Finding the right Orlando Short Sale Realtor for you
Regular listings and short sale listings are 2 completely different beasts, which is why if you need to short sale your home, you should seek out an “Orlando Short Sale Expert”. This is an agent that specializes in doing only short sales and nothing else. Your short sale realtor should know the Orlando short sale process inside and out. This includes being up-to-date with all of the latest programs and laws that are in place to help homeowners that are going through financial hardship. If you choose the wrong realtor to do your short sale it could end up killing your short sale and put you in worse shape than you started out in.
Doing a short sale can be one of the most important decisions that a homeowner can make in their life and you need to be with an Orlando short sale specialist that understands this and that takes his or her job very seriously. You should also make sure that your short sale agent is a Certified Distressed property expert [CDPE]
If you want some helpful tips on finding the best realtor for you check out my article “9 critical questions you must ask an Orlando Realtor Before Listing your home”
Putting together the Short Sale Package
One of the biggest complaints that I’ve heard from short sale negotiators over the years is that realtors fail to submit complete short sale packages to them. This part of the process is extremely important because it can set the tone for the rest of your negotiations with the loss mitigation rep that is handling your file. Here’s a basic list of what most lenders require in order to submit a short sale package.
1-Hardship Letter-[A letter explaining the reason for your financial hardship]
2-Last 2 years’ tax returns
3-Recent pay stubs or profit and loss statement
4-Financial statement-[most lenders have their own that they will require you to fill out, these forms can easily be found online]
5-Listing agreement-[all lenders now require homeowners to have the home listed for 3 months or more]
6-Contract-[this is a contract between seller and potential buyer]
If this package is submitted incomplete or incorrectly, it can make the process a lot slower or stop it all together. A short sale package will not even be considered unless it’s complete to the satisfaction of the lender. Sometimes negotiators will even close the file and make you start from all over again.
I always tell my clients to call the bank themselves so that they know where they are in the process and how things are going. If are currently working with a short sale agent, you should be doing the same thing, call your bank and check on the agent’s work, and don’t just take the realtor’s word for it.
The Brokers Price Opinion [BPO]
After the lender receives the sort sale contract complete with the contract, the bank will then order what’s known as Brokers price opinion or BPO. The person that does the bpo is not an appraiser, but a local realtor. The BPO is crucial in completing a short sale because whatever that number comes in at will be the negotiating point. This will be a back and forth negotiation between the lender and the agent which can sometimes drag on for several months before both parties come to an agreement.
The Terms of the Short Sale
Negotiating what terms the short sale can be completed with is again very important. You need to make absolutely sure that you understand exactly what you are agreeing to. The last thing that you want to have to happen is finding out a year from now that you have a deficiency judgment against you for the balance of the short sale that you did on your home last year. I’ve seen it happen many times over the course of my career as a short sale broker and it’s a shame because usually, all it would’ve taken was for the short sale realtor to go that extra mile and continue negotiating until the lender agrees to not pursue the balance of the loan.
After it’s all said and done there is still another step that is crucial for you to follow up with and that is to make sure that the payoff has been legally recorded. As a matter of fact, you should continue to follow up with the short sale realtor as well as the title company until you have written proof that the payoff was recorded. If your payoff doesn’t get recorded for some reason this could kill your credit score.
The Mortgage Debt Relief Act of 2007
This is the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lender. However, the tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners are about to come to an end at the end of 2012. The good news is that if you’re considering an Orlando Short Sale, there is still time to take advantage of this very important law.
According to the law, borrowed money doesn’t need to be reported as income because you have an obligation to repay. But if your lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists. So, if you owe $350,000 and your lender forgives $50,000 of that debt in a $300,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36 percent, you would owe $18,000 in taxes. Ouch!
Although the law doesn’t officially expire until Dec 31, 2012, anyone considering a short sale should get started now. We’ve had short sale files in our office that have taken up to two years to complete. It’s true that banks are moving Florida short sales along much faster now but overall they still move pretty slow.
Cash Incentives to Sellers for agreeing to a Short Sale
Bank of America, JPMorgan Chase, and Wells Fargo have all been offering cash incentives to their delinquent customers in Florida who agree to a short sale. It’s not unusual for a lender to give a cash bonus to foreclosed customers who leave their properties in good condition, which has become known as “Cash For Keys”. What is different about these new programs at the nation’s top three mortgage lenders is that the amounts are significantly higher, sometimes up to $30,000.00.
Short sales, while still not a particularly short process, are much more efficient and overall more beneficial for everyone involved.
In short sales, homeowners are protected from potential deficiency judgments and severe credit hits, while the banks themselves are able to recoup something, instead of nothing, from defaulted loans. They also save money that would otherwise be spent on the eviction process. It is the smarter business move for sure. Encouraging short sales is also a public relations boom for banks reeling from a recent lack of confidence from consumers. By helping people to avoid foreclosure, they present a more beneficent image. That improves their overall bottom line by bringing in new customers.
It may be smart business to offer a cash incentive for a short sale, but it really does help people, too. Those facing foreclosure frequently don’t know where they are going to live once their home has been taken away. They are often so strapped for money that they cannot afford a typical first-and-last-month’s upfront payment on a rental property. The cash makes a big difference in helping people to land on their feet. Some may even be able to use it as a down payment on a more affordable home.
The government also has a program, the Home Affordable Foreclosure Alternatives (HAFA), that provides cash, up to 3000 dollars, for short sales. To get the government credit, homeowners must meet certain minimum criteria, including that the loan is owned by Freddie Mac or Fannie Mae.
Jenny Zamora, Lic. RE Broker
