What is a Foreclosure?

As a result of the Homeowner not being able to make their mortgage payments, the Lender takes action to seize the property. Basically, the Homeowner borrowed money from the Lender, using the house as collateral. There is an agreement that if the Homeowner does not maintain payments, then the Lender could take the house.

What is a Short Sale?

A Short Sale is when the Lender will accept less than the full amount due on a mortgage when a property is sold.

As a Homeowner where can I find more information so that I can avoid Foreclosure?

Watch this Video from the U.S. Department of Treasury's Making Home Affordable program

Visit http://makinghomeaffordable.gov


Why would the Lender want to allow a Short Sale on the property?

The reason is simple. A Short Sale often has a better return on investment to the lender than a foreclosure. The savings a lender sees from a Short Sale compared with a foreclosure are substantial. Not only does the lender receive this savings, they are also paid on the loan 6 months earlier than in the foreclosure process. This allows them to collect and cash-out earlier than they would in a foreclosure. Plus, lenders spend a great deal of money with attorneys to complete the foreclosure process. Lenders created the Short Sale process as a foreclosure alternative for these reasons. The incentives to perform a Short Sale on your property are in place to motivate you to participate.

Additional reasons for the Lender to accept a Short Sale:

• Legal Concerns

Lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.

• Wall Street

Wall Street is watching Lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender's ability to sell their loans on the secondary market. A successful short sale gets the loan payoff resolved quickly.

• Asset Management Expenses

If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage real property assets - homes – spread throughout the region, the state and possibly even the nation. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful short sale eliminates most of these costs.

• Reserve Requirement

Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful short sale lets the lender put their money back to work.


I'm a REALTOR® with a Short Sale Listing, why should I use EAG & Associates?


At EAG & Associates we feel that Real Estate Agents should focus on what they do best and that is assisting buyers and sellers.

Some reasons that other Real Estate Agents have come to EAG & Associates:

  • Short Sale negotiations are time consuming.
  • Negotiating with banks is not your specialty nor do you want it to be.
  • We handle all the communications for you. You no longer have to deal with non-stop calls from Selling Agents, Clients, Title Brokers, etc. even if you don’t have any updates.
  • EAG does ALL the work.
  • It takes relationships to get transactions done. We have the volume and the established solid personal contacts and relationships with banks which gives us the ability to push the transactions through better than a single REALTOR® who may have had only a few transactions with short sales.
  • If the short sale property does not get the to Closing Table, EAG will NEVER seek compensation.



What is the cost for the Homeowner to use EAG to facilitate the Short Sale?

There is never an out-of-pocket expense to EAG! Period.

We collect fees from the lender, and only when the property has successfully gone to Closing. We do NOT collect from the commissions. AND ... if the deal does not close, EAG seeks no compensation.

Will the Lender approve a Short Sale even if a Homeowner is current on their mortgage?

Yes. We we have successfully negotiated and received an approval on a Short Sale even when the Homeowner was current on their payments. However, the Lender has the upper hand and negotiations are more difficult when Homeowner is not in default.


Can I still Short Sale my property even if I have 2 loans?

Yes. It doesn’t matter how much you owe. The lender will evaluate what the current market value is and then decide how much they will accept.


Can I still do a Short Sale even if the property is in very bad condition?

Yes. Lenders are more motivated to do a short sale on a property that needs work than on a property that doesn’t. Lenders know losses start to skyrocket when they foreclose on a property that needs a lot of repair work. Lenders are in the business of lending money not property management and home repairs.





If I am behind in my payments and can't afford closing costs what can I do?

Lenders are understanding when it comes to this situation and will actually pay the REALTORS® commission and your closing costs.


What is a Deficiency Judgment?

A Deficiency Judgment can arise if the bank sells the house for less than the mortgage debt. Thereby, lenders can hold the you responsible for the unpaid portion of the loan. This can result from a Short Sale or a Foreclosure Property. The Lender may be allowed to take further legal action. Some states have restricitons and regulations on deficiency judgments, but unfortunately the majority do not.

The majority of Lenders will not choose the deficiency judgment option and choose to write off the loan. If they choose to pursue a deficiency judgment on the balance owed, the amount can normally be settled for pennies on the dollar.

EAG & Associates always seeks a full release of any lien and request that the debt be considered settled.

Is the Seller going to get hit with a tax bill or a 1099 if you do a Short Sale?

Upon successfully closing a Short Sale, lenders will always report a loss to the IRS and issue a 1099. However, the Mortgage Forgiveness Act of 2007 was signed into law on 12-20-07 and is now official, effectively getting rid of the question "will I be taxed on the Short Sale". Prior to this Act, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was potentially taxable income to the borrower.

This was the subject of much media attention and led to many questions and concerns from Sellers wondering whether or not they were going to get “hit with taxes” on the Short Sale.
The new law, however, temporarily waives these taxes for debts forgiven (as high as 35%) from the beginning of 2007 to the end of 2012.

This will effectively put an end to the question from Sellers... will I be taxed on the Short Sale discount of my primary residence. The definitive answer (at least until the end of 2012) is NO!

 Will a Homeowner's credit be affected?

If the Homeowner has to Short Sale their home they’ve most likely missed payments already. That in and of itself has already adversely affected the Homeowner's credit. The key here is to stop the devastating affect on your credit that a Foreclosure causes. A Foreclosure is the most damaging record on your credit report – its even worse than bankruptcy. A Short Sale, on average, can affect a homeowner's credit by 50 points, while a Foreclosure can adversely affect the credit score by 300 points.

By working with EAG & Associates you give yourself a fighting chance of avoiding Foreclosure and start towards the “Rebuilding” process. With our help, your credit will recover quickly if you keep your other lines of credit in good standing. With EAG & Associates you have an experienced team of professionals that will help you through these tough times.


How does a Foreclosure and a Short Sale show up on my Credit Report?

A credit bureau is the only true source of information for determining how a Foreclosure or a Short Sale is going to affect your credit. Therefore, we are not attempting to provide any form of legal advice.

However, from our experience with homeowners, a foreclosure usually shows up as FORECLOSURE and can stay on your credit report for ten years. A short sale transaction is commonly listed as SETTLED FOR LESS THAN BALANCE.

Please consult a credit bureau for how a Short Sale and a Foreclousre will actually affect your credit.


Is a Short Sale right for me and my situation?

Lenders are increasingly willing to work with borrowers faced with a financial hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship, and are unable to meet your obligation on your mortgage, the Lender would prefer to settle the matter with you as opposed to taking the property through Foreclosure.

As you consider the option of pursuing a Short Sale, remember your Lender is looking to limit any potential loss on your loan. By completing a Short Sale, your Lender has arrived at a solution that is, for them, much better than a costly Foreclosure.








What sort of hardship would a Lender consider legitimate?

To some extent, that will depend upon the mortgage company considering the Short Sale request. Generally, as long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the Short Sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter. The hardship letter sets the tone for the entire file.

Acceptable Homeowner Hardships

  • Death of a borrower
  • Illness of a borrower
  • Illness of a borrower's family member
  • Death of a borrower's family member
  • Marital difficulties
  • Curtailment of income (reduction of income of a borrower)
  • Excessive obligations - same income, including habitual non-payment of debts
  • Abandonment of property
  • Distant employment transfer
  • Neighborhood problem
  • Property problem
  • Inability to sell property
  • Inability to rent property
  • Military service
  • Temporary loss of income due to layoff
  • Health/Medical reasons
  • One-time repairs (home, auto, etc.)
  • Other Temporary loss of income

Unacceptable Reasons

  • Quitting a job
  • Leaving a job to stay at home and care for children
  • Voluntary reduction in hours worked, reducing pay
  • Seasonal layoff from a job
  • Quitting a job to go back to school


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