Real Estate is totally different today than it was just ten years ago, especially because of the “Great Recession”. One thing that has changed is that, more than ever, the term “Short Sale” is now a hot topic that almost anyone paying attention to the news media must have heard. Many sellers who have determined that they can’t sell their home for the amount they owe are now considering doing a short sale instead of allowing the lender to foreclose. But is it always a good thing? How can you tell whether a short sale is right for you? Let’s take a look at some guidelines that will help you decide.

What a Short Sale?

Nowadays, a lender will agree to accept a lesser amount for the sale of a home than the amount which is due. This is considered a short sale. For instance, perhaps the home mortage is $150,000, but the home is worth only $120,000. This means you are $30,000 short. This is not even considering closing costs, recording fees, real estate commissions, or title charges.

Why will a lender approve a short sale?

The lender who agrees to the short sale does so to avoid going through foreclosure and incurring the costs associated with it. When the lender approves a short sale, they are basically allowing the buyer to purchase the home for an amount less than the mortgage balance.

Here is an example of a short sale, in five steps:

• The seller and real estate agent sign a listing agreement; the home is listed for sale on the Multiple Listing Service (MLS) as a short sale pending the approval of a third party (your lender).
• The agent finds a buyer who makes an offer that is less than the mortgage amount (an amount that reflects the current market value).
• The seller accepts the offer.
• The short sale negotiation with the lender starts once the agent submits the short sale packet (the offer contract from the buyer and other required documents from the seller).
• The lender accepts the purchase offer.
• The buyer presents funds, the lien is released, and the seller signs the deed to the buyer at closing.

It’s a great solution, as long as you’re a good candidate for the short sale.

What are the qualifications that indicate that the short sale is right for you?

• Your home’s market value should have dropped. Furthermore, you need to be able to substantiate that the home is now worth less than the balance that is still owed on it.
• The mortgage should be near or in default status. At one time, lenders wouldn’t even consider a short sale when payments were current. That’s changed because lenders are now considering Strategic Short Sales as well. Many lenders now, understanding that other factors might contribute to a possible default, want to head off future problems. Therefore, they are open to consider a short sale.
• The seller should have fallen on hard times. This means that you, the seller, should expect to demonstrate to the lender why you’re not able to keep making payments on your mortgage. As in you need to show the true reason for your financial hardship which should include why you have or will soon stop making monthly payments.

So what constitutes hardship?  Any of the following usually qualify:

• Unemployment
• Death
• Bankruptcy
• Medical Emergency
• Divorce
• Lack of Assets by the Seller

On the other hand, the following usually are not accepted as financial hardships:

• Problems with the Neighbors
• Plans to Buy Another Home
• Bad Spending Decisions
• Pregnancy
• Plans to Move to an Apartment

Keep in mind that usually, the lender will ask for a copy of your tax returns or other financial statement. The lender might not grant the short sale if he discovers that you, as the seller, have significant assets. They’ll feel—probably correctly—that with those assets, you should be able to pay the balance. This doesn’t mean that sellers with assets are never granted a short sale.  But when they are, they are frequently asked to repay part of the short-fall.

In conclusion

Finally, remember that being granted a short sale will depend on if there is a buyer who makes an offer to purchase and the experience of the real estate agent negotiating the short sale.  Without such an offer, you won’t qualify and without a seasoned agent working on your short sale, it will not get approved by your lender. It also will depend on whether or not the lender agrees to accept the buyer’s offer. The short sale will not take place of the lender rejects that offer.

Bottom line: The short sale is not a miracle pill that will solve all problems for the person who is behind on their mortgage payments. However, it can be a life-saver for the person who meets all of the qualifications. If you are a Maryland (MD) homeowner in needs of an agent with proven short sale experience? Check out one of my successful, approved short sales and then feel free to contact me. I will be glad to answer all your questions!

Questions for you

• At what point would you think that a short sale is the only option left for you?
• What would keep you from considering it? Tell me your thoughts.

Visitors who read this post also read:

• A True Foreclosure Story – Note: the tale you are about to read might be yours!
• Maryland short sale approval success story: $91K Forgiven (discounted) by American Home Mortgage Servicing
• Free Short Sale Seminar for Maryland Homeowners on How to Stop Foreclosure by Owen McGab Enaohwo; a Realtor and Certified Short Sale Specialist

In my Part 1 of this blog post, I pointed out a new study by Experian that showed an alarming number of homeowners who were electing to intentionally have their homes foreclosed upon by refusing to make their mortgage payments even though they can afford it. This trend which is now called a “Strategic Default” was accelerated greatly with the housing collapse of 2008, when homeowners suddenly found themselves in possession of homes that are now worth as little as half of what they paid for it, their home values have been reduced to the point that they feel like they are swimming in negative equity. Also the mortgage payment for many of these people have become more expensive than what they can pay as rent for a similar house—hence, they have made the financial decision to strategically default, to essentially walk away. Is this the right choice?

There is a better option

While this might seem like the only logical option for homeowners facing the situation described above, I believe a much better solution is the Strategic Short Sale. In case you’re not familiar with the term, a short sale is the sale of property in which the amount received for the property is less than (or “short of”) the balance that the homeowner owes on their loan. A strategic short sale is a modified form of this process. If you’re a homeowner, a strategic short sale would be a situation where you’re able to continue making your payments on the home loan, but you’re upside-down on it. Usually, you would be behind on the payments, but it’s even possible that you might be current on your payments.  However, because you owe more than the property is worth, you would seek a strategic short sale because you need to unload it because it has become such a negative investment.

When you opt for a strategic short sale, you’re making a business decision. You’re deciding to accept a slight decrease in your credit score (as a result of the short sale), the possibility that your lender might ask you to share in the loss by coming to closing with some cash or sign an unsecured promissory note in order to get rid of an upside-down property and to decrease your debt load.

Please note that both the cash option and/or the promissory note option will be negotiated on your behalf with your lender by your real estate agent on terms that you can afford. Hence it is of utmost importance to have a discussion with your agent on what those terms should be ahead of time.

Why is a Strategic Short Sale better than a Strategic Default

Let’s look at several ways in which a strategic short sale is preferable to a strategic default.

• Although both a short sale and default will negatively impact your credit rating, the short sale will not affect it as badly as a foreclosure will.
• Opting for a short sale will allow you to qualify for a decent mortgage with two years as opposed to a foreclosure which will put you at a disadvantage; for instance Fannie Mae just came out with a new lending guideline that punishes homeowners for strategically defaulting by not allowing them to qualify for mortgages until 7 years after the foreclosure.
• Many banks, because of the state of the economy, will be willing to accept the property’s current market value and consider it “payment in full.” This is preferable to them over the time and costs involved in foreclosing on the property.

Is a Strategic Short Sale right for you?

My point is not to say that a strategic short sale is for everyone. So if you’re able to afford your home and you’re still happy in it despite the significant loss in value, then keep on making your mortgage payments and keep your property. After all, my assumption is that you bought the home to live in long term, and if this is the case, years from now the market will eventually correct itself and your home will eventually begin to gain value hence positive equity.

What is the process for moving forward with a Strategic Short Sale?

There are four main steps involved:

1. Hiring a real estate agent who has experience with getting short sales approved
2. Finding a buyer
3. Putting together the paperwork required by the lender from the homeowner and the buyer
4. Negotiating the short sale and getting it approved by the lender so that the home can be sold to the buyer and hence allow you to avoid foreclosure

Of course, these steps are more complicated than those four simple statements. That’s why it’s so important that you work with a seasoned professional to help lead you through what could be a minefield. Not too many lenders are going to give you a “do-over.” In other words, if you try to get the short sale approved by yourself, without any expert guidance, and if you make a total mess of things, don’t expect the lender to listen to you a second time after you finally decide to hire a professional.

Remember also that a short sale often takes longer to complete than a regular sale, since lenders must spend some time deliberating over it. However, it doesn’t take as long as many people fear. And in most cases, you save time, because you’ll typically be able to buy a new home in a shorter time following a short sale than you would be after a foreclosure. In the end, a strategic short sale will save you years worth of headaches trying to get into a new home.

Questions for you?

• How is housing in your area? How many foreclosures are you noticing?
• Do you see it improving or getting worse? Please tell me what you’ve personally noticed.

Visitors who read this post also read:

• Strategic Default Vs. Strategic Short Sale; which one do you think is the best choice? – Part 1
• Should I Strategically Default on my mortgage and “punish” Fannie Mae?
• Townhouse For Sale Bowie Maryland Short Sale 11201 Westport Dr Home

There was an article on the Los Angeles Times website a few months ago that discussed the increasing problem of Strategic Defaults in the United States. I want to tell you why the study cited in the article is right and why this is a growing problem that is gradually reaching crisis proportions in America. Then on my next blog post (Part 2 of this series), I will show you why Strategic Short Sale is the solution.

This LA Times article cited a study conducted by Experian, one of the three national credit bureaus.  They studied the credit files of 24 million Americans and discovered that “homeowners who have high credit scores when applying for a home loan are about 50 percent more likely than low-scoring borrowers to go into strategic default.” In other words, they intentionally and abruptly abandon their mortgages. (SEE ARTICLE http://www.latimes.com/classified/realestate/news/la-fi-harney20-2009sep20,0,2560658.story)

Findings from the study:

• Roughly two-thirds of strategic defaulters have just a single mortgage from which they’re walking away.
• The number of homeowners who strategically defaulted in 2008 was 588,000; double the number from 2007. This strongly hints that the homeowners did this as a response to the “Great Recession”, which hit hardest in 2008.
• Strategic defaulters were 18 percent of all serious delinquencies which extended for longer than 60 days into the fourth quarter of 2009.
• The homeowner with a larger mortgage balance is more likely to walk away from the mortgage than the person with a lower balance. Also, someone with credit scores in the two highest categories are more likely to opt for a strategic default than those in the lower score categories.
• None of this appears to be done by ignorance on the part of the homeowner who defaults. The study suggests that someone who defaults strategically and as a result, loses the house, is completely aware that this would be the outcome. They further understood all of the future negative ramifications of their action. The TIMES quotes one person who worked on the study who said that the strategic defaulters are “clearly sophisticated.” Her reasoning was that they seemed to make intelligent decisions as to where to make payments and when. They didn’t default on equity credit lines until after bailing out on the primary mortgage, for instance, presumably to receive more cash on the equity line.

My opinion of the study:

Although 588,000 strategic defaulters is an incredibly high number already, I believe the number will unfortunately continue to rise. I say this because many option ARM and interest-only products will be hitting recast dates from now through 2012. This will seriously impact the borrower’s monthly payment. A great many of these loans are far below loan modification program caps of being underwater. It’s possible for someone to have a $600,000 on a property worth just $300,000.

Frankly, before the Great Recession of 2008 struck, most homeowners would have said that they would not consider a strategic default, because it seemed somehow wrong.  It was as if they were walking away from their responsibilities.  But desperate times call for desperate measures, and the housing crisis caused thousands to reconsider this position—and to conclude that caring for their families required that they default.

Put yourself in the other guy’s shoes. Suppose you bought a home for $500,000 during a housing bubble. You figured that a worst-case scenario would be selling the home for $600,000 or $700,000 in three or four years when your loan recast.  Now, however, your home is worth only $300,000. And it may never reach $500,000 again, let alone $700,000. Your payment might jump up to $3,000, from its previous amount of $1,500 monthly. You think about the fact that you could rent a similar home for less than that. This is the position that thousands of home-owners are in. In their eyes, a strategic default is the only smart move, and some would say that they might be right.

In my view there’s a better solution for many of them; this solution is the Strategic Short Sale. This solves most of the same issues as the strategic default, and yet quickly creates a brighter future for the sellers. We’ll talk about this solution in detail on my next blog post, and why it’s usually preferable to the strategic default.

Questions for you:

• How do you foresee the housing market playing out over the next several years?
• Tell me what you predict will happen regarding the economic recovery and how you think this will impact homeowners.

Visitors who read this post also read:

• Strategic Default Vs. Strategic Short Sale; which one do you think is the best choice? – Part 2
• Should I Strategically Default on my mortgage and “punish” Fannie Mae?
• Townhouse For Sale Bowie Maryland Short Sale 11201 Westport Dr Home

Although a short sale is a much better option than a foreclosure—one which won’t leave you foreclosed out of your property with a foreclosure on your record—it is, granted, not a happy time. It can be quite stressful. One of the biggest stresses for the person going through it is wondering what life will be like after the short sale. Just how will it affect your future? There are two primary considerations that I’ll examine:  how the short sale will affect your credit, and how soon after a short sale you can again buy a home.

The Short Sale and Your Future Credit

One of the benefits of doing the short sale is that you will not have a foreclosure on your credit report.  It’s important that you remember that a short sale will be much less damaging to your credit than a foreclosure or a deed-in-lieu would be. With a foreclosure or a deed-in-lieu, your credit score would likely drop about 250 points or more. Compare this to the drop of 75 to 100 points that your FICO score will probably drop following a short sale.

The above information is not absolute and might not be the case for everyone. In some cases, a person takes as much as a 160 point hit on their FICO score following a short sale. And in some cases, the person who goes through foreclosure might have their credit score be decreased by an amount less than 250 points.  These are the exception rather than the rule, however.  The typical person suffers more of a hit following foreclosure than he does after a short sale.

The Short Sale and Your Future Ability to Buy a Home

This brings us to the question of how soon, following a short sale, will you once again be able to buy a house? Here again, the person who did the short sale is in better standing than the person who underwent foreclosure. Let me explain why.

Because of the recent economic crisis, which was primarily related to housing loans, Fannie Mae has made some changes.  Fannie Mae, in case you don’t know, is the entity which holds the most power in the United States’ conventional mortgage market. Put simply, they buy mortgage loans on the secondary mortgage market. Because the properties wind up going back to Fannie Mae if the borrower defaults, they have a substantial interest in establishing guidelines to keep a foreclosure from taking place.

Under Fannie Mae’s new guidelines, even if you went through foreclosure, your waiting period for getting a new mortgage can be cut down significantly if you provide documentation of extenuating circumstances that led to the foreclosure. These extenuating circumstances are basically the same types of circumstances that a person puts in his “hardship letter” to qualify for a short sale. They include things such as death, major illness, accident that resulted in severe injury, job transfer, and other things that were beyond your control which significantly affected your ability to stay up-to-date with your house payments.

Without proof of extenuating circumstances, the person who goes through foreclosure can expect a waiting period of about five to seven years before he qualifies for a new loan. With proof of extenuating circumstances, this wait can be cut down significantly:  three to seven years.

However, even this best-case scenario is not as good as the situation with the person who has done a short sale.  For him, the waiting period is just two years to be able to buy another home. Furthermore, if a seller doesn’t have a sixty-day late-pay, then the seller can immediately purchase a new home. This should be considered a strong incentive to remain current on your house payments even when your home sits on the market as a short sale; a situation known as a “Strategic Short Sale”.

A Short Sale is better for You. Seriously!

So, no, the short sale is never exactly a happy event. No more than nearly drowning, but being saved, is especially happy. It is, however, something that gives you a much brighter future than many of the other would be alternatives such as a foreclosure, deed-in-lieu and so on.

Questions for you:

• I’d like your views on something: Given the economic collapse of 2008, what part do you think Fannie Mae played in it? Are their lending practices better or worse now than they were previously?

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In a previous blog post, I mentioned that one of the documents required by lenders in order to begin the short sale process is a hardship letter. I will now take some time to explain what it is, why you need it and how to write one. I will even include an example that you can remodel to suit your own true situation.

In my opinion, the hardship letter is one of the important documents you’ll be expected to submit to your mortgage lender because it gives them a snapshot of the financial distress that you are experiencing. It is basically is a signed and dated one page letter (handwritten or typed) through which you explain the reasons why you are having a difficult time making payments. You can also include information on what you have done so far to resolve the situation and why you need the lender to approve the short sale in order for you to avoid foreclosure. Of all the other required documents, the hardship letter leaves the most room for creativity, and therefore the most potential to confuse people as to what it should contain.

Tips that you should keep in mind as you prepare the hardship letter:

• You cannot use someone else’s letter as your own; your letter must be truthful.
• However, you should try to make the letter dramatic. Tell a dramatic story in a dramatic manner.
• The letter should evoke emotions and sad feelings from the person who reads it.
• Most importantly, the letter must present at least one documented, valid reason why you’re no longer able to afford your home.  Some acceptable reasons could include sudden unemployment after you’d already bought the house; large, unexpected medical bills; incapacitation and an inability to work because of an accident or illness; skyrocketing interest rates which have left it impossible for you to make payments. (Generally, reasons such as bad buying decisions, pregnancy, moving into an apartment or smaller home, or being unhappy with the neighborhood will not suffice.)
• A timeline of events that led to your inability to pay the mortgage.
• An explanation of the steps you’ve taken to try to correct your financial challenges.

Remember that your hardship letter should be concise yet thorough. The lenders want to have enough information to help with making a decision, but they don’t want to know every minute detail of your life.

Below is a sample hardship letter. I have included it as a means to guide you on how to write yours, because, as I said above, your letter should be totally your own, with your own personality, your own life story, and your own challenges given. Remember that I’m only showing you this letter so that you have an idea of how to put all of the elements together.

Dear Loss Mitigation Officer:

I am an electrical engineer by trade. Recently, I was laid off from a job that I’ve had for 19 years due to the recession. I was one year away from retirement, yet there was nothing they could do to take care of me. That means I’m at a loss now to take care of my family.

My wife has taken a job to try to help out with our situation.  Unfortunately, all she managed to get is a minimum-wage job at a local convenience store. Our life savings is drained, and even with my wife’s new income of $325 a week, we are far short of being able to afford our mortgage payments.

As a result, I am embarrassed to tell you that we’ve had to move in with my brother, who has given us one bedroom and a small study to turn into our “living room.”

We have hired a real estate agent, and fortunately, he found a buyer for our property. Their purchase agreement offer is $____________ (the property’s current market value). The offer is less than what we need to pay off our first and second loans for the property. Still, the offer is a good one, but I must have the first and second lenders agree to work with us on a short sale and accept short payoffs

I have attached my authorization for my real estate agent and escrow officer to speak with you.  The real estate agent is _________________ and the escrow officer is ________________. with (Title company). I’ve also enclosed this with this letter all the other required documents needed for you to approve the short sale.

Thank you for your time and consideration in this matter.

In conclusion; while your letter should be considerably different from this, hopefully you understand the elements that your lender will want to see in it.

Questions for you:

Given the chaos that is going on in the homeowner’s life at the time, do you think the process of requesting a short sale is too complicated? If so, how could it be streamlined? I will like to hear your thoughts!

Visitors who read this post also read:

• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress
• Documents required by lenders in order to begin the Short Sale process
• Strategic Default Vs. Strategic Short Sale; which one do you think is the best choice? – Part 2

A couple of days ago the Federal National Mortgage Association (AKA Fannie Mae) sent out a press release stating their plans to “punish” homeowners who strategically default (walk away) on their loan. They also released an updated guideline explaining what they had in mind. This news immediately caused a storm and the news media as well as some notable real estate professionals where all ranting about it.

Well, after doing my research I felt I had to share my opinion with you because its seems that most people (including Fannie Mae) do not get it. Hence I created a video discussing what I think the real point is and why a Strategic Short Sale is way better than a Strategic Default. Watch the video and let me know what you think?

Questions for you:

• What are you thoughts on Strategic Defaults? Do you think that there is anything morally wrong with someone making a financial decision to walk away?
• What other solutions beside Strategic Short Sales do you propose?

P.S I apologize the lighting of the video was a little dark – it will be better next time

Visitors who read this post also read:

• Strategic Default Vs. Strategic Short Sale; which one do you think is the best choice? – Part 2
• Should Homeowners strategically default on their mortgage payments?
• Strategic Default Vs. Strategic Short Sale; which one do you think is the best choice? – Part 1

Painting the picture – You are a homeowner experiencing a financial hardship, you have lost your job and can’t keep up with your mortgage payments. You desperately need to find a solution to the problem because it’s weighing down heavily on you. You can barely function or think properly because it feels like your whole world is crumbling and you need to get you life back on track.

The credit police – You are tired of creditors, especially your mortgage lender hounding you or worse not even responding to your inquiries for help. You really do not want to sell your home if you can help it but realize that not only has the home lost its value, even if you could get your lender to reduce your monthly mortgage payments, you still will have tons of negative equity and your reduced monthly payment would hardly do anything to reduce the underlying principal balance that you owe. What you really will prefer is for your lender to reduce the principal balance and the monthly payment at the same time so that you can keep the home but heck that isn’t going to happen and you know it. To make matter worse, you just watched a report on the news that stated that most Loan Modifications don’t work and the borrowers eventually end up defaulting again.

A friend indeed – You have started talking to your friend about your situation and as true friends they sympathize with you. The solutions they suggest to you only serve to confuse you; it’s not really their fault because you know that they might have gotten their information from the wrong source. Then you realize that you need to talk to a professional who can give you sound advice on how to avoid foreclosure.

The mailbox overflows – Everyday your mailbox gets a new dose of letters, postcards and all sorts, you are sure now that even the mailman knows your situation and are afraid your nosy neighbors might be in on it too. Not only do you have to put up with constant calls from your creditors and so on, now it seems everyone from your lenders to others offering “scam-like” help in exchange for upfront payments are now waging a war on your mailbox. Something has to be done about this, enough is enough!

Seeking Professional Help – Your online research for a solution to your problem is finally paying off. You have been proactively seeking a way to avoid foreclosure that you now know the term “Short Sale”. At first you thought it meant the property will sell quickly but then you find out that it means that the lender accepts a “short payoff” – a lesser amount at the sale of the property instead of what is actually owed to them since the property has lost its value. You call your mortgage lender demanding a short sale and they tell you that you first need to get a Real Estate Agent to list your property, find a buyer, negotiate the short sale, and get it sold. They also tell you all the list of documents you need to put in place, the estimated length of time the negotiation might take, all the steps involved and so on it begins to seem so mind boggling and you wonder why it’s not called a “Long Sale”. You almost give up but persevere and decide to find a real estate agent who specializes in short sales.

Get the door, help has arrived – You finally found a real estate agent with a proven experience and track record getting short sales approved and sold. The agent even insisted on showing you video testimonials from past and recent clients who vouched for their ability to provide the short sale solution that you desperately need. The agent walked you through the entire process, explained any new laws, guidelines and processes that will affect the outcome of the short sale and answered all your questions; now you feel like you can begin to breathe again. The agent signs the necessary listing paperwork with you and puts the property on the “Multiple Listing Service” (MLS) at the right price to bring in a flood of buyers looking for a great deal. You finally receive an offer and the agent puts together all the necessary contract paperwork from the buyer and collects all the documents that your lender requires from you in order to submit the complete short sale packet.

A favorable ending & new beginnings – After couple of weeks that seemed shorter than you had previously expected, your agent was not only able to get the short sale approved, he was able to work efficiently and effectively with all parties involved in the transaction in order to get to closing the sale. Now today you are at the closing with the buyer. You can’t help but smile because you know that you are about to sign the closing documents which means you are about to take the first step toward a better future; you can now begin to see this entire nightmare from the rearview mirror as you drive away to your bright future!

Your call To action – I have taken the time to go through the pain and suffering that millions of homeowners are currently going through. The sad reality is that most of them are not proactive and do not seek a solution to their problem; many show signs of the “ostrich syndrome” and stick their heads in the sand, do nothing and hope that their problem will disappear by means of a miracle or some magic “Genie”. Many of such people end up in foreclosure which in itself is not something you should have to endure or have on your record especially when it can be avoided altogether. I am happy now because I know that you are not the type of person to do nothing; I know now that you are proactive because you have read this blog post all the way to the end, so congrats! What you need to do now is call up your local Real Estate Agent, interview them and get a sense of their experience negotiating short sales. Once you find the right fit, have them list your property and begin the short sale process. If you just so happen to be a proactive homeowner in Maryland in need of a short sale then allow me to provide you with the solution that you need and the peace of mind you deserve! You can contact me simply by clicking on this above and entering in your details. Note I will treat your information with the utmost care and will respect your privacy. Cheers! Smile because your solution provider awaits you!

Question for you:

• Do you think homeowner’s experiencing financial hardship should sell their properties as a short sale or keep it? Please explain your answer.

Visitors who read this post also read:

• Is a Short Sale Right for You? Read and then Decide!
• Maryland short sale approval success story: $91K Forgiven (discounted) by American Home Mortgage Servicing
• Free Short Sale Seminar for Maryland Homeowners on How to Stop Foreclosure by Owen McGab Enaohwo; a Realtor and Certified Short Sale Specialist

My reason for doing this:

I have decided from now on to start blogging about my success with short sales so that you can see for yourself the prove that once you hire me as your real estate agent; I will get the job done, you will get to avoid foreclosure and get the peace of mind that you deserve (enough with the self praise – now to details on this deal).

The background story:

Last December, I got a call Michael Y. (my client and seller of this short sale), he said he had seen a blog post online about short sales that I had written and needed some more explanation. Excited, I gladly took the time to answer all his questions over the phone and then set up a meeting with him several days later to sign the listing agreement. The listing appointment with him was great, when it was over I prepared to do battle with his lender, but first I had to get the property listed.

Deal Details:

Bank / Lender Name: American Home Mortgage Servicing Inc / AHMSI

Seller Hardship: Mortgage Adjustment – could not afford the change

Listing Date: 12/14/2009

Contract Date: At the end of the day, we had three contracts on this deal; the first was a cash offer that kicked off the initial short sale negotiation and within a couple of weeks the lender countered but that buyer did not increase his offer price, the second buyer offered a higher amount and also requested a seller closing cost credit which the lender did not approve. Finally our third buyer came in and offered just the right amount on 04/01/2010.

Short Sale Approval Date: 04/21/2010

Closing Date: 05/20/2010

The End Result:

• I negotiated a discount of $91K on this short sale for the seller
• The seller’s total out of pocket expense was $2033
• He did not have to sign a promissory note
• He got a full release
• He gladly gave me an audio testimonial
• I also got a video testimonial from the buyer’s agent

Audio Testimonial from Seller:

Below is the audio testimonial from Michael Y.

Video Testimonial for Selling Agent (AKA the Buyer’s Agent):

Below is the video testimonial from Kim Bogris.

American Home Mortgage Servicing (AHMSI) Short Sale Approval / Demand Letter:

American Home Mortgage Servicing (AHMSi) Demand or Approval Letter for $91k Discount – MD Short Sale Success

Lessons I Learned from this Short Sale Negotiation:

I learned no matter how rocky a short sale negotiation gets, I always have to rise to the occasion, grab the bull by the horn and steer it in the direction that will results in a win-win situation for all the parties involved in the transaction.

Special Thanks To:

• Michael for believing in my abilities to get the job done and seeing it through all the way to closing.
• Kim, for being a buyer’s agent that really gets it and knows how to set the expectations of her clients (If you are looking for a buyer’s agent in Maryland contact Kim @4109372791, you will be pleased)
• Jacquie and Maritza from Wall Street Title Corporation for being my go to title company here in Maryland – you ladies are the best!
• LaTonya Folson from American Home Mortgage Service for making this short sale negotiation as smooth as possible (Also I want to thank AHMSi – you guys rock too!)

Call to action:

So I hope you enjoyed reading my blog post. If you a homeowner going through financial hardship, I want you to know that there is a way out. The first step is for you to contact your local Realtor to discuss all your available options.

So if you are a Maryland Homeowner, I will like to hear from you; you can do so by clicking on this link to enter in your information and I will get back to you ASAP – I promise!

Visitors who read this post also read:

• Is a Short Sale Right for You? Read and then Decide!
• A True Foreclosure Story – Note: the tale you are about to read might be yours!
• Free Short Sale Seminar for Maryland Homeowners on How to Stop Foreclosure by Owen McGab Enaohwo; a Realtor and Certified Short Sale Specialist

Disclaimer: I am not an attorney, I do not play one on my blog so please do not assume I am practicing law or giving you any legal advice. If you need an attorney, please take the necessary steps to hire one!

On April 4, 2008 a new foreclosure law in Maryland went into effect. All foreclosure proceedings after that date have to follow this law. The law outlines a series of steps that your lender will have to carry out within a specific timeline in order to foreclose. This effectively gives you – the homeowner enough time to find a solution to your problem and avoid a foreclosure as well as the negative consequences it will have on your credit rating. Having a foreclosure filed against you will prevent you from acquiring a loan for a new house within 5 to 7 years after the foreclosure even if your financial situation improves.

Let us go through the timeline and steps lenders have to follow before a foreclosure case can be filed and then eventually execute the sale of your house.

Steps your lender must follow before they file the foreclosure case.

The law requires your lender to first wait 90 days after your loan has been in default before they can begin the initial foreclosure process. In addition, they must send you a “Notice of Intent to Foreclose” 45 days before the actual foreclosure case can be filed at the court house, which makes a total of 135 days; hence you have more than enough time to find a solution(s) to avoid the foreclosure. The notice which the lender files will inform you of their plan to foreclose your house and it also contains the following information:

• why the loan is in default
• The amount needed to bring your loan current
• The date of your last payment
• How to get in touch with your lender, or the office/ person in charge of collecting your loan payments.

This information is meant to give you a clear summary of your financial obligation to the lender.

Steps your lender must follow when they file the foreclosure case.

The law requires your lender to file the case with the county court where your home is located. Your lender has to submit these documents to the court at the time of filing the foreclosure case:

• A copy of the Notice of Intent to Foreclose;
• Certification that you are not enlisted military personnel because enlisted men and women have certain special rights when cases are filed against them.
• The original or certified copy of the assignment of the mortgage if the mortgage was assigned or bought by another lender;
• A detailed estimate of the total sum of money payable to your lender under your mortgage agreement which includes the initial amount owed, interest and monthly charges, late charges, attorneys’ fees and other applicable fees.
• An affidavit of ownership and a copy of the debt instrument;
• Declaration, under oath, indicating the date of default, the type default and the day they sent you information of their intention to foreclose your property;
• Original or certified copy of the deed of trust or mortgage;
• A uniform Notice regarding the filing of the foreclosure action; and
• The mortgage lender and originator’s license number if applicable.

Take note that the case can only be filed 90 days after you are in default of your loan, and 45 days after you have been notified by the lender via a Notice of Intent to Foreclose. The documents the lender is required to submit to the court needs to be properly documented. Any document submitted by the lender containing an error or false information can be used by you to stop the foreclosure proceedings. That is why lenders have to ensure that all information filed with the court is correct and properly documented. You must be given a copy of all of these documents.

Steps your lender must follow after they file the foreclosure case.

• They must personally give you a copy of all the documents that they filed at the court. Your lender has to deliver to you copies of all the documents that were submitted to the court when they filed the foreclosure case against you. If after two attempts on two different days, they are not able to serve you the documents, then the lender must file an affidavit to the court relating the attempts to deliver the documents to you. After that, the lender may deliver the documents to you by using both First Class and Certified Mail as well as post the court papers visibly on the property. In doing this, you will not be able to tell the court that you were not informed by your lender because you never received the documents.

• Your lender must wait an additional 45 days from the time you received the foreclosure documents before they can hold a sale of your property. The lender has to advertise “Notice of Sale” of your house in a newspaper with general circulation in your county for three weeks back-to-back. The first ad has to be published no less than 15 days before the date of the foreclosure sale, and the last publication should not be more than 7 days before the sale. Your lender has to inform you of the time, date and place and the terms of the sale through certified and first class mail. You should receive the information not later than 10 days before the date of the sale. The sale will not stop if you fail to receive the letter informing you of the foreclosure sale.

Note that you can stop the foreclosure one business day before the sale by paying a certain amount as determined by your lender which will include missed payments, late fees and costs. Upon request, your lender will provide you with the exact information on how to cure your loan and provide instructions how to deliver the payment.

In conclusion, the April 2008 law gives Maryland homeowners a lot of time to remedy their situation. The entire process can take more than 6 months; from the time your loan went into default, to the time you end up losing your home to foreclosure. This will only happen if you choose to “dig your head in the sand” and do nothing. That said; I am positive you are the proactive homeowner; otherwise you would not be reading my lengthy blog post. The mere fact that you are here proves to me that you have chosen to “grab the bull by the horns” and find a solution that will help you avoid foreclosure. Congratulations! You are on the right track, now allow me to propose a solution for you – it is call a Short Sale.

The first step you need to take is to find a local Real Estate Agent to help you with a Short Sale

Within the 90 day period that the law prevents your lender from moving forward with the foreclosure proceedings against you, I suggest you find a real estate professional that can help to analyze your situation and find out if the best option for you is to sell your property through a short sale. The reality is that short sales tend to take time and the earlier you get started, the better your chances are of selling the property before the foreclosure. Even though your situation might be difficult and emotionally challenging, be encouraged by the fact that your actions to seek help from an agent at the early phase of the foreclosure will yield a better result and increase your chances of taking back control of your financial situation and getting the peace of mind you deserve.

For more information on the short sale process, read my blog post titled “Take a dose of the Short Sale pill from your local Realtor to relieve your Mortgage payment Headaches”. Also read my blog post on the Home Affordable Foreclosure Alternatives (HAFA) guidelines to determine if you qualify for HAFA and its benefits.

I hope this blog post gave you a clear understanding of the Maryland Foreclosure Law, the timeline and the requirements your lender has to follow before being able to foreclose your property? Please, take time to share your thoughts, questions and ideas with me and other readers to this site by leaving a comment below.

Visitors who read this post also read:

• The HAFA Guidelines for Maryland Homeowners who need a Short Sale in order to Avoid Foreclosure
• Short Sale VS Foreclosure VS Deed-In-Lieu of Foreclosure; which of these represents the best choice for a homeowner in distress
• Documents required by lenders in order to begin the Short Sale process

This is an announcement for a Townhouse I have listed For Sale in Bowie MD 20720 – Short Sale:

Submit AS IS offers for this Well maintained end unit townhouse, 3 Br / 2 Ba on main level. Its a beautiful home, Hard wood floors, and finished basement with wall to wall carpet and additional rooms.

For complete information of this property directly from the MLS; Call 301-841-7593 for more information OR go to

http://budurl.com/11201WestportDrBowie

Watch the video walkthrough of this home and leave you comments on my blog

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