also an investment. Investments can be good or bad, but you must know when to bail out. If the investment has gone bad, it may take a decade or more to get back to the value where you break even. (Remember, real estate typically has about a 2% average appreciation.) You will be paying interest on an overvalued investment. Interest is also known as Profit to the banks.
Delay the Inevitable:If you are one of the lucky ones to reduce your monthly payment to something that is manageable, congrats! For those lucky ones I anticipate many will end up in Foreclosure or a Short Sale at some point in the next few years. I believe this because their houses will still be worth less than they owe which will prevent them from selling should another job loss happen, a medical emergency, a job transfer, etc.
Options for a Over Mortgaged home that you can no longer afford:
Deed in Lieu of Foreclosure: Deeding the house back to the bank voluntarily. Bank will want you to attempt short selling first and then might consider this before they foreclose.
Foreclosure: Walking away and giving up.
We meet with clients daily who need to sell a property and are overly frustrated with their bank. Don’t wait too long before you make the decision to sell. It still takes time to sell a home in this market: Even a short sale. Contact our team if you would like to schedule a meeting to discuss your options.
Jacksonville Short Sale realtor Specialist – Jacksonville REMAX
The Mortgage Banker Association has completed a short sale on their office building after owning it for a very short period of time….less than 2 years.
