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.
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
Hot question of the day: I owe $X, do you think the bank will take $y?
When selling your home via Short Sale, most people think the bank is concerned about what is owed on the property. Regardless of what is owed, the bank’s only concern is what the property is currently worth.
That means, if you owe $1.5mm dollars on a beautiful waterfront home and the surrounding waterfront comparable sales point towards a price of only $900,000, the bank wants an offer around $900,000. Will they do their due diligence to make sure they aren’t giving it away: YES.
If you need to sell and find yourself upside down in value, it’s time to Short Sale. It’s the best option if a Loan Modification doesn’t work or doesn’t help. It’s the best option as opposed to a Foreclosure.
Short Sales are very complex and take everyone working together to finally get an approval from the Banks. To learn more about short sales you can go to our Short Sale Information Guide.
A trend has started to emerge within the Short Sales that we have been negotiating. The banks, for what ever reason, have denied several short sales due to lack of communication with the Owners.
If the owner has fallen behind on payments, the lender will often start collection calls – sometimes twice a day! Even after we have a buyer for the house and have submitted an offer to the lender, the calls keep coming in. The banks are so over capacity with short sale business, the different departments within the bank have no idea of what is happening in the other departments. Therefore, you can tell the collection agent that you have a short sale till you are blue in the face, but they will just call again tomorrow.
The owners, can’t blame them, get irritated and stop taking the collection calls. At some point in the process the negotiations start to happen, the short sale attorneys representing the seller are communicating with the lender, the listing agent is communicating with the lender, but the seller/owner has stopped communication due to the harassing collection calls. At that point, several sellers/owners have received rejection letters due to “lack of communication”.
This has happened with Wells Fargo’s short sale department….so far.
Short Sale Tip:As much of a pain as it is, take the collection calls and tell them, “I am short selling my home, I have a contract that we have submitted, we are waiting for your negotiator to give us an answer, are you the negotiator?”
Short Sale Tip Bonus: Send your bank a certified letter stating the above.
Short Sales are a mess, but they do serve a purpose. In this slow and messed up process with the banks, the more communication you can have with them, the better!
Jacksonville Short Sale Specialists – RE/MAX Agent
The chart below is courtesy of Zillow. It shows the current pricing trends in several areas of Jacksonville. The graph points towards a slowing in the price drops on homes for sale in our area.
In the past month there has been numerous real estate predictions from hundreds of sources. Economist, local papers, national papers, National Association of Realtors, local realtors, mortgage brokers, talk show host, etc. Just about everyone of them fall into one of 3 categories:
The Prices are going down
The Prices are stabilizing
The Prices are going up
I decided to unveil the Official Officer 2010 Real Estate Prediction:
Buyers will buy because they want a home. They will choose the best location that their money can buy. Their money will go further this year than last year and they will be happy with the purchase for many years to come. Sellers will be able to sell their home in 2010 – if it is priced competitively, in good condition, and has good curb appeal.
Not sure which one of the many predictions from so many sources will prove to be most accurate, however I’d bet I’m fairly close to #1.
Jacksonville Real Estate Agent – Jacksonville Homes
Short Sales are about to finally speed up! The Treasury department is putting big pressure on mortgage companies to speed up the short sale process. The MAJOR change:
Answers within 10 days from the bank when a Short Sale offer is submitted
This change can’t happen soon enough! However, the time line actually starts April 1oth, 2010. Lenders can go ahead and start complying sooner if they choose. They have financial incentives to approve these sales and get them off their books.
Short Sales have been a grueling process for just about everyone involved. Mostly due to the extremely long process it takes to get any information from the lender. This big change will finally force banks to make a decision one way or another.
A mortgage company has incentives to move the property through a short sale rather than a foreclosure. Other than the financial bonus from the government, the bank benefits in that the house is sold by a willing owner. A willing owner keeps the house up, keeps its curb appeal in good condition, and genuinely works to help get it sold. A foreclosed home is the opposite. The bank spends money through attorneys repossessing the home which is often left in ruin due to an unhappy and irritated homeowner vacating fast.
I anticipate the sales of short sales will start happening much quicker as Buyer Agents will be able to show potential buyers the property even if the buyers have a tight time frame to purchase, close, and occupy the home. This is good for Sellers and Buyers!
Short Sale Realtor in Jacksonville Florida – Jacksonville RE/MAX Agent
