This is another interesting Short Sale success story that closed in September 2008'.  The property was located in Ladera Ranch in the prestigious community of Covenant Hills.  The house comprised of 4 bedrooms, 4 baths, with 3 car garage and 3,600 square feet of living area. 

This property sold for $1.2 Million in December of 2006', right around the peak of the market, and was worth about $890,000 in September of this year.  The first Mortgage was hald by EMC mortgage, and the second Mortgage was with Homecomings.  The balance on the 1st loan was approximately $870,000 and the 2nd trust deed note balance was $240,000, for a total loan balance of $1,110,000.  That means the property was upside down by $220,000 at the time the homeowner came to us requesting a Short Sale.

EMC was very difficult to work with on this short sale for the BPO they ordered came in high.  The 2nd mortgage bank, Homecomings, also was requesting a 10% pay-off for their 2nd trust deed note, which was $24,000.  We received an offer for $850,000, and after several counter offers, were able to bring the buyer up to $875,000. 

After several months of back and forth negotiations, we persuaded EMC to conduct another BPO, which came in at a more realistic price of $900,000.  During the same time, we were able to convince the 2nd mortgage lender to accept just 5% of their outstanding balance, equal to $12,000.  EMC agreed to pay the back property taxes of  $6,000 and they ultimately accepted a discounted pay-off of $795,750.  This resulted in a pay-off of 91.5% to the 1st mortgage lender. 

Everyone was better off in this short sale transaction as compared to a foreclosure.  The 1st mortgage bank received 91% of the original balance.   If they denied the short sale, they probably would have only received 80% from an REO sale 8 months into the future.   The 2nd mortgage lender received $12,000, and if the 1st foreclosed, the 2nd would have been wiped out.  The homeowner avoided foreclosure, and was able to sell their home without Bank Foreclosure signs posted all over the property.    In addition, their credit will be more easily corrected/improved down the road, compared to foreclosure. And within 2 years, FNMA will underwrite a new mortgage loan, versus having to wait 5 years for such a privilege if they chose foreclosure. 

The ShortSalesASAP group of professionals specialize in short sales in Orange County and throughout southern California. We are determined to close each short sale we take on and are great negotiators.  We know what banks expect in terms of negotiations,  packaging, settlements and more.  For questions abut short sales, or other possible solutions such as deed in leu of foreclosure, loan modifications, and more, please give us a call at:  949-388-3396. 

We are show casing one of our many Short sale successes in Orange County, CA.  The exact address and buyer seller details will not be published to protect their privacy. 

The home was located in Coto De Caza and was a beautiful 5 bedroom, 3 bath, 3 car garage estate with a golf course view. At the time, this home was worth $910,000 (April 2008').  There was a 1st Mortgage with Saxon Mortgage with a total outstanding loan balance $1,140,000, and this lender had filed Foreclosure about 4 months earlier.  There was also a 2nd Mortgage with Homecomings with a total outstanding loan balance of $150,000 on the property as well, plus $9,000 in back property taxes.  This resulted in a total outstanding debt of just about $1.3 Million  The homeowner first came to us on a Thursday afternoon, desiring a Short Sale, and he told us that the Foreclosure Trustee Sale was next Tuesday at 1PM at the Courthouse steps in Santa Ana - just 3 working days away.

We told the homeowner, that we could not guarantee success, for we had very little time left to work with the mortgage banks, but we would give it our bet efforts.  To make a long story short, in the first few days, we were able to convince the 1st mortgage bank to postpone the foreclosure sale for 1 month.  During the next 3weeks, we gathered and packaged the short sale documents for both the 1st and 2nd mortgage banks - submitted these packages and got the negotiators assigned - we obtained the BPO/appraisal for both lenders.  The week before the postponed foreclosure sale, we obtained a good offer to purchase from another buyer, this time for a fair price of $900,000.  We were again able to postpone the foreclosure sale one more month.

During that next month, we conducted expert negotiations in order to get the loan balances reduced to allow the purchase of the property.  The 1st Lender, Saxon, eventually agreed to a discounted settlement of $800,000, which represented a 29% discount from the total outstanding loan balance owed... plus we convinced the 1st Mortgage to pay all of the back property taxes.  The 2nd lender, Homecomings, agreed to a settlement of just $15,000, for an outstanding loan balance of $150,000, which represents a 90% discount.  Sounds hard to believe I know, but the 2nd mortgage was faced with the tough decision of  either accepting this massive discount, or receiving nothing from the eminent foreclosure sale. 

The grand total outstanding mortgage debt was $1.3 Million before the short sale, and after our expert negotiations were completed, were able to negotiate this debt down to $815,000 plus misc costs, in order to close the short sale purchase escrow.  It was a win win for all. The 1st mortgage bank got 70% of the original balance plus arrears.  If they were to foreclose, they probably would have only received 65% from an REO sale 6 months down the road.  The 2nd mortgage lender received $15,000, and if the 1st foreclosed, the 2nd would not have received a dime... 

The homeowner also won, in that they were able to sell their home in a relatively dignified manner, versus being evicted by the sheriff in a  bank foreclosure.  Plus the credit will be more easily corrected/improved down the road as compared to a foreclosure.  Plus within 2 years, FNMA will underwrite a mortgage loan for them, if they so choose, versus having to wait 5 years for such a privilege if they chose foreclosure. 

The Team at ShortSalesASAP is one of the leading short sale experts in Orange County.  To be great at short sales, a firm needs to be dedicated full time plus, to this endeavor, for bank negotiations are very trying frustrating and time consuming.  Also, an expert short sale team must be cunning negotiators and know what banks expect in terms of negotiations,  packaging, settlements and more.  Plus there is no substitute for results.  Our team at ShortSalesASAP.com has over a 90% success rate for all short sale clients we have accepted.  

Fannie Mae (FNMA) recently passed a new policy which makes a Short Sale a better solution for homeowners compared to Foreclosure. 

Fannie Mae is a shareholder-owned company whose charter is to make sure mortgage loan funds are made available to mortgage lenders who make loans to home buyers. They don't make loans directly to homebuyers, but work with mortgage banks via the secondary mortgage market. FNMA purchases mortgages from lenders and hold those mortgages in their portfolio, and they also issue Mortgage-Backed Securities. These basic financial services help to bring liquidity to the residential mortgage banking marketplace.  .

Fannie Mae recently changed their underwriting policies for new mortgage loans for  homeowners who have been caught in the recent mortgage loan crisis. Starting in August of 2008, the new guideline requires that a Orange County homeowner must wait five-years after the completion date of a foreclosure, before they will underwrite a new loan with such a home buyer.  The previous requirement was only 4 years.

On the other hand, FNMA added a new guideline for Short Sales.  Fannie Mae is now stating that a homeowner who conducts a successful short Sale, only needs to wait  2 years to reestablish credit prior to buying another home, compared to 5 years for a Foreclosure.  This further adds to the other advantages that a Short Sale has compared to Foreclosure.

This is a huge advantage compared to Foreclosure.  In 2 years, the local real estate market here in Orange County will have bottomed out, and possibly start to slightly appreciate. Whereas, 5 years from now, the market will probably be in full swing recovering mode and possibly appreciated substantially from the bottom of the market values. 

For more information or questions regarding Short Sales in Orange County, please visit our website by clicking the previous link.  Or feel free to email us at:  Info@ShortSalesASAP.com or call:  949-388-3396

There are many Orange County homeowners who are caught in today's mortgage loan crisis. Home values have now dropped by 20% to 30% in some cases.  And there are a large number of highly leveraged loans with adjustable rate mortgages, which results in thousands of Orange County property owners having great difficulty keeping up with their mortgage payments, and unable to refinance or sell.  There is now a growing trend for homeowners who are caught in this mortgage loan crisis, to simply stop making their mortgage payments and walk away from their home and letting it go to foreclosure sale.  There is even a website company that focuses on this growing trend and charges clients $1,000 or more simply to tell them to let the home fall into foreclosure.  I think this is a big mistake.  A Short Sale is a far better solution, and more socially responsible choice compared to simply letting the property go back to the bank via foreclosure.  Let's compare the two choices. 

First a few definitions.  In a Short Sale, the homeowner decides to the sell their home, and the sales price minus sales costs, are less then the current loan balances on the property.  In this scenario, the mortgage bank(s) must agree to forgive some of their debt in order for the  property to be sold and close escrow.   A Foreclosure is a legal process initiated by the mortgage bank(s) after several months of mortgage payments have been missed by the homeowner.  This Foreclosure process begins with a 90 day Notice of Default process, followed by a 3 week Notice of Trustee sale period.  At the end of this period, the home is sold via open outcry auction on the county courthouse steps to the highest bidder, or goes back to the bank unsold and becomes an REO property. 

The Short Sale is a much more dignified solution then a Foreclosure.  In a Short Sale, you list your home with a local Realtor (who has experience with short sales). As far as your neighbors and the public is concerned, it is a normal home sale, just like any other.   A Foreclosure on the other hand, usually winds up first as a vacant neglected bank owner REO home with a brown lawn, dead landscaping, and stacks of nwepapers on the driveway.  Then a REO Agent posts "Bank Owned Home" signs all around the neighborhood during the weekend for weeks in a row. In addition, Short Sales nominally sell for about 5% more then the corresponding resale of the bank REO.  A Short Sale transaction is better for the bank, the local real estate market, and even the homeowner.

The Short Sale is better for the homeowner for financial reasons as well.  A foreclosure will usually stay on ones credit report for up to 7 years, while according to mortgage industry experts, the newly  refurbished FHA loan will allow a prospective  buyer buy a home with 1 year after conducting a Short Sale. Also, industry experts in credit counseling state that a Short Sales are approximately 100 points less damaging to ones credit as compared to a Foreclosure sale.

Finally, a little know but huge advantages of a short sale as compared to a foreclosure is the following.  In Orange County, there are many homeowners who have a 2nd trust deed (TD) Home Equity Line of Credit (HELOC) loans. The majority of these loans are recourse loans, which in California, means that if the first mortgage were to foreclose, the 2nd TD HELOC loan is removed from the home, but is not wiped out at the foreclosure sale.  It then becomes a delinquent unsecured debt.  The 2nd TD HELOC lender then has no other choice but to go after the homeowner will all of the legal recourse available to them.  A Short Sale, on the other hand, allows the knowledgeable real estate agent to negotiate with both the 1st and 2nd mortgage holders, in order to divert some of the available sales proceeds to the 2nd HELOC lender, so that they will agree to wipe out the HELOC debt at the close of escrow with no recourse against the homeowner. 

If you have any questions about the Short Sale process, please feel free to call for our real estate team has many years of experience in this area of expertise.

Currently there are 288 homes and condos listed for sale in Dana Point.  Of these properties, only 18 are Short Sale homes and condos, and 12 Bank owned REO properties listed for sale in Dana Point, CA.   This represents 10% of the available inventory are distressed properties for sale.  For sold homes in the month of April, there were 35 properties that sold and closed escrow in the past month.  Of these 35 sold properties, 4 were Bank Owned REO  transactions, and 1 was a Short Pay property.  This represents 14% of the transactions in the month of April were distressed properties.

If you would like more information about homes and condos for sale in Dana Point, CA., please visit our website at:  Dana Point Real Estate.  If you would like more information about short sale or Bank Owned REO properties, visit our OCBargainHomes.com website by clicking on the link at the top left of this blog. 
 

If you own a home in Orange County, Ca and you find yourself unable to keep up with your mortgage payments, you may find yourself in Foreclosure in the near future.  The basic question you need to ask yourself is, "Do I try to keep my home, do I sell it, or do I declare Bankruptcy ?". 

If your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property.  If the payment is greater than 40% of gross monthly income, consider selling it or transferring the property to avoid negative impacts to your credit. 

Plan A -  Keeping the Property:  If you have a significant amount of equity left in your home (greater then 20%), and the cause of your delinquent payments was due to a temporary setback which you have, or can soon overcome (ie: Medical Emergency), then your first option may be to refinance your home and include the back payments (referred to as Arrears) in the new loan balance. If that does not apply to you, then you can try to negotiate a work out with your existing mortgage lender(s).  Lenders want the loan to be current - they don’t want to have to complete a foreclosure and own a vacant home. See if it is possible to make up the defaulted amount over a period of months.. or renegotiate the loan interest rate ... or re-write the note and include the defaulted amount.  If none of these options are possible or did not work, then it is time to consider Option 2. A side note - make sure you talk with a Short Sale expert even if you think you have some equity in your home, for property values have dropped substantially in the past 12 months, and many homeowners are not aware of the true value of their property.

Plan B - Selling the Property:   If you have some equity left in your home (ie: 5% or more), then your best bet is to sell your home outright on the open market using a professional real estate broker.  If your equity is less then 5%, but greater then 0%, and the Arrears are a few Thousand or less, and your monthly payments are too much greater then the market rent for your home, you may want to consider a Lease with an Option to Sell.  You will most likely need a professional Realtor to handle this type of transaction as well for they are more complicated then a standard sale. If none of the above options work out, or if you have no equity left in your home, then your only option at this point may be a Short Sale.

A Short Sale is a situation in which the mortgage debts are more then the home is worth.  In this situation, the Mortgage Lenders need to be convinced to reduce your mortgage debts down to level equal to the net selling price of the home.  You will most certainly need real estate professional who are experienced in these types of transactions, for as you can imagine, trying to talk the mortgage lender(s) into writing off, let's say $40,000 in debt, is no easy chore. 

Plan C - Foreclosure and/or Bankruptcy:  Bankruptcy is a major step that will have long lasting negative impact on your credit rating. Also, when you file bankruptcy, your financial matters fall under the jurisdiction of the courts which could limit your options. For these reasons, we do not recommend filing Bankruptcy as simply a means to try to keep your home.  I've never seen that work, for the mortgage banker(s) can pierce the Bankruptcy so to speak, and still foreclose on the home for they have priority to any equity that may exist in the property. If you have other financial issues that may require a Bankruptcy that is a different story, so please seek appropriate legal advice.  

We also would never recommend letting your home go through to the end of the Foreclosure Sale.  A Short Sale can stop a Foreclosure and is a much better solution.  A Foreclosure will stay on your credit report for 7 years, plus many mortgage experts claim that a Foreclosure will damage your FICO score much worse then a Short Sale, in the range of 100 to 200 points lower.  A Foreclosure will usually be filed by the mortgage lenders after your loan payments have fallen 3 or 4 months behind.  The Foreclosure filing consists of a 3 month Notice of Default period, then a 3 week Notice of Trustee Sale period and then the house is sold at Auction to the highest bidder, if any.  If the Notice of Default has been, or is soon to be filed, you have sufficient time to explore your options, but time is of the essence.  There are some potential income Tax consequences of either a Foreclosure or a Short Sale, so consult with an expert in this regard.

Please don't make any hard decisions regarding Foreclosure, Bankruptcy, Short Sales or other options, based solely upon reading this article though.  Please seek appropriate legal and financial council first. If you would like to discuss your options regarding selling, leasing or conducting a Short Sale of your property here in Orange County, please feel free to call us anytime at:  949-388-3396 or drop us an email at:  Info@OCShortSaleTeam.com , or visit our website at:  www.OCShortSaleTeam.com 

Actually, compared to a Foreclosure, there are no Disadvantages to a Short Sale, just a few hurdles. First of all, let me briefly define a Short Sale.  Simply put, a Short Sale (sometimes called a Short Pay), is a situation in which a home is sold to a new buyer, and the sales price is less then the face value of the mortgage loan(s), plus back payments (if any), plus all other sales and closing costs such as Title, Escrow and real estate commission fee's.

As we discussed in a previous blog post, many banks today would prefer to accept a Short Sale versus going through with a Foreclosure repossession of the property.  But what are the Advantages of a Short Sale as compared to a Foreclosure, from the Orange County homeowners point of view ?

The main advantage of a Short Sale is it is less damaging to ones credit.  First of all, many credit counselors state that a Short Sale will stay on ones credit report for about 4 years, while a Foreclosure will stay on the credit report for up to 7 years.  And, an experienced credit counselor may be able to have the Short Sale removed from ones credit report in less time then that.  Another factor, is that some lenders and credit consolers claim that a Foreclosure will damage ones credit by as much as 200 points more then a Short Sale.  If one intends to borrow money in the next 7 years for a car, boat, or another home, this can make a huge difference in ones ability to get another loan and what the interest rate will be.

The other advantage of a Short Sale is the sense of dignity and responsibility.  During a Short Sale, the homeowner is marketing the home for sale with a local Realtor (who hopefully has vast experience with Short Sales), in an attempt to sell the home at the best price thus bringing in as much money as possible to the Bank.  When the home is sold to a new home buyer, the homeowner moves out a that close of escrow in a orderly and dignified manner, just like any other home sale transaction. This is a relatively painless resolution to a difficult situation. On the other hand, after the Foreclosure sale, you are forced out of the house by court eviction.  Then the home usually sits vacant as the grass turns brown, and newspapers collect in the driveway.  Then in about 4 to 6 months, a local Realtor is hired by the foreclosing bank and 'Foreclosure for Sale' signs are posted on the property. A humiliating ending to a painful process.

What are the hurdles or disadvantages of conducting a Short Sale, as compared to a Foreclosure?  One, the home owner must be essentially broke... that is to say, the property owner must prove to the bank that they are ill-liquid and essentially unable to make your mortgage payments.  If one has a good source of income and/or significant sums of money in the bank, the mortgage lender will most likely decline the Short Sale request and demand that the homeowner make up for the Short Pay with their own cash. Or may require the home owner to carrying a new note to be paid back to the bank with the homeowners strong income.

The other hurdle, is that the home owner may be liable for federal income tax based upon the income generated by the debt relieve.  This does not always happen, and congress is now considering a bill to remove this penalty from the Tax code. Actually, compared to a Foreclosure, this is not a disadvantage, for this same potential Tax consequence can happen as a result from a Foreclosure as well.

If you are a home owner and you find yourself behind in your payments and your value of your home has dropped, please give us a call.  Our team of experts will advise you as to the best approach to resolve the situation and the conversations will be held in the strictest confidence.  You can reach us at:  949-388-3396, or email us at:  Info@OCRealtyGroup.com  

The last time Orange County CA. experienced the current level of Short Sale properties for sale was in the mid 1990's.  Back then, Short Sale and Foreclosure activity was due primarily to massive job losses and a glut of new and existing homes for sale.  Today, the main culprit is a correction in local home prices coupled with many highly leveraged, adjustable rate mortgage loans that were made in the past 4 years.

Using a Short Sale to sell you Orange County home is a difficult transaction, but is a much better alternative then out-right Foreclosure or Bankruptcy.  A Short Sale occurs when a homes sales value is less then the outstanding mortgage debt plus sales costs (sometimes called an "upside down Mortgage"), and the mortgage bank(s) has agreed to write off a portion of the outstanding loan debt in order to consummate the sale.  For example, if a home sells for $600,000 with $20,000 in total sales costs, and the total outstanding loan balance is currently $620,000, then the lender(s) would have to agree to reduce the mortgage loan debt by $40,000 in order to close the deal.  Lenders often entertain such an option for in the long run, they will usually receive a higher percentage of their principal back as compared to forcing the property into Foreclosure and run the risk of property neglect or damage, and additional delays and costs, and the possibility of property owner bankruptcy. 

Today, the "upside down Mortgages" in Orange County are due mostly to the risky, highly leveraged loans in which the home buyer purchased the home with little or nothing down, with an interest-only or worse yet, negative amortization loan in which the loan balance gets higher every month.  Combined with the softening of Orange County home prices that have now decreased by as much as 12% in some areas. 

These factors are causing many home owners to consider a Short Sale to solve their financial crisis, but this is a  difficult real estate transactions that requires additional paperwork and intricate negotiations between the real estate agent and the mortgage banker(s).  Basically, the real estate professional must prove to the mortgage bank(s) that the homeowner has a financial hardship.  In other words the home owner is unable to keep up with the current mortgage payments, and has minimal bank account savings, or other investments.  This financial duress can be due to job layoffs, illnesses, divorce, or even the unexpected large increase in mortgage payments due to interest rate resets. 

Many lenders today in Orange County, won't commit to a Short Sale until their is a valid and firm purchase offer in hand from a qualified new buyer, and a knowledgeable broker/agent who can negotiate the deal. It's imperative to work with an experienced real estate agent for they will need to prepare a professional and complete Short Sale package.  This package includes the purchase offer contract, buyers detailed loan qualifications, a realistic and detailed analysis of the fair market value of the home, current local real estate market conditions, and financial information and hardship letter from the homeowner.

In addition, there may be income Tax consequences if the home was refinanced.  Technically, the difference between your home's value and the balance on the mortgage is considered a forgiveness of debt and this amount may be considered taxable income if the loan(s) were not purchase money, but were refinanced. If one can prove financial insolvency, then this tax consequence may be forgiven.  It is imperative that one consult with a Tax accountant regarding these matters.  This potential Tax issue is the same regardless of whether the property was sold via a Short Sale or taken back in Foreclosure, so a Short Sale is still a much better choice then Foreclosure. As a side note, Congress recently passed a bill (Mortgage Cancellation Relief Act of 2007 ) that essentially eliminates this tax issue for purchase money mortgages, and is awaiting Senate approval.. 

If you are a home owner that is falling behind in your payments, or potentially facing foreclosure, or a prospective home buyer who is entertaining the purchase of a home that is in Foreclosure or a Short Sale, please feel free to contact us with any questions or concerns that you may have at:  949-388-3396 or email us at:  Info@SearchOCHomes.com , or visit our website at:  www.OCShortSaleTeam.com