Florida Real Estate Blog

Pre-Foreclosure opportunity or not

Listen to the radio, they’re everywhere. Somebody wants to send you that special list of homes in Pre-Foreclosure. So do you jump in? Ponder this.

First, don’t get caught up in the hype. I heard an ad on WDBO yesterday for pre-foreclosures for as little as $9,000 or $120 a month. Don’t believe it, remember what

Dad said, “If it sounds to good to be true, it is”. So what are they and how do I get involved. They are notifications by the lenders to the owner once they have missed three mortgage payments. They are then put on a list, 80% of these people work things out and never go to Foreclosure. There is a step between Pre-Foreclosure and Foreclosure where opportunity lie’s its called SHORT SALE.

What is a SHORT SALE? That is a situation when the house you own is worth less than what you owe on it. IE: Bought the house in 2006 for $235,000 with 100% financing and now the Realtor tells me it will probably sell for $199,000. That leaves you with bringing a check to the closing for $36,000 plus closing expenses. Not a pretty picture but a fact in today’s market.

Once the seller has secured a Realtor they will begin the process. The Realtor will do the preliminary title work to assure no other debt exist on the property. They will price the home in an attractive range to get maximum showings in minimum time. Time is not their friend so they will aggressively manage the Sale price. If you are interested in the home contact the realtor and they will provide you with the recent sales in the area to help you decide if it is a good deal for you.

Remember Short Sales are just that, the bank is going to receive less than what they lent out. That does not mean they take .50 on the dollar. Once a contract is written they will require your Pre-Approval letter from your lender (not a pre-qual it must be pre-approved, there is a difference) they will then order their own BPO (Brokers Price Opinion and probably counter back) This will normally take 4 to 6 weeks so don’t expect a quick turn around on a Short Sale.Property is sold AS-IS with right to inspect. Do not expect the lender or the seller to do any repairs. They will not.

Next you should secure your lender and make sure you have all the documents they will need to generate your mortgage. You should confirm with them that they will be able to do the deal within 12 days calendar not business. If not find some one else. Good luck and give us a call if we can help.

Pre Foreclosure how do I escape it

First you always pay your mortgage above all other payments each month. Yes before the car and the credit card.

You contact your Bank and ask for a workout plan. You will need to draft a hardship letter and fax that to them. Make sure your loan # is on the top of every document you send to them and follow up to confirm receipt (after 3 days they scan everything to files so it will take that long for them to see it). If you are finding them hard to deal with, you are probably contacting their collections department (not where you want to be). Locate their Loss Mitigation Dept. If you cannot find them give Maggie or I a call. We have the number for the majority of banks and may be able to help you.

Once they accept you into the work out plan they will have a form that you will need to fill out regarding your Finance situation. Be honest for they can find every account you own and they will be looking. Send it back to them and see if they can restructure the loan for more years or provide you with a few months relief that is added to the back end of the loan. If none of this works you need to move to the next step, that is SHORT SALE.

What is a SHORT SALE? That is a situation when the house you own is worth less than what you owe on it. IE: Bought the house in 2006 for $235,000 with 100% financing and now the Realtor tells me it will probably sell for $199,000. That leaves you with bringing a check to the closing for $36,000 plus closing expenses. Not a pretty picture but a fact in today’s market.

So what are my options? Place your house for sale and bring your checkbook to the closing or declare a SHORT SALE. The Short Sale begins once you sign a listing agreement with a Licensed Realtor. He or She then contact the banks (as most short sales have two lenders involved). The Realtor gathers all the need documentation to satisfy the lenders and develops a marketing plan to move the home quickly. That usually means aggressive pricing with weekly adjustments. Once a contract is received both parties sign and we fax to both lenders. The buyer must realize that this process will take 4 to 6 weeks to get an answer. This can be frustrating to buyers so constant contact is required to keep everyone engaged.

Once the lenders accept the property into the short sale process they will order a BPO (Brokers Price Opinion). The First position Lender will usually require that the Realtor secure a letter from the 2^nd Lender that they will accept a short sale. That is where it can get tricky. Once all of this is accomplished the Lenders will probably come back with a counter offer. If the buyer accepts or counters and all parties come to agreement the sale goes foreword.

The Buyer then has a short period to do their inspections to confirm they will move foreword remeber the house is being sold AS-IS the lender and seller will do no repairs. . You will also place their escrow deposit with their Realtor within 48 hours of acceptance. of the counter offer. The Banks usually want to close within 15 days of acceptance so the Buyer should have been pre-qualified and have all of their documents ready to satisfy their Lender (yes I know we have a lot of lenders in a Short Sale, they are lender 1 who is original mortgage holder, lender 2 the party that provided the owner with a second mortgage on the home when they bought it. 3 is the new lender that the buyer will use to purchase the home. By the way the new lender can never be the same as lender 1 and 2.

The Banks will select the closing date and the Realtor and Seller will select the Title Closing office (unless the bank directs).

Items to remember if you are the Seller in a Short Sale:

1. Keep paying your mortgage or work out amount
2. Never let your home insurance lapse
3. Do not turn off utilities or stop paying on them
4. Do not further encumber the property with any additional debt.

So why should I do this? If you are foreclosed by lenders your credit is trashed for over 7 years. If you are successful with a Shot Sale you may be able to reestablish your credit in 1 year. Life happens, now is the time to turn lemons into lemonade. Good Luck, call us we can help.

Great article in the Orlando Sentinel on 9/3/07 addressing the upcoming insurance cancellation letters from to insurers. They detailed what steps you should take once you receive the notice. It is very important that you get on this right away. If your insurance expires your Lender that has your mortgage will purchase insurance to cover the home (at your expense) and it is always a very expensive policy. Do not delay, here are the steps to take.

• Contact your insurer to see if they have any companies that may take on some customers in this case one insure did while the other did not.
• Contact an independent insurance agent and provide him/her with the details of your policy. They will then shop it for you and possibly locate a company.
• Contact the State they want to know if the insurance company is following the rules when canceling home insurance. 800-342-2762.
• Contact Florida Market Assistance Plan 800-524-9023 or on line at www.fmap.org they will gather your information for insurers to contact you if they are interested in insuring your property.
• Contact Citizens Property Insurance this is the State backed insurer of last resort. You are eligible for coverage if your premium is 15% higher then Citizens for a comparable coverage.

This should all be started at the same time and you should have all your answers within a week. You may consider increasing your deductible to improve the way an insurer looks at your home. Good luck and remember. “Call Ruddy when your Ready”