Short Sales
Real House Foreclosures of New Jersey: How Teresa Giudice Should Save Her Home
Tuesday, August 24th, 2010 | Foreclosure, Home Selling, Short Sales, Uncategorized | No Comments
Though $11 million in debt, there are alternatives Teresa Giudice can seek to avoid foreclosure on her dream home. Chaunce Hayden Collection/Getty Images Entertainment
Before she was shilling for Garden State tanning chains Sizzle Tan, spokeswoman Teresa Giudice was a big-spending Real Housewife living comfortably in a North Jersey estate. So when she suddenly filed for bankruptcy in October, it sent the gossip press into a frenzy. Known for dropping $2,000 in ten minutes on shopping sprees, it was no big surprise that Giudice and her husband found themselves $11 million in the hole. Then rumors began to circulate that her multi-million dollar North Jersey mansion is in foreclosure. Whether or not Villa Giudice is on the block, there are steps to avoid it. If you ever find yourself in a similar position, be sure to consider these alternatives.
Contact the lender
When facing foreclosure, you have options. But one thing that isn’t optional is talking to your lender. The last thing a lender wants is to foreclose on a property, so start discussions with your lender about your choices. Hopefully Giudice was smart enough to pick up the phone and try to make arrangements to keep her Garden State Shangri-La.
Compromise
Lenders are often willing to work with you. That can mean modifying your loan, selling the property, or suspending payments temporarily to give you time to raise funds. In Teresa’s case, it could give her time to sell a boatload of her cookbooks.
Short sale
When your house is worth less than what you owe, you could opt for a short sale if your lender agrees. If that’s the case for the Guidices, it could work in their favor since, despite 12,000 square feet and a sea of marble and onyx, their estate clocks in at a mere $1.8 million.
Deed in lieu
While just as damaging to your credit score as foreclosure, you could ask your lender to cancel your mortgage in exchange for the deed to your house. And thanks to the new Home Affordable Foreclosure Alternatives Program (HAFA), you could get as much as $3,000 to help with relocation expenses. Which, for Teresa, equates to a solid 15 minutes at the local shopping mall.
If you’re facing foreclosure, be sure to explore our extensive foreclosure guide for more info. Or, if you’re in no financial trouble at all, you might consider placing a bid on everything from a 20-foot speed boat to a suit of armor in the Giudice bankruptcy auction.
(HouseLogic.com)
Superman, Save Our House… Top 5 Craziest Forsclosure Rescue Attempts
Tuesday, August 10th, 2010 | Foreclosure, Short Sales | No Comments
Superman! Save my House!
Three years after the recession hit, Americans still are losing their homes to foreclosure in record numbers. Not even celebrities are immune. Wanting to do anything you can to avoid losing your home is only natural. There are a wealth of resources to help you take action. Still, some homeowners have tried other, less-proven methods. Here’s a countdown of some outlandish foreclosure rescue attempts:
5. I pimped my yard to PETA.
This past March, “Octomom” Nadya Suleman was reportedly approached by PETA when word got out about her mortgage woes. The offer: A billboard sign urging pet owners not to let their dog or cat become an “Octomom” in a campaign to raise awareness about controlling the pet population. Suleman ended up letting PETA advertise on her front yard for $5,000. In April, Suleman reached an agreement with the mortgage holder for a sixth-month extension to pay off the $450,000 debt.
4. God made me do it.
Earlier this month, a Montana man, Brent Arthur Wilson, was convicted for removing For Sale signs and forging ownership papers on a foreclosed home in a bizarre effort to keep a roof over his head. During his trial, Wilson claimed that “Yaweh,” or “the creator,” gave him the home. The jury was out for less than an hour before finding Wilson guilty. He now faces up to 30 years in prison and is scheduled to be sentenced August 19.
3. Buy my T-shirt, save my house.
To raise the $250,000 he needed to avoid foreclosure on his Port Washington, Wis., pad, former Saved by the Bell star Dustin Diamond sold T-shirts with his photo and a caption reading, “I paid $15 to save Screeech’s house.” (The extra “e” in “Screeech” was to get around copyright laws.)
The down-on-his-luck comedian turned his money problems into a publicity ploy, telling his story on The Howard Stern Show and even scheduling an online telethon to raise more money. The appearance was canceled moments before it went on the air. Despite all that, it looks like Diamond is still going to lose his home. Wells Fargo started foreclosure proceedings in April.
2. If I can’t live here, no one can.
This past February, Ohio carpet business owner Terry Hoskins decided that he’d rather bulldoze his $350,000 house to the ground than let the bank have it. Hoskins also basically confirmed that he’d do the same to his carpet store if he had to. Thankfully, it didn’t come to that. Although Hoskins didn’t technically break any laws, the bank did hold a sheriff’s auction of his business property to pay off the $600,000 debt he owed.
1. Superman saved our house.
On a more positive note, a rare comic book (an Action Comic #1—the issue that introduced Superman to the world) was recently found in the basement of a couple facing foreclosure. Although it hasn’t been valued yet, Stephen Fishler, co-owner of ComicConnect.com, guarantees that the comic will bring in more than enough to pay off the mortgage at auction time. Other rare finds like this have been valued at more than $1 million. (HouseLogic.com)
Foreclosure Alternative: The Short Sale
Sunday, July 18th, 2010 | Home Selling, Short Sales | 2 Comments
After a short sale, you may qualify for a loan again in two years--quicker than you could with a foreclosure in your past. Image: fotog/Getty Images
By Gwen Moran
Facing foreclosure and tempted to stay in your home until the bank pulls it out from under you? Bad idea. Don’t do it. A much more graceful exit is a short sale, an agreement between you and your lender to sell your home for less than you owe. Although there’s no guarantee that your lender will let you avoid foreclosure with a short sale, new government regulations are aimed at encouraging lenders to do so.
Short sales get government incentives
Although short sales are not hassle-free, at least you’ve got the government backing you. The Home Affordable Foreclosure Alternatives (HAFA) program provides financial incentives for lenders and borrowers to avoid foreclosure through short sales or deeds in lieu of foreclosures.
Participation in the HAFA program requires adherence to guidelines—including a standard process and minimum timeframes—that speed the process, says Dallas-based REALTOR® Tom Branch, co-author of Avoiding Foreclosure: The Field Guide to Short Sales. The HAFA program is for homeowners who can’t keep their homes with the help of a loan modification.
Advantages of a short sale
- You can be a homeowner again more quickly with a short sale in your past than with a foreclosure. New Fannie Mae guidelines help you qualify for a new mortgage in as little as two years after a short sale, as opposed to three years or more after a foreclosure.
- You will have more time to make relocation plans and save money than with a deed in lieu. A short sale may take four to 12 months. A deed in lieu of foreclosure arrangement typically requires you vacate your home within 30 to 60 days of signing, according to real estate attorney Lance Churchill.
- You can receive up to $3,000 from your lender for moving expenses at the time of closing of a HAFA short sale or a HAFA deed in lieu of foreclosure. Relocation funds are part of the incentives of HAFA, but not necessarily for other short sale or deed in lieu programs of the lenders.
- You can help your community’s home values. Because the lender often receives a higher amount of the remaining loan balance than it would from the sale of a home after a foreclosure, short sales help support home values in the surrounding community.
Disadvantages of a short sale
- Your credit score will take a severe hit. But that would happen anyway with a foreclosure. Fair Isaac, creator of the FICO score, says foreclosure and short sales have virtually identical impacts on your credit score. VantageScore—a company that has created a credit score model for consumers—says a short sale will lead to only a marginally lighter hit when compared with foreclosure.
- You may owe additional taxes. In the past, if your outstanding mortgage was $100,000 and your lender accepted a short-sale purchase offer of $90,000, you were liable for income tax on the forgiven $10,000, says Harlan D. Platt, economist and professor of finance at Northeastern University in Boston. However, the Mortgage Forgiveness Debt Relief Act of 2007, which runs through 2012, generally allows taxpayers to exclude income from the discharge of debt on their principal residence in some circumstances. Full relief is available only if the amount of forgiven debt doesn’t exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Consult a tax professional and an attorney to minimize or avoid this liability.
- In some states, your lender may still be able to come after you for the difference between the short sale price and the amount needed to pay off the mortgage. Your actual agreement with your lender and state and local laws and regulations spell out the details. Consult a tax professional and an attorney to minimize or avoid this liability.
How to proceed with a short sale
- Find a qualified REALTOR® experienced in short sales. Short sales are tough to navigate, and they’re further complicated by your loan type—FHA vs. Veterans Administration vs. conventional loans. Real estate agents who specialize in short sales will know the proper steps and order of the steps involved. They’ll also be able to navigate the many parties involved in the process and over-burdened loss mitigation departments. Look especially for agents who have Short Sales and Foreclosure Resource (SFR) Certification, which requires specialized training.
- Gather evidence to support your need for a short sale as opposed to a foreclosure. You’ll need to prove that you have little or no equity in your home, you’re behind on your payments, and you’re no longer able to afford your home. You’ll need to write a hardship letter to the lender describing your circumstances, such as a divorce, job loss, illness, death, or other event that has impacted your income.
A short sale can be a time-consuming process, but if you can avoid foreclosure, it’s worth it in the long run.
Thinking you might need to do a short sale? Contact HomeTeam4u ~ We can help!
Will a Short Sale Save Your Credit?
Thursday, June 17th, 2010 | Home Selling, Market News | No Comments
RISMEDIA, June 11, 2010— (MCT)—Stuck in a house you can’t afford or can’t sell for more than you owe on it? Beware the Web, where you’ll see plenty of claims that short sales will save your credit, simple as that. But there’s nothing simple about deciding whether to sell your house in a foreclosure or in a short sale, which means you sell the property for less than you owe the bank. And in most cases, going through either process will wreck your credit score.
“Both short sales and foreclosures are considered negative by the score, because our data shows us it’s very predictive of future credit risk,” Tom Quinn, Minneapolis-based Fair Isaac Corp.’s vice president of FICO scores, said. “The claim that doing a short sale is not going to hurt your score is false. It’s inaccurate.”
Credit scores, which are designed to assess how likely it is that consumers will uphold their side of the bargain, look at the severity (are we talking bankruptcy or a late car payment?), frequency (have you skipped a payment once, or have you missed a bunch?), and recency (did you miss a payment last month or last year?) of items on your credit report.
In both short sales and foreclosures, “you made a lender eat a big number,” said Alex Stenback, a mortgage banker with Residential Mortgage Group in Wayzata, Minn.
That’s not to say that there aren’t some instances where short sales are better. If a borrower is current at the point of a short sale, for instance, then the consumer’s credit score won’t sink as far as it would have if he hadn’t made a mortgage payment for six months. Still, Fair Isaac says that the benefit from not having prior delinquencies on file pales when compared with the hit a score takes from a short sale.
Dan Williams, program director for LSS Financial Counseling Service, says this widespread notion that short sales are better for credit is a big problem because it deters some people from going into foreclosure when that would be the best option for them.
In Minnesota, homeowners can stay in their houses for six months after the foreclosure sheriff’s sale. Factor in the fact that many banks don’t start foreclosure proceedings right after the third missed payment, and families can potentially stay in a house for more than a year rent-free, hopefully saving that money to help them get back on their feet. This could amount to thousands of dollars.
Housing counselors say that most clients have credit scores in the basement already. “If you’ve got a poor credit score and are doing a short sale to preserve your credit, it’s ridiculous,” Williams said. And it’s happening every day.”
If you’re having mortgage trouble, seek help right away from a housing counselor or an attorney. Realtors are the go-to professionals to learn about the local housing market and what it takes to sell your home. But they aren’t credit experts, and I’d get a second opinion if anyone is telling you that a short sale will save your score. And don’t pay someone a lot of money if they promise to quickly rehab your credit score after foreclosure. Credit scores are forgiving—over time.
Both FICO and its credit scoring competitor VantageScore have released estimates for what happens to consumers’ credit scores when they make mortgage missteps. In the VantageScore study, a homeowner with an otherwise clean record who then has a short sale sees their credit score drop between 120 and 130 points (on a scale of 501-990) compared with between 130 and 140 points if the same homeowner ends up in foreclosure.
For a homeowner whose credit report is rife with late payments on everything from credit cards to car loans, a short sale would ding them between 15 to 25 points compared with 10 and 20 points for a foreclosure. Customers with rotten scores will see smaller point drops than someone whose score is good, because the score already has taken into account the lower-scoring customer’s risky behavior and adjusted the score downward.
FICO’s example found short sales and foreclosures will set you back between 140 and 160 points if your credit score is a respectable 780 (on a scale of 300 to 850), or between 85 and 105 points if your credit is 680.
Even if you do your homework, you ultimately can’t control how your housing woes are reported to the credit bureaus. For example, mortgage servicers may report your situation to the credit bureaus using different codes that could be interpreted more or less favorably by FICO, Quinn said.
What if your circumstances change and you’re able to save your home from a foreclosure? “Once you’ve got a foreclosure starting to track on your credit file, you’re taking a major hit,” even if you ultimately save your house, said Sarah Davies, a VantageScore senior vice president.
Credit scores play such a central role in consumer’s lives. Yet it’s so hard to understand them that people can end up making disastrous choices based on myths that are taken as fact. It’s certainly not a catchall solution, but Congress should at least grant consumers free access to their credit scores, an idea which is currently being floated at the capitol.
(c) 2010, Star Tribune (Minneapolis)
Distributed by McClatchy-Tribune Information Services.