What is the Credit Impact of a Short Sale vs Foreclosure?

I was recently asked the question by a homeowner going into foreclosure…

What is the benefit of going into a Short Sale vs Foreclosure?

Although this is a question we get asked with nearly every client, this particular client wanted to know all the exact specifics. Since you are reading this now, you can probably benefit from the information that we found out when digging even deeper into the issue of what is the best option for most homeowners: Short Sale or a Foreclosure?

After doing all the research I am convinced now more than ever that the decision is a no brainer for most homeowners… A Short Sale is the OBVIOUS choice. Take a look at an email I sent to this client and see for yourself:

“Hope your doing well. We have been playing a little phone tag lately it seems, give me a call back when you get the chance.

After our conversations, you sparked an interest in me getting to the bottom of the question Short Sale vs Foreclosure?

Along with finding out great information on the mortgage debt forgiveness relief act:
http://realestateblog360.blogspot.com/2009/04/what-is-mortgage-forgiveness-debt.html

I also recently contacted Fannie Mae to get their latest guidelines as far as the exact credit impact of a Short Sale versus a Foreclosure, which I thought would be helpful to you in your research:

Short Sale: Fannie Mae refers to these as “Preforeclosure Sales” and requires only a 2 year waiting period after the sale, with acceptable re-established credit to re purchase.

Foreclosure: Standard minimum 5 years waiting period, with minimum of 10% down & 680 credit score for 7 years to re purchase. Primary residences only, no second homes or investment property loans for 7 years.

Take a look at the full report: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf

Give me a call when you get the chance and we can discuss how you wish to move forward.”

Meaning: If the property owner goes through a Short Sale they will be able to purchase a home again in the next 2 years. A foreclosure on the other hand, they will have to wait at least 5 years!

The question is simple: Do you want to purchase a home again in 2 years or 5?

Who would want to do a foreclosure? Which do you think is better?

Contact me anytime for help or questions,

Oliver Graf
Real Estate Expert


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Obama Announces Big $$ Incentives on Short Sales for Lenders and Homeowners

With around 43,000 notices of default last month in California alone, now more that ever the industry is in need of a Foreclosure Alternative Program.

I am so happy to see that the Obama administration has recognized the need to streamline the short sale and deeds-in-lieu process, and has provided viable options to homeowners who have fallen behind on their mortgages or owe more than their homes would sell for in today’s market.

The Obama administration announced the new details under its Foreclosure Alternatives Program (FAP) enabling lenders and borrowers to pursue Short Sales and Deeds-in-lieu of foreclosure in cases where the does not qualify for a Loan Modification. The program requires that before proceeding with a foreclosure, lenders must determine if a short sale is appropriate, if that is not successful, a deed-in-lieu of foreclosure.

They are even providing incentives for homeowners and lenders!

Borrowers (Homeowners). Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program but don’t qualify for a modification or do not successfully complete the three month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.

Incentives. Incentives include: (1) $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; (2) $1,500 for borrowers/homeowners to help with relocation expenses; and (3) up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).

Standardized Documents. The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.

Property Valuation by Appraisal or BPO. Servicers will independently establish both property value and minimum net return to the bank, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs)

Timeline. In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional and no foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.

Commissions. The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.

No Borrower Fees. Servicers may not charge fees to borrowers/homeowners for participating in the FAP. Contact Short Sale Pros for 100% Free Short Sale Help

Program Expiration. Starts May 14th 2009 and is in effect through 2012.



For the full report take a look at
http://www.treas.gov/press/releases/docs/05142009FactSheet-MakingHomesAffordable.pdf



How do you think the Foreclosure Alternatives Program will help the thousands of struggling homeowners? Do you think this is the best way to fix the problem?




Contact me anytime,


Oliver Graf
Real Estate Expert
Follow me on Twitter: Twitter.com/OliverGraf360



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California cracks down on "Foreclosure Consultant" Scam Artists

Beware of so called "Foreclosure Consultants"!

With the current state of the economy and the down turn of the Real Estate market its times like these where we see all the opportunistic Sharks coming out of the water! They are preying on desperate homeowners during moments of weakness… charging up front fees… and then NOT Performing the Service they said they said they would perform.

California Foreclosure Consultant Act aims to protect Families from these scam artists

The California Foreclosure Consultant Act Summary.

If a Notice of Default has been recorded against your home, this law will prevent a “foreclosure consultant” (even a real estate licensee) from charging fees in advance(in any form) to help you work out a loan modification or in some other fashion avoid foreclosure.

If a Notice of Default has not been recorded on your home it may be permissible for a real estate broker to assist you in obtaining a loan modification. Although in this narrow circumstance the broker can ask for advance payment they must provide you with a written contract which satisfies certain specific statutory requirements(and is compliant with the local real estate board).

Along with that, the contract must have been previously submitted to the California Department of Real Estate for review and received a “no objection letter” regarding its use. Real estate brokers who do not charge an advance fee for loan modifications or similar services are not required by the DRE to obtain a "no objection letter." However, their work must be completed before they’re paid.

You should know that there are agencies, attorneys, and real estate licensees who will assist you with your loan workout for a fee payable after the work is completed.

Attorneys licensed in California rendering services in the course of their legal practice are exempt from this law.

Definitions for Foreclosure Consultants

This Act defines a "Foreclosure Consultant” as anyone who offers for compensation to perform any service which "the person will in any manner do any of the following."

• Postpone or stop the foreclosure sale
• Obtain any forbearance
• Assist in the reinstatement of the loan
• Obtain extensions to reinstate the loan
• Obtain any waiver of an acceleration clause
• Save the residence from foreclosure
• Avoid or repair adverse credit reports resulting from a foreclosure sale
• To assist in recovering residual proceeds from the foreclosure sale of the owner’s residence.

Right to Cancel must be specified-

Under this section the owner is given 3 business days to cancel the contract and specifies the method of notice of cancellation.


Once operative the new law will require a Foreclosure Consultant to register with the Department of Justice and maintain a surety bond of $100,000.00. The Department of Justice will have the power to refuse to issue, or to revoke a Foreclosure Consultant’s registration. A violation of these provisions will be a crime. These changes will effectively give the Department of Justice oversight over California Foreclosure Consultants.

If you or someone you know is, or is about to be, in default on their home mortgage, and are approached by an individual or company that is offering to, in some fashion, “save the home from foreclosure” be sure they are reputable and only get paid when they perform!

What programs have you seen out there that this will affect?


When we are performing out Short Sale service for homeowners we make sure that we NEVER charge any fees! The goal is to help as many families as possible, NOT take advantage of them.


For any additional questions contact or visit:
http://www.realtytrac.com/interior/ccsection2945.htm


To your success,

Oliver Graf
Real Estate Expert


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Mortgage Forgiveness Debt Relief Act - Provides Tax Releif for Homeowner in Short Sale

Mortgage Forgiveness Debt Relief Act - Provides Tax Releif for Homeowner in Short Sale

Big Help for Struggling Homeowners:

What is the Mortgage Forgiveness Debt Relief Act of 2007?

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007. It applies to qualified debt forgiven in 2007, 2008 or 2009. Generally, the Act allows exclusion of income realized as a result of a loan modification, short sale, or foreclosure on your primary home.

What does that mean?

Generally, debt that is canceled by a lender must be added as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain canceled debt from income(Short Sales and Loan Modifications).

Does the Mortgage Forgiveness Debt Relief Act of 2007 apply to all forgiven or canceled debts?

No, the Act applies only to forgiven or canceled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.

If the forgiven debt is excluded from income, do I have to report it on my tax return?

Yes. The amount of debt forgiven must be reported on Form 982 and the Form 982 must be attached to your tax return.

How do I know or find out how much was forgiven?

Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or canceled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982. Contact and Accountant for Additional info, Tax and Accounting group: Lou DelVechio 760 439 2433.

Can I exclude debt forgiven on my second home, credit card or car loans?

Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.

If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?

Yes. The forgiven debt may qualify under the "insolvency" exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent. A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. Contact an Accountant for additional info, Tax and Accounting group: Lou DelVechio 760 439 2433.

Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?

There is no dollar limit if the principal balance of the loan was less than $2 million ($1 million if married filing separately for the tax year) at the time the loan was forgiven.


How beneficial do you think this new Act will be?

See the IRS update here: http://www.irs.gov/irs/article/0,,id=179073,00.html


For any additional questions contact:

Oliver Graf
Real Estate Expert


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How to write up the Perfect Real Estate Offer

How to write a perfect Purchase Offer

Top 10 Tips for Writing Purchase Offers

So you’re ready to buy a house? First off congratulations!

The first step in buying property is writing up an offer. Many people do not realize how important the offer contract can be when buying real estate. If you have a poorly constructed offer it can cost you getting the property you want, while a well written offer can get you the property you want at the price you want!

Meanwhile use the following tips as a guide to creating a great offer:

1. Get the right Contract

This might seem basic, but there are a lot of purchase contracts out there. Each state has its own rules and regulations. Realtor associations publish purchase contracts. If you are looking to buy in California, please contact me and I will help you with the correct forms.

Some example purchase contracts would be:

• · New Construction Residential Purchase Agreement
• Notice of Default Purchase Agreement
• Residential Purchase Agreement
• Residential Income Property Purchase Agreement
• And many more

2. Determine what price you want to offer

Evaluate market conditions and come up with what you think is a fair offer price. TIP: Initially offer a bit less than you expect to pay, this will give you some room to negotiate and possibly get an even better deal. Be prepared to move quickly, in today’s market the good properties are being sold very quickly.

3. Put down a deposit

You will need to make a “good faith” deposit. The most common deposits can be cash, personal check, or cashier's check. On average the deposit amount should be at least 1% of the sales price. This money(a copy of the check) will be submitted with your offer.

4) List your Financing Terms

Disclose the type of financing you hope to obtain: The amount of money down and the type of loan (conventional, FHA, VA, contract of sale, assumption or other).

Please remember that your deposit, when added to your down payment and financing should equal the total consideration paid.

6. Include Contingencies

Contingencies are: Conditions --or "safety valves" written into Real Estate offers and contracts that protect they buyer from buying a house that is unsatisfactory--either structurally or financially

Contracts carry provisions for contingencies as:

• Appraisal (California gives 17 days to complete all inspections)
• Loan Funding
• Physical/Home Inspections.

7. When do you take possession of the property?

• Spell out the possession date. Is it on closing? A day after closing?
• If possession will be prior to closing, enter into a rental agreement to protect all parties.
• If possession is more than two or three days after closing, execute a rental agreement to protect the buyer.

8. Negotiate Who Pays the Fees

Even though most contracts call for fees to be negotiable, some fees, depending on your state, are customarily paid by one party. You can spell out who pays fees for title, escrow, and county or city transfer taxes. In most cases the Seller will pay the fees.

9. Request Special Reports

If you are concerned with anything with the property ask for a Special Report Upfront. Example Reports: Termite Report, Lead based paint report, and Mold inspections.

10. Clearly State Expiration of Offer

Clarify when the offer will expire. You will want to give the seller enough time to come to a decision, but not allow them to take their sweet time.

For any help or questions on creating a great offer contact:


Oliver Graf
Real Estate Expert

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Lenders pay 6% commission on Short Sales - Great news for Realtors!

Lenders pay six percent commission on Short Sales!

6% Commision guaranteed by Fannie Mae on Short Sales!

Great news for Real Estate Agents who are working short sales…. Now companies servicing any Fannie Mae loan products can no longer force real estate agents to reduce their commissions as a condition to a short sale getting approved.

Fannie Mae stated, “Effective March 1, 2009, closing of pre-foreclosure sales may not be conditioned upon a reduction of the total commission to be paid to real estate agents to a level below what was negotiated by the listing agent with the borrower, unless the fee exceeds 6 percent of the sales price of the property in aggregate.”

So now any agents will no longer be forced to take commission reductions to service short sales. When you submit the short sale package be sure to check in advance to see if the loan is a Fannie Mae Product.

How do you think this will affect the Short Sale process for agents?

For any help with Property Foreclosure or Short Sale questions contact:



To your success,

Oliver Graf
Real Estate Expert
Follow me on Twitter: Twitter.com/OliverGraf360



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How will Obama's Bailout affect Modifications and Short Sales?

New Obama Bailout, Modifications and SHORT SALES... How will this affect us?

There is a lot of buzz going on today with this Bailout and what is going to do for everyone. These questions and answers were posted at a White House Forum to inform the public of Obama’s new plan.

Lets get Started:

• I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

There is not many Homeowners that are as low 105% . .its more like 150%!

The cold hard truth is that most homeowners are tens of thousands of dollars upside down on property value.

• I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

This wasn’t a surprise. . but it gives you notice that if you are thinking of moving out of your home before you find an option to settle your mortgage. .you will not be eligible if you are already living somewhere else.

This is also a big concern because a majority of Americans that are under water right now are Investors. Meaning they own more that a few properties which are all going to need a loan modification.

• How do I know if I am eligible?

Complete eligibility details have been announced on March 4th when the program started. The criteria for eligibility will include having enough provable income to make the new set mortgage payments along with a decent mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

• Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide credit worthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

EVERYONE needs to call their bank to see if they can get into a better loan! Even if you loan is not due to adjust for another year, I still recommend you contact now to get into a new today! You don't wait to wait until your loan adjust before you start working on it, that's how people get into trouble!

• 
  Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

No Way! Other than doing a short sale there is never a way to reduce principle balance!

• Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

If you see your financial situation changing in the future, Modify Now or Short Sale Now!!

• How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

• I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification. One a short sale both banks will negotiate both down.

If you are very upside down on your property and don't really see yourself being able to afford the payments in the future, do a short sale now!

I recently read somewhere that over 50% of loan mods go back into default!

• How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

There is a lot of nonprofit loan mod companies out there. I suggest you hunt one down and go with them!

• Is my lender required to modify my loan?

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

I think this is going to open a lot more doors for people that where previously out of luck.

• I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.

Shot Sale Time! If you owe a lot more than what your house is currently worth and you don't see your equity coming back up for 10 years.. . you should start thinking about doing a short sale as long as you can't make your payments anymore.

I think that Shorts Sales are great option for a lot of people!! The best part is that it cost the Homeowners nothing!

Lenders will not negotiate on short sale that is being purchased by one of your relatives.

A Short Sale helps every party involved! The bank will always net more with a short sale than with a foreclosure.

The Realtor or Mitigation Company negotiating your short sale should have sufficient knowledge with short sales. Sometimes get get a little tough to do and that is why you want to make sure you have a Pro!

No matter what the size of your loan the chances are a short sale will work for you!

For any help with Property Foreclosure questions contact:

Sam Khorramian
Success Expert


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