6 Tips Before Selling a Home for a Loss

Bills.com offers tips for home short sales that leave owners with mortgage debt

Although national housing markets have not necessarily recovered from the economy’s recession, some home owners must sell immediately, even at a loss, and free online consumer portal Bills.com has six suggestions to ease the pain of a home sale that leaves sellers in debt.

“Although some economic indicators hint that the U.S. economy is moving toward a recovery, home values are still suffering from a serious economic hangover. Many home owners are putting off a sale until prices recover. But some owners must sell at a loss,” said Ethan Ewing, president of Bills.com. “Selling a home for less than the debt on the loan — called a ‘short sale’ — is not desirable, but sometimes it is necessary for those who face major financial hardship.”

Statistics on home price trends vary. One August report indicated that 80 percent of real estate markets increased in median home value over the previous year. A separate July report found that home values are down 21 percent from their peak in the second quarter of 2006. However, July was the sixth consecutive month that the decline in national home values lessened.

Overall lower home values mean that many home owners are “upside down” in their mortgages. This term means that they owe more on a mortgage than the home is now worth. “This is especially true in the current real estate market, because low down payments and cash-out refinance deals were the norm in the past decade,” Ewing noted.

Home owners who are facing a possible short sale should consider these points:

1. Know what qualifies for a short sale. Several factors make a home a candidate for a short sale. Typically these are a general drop in home values (such as has happened in many markets), a mortgage that is near default status, or a home owner who is unable to pay due to hard times.

2. Find the right real estate agent. The short-sale process is specialized. Lenders have stringent requirements and might ask agents to take a lower-than-standard commission. Look for agents with experience.

3. Talk to the lender. If a home is worth less than the mortgage amount, sellers will need special permission from the lender to sell the home at a loss for its current value. If the sale stems from financial hardship, home owners will need to prepare a hardship letter explaining why they need to sell. “Remember that some lenders will be open to the possibility of a short sale to avoid the alternative of foreclosure,” Ewing said. “If you are a good borrower hit by bad times, make sure to communicate this effectively to the lender.”

4. Understand tax consequences. In some cases, a lender forgives the difference between what is owed and the selling price. Lenders can classify that forgiven debt as income to the seller, which means that the seller would be required to pay income tax on the amount. However, the Mortgage Forgiveness Debt Relief Act of 2007 allows some home owners to exclude that income. This exclusion primarily applies to those whose home was foreclosed on or who had debt forgiven as part of a loan restructuring. Individuals who are truly insolvent (total liabilities are greater than total assets) also can file IRS Form 982 declaring the insolvency to have the tax waived. Sellers should consult a licensed tax advisor to learn whether these exceptions apply to their situation.

5. Know it will impact credit. A short sale is recorded on a credit report as a pre-foreclosure proceeding. As such, it will damage credit scores. Still, it may be the best alternative for some homeowners.

6. Consider alternatives. If paying the mortgage is the problem  and there is no desire to sell — some home owners have options available. Some lenders will consider a loan modification, which seeks a permanent change to the loan, such as lowering the payment and extending the loan’s term, or rolling delinquencies into future payments. Government programs such as Hope for Homeowners also fall into this category. Another option is a “deed in lieu” of foreclosure, which essentially allows the borrower to return the title or deed of the property giving the home back  to the mortgage holder to avoid foreclosure. The borrower forfeits equity in the property, but avoids a foreclosure on his or her credit record.

“Short sales are hard facts of life following a serious real estate downturn like the one our nation has undergone,” Ewing said. “Do your homework before agreeing to a short sale. Becoming a knowledgeable seller will help make the process as painless as possible.”

About Bills.com

Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt consolidation, insurance, mortgages and other loans. Bills.com holds the No. 273 spot on the Inc. 500 list for 2009.

Bills.com and its sister companies, Freedom Debt Relief and Freedom Tax Relief, are wholly owned subsidiaries of Freedom Financial Network, LLC. The company has served more than 50,000 customers nationwide since 2002 while managing more than billion in consumer debt. Its RSS feed is available here.



Posted On: San Mateo, Calif. (Vocus) October 28, 2009

Produce The Note – Can Help You Stop Foreclosure

Produce The Note - Legally Stop Foreclosure
Produce The Note is a new way to legally stop a foreclosure seen on good morning america where home owners are demanding the banks that are foreclosing produce the note. This is to ensure that they legally are the ones that are the ones who have the note to foreclose your home. …

Facing Foreclosure, Bank Reimburses Fla. Couple

Facing Foreclosure, Bank Reimburses Fla. Couple
A Fla. couple finally got thousands of dollars in reimbursement from Bank of America by threatening the bank with foreclosure. The long legal battle actually began when the bank wrongly foreclosed on the couple’s home. (June 6)

RP Funding Advice to Home Buyers: Pick Your own Title Company

Delays, hidden costs can mean big trouble for buyers

RP Funding, a direct lender known for advising consumers to shop for a mortgage has some more advice that can save consumers money, time and trouble when buying a home: shop for a title company.

Because of recent abuses in the title industry, RP Funding is launching an educational campaign to help home buyers learn how to save money, headaches and time by choosing a good title company.

“Unfortunately, we’re seeing a lot of abuses in the title industry now,” said Robert Palmer, President of RP Funding. “Just as some consumers are taken advantage of by mortgage companies, some are being taken advantage of by title companies and foreclosure law firms.”

Those abuses can cost home buyers as much as ,500 in fees and other unjustified costs or throw their schedule into a tailspin. Palmer says that’s especially true for people buying REO properties.

“Banks typically pick the title company, and unfortunately, some banks are picking companies that are giving them something in return,” said Palmer. “That ‘something’ ends up costing consumers money. Often the buyer doesn’t find out until the day before closing.”

Closing problems cause nightmares for buyers

For some buyers, trying to close on their dream home becomes a nightmare. The problems include:

  •     Lost or late paperwork
  •     Last-minute fees
  •     Illegal signatures on documents

One Florida law firm has paid million to settle a slew of foreclosure fraud charges, which include forging some documents, while “robo-signing” others without reviewing them. In another case, lenders cut ties with what was once the largest foreclosure law firm in the state because of allegations of flawed paperwork, which left thousands of transactions in limbo.

A title policy for a 0,000 home costs about 5. While this fee is usually paid for by the seller giving them control to select the title company. According to Palmer the solution is simple “Buyers should offer to pay for the title policy and protect themselves from poor customer service, closing delays and thousands of dollars in inflated fees. Who wouldn’t pay 5 to save ,500?” RP Funding has seen consumers overcharged by just that amount, up to ,500 by companies piling on closing fees- usually at the last minute.

How buyers can protect themselves

RP Funding urges buyers to protect themselves – pick and pay for your own closing agent.

“The seller, or the bank in an REO sale, typically chooses the closing agent, but it doesn’t have to be that way,” said Palmer. “We strongly urge people to shop for a reputable title company, just as they would shop for the best realtor or the best mortgage loan for their situation.”

As part of its continuing campaign to help consumers protect themselves and save money when buying a home, RP Funding has identified numerous title companies in Florida who do offer discounts of up to ,000 for buyers who take the initiative, pay for the title policy and make their own choice. All it takes is a bit of shopping around to discover this type of savings.

“Only about 2% of buyers shop for their title company,” said Palmer. “You’re much better off shopping around to find a title company that will save you money and put your interests first – not the interest of some big bank. The peace of mind and other savings more than offsets the cost of the title policy.”

To learn more about RP funding go to RPFunding.com or call 407-802-3344.

On the web:

Title insurance fraud put under the microscope

Baltimore Co. title company owner pleads guilty to wire fraud

About RP Funding: RP Funding is a licensed Florida Mortgage Lender with offices in Maitland, Florida. As a direct lender, RP Funding underwrites, closes and funds its own loans in order to offer customers the best rates and highest level of service. Unlike banks and mortgage brokers, RP Funding offers “wholesale” mortgage rates directly to consumers to save them money. The only fee that RP Funding customers pay is when they choose to buy down to a lower interest rate through a rate discount cost. For more information, please visit http://www.rpfunding.com/.

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Posted On: Orlando, FL October 26, 2011