Disclaimer:  Consult your attorney and your CPA to ensure you fully understand the ramifications of a short sale.

Given the state of our economy, it appears short sales are becoming more popular as unemployment drives some folks toward foreclosure.  Hawaii foreclosures rose in 2009, destroying owners’ credit in the process.  A short sale may have helped minimize that damage.  For a homeowner to qualify as a short sale candidate, generally, the following must be true:

1. The homeowner is in default - this means the owner is at least 30 days past the last day of most lenders’ grace period.
2. The homeowner has little or no equity in the property - the market value of the home is less than or about equal to the amount owed to the lender(s).
3. The homeowner has a legitimate hardship - the owner must be able to prove that a real hardship caused them to fall behind in their payments.  Examples include:

• temporary or permanent job loss
• significant pay cut
• divorce
• illness or death in the family
• increased property taxes
• decrease in property value
• increase in payment due to an Adjustable Rate Mortgage (ARM) resetting

If you are considering a Honolulu short sale, contact Michael Zimmerman for a free consultation.

First, a disclaimer.  I cannot stress this point enough: consult your attorney, your CPA and your real estate professional to ensure you fully understand all ramifications of a short sale.

In just the last two weeks, I have received phone calls from three people who were considering a short sale.  Each has his/her own reasons for investigating the possibilities.  The usual reasons include large negative monthly cash flows and a desire to avoid foreclosure.  Here are three things many lenders look for when considering a short sale request:

• Financial Hardship - is there a verifiable reason that has or will cause you to miss a payment.  Examples that qualify are mortgage payment adjustment, a job loss, too much debt or a business failure.
• Monthly Shortfall – lenders need to be convinced that you cannot afford to pay your mortgage.  You will be required to provide a financial worksheet that demonstrates this fact.  The shortfall equation is simple:  total monthly income – total monthly expense = monthly shortfall.
• Insolvency - you must be able to prove that you owe more than you have in cash.  Insolvency can be proven in many cases, even though you may still have some money for living expenses.

First, a disclaimer.  I cannot stress this point enough:  consult your attorney, your CPA and your real estate professional to ensure you fully understand all ramifications of a short sale.

If you must sell your home and owe more than it is worth to sell, a short sale may be an alternative.  Several myths have evolved over time, so it’s imperative to understand the realities of your situation.  Short sale myths include:

• Short sales are impossible and never get approved.  Short sales are more difficult, but not impossible.  They don’t happen over night.
• Banks don’t accept short sales.  In reality, most banks will do all they can to avoid a foreclosure.
• You must be behind on your mortgage to negotiate a short sale.  Many lenders focus on verifiable hardship, monthly cash flow shortfall and insolvency; not just people in default.
• Buyers avoid short sales.  Some agents report that buyers are actively looking for short sales.
• Listing your home as a short sale is embarrassing.  Recent figures show that 1 out of 5 U.S. homeowners face this situation, so it’s more common than you think.
• Banks prefer to foreclose.  Banks do NOT want to foreclose.  Banks, investors and the federal government have all publicly stated that if a person qualifies for a short sale, the deal should be considered in good faith.
• There is not enough time to negotiate a short sale before my foreclosure.  Many lenders will halt a foreclosure up to the final day of the process, with a legitimate contract.