Know this – there is more to learn about Short Sales, Foreclosures, Loan Modifications, Pre-foreclosures, Bankruptcies and Repayment Plans than can possibly be covered in a blog post. Consider this a starting point. This post is derived from a Short Sale luncheon held last week at CAAR. See the bottom of the post for some of the community partners working to mitigate these forthcoming challenges.
Do you want to keep your home?

That’s how the process starts. Leaving out the myriad government “plans” to “save” people’s homes, here is a concrete way to deal with the struggles that many (more) people are facing and likely will be facing in the near future.

What’s a Short Sale? Simple –

A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes.

I have spoken to several people who predict that next year is going to bring dramatically more short sales and more foreclosures – both of which will have profound impacts on our neighborhoods, communities and regions. From one perspective, these are individual problems that have collective impacts. From a social perspective, it is difficult to quantify what the likely results may be (a subject for another one, two or series of blog posts, at least). From a financial perspective, housing values may be severely impacted.

Charlottesville Realtors – take the time to attend the next Short Sale class that’s offered at CAAR – with the expected (some forecast dramatic/staggering/flood – insert your adjective here) increase in short sales next year, you are not going to be adequately prepared for the new market unless you learn about this new segment of our market. Know the process.

For consumers –There are options.

If you’re in trouble, or anticipate being in trouble, you would do well to call somebody now and prepare – educate yourself. Ask questions.

Highlights from the class –

– Denial is a powerful force. If you think that trouble may be on the horizon, talk to PHA, the bank, somebody (but not one of the foreclosure scammers)
– The Short Sale process does not stop the foreclosure process
– The Hardship Letter is critical
– Behavior Modification is key. If you see that your income is going to be reduced, but you keep going to Whole Foods or Foods of all Nations, then you’re likely in need of some counseling (and I’m not being facetious).

– Lenders do not want to own the properties!

– Another good thing about working with PHA – they have the contacts and aren’t relegated to 1-800-NoOneCares, Press 1, then 2 then 8 … they do this all the time and are the only HUD-approved housing counselors in the region.

For Realtors (and consumers) – the presentation below gives just a taste of what is covered in the two hour class, but the talking points below serve as they should – guides from which greater knowledge is learned. The class is where the real knowledge – and questions/answers – are gained.

Another note – renters living in foreclosed properties might be up the proverbial creek as their leases may not be honored. A good place to start asking questions about this subject is the Charlottesville Legal Aid Center.

– Another thought – as a Buyer (or Buyer’s Agent) – you may not even know if a property is in a short sale position! From a recent Washington Post article:

“From a disclosure standpoint, agents are between a rock and a hard place,” said Tony Arko, an agent with Market Advantage in Sterling. “Certain information is confidential but at the same time, there’s a lot of information the buyer is going to need, and usually they are wanting a response in a couple of days. If you don’t tell them up front that it’s in pre-foreclosure or a short-sale, an agent and the buyer might get ticked off. They feel like the wool has been pulled over their eyes.”
…
Until last year, many homeowners were reluctant to advertise their properties as short sales, mainly because they were embarrassed to be in debt, Arko said. But with the growing number of foreclosures and upside-down mortgage situations, the stigma is gone.

“A lot of people are underwater in their financial obligations. They are not just looking at this as a bad situation that they are trying to fix,” Arko said.

Also, more short sales are receiving bank approval because banks don’t want to be in the business of owning property, he said.

Sometimes, agents don’t reveal a short sale, default status or pending auction because they simply don’t know about it. Listing agents often require their clients to sign statements regarding their mortgage status, but clients can deceive their agents or can slip into default and not say anything. In addition, lenders can initiate trustee sale proceedings without informing the real estate agent.

A final thought for Realtors – If you’re concerned about the commission, consider using Buyer Brokerage forms and learn about Divorced Commissions. Starthere and here.

Amy Webb with Real Estate III has a good summary as well.