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Certified Sacramento area short sale expert Forth Hoyt answers questions on Foreclosure Avoidance and Short Sales.
Many Sacramento area homeowners are looking for foreclosure options and foreclosure avoidance advice from a Short Sale Expert. Many already know how they want to proceed and are looking for a short sale agent.
As a Folsom short sale agent and top Sacramento area short sale Realtor, I am frequently asked about why a homeowner should stay out of foreclosure.
“Why Not Just Go To Foreclosure?”
To stay in control of the situation, get through the process faster and reduce the damage to your credit.
Foreclosures damage to credit is not only from the foreclosure event, but from the entire process. In this environment, foreclosures are taking years to complete, banks and servicers are completely overwhelmed with the volume and instead of a few months without making payments, (every month is 8-16 points off your credit score) in today’s foreclosure environment, you may be two years or more of no payments before your foreclosure is finalized! Can you say NUCLEAR DAMAGE to your credit?
To help your Folsom neighborhood!
Short sales are done before the home is vacant, the homeowner continues to maintain and care for the home, making it in much better condition than the typical foreclosure bank owned listing, and it sells for more money, improving values in the neighborhood. once the foreclosure has been finalized, the home is empty and usually has been vacant for weeks or months, with no one tending the landscaping, maintaining or caring for the property.
Also, it puts you in control of your exit strategy and in control of your timelines, making the process much more manageable. Especially for children, the short sale strategy allows for a much planned move; no surprises, no eviction letters, no three day eviction notices posted on the door.
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Many people have asked me; “why would I want to go through the hassle of a short sale?”. My answer is not always the same, but after finding out the homeowners situation, their goals and needs, the answer to their question usually has to do with credit scores, staying in control and helping the values in their neighborhood. Since April 5, now with many banks using the HAFA program, homeowners will also receive HAFA’s $3000 in moving expenses!
What else do you get out of a short sale?
What is your situation? Do you qualify for HAFA? Find out!
Here’s another great article on reasons to do a short sale from:
NEW YORK (CNNMoney.com) — Short sales are the hottest thing going in the distressed-property market, and the trend is expected to get even hotter in coming weeks, when the government starts handing out cash to encourage lenders to close these deals.
“Banks have ramped up short sale approvals,” said Duane Legate of House Buyer Network, which connects short sellers with buyers. “They’re hiring a lot of the people who once worked in the mortgage-lending industry and moved them over to short sales.”
These transactions, where lenders allow homeowners to sell their houses for less than they owe, accounted for 17% of all residential real estate sales in February, up from nearly 13% in November, according to a monthly real estate market survey by Campbell/Inside Mortgage Finance.
Elizabeth Weintraub, a Sacramento, Calif.-area real estate agent who handles many short sales, was amazed at how quickly a recent deal went through. “Bank of America approved it in 24 days,” she said. “That flipped me out.”
This is a huge change from even just six months ago when the short-sale market was stalled and most people would describe the process has real estate hell. Because lenders stand to lose so much on these transactions, they have been reluctant to make short sales happen, often waiting months before getting back to potential buyers.
“In the past, many short sales would never come to fruition and the ones that did averaged over half a year to complete,” said Chris Saitta, CEO of Equator, which produces short sale software.
“Things would just fall into a black hole and not come out again,” added Weintraub.
And even when banks did agree to the sale, the process could be further complicated if the original owner had a second mortgage.
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In most cases, the first lender is repaid in full before any money flows to a second-lein holder. And because most distressed borrowers are severely underwater, there’s usually nothing left to send on. As a result, second-lein holders are left holding the bag and have been killing many deals.
But that has been changing. For one thing, banks realize that they make out far better financially with a short sale than a foreclosure. “The lenders lose 50% on a foreclosure and only 30% on a short sale,” said Glenn Kelman, founder of the real estate Web site Redfin. “And short sales offer a way to get distressed properties off their books quickly.”
And on April 5, lenders and mortgage investors will have even more incentives to offer troubled borrowers short sales instead of foreclosing.
Under the new Home Affordable Foreclosure Alternatives program, borrowers will earn a $3,000 “relocation incentive” and servicers will get $1,500 for handling a short sale.
The investors who actually own the mortgage notes will get $2,000 in exchange for sharing proceeds of the short sales with any second-lien holders. And, finally, those second lien holders will receive up to $6,000 for releasing their claims.
Lenders participating in the program must also determine the market values of properties early on and inform the owners of just what price they’re willing to accept. Then, if owners come back to the lenders with bonafide offers, they have to be accepted within 10 days.
Equator’s Saiita anticipates a short sale explosion in response to the new program. “The challenge will be handling all the volume,” he said.
The company has already tweaked its software, which 58 servicers use, to handle the new HAFA rules. And that should help reduce the time it takes to execute a sale, which currently averages 88 days.
The boom in short sales may accelerate the end to the foreclosure crisis by cleaning out the overhang of borrowers in distress and replacing them with more stable homeowners.
Plus, these sales are better for distressed borrowers because their credit scores suffer less. Going through a foreclosure can knock 200 points off a FICO score, twice as much as the penalty for a short sale.
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