Lee Morof's Real Estate Blog

Today’s economy has been rough on most everyone’s pocketbooks, and when it comes to prioritizing payments, mortgage payments can take a hit. If you find yourself in a bind, owe more than your home is worth and can’t afford your current mortgage, then you might want to consider talking to a real estate agent, one who is a Certified Distressed Property Expert, and bank about the possibility of a Southeast Michigan short sale.

To help you prepare for those conversations, here are the basics about Southeast Michigan short sales:

• What is a short sale? A short sale is an agreement that your real estate agent negotiates between you and your bank to sell your home for less than you still owe. The bank absorbs the loss so that the seller doesn’t have to repay the balance of the mortgage.
• Why would you do this? Your home is now worth less than you owe, which is called being underwater, and you have a financial hardship. There are a number of reasons that could put you in financial hardship and have you considering a short sale — such as unemployment, job transfer, illness, under employment and divorce.
• How does it work? A real estate agent lists your home at its current market value. Then a buyer places an offer that is usually much less than the amount required to pay off the loan. The seller or agent (if the seller has given written permission for the agent to do so) takes the short sale purchase agreement to the bank holding the mortgage in hopes that they’ll accept it.
• What do you need? Basic guidelines usually include a hardship letter about why you need a short sale, bank statements for the last three months, two years of tax returns and permission for your real estate agent to negotiate short sale terms with your bank.
• How should you proceed? Most accountants agree that a short sale is better for your credit score than a foreclosure. Talk to your real estate agent who is a Certified Distressed Property Experty and have him or her refer you to an accountant who can evaluate your situation and help you take the steps necessary to secure a good financial future.

There’s a lot more to short sales than I’ve outlined here, but it gives you a starting point.

If you’re finding it difficult to meet your monthly mortgage payments and still owe more than your home is worth, then you might want to consider a Southeast Michigan short sale. It can decrease your debt and release you from that monthly financial burden. Call me at 248-514-2640 or email me at info@NorthWoodwardHomes.com for more information.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

Just over a year ago, the federal government launched the Home Affordable Foreclosure Alternatives (HAFA) program.  It was supposed to streamline the Southeast Michigan short sale process for home owners and home owners nationwide.  This article provides an update on HAFA.

How does HAFA benefit Southeast Michigan home owners?

Home owners who don’t qualify for a loan modification can apply for a Southeast Michigan short sale through HAFA.  If the home owner qualifies for a HAFA short sale, the difference between the sales price of the house and the loan balance is forgiven.  In addition, HAFA offers qualified home owners $3,000 for moving expenses.

How well is HAFA working?

From April, 2010, to December, 2010, HAFA has disbursed just $9.5 million of the $4.1 billion in its budget.  And, through May, 2011, only 8,541 HAFA short sales have been completed.

However, HAFA short sales have increased.  There were only 320 HAFA short sales pending in September, 2010. Now, there are 18,000 pending nationwide.

What went wrong with HAFA?

Because the loan balance is forgiven with HAFA short sales, lenders cannot collect that amount.  Lenders can collect the loan balance on short sales that go through them, so the majority of short sales are still handled by individual lenders’ programs.  Although HAFA provides a $1,500 incentive to the lender, it isn’t enough to entice them to go along with the program.

What’s next for HAFA?

The HAFA program expires at the end of 2012, and by then, the U.S. Treasury hopes to have a model process and uniform documents that banks could use to speed the process and avoid greater losses that come with foreclosure.  In the meantime, changes are being made to HAFA to ease eligibility requirements.

If you have any questions about selling your home, whether through a regular sale or a Southeast Michigan short sale, please give me a call at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

If you haven’t read “Real Estate Investing:  How to Buy Southeast Michigan Short Sales Steps 1 through 5,” start there.  This blog post provides steps 5 through 9 of the short sale process.

6.     Visit the Southeast Michigan short sale properties on your short list.  You’ve already searched for short sales, researched them and narrowed your list to a few short sales that meet your criteria and have the best chance of making it to closing.  Now it’s time to personally visit the few on your short list.  Your primary purpose in visiting the property is to get an estimate as to how much it’s going to cost you to repair the home.  As a real estate investor, you want a property that needs some work so that the average home buyer won’t want it, and you can get it at a lower-than-average price.   But, you also want a property that is in good enough condition that the cost of the property plus repairs still gives you a good return on your investment.

7.    Get a home inspection.  Since short sales are typically sold “as is,” it’s crucial that you have a licensed home inspector evaluate the condition of the short sale that you’ve decided is the one you want to buy.  An inspection will find problems you might not have been able to see in your initial visit to the home.  It will also give you a more precise idea of how much it’s going to cost you to repair and renovate the property.

8.    Make an offer.  Now that you’ve found the Southeast Michigan short sale you want to buy, you’re ready to prepare an offer.  Have your real estate agent prepare all the documentation and submit the offer to the seller’s agent.  The seller’s agent will submit the documentation to the lender.  Hopefully, you’ve chosen a short sale with only one lender, but if there is more than one lender, remember that all lenders have to agree on the terms of the sale.

9.    Make a counter offer or walk away.  After getting your offer, the lender has his real estate agent evaluate the offer.  More than likely the lender will make a counteroffer.  That’s the time for you to do a final evaluation.  Double check your numbers using the higher purchase price and ask yourself, “Is this property really going to give me the profit I want?”  If the answer to this question is no, or if you’ve already reached the maximum you’re willing to pay for the property, it’s time to walk away.

10.    Finalize the deal.  After you, the seller and the lender have all reached an agreement, get everything in writing and officially record it.  Go to closing, and the property is now yours.  Congratulations!

If you’re a real estate investor looking for a well-priced property to invest in, I can help.  Give me a call today at 248-514-2640 or email me at info@NorthWoodwardHomes.com for more information.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

Are you an investor looking for Southeast Michigan short sales or home buyer who wants to buy a short sale in order to get a great deal?  Unless you’re a seasoned short sale buyer, it’s not as easy as you may have been told.  In fact, there are so many steps to the process, this blog post only covers the first five.

1.    Hire an experienced Southeast Michigan real estate agent.  The first thing you want to do is find a real estate agent who is knowledgeable about buying Southeast Michigan short sales in your local market.  Unless you’re already a short sales expert, you need an experienced agent to guide you through the process because most homes that are listed as short sales never even make it to closing due to problems encountered along the way.  In fact, some stats show that as few as 1 in 10 short sales make it all the way to closing.

2.    Get your financing in order.  How are you going to pay for the property?  Before you do anything else, have your financing in order.  In a short sale, the lender often moves at a snail’s pace, but you have to be able to move quickly.  Once an agreement is worked out, the lender may require that you close in as few as 20 days.  That’s too late to shop for a mortgage.

3.    Search for short sales.  Your agent will have access to all the homes up for sale as Southeast Michigan short sales.  Let him or her help you sort through the homes to identify those that fit your needs and are most likely to make it to closing.

4.    Research the short list of short sales.  Have your real estate agent (see how much work this agent is doing for you?) research the short list of short sales you’re interested in to find out how many loans are against them and how much money is owed.  If you find that there are a lot of loans against a property, your best bet is to move on and find a short sale with only one loan.  Additionally, your experienced agent can steer you away from homes with lenders who are difficult to work with on short sales.

5.    Be prepared to pay close to market value.  This may sound ridiculous to you because you’ve heard that short sales are an amazing bargain.  Yes, some short sales are priced very low, however, that does not mean the lender will accept that super-low price.  Typically, the short sales that actually make it to closing are going to be priced close to current market value.  Have your real estate agent research pending sale comparables to determine what the current market value is for the short sale you’re thinking of buying.

If you’re interested in investing in Southeast Michigan real estate in Oakland County, I can help you find the true bargains, whether they’re Southeast Michigan short sales, foreclosures or just well-priced real estate.   Give me a call today at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

You want to avoid a foreclosure on your home so you’re decided to try to sell it as a Southeast Michigan short sale.  Unfortunately, there are several stumbling blocks that can keep you from successfully selling your home as a short sale.

Lee Morof is a Certified Distressed Property Expert and Attorney.

Here are 4 short sale killers you should be aware of before deciding to sell your home as a Southeast Michigan short sale:

1. You have not defaulted on your mortgage.  Lenders will almost never accept requests for short sales until you are significantly behind in payments and have received a notice of default.

2. You filed for bankruptcy.  If you’ve filed for bankruptcy, a Southeast Michigan short sale will most likely not happen. Few, if any, lenders will consider a short sale when the seller has filed for bankruptcy.  This is because collection activities are not allowed in bankruptcies and a short sale is considered a collection action.

3. More than one lender is involved.  If you have a second or third mortgage (or home equity loan or line of credit), all the lenders must agree to the terms of the short sale. Unfortunately, this is often difficult because the second or third lenders are the ones who absorb most of the loss.  If you have more than one lender, and you want to try for a short sale, do a title search to verify the first and primary lender.  Making a deal with the second or third lender is a waste of time because you’ll still owe the first lender.

4. The lender drags his feet.  Many short sales fail because the lender fails to complete the deal before the property goes to auction.  Get the lender to move faster by making sure he has everything he needs in one concise package.  If the lender doesn’t get everything at one time, he tends to set the file aside and forget about it.  You can also speed up the process by working with a Southeast Michigan real estate agent who is experienced with and knowledgeable about short sales.

If you have additional questions on short sales, foreclosures or any other southeast Michigan real estate related topics, please give me a call at 248-514-2640 or email me at info@NorthWoodwardHomes.com. I’m happy to help.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

Flopping is a short sale scam in which investors hire brokers to assess southeast Michigan real estate for less than its market value and convince lenders to sell the home for far less than market value.  Then, the investors quickly turn around and sell the property for a profit to a buyer they already have lined up.

This type of “flopping” is on the rise, and it is costing lenders millions of dollars.  The greater the losses for lenders, the more difficult it becomes to make new mortgage loans available.

Here are the basics you need to know to prevent your southeast Michigan real estate from becoming a southeast Michigan short sale flop:

What makes flopping a scam?

The crime is in the fact that the lender was not made aware of the other, better offers.  Instead of the lender getting a higher price for the southeast Michigan real estate, the difference in the short sale price and the resale price is divided between those involved in the flop.

Can I get tied up in this flopping mess and not even know it?

In most cases, the homeowner has no idea that this illegal activity is going on.  However, in some cases, the homeowners themselves can be part of the southeast Michigan short sale scam.  That is, the broker involved in the flop convinces the homeowner it is a faster way out of the present situation or that it is a way they can get a few thousand dollars to help with expenses.  Brokers involved in flopping scams are not going to tell the homeowner that it is illegal.

How can I protect myself from a short sale flopping scam?

The best way to protect yourself from this type of scam is by educating yourself.  Most importantly, make sure you are dealing with an honest real estate agent.  Interview agents before choosing one, get referrals and references and don’t be afraid to ask questions.  Remember this is your financial obligation.

Are you behind on your mortgage and thinking about a short sale?  As a Certified Distressed Property Expert and attorney, I can help you navigate a Southeast Michigan short sale to keep you from making a terrible mistake.  Give me a call today at 248-514-2640 or email me at info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Certified Distressed Property Expert/Attorney
RE/MAX Showcase Homes, Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com

There’s a lot of confusion surrounding southeast Michigan short sales, so I thought I’d answer some of the questions I’ve received from clients, owners of southeast Michigan real estate and blog readers.

Q:  What is a short sale?

A:  A short sale is when a lender agrees to accept less than what is owed on a home.  For example, you owe $300,000 on your home loan, but your lender will allow you to sell your home for $250,000.

Q:  Who makes up the difference between the short sale price and the amount owed?

A:  In the past, the owner of the home would receive a 1099 income statement at tax time.  The “forgiven amount” would then be counted as income subject to income tax.  This left homeowners in debt to the federal government for the tax owed on that amount.  Now, with the passing of the Mortgage Forgiveness Debt Relief Act and Debt Cancellation, the short fall on a primary residence is not counted as income.  This eases the financial hardship of those who are already struggling.

Q:  Does a short sale impact your credit the same way as a foreclosure?

A: No, the impact of a southeast Michigan short sale is milder on your credit than a foreclosure. Short Sales usually reduce your score by about 80 to 250 points and only stay on your record for around 5 years.  Compare that to foreclosures which reduce your score approximately 250 to 400 points and remains on your record for 10 years.

Q: How do I qualify for a southeast Michigan short sale on my home?

A:  Contact your lender as soon as you know you are in financial trouble.  Government programs, particularly the Home Affordable Foreclosure Alternatives (HAFA), are designed to make short sales more attractive to lenders by giving them incentives for allowing a short sale over a foreclosure.  However, if you allow your loan to become delinquent (more than 60 days), lenders are less likely to grant a short sale.

Q:  Can I sell my home as a FSBO and still qualify for a short sale?

A:  No.  Lenders rely on “broker opinion” as to what the home is worth at this time.  You need to hire a real estate professional that has experience with short sales.  Short sales take longer to close and properly handling the sale can make a difference in getting an offer accepted by your lender.

If you are facing the possibility of foreclosure, let me help you discover the options that are available to you. I’m a Certified Distressed Property Expert and an Attorney. You can reach me at 248-514-2640 or by email info@NorthWoodwardHomes.com.

Lee Morof
Associate Broker/Attorney
Certified Distressed Property Expert
RE/MAX Showcase Homes
Birmingham, Michigan
Call:  248-514-2640
info@NorthWoodwardHomes.com
www.NorthWoodwardHomes.com