Jon Griffith, Certified Short Sale Negotiator

What could be worse, in times of financial hardship, than receiving news from your real estate agent that his or her services will cost you, out of pocket, before any work begins?

Now that would be adding insult to injury.

In a normal real estate transaction, the cost to sell a home is typically on the shoulders of the home-owner who has hired a listing agent to market the home.  A rate is negotiated, and the resulting fees are split evenly between the listing broker, and the selling broker, and these fees are drawn from the proceeds of the sale of the home at closing.

A short sale is a different beast altogether, because it’s assumed that the homeowner has fallen on hard times; specifically that they owe more on the house than it will sell for (see the article “What Does It Mean to Be Upside Down in Your House”)  When the amount you get at sale is less than what is owed, the seller either needs to come to the table with cash out of pocket to bridge the gap, which most cannot do, or seek out the approval of the lender to release the property for less than is owed.  Sometimes the lender will ask the seller to sign a personal note for the difference.  This is commonly asked, but rarely agreed to.  This happens all day long and for good reason.  Banks aren’t in the real estate business.  They’re in the money business.

The prime time  for a short sale to be approved by a lender is when it’s clear to the lender that the home is headed for foreclosure, or there’s an inevitable need to sell due to other unforeseen circumstances.

In the event of a short sale, whereby the seller has no money left over when the house sells, how do the REALTORS® receive compensation for their work?

That’s easy.  Fees are built into the transaction and paid for by the lender releasing the note.  The banks know that it takes time and expertise to properly sell a home, and since they aren’t in the real estate business, they’re more than happy to partner with REALTORS® to ensure the job gets done.  Selling your home short of what you owe lightens the blow on the property values in the neighborhood which is an additional plus for the banks, as they may own multiple properties near your home.  Save one, save many.

So, on a house that sells for $120,000.00 that has a payoff of $150,000.00, the bank will subtract the broker fees and closing costs from the final sales price, resulting in an even lower net payment to the bank.  In this example, it’s possible that the bank will only receive a payment of $105,000.00, maybe more, maybe less.  It all depends on what they’re willing to take.

What this ultimately means is that you, the home-owner, receive top notch professional representation at ZERO OUT OF POCKET COST to you.

There are implicit associated costs when you sell your house for less than you owe, but they come in the form of a temporarily affected credit rating, and potential tax consequences.  The impact upon your credit score if you foreclose is far greater than if you sell short.  What does zero cost mean to you?

It means my services are completely free of charge to you.

But what if we don’t want our credit to be affected?

The only way to protect your credit from the effects of a short sale (which are far less damaging than foreclosure), is to sell the home and cover the difference between what it sells for and what you owe, so the lender will report your account as “Paid in Full.”  Either cash at sale or a note for the deficiency will accomplish this.

If you have any questions about the process of preventing foreclosure, whether you’re just now considering it might be a possibility, or you’ve already received a Notice of Trustee sale, please contact me today: (602) 312-3262

Experiencing foreclosure is an extremely emotional event in one’s life. It ranks in the top 5 most-traumatic things that can happen to an individual. The ramifications of foreclosure reach much further than most people understand. Here are the top five reasons why avoiding foreclosure is the best choice you can make:

Disclosure

For the rest of your life, you will always have to disclose that you have been through a foreclosure.  When you fill out any application that asks whether or not you’ve been through a foreclosure, you’ll find that the only options are YES, or NO.  You will be required to answer truthfully in order to avoid being involved in mortgage fraud.

Credit Score

When your bank repossesses your home, your credit score can drop by 300 points or more.  It takes a long time to repair your credit history, and this will surely knock you into a no-qualify position financially.  Not only that, but it will affect other service providers that you may have, and could affect your future employment.  Some insurance companies check your credit score and use that as a measurement of risk.  Your rates could sky-rocket as a result.  You can be assured that your credit card rates will also be raised the next time your creditors check your credit status.  All of that can be extremely costly down the road.

Permanent

Foreclosure is a permanent event.  You cannot have a foreclosure removed from a credit history report.  In fact, the only information you have have modified on your credit history is data that is considered an error.  All other events will remain on your report for a long time.  A foreclosure will stick with YOU forever, even if it disappears from your report.  You will always be obligated to report it if asked on a legal document.

Security Clearance

If you work in an industry that requires security clearance to do your job, such as the military, or other high level security jobs, you will be at risk of losing that clearance.  In most cases, when people lose their clearance, they lose their job.  Foreclosure can lead you to unemployment.

Job Hunting

There are plenty of companies who run your credit history report when you apply for a job.  If your record is tarnished by a foreclosure, your future employer may consider this when they compare you to another candidate with a clean record.  You want to remain as marketable as you can, so having a foreclosure will impact your ability to find new work.

There is a clear difference between living with foreclosure and moving forward without it.  I can help you prevent it through the process of a short sale.  Contact me today for more information.

1. For the REST OF YOUR LIFE, you will ALWAYS have to disclose that you have been through a foreclosure when you apply for a mortgage.
2. Your credit score will drop by up to, and perhaps more than 300 points.  Credit scores are being reviewed by insurance companies and other service providers to assess risk and determine what they’re going to charge you.  In EVERY CASE, a low credit score costs more than NO credit score or a high credit score.
3. It is virtually impossible to reverse or repair your credit report and the foreclosure will remain on your record for up to 10 years.  Regardless of the length that it remains on your credit report,

There’s a certain threshold in a given area regarding how much you should upgrade your home and how much it will make a difference in the competition. It would not make sense to put a $5000.00 stove in a $200,000 condomimium, etc. That’s just one example. So, when a prospective tenant or buyer is looking for a place to buy or rent, there’s also a threshold to their perception of value, and when something seems out of place, it won’t matter to them that you have the nicest property in the area, when it comes to considering the rent or price.

Most upgrades will increase the ability to sell or rent your home over the next door neighbors, but it won’t guarantee that you’ll be able to draw a premium based solely on those upgrades, especially if the area in which you’re renting or buying doesn’t warrant such upgrades.

For potential rental properties, if you ever find yourself saying, “I can’t drop the rent that low because my mortgage is more than that,” then it’s time to think about the cost of carrying a vacant property.

Let’s say your mortgage payment is $1500/month and your home can draw $1200/month in rent. That’s a loss of $300.00/month when it’s rented. If it’s not rented, it’s costing you $1500.00/month.  If you rent it for $1200/month for one year, you’ll lose only $3600.00.  Let’s see, $3600 divided by $1500 is 2.4.

You choose.  You can be realistic about your asking price and get the property rented and lose $3600 in 12 months, or you could hope and pray you get someone to rent your house at your inflated price and lose $3600 in 2.4 months.  Hmmm… 12 months versus 2.4 months.

If this is your way of thinking, it’s just not realistic and you may need to be innoculated from the virus, infection, or well whatever it is that’s keeping you from seeing the real market conditions.

Remember, time is money and the entire nation is getting a swift lesson in loss mitigation.  Most of us are in a “collection” mindset.  We want the full payment and we want it now, and we waste all of our time trying to hunt it down.  The best method is to mitigate your loss by getting something going…anything.

Susan Gruenling in an article entitled Open Sesame, outlined what it means to “open escrow.”  As I was reading it, I was thinking about what the word Escrow really means and where it comes from, so I did a little research.

If you ever learned Spanish, you probably remember that the verb to write is escribir.  A desk is an escritorio.  The word Escrow, according to The Online Etymology Dictionary is basically a scroll that is a deed delivered to a third person to hold until a future condition is satisfied.

In real estate transactions in Arizona, the escrow is the period during which the Title/Escrow company (the third person) holds the proceeds from the sale of a home until both the buyer and seller sign their documents at which point the funds are transferred from the buyer or buyer’s lender to the seller and/or lienholders of the property being sold.

In other businesses, escrow companies are responsible for securing the funds from the buyer and holding those funds until a future condition is satisfied.  When the conditions are met, the escrow company releases the funds to the seller.  An example would be the process of selling a vehicle or other high dollar luxury item, like a piano, over the internet.  If you have a car to sell, and someone across the country whom you do not know wants to buy it, you would most likely involve an escrow company to ensure that you get your money, and they get their car.

I know the market and our industry inside and out. After all that is what being an executive is all about.  Realty Executives agents average more years in the real estate profession and typically represent more buyers and sellers than the average agent.  The result?  The knowledge of what it takes to achieve the best possible results for you in the shortest period of time — whether you’re buying or selling.