Avoiding Foreclosure

In trouble with your mortgage payments?
Many markets are seeing a rise in delinquencies and foreclosures. If you’ve missed payments on your mortgage or are worried about future payments, it’s easy to feel like you’re all on your own. With your house on the line, you may be tempted to hide and merely hope for the best. However, if you face problems quickly and directly you’re much more likely to avoid foreclosure.
It’s important to remember that foreclosure is also an undesirable endgame for lenders. Many mortgage companies would rather attempt to work with a delinquent borrower before resorting to the expense and hassle of foreclosure.
Identify the Timeframe of Your Financial Issues
Generally speaking, mortgage service companies provide one set of solutions for borrowers who have short term troubles and another set for those whose problems are more long term. Before you begin negotiating with the mortgage company, you should know which category your situation falls into.
For example, if you’ve been recently confronted by a costly auto repair, you may be in a crunch trying to meet a mortgage payment or two. Because the repair bill is a one-time expense, the mortgage issue is short term.
On the other hand, a change in employment or earning ability can be a longer-term problem, especially if your financial outlook is unknown.
Respond to Contact
Ignoring a problem rarely makes it go away. Unfortunately, in far too many cases borrowers fail to respond to their mortgage service company (the firm that collects payments and sends notices when payments have not been received). The first step in showing good faith is responding to the calls or letters regarding your delinquency. Many service companies have a foreclosure prevention department that is trained to empathize with troubled borrowers. So make initial contact, but be careful not to agree to any new terms hastily.
Get Outside Assistance
The mortgage company may offer up several different solutions initially, but the last thing you want to do is to agree to something new that may put you into even more of a bind down the road. Before agreeing to any new terms, you should describe your situation to an outside expert. Seek outside help in the form of a real estate attorney, credit counselor or a housing counseling agency.
Document, Document, Document
The most caring mortgage lender in the world still sees things largely in black and white, so it’s important to gather as much information as possible. Begin by collecting all correspondence from the mortgage service company. Keep envelopes when possible, as sometimes the postmark of critical notices can affect a borrower’s eligibility for relief.
Document Income – Collect as much documentation displaying your income as possible. Lenders typically want to see at least one month of income, but get together as many consecutive recent pay stubs as possible. Find your last two to three tax returns and W2 forms. Also include three to six months of bank statements.
Document Expenses – Assemble all bills, paid or unpaid, from the time you began to fall behind in payments until now. Include utilities, credit card bills and auto payments. It’s particularly important to show any of the reasons that you may have fallen behind in the first place (such as unexpected repair or medical bills).
The documents will likely help tell the story of why you fell behind on your mortgage payments. Now it’s up to you to fill in the blanks with the human element. Write down all of the circumstances that lead to your current situation, and you’ll be better prepared to explain yourself to the powers that be.
Possible Solutions
Depending on the number of payments missed, the size of the loan and the financial outlook of the borrower, the mortgage company has a variety of potential solutions that it may offer.
Repayment Plans – If you haven’t missed many payments, the mortgage provider may work with you to form a repayment plan that allows you to pay off the past due amount bit by bit (in addition to your regular mortgage payments).
Reinstatement – Should you be experiencing a temporary shortfall of cash, your lender may provide an extended period of time to pay of the past due amount. In most cases you will still be responsible for any late fees or penalties you’ve already incurred.
Forbearance – If you need temporary relief, the lender may offer a forbearance plan. A forbearance plan suspends or reduces your payments for a set period of time, with the unpaid to be paid later in either pieces or one lump sum.
Loan Modification – Longer term financial problems that affect overall income are sometimes solved by loan modification. Any term of a mortgage may be modified by a lender: the rate, the payoff date, and even the total amount owed. A lender may modify the terms of the mortgage if you cannot make payments under the current agreement, but the lender is reasonably sure that you will be able to consistently make future payments under new terms. Modifications are extreme measures and are used sparingly, but are an option for lenders who conclude that foreclosure would be more costly.
Be Relentless, but Realistic
Most mortgage service companies are essentially divided into two branches. The first tier is the collections department, whose job is to track down delinquent borrowers and recover back payments. The second division is the foreclosure prevention department (sometimes called loss mitigation, delinquency customer service or loan resolution). This second tier is responsible for making the tough decisions.
Getting past the collections agents and to the loss mitigation department is critical. The help of an attorney can be crucial in gaining you such access. When you do get through to a loss mitigation agent, tell your story and answer all questions about your income and expenses, and request an application for forbearance or modification.
While the hope is that the lender will offer mitigation, you should be prepared for the worst case scenario: that you will have to move out. However, if the lender does over loan resolution, they likely will push you to make a quick decision. Instead take time to consider it with an advisor before agreeing to anything.
Reprinted from Re/Max MonthlyNewsletter, November 2007 Issue

Short Sales-What's it all about?

The real estate market is all "abuzz" about Short Sales. What exactly is this?

In these troubled real estate times with decreasing property values, an ever increasing supply of inventory, and the mortgage market problems, many sellers are faced with tough choices. They can't sell their house or make their mortgage payment and the value of their home has decreased to the point where they owe more than its worth. One answer may be using the Short Sale. This is a alternative method of disposing of your home or property without having the lender foreclose on you. It is an arrangement made with your lender where they will allow you to sell your property for less than the amount of the current mortgage, and (hopefully) forgive the difference.

A Short Sale should be considered only if the other final alternative is foreclosure. It can be a detailed, lengthy, but fairly straightforward process that can work to benefit all parties involved- Buyer, Seller, and even the Lender. The Buyer gets a good price on the property, the Seller gets to avoid foreclosure and the complete destruction of their credit, and the Lender avoids the delay and considerable expense of foreclosing a home they really don't want to own, plus impact their ability to make future loans.

Typically, it is easier to qualify for a short sale IF: the market value of your home has decreased to the point where you are "upside down"; in other words, if you owe more than the current value, AND you have suffered some type of hardship; for example a divorce, loss of a job, health issues, significant pay cuts, or loss of retirement benefits due to restructuring, AND you no longer have any significant assets to bail you out.

Not all lenders will allow a short sale. Their decision depends on a number of factors: location of the property, the loss involved to the Lender, the possibility that a speculator/investor will pay more at a foreclosure sale, a BPO (Broker's Price Opinion) and of course, the seller/owner's particular situation.

The first step is to determine if your situation will qualify as a short sale. You should contact your financial (CPA) and legal advisors first to determine the potential risks. Contact the Lender after you fully understand the risks involved, including potential mortgage fraud. Make absolutely certain that even if the Lender approves a short sale, you will not be obligated to make up the difference, which is called a deficiency.

There still may be tax consequences involved with the forgiven debt of a Short Sale. Under Federal law, when a debt is forgiven, it can be treated as ordinary income on which tax must be paid. You will get a 1099C at the end of the year from the lender for the deficiency. This is considered income even though you did not receive it. Currently they are trying to get this law changed to help relieve the costs involved for the overwhelming number of owners in this situation.

After you are satisfied that you understand the concept and the penalties involved, and are prepared to move forward, you, or your authorized agent, should contact your lender to determine if your Lender will agree to a short sale. Usually, the Mortgage Company has a Loss Remediation Department that handles these matters. Ask to speak directly with the manager of the short sale department. You will get way more accomplished starting at the top.

Once you determine that your hardship case applies and the bank is agreeable to allowing a short sale, the following steps should follow: 1. List your house on the Multiple Listing Service, preferably with a knowledgeable Realtor, 2. Negotiate a Sales Contract from a willing and able Buyer. The sales contract should specifically state that the offer is contingent upon the Lender accepting the purchase price in full and forgiving the Seller the deficiency on the mortgage. 3. Include these with a comprehensive package explaining why you are requesting the short sale and include your Hardship Letter explaining why you cannot continue to pay the mortgage. Also include any supporting documents such as tax returns, bank statements, that will help build your case. Finally, your packet should have information and photos of your property, and a list of comparable homes that have recently sold or are currently on the market. Your proposal should be as specific as possible. And emphasize the hardship. The more documentation you can provide the Lender, the faster the decision will be.

Make sure you go to Closing knowing exactly the terms and conditions on which your lender will accept the short sale, including whether or not you will have to come up with any money at the settlement table. It helps to provide the Lender with a detailed expense sheet or net sheet showing all costs involved, who is paying what, and what the bank will get in the end. It is extremely important that the bank is accepting this as a final settlement of the loan and this should be in writing.

Currently lenders are swamped with these requests, so this process can take up to 2-3 months. Thus, the earlier you can start the process, the better chance you have of getting it approved.

The short sale process works, but is complicated, time-consuming and uncertain. If you can start now -- before you are actually in default -- you will be ahead of the game. Hire a good attorney, a knowledgeable realtor, and consult your accountant to get the best advice to get out of a sticky situation and save your credit rating.

Please consider this as only a simple and condensed guideline on how Short Sales work. All banking institutions and Lenders have their own policies and procedures regarding Short Sales and it is in your best interest to seek qualified advice.

And finally, please, please, please, act as soon as you realize there is a problem. I would much rather help a homeowner avoid losing their home altogether by giving free advice on getting a loan modification from their Lender or some other alternative way other than taking a short sale listing!

Buyer's Incentives for a Slow Market, What Works!

Selling Tactics: Buyer’s Incentives for a Slow Market
(Reprinted from Remax.com monthly newsletter)
In a slowing market, sellers can find it tempting to believe in magic solutions. With unsold inventories growing in most areas, some sellers resort to offering flashy incentives for buyers. Everything from big-screen TV’s to vacation packages to new cars, are being tacked onto listings in the hope of luring in interested buyers.
In truth no amount of flash or gimmickry will change how buyers feel about your home’s core qualities, but incentives that appeal to a buyer’s wallet can be effective in certain situations. Below are some buyer’s incentives that may help set your home apart from the rest:
Paying Points - The current housing slump has placed mortgage concerns in the minds of many buyers. Sellers who offer to pay mortgage points for the buyer (sometimes referred to as “buying down the mortgage”) are more likely to attract buyers who are nervous about their monthly payments or interest rate. Each point you pay equals 1 percent of the loan amount, so mortgage buy downs lower both the interest rate and the monthly payment.
Down-Payment Aid - One of the biggest hurdles for many homebuyers, especially first-time homebuyers, is the down payment. Help with the down payment may in many cases be more important to the buyer than the actual asking price itself. This incentive works well for those selling “starter” homes that are more likely to draw first time homebuyers.
Closing Costs Help - Legal fees, title insurance, filing fees – closing costs can add up in a hurry for buyers, typically totaling somewhere between 2 and 7 percent of the total loan amount. Sellers who offer to assist with the closing costs will appeal to cash buyers short on cash
Home Warranty - Including a year (or two) of home warranty coverage serves as a peace of mind for the buyer that they won’t have to foot the bill for unexpected repairs in the first year or two of ownership. Most policies include service to the home’s HVAC, interior plumbing, appliances and major fixtures. The low cost of home warranties (typically a few hundred dollars) makes them a low risk-high reward incentive to offer.
Maintenance Fees - Some features of a home that you may consider “selling points” (pool, hot tub, sauna, gas fireplace, AC system, etc) can actually seem like detractions to buyers due to their related maintenance costs. You can assuage a buyer’s concerns by offering to pay for the first year’s worth of maintenance.
Landscaping - Offering to spring for a few additional landscape features can be a nice way to let buyers add personal touches to the property without taking on personal expense. Keep in mind that adding such touches on before putting the home on the market may have a greater impact (provided, of course that your landscaping choices aren’t woefully misguided).
Condo/Homeowner’s Association Fees - In a condominium complex or planned community, homeowner’s dues add to the monthly cost of ownership. If the first year’s worth of dues are taken care of by the seller, potential buyers have one less early-expense to worry about.
Price Reduction - Price reductions don’t usually come to mind when discussing incentive strategies, but really no single factor is more important than the asking price. A well-timed price reduction can indicate to buyers that you are flexible and serious about selling the home.
Upgrades - In most cases major home repairs and touch ups should be completed prior to putting the listing on the market. However, offering to finance certain aesthetic changes, such as new exterior or interior paint, can be marketed as a means for the buyer to add their own personal touch to the home.
Extras - If you’re going to offer a “throw-in” as an incentive, why not tailor the offer to the charms of your home? For example, the antique hutch that perfectly compliments your entryway might be included in the list price. If you’ve invested time and money in a prized back deck, including a premium gas grill could be a logical pairing. Buyers often view wild incentive offers with skepticism, but “thoughtful throw-ins” don’t carry the same air of desperation.

The Risky Side of Selling your Home on Your Own

The Risky Side of Selling a Home on Your Own
The vast majority of sellers list their home with a real estate agent, but some individuals choose to go through the selling process on their own. Selling a home “For Sale By Owner”, while entirely possible, does come with a list of hurdles and some significant risks.
Un-represented sellers are motivated to save the cost of the agent’s commission. In many cases, however, selling without assistance can result in a lower closing price that negates such gains. In a survey of more than 7,800 buyers and sellers from around the country, the 2005 National Association of Realtors® Profile of Home Buyers and Sellers showed that the median price for homes sold directly by the owner was 16 percent lower than homes sold with the assistance of a real estate professional.
FSBO vs. Direct Sales
In 2005, only 13 percent of home sellers conducted transactions without the help of a real estate professional. However, of these transactions 39 percent were “closely held”, meaning that the two parties knew each other in advance and the home was not fully placed on the open market.
Risks
So just what are the potential downfalls of selling your home by yourself?
Setting the Wrong Price - In the world of real estate, setting a good asking price is absolutely critical. Owners frequently have a difficult time setting a realistic sales price, even if they have paid for an independent appraisal. Impartially evaluating your home and all its shortcomings (and selling points) is a lot to ask. An overpriced listing can linger on the market and necessitate later price drops. An under priced listing can either scare off wary buyers or can result in a closing price significantly below market value.
Under Exposure - Attracting serious buyers requires much more than a classified ad and a sign in the front yard. Many of the marketing avenues that agents utilize are costly or require resources that the average homeowner just doesn’t possess. Between 75 and 80 percent of buyers use the Internet during their home search. Savvy agents come equipped with a strong Internet presence that draws online buyers to your listing.
Lack of Marketing Experience - Most of us are not practiced in the art of promotion, and don’t possess a great deal of knowledge or perspective when it comes to marketing real estate. A skilled real estate professional knows the techniques to make your home competitive with comparable properties in the local marketplace.
Buyer Wariness - Some buyers will avoid a FSBO listing for fear either there is “something wrong” with the property or that the asking price will not be based on current market trends.
Buyer Haggling - A FSBO listing can attract buyers out to find a “deal”. These individuals are more likely to see the listing price of a FSBO property as merely a starting point.
Failure to Disclose - This is a biggie, Folks! Failing to disclose or fully disclose any defects in your home is a huge liability for any seller. Improper disclosure or nondisclosure usually results in lawsuits, an unpleasant prospect for all parties. Licensed real estate agents are required to stay up to date on all mandatory local, state and national disclosure requirements.
Commission to Buyer’s Agents - Nine out of ten homebuyers use a real estate agent in the search process. If a potential buyer is using the services of an agent, their commission will generally be taken out of the selling price.
Lack of Negotiating Experience - One of the most important services real estate agents provide is the negotiation a sale. Working without an intermediary makes it much more difficult to keep emotion out of the process. Sellers without representation can employ the help of a real estate attorney, but their primary function is to ensure that the contract is not marked by errors or omissions.

Lower Keys Real Estate Closings and New Listings

Weekly Update...
The following are recent closings in real estate market in the Lower Florida Keys. This is from Milemarker 15 to Milemarker 34 or from The Saddlebunch Keys to Big Pine Key. This will be a weekly posting to help update all of you interested buyers and others looking to find out what is happening in the Real Estate Market in the Lower Florida Keys. Click on the link below to find out what has sold the first 7 days of August of 2007. This list will include all vacant land, all residential sales, as well as, any commercial properties.
Click to view listing(s)


The next link will be all new listings in the same area for the first week of August:

The last link will be of all properties with a price change in the same area and the same timeframe. Click on the link below
Check back each week to find out what is happening in the beautiful Florida Keys. Thank you for visiting my BLOG, please check out my website at http://www.keystropicalproperties.com/ for more information. Ta Ta for now. Rhonda Williams, Re/Max Southernmost

Its a great time to buy in the Florida Keys

For the first time in many, many years, we are having what we call a Buyer's Market in the Florida Keys. This is due to several reasons. Normally, we do not follow the national trends for real estate in the Florida Keys. No matter the economic outlook nationwide, people still want to find their dream home in the warm and sunny islands of the Florida Keys. (Do you blame them?) In the next few years, we have the "Baby Boomers" thinking about retirement and planning for their future. One of their favorite choices has been the Fabulous Florida Keys, with its sunny, warm year round weather, excellent boating, fishing, diving and clear, warm, tropical blue waters.

However, 2006 was a very tough year for us following 2 very active hurricane years, lots of hurricane debris clean-up, and consequently rising insurance costs, and of course, the always rising real estate taxes. “Hurricane Fatigue” set in and many of our Keys homeowners said enough was enough, and decided to cash in on their investments after many years of double digit value increases on their property.

We saw almost 4 times the normal amount of housing inventory come on the market. For the first time in many years, buyers actually had a very nice selection of homes to purchase, thus causing greater competition. Sellers that were desperate to sell dropped their prices or took outrageously low offers. Once our prices started to tumble, buyers were reticent to jump in fearing they were going to buy at the top of the market or at least before the market hit bottom. Throw into the mix, the shaky national economy, rising gas prices, the unknown of our split political arena, the news media claiming a housing slump, and finally those pesky, unpredictable interest rates and you have a pretty good combination of why homes are not selling like they normally do. Some say we are just having a market correction from the rampant increases of the past 3-4 years.

Once buyers feel secure in the knowledge that we have hit the bottom of the down turn, the investors and second home buyers will jump back in. My feeling is that we are at or very close to the bottom of our market. Once we have depleted some of the housing inventory currently on the market, and cleared out the sellers that really need to sell their homes, the prices should resume at a more normal rate increase. In the past few years, this figure was as high as an astounding 48% increase in just one year.

If you have checked around the neighboring states and even in mainland Florida, you know that we are still a very good deal for waterfront property. Where else can you find great boating, fishing, diving, snorkeling, and swimming right out your back door? We have friendly neighbors, low crime rates, beautiful azure colored water, and warm tropical weather year round. We are indeed a good deal! Its a great time to buy in the Florida Keys. Tune in next week to check out statistics on what is selling and great investment opportunities. Please call me if you have any questions or log on to my personal website at http://www.keystropicalproperties.com/ to check out all of the properties for sale in the Florida Keys.