• Are you behind on your mortgage payments?
   
• Are you having sleepless nights because your income does not support your mortgage payments?
   
• Are you about to be foreclosed on?
   
• Are you worried about foreclosure showing up on your credit record in the future?
   
• Do you owe the bank more than what your house is worth?
   
• Are you trying to sell your house on your own and/or at inflated price to enable you to payoff your loan?
   
• Do you need help NOW?

When money was easier to get, lenders were lax in extending credit.  Not that they extended credit to non-deserving borrowers.  However, the amount they allowed borrowers to borrow in some cases is more that what they normally would because the money supply was plentiful.  This left little room to maneuver when a homeowner's financial situation changed, or when their monthly payment increased due to interest rates resetting.  This is particularly true for those who obtained adjustable rate mortgages (also known as ARM), or interest-only loan.

The good news is that there are several solutions to getting out from under this financial dilemma; and doing nothing is not one of them. Instead of sitting tight "hoping" that things will change, you should be proactive in looking at alternative ways of getting out of this difficult situation.  When faced with financial pressures such as foreclosure some people may be in denial, instead of facing reality and looking for alternative means for solving the problem.  Some homeowners who are in this situation simply give up and mail their keys to the lender while some think of filing for Chapter 7 (where the debtor is released from, and does not have to pay for, the debt) or Chapter 13 Bankruptcy (where you are on court monitored payment plan) protection.  While others still try to sell their home at inflated prices, hoping that they will get sufficient money to payoff all their debt. 

If you fall into this category we suggest that you look into the pre-foreclosure alternative called a “short-sale”. Keep in mind, that not all real estate agents are knowledgeable in short-sales, and many who know about it are not that versed in handling it.

Short sales are a specialized field. In fact…short sales, foreclosure, and pre-foreclosure sales should be conducted by experienced professionals only.

Here are some alternatives and their consequences:

• Mailing your key to the lender and "giving up" your house is the same as getting foreclosed.  You don't want that and, believe it or not, lenders don't want that either. In addition; your credit report will show that you have been “Foreclosed.”
   
• Filing for bankruptcy protection under Chapter 7 or 13 will appear on your credit record for many years to come, and it will affect significantly your ability to borrow, buy a home, or even rent.  Also, bankruptcy laws have recently changed, and you will need to meet certain requirements (age, income, etc.) before you can file for bankruptcy.  You may not even be eligible to file even if you want to.  Check with a bankruptcy lawyer on this, but filing for bankruptcy should be your last resort. In the case of Chapter 13 bankruptcy, it will simply reorganize your debt, but you will still have the burden of paying off the loans over some period of time.  This will give you some temporary relief that will work only if you have a temporary financial problem as opposed to a permanent or extended one.  This, too, will be reflected on your credit report.
   
• Selling an overpriced home could be an issue since it takes longer to sell homes today because of the weakening real estate market.  With this option, time is against you.  Also, over pricing a home makes it difficult, if not impossible to sell your home.  In all likelihood, you will have to sell your home at distressed price to move it quickly.  Some people try to sell For Sale By Owner in hopes that they will save commission because they need to get the maximum proceeds out of the home to payoff the loan.  However, in this market, real estate companies themselves are having difficulty selling homes and this is their expertise and full-time job.  Now, imagine trying to sell it on your own part-time. 

Instead, you should talk to your lender and seek forbearance by extending your loan payment, or even stopping your loan payment temporarily. 

Help on this alternative called Loss Mitigation is also available. However, this is usually a "temporary fix" if all you need is some breathing room.  So, what else is there?  By the way, keep in mind that before talking to your lender, it might be prudent for you to look at the other alternatives first.  Your talking to the lender is a prelude to negotiating terms, and you should be prepared to have looked at all alternatives.

About Foreclosure, Pre-Foreclosure & REO

Foreclosure is a legal process that allows a lender to take possession of a property for non-payment of a loan that is secured by that property.  This is a very unpleasant experience.  If you sit back and do nothing, you will get thrown out of your own home.  Don't wait for foreclosure to happen.  Be proactive, and do something... early on well before the foreclosure process starts!  It will pay for you to plan ahead... and not "hope" that a miracle would happen.

When a property is in pre-foreclosure, the owner still has a chance to stop the foreclosure process by paying the entire balance that is owed or by selling the property; and this will include "short-sale" as explained above.

After a property owner misses several mortgage payments, the lender starts sending out letters or notices, and the owner has a pre-foreclosure period of a few weeks to few months to bring the payments current and to stop any foreclosure proceedings.  If the owner does not bring the delinquent payments up to date during this period, the property will be sold at a public auction.  This entire process can last several months.  For this reason, lenders do not wish to foreclose if at all possible.

The lender would usually repossess (take ownership of) the property either through an agreement with the owner during pre-foreclosure period or at the public auction.  The lender usually sells the property to recover the unpaid loan amount.  How long the foreclosure process takes depends on the state you're in.  In New York, it usually takes nine to ten months.

After repossession, the property becomes a so-called REO.  REO means Real Estate Owned [by the lender]. It's another way to say the property has already gone through the foreclosure process, and has now been repossessed by the lender.  Lenders often want to get REOs off their books quickly.  However, there is usually a "redemption period" for the owner to buy-back the property after it is repossessed by the lender, and the lender will typically wait until the end of any redemption period before selling the property.  During this entire period (from pre-foreclosure to REO sale by the lender), the owner and the lender generally receive phone calls from people (or investors) who are interested in buying the property.  They try to arrange a meeting to discuss a possible sale and to preview the property.

How We Can Help

You must work with someone who is not in the business of buying these properties (also known as distressed properties).  People who buy distressed properties usually buy them at "low ball" prices.  This is because they are in the "business" and they have to make money from the purchase.  Instead, work with those who are in the business of helping homeowners avoid foreclosure.

How can we help you avoid foreclosure? We are not in the business of buying pre-foreclosures or foreclosure properties.  We are a licensed real estate brokerage and certified real estate auction firm, knowledgeable in handling the short-sale of homes.  This is a specialty since many agents do not even know what a short-sale is; and those who know generally do not want to be involved in it due to its complexity compared to a regular home sale.

A home that is in pre-foreclosure status is not necessarily for sale.  The owner may still be pursuing other options to cure the default, which could include re-financing their loan.  However, an offer from a financially-qualified buyer could sometimes be the best solution to get the owner out from under the impending foreclosure.

We can help you avoid foreclosure in the following ways:

1. You will receive assistance in preparing a financial analysis to establish your financial difficulty, or to determine eligibility for re-financing.
    
2. You will receive assistance in preparing a letter to the lender to give you some time as you are pursuing other alternatives, which could include re-financing and/or normal sale of your home. 
    
3. If necessary, we will help you sell your home as a “short-sale.”  A short-sale is a sale of your property for a price where your net proceeds from the sale would be less than the amount you would need to payoff your loan.  Not desirable, but sometimes necessary to avoid foreclosure and frequently the case in a “down” market.  In this situation, remember that the lender will, in effect, be paying for the commission.  Thus, for those who are trying to sell their own home as a FSBO to save the commission, this will no longer be necessary.

4.      We will prepare a Comparable Market Analysis (also known as CMA or Competitive Market Analysis) for you to establish a realistic asking price as well as a Net Sheet for you to present to the lender. The lender will usually ask for a Broker Price Opinion (BPO), but we do not get involved with that because of perceived conflict of interest.

In detail, here's what we will do:

1. Handle your administrative file
2. Conduct a short sale auction of your home subject to bank approval
3. Handle loss-mitigation negotiation with your lender
4. Prepare your Net Sheet (Estimated HUD-1)
5. Organize the entire short sale package
6. Submit the complete short sale package to your lender
7. Resubmit the package because bank lost it (sometimes as many as four times)
8. Confirm bank receipt
9. Order the Broker Price Opinion or Appraisal
10. Coordinate BPO or Appraisal with you
11. Follow-up with your Lender
12. Negotiate settlement with lender's loss mitigator
13. Receive discounted mortgage payoff letter
14. Fax you the approval from the bank
15. Coordinate closing
16. Keep you updated every time your file is updated

The key benefit to the borrower is that it increases borrower's credibility in dealing with the lender because the borrower employed the services of a professional.

About Short-Sale

Here are some things to keep in mind regarding a short-sale transaction:

Buyer and Seller must be patient:  Lenders are usually inundated with many of these cases especially because of the current credit environment.  The offer you will receive on your property will have to be considered along with many others.  Thus, you have to wait for your turn.  You are not dealing with a person who is dealing with only one sale.  Never expect to receive a response in a day or two.  It could take anywhere from four to eight weeks, because of increased volume of transactions, before you get an answer (hopefully, an approval) from the lender.  Therefore, the usual term of response required within 24 hours is useless and is ignored in a short-sale transaction.

• Price it right:  The property must be priced right to ensure that an offer is received and that the offer price is close to it.  Remember that lenders will be losing money, and the lower the offer, the greater the lender's loss is going to be. 
   
• Inspection Contingencies (repairs, etc):  Unless buyer is writing a full-price offer, do not expect a lot in terms of concession.  Although short-sales don't like home inspections, buyers should still do the usual inspections, but any negotiations on insignificant items will only cause a delay due to the approval process involved in a short-sale.  The mortgage loan release the lender will give the seller will be exact to the penny.  Any deviation from this, no matter how small, will result in a delay.  Thus, buyers must understand the lender approval process, how it works, and be realistic with the expected results.  Said another way, don't even think of concession unless there is something really wrong with the house!
   
• Remember that in short-sale, the seller is no longer in control; it is the lender.  Usually, the buyer's agent will be dealing with the seller's agent who is dealing directly with the seller's lender.  The seller's role will be to simply sign the paper work and move on.  The seller is usually not allowed to receive any money out of the transaction.
   
• Seller may not be completely out of it.  Depending on seller's financial position, the bank could ask seller to pay for some of the loss incurred in the short-sale.  

On December 20, 2007 President Bush singed a measure to provide financial relief for financially strapped homeowners facing foreclosure.  The bill gives a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan.  NO TAXES WOULD BE OWED ON THE VALUE OF ANY DEBT FORGIVEN OR WRITTEN OFF.  This tax relief is temporary and due to expire before 2010.   Please consult with your local tax advisor or CPA for further information on this matter.

Avoid Equity Skimming

Equity skimming is illegal in all 50 states of the United States.  It is a federal crime punishable by a fine or imprisonment.  To illustrate how Equity skimming works, here's an example of how a Scam Artist operates:

A homeowner falls behind on his mortgage payments and enters foreclosure.  A Scam Artist comes in and offers to rescue the homeowner from foreclosure by offering "miracle refinancing."  At closing, the homeowner transfers title (possibly unknowingly) to the Scam Artist.  The Scam Artist pays off the amount owed in foreclosure to acquire the deed, and inherits any portion of the homeowner's remaining equity. The Scam Artist will re-convey the property back to the homeowner in the form of a lease or contract-for-deed.  The homeowners remains in the home and pays rent or contract-for-dead payment (often higher than their previous mortgage payments).  They inevitably fall behind, and are evicted from their homes with very little, if any, of their equity.  The Scam Artist takes possession of the home and all its equity.

In Closing

Don't wait until the 11th hour... waiting to be foreclosed will cost you your home... and your credit. Your ability to borrow money for any purpose may be in jeopardy. Conducting a "Short Sale" of your home is a much better alternative to foreclosure... if you qualify! You will need time to do this so ACT NOW!

Service available in New York State only. For more information, call me directly at 1-877-456-2828 extension 1.

Thank you.

Sincerely,

Giacomo Sinisgalli, President
New York International Real Estate Corp
Certified Real Estate Auctioneers