Strategies and Solutions for Distressed Homeowners


		The Stephen Howell Realty Group, LLC
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Are you overwhelmed with high mortgage payments? Facing Foreclosure?

Are you behind on your mortgage? Facing foreclosure? Have to sell your home? Lost your job? Or the mortgage payment is too high for what you can afford? Not sure what to do?

As a distress homeowner, you need answers and options. You need to know your rights. I’m here to here to help you. It’s my job as a REALTOR® to provide you the help you need. I’m here to tell you that there are options when you face an uncertain future. You may be able to:

REPAYMENT PLAN - Negotiate a repayment plan with your lender if you have experienced a temporary reduction in income.

FORBEARANCE PLAN - Negotiate a suspension or reduction in your mortgage payments for a short period of time.

LOAN MODIFICATION - Negotiate a loan modification with the lender changing the terms of your mortgage.

DEED IN LIEU OF FORECLOSURE - Negotiate to voluntary deed your property to your lender without going to foreclosure.

PRE-FORECLOSURE SALE - Negotiate a pre-foreclosure sale (also known as a “short sale”) allowing you to sell your property, pay off your mortgage, avoid foreclosure, and minimize the damage to your credit rating for an amount less than the total pay off of your current (an possibly your second) mortgage.

The first step is to contact your lender and discuss your options with them. You should also seek the advice of an attorney and/or a qualified tax professional. And, you should call a real estate professional. Simply wishing the problem will go away isn’t a solution, it’s not going to correct itself. The longer you wait to take action, the fewer the options.

Is A Short Sale Right For You?

If you owe more on your home that it’s worth, then a short sale may be your solution. When you owe more to the bank than the amount you can sell your home for, including transfer and recordation taxes, real estate commissions, and other transfer costs, then you are “selling short”. The process doesn’t have to be time consuming, but, it can be nerve racking and isn’t for the faint of heart.

Two Key Criteria To Meet

There are two key criteria that you should meet if your considering a short sale for your home. They are:

1. You can no longer afford your mortgage payment.

2. You owe more to your lender than your home is presently worth.

If you can no longer afford the mortgage payment because your adjustable mortgage has reset, you or your spouse has lost a job, you were hospitalized and could not work, or similar situation, then might also meet the first criteria. However, if you just bought a new car or new boat and now you have less money for the monthly mortgage than you did before the major purchase, then you probably don’t meet the first criteria.

If you home is worth less than your outstanding mortgage balance and you could not sell it for what you owe, then you most likely meet the second criteria.

The Short Sale Process

The short sale process consists of the following steps:

1. Decide to take action. You can no longer afford your mortgage payment and you owe more than your home is worth. Instead of delaying and ignoring the situation, take the next step.

2. Contact a real estate professional who is experienced in short sales. Review your situation with the agent. Be honest. Don’t hide anything.

3. Once you’ve selected an real estate agent, have them help you evaluate your situation by completing a comprehensive market analysis of your home and how it fits into today’s marketplace. You may be surprised - good or bad - at what your home is likely to sell for. But you must understand one thing - your home is no longer your home, it is not even a product for sale, it’s a commodity whose price goes up or down based on supply and demand. When there are few buyers in the market and supply is high, the price of your home will be lower. You must price your home 5% to 10% below your competition so the serious buyers will consider your home before all others.

4. Review the results with the real estate professional. Determine the very best asking price that is likely to generate an offer on your home in less than 30-days.

5. Execute an agreement with the real estate professional to list your home and start the marketing process.

6. Review traffic. If you have had no showings within 14 to 21 days after placing your home on the market, reduce price by 5% to 10% of the current price. Repeat this review and continue to lower the price until showings result in offers.

6. Prepare the short sale submission package. You will want to start on this prior to submission of the offer to the bank. You’ll need a hardship letter, tax returns, pay stubs, bank statements, financial worksheet, property condition report, listing agreement, and authorization for your real estate agent to speak with your bank. Your agent can help you start assembling this information once your home is listed.

7. Submit the offer you received to your lender along the other documentation you’ve gather and wait. Be prepared to wait for a long time. It may be 30, 60, 90, 120 days before you’ll know whether or not the bank will accept your short sale.

8. Be prepared to negotiate. The bank may not accept the short sale contract. You may need to negotiate further with the buyer and the bank. You real estate agent is there to help you with this - negotiating for you as a third-party, never compromising your position nor alienating the buyer or the bank.

9. Once the short sale is approved, you’ll settle the sale of the property using the buyer’s title company or attorney. You are not likely to net any money from the sale, so your side of the settlement statement (the HUD-1) will show zero dollars to/from you as the seller. The buyers’ closing costs will not necessarily change because you are completing a short sale. The bank will want to approve the final HUD-1 before they allow you to settle.

There may be other steps in the process to completing a short sale. Let your real estate agent be your guide.

From The Lender’s Point Of View

Not every short sale is going to be approved by the bank. Many are just not viable and the seller and buyer simply won’t be able to close. But once you have a contract on your home you can begin the negotiations. It is not likely that once you start negotiating a short sale that they will foreclose on your home. But foreclosure - even in this market - is a very real possibility!

Considerations Before Undertaking A Short Sale

Obviously there are severe financial consequences to a short sale. But, they don’t last forever. There will be an impact to your credit worthiness. The short sale is likely to be reported to the IRS, to the Credit Bureaus, and may impact your future ability to borrow money for a home or a car and obtianing credit cards. And, anyone who uses credit reports (such as employers conducting background investigations prior to hiring) will see that the account has been settled. You should request that your bank mark the account as “paid in full”. In any event, expect a hit to your credit score for some time to come.

Your lender may also seek a deficiency judgement for the amount of the short fall in the sale of the property. If you have other assets (cars, boats, trailers, 401K’s, IRA’s), you may be required to liquidate those assets in order to minimize the bank’s loss.

If you’re paying mortgage insurance, the insurer may also have to approve the sale further complicating the situation.

You should alway consult your attorney and qualified tax professional for their professional opinion about your situation. Your real estate agent cannot provide you with either legal or tax advice.

Power Pricing and Positioning

We offer sellers a program specifically tailored to the short sale process. It’s called “Power Pricing and Positioning”. The steps to completing a short sale are outlined above. This program is designed to help you - as a seller - obtain the best price, in the shortest time, with the fewest problems. This is a proven program that we have successfully implemented with many clients.

More Information

If you would like a private, confidential consultation, please contact:

Stephen Howell
Associate Broker, REALTOR®
Coldwell Banker Residential Brokerage
170 Jennifer Road, Suite 102
Annapolis, Maryland 21401
410-923-3217 Direct
410-224-2200 Office
443-994-8043 Fax

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Stephen Howell
Associate Broker, REALTOR®
Coldwell Banker Residential Brokerage
170 Jennifer Road, Suite 102
Annapolis, Maryland 21401
410-923-3217 Direct - 410-224-2200 Office

Stephen Howell, Associate Broker, REALTOR®, provides full-time professional real estate services to buyers and sellers in the
Maryland, Anne Arundel County, Annapolis, Waterfront, Chesapeake Bay, Eastport, Edgewater, Riva, Davidsonville,
Crofton, Millersville, Crownsville, Arnold, Kent Island, and Stevensville areas.

“Remember the word to Your Servant,
Upon which You have caused me to hope.
This is my comfort in my affliction,
For Your word has given me life.”
Ps 119:49, 50 NKJV