Charlottesville Real Estate Blog

Understanding the Short Sale Process

Before you consider a Short Sale be sure to contact your lender and any other agency that may be able to help you. Beware of anyone who approaches you to "solve your problems," or charges you any fees. Use only a licensed realtor who gets paid only when the property is sold. There may be important tax considerations. Be sure to contact a qualified tax accountant to understand how they may affect you. As soon as you get a Foreclosure Notice... If you have missed any mortgage payments the lender will contact you to warn you of a possibility of foreclosure. You will usually be given the option catch up with your payments or perhaps to work out some kind of payment schedule. This is called the REINSTATEMENT PERIOD. If you are unable to do this you will get a notice in writing, usually from an attorney acting on the lenders behalf, warning of the foreclosure and the impending SHERIFF'S SALE.

The SHERIFF'S SALE is scheduled and there is a public auction for the property conducted at the Sheriff's office or county courthouse. Usually it is the bank that wins the bid for the property. After the Sheriff's Sale, in Minnesota, you usually have six months, called the REDEMPTION PERIOD, during which the mortgage needs to be paid in full either by refinancing, a cash payment or selling the property to satisfy the mortgage(s). You do not need to move until the end of the redemption period or the sale of the property. In many cases the only option is to either let the property go to full foreclosure or sell the property. It is often better for your credit to sell the property and satisfy the mortgage than to let the bank foreclose. However, in this market the odds are very high that the value of the property is less than the mortgage(s). That brings us to the SHORT SALE.

SHORT SALES

A SHORT SALE is when the bank agrees to take less than what is owed, and to allow the property to be sold at a loss. This way the lender removes a non-performing loan from their portfolio and lessens the risk of selling the property at even a greater loss after a foreclosure. Not to mention all of the carrying costs the bank may have during and after a foreclosure. The seller is then released from the loan with less damage to their credit than a foreclosure.
Short Sale Process
A Letter of authorization to release information is sent to the lender. This allows the realtor to talk to lender. The property is listed on the MLS for sale. A Short Sale Package is assembled and sent to the lender. This includes a hardship letter, a financial statement, monthly bills, debts, income pay stubs, tax forms, etc. The realtor sends this to the lender for review. An offer/Purchase Agreement is received. The lender reviews entire package, including the offer. The lender may negotiate terms or price of offer. The property is sold & the owner is released of debt liability.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com/
http://www.forestlakesliving.com/
http://www.theaverygroup.com/

Here’s the situation: A beleaguered home owner is in bankruptcy, overwhelmed by debt. The mortgage lender had begun foreclosure proceedings, but they were stayed by the bankruptcy court. That stay, however, is about to end, and the lender may be allowed to proceed. The owner owes the mortgage lender about $170,000. Another $50,000 (representing 13 cents on the dollar) is owed to unsecured creditors under the approved bankruptcy plan.
Along comes a potential purchaser of the property – a person who just happens to be a real estate broker and owner of both a finance company and a company by the name of Innovative Real Estate Strategies, LLC – who offers her this deal: “I’ll pay you $220,000 for your property – enough to pay off the mortgage and to satisfy the creditors according to the bankruptcy plan. You and I acknowledge that the property may be worth more, but, given the exigencies of the situation, that is a satisfactory amount. It is deemed to be fair and equitable, and in the interest of the seller. [Note: This is not the exact language of the agreement, but it represents the substance.] Furthermore, I, the buyer, will let you remain in the property under a one-year leaseback agreement. Not only that, I will also grant you an option for the next twelve months that allows you to repurchase the property for the amount of $260,000.”
So how does that sound? Does it look like a win-win? The owner is given a way out of her debt, is allowed to stay in the property, and even has an opportunity to purchase it back. Meanwhile, the buyer has positive cash flow for at least a year (the lease amount more than covered expenses) and, if the option isn’t exercised, may be able to turn the property for a good profit.
Well, it sounded good to the bankruptcy trustee who approved the deal, paid off all the creditors, and ultimately discharged the homeowner from her bankruptcy debts.
Unfortunately, things did not turn out so well. Within nine months the former home owner had fallen behind in her rent. She tried to exercise the option, but couldn’t qualify for a loan. When the option expired, the broker/rescuer offered her the property for $315,000. Of course, she was unable to do that. He then listed the property for $369,950; and gave her a sixty-day notice to quit.
The above provides a summary description of the facts underlying the case of Spencer v. Marshall, recently decided by the California First Appellate District Court of Appeal. The home owner was Alanna Spencer and the purchaser was Ryan Marshall.
When Marshall began an unlawful detainer action against Spencer she filed a notice of recession of the sale. Subsequently, she filed a case asking for both compensatory and punitive damages. Spencer alleged that both the form and content of the purchase agreement drawn by Marshall had failed to meet the requirements of the Home Equity Sales Contract Act (HESCA), found at California Civil Code 1695 and following.
The California Legislature enacted HESCA upon a finding that “homeowners whose residences are in foreclosure have been subjected to fraud, deception, and unfair dealing by home equity purchasers.” (An equity purchaser is an investor buyer of an owner-occupied home for which a Notice of Default has been filed.) The purpose of the act is to enable defaulting homeowners “to make an informed and intelligent decision regarding the sale of his or her home…” and “to safeguard the public against deceit and financial hardship; to insure, foster, and encourage fair dealing in the sale and purchase of homes in foreclosure;” and to “prohibit representations that tend to mislead.”
The court determined that Marshall’s purchase agreement did not conform to HESCA requirements. Indeed, the lower court opined that, insofar as their dealings (Marshall had an associate) with Spencer, “defendants were in every respect the ‘archetypal predators’ that HESCA seeks to regulate.”
Marshall’s defense, in part, was that the bankruptcy court had approved the purchase. But the bankruptcy trustee testified that her sole concern was that the payment plan would be satisfied. It was not her concern whether Spencer would be receiving a fair price or a fair deal.
The appellate court upheld the decision against Marshall and the award of $70,000 actual damages and $210,000 exemplary damages.
There is a lesson here for California investors and real estate agents. Homeowners in default are protected by laws that very specifically detail what any contract offered to them must look like. It’s a good idea to pay attention to those laws.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Beware of Foreclosure Scams

Where there is money to be made, you will find the predators, salivating at a new opportunity to take people's money and run. Welcome to the homeowner loss mitigation business where the sharks are having a feeding frenzy on already wounded homeowners who are facing foreclosure.
Homeowners need to be aware of these scams and what to look out for.
IamFacingForeclosure.com plans to expose the predators and educate homeowners about the legitimate foreclosure prevention services that are available to them through our network of legal aid attorneys, non-profits and loss mitigation professionals.
These scam artists usually locate you by when your lender files a foreclosure notice with the public trustee (aka Notice of Default), and your local community is notified through the foreclosure listings in your newspaper. Many of these companies actually prescribe to services that provide daily data of these filings or they go to the court house themselves.
H0meowner Beware: Here are some of the tricks these scammers use. Get educated and don't become a victim!
Equity Stripping - These scams involve a lender or mortgage company (aka Hard Money Lender) that offers you an outrageous loan to "help" you avoid foreclosure. These loans are based solely on your equity and not your ability to pay. In other words, a loan made to "fail". The moment you default on payments, they play hard ball and will foreclose on you in a heart beat. You see, that's exactly what they want to happen and chances are heavily in their favor.
Loss Mitigation Consultant- There are many unqualified people offering to assist homeowners that are facing foreclosure. Theie attempt to be of service is actually a disservice and can seriously hurt the homeowner more than it can help. There in no licensing, regulation or policing of these consultants and "anyone" can become one and operate on their kitchen table over night.
Beware of anyone who offers to collect a fee up front to negotiate with your lender. Many are scammers and will take your money and run. Before you know it, the sheriff is knocking on your door and telling you to move out and the scammer is nowhere to be found. Make sure that if you are looking to hire a firm to represent you, that you do your due diligence and research the company before you sign any contract.
Loan Tranaction Scam- In these scams, a lender produces a refinancing loan document that claims to bring your delinquent mortgage current. This document will actually transfer the title of your home to the company's name for part equity in your home. Usually these loans will include huge fees with big prepayment penalties, balloon or interest only payments and an adjustable rate that shoots through the roof almost immediately.
Next thing you know, this lender that was bailing you out is now taking you out and your house. Not a good loan is it?
So, be very careful and read whatever it is till you understand the document 100% and if you don't, then hire trust worthy attoney or mortgage professional to examine the paperwork for you.
Government Foreclosure Scam Alert Links:
Department of Justice
Foreclosure Scam Articles:
Con-artists circling over homeowners in foreclosure
At the Legal Assistance Foundation of Metropolitan Chicago, the phone calls come nearly every day from yet another financially desperate homeowner who's become the victim of a "foreclosure rescue" scam. "This has become the No. 1 problem in terms of calls we're getting and cases we're filing," says Daniel Lindsey, supervising attorney for the foundation's Home Ownership Preservation Project.
And it's clearly a nationwide problem that's likely to get worse. The Better Business Bureau has received complaints from every state and has issued an alert to warn consumers to be cautious about foreclosure-rescue companies.
Springboro Man Pleads Guilty to Foreclosure Scam
DAYTON - A Springboro man pleaded guilty Tuesday in U.S. District Court to mail fraud for soliciting homeowners who were in danger of losing their homes through foreclosure.
Randall L. Webb, 50, was accused of "falsely promising homeowners he could provide affordable solutions and assistance to enable the homeowners to keep their homes and not put them in a more difficult position," said Fred Alverson, law enforcement coordinator for the U.S. Attorney Gregory G. Lockhart.
Webb faces up to 20 years in prison, although Webb will likely receive a shorter sentence. Webb also agreed to make full restitution to victims. The loss is estimated at $5,000.
‘Angels' hit desperate homeowners with foreclosure scam
Heartless scammers who call themselves "angels" are ripping off scores of desperate homeowners facing foreclosure, a Daily News investigation shows.Instead of rescuing them from the financial abyss, they steal their savings, their homes and their dignity.
One self-declared "angel" is Maurice McDowall, who ran a string of companies in Brooklyn, Manhattan and Long Island.
Presenting a business card that reads, "Helping you keep what's yours," McDowall promised to save homeowners from imminent foreclosure. Instead, his companies, which bore names like "Lost & Found Recovery" and "Home Mergers," stripped them of their deeds and the equity in their properties, The News found.

Where there is money to be made, you will find the predators, salivating at a new opportunity to take people's money and run. Welcome to the homeowner loss mitigation business where the sharks are having a feeding frenzy on already wounded homeowners who are facing foreclosure.
Homeowners need to be aware of these scams and what to look out for.
IamFacingForeclosure.com plans to expose the predators and educate homeowners about the legitimate foreclosure prevention services that are available to them through our network of legal aid attorneys, non-profits and loss mitigation professionals.
These scam artists usually locate you by when your lender files a foreclosure notice with the public trustee (aka Notice of Default), and your local community is notified through the foreclosure listings in your newspaper. Many of these companies actually prescribe to services that provide daily data of these filings or they go to the court house themselves.
H0meowner Beware: Here are some of the tricks these scammers use. Get educated and don't become a victim!
Equity Stripping - These scams involve a lender or mortgage company (aka Hard Money Lender) that offers you an outrageous loan to "help" you avoid foreclosure. These loans are based solely on your equity and not your ability to pay. In other words, a loan made to "fail". The moment you default on payments, they play hard ball and will foreclose on you in a heart beat. You see, that's exactly what they want to happen and chances are heavily in their favor.
Loss Mitigation Consultant- There are many unqualified people offering to assist homeowners that are facing foreclosure. Theie attempt to be of service is actually a disservice and can seriously hurt the homeowner more than it can help. There in no licensing, regulation or policing of these consultants and "anyone" can become one and operate on their kitchen table over night.
Beware of anyone who offers to collect a fee up front to negotiate with your lender. Many are scammers and will take your money and run. Before you know it, the sheriff is knocking on your door and telling you to move out and the scammer is nowhere to be found. Make sure that if you are looking to hire a firm to represent you, that you do your due diligence and research the company before you sign any contract.
Loan Tranaction Scam- In these scams, a lender produces a refinancing loan document that claims to bring your delinquent mortgage current. This document will actually transfer the title of your home to the company's name for part equity in your home. Usually these loans will include huge fees with big prepayment penalties, balloon or interest only payments and an adjustable rate that shoots through the roof almost immediately.
Next thing you know, this lender that was bailing you out is now taking you out and your house. Not a good loan is it?
So, be very careful and read whatever it is till you understand the document 100% and if you don't, then hire trust worthy attoney or mortgage professional to examine the paperwork for you.
Government Foreclosure Scam Alert Links:
Department of Justice
Foreclosure Scam Articles:
Con-artists circling over homeowners in foreclosure
At the Legal Assistance Foundation of Metropolitan Chicago, the phone calls come nearly every day from yet another financially desperate homeowner who's become the victim of a "foreclosure rescue" scam. "This has become the No. 1 problem in terms of calls we're getting and cases we're filing," says Daniel Lindsey, supervising attorney for the foundation's Home Ownership Preservation Project.
And it's clearly a nationwide problem that's likely to get worse. The Better Business Bureau has received complaints from every state and has issued an alert to warn consumers to be cautious about foreclosure-rescue companies.
Springboro Man Pleads Guilty to Foreclosure Scam
DAYTON - A Springboro man pleaded guilty Tuesday in U.S. District Court to mail fraud for soliciting homeowners who were in danger of losing their homes through foreclosure.
Randall L. Webb, 50, was accused of "falsely promising homeowners he could provide affordable solutions and assistance to enable the homeowners to keep their homes and not put them in a more difficult position," said Fred Alverson, law enforcement coordinator for the U.S. Attorney Gregory G. Lockhart.
Webb faces up to 20 years in prison, although Webb will likely receive a shorter sentence. Webb also agreed to make full restitution to victims. The loss is estimated at $5,000.
‘Angels' hit desperate homeowners with foreclosure scam
Heartless scammers who call themselves "angels" are ripping off scores of desperate homeowners facing foreclosure, a Daily News investigation shows.Instead of rescuing them from the financial abyss, they steal their savings, their homes and their dignity.
One self-declared "angel" is Maurice McDowall, who ran a string of companies in Brooklyn, Manhattan and Long Island.
Presenting a business card that reads, "Helping you keep what's yours," McDowall promised to save homeowners from imminent foreclosure. Instead, his companies, which bore names like "Lost & Found Recovery" and "Home Mergers," stripped them of their deeds and the equity in their properties, The News found.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Short Sale Hardship Letter Example

Lender Name
Lender Address

Today's Date

Re: Hardship Letter/Short Sale for 123 Main Street, City, State 12345

To Whom It May Concern:

I purchased the property at 123 Main Street in March 2006. At that time, I had just
started my own antique resale business, which had great promise for generating profits
capable of supporting my mortgage. Unfortunately, sales were slow, which I attribute to
great declines in tourism after gas prices skyrocketed. I ran out of money, and began
working as a waiter to make ends meet. At the same time I was redoubling my efforts in
my own business, but to no avail. After struggling for months to make my expensive
mortgage payments, I had no choice but to put my house on the market. In August of
2006, I put my home up for sale by owner at an original listing price of $210,000. The
only people to look at the house ran when they saw the extensive damage to the pool and
the severe water damage from a leaking roof that had long needed a replacement. I
lowered the price, but still had no takers. Over the next couple of months I lowered the
home price three times, finally settling at $170,000. This price was the lowest I could list
the house at and still afford real estate agent commissions to be deducted, although it
leaves me with no profit. The home still has no offers. I am working with a real estate
agent now, who is listing my house and promises to push it to get it sold quickly. I believe
that using an actual agent will ensure that the home sells promptly.

I love my home, but I also understand that, at this point, I cannot afford it. I am a single
parent, now working as a waiter to survive. My financial situation cannot sustain a home
mortgage of nearly $2,000 per month. I would like nothing more than to sell my home,
avoid foreclosure, and salvage my credit. This is my main concern. I know that a
foreclosure on my record will affect me for years to come. I would ask that you please
assist me in avoiding this.

Please accept this offer as payment in full. My attorney has advised me to file
bankruptcy, but I prefer to avoid further destruction of my credit. I just want to move on
and start over.

I deeply appreciate your help and understanding in this matter. If you have any
questions, or need anything further from me, please contact me personally.

Kindest regards,

Home Owner Name

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com

Fake HUD Website...Beware!!

There is a deceptive website out there that is posing as HUD. This website tries to dupe people into giving out personal information (known as "phishing") - and because they've made their site appear to be an "official us government website", some people may fall prey to this scam.

The website is: http://bailout.hud-gov.us/

If anyone asks you about this website, advise them to stay away.

Rob Alley, Realtor
The Avery Group at Roy Wheeler
540-250-3275
roballey@roywheeler.com
http://www.robsellscharlottesville.com
http://www.forestlakesliving.com
http://www.theaverygroup.com