The short sale is going to be different than just selling. You will seriously need a real estate agent who is very, very experienced with short sales. You and your agent will be negotiating with your lender(s) to accept less than what you owe on the loan. The lender forgives the remaining balance of the loan. You are mainly trying to sell quickly, and you WILL NOT get any money out of the deal. All the money will go to paying the closing and paying off the lender(s).

Here’s what you need to do for a short sale:

1. Get a real estate agent that is very experienced with short sales.
2. Make sure that your property is listed.
3. Have a 3^rd party authorization ready for your agent and/or other parties that will need your permission to speak to your lender on your behalf.
4. Call your lender(s) – be sure you speak to someone directly in loss mitigation or short sale department. Or speak to a supervisor.
5. Make sure that you write down everything that the lender is going to tell you that they need from you. They may even send you an actual short sale application and/or package.
   1. Hardship Letter – this letter will let the lender know why you need to do a short sale. Let the lender know what has seriously happened to you. Maybe there was some extremely serious injury/illness within the family, that in turn caused you to lose your job. Maybe your rates and payments have gone up too much due to ARM. Just tell the story and let them know how desperate your situation has become now.
   2. Proof of Income – or proof of a loss in income. Bank statements, tax returns.
   3. Expenses – how much are your monthly utilities, groceries, car payment, gas, phone, cable, etc. Have this paperwork ready!
   4. A value statement/BPO/CMA – this statement will show your property’s current market value. You may even include a summary of the condition of your property.
   5. Net sheet/HUD1 – will show exactly how much the lender(s) will end up with.
   6. Contract offer - the signed contract between the buyer and seller.

Once you begin your short sale process, try to have patience. Remember that you are trying to convince your lender to accept less than what you owe.

Make sure that you are always talking to the right person in the right department with your lender. Do not rely upon the lender to be following up with you regularly. Always make sure that you are following up constantly with the person who is assigned to your file. Don’t let several weeks pass by without knowing what the current status of your short sale is.

And in some extreme circumstances, if you feel that everything is just being stalled too much, it may help to have the buyer’s lender contact your lender. Having that lender communicate with your lender may help ease the mind of your lender. Maybe just hearing from that “big entity” that the money is ready and just waiting, will be enough of a nudge to get your lender to finalize the short sale.

Barbara Partaka
Home-Buddies

ShareThis

The politicians and the feds have taken as much action as they can to help the foreclosure problem; however, they can only go so far. Even though congress has approved H.R. 5830, if passed it would allow for $300 billion to refinance troubled home owners out of their adjustable rate mortgage (i.e. ARM). But this would not be enough to save many home owners who will lose their house to foreclosure. Therefore, we will need market actors to “step in” and buy these foreclosed homes to stabilize neighborhood prices.

How will the act of foreclosure investors stepping into the market ultimately help our country get out of the foreclosure mess?

First, as they are “stepping into a neighborhood” that has had several foreclosures, it will stabilize the prices within the neighborhood. Currently, foreclosures continue to add excess inventory to markets that are already over-stocked with homes to sell. Investors will cause a reduction in inventory that will then bring stability to the market.

Second, it will reduce crime by cleaning up the vacant houses that squatters and drug users like to use.

Next, investors who purchase these homes will provide much needed tax dollars for local governments. Many people forget that local governments borrow money based on projected tax revenues. Because there are so many foreclosed homes, tax revenues are down and some communities are running the risk of falling short on debt obligations. Many smart Realtors already have taken notice to this emerging trend. As one Realtor put it, “Everyone else is suffering, but I’m smiling ear-to-ear…”

Although we may not like the thought of investors benefiting from other’s misfortune, we need the eye sores removed from our neighborhoods. In addition, we cannot depend on government to lend money that will ultimately end up being paid by all of us - the tax payers!

Cliff Pape
Home-Buddies

ShareThis

General Warranty Deed – very commonly used in the Midwest and Eastern states, but accepted nationwide.

As a buyer, you definitely prefer to have this deed. The General Warranty Deed is the one most commonly used. It also is the one that carries the greatest protection with it. The main advantage this deed has is that the grantor is agreeing to pay damages if the title fails at any time in the future. The grantor is giving a warranty (guarantee) to you that the title is clear of any “encumbrances” (liens, taxes, assessments, etc.), and that he has not given any rights, title, or interest of the property to anyone else but you.

Special Warranty Deed

Most sellers would prefer this deed. The Special Warranty deed places limits on the grantors warranty about the property. With this deed, the grantor claims the title “by, through, or under him, but not otherwise.” It relieves the grantor from any liability of claims against the title that did not come through him. He is only guaranteeing that he himself, has not personally done anything to affect the title during the time that he has had it.

Deed Without Warranty – widely recognized in the state of Texas

This deed falls in between the Quitclaim Deed and the Warranty Deed. It still uses the particular “language” that the warranty deed does to establish title, but it carries no warranty (quitclaim deed does not establish title). Title companies will usually not insure with this type of deed.

Quitclaim Deed – often misnamed as quick claim deed

This deed carries the lowest level of protection to the buyer. The Quitclaim Deed transfers only someone’s interest in real property. It simply just says that IF that person had any interest in the property, that they sign it over to you. They may not necessarily own the property being sold, but they hold responsibility for it. It does not establish title. The grantor might be on the title, or may have never been identified on that deed. He is only passing on his interest that he was granted in the property. He does not claim that the title is valid. He is not held responsible if any title defects are eventually found. Quitclaim Deeds are best used when the property will just stay within a family. Most often they are used to just get the other person’s name off of the title.

Special note: A quitclaim will not release you from your obligation to any mortgage loan, or other lien secured against the property. Refinancing is the best means to achieve this. The grantee must refinance the property using their own income, assets and credit, and they cannot use your income, assets or credit to get the financing approved.

Title companies will not usually insure with a quitclaim deed.

Grant Deed – most commonly used in the state of California

The Grant Deed is very similar to the Warranty Deed. The main difference between the two is the number of guarantees contained within them. A Grant Deed has two, and the Warranty Deed has three. The third one in the Warranty Deed that makes the difference: The grantor guarantees that if the title ever fails he or she will compensate the grantee (new owner) for any losses.

Another important note about Grant deeds, is that they don’t need to be recorded to be valid, nor do they need to be notarized to be valid.

The other types of deeds, of course need to be recorded and notarized.

Barbara Partaka
Home-Buddies

ShareThis

Energy and food have been the primary drivers on inflation fears.  This has understandably caused an increased expectation that inflation will be 5.2% next year according to Business Week data.  Recently Thomas Hoenig of the Fed warned that “inflation psychology” could become the biggest driver of inflation into the economy.

Maybe with all the chatter about inflation it’s time to take a step back and analyze the economy.  Lets for a second forget about $4 gas and $4 box of Cheerios.  The economy is barely growing, jobs are being reduced due to cost cutting, and salary increases (adjusted for inflation) have fallen to zero.

Overall, households may expect tighter budgets do to energy and food but, in reality, 70’s-style inflation will not occur.  Why?  Spending on energy and food substantially cuts spending elsewhere.  This has caused the weakest demand in 13 years which, in turn, is causing businesses to cut costs and lower prices rather than raise prices.  Unlike the 70’s where wages and prices were pushing up inflation.  Inflation is confined to energy and food.

We can really get a picture by looking at core inflation which excludes energy and food.  Core inflation is no higher than it was a year ago and is less than it was two years ago.  In addition, the past quarter core inflation numbers have slowed even more indicating that weaker demand is already preventing inflation from rising.

Time will tell if inflation stays contained to food and energy.  However, it’s worth noting that the unfortunate intrinsic meaning of this gentle outlook outside of food and energy is that it will require weak economic growth to ensure that prices stay down.  Given the problems in housing and credit, that is the most likely outcome.

Cliff Pape
Home-Buddies

ShareThis

TAKE ACTION NOW by contacting your lender. Keep your line of communication open. Do not wait to contact them until a few days before the scheduled foreclosure sale date. It then becomes very difficult for the lender to have enough time to put together your file and request a postponement. Some lenders even have their own internal policies in which they will not allow any type of foreclosure negotiations if it is within 5 - 10 days of the foreclosure sale date.

The mortgage company wants their money as much as you want to keep your home. They will use a little scrutiny in their decisions, so you should always show good intent. They don’t want to postpone or stop your foreclosure if it appears that you will be back in foreclosure again.

Ask for a postponement so you can have more time to get the necessary finances, or documentation that they need. Don’t expect them to automatically offer a postponement. Go ahead and ask for it. Show them, tell them, how willing you are to do what it takes to keep your home. The mortgage company needs time to pre-qualify you for a workout. Most often, while your file is in review with the negotiator at the mortgage company, they will place your foreclosure “on hold”, or give a postponement of the foreclosure sale date.

Find out what workout option you may qualify for in regards to your financial issues that you are facing with your mortgage. Several workout options that are usually available include: a special forbearance, a loan modification, a repayment plan, or a partial claim. Other less desirable options include a short sale, or bankruptcy.

You can also check with your lender and find out if they are one of the lenders in the “Project Lifeline” program. This program was announced by the Bush administration on February 12, 2008. The lenders under that program are supposed to contact homeowners who are at least 90 days delinquent on their mortgage payments and give those homeowners a chance to have their foreclosure process put on hold for 30 days while the lender tries to find a workout plan. Not everyone will qualify for the program. Some reasons you may not qualify are: if you have entered bankruptcy, if you already have a foreclosure sale date scheduled within 30 days, or your home loan was taken out to cover an investment property or a vacation home.

And, you are welcome to use our Free Step by Step Help guide that is available on this website.

Take action now. Good luck.

Barbara Partaka
Home-Buddies

ShareThis

Contrary to what many people may think, these are not lazy Americans. Many of them come from the hard working American cities that produce cars. Cities such as Detroit have unemployment figures that have reached 6.9%. As we all know this is a major shift in the automotive industry due to high gas prices and mismanagement by the big three top brass. Many people are seeking jobs that just aren’t there and those jobs will not return until our economy makes a turn out of this current recession. Earliest projections for a turnaround are not expected until mid 2009.

With a foggy economic picture there are many Americans who will need H.R. 5749 to get them through this rough time. The measure is important because it will provide support for battered Americans in hard hit local economies in the Midwest. In addition, it will provide stability to our nation as a whole.

Although HR 5749’s defeat is probably not over, with jobless claims on the rise, and an economy in a recession, politicians will have to take action as they head into an election year. Let’s hope that H.R. 5749 is passed in time to provide the much needed relief for the hard working unemployed.

Cliff Pape
Home-Buddies

ShareThis

You don’t have to already be in foreclosure to submit a hardship letter to request a new workout plan. As soon as you are facing some new financial issues that were not in your control, contact your lender and be prepared to explain what has happened. Make sure these key things are in your letter:

• Begin with your name, property address, and your loan number.
• Give a valid reason of why you have fallen behind on your mortgage. Include dates if you can. A loss of job, mandatory reduction in pay, medical disability or illness, death of someone who contributed income, natural or man-made disaster, a decline in earnings if self employed, incarceration of spouse, separation, divorce, or some unavoidable increase in your monthly expenses. Whatever your reason may be, have some documentation to back it up with. Have proof available.
• Explain what you are doing to try to correct the situation, and when you will be able to resume your responsibilities.
• Be specific about what you need in the new workout plan. Are you currently on an ARM and need a fixed rate. Do you need a lower rate? Or a lower monthly payment? Do you just need a few months to get your finances adjusted so you will be able to resume your normal monthly payment?
• Thank them for the opportunity to explain yourself to them. Let them know that you are willing to cooperate.
• Include the best way that they can contact you. If they cannot contact you within a reasonable amount of time, they may choose to close your file and not proceed any further.

We have already posted some example hardship letters on this site (Example Hardship Letter 1, Example Hardship Letter 2, Example Hardship Letter 3). Take a glance at those and get a good feel of how you want to write your hardship letter. And contact us if you have any questions or need any help. Good luck.

Barbara Partaka
Home-Buddies

ShareThis

With the rise in gas prices, the automotive industry understands economics and has already been innovating ways to combat rising gas prices. With new vehicles such as the 2009 Toyota Prius that will get 100 miles/gallon, the net gas price will be the equivalent to $1 dollar gas at the pump!

So you are probably wondering how this idiot came up with $1 gas prices when gas is hovering around $4 per gallon. Well it is simple math and economics.

First, we have substitution. This is what occurs when people have budget constraints and demand a certain amount of a goods based on a budget. People will choose substitute goods if it allows them to consume more in other areas. For example, we will all be more likely to buy a car that uses less fuel because it will allow us to eat more chocolate. Okay, stupid example but you get the picture.

This leads to innovation. In order to compete, car manufacturers design cars knowing that consumer behavior will shift in order to maintain the ability to - sticking with my bad example - eat more chocolate. Led by Honda and Toyota, even GM and Ford have rushed to develop cars that get 100 mpg.

In today’s market, assuming I have a fuel efficient car, I might be getting roughly 25 miles per gallon. If I were getting 100 miles per gallon, I could drive 4 times further per gallon. If today’s gas is $4 per gallon, I would end up with a net price of $1 per gallon compared to the average.

We don’t like paying $4 at the pump and the car companies had to listen and offer a car that will lower the “real price” to $1. Unfortunately, during 2008 we all feel tighter in the wallet but by 2009 we can get back to affording more chocolate by purchasing a well deserved new car! If you prefer to buy American, whatever that means, buy a volt.

This is the age of the consumer, so let’s tell them what we want, what we need, and watch them deliver!

Cliff Pape
Home-Buddies

ShareThis

Convincing your lender to accept a Deed in Lieu (DIL) of foreclosure, should only be used as your very last, extreme resort to avoid a foreclosure. It can quickly release you from all or most of your debt that is associated with your defaulted loan. It does not save your home, but it is a little less damaging on your credit report than a foreclosure would be. The credit report will still show that your loan went into arrears, how many months of late payments you had, and that the lender closed the account.

Even though a Deed in Lieu (DIL) is less time consuming, and less expensive than a foreclosure for the lender, as well as for you, most lenders will still prefer to negotiate a workout plan, or accept a short sale.

So what about a Short Sale? The short sale option, if the offer is accepted by the lender, is not as quick of a solution as the Deed in Lieu (DIL). The sale still must be approved and accepted by the lender. And you and your lender may not always agree on the amount. Your lender is basically allowing you to sell your home for less than what you still owe on it. And your lender is the one getting stuck with the loss. And in comparison to the effect upon your credit as opposed to a Deed in Lieu (DIL), the short sale is less damaging than a foreclosure, because it is usually listed as a “settled debt”. But, it is still harmful and can reduce your credit score by at least 200 points.

So let’s convince your lender to accept a Deed in Lieu (DIL). There are certain eligibility requirements that you must meet, before your lender will even entertain the option to accept a Deed in Lieu from you:
• Are you imminently facing foreclosure? Are you at least 31 days delinquent?
• Have you exhausted all means to avoid foreclosure?
• You, the borrower, must voluntarily submit a written offer of the Deed in Lieu and it must specifically state that the offer to enter these negotiations is being made voluntarily. You must list all the conditions for which the DIL will be accepted. Including the agreed upon transfer date of the property. On that date, the property must be vacant and clear of all your personal property.
• Usually the lender requires that you have listed your home with a Realtor for at least 30 days. They need to see that you have attempted to sell the property, but that you have been unable to sell the property. They prefer for there to be no other liens against the property at all.
• The property should still be occupied, unless you provide documentation that can verify your need to vacate the property, i.e. loss of income, increased living expenses.
• The property is not a rental investment, nor used as a rental for more than 12 months.

Keep in mind, that neither you nor the lender is obligated to proceed with the Deed in Lieu unless a final agreement is reached. The lender is not required to accept the Deed in Lieu. And as each day continues to pass, you may become further in default with your mortgage. If the Deed in Lieu has been approved, the lender must complete the process within 90 days that it was initiated.

Your biggest advantage in pursuing any solution to your financial difficulties with your mortgage, is to act as soon as possible! Keep yourself in a strong position to negotiate with your lender. Once you have become delinquent on your loan, the fees and penalties add up so quickly, that it becomes an even larger debt for you to overcome. Do something, and do it now! Good Luck.

Barbara Partaka
Home-Buddies

ShareThis

So here is some good news for you. Though it may seem like the mortgage company wants to foreclose on your home, the truth of the matter is that they simply do not. Why? If a mortgage company has to end up foreclosing on a property, then that home becomes their liability. One problem for the mortgage company is that they may be located hundreds or even thousands of miles away from the property. The longer a property sits vacant, the harder it is for the mortgage company to sell. They are responsible for the taxes, maintenance, keeping vandals away from the property, and so forth. They know that they will usually lose money, especially if they are the one who ends up “taking the property back”. The mortgage company can become “stuck” with it because no one else bought the property at the foreclosure auction sale. So the mortgage company would much rather be able to initiate a workout plan with the homeowner, in an effort to avoid the foreclosure sale date.

So, why does it seem like they’re beating down your door to kick you out? Remember, mortgage companies are still the biggest playing factor in real estate, due largely to the amount of properties they end up assuming after the foreclosure sale. They are not afraid to foreclose on your home. They really would prefer to avoid it. Any correspondence from the mortgage company to you is generally a form letter written by some heartless lawyer who is just doing their job. If you do actually get contacted by a real person, you should remember that they may often be a minimally trained employee reading from a pre-written script. Also, they may be limited from negotiating anything with you because they are not the actual “loss mitigator” who has been assigned to your file. Because you are one of a million “loan numbers” to your mortgage company, they can have a tendency to let themselves become insensitive. Then they let themselves think that they don’t need to or want to specifically help you.

The mortgage company’s real interest lies in maintaining “performing notes”. They need money coming in every month on good mortgages to make their reports look better. The more homes a mortgage company forecloses on, the worse they look to their investors and the more difficult it will be for them to get more money to loan out on more mortgages.

While foreclosure is certainly an option for the mortgage company, the best option for them is to re-negotiate the loan and have another “performing note” rather than another vacant home that is a liability and burden on them. The best option for a homeowner is to have a professional negotiator get you the best workout plan possible.

Barbara Partaka
Home-Buddies

ShareThis