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What is a short sale? A homeowner is considered “short” when they owe an amount on the property that, combined with closing costs and commission, is higher than the current market value.

A short sale occurs when the homeowner’s mortgage company agrees to accept less than the full balance of the loan at closing. This sounds like a very easy definition, but it actually can be an involved and time-consuming process if not handled properly.

There are many myths about short sales that must be addressed. Let’s take a look at a few myths and truths.

Myth: Your lender would rather foreclose than do a short sale.

Truth: It’s just the opposite. The foreclosure process is long and costly for the lender. Some national statistics show that on average a lender will receive 30 percent more from a short sale than a foreclosure.

Myth: I have to be behind in my mortgage payments to do a short sale.

Truth: That may have been the case in the past, but today lenders are looking for a verifiable hardship, monthly cash flow shortage or a pending shortfall. If you are facing any of these situations, call  your lender immediately. Waiting will only limit your options as to what the lender may be able to do to help you.

Myth: There’s not enough time to complete a short sale before my foreclosure.

Truth: A foreclosure is a long process. In many cases a lender will stall the foreclosure process if they know you are trying to sell your house. But, they want to know you are making a real effort to get it sold. They will want proof that it is listed at a reasonable price, and they will most likely want to speak with your Realtor.

Myth: Listing my house as a short sale is an embarrassment.

Truth: There are many Americans that are in the same situation you are. Some estimates show that one out of eight homeowners is in some state of distress with their mortgage. You should be congratulated for admitting you need help and are trying to save your credit.

Myth: Short sales never get approved.

Truth: If you are upfront with your Realtor and give them all the information they need to supply to the lender, a short sale has an excellent chance to be approved. But, you need to stay in contact with your Realtor concerning any changes in your financial situation and your Realtor needs to stay in regular contact with your lender. Short sales do take more time and are more involved than a regular transaction, but if handled properly your short sale will get approved.

Myth: Buyers are not interested in buying short sale properties.

Truth: Buyers are always looking for a good deal. As with any real estate transaction, a home in good condition and properly priced will attract attention. Buyers just need to be aware of the differences between a short sale and a regular transaction.

Myth: I will have to pay back the difference of what the property sells for and how much I owed on the property.

Truth: In most cases, that isn’t the case. You will want to get something in writing from your lender saying that the difference has been forgiven. You will want to seek legal advice and speak with a tax adviser to know the legal and tax consequences.

The final thing to keep in mind is that no two cases or no two lenders are exactly alike in how they will handle a short sale.

A foreclosure is the last thing you want to happen. It will destroy your credit and change your life.

Source:  http://www.htrnews.com/article/20091129/MAN04/911290357

What is a Minnesota Short Sale?

A Minnesota short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy and the Obama administration have also improved the chances of getting a short sale approved.

But to be technical, here’s a more official definition:

• A homeowner is ’short’ when the amount owed on his/her property is higher than current market value.
• A Minnesota short sale occurs when a negotiation is entered into with the homeowner’s mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ’sold short’ of the total value of the mortgage.

For homeowners to qualify for a short sale, they must fall into all of the following circumstances:

• Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
• Monthly Income Shortfall – In other words: “You have more month than money.” A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
• Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.

Source:  http://www.cdpe.com/what-is-a-short-sale.html

In 2007 Minnesota had over 13,000 filings for foreclosure. This was a 100% increase from 2006 and a whopping 500% increase from 2005. These numbers have gone down since then but the cold hard truth is that there are still nearly 10,000 filings for foreclosure with more being added each day. So why is this happening? Why are Minnesota families being forced to foreclose their home? And, is there any other option?

What Happened? Reasons for Foreclosure in Minnesota

Some of the most common reasons for foreclosure are as follows:

Job loss/ unexpected unemployment – in August 2009, the unemployment rate in Minnesota was at 8.0% which is the same as what it was in April 2009. What this means is that, although the global economic recession appears to be slowing down, jobs are actually not picking up and more and more Minnesotans are finding that their temporary unemployment status is turning permanent.

Sudden illness or medical emergency – another common reason that more people are losing their homes to foreclosure is because they are struggling to overcome an illness or medical emergency and simply cannot pay for the bills. In 2007 there were over 4 million cases of injuries at work that cause problems in the financial sector. If you or the main income earner all of a sudden cannot work, then you could easily fall behind on your payments and end up in trouble with your mortgage.

Divorce / Loss of second income – 1 in every 2 marriages end in divorce and many more people split up every day causing not only a problem in their emotional life but also in their financial life. The reason is because, with a separation also comes a split in income. Furthermore, divorce proceedings can be extremely expensive and thus many people are struggling with even more debt once they have ended their marriage.

Unexpected Home Maintenance – another problem that Minnesota families face is that their home is suddenly damaged. Although most families will have insurance that will cover accidents, there are certain problems that will need your out-of-pocket expenses. The fridge could break; the heating could crack down or the roof could leak. All of a sudden you are spending your monthly paycheck on home repairs instead of on the mortgage.

The Short Sale in Minnesota Option

One of the best options to avoid foreclosure is to opt for a Minnesota short sale. A short sale is a real estate transaction that occurs when the banks agree to take an offer on a house that is less than what you currently owe. They are willing to ignore the additional money you owe and you are able to sell your house without worrying about that dreaded ‘foreclosure’ status on your credit report. If you are having trouble making your mortgage payments, regardless of what the reasons are, you do not have to commit to the foreclosure status. A MN short sale is an option that just might work for you.

One of the biggest parts of the short sale Minnesota transaction process is composing the letter of hardship. This is required piece of documentation that proves that you are in hardship and thus need to short sell your home. You will need to explain your situation so the lending company can understand why they need to consider a short sale for your home. This can be a very hard letter to write. For many, finding the time to sit down and write such a personal letter is hard enough but many will also find it hard to find the right words to express their emotional strain and financial burden. Many are also ashamed to put the words to paper as it makes the situation real. However, writing this letter is the biggest step to a brighter future and, in most cases, the only way you can avoid a foreclosure on your home.

How to Start your MN Short Sale Letter of Hardship

Start your letter with the following formalities:

• Lender Name/ Lender Address/ Lender Fax Number
• Today’s Date
• RE: Hardship Letter – Short Sale for YOUR ADDRESS
• To Whom It May Concern

The Bulk of your Minnesota Short Sale Letter of Hardship

Your short sale letter of hardship does not have to be a novel but it should be a typed page in length outlining the details of your current situation. This will include:

• Where you purchased your home and your financial situation at that point. You will need to include your salary and other incoming income.
• What happened to cause the payments to pile up and for the missed payments? This may include a job loss, unexpected bills or medical payments, a loss of a spouse, a divorce or separation, an increase in interest rates or anything else that has happened to cause financial hardship. You will need to be as honest and detailed as possible when explaining your situation.
• The details of the MN short sale. You will then need to explain that you are now trying to sell your home and ask the lending company to accept your offer as ‘payment in full.’ Let them know that you just “want to move on” with your life.

Conclude your letter by informing the lending company that you are available to answer any questions or provide any more details and include your name, address and contact number at the bottom.

The Importance of a Letter of Hardship in a Minnesota Short Sale

Your letter of hardship is your plea to the lending company on a human level. If your letter is well written and compelling, then it will be a lot easier for the lending company to accept the short sale offer. Many people are not naturally poetic and have trouble finding the right words. That is why it’s important to get the help you need from a qualified short sale agent in Minnesota when composing your letter of hardship.

When it comes to a short sale transaction, it’s important to understand that the process can take a lot longer than a regular real estate transaction. When you bought your home, you probably made the offer, contacted the lending company, were approved shortly after, signed the contract and moved in within 30 to 60 days of signing. Unfortunately, this process will take a little longer when dealing with a short sale in MN. However, there are ways to speed up the success of your short sale in Minnesota. This can be especially important if you are racing against the clock of foreclosure.

Make your home desirable – when it comes to a short sale, the first step is to attract a potential buyer to your home. And, the better your home looks, the higher the offer is going to be. This does not mean you need to spend a fortune on renovations but you should try to up the curb appeal by doing little things around the house. Keep the yard and the inside of the house as clean as you can. Try to rearrange the furniture to focus on the house’s best assets. There is nothing worse than arriving at a potential home and seeing an unattended lawn. It may seem silly but it’s the little things that make the difference in real estate offers.

Be as Detailed as Possible with the Documentation – once an offer has been put on your house, you and your Minnesota short sale agent will need to sit down and complete the documentation. This will include the purchase agreement as well as your letter of hardship and reasons for needing a short sale. The process of gathering the documentation can take up to two weeks but you can help this process by including any relevant details. Go through all your old financial statements and make sure you include any pay slips, termination letters, medical bills and other evidence of your hardship. Make copies if you cannot give the originals.

Make sure you Choose a Qualified Short Sale Agent in Minnesota – finally, much of the short sale in MN transaction comes down to the lending company. However, if you choose a qualified Minnesota real estate agent to handle your short sale, you will most likely have an answer sooner. Although technically your short sale agent cannot go into the bank and demand they hurry up, they are able to speed things along once the BPO has been processed and the negotiation is taking place. The negotiation process can take around 45 days to complete; with a professional and experience short sale Minnesota agent, you can expect this to happen a lot faster.

If you are undergoing a short sale then you probably feel like the process is taking forever. It can be hard to keep your head up and continue on as if nothing is different but this is your best bet to succeeding in this situation and getting out ahead. Patience is of utmost importance when it comes to a Minnesota short sale. And, in many cases, your patience will pay off in the end.

No home owner plans on foreclosure. They do not purchase a home thinking that there is the chance that, a few years down the road, they could lose it. However, the sad reality is that this is happening more often than ever before. With the financial crisis just behind us, we are still struggling to keep afloat and more Minnesota homes are pending foreclosure every week. If you happen to find yourself in this category, there are things you need to know about how to overcome this unfortunate fate and get back on top of things.

Avoiding MN Foreclosure Before it’s too Late

One of the biggest mistakes people make when it comes to foreclosure is that they avoid the current situation. The letters come, the payments are due and things just keep being pushed aside with the hope that it’s going to get better next month. Although it’s important to keep your hopes up, it’s also time to be realistic and make a plan of action.

The first thing you can try to do is speak to your lending company about forbearance or changing the terms of your loan. If you speak to them early and explain the situation, you may be able to hold off the legal actions and adjust your mortgage rate to suit your current financial situation. However, in many instances, the situation has progressed beyond this and the lender has already filed a Notice of Default.

Notice of Default and the MN Short Sale Alternative

Receiving that Notice of Default can feel like a ton of bricks being shoved in your throat. But you need to take a deep breath and understand that this burden can actually be avoided. You simply need to contact a MN real estate agent and discuss a Minnesota short sale.

During a Minnesota short sale, you are selling your home for less than what you owe on it. Although the banks do not want to do this, short sales are a better option for them than foreclosure and thus they are willing to negotiate short sales on Minnesota homes. A short sale in Minnesota will not help you profit from your home but it will ensure that you get out of a very messy situation and on with your life. Furthermore, when you are back on your feet, a short sale will allow you to start again without worrying about poor credit that comes with a foreclosure.

When it comes to the short sale in Minnesota process, it’s important that you act fast. A short sale transaction is extremely complicated and due to the frequency of them, it can take up to 100 days or more for a lending company to approve the short sale transactions. That’s why the sooner you contact a professional MN short sale agent; the better it is for everyone involved. Furthermore, the quicker you act the better chance you have of getting the short sale transaction approved and avoiding the dreaded foreclosure.

In today’s fast paced world, we all want everything now! Although there are only a few things in life we have to wait for, these things are often worth the wait. This is the case when it comes to real estate transactions. Although some real estate transactions will go off without a hitch and the contracts can be signed within a matter of days, this is usually not the case when it comes to Minnesota short sale transactions.

What can you expect when it comes to time and a short sale?

On average, MN short sales will take anywhere from 60-120 days to complete. However, this is a rough estimate and, as more and more families look for short sales as an option, you can expect the wait period to continue to lengthen.

Reasons for the Lengthy Short Sale Transaction Period

So what’s taking so long? One of the reasons you can expect a long wait period when it comes to Minnesota short sales is simply because of the current real estate market. According to the National Association of Realtors, over 50% of properties sold are short sale or REO properties. What this means from a lending point of view is that there are so many different short sale packages coming in each day that is can take a while to get to all of them. For the short sale seller and the short sale buyer, there is nothing to do but wait.

Another reason for the long wait in Minnesota short sale transactions is because there is a lot of paperwork and organization involved in the process. And, finally, short sales in Minnesota take so long because there are so many steps involved. Below is a timeline for the typical short sale process in MN.

A Break Down of the Short Sale Transaction Timeline

First of all, you will need to get authorization on file with the lender. This can take around 2 days. Next you and your real estate short sale agent will need to compile all the short sale documentation which can take anywhere from 7 to 14 days. You can expect another 3 to 7 days for the short sale package to be filed by the lender and another 10 to 14 days for your package to be assigned to a negotiator in the lending company. These are only the first steps involved.

Next the BPO will need to be ordered and scheduled which will take anywhere from 19 to 30 days to do. The BPO will need to be sent to the negotiator who will then be in touch with the short sale agent about the negotiation or approval of the short sale. All of this can take between 30 to 45 days to complete. And thus, your grand total for the transaction process is between 70 and 107 days to complete the entire process.

You will notice that most of the waiting time occurs due to the lending company, BPO and negotiation process and, unfortunately, there really is no way to speed this up. It all depends of the efficiently and the availability of your lending company at the time of your short sale transaction.

One of the most common questions that families have when it comes to the short sale Minnesota process is what they should do with their mortgage in the meantime. A MN short sale transaction can take anywhere from 3 to 4 months to actually complete. Should you be making your mortgage payments or should you just stop? This is not something that can be answered easily because there is no right answer set in stone. However, it’s important to understand what is at stake if you do completely stop with your mortgage payments during a MN short sale transaction and what this could mean in the long run.
For many short sale sellers the choice whether to continue with the payments is not even a viable one as the debt and the bills are simply too much without even trying to make the payments. Other short sale sellers may have a little extra money that could go towards the mortgage- the question is whether or not it should.

Saving your Money during a Short Sale MN Process

The first reason why stopping payments on your current mortgage could be a good move is because you can put that money towards something else, such as the funds to move elsewhere or pay for a deposit on a rental home. If you have credit card debt or other large debts that are damaging your credit, you could also put the acquired mortgage money towards lowering these debts.

Accepting Defeat during a Minnesota Short Sale

Another reason why many people stop paying the mortgage when negotiating a MN short sale is simply because it is not their house anymore. If they are struggling to make payments and have been warned that foreclosure is in the near future, it may seem fruitless to even try. If the short sale does not go through and you know that foreclosure is the only other alternative, it might be best to save your money to start over again.

Providing Incentive for the Banks to Make a Decision

Finally, those who are in true default and are not paying their mortgage may take the top priority spots in the lending company lineup and thus, the short sale transaction may be sped up. By not paying the mortgage, you are actually speeding up your short sale in MN transaction and providing the lender with an incentive to accept the short sale offer. However, while you are not paying your mortgage, you will be incurring a poor credit rating in the process.

Keep in mind that choosing to continue to make payments during a short sale or stopping these payments is something that every individual must decide on his own and will come down to your personal financial situation and what is best for you. Understanding the pros and cons on each side will allow you to make the right decision. To see a list of the pros to short selling, see the blog titled Continuing Payments When Negotiating a MN Short Sale. And, keep in mind that there are always two sides to every decision in life. The big question is – which is right for you?

When it comes to whether or not you should continue with your mortgage payments during the process of a short sale, there is no clear right or wrong answer. No one can tell you what you should do and no one, except perhaps a lawyer, should offer you this legal advice. Instead, outlined below are some of the advantages to keeping up with your mortgage payments during a Minnesota short sale transaction. See next week’s blog – Stopping Payments When Negotiating a MN Short Sale – to read the other side of the story and make a more informed decision.

First of all, not everyone can afford to make this choice. It is important that you do not let other parts of your life suffer when trying to continue with your mortgage payments during a MN short sale. If you can, make sure your family is supplied with food, clothing and the basic living essentials. Make sure the electricity is paid, that the car insurance is up to date and that there is fuel in the car to get to work. If there is money left over, then putting it towards your mortgage can offer some serious advantages in the long run. They are outlined below:

Keeping Your Credit and Future in Order during a Minnesota Short Sale

One of the biggest advantages to continuing to make payments is that you will be able to qualify to purchase a new home right away. If you have kept your payments up to date and have not been classified as a ‘delinquent’ then you will be able to immediately buy another home after a short sale. For some families, this can be a big incentive to continue with their payments.

Another big advantage to continuing your payment is that you will be able to protect your credit rating. Every time you miss a mortgage payment, your credit rating will go down which can result in higher interest rates and stricter loan terms in the future. Although undergoing a short sale in MN will drop your FICO rating a little bit, it will not nearly be as substantial if you continue with your payments during the waiting process.

Peace of Mind in Continuing Payments during a MN Short Sale

Although this is not true with everyone, many people find that continuing with their mortgage payments gives them a peace of mind and a sense of pride that they have not completely given up and accepted defeat. Understand that in a short sale, you are not accepting defeat- you are simply choosing the better alternative to a foreclosure. However, for some, this payment will help them sleep better at night.

Finally, perhaps the biggest advantage of continuing your mortgage payment is that, if the short sale is not accepted by your lending company, you do not have to necessarily give up your home. Furthermore, if the deal falls through, you can continue to list your home and hope for another short sale offer in the future without worrying about the lending company foreclosing right away.