For homeowners with Countrywide loans, the process has been terrible.

It sounds like things are finally starting to change. I’m not sure if this has to do with the Bank of America takeover (likely), but according to two separate real estate sources I’ve talked to on the phone, Countrywide has beefed up their staffing for loss mitigation/short sales.

I’ve seen rumblings on my own posts from readers about short selling with countrywide about them finally stepping up and speeding up the approval process. Up to this point many people have been waiting sometimes 6 months to get approval from countrywide to short sell their home.

Madness, I say.

Glad to see things picking up. Short selling your home is a much better alternative for all parties involved than a foreclosure. I think people who short sell their home will have a much better time trying to buy again in the future vs. those who just walk away from the home. Obviously keeping current on payments is the hope but for many homeowners under water, a short sale is the best option.

If anyone else has news on Countrywide’s policy regarding short sales, please comment.

You Need An Experienced Short Sale Agent!

From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.

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A short sale simply means that the amount of the mortgage balance owed is greater than the current market value of your home. Homeowners who are in financial difficulties and facing foreclosure often opt for a short sale in order to escape the foreclosure process. This is precisely the situation now across the United States where the sub prime adjustable rate mortgage mess has caused mass foreclosures and significantly reduced the value of real estate.

A short sale takes place when the lender agrees to accept less than the amount you owe him on your mortgage because you don’t have enough equity to sell the home and pay all the costs of the sale. And make no mistake, the lender must agree or you’re out of luck.

the effect on your credit report

You will suffer much more damage to your credit report with a foreclosure than you will with a short sale. It will also take considerably longer to restore your credit rating once your financial difficulties are resolved. In general, here’s what happens:

For a Foreclosure or Deed-In-Lieu of Foreclosure

- Expect about the same things to take place. Quite often this means a loss of between 200-280 points on your FICO score. A pre-foreclosure FICO of 675 could drop to as low as 395, essentially eliminating you from future credit approvals. It may be as long as three years before you can qualify for another home loan.

For a Short Sale

- Expect to suffer some credit score damage, but nowhere near as much. Loss of FICO points will be around 75-125 and your report will show it listed as a ‘pre-foreclosure in redemption’ which is far less negative. You will most probably be able to secure a new home loan in about a year and a half.

In any case, it is a good idea to consult with a lawyer, tax accountant (CPA) or a good real estate agent who is experienced with short sales. These professional may charge you a bit for their services, but failing to have the right counsel could end up costing you a sizable bundle. So don’t consider going it alone. Get the help you need.

Know Where You’re At

NOTICE: Don’t get your credit score from anywhere else except myfico.com. They have real scores here, not the fako crap that many sites give you. These are the real deal.

You Need An Experienced Short Sale Agent!

From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.

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Of all available options, foreclosure is the worst

The inevitable result of a foreclosure is the lender taking your house. Not only will you lose your house, but the lender can get a judgment against you for the arrearages you owe plus his costs for the foreclosure action. If that isn’t enough, your credit report will be in terminal condition for many years to come, worsening an already bad financial situation and making it very difficult to obtain any other kind of credit. There is no upside to foreclosure. It should be avoided at all costs.

Consider a short sale when foreclosure seems inevitable

A short sale is a popular option for homeowners mired down with financial problems. In this case, you would sell your home for less than what you owe your lender; the biggest problem you will face is getting your lender to agree to a short sale. In many situations, they will not. Experts advise pursuing this option the minute you realize that you are falling behind in your payments and most likely won’t be able to catch up. The longer you wait and the greater the amount you are in arrears, the less likely it becomes that your lender will even be willing to discuss a short sale.

short sale has disadvantages too

While a short sale will save you from foreclosure, it will also have a negative effect on your credit score, frequently lowering it by as much as 200 points. This can be overcome more quickly than the black mark of a foreclosure, especially if you manage to retain one or two credit cards and keep them current. Perhaps equally distressing, the Internal Revenue Service frequently deemed the difference between the mortgage balance and the amount realized from the short sale to be taxable as income despite the fact that the debtor never saw a dime of it. There is new federal legislation called the Mortgage Forgiveness Debt Relief Act 0f 2007 that just went into effect on January 1st, 2008. The new act essentially eliminates this problem.

Almost any option is better than foreclosure

Simply stated, do everything you can before foreclosure occurs and do it as quickly as humanly possible. Don’t sit back and keep thinking, “What can I do?” Instead, consider that short sale and check with your lender before your options become more limited.

The One Best Tip I Can Give You: Don’t Do This Alone

I successfully short sold my house, and the single biggest reason was my real estate agent. Having someone who could work on my behalf was incredible. Facing foreclosure is a scary thing, I know, I was about a month away from losing my home before I got my short sale done.

Don’t just get any real estate agent to help you! My agent had lots of short sale experience, and it made all the difference. He knew who to talk to, when to talk to them, and how to handle all the paperwork to get the deal done.

You Need An Experienced Short Sale Agent!

From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.

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In a short sale, your lender takes the loss

When you decide to use a short sale to prevent foreclosure, you should understand that the sale must have the lender’s approval and that lenders don’t always agree. What the lender is doing when he accepts, is permitting you to sell your home for less than you owe him and taking the loss himself. If he does go along with the short sale, it will relieve you of the burden (arrearages) as well as the cost, emotional strain and embarrassment of a messy foreclosure procedure. On the upside, a short sale is far less destructive to your credit rating than a foreclosure, as it is supposed to be listed as a “settled debt” on your credit report. However, it is still harmful to your credit score and can reduce it by 200 points or more.

On the downside, the lender could always go after you to collect the difference between the short sale price and what you owed him by getting a deficiency judgment against you. However, more often than not, this doesn’t happen simply because he knows that there is no money to recover and that he will have to pay all the costs of the legal action.

deed-in-lieu may be your fastest way out

A deed-in-lieu of foreclosure is when you give your home back to your lender, take your losses and thereby prevent the foreclosure. Lenders will frequently accept this because it is a less expensive and time consuming process for him than a full foreclosure action. The upside is that a deed-in- lieu is a faster solution than a short sale and that it is more likely to be acceptable to the lender. The ramifications to your credit score are about the same as the short sale.

On the downside, if the lender eventually sells the home for a price that doesn’t pay off the original mortgage amount, he can get a deficiency judgment and try to collect it from you. Once again, however, he knows that you can’t get blood out of a stone and probably won’t proceed if there doesn’t appear to be any money to recover.

Select either Short Sale or Deed-in-Lieu as early on as possible

The sooner you act on either a short sale or a deed-in-lieu the better. Once the foreclosure process is activated, you will not be in a strong position to negotiate with your lender because payment arrearages, interest and penalties have piled up. He can hold you financially responsible for his losses and seek a deficiency judgment that will appear on your credit report even if you don’t have the money to pay it. In either case, however, avoiding foreclosure is always a better choice in terms of the effect on your credit.

I successfully short sold my home. It was an easy process, but it beat having my home go to auction at foreclosure! Check out my guide to short selling a home before you do anything else!

You Need An Experienced Short Sale Agent!

From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.

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If you are facing foreclosure, in default, and looking at a short sale, you’re probably getting lots and lots of junk mail. Having almost lost my home last year, I know it’s an emotionally draining process.

Having someone on your side, negotiating and working on your behalf can be lifesaving. For me, I had a short sale agent who handled 99% of the entire process. That left me sane, and able to focus on getting my finances back together.

Two Options When Hiring A Negotiating Service

There are two paths to go when you want to short sell your home.

1. Hire a real estate agent with short sale experience

This is what I did. I was able to find a real estate agent that had closed a number of short sales. He was able to negotiate on my behalf and made the process of doing a short sale as easy as possible on me.

You can read my post on how to find a short sale agent here

2. Hire a negotiating service

Whatever you do, don’t hire one person “loss mitigation” specialist. More likely than not, they are just looking to get your money. If I was going to hire a service, I would go with a large company like Home Assure.

These guys are able to help you with a short sale, or negotiate with your lender if you are able to workout a plan to keep your home. Either way, they have the expertise and the size to handle your situation. They will talk with your lender, so you don’t have too. I know they offer a free consultation, so it can’t hurt to check out this option.

It’s going to be OK

No matter what happens, it’s going to be OK. You’re taking action, and the sooner you get someone on your side, the better you will feel!

Good Luck!

Until this year, there were definite tax consequences from escaping foreclosure through a short sale. Avoiding foreclosure has always been the best thing to do since it prevents a black mark on your credit report that might keep you from being approved for future loans. Most financial experts will tell you that even today, keeping a foreclosure off your credit report is more important than any added tax liability.

First, consider the credit problems

Whether you are foreclosed or choose an option such as a short sale or a deed-in-lieu of foreclosure, you will have to deal with the tax man. And most real estate professionals will advise you that a short sale is your best option if preserving your credit is important. There are a number of potentially-costly consequences of foreclosure, deed-in-lieu of foreclosure and a short sale. Most of these are the impact on a debtor’s credit rating. The first two, foreclosure and deed-in-lieu, have about the same impact—reducing your FICO score by 200 points or more. With a short sale, this reduction is more in the order of 100 points. You can also expect it to be impossible to get a new loan for 36 months or more with the first two, and around18 months with a short sale. This means that you will be able to recover from the credit impact much faster with a short sale. Nevertheless, there will be credit consequences no matter which solution you select.

Mortgage Forgiveness Debt Relief Act of 2007

The new Mortgage Forgiveness Debt Relief Act of 2007 all but eliminates the extra financial ‘hit’ a debtor would take due to tax liabilities. It was first introduced in the House in September, 2007 and finally signed into law by President Bush on December 20th, 2007. Now, the act is law and is termed Public Law No. 110-142.

Prior to this year, a debtor would suffer the loss of his home, negative impact to his credit rating and additional debt arising from federal tax laws that made the difference between what the home sold for and what he owed on his mortgage, taxable as income. The only escape from this new financial liability was to file bankruptcy which, regrettably, makes one’s credit terminally ill.

Public Law No, 110-142 (H.R. 3648) amends the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income and for other purposes. It does not, however, apply to homes purchased for investment and subsequently rented out. It only applies to homes where the owner has been in residence.

There are some limitations under the new act

The new law also reduces the income tax breaks on most gains from the sales of non-primary residences based upon a formula that considers the amount of time that the taxpayer actually lived in the property during the five years preceding the sale. And it limits the excludable amount of the indebtedness to $2-million and forbids the inclusion of indebtedness arising from services performed for the lender. There are other benefits and penalties as well. Perhaps most important, however, the new law keeps insolvent homeowners form taking an additional financial beating on a 1099 IRS gift of their short sale or foreclosure which only bankruptcy could do until this year.

Full details on Public Law No. 110-142 (H.R. 3648) can be had by going to: http://www.govtrack.us/congress/bill.xpd?tab=summary.

You Need An Experienced Short Sale Agent!

From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.

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Hi Debt kid,
I have a question for you do i have to pay for the commission out of my pocket or they just take it out from the sell when i do a short sell? And when you at it please send me some short sell agents for Some Random City, Florida.
thanks.
READER.

It’s not that I don’t want to help this person. I do. I just don’t have the time at the moment to ferret out an experienced agent in a random city in Florida.

Short Sale Real Estate Agents

If you are a real estate agent that has short sale experience, please leave a comment below (use a real e-mail). I am working on a more automated way to connect these people with experienced short sale agents and would love to have you in the database.

Thanks!

As more and more homeowners face foreclosure, many will hear about short selling their house, like I did. So will 2008 be the year of the short sale or the year of the foreclosure? I’m hoping for homeowners sake it will be the year of the short sale. Successfully completing the short sale on my house, and avoiding foreclosure was one of the highlights of my financial journey this year.

I wrote a “short sale advice” type post if you’re looking for advice and tips about short selling your home.

Countrywide’s Full Spectrum Lending division was the King of awful sub prime mortgages the past few years, and now those loans are going bad. If you have a countrywide loan and are facing foreclosure, a short sale of your home might be your best option.

I did a short sale of my home (and I had a first and second mortgage on the property) earlier this year. It can be done, but it requires patience and a plan and a little help. There are a zillion schmucks out there who will offer to “help” you when your down. Some are legit, most are not.

What I Did In My Short Sale

What I did (hiring a real estate agent with short sale experience) worked for my situation. It may not for your short sale, but I found it the best option. Working with a real estate agent you at least can get a background on the person, and if they work for a larger brokerage you know they have resources to help you. Think short sales are hard for you? They are equally as hard on the real estate agent! Getting a short sale deal done (especially right now with the overwhelmed lenders like Countrywide) takes alot of work. I do think its the best option vs. foreclosure though. You can also read my 7 steps to a successful short sale guide.

You Need An Experienced Short Sale Agent!

From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.

cforms contact form by delicious:days

I should be able to change some of that starting next week.

First off, It looks like I’m getting a place to live. Like a real place to sleep, not just a camping pad in my office. Everything is lined up and approved, I just have to have my deposit and cashola ready by this weekend. How tight is it? It’s down to dollars. It may have been wise in terms of cash-flow issues to do another month in the office, but:

1. I’m starting to notice some health issues both emotionally and physically
2. I’ve spent a good deal of time looking at potential places, and the combo of being able to work form the place I’m getting is too good to pass on.
3. Living in your office officially blows.

So I am excited. I’ll be able to relax once I’ve got all my money together to get the place. But I’m still starting to get excited. It’s almost been two months now living in my office.

I’ve managed to lay low the last two months. A good number of people know I’ve been living in my office (I played it off well…), but my employees thankfully never noticed. I’ve never overslept (they come in around 9), and have not seemed to arouse any suspetions of any other tenants in the office. I could probably go another 10 months and no one would no the difference. Of course I would be withering mass of a man, going crazy from white walls and no windows 24 hours a day…but I’m just saying it could probably be done.

Debt Update

I need to do an updated spreadsheet with my current debt levels. I have been paying down a number of my business credit cards, as well as continuing to pay my mother monthly. My personal debts I have not been paying, nor could I with the dismal salary I can afford myself at the moment. Nor should I be if I still plan to file my chapter 7 bk as soon as I have the money for the fee (I do still plan to file, unless my income level changes dramatically in the next 30 days. Which is possible. But not likely)