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Short Sales

Home Affordable Foreclosure Alternative (HAFA)

Home Affordable Foreclosure Alternative (HAFA)

The Government’s H.A.F.A.® Program benefits borrowers who short sale their homes.

On the official Government website for H.A.F.A.®, it simply states the following:

“If the cost of home ownership has become too expensive to bear, the Home Affordable Foreclosure Alternatives Program ® (HAFA) allows you to transition out of your home and avoid foreclosure with $3,000 in relocation assistance and peace of mind.”

The HAFA program also says: “In many cases, [a short sale] is the dignified exit strategy where the borrower can sell their home and avoid the negative impact of foreclosure on their credit report and return to a better financial position.”

What does this mean for Chico home owners?

The exciting news for underwater homeowners, is that there is now a federally sanctioned and endorsed alternative to foreclosure.  Unlike foreclosure, with a H.A.F.A.® short sale you can be completely released from your mortgage debt after selling the property. This means you will no longer be responsible for the amount that falls “short” of the amount your lender receives for the property compared to what you still owe.  This deficiency is guaranteed to be waived by your servicer and H.A.F.A.® covers borrowers in all 50 states.

We would consider it a privilege to help you research your options and provide you with the tools and the education that you need to make informed decisions, thereby ensuring the best possible short sale outcome for you and your family in Butte, Glenn and Tehama Counties. Yes! We have extensive experience in areas surrounding Chico such as Paradise, Magalia, Durham, Oroville, Orland, Willows and Corning!

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What Is HAFA?

“Home Affordable Foreclosure Alternatives” is a government sponsored initiative program overseen by he U.S. Territory Department and administered by Fannie Mae.  Learn more here:  www.makinghomeaffordable.gov/

Truth be told, there sometimes seems to be no rhyme or reason as to why a homeowner may or may not qualify for HAFA.

HAFA has it’s specific guidelines, which are easy enough to discern.  In addition, most lenders have overlay guidelines that can change as often as we change our underwear.

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As Chico short sale negotiators, we will submit our client’s files for cash incentives available through HAFA or their specific lender(s). However, there can never be a guarantee of funds for a seller at close.  The guidelines are always changing.

Let’s explore your options!  For a confidential consultation with The Sandi Bauman Team short sale negotiators, call 530-864-5407 or email [email protected].

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March 2012 Butte County Foreclosure Rate Heat Map

1 in every 493 properties in Chico is a foreclosure!

Are you facing a Chico foreclosure?

I can help you explore your options.

Foreclosure alternatives can include:

Reinstatement

Forbearance or repayment plan

Mortgage modification plan

Rent the property

Deed in lieu of foreclosure

Bankruptcy

Refinance

Servicemembers Civil Relief Act (military personnel only)

Sell the property

Short Sale

Need more info on avoiding foreclosure? Click here for foreclosure alternatives.

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Chico CA Short Sales: Frequently Asked Questions

I hear so many questions about Chico, CA Short Sales!  The following frequently asked short sale questions should apply to homes in Chico, Paradise, Magalia, Oroville, Durham, Willows and Orland in Butte, Glenn and Tehama Counties.

What is a CA short sale? A short sale is a sale in which a lender allows a borrower to sell their property for less than the amount that is owed.

Why is it to my advantage to short sale my home?
• If  your sale is successful, your bank would forfeit their right to  pursue judgment on the deficiency amount, thereby relieving you of the stress of paying off the debt.
• A short sale has a less negative effect on your credit than foreclosure.  Some banks don’t even report a short sale.  Your credit score may recover from a short sale in less than two years, whereas a foreclosure or bankruptcy can take 7 or more years.
• Some lender programs  are now offering a $3,000 to $20,000 incentive to a borrower to complete a short sale transaction!!

How is the short sale process different from a traditional sale?
During a traditional sale, the homeowner decides to sell their property, often for much more than they owe. This means the loan would be fully paid off and the borrower would actually make a profit. When offers on the home are received, it is up to the homeowner to accept or deny the offer. A short sale on the other hand, puts things in the lender’s hands for the most part. Since the lender understands they will not be paid back in full on the money they lent the borrower, it is up to them to accept or deny offers received. The main aspects of the sale remain the same. The home is listed for sale and shown to prospective buyers until an offer is received. The process differs from a traditional sale once the offer comes in. When received, the offer is sent in to the bank in hopes of approval. Waiting for the bank’s approval is the most time consuming in many cases. This is when we will work with your bank, gaining you every benefit possible. Once the bank responds with approval or disapproval as well as the short sale’s terms (release from deficiency, etc.), a closing date can be set.

Can I get any money back from a short sale?
A homeowner does not typically receive any funds at closing from the sale of their home when it is sold as a short sale. Recently as part of the Making Home Affordable Plan, and specifically the new Home Affordable Foreclosure Alternatives (HAFA) Program, qualified home owners can get $3,000 BACK from a short sale (depending on your lender) to use towards relocation expenses!

Should I hire a Realtor?
A qualified Realtor will help you by advising you on market value,  listing and aggressively marketing your property, and serving as a liason between you and your lender.  Many sellers state that communicating with their lender in an attempt to negotiate a short sale is EXTREMELY frustrating and time consuming.  In addition, a Realtor will work with your lender to get a lower payoff amount approved, allowing you to price your home below the competition.

If I already have a Realtor®, can he/she short sale my house?
It takes a Realtor especially knowledgeable in the niche market of short sales to successfully complete one. This is not a process for just any real estate agent, and the majority are ill-prepared to handle the task.  Ask your Realtor how many short sale transaction they have closed, and what their education and background are. Some Realtors would rather not associate with short sales because it is such a specialized process that requires additional hours and organizational skills.

Do I qualify for a Short Sale?
You will need to prove to your bank that your financial position limits or prohibits your ability to continue paying on your  home.  This must be due to a financial hardship such as: job transer or location, loss of employment or income, marital difficulties that lead to divorce or separation, business failure, military service, payment adjustment,  major illness, medical expenses, high dollar repairs without the resources to make them, or increased bills or living expenses.   Keep in mind that it’s supposed to be an actual hardship, not just a desire to sell.

What if my home is worth more than my loans, but I cannot pay the closing costs?
The lender will typically pay all of the costs necessary to close your short sale.  Included fees may be: agents’ commissions, title and escrow fees, back taxes, minimal repairs costs and transfer taxes.

If I sell my home short, can the bank come after me for the money?
The answer is usally no, but all sellers are encouraged to consult a real estate attorney for clarification. We will work to get a full release of debt  for you at closing. The release will fully forgive any deficiency between the amount you owe, and the proceeds from the sale of the property.  Sellers are encouraged to consult an accountant regarding tax ramifications, especially if it is an investment property.

Who will pay the Realtor’s commission?
The lender will typically pay a standard commission fee, at no cost to the seller!

Who will pay the closing costs?
The  lender will typically pay all closing costs that  are  to be paid by the seller.  The seller will not be expected to cover any of the closing costs, due to the hardship position.

Is there any chance that I can keep my home?
Yes.   Your lender may offer you a loan modification, which may help you stay in your home.  However, it’s really important to be aware up front that VERY few loan modifications are actually successful.  The process can take so long that the bank forecloses before the process is complete.  Sometimes a homeowner will wait several months to hear the revised terms offered, only to find that their expected payment is HIGHER than what they were paying before!  You are encouraged to research ALL of your options, while remaining cognizant about the timelines and current realities of the modification process.

How much work will it take to complete my Chico short sale?
I will ask you to gather financial information, documentation, and complete  forms  to present to your lender.  Outside of providing the required paperwork, a short sale will not require any additional work for the HOMEOWNER than might already be expected in a traditional sale.  For the Realtor, however, there is a great deal more effort and time involved!

How long will it take to complete a short sale?
The short sale process can take as little as 30 days,  but some take over a year.  The average time to close a short sale is 90-120 days. There are many contributing factors, and each short sale file is unique.  The transaction tends to move more quickly when motivated sellers and buyers are  cooperative and timely in meeting their obligations throughout the process. A higher offer may lead to a faster approval.  Low offers tend to slow down the short sale process, as well as inexperienced Realtors on either side of the transaction. The other main factors that contribute to the time process are: 1.) Multiple liens and mortgages to negotiate, 2.) Mortgage Insurance company approval, and 3.) Investor approval.  If you have only one mortgage that is serviced by the company that actually owns the loan, they can be closed in as little as thirty days. On the other hand, there are no hard and fast rules!  Short sales CAN take a very long time.

Who decides what the list price  of my short sale will be?
As the homeowner, you still call the shots, and the final decision is yours.  I will complete a thorough Broker’s Price Opinion (BPO) on your home, so that you have a professional opinion of market value and can make a well-informed decision.  A BPO is similar to an appraisal, but is completed by a Realtor, not an appraiser.   The BPO is a critical part of the process.  If your Realtor of choice is not adept at pricing (a large percentage of Realtors are not skilled at determining value!!), then precious time can be lost, and you are one step closer to foreclosure.  It’s important to keep in mind that the lender will be wanting us to sell the house as close to actual market value as possible.  They are going to take a loss, and they want to minimize it.  If we present them with an offer that is too low, they are likely to recognize the fact and reject the sale.

Who approves the final sales price of the short sale?
Your lender will be the one that either approves or rejects the short sale package, and part of that process is approving the sales price.  You and your Realtor will work together to procure the highest and best offer possible from a buyer, thereby minimizing your chances of having your Chico short sale package rejected.  Once you have an accepted an offer from a buyer, it will be presented to your lender.

What happens to the dollar amount that is forgiven by my lender?
A shortfall on your mortgage will likely be written off as a loss by your lender.  Your lender may send you a “1099 form” for any amount forgiven.  Due to the Mortgage Debt Relief Act of 2007, you are NOT required to pay taxes on this money if you short sale your primary residence prior to the end of 2012. Consult your accountant for additional information.

What if I have more than one loan?
You can still short sale your home, but the process does become more complicated with each additional loan.  It will likely take additional time, patience, and determination to close your short sale transaction, but it can be done!

What is a deficiency balance?
A deficiency balance is the difference between what the house sales for, and what the borrower actually owes the lender.  If you owe $200,000 and you short sale your home at $170,000 the deficiency balance is $30,000.  Our goal is to have the deficiency balance removed during the short sale negotiations process.  Although your credit will suffer, the mission is to have you walk away from the house free and clear of all loans.

How will a short sale affect my credit?
A short sale will show up on your credit as “Settled in Full” or “Paid as Negotiated.” This is more attractive to future lenders and employers than a foreclosure on your credit report.  A short sale itself typically lowers a credit score by only 30-70 points. The major damage to a credit score is usually the missed mortgage payments, which can average around 30 points or more each.  If a borrower is in default and then completes a short sale, the short term effect on a credit score can be similar to a foreclosure.  Again, please consult your accountant to verify.

If I am already in foreclosure, can I do a still short sale?
YES!  In fact, your bank may be very happy to work through a short sale with you.  It costs a lender $58,000 on average to go through foreclosure proceedings on a home.  Additionally, a short sale can be more timely than foreclosure and eviction proceedings.  The lender would prefer to not carry the inventory, and subsequently take responsibility for trashouts, sales cleans, yard maintenance and utility bills.

Will the bank continue their collection activities?
Yes, the bank will continue its collection activities.  In all liklihood, they will still call or send you letters looking for a payment, even if you are in the middle of negotiating a short sale.  It’s important to be aware that some banks will still foreclose despite progress that may have been made on a short sale.  Securing a buyer for your short sale will NOT guarantee that the bank will not foreclose.  However, there is a good chance that we can get the lender to delay the foreclosure proceedings.

Do I have to move out of my house before the short sale is completed?
No, you will not have to move out until the closing.

What if the short sale terms are unfavorable?
If the terms offered by your lender in the short sale are not in your best interest, you are not required to sell the property.  It’s important to remember, however, through a short sale your lender will forgive you the debt, and it is usually the best option to avoid foreclosure or bankruptcy.   It  will have the least negative effect on your credit. If you do not complete a short sale, the bank will not forgive you the debt, and may continue to pursue you for the outstanding loan balance.

Are there any dangers to be aware of when working a Short Sale?
Beware of scam artists if you are in financial hardship or facing foreclosure.  Never sign a quit claim deed, power of attorney, or an “option” to purchase your home without consulting an attorney.  Also consult an attorney before paying out $500-$5000 dollars to a firm who requires an upfront fee.   I can’t tell you how many times I’ve heard a prior owner state that they paid out $1000’s only to end up in foreclosure anyway.  Realtors work on your behalf and are licensed and regulated by their respective states.    They must adhere to a strict code of ethics and laws, and rarely ask for an upfront fee.

If I decide to short sale my home, where do I start?
Give us a call at (530) 864-5407. My team and I will assess your current situation, provide you with information, and  guide you through the  short sale process.  I will recommend attorneys and tax professionals as needed, provide you with a current market evaluation on your property, advertise your home, negotiate the best possible offer, and submit your short sale package to your lender(s). I will handle all negotiations on your behalf with your lender.

How do I choose a Realtor to help me sell my home?
It’s really important to choose a Realtor that is adept at pricing, marketing, negotiating, and closing properties.  Make sure you choose one that is actually producing results!  Did you know that the average Chico Realtor only sells about 5 or 6 homes in a year?  In 2011, I sold about 165.  2010?  140 homes.  It’s always interesting to me to find myself competing against a Realtor that has only sold a handful of homes in the past year, or maybe in their whole career. If I’m going to hire a specialist in ANY field, I’m going to be looking for the best one I can find or afford!  Since a phenomenal Realtor won’t cost you any more than a mediocre one, try to ensure that you’re hiring someone with a lot of experience, and one that is producing a great deal of volume. It seems that many sellers aren’t sure what questions to ask when hiring. An older article with some good suggestions: “How to Hire a Chico Realtor…”

Why would my lender allow me to short sale?
On average, it can cost a lender $58,000  to foreclose on a home. The bank will attempt to sell the home at auction which is not always successful. If the home doesn’t sell, the property must go back on the market as a foreclosure property, which can lead to additional time, funds, and liability extended on behalf of the lender.  The lender does not want to manage inventory, they want to manage loans.

Short sale specialist network preferred partnerShort Sale Foreclosure Resourcefivestar short sale certified

Sandi Bauman is the Broker and Owner of Chico Homes and The Sandi Bauman Team! Bauman produces within the top 1% of her market area, which includes Chico, Paradise, Magalia, Durham, Willows, Oroville, Hamilton City and Orland in Butte, Glenn and Tehama Counties. Bauman successfully lists and sells a large volume of REO properties for default sellers in addition to luxury homes and now short sales. Call Sandi Bauman at 530-864-5407 or email [email protected] and put her years of real estate success to work for you.  DRE License #01460929.

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Sandi Bauman (Chico Homes): Real Estate Agent in Chico, Butte County, California
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