Short Sales In 2014 are very different then they were in 2008, but there are some similarities. Many of the banks (and attorneys for that matter) have begun to reduce their work staff as short sales have decreased. However, that doesn’t mean that there are no more short sales in 2014. Short sales are still common and in Georgia real estate, they make up about 20 to 30% of the market. So what’s different
Short Sale “Decisions” Take Less Time
Overall Banks and Investors are making decisions faster. Their process is more straightforward. This is true of most banks, such as Bank Of America and Wells Fargo but Ocwen is still going to take a long time dealing with Pakistani outsourcers.
Short Sale Lenders Are Looking For Some Return
Most short sales lenders are asking for money, that doesn’t mean they mandate it, it just means they will ask. We haven’t had any clients pay out of pocket but most have been asked.
Short Sale “Cases” Are Harder
You have to prove the financial hardship. No more strategic short sales. If you can’t prove it then you’re out of luck. Luckily, proving the financial hardship is relatively easy. If you can barely make payments, then you’re in good shape for a short sale.
One of our most recent posts (“Back on the Market”) was about 2090 Brickton Station and how it come back on the market. Are Banks Still Accepting Short Sales? YES! The challenge with short sales has actually never been the bank’s willingness to do them, it’s been either the seller’s lack of knowledge (or the listing agent they chose) or the buyer backing out of the transaction. This is why the Jarvis Team has a 90% success rate with short sales.
I know some people wonder Are Banks Still Accepting Short Sales? because they heard that the tax exemption will end or that HAFA ended but the truth is, that they are still vaiable. They are and they probably will for at least another year or so.
It’s still the best option for those under water and struggling to make the mortgage payments. Obviously, selling traditionally is the best but a short sale is the next best option for those in a hardship.
Just because banks are still accepting short sales doesn’t mean they are easy. In fact, although the process is more streamline, the qualifications are a bit tougher. You need to be able to demonstrate you cannot afford the home with your income (do not count savings).
For the longest time it seemed like if you filed for bankruptcy there didn’t seem to be any reason to do a short sale. Afterall, your debt is gone and that’s kind of the whole point of the short sale is to get the debt, gone. In this case it’s not all about the debt. Bankruptcy affects your credit in a HUGE way, it pretty much eliminates you from buying another home with financing (and credit cards, etc) for at least 3 or 4 years (3 years from discharge).
A foreclosure will prevent you from buying a home with financing for up to 7 years!
You might think to yourself, “well I’ll be sitting out for 7 years due to my bankruptcy, so a foreclosure can’t hurt me.” If you thought that, you’d be wrong. You might have noticed some of your neighbors have no jobs and are at home and yet no one has evicted them. It can be a big win for the bank, they have someone take care of the property and they’ll get to foreclosing when they feel like it. The result? Let’s go to an example:
Say you filed bankruptcy in 2006. The bank took their sweet time foreclosing, so your debt slate is clean but the home still remains an “asset,” since the bank never took back possession. Let’s say you get clear in 4 years, sometime in 2010. The bank now decides to foreclose because the see the market starting to come back. Yep, you guessed it, now you have a bankruptcy that has faded away but a new foreclosure hitting your credit as if it just happened. So when can you buy again? Yep, the earliest maybe 2014 with some programs, but if Fannie Mae still exists you won’t get a loan from them until 2017.
After a Bankruptcy? Short Sale or Foreclosure?
The answer is pretty simple. You should short sale, there’s almost no downside in this scenario except the time spent. Not to mention the short sale does the least overall damage to your long term credit.
I had a recent conversation with a negotiator that was servicing a file with Fannie Mae and told me the ways you can get an automatic short sale approval from Fannie Mae. I should correct myself and say “approved of” but only the value and the offer are needed if you have one of these 4 circumstances. In each instance, the borrower can remain current if they choose and still qualify. (more…)
In a short sale, it’s a pretty common question to ask whether or not, Does Freddie Mac Pursue Deficiency Judgments? Luckily for us there’s a clear definition already out there for this.
Chapter 55.3.1: IRS Form 1099-C, Cancellation of Debt (04/25/06) states that the Servicer must report cancellations of Borrowers’ mortgage debt on IRS Form 1099-C, Cancellation of Debt, as required by the Internal Revenue Code. Under 55.3.1.d .6 it defines a short sale (not by name) as “A discharge of indebtedness under an agreement with the debtor to cancel the debt at less than full consideration.
Most of the time you want to get it in writing and possibly reviewed by an attorney but this is pretty clear that a short sale completely cancels the debt. The way it’s worded above, it’s worth pointing out that your credit report often reports a short sale this way as well.