The Short and Long of It: A Pre-Foreclosure Reality
If you haven’t already heard the phrase “short sale”, you must be living in denial or hiding under a rock. In our 2008 real estate reality, short sales will fuel realtors with 70% of total annual real estate transactions. Short sales will also provide an overwhelming number of homeowners with the opportunity to avoid bankruptcy. That’s a hard to believe fact that we all can no longer afford to deny. Snap out of it sleepy homeowner, your home value and your credit rating may be in jeopardy.
Here’s the deal. If you feel like your mortgage broker sold you an adjustable rate mortgage product that was just too good to be true, you’re right. In 2005, you could have purchased a 3.9% adjustable rate mortgage that has now turned into your 2008 10% rate nightmare. So, where is your mortgage broker now? You can bet that he or she is not calling you to chat you up about a “refi” opportunity. Forget about your mortgage broker. Think mortgage lender. Then consider how you might convince that lender that you are worthy of forgiveness and deserving of a chance to avoid foreclosure on your homesteaded property.
How does a short sale work? Basically, a short sale occurs when a lender approves of a sale price that is less than the amount owed by the borrower. First, the borrower/seller must demonstrate a financial “hardship”. This can be accomplished by proving that your mortgage payment amounts to 40%-50% or more of your monthly gross income. Second, the borrower/seller must cooperate by submitting all required financial documentation to the lender. Third, the borrower/seller gives his or her realtor the authority to speak directly with the lender and the lender agrees to an asking price based on considered comparative market analysis. Fourth, the realtor or attorney then sells the house (hopefully) at that competitive asking price.
In short sales, the biggest hurdle that borrower/sellers have to overcome is their pride. Then they have to understand that it may take 120-180 days to actually get to closing. Think about it, these days the banks are so overrun with potentially defaulting customers and the paperwork that comes with them that there will be no race to closing these short sale deals. During the delay, make sure that you renegotiate your monthly mortgage payment obligation. Don’t worry, the lender will agree (but you need to get it in writing).
If you feel like you are a candidate for a short sale transaction, don’t get started too late. You don’t have to be behind on your mortgage payment in order to begin the process. If you wait until the lis pendens (foreclosure) has been filed, you have waited too long.
This New Year brings a harsh reality. In 2008, there will be two times as many homeowners in financial trouble as compared to 2007. Do yourself a favor, hire a competent attorney or real estate agent to assist you with any short sale of your home. You can kick your mortgage broker later.
By Charlie Hounchell, Esquire
Please be advised that this article does not constitute legal advice nor does it provide any basis to form an attorney-client relationship. Nothing in this article should be copied without the express permission of the author.
Mr. Hounchell has a law degree from The University of Florida College of Law and he is a partner in The Law Offices of Charles A. Hounchell, P.A. â€“ Attorneys & Counselors at Law, in Tampa, Florida. Mr. Hounchell obtained his undergraduate degree from The George Washington University in Washington D.C. and he obtained his MBA in International Management from the American Graduate School of International Management (“Thunderbird”) in Glendale, Arizona..
Mr. Hounchell is a licensed real estate agent with Smith and Associates, Inc. www.smithandassociates.com; www.livecasanova.com. He has lived in many different countries, including Spain, Brazil, Argentina, Mexico and Germany and he speaks Spanish and Portuguese. A significant portion of Mr. Hounchell’s law practice is concentrated on Real Estate Law. He can be reached at 813-230-3376 or email@example.com