How To Sell A San Mateo Home You Cant Afford

How to Sell a Home You Can’t Afford

Thanks for joining tonight’s webinar. We will begin shortly. To download the slides, please visit

http://budurl.com/WebinarHandout

The RayChel Realty Group

Tonight’s Speaker

Raymond StoklosaManaging Broker and Co-Owner

Phone: (650) 655-2500

www.LivingWellinSanMateo.com

Questions During the Webinar

Short sale experts are available to answer questions throughout the presentation

This is an interactive learning environment. You will get the most value from this program by having your specific questions answered.

having your specific questions answered.

The only dumb question is the one you don’t ask

Questions During the Webinar

You may type questions in at any time during the presentation – Question box on your screen

How to Sell a Home You Can’t Afford

Presented by

The RayChel Realty Groupw w w . R a y C h e l R e a l t y G r o u p . c o m

Presented by

Raymond StoklosaManaging Broker and Co-Owner

Phone: (650) 655-2500

Purpose and Goals of This Evening’s Webinar

Purpose

Share our Passion for Your Education

Increase your awareness about your options when you can no longer

options when you can no longer afford your home

Show what you can expect and what your lender expects from you

Educate and empower home owners in ways that improve their lives

Life Got Hard?

Have you hit a pothole on the road of life?

Is your home worth less than you owe the bank?

Does the month last longer than your money?

Is your monthly mortgage payment unaffordable?

Can’t Afford Your Home?

If you can’t afford your mortgage payment, here are your options…

� Refinance – replace existing with a better loan

� Loan Modification – loan terms adjusted

� Forbearance – suspended payments

Can’t Afford Your Home?

If you can’t afford your mortgage payment and selling is your only option, here are the possibilities…� Short Sale – Sell for less than amount owed

� Deed in Lieu – Transfer to Bank

� Foreclosure – Home sold at public auction

� Bankruptcy – Court reorganization plan stays foreclosure

Primary Benefit of Short Sale

Seller Avoids Foreclosure

• Ineligible FNMA for 5 years

• Shows on Credit for 10 years

• Foreclosure could mean loss

• Foreclosure could mean loss of security clearance

• Current & future employment in jeopardy

Short Sale Myths

• Bank is desperate to dump nonperforming assets

• Bank has no choice but to capitulate to demands of buyers and needs of sellers

Short Sale

Apt Solution

Wishful Thinking?

What is a Short Sale?

• Arms Length - FMV – Sale to Buyer

� Subject to Lender Approval

� Lender Agrees to Accept Less than Amount Owed

� Usually Considers the Debt Repaid in Full

� Seller Receives No Money

Who is Eligible?

Eligibility of Seller is…

• Completely Up To Lender

• Rules Vary Lender/Loss Mitigators

• Each Lender Sets Own Rules

Getting an Approved Short Sale

Single Factor Common

to All Approved Short Sales is…

Hardship

What is a Genuine Hardship?

• Job Loss

• Serious Illness

• Divorce

• Involuntary Relocation that Depletes Homeowner’s Assets

Homeowner’s Assets

• Cannot Pay New Loan Payment – ARM Adjustment

What is Not a Hardship?

Personal Preferences

• Home Worth Less than Borrower Paid

• Borrower Does Not Want Home

• Borrower Does Not Want to Make Payments

• Borrower Wants to Buy Another Home

Who May Not Qualify?

Show Stoppers…

• Homes with Substantial Equity

• Homeowners with Significant Assets or Income

• Homeowners with 2nd Homes or Rentals

• Homeowners in Bankruptcy

• Home Loan is Government Insured

• Investors

General Rule

Borrower Must Be Delinquent Before Lender Will Approve – or even consider – a Short Sale.

It’s a Numbers Game

• Lender Makes a Financial Decision� Strictly the “Bottom Line”

� More now, less later

• Avoids Expense of Foreclosure� Uncollected interest and penalties

� Attorney’s Fees

� Trustee’s Fees

• Eliminates Non-Performing Loan� Non-Performing loans are Liabilities

• REO Inventory Unaffected� Avoid Carrying Costs

� Opportunity Loss

Who are the Initial Players?

ServicerHome-owner’s REALTOR®

Homeowner

Initial participants

BuyerBuyer’s

REALTOR ®

participants

Who are the Players?

Junior Lien

Holders

Private Mortgage Buyer’s

Home-owner’s REALTOR®

Homeowner

Short sale

MortgageInsuranceCompany

Investor

Servicer

Buyer’s REALTOR®

Short saleparticipants

All Parties Must Be Aligned

• Seller/Borrower - Debtor

• Lender – Made the Loan

• Servicer – Collection Service

• Investor – Owns Loan

• Mortgage Insurer – Insures lender/investor loss

• Junior Lien Holders – Other creditors

• Real Estate Agents – Authorized 3rd party

Seller’s Final Position

In the end, the Seller…

• Avoids Foreclosure

• Eliminates a Financial Burden

• Salvage Credit Rating

• Receives No Money

• Loses Property Voluntarily

• Vacates Property

• Moves on with Life

Uncertain Outcome

• Most Short Sales are Not Attainable

� Seller Cannot Demonstrate Hardship

� Price NOT Acceptable to Lender or Investor

Challenges of Short Sales

• High Failure Rate

• Lengthy Processing Time

• Paperwork Intensive

• Lenders Unfamiliar with Local Market

• Lenders Overwhelmed

• Seller’s In-Difference

• Real Estate Agents Ill Informed

• Real Estate Agents Not Proactive

• Recovery Demand Unacceptable

• Foreclosure Date Too Near

Potential Tax Consequences

Federal Government passed law in 2007

� Directing IRS NOT to include the mortgage debt forgiven by the lender as income, however…

� Applies only to purchase loans

� Does not apply to debt on cash-out refi’s

� Does not apply to 2nd homes

� Does not apply to 2 homes

� Dollar Limitation

� $1 Million for married couples filing separately

� $2 Million for married couples filing jointly

Seek Professional Tax Advice!

Pitfalls of Secondary Debt

• Typically, Junior Lien Holders do not forgive the unpaid debt.

� Accept partial payment

� Then, sell the unpaid debt to Collection Agency

� Junior Loans are normally recourse debt

� Collection Agency pursues the seller

• Negotiate a Release for Full Satisfaction of Debt

Beware of Schemers and Predators

• Money Up Front “Problem Solvers”

• Illegal Kick Backs

� Seller cannot receive money “under-the-table”

• HUD-1 Must Account for all Funds

• Lender Fraud is a Felony

Nothing Short About Short Sale

The Only Thing Short

About a Short Sale is the

Lender is Short Changed!

Short Sales are…

Complicated

Legally Complex

Technically Difficult

And, They Are Doable.

Special Word About Investor Sales

Home Equity Sales Contract Law

Special Contract required when…

• Buyer is an Investor

• Property Being Sold is Residential 1 - 4 Units

• Owner Currently Occupies the Property

• Notice of Default (NOD) has Been Recorded

Seller Has Legal Rights

Upon Recording Notice of Default

• 5 Day Cancellation Period

� Seller may cancel

• 2 Year Contract Rescission Period

� Rescission for any unconscionable acts

• No Waiver by Seller

� Any waiver is void

• No Limitation on Damages

� Limiting investors liability is void

Why Short Sales Derail…

• Seller cannot document hardship

• Seller will not agree to approval conditions

• Seller will not sign promissory note

• Seller will not make property accessible for showing

showing

• Lender and/or Junior Lien Holders will not approve

Why Short Sales Derail

• Investor will not approve

• Mortgage Insurer will not approve

• Buyer unable to get financing

• Property has clouds on title

• List price is too high or too low

Keys to Short Sale Success

• Be Engaged

• Respect the Process

• Be Mindful of the Details

• Send Complete Short Sale Package

Package

• Respond in Timely Manner

• Set Realistic Expectations

• Retain Professional Representation

Technology Tools You Can Use at Home

Home Value – PropertyValuesNow.com

Find out what homes in your neighborhood have sold for

Ask a Real Esate Question

http://LivingWellinSanMateo.com/San-Mateo-Real-Estate-Question/

Help Us Spread the Word

“Classes” Tabfor a Class Schedule

Free Conversation

Raymond StoklosaManaging Broker and Owner

Chela StoklosaAgent and Owner

Rebecca WilliamsonAgent

Managing Broker and Owner Agent and Owner Agent

Phone: (650) 655-2500info@RayChelRealtyGroup.comLivingWellinSanMateo.com

YouTube.com/LivingWellinSanMateo

How To Sell A San Mateo Home You Cant Afford

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