Default - Must miss a payment, default on payment is the only way a property can enter the foreclosure process. - Can also be a missed payment to local taxing authority, a condo association or homeowners association.
Legal Notice - The lender or foreclosing party must notify the owner that they are entering into the foreclosure process. - Personal service of a document or if the owner cannot be located through publication in a legal journal. ? Florida = Notice of Lis Pendens (or notice of a lawsuit) ? California = Notice of Default or NOD ? Complaint, Notice of Sale or a Petition
Bank Sale or Auction Date - Homeowner informed of bank sale or auction date - Foreclosing entity will gain control of the property
Redemption Period - Not all states have a redemption period - Period of time in which the homeowner may present payment and regain possession of his property
POSSIBLE CONSEQUENCES
Reasons to Avoid Foreclosure
You will always have to disclose on any mortgage application and many job applications
Only credit item that even once it is off report still affects your rates
Credit scores will be lowered by 300+ points
most devastating credit issue you can have in relation to future credit availability
You will be ineligible for a government insured loan for 5 to 7 years (only 2 years in a short sale)
You may end up with Deficiency Judgment *
Many employers run credit checks
foreclosure is one of the top items that will put a potential new hire in jeopardy
Many current employers run credit checks and a foreclosure can put a current position in jeopardy
Security clearances, government positions
Military and law enforcement and more
Your tax liability in a foreclosure may be much higher than in a properly negotiated short sale since in most cases cancelled debt will be higher.
As your CDPE agent I will explore every option with you and work towards a resolution.
While it may not seem like it now, there will come a time when you look back on this situation and will want to know you did everything you could.
A short sale can be negotiated if the homeowner has: - Financial Hardship - Monthly Shortfall on Financial Worksheet (or pending shortfall) - Does not have significant assets to assist in paying down the mortgage
A homeowner is 'short' when:
When a borrower owes an amount on his property that when combined with closing costs and commission is higher than current market value.
A short sale occurs when:
A negotiation is entered into with the homeowner's mortgage company or companies to accept less than the full balance of the loan at closing. A buyer closes on the property and the property is 'sold short'.
What a Short Sale is Not
If you do not have a financial hardship then you will most likely not qualify for a short sale
A short sale is only for those who meet all requirements
SHORT SALE PROCESS
Owner Involvement
Complete or provide all necessary documentation - Signature Authorization (FORM A) - Short Sale Disclosure (FORM P) - Hold Harmless (FORM C) - Homeowner Document Checklist, Provide all Documents (FORM E - Homeowner Financial Worksheet (FORM F)
Keep property presentable and ready to sell
Homeowner Property Checklist (FORM G)
Be available to communicate with mortgage company if necessary
Below is an article from About.com that may give you some inside tips on how to go about purchasing a foreclosure and how to protect yourself as the purchaser. When looking to purchase a short sale or foreclosure in Perryville, MO contact the Experts at RE/MAX Realty Experts. Below the article are a few links that may help you along your way!
Lots of savvy home buyers want to hit the jackpot and buy that REO foreclosed home, many of which are often under-priced. When banks price REOs under the comparable sales, multiple offers are often the response. This means you could be up against stiff competition for that bank-owned home.
It's not unusual for some REO homes in Sacramento to receive 15 or 20 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called "Highest and Final" offer. Sometimes the bank simply accepts the best offer at inception.
If you're wondering how you can make your offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms:
1) Get the Property History
Ask your buyer's agent to find out the bank's purchase price on the Trustee's Deed or Sheriff's Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.
Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.
2) Determine Comparable Sales
In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.
Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.
Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.
Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.
3) Analyze Listing Agent's REO Solds
Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.
Ask your buyer's agent to look up the listing agent in MLS.
Run a search using that listing agent's name to find the last three to six months of that agent's listings.
Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.
4) Ask About Number of Offers
If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.
If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.
5) Submit Preapproval Letter
It goes without saying that you do not want a prequal letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.
Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don't trust other lender preapprovals but trust their own departments.
6) Don't Ask for Repairs / Inspections
Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted.
7) Shorten the Inspection Period
If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.
8) Offer to Split Fees
Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.
Many banks negotiate discount fees for title insurance. If the bank will pay for the owner's policy, the ALTA policy might cost a bit more. But it's still a good idea to let the bank choose title if you want your offer accepted.
Consider the Appraisal Consequences
If you offer over list price, bear in mind that the appraisal will need to substantiate that price. If you find yourself dealing with a low appraisal, you have options, so don't despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing.
