This is a first in a series of discussion about doing short sales for different services.  The purpose of these upcoming articles is to highlights some of the tips, tricks and secrets we have uncovered negotiating Bank of America short sales.  These tips and tricks should help with your experience and increase your chances of a successful short sale with Bank of America.

Click HERE to see if you Qualify for a Bank of America Short Sale

The biggest advantage of doing a short sale with Bank of America is that they utilize Equator.com for document management.  Equator.com is a web-based servicing platform that allows the agent, homeowner and servicer to track the progress of the short sale from an internet portal.   The listing agent can uploaded seller documents, such as tax returns, W-2s, etc., into the website without the risk of items getting lost.  Also, the servicer can negotiate offers and track the sales process and tasking system to make sure the transaction is on track.

Shandrow Group has completed numerous Bank of America short sales on Equator.com and has an almost 100% success rate negotiating short sales without deficiency judgements with Bank of America.

Click HERE to see if you Qualify for a Bank of America Short Sale

This is a great article on Huffington Post about why bank can not rent home to the previous home owner–it is currently prohibited by Fannie Mae or Freddie Mac–two of the largest investors in home mortgages.  Here is the full story. . .

Housing investors and advocates are embracing a new strategy to keep struggling borrowers in their homes: Purchasing houses from homeowners who can no longer afford to pay the mortgage, then leasing the property back to the previous owner at an affordable rent.

The strategy looks like a winner for both homeowners and banks. The homeowner gets to stay put and the stress of paying what has become an unaffordable mortgage disappears. Meanwhile, the lender doesn’t have to foreclose, which is costly and usually results in a vacant home they have to maintain until they can sell.

The problem is the strategy is prohibited. The nation’s major banks and mortgage companies, as well as housing giants Fannie Mae and Freddie Mac, typically bar the previous owners from remaining in their properties after homes are sold for less than the value of the outstanding mortgage — what is known as a short sale.

With nearly one in every five homeowners owing more on their home than it’s worth, and millions of homeowners on the verge of foreclosure, short sales are on the rise. Last year, there were 26,000 more short sales than in 2010, according to Hope Now.

At the same time short sales are increasing, there continues to be an oversupply of vacant homes, with nearly one in every ten houses sitting empty, according to the Census Bureau. The flood of vacant homes is hampering a rebound of the housing market, say economists, by keeping home prices low. It makes sense, then, to try to avoid bringing more empty homes onto the market.

But in fact, the banks refuse to allow these kinds of transactions unless the buyers sign legal documents promising they will not rent the property back to the previous owner. The restrictions are designed to limit fraud: If a struggling homeowner can sell the property for less than what they owe the bank and remain in the home, they could find a partner to buy the home at the reduced price, and together they could then sell the home and split any profits.

However, this seemingly sensible provision is now having an unintended effect, staunching what many experts portray as a promising way to bolster the troubled housing market: inviting investors to buy distressed homes en masse and then rent them out.

“All these government agencies, Fannie, Freddie, the Federal Housing Administration, they all have this policy,” said Jorge Newbery, director of American Homeowner Preservation, a company that buys homes and rents them back to the previous owner. “They have all this rhetoric about keeping families in their homes, but then it’s just pushed to the side. What they’re doing just seems punitive and illogical.”

The short sale policy is recent. Freddie Mac and Bank of America adopted it in summer 2010, with Citigroup following in early 2011. Wells Fargo and J.P. Morgan Chase declined to comment on the timing of their policies.

Investors say the policy is just bad business. “Short sales are a third of our market, and they’d sell faster if we could just rent them back to the previous owner,” said Steve Schmitz, chief executive officer of American Residential Properties, a firm that bought and then rented over 500 foreclosed properties in the Southwest. The firm is also nearing completion on a $100 million deal to acquire an additional 800 foreclosed properties.

According to Schmitz, the prohibition on short sales also makes impossible what could otherwise be a win-win transaction.

“The best deal for everyone is where we can lease it back to the previous owner,” he said. “The homeowner isn’t being kicked out. Their kids can stay in the same schools. For us, we don’t have to pay a leasing commission or have a vacant home. The bank wins because we’d be willing to pay more money for that house if we could lease it back to the previous owner. The community wins because there’s never a vacant home in the neighborhood.”

Ivy Zelman, chief executive officer at financial analysis firm Zelman and Associates, disagrees with the assertion that the restrictions impede short sales. “I don’t think it’s an issue for the single-family rental market, as investors rehab homes and have enough tenants to rent them to other than the former mortgage holders.”

Last month, the Federal Reserve Board released a 26-page paper that supports converting foreclosed properties to rental units. According to that report, now is an unusually good time for such a strategy because demand for owner-occupied homes remains low, demand for rental properties is rising, and the problem of banks’ continued hesitance to offer mortgages to everyday Americans means the situation won’t resolve anytime soon. The Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae, is also currently reviewing proposals from potential buyers to convert the two companies’ foreclosed properties to rental units.

Though the Fed report and the FHFA program focused on already-foreclosed properties — as opposed to short sales, which function as an alternative to foreclosure — the same argument applies to both, said Newbery of the American Homeowner Preservation.

“If you have a borrower who can’t afford to own the home anymore, but can afford to rent it, and wants to rent it, why wouldn’t you let them?” Newbery said. “Why would you bring another vacant home on to this market if you didn’t have to?”

What do you think this sign tells us about the real estate ?

The bill, SB 931, adds a significant provision to the California anti-deficiency laws which protect California borrowers from deficiency liability on real estate secured obligations. The purpose of SB 931 is to facilitate short sales of distressed residential property and avoid the burdens of foreclosure sales while preserving for the borrower the anti-deficiency protections that are already set forth in Code of Civil Procedure (CCP) Sections 580b and 580d.

SB 931 adopts new CCP 580e which ensures that no judgment shall be rendered for any deficiency on a note secured by a first deed of trust encumbering a dwelling of not more than four units in any situation where the trustor sells the dwelling for less than the remaining balance of the secured indebtedness due at the time of sale, if the beneficiary under the first deed of trust consents to the sale in writing. The beneficiary’s written consent to the sale will obligate the beneficiary to accept the sale proceeds as full payment of the secured obligation.

You can read the new bill, SB 931, by clicking here.

The intent of SB 931 is to protect a homeowners in connection with a short sale on their residence. California homeowners pursuing short sales on their first mortgage will no longer need to worry about their lender seeking a deficiency judgment after a short sale.

Bill SB 931 is not intended to protect an entity or an individual borrowing on a commercial loan secured by one or more consumer residences, which would be a case where an individual or limited liability company or partnership is a borrower on a construction loan to build residential units.

Some concerns have been raised that CCP 580e could provide protection for a real estate developer following consensual sales of  new  residences for less than the outstanding balance of the construction loan, as CCP 580e is not limited in its protection of homeowners, nor does it require that the residential property be occupied by the homeowner, nor limit the residential property to only one building (of 1-4 units).

The bottom line is that before bill SB 931 was added, homeowners received more deficiency protection when opting for foreclosure instead of a short sale.

This bill will now provide the homeowner by providing the same deficiency protections as a short sale.

If you have questions about bill SB 931 or Short Sales in Long Beach, CA, feel free to contact me @ 562-364-9505 or mark@shandrowgroup.com

One Less Foreclosure.

Sincerely,

Mark Shandrow
Real Estate Broker
office 562-364-9505 ext 100
mark@shandrowgroup.com
Shandrow Group
3970 Atlantic Ave., 210
Long Beach, CA  90807
follow my story at http://markshandrow.com

Are you financially strapped and considering a short sale for your home? If yes, then what you thoroughly need to understand is the tax ramifications of such short sales. Every lender has their individual set of rules and preferences regarding when and how to go about a short sale.

In a short sale, the lender allows you to sell the collateral for an amount less than what you owe to the lender and the remaining balance is usually forgiven. And here is where the tax ramification emanates from. It is rationalized by the fact that when you take out a loan you are not required to report it as income because it is assumed that you will pay back the loan.

But, when the obligation to pay back the loan is eliminated, the amount becomes reportable as income. And thus the IRS would treat the forgiven amount as taxable income, quite like the forgiven amounts in normal debt settlement.

However, you need to consider your tax due, by judging the kind of loan that you took out, so you can work on your tax debt relief accordingly. Here are the tax consequences for some loans on which short sales can be undertaken:

• Recourse Loans: These are loans where you are personally responsible for the repayment of the balance after the lender repossesses your asset. Upon a short sale on recourse loan, you might get the balance forgiven but you will have to pay taxes on it and report on your income tax return
• Non-recourse Loans: In this kind of loan, you will not be personally responsible for paying the balance after the lender sells your collateralized asset. Usually, the term “non-recourse” loan is mentioned in the loan agreement and you are not required to report any forgiven amount on your income tax returns after short sale, as you are not liable for the balance repayment.
• Forgiven Debts: The IRS deems any loan balance forgiven by the lender to be taxable income, depending upon the situation. So, the amount of the loan balance you owe during the short sale is regarded as reportable income. On successful completion of the short sale, the lender will send you an IRS Form 1099-C so you can report the taxable income on your income tax return. However, any debt you get cancelled through bankruptcy will not be treated as taxable income.
• Short Sale of Primary residence: On completion of short sale of primary residence, the mortgage lender will normally forgive the loan balance that cannot be covered by the sale proceeds. The forgiven balance is taxable. At present, the intricate short sale tax ramifications are lessened primarily by the Mortgage Forgiveness Debt Relief Act of 2007 and the Emergency Economic Stabilization Act of 2008. Under the 2007 Act which any amount forgiven in a short sale between 2007 and 2010 will not be regarded as taxable income. The 2008 Act takes it a step ahead and extends the time limit till 2010. However, cancellation of any mortgage balance up to $2 million is non-taxable.  The provisions under these Acts are applicable only to redeemed amounts ensuing from defaulted loans for refinancing, purchasing, constructing or renovating the homeowner’s primary residence.
• Tax implications for other kinds of short sales

The canceled debt from vacation homes, rental properties, and second homes that are liquidated via short sale is treated as income.

Short sales are intricate issues and indeed have significant consequences with respect to tax. So, whenever you need to deal with tax issues ensuing from short sales, do consult a tax debt attorney right away, and get the best advice on how to handle your taxes.

If you have any questions, you can contact Kevin at kevin.craig672@gmail.com

Just be cautious. You could be bait for a new real estate scam called Short Sale “flopping.”

What is Short Sale Flopping?

A Short Sale “flopper” works to drive down the price of your home so that your lender will allow you to sell your home for much less than it’s worth. In order to pull it off, the Short Sale flopper must find a home appraiser who agrees to be part of the scam. Without this valuable player, the flopper won’t be successful at undervaluing your property.

It works like this: once the flopper drives down the price of your home and secures your property in Short Sale, he then finds a buyer (or may already have a naive buyer lined up) who will buy the property for thousands of dollars above the Short Sale price. Then your lender, not the flopper, takes the loss.

And, if you’re not protected against being sued by your lender, they can come after you to pay the deficiency left by this “flop.” That means that if your Short Sale agreement doesn’t protect you from being subjected to your lender’s deficiency judgement, you could be responsible for paying thousands of dollars while the buyer walks away with your property. And, believe me, the bank will have the right to chase you for any shortfall.

How Do You Ensure You’re Protected from a Short Sale Deficiency Judgement?

If you start having financial difficulties, contact your lender right away. Make them aware of your situation before you miss your first payment. Our next step is to contact a Short Sale Real Estate Agent who has experience with loan modifications and refinancing programs available to people who have not yet missed a mortgage payment.

Then, work with your Short Sale Real Estate Agent and your real estate lawyer to help you prepare a proper Short Sale contract and assist you in negotiating with our bank. If someone approaches you with a quick deal to get out of your mortgage and they advise you against hiring a Real Estate lawyer or buyer’s agent, be very careful.

How Do You Protect Your Long Beach Property from Being Flopped?

Don’t try to sort through your Short Sale options alone – or take help from a stranger who comes bearing a deal that sounds too good to be true. It always is.

Most distressed homeowners who get caught up in “flopping” scams or other types of real estate fraud usually do so because they don’t seek competent help early enough in the process and are left with no other options.

If you’re considering working out a deal with a buyer, get the help of an experienced – and licensed – Short Sale Real Estate Agent. If you don’t know one, ask your neighbors and take the time to ask a lot of questions. Conducting a little research on licensing a signs of real estate scams will help you determine if your “real estate representative” is qualified, or ethical.

The best thing you can do is seek help from an experienced Short Sale brokerage.

If you have more questions about flopping and Short Sale scams in the Long Beach area, feel free to contact me @ 562-364-9505 or mark@shandrowgroup.com

One Less Foreclosure.

Sincerely,

Mark Shandrow
Real Estate Broker
office 562-364-9505 ext 100
mark@shandrowgroup.com
Shandrow Group
3970 Atlantic Ave., 210
Long Beach, CA  90807
follow my story at http://markshandrow.com

And though the government has implemented a number of homeowner programs, mortgage lenders and banks have repossessed another 398 homes.

With so many homeowners in trouble with their mortgages and many lenders trying to prevent more foreclosure inventory, homeowners may be able to find the best house for their budget by contacting a Long Beach Short Sale real estate agent.

Why Should You Contact a Short Sale Agent?

Currently, there are 822 Long Beach homes in pre-foreclosure. This means there is a lot of Short Sale competition in the Long Beach area. Our pre-foreclosure rates are still lower than other areas, but over 800 choices can be intimidating when you attempt to negotiate a Short Sale home purchase for the first time.

Purchasing at a pre-foreclosure is a viable option that helps both you and the seller meet your financial expectations. But like every other major life decision, buying a Short Sale has unique ups and downs that set it apart from relying on traditional house hunting and negotiation tactics. Regardless, using a Short Sale real estate agent is the best way to start your home search and should be your first real estate tool rather than your last resort.

What Are the Advantages to Buying a Pre-foreclosure in Long Beach, CA?

The biggest advantage of a Short Sale is the large margin for negotiation. Also, based on the pre-foreclosure numbers in the Long Beach area, most home buyers can pick and choose their new neighborhood instead of settling for a bargain home in a remote or undesirable area. If the distressed homeowner has received a Notice of Default or has been advised to put their home on the market as a Short Sale, you are more likely to settle on a price that satisfies both you and the seller.

Also, when you choose to purchase a home before the final foreclosure or auction phase, there is a better chance that the family is still living in, and maintaining, the home before you take possession. This usually means the buyer will conduct a home inspection or other due diligence and you may have the option to ask the owner to make any necessary repairs.

How Do You Get the Short Sale Listings Answers You Need?

Foreclosure listings do not offer full disclosure on a home before you choose to make an offer to purchase, so having a Long Beach Short Sale real estate agent on your team will help you get answers to the important questions and ensure you are getting the most house for your money.

Buying a pre-foreclosure takes a lot of time and effort, but hiring an experienced agent to be on your team will help you get the best deal possible in the least amount of time. A Short Sale buyer agent will help you understand all the property features, estimated repairs and landscaping, and ensure you negotiate a final price that works to your advantage.

If you have more questions about buying a pre-foreclosure house in the Long Beach area, feel free to contact me @ 562-364-9505 or mark@shandrowgroup.com

One Less Foreclosure.

Sincerely,

Mark Shandrow
Real Estate Broker
office 562-364-9505 ext 100
mark@shandrowgroup.com
Shandrow Group
3970 Atlantic Ave., 210
Long Beach, CA  90807
follow my story at http://markshandrow.com

So What Has Changed?

The motivation of many homeowners who want to start the short sale process is that their mortgage balances have suddenly become higher than the value of their homes. Essentially, they owe more than their homes are worth. Instead of waiting until they are in financial distress, these sellers hope to avoid paying an inflated home loan waiting for their home value to recover, and possibly protect their credit rating at the same time.

What is a Short Sale Hardship in Southern California?

Sometimes a financial hardship is a matter of your lender’s perception. A hardship is defined as a condition that is difficult to endure, either financially or emotionally. It may involve a form of distress, suffering or income loss.

Most lenders will consider the following hardship conditions:

• Unemployment
• Reduced income
• Illness or medical emergency
• Job transfer (voluntary or involuntary)
• Divorce, separation or marital difficulties
• Military service
• Death in the family
• Incarceration
• Increased expenses and excessive debt
• Unexpected repairs or home maintenance

What Are Your Short Sale Options if You Aren’t Experiencing a Hardship?

Your simplest solution is to apply for a loan modification to reduce your principal balance below the home’s market value. If you’re request for a loan modification is rejected, you can move forward with your short sale plans.

The easiest way to start a strategic short sale is to write a strong and honest hardship letter. You need to focus on your reasons for wishing to short sale your home, and how you plan to do everything you can to find a seller that will pay the highest amount possible. You might want to include any upgrades you might complete, or the methods you will use to market your home to qualified buyers.

Here Are Some Strategic Short Sale Tips:

• Hire an experienced strategic short sale listing agent.
• Talk to a lawyer who specializes in Southern California real estate short sales.
• Obtain competent tax advice about possible tax consequences from an Accountant.
• Price your short sale in line with the comparable homes in your area.
• Contact your lender to find out how to fill out and submit your short sale paperwork.

Will Banks Let Sellers Walk Away from Your Southern California Home Without a Hardship?

The answer to this question really depends on your lender. More often than not, the short sale is granted. A hardship is not always necessary because sometimes the bank prefers to dump the property than risk taking it in foreclosure.

Honestly, there is no guarantee that the bank will accept your short sale request, with or without hardship. Every lender is different. And if you are working with two different lenders, your situation is even more complicated.

If you have more questions about the strategic Short Sales, feel free to contact me @ 562-364-9505 or mark@shandrowgroup.com

One Less Foreclosure.

Sincerely,

Mark Shandrow
Real Estate Broker
office 562-364-9505 ext 100
mark@shandrowgroup.com
Shandrow Group
3970 Atlantic Ave., 210
Long Beach, CA  90807
follow my story at http://markshandrow.com

Long Beach, CA. – With almost 3,000 Long Beach properties approaching foreclosure, according to foreclosuresradar.com, most troubled homeowners are unaware of the option to short sale their distressed properties with assistance from the federal Treasury Department’s Home Affordable Foreclosure Alternative (HAFA) Program. Offering financial incentives to both the borrower and the mortgage lender, HAFA was established to help families avoid foreclosure.

In a free, downloadable book, Should I Short Sale My Home? A Homeowners Guide How to Survive the Worst Real Estate Market in History, authors Mark Shandrow, CEO of Shandrow Group and Tim and Julie Harris of Harris Real Estate University, aim to provide HAFA and Short Sale information to homeowners early in the foreclosure process, so they can seek out professional assistance from a qualified short sale specialist or counselor, a significant step to stemming the overall rate of foreclosures.

“Missing mortgage payments, or anticipating missing them is stressful and hard to face, but reaching out to talk to a professional while there’s still adequate time to develop a plan of action is key to preventing a foreclosure, and in some cases, avoiding damage to the family’s credit scores,” says Shandrow, whose real estate brokerage firm employs more than six trained short sale specialists.

A qualified short sale real estate agent can be invaluable to navigating a short sale transaction, which often involves completing intensive paperwork, meeting deadlines, and negotiating the terms with the lender in a direct, proactive manner. But Shandrow Group’s relationships with many of the top U.S. banks and real estate companies through its bank-owned properties (REO’s) business is one of the firm’s most powerful tools for brokering successful short sales on behalf of its clients.

One example, PMH Financial, LLC, a financial services company from Denver, enables Shandrow Group to better help clients expedite short sales.  Like Shandrow Group, PMH Financial has strong relationships within the banking industry and direct access to lenders’ key decision-makers.

The melding of Shandrow Group on the local level and a partner like PMH on the national level assures the highest success rate and the most professional service for their clients.

“The Shandrow Group’s proactive and full-service approach shows that if the right representatives are at the table discussing their needs and options, we can facilitate a short sale transaction and avoid a foreclosure,” says Kristy B. Wray, Vice President of Loss Mitigation at PMH Financial.

Educating property owners about HAFA and short sales is central to Shandrow Group’s One Less Foreclosure philosophy aimed at helping homeowners explore alternatives to foreclosures. “While foreclosures are sometimes a reality, they have devastating, long-term effects to the individual, the community, and the market, driving real estate prices down,” says Shandrow. “One less foreclosure means one less homeless family, one less vacant home in the neighborhood and one less problem for our economy.”

The free book, Should I Short Sale My Home? A Homeowners Guide How to Survive the Worst Real Estate Market in History, is available for download at: http://www.shandrowgroup.com. For further information, contact Shandrow Group at 562.364.9595, ext. 100.

# # #
For frequently asked questions about short sales or related information on foreclosures, visit: www.shandrowgroup.com or call 562.364.9505 ext. 100

“As a Short Sale Specialist, I help families in the Long Beach area navigate their underwater mortgages and find suitable solutions to their loan issues. In some situations it’s too late to do anything, but wait for the bank to take their home. But when a client comes to me early enough in the process, we can usually find an alternative that doesn’t leave them out in the cold. – Mark Shandrow -

Other sources of counseling and information for borrowers in default including:

• Americans for Fairness in Lending: www.affil.org
• Freddie Mac’s online guide to avoiding foreclosure: www.freddiemac.com
• L.A. County Department of Consumer Affairs Home Owner Assistance: 1-800-973-3370
• Los Angeles Neighborhood Housing Services: www.lanhs.org
• National Assn. of Consumer Advocates: www.naca.net
• NeighborWorks America: www.ng.org
• U.S. Dept. of Housing and Urban Development: 1-800-569-4287

Despite the fact that you don’t have a documented financial hardship, and are current on your payments, it’s not impossible to submit a Short Sale request to your lender.

Traditionally, to complete a Short Sale you must be in serious financial trouble –  unemployed, getting a divorce, have paying medical bills, or being forced into relocation. The minimum requirement was being at least 2 months behind on your mortgage payments and facing foreclosure.

Today, depending on your situation, your lender may overlook the financial hardship classification and accept your request in good faith.

This is called a strategic Short Sale.

Over the past few years, Shandrow Group has worked with hundreds of families facing foreclosure or considering Short Sales. We have worked with every major lender and credit union in Long Beach, CA and recently, we’ve closed Short Sales for clients who have never missed a mortgage payment, were up to date with their loan requirements, and did not have a documented financial hardship.

Why did lenders approve these strategic Short Sales?

1. Lenders are overwhelmed with Short Sale requests, so they can’t afford to aggressively pursue borrower hardships. The negotiators at the banks are overwhelmed with foreclosures and Short Sales. They just don’t have the time to spend on each file. This gives you the chance to make a case that gets their attention, proves that you have considered the options, and their bottom line, the negotiator will approve it and move on.
2. Lenders weigh the financial options of the return on Short Sales or the chance that a homeowner will walk away from their mortgage. Many lenders look at a borrower who is applying to do a Short Sale and very realistically conclude that either the borrower will request a Short Sale, or they will walk away and let the house go to foreclosure. A Short Sale is definitely a better option for the lender.
3. At Shandrow Group, we’re familiar with the unwritten Short Sale policies of many lenders, and we know how to submit a Short Sale package with a better chance of acceptance. Different lenders have different hot buttons. Some lenders will not accept a Short Sale on a non-owner occupied property. Some banks will accept a Short Sale for a borrower who is current on their loans, while others require that the borrower be behind on their payments. Working with a Short Sale agent will help you figure out these buttons so you get a better chance of receiving your approval.

So, what does this mean? Some lenders are now beginning to look at their bottom line profit of a Short Sale vs. a homeowner walking away from their mortgage.  In other words, most lenders realize that they can’t take on any more foreclosures and will consider homeowners who do the work to put together a convincing Short Sale request.

One difference we’ll see in the near future is an increase in the number of homeowners considering strategic Short Sales.

If you have more questions about the strategic Short Sales, feel free to contact me @ 562-364-9505 or mark@shandrowgroup.com

One Less Foreclosure.

Sincerely,

Mark Shandrow
Real Estate Broker
office 562-364-9505 ext 100
mark@shandrowgroup.com
Shandrow Group
3970 Atlantic Ave., 210
Long Beach, CA  90807
follow my story at http://markshandrow.com