Archive for month June, 2009

Short Sales Program for FHA Loans

Tuesday, June 16th, 2009

In February 2009, new rules were announced for those who cannot pay their mortgages, who want to make a Short Sale on their property, and whose original mortgage was backed by HUD, VA, FHA and other government entities.

The Pre-foreclosure Sale Program allows a Mortgagor in default to sell his or her home and use the sales proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount owed.

FACTS
• Outright sale of mortgaged property to a third party and must be an “arms length” transaction.
• Outstanding indebtedness includes; unpaid principal balance + delinquent interest + Partial Claim (if applicable).
• HUD will pay $750 – $1,000 incentive to the Mortgagor.
• HUD will pay an additional amount up to $1,500 for the discharge of junior liens after the Mortgagor’s incentive has been applied.
• HUD allows all reasonable costs of the sale including up to 6% sales commission, transfer tax stamp and other customary closing cost.
• HUD allows up to 1% of the buyer’s mortgage amount for closing costs if the transaction involves a new FHA-insured mortgage.  Certain categories of costs are excluded.
• Sale amount must be between 84% and 88% of the “As-Is” appraised Fair Market Value depending on the number of days since application.

Some restrictions exist on the condition of the property and how repairs are valued.  Check out the official site for details.

ELIGIBILITY
• The property must be owner-occupied, no “walk-a ways” or investment properties, with some exceptions on investments.
• The Mortgagor must be 31 days or more delinquent at the time of the Preforeclosure Sale closing.
• The Mortgagor must provide documentation substantiating a reduction in income or an increase in living expense, and documentation that verifies the Mortgagors need to vacate the property (if applicable).

Under no circumstance should the Mortgagor be encouraged to default on their mortgage for the purpose of participating in the Pre-foreclosure Sale Program.

Sharing this information with all of you means that more Short Sales transactions will complete, and that Loss Mitigation negotiators will be more fair in our transactions.  As I mentioned in an earlier blog, I am still negotiating a Short Sale since September, 2008, with one of the “Big Boys” who instead of making a price reduction when they needed to in order to make the transaction happen, they instead increased the sales price of the property.

Let’s continue to help people, and please share all the comments and knowledge you have and tell me your stories.  Together we can make this market work for us all.

Playing with your financial future

Thursday, June 4th, 2009

An investor called me and told me that he was interested in buying all my Short Sales. I was thrilled, even though I thought it was too good to be truth. I met with him at my office and he gave me a contract that I would have to use to work with him.

In explaining his contract to me, he said that his “idea” to buy all my short sales that I had been working was that he would make an offer from the beginning of the process (with a rather ridiculous amount) and that I had to find another buyer to make an offer (for more than his).  Then he would give the other buyer the option to buy the house, but he would keep the difference between the two offers at the end of the transaction.

I talked with my lawyers, and in Georgia it is not illegal to agree to this kind of transaction, but from my point of view it is unfair.  Especially when I as a Real Estate Agent am representing a seller in distress, not the bank, not that investor.  I understand that every human being needs to make their living, but it is not always the fair way.

Sellers, would you like it when a person is taking advantage of your situation, playing with your financial future.  How many of you believe that this investor is going to be fair, if the bank does not accept his offer, or the investor does not allow any competing offers to be presented if he does not make money on the transaction.  Even worse, how many of you believe that this investor will buy the house at the end of the day, if he’s lucky enough for the bank to accept his offer, but no second buyer has come along to make another offer?

Short Sales are demanding and can also be a source of revenue for lots of investors.  Which of these investors will be interested in the seller’s financial future?  It was good for my sellers that I am interested in their financial future and helping them make a new financial life for themselves.  Let me know if I can help you protect yours.