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Can You Stay in Your Home After a Short Sale?

Stay-Home-after-Short-sale

Your mortgage is under water and you can no longer make the payment.

Is there any way to remain in the home? 

The answer is… possibly.

This is really a two phase question-  before I answer the “remain in home” portion let’s take a look at the first phase.

What is a Short Sale?

what-is-a-short-sale

A short sale is when you are given approval by your mortgage company to sell your home for less than the mortgage that is owed on the property. 

For example, you might owe $200,000 on you mortgage but because of the housing crash of 2008 it’s now only worth $125,000. 

Imagine your  mortgage company agrees to accept $125,000 in a sale as payment in full for the outstanding debt. You’d be released from the obligation to pay the shortfall of $75,000

Here’s the big question:

“Why would any mortgage company agree to take less than owed and let you off the hook for the rest?”

The truth is, they actually make more money this way.

History has shown that Banks and mortgage companies typically net 12% to 25% more in a short sale or modification than a foreclosure. 

More importantly, the US government says that they have to work with you. 

Enter the HAFA.

What is HAFA?

Home-affordable-foreclosure-alternatives-hafa

Glad you asked…

An article by Bankrate.com describes it very well so I just copied and pasted the gist of it below:

“Homeowners struggling to sell their homes in a short sale are getting some relief, thanks to the federal government’s Home Affordable Foreclosure Alternatives, or HAFA, program.

Up to now, many short sales — in which the lender accepts a sale of the property for less than the full amount owed — have taken months to complete. Sometimes, the complex and lengthy process has failed, resulting in foreclosure.

HAFA establishes streamlined short sale rules and incentivizes borrowers and lenders to work together to avoid foreclosure. The rules — in effect between April 5, 2010, and Dec. 31, 2012 — also are intended to speed up the short sale process.”

But wait… the program expired in 2012, right? 

Wrong…

HAFA short sale is extended until December 31, 2015 with a closing date on or before September 30, 2016.

(And, it is expected that it will be extended again, so stay tuned…)

NOW HERE’S the hidden gem:

According to HAFA rules, lenders now must offer a short sale in writing to the borrower within 30 days if the borrower does not qualify for or complete a loan modification. Borrowers then must respond within 14 days to the lender’s short sale agreement.

OK, so you may be able to short sell your property… but how does that help you stay in your home? 

Enter the Short Sale Lease Back Option

short-sale-lease-back-option

A Short Sale Lease Back program (SSLB), allows you to sell your upside-down home and remain there for up to three years while paying a fair market rent.

If the renter is successful, he or she should be able to buy anew at the end of the rental term.

The SSLB is the brainchild of Bob Irish, a Riverside, CA real estate broker at Lake Hills Realty and CEO of National Short Sales, the SSLB program facilitator.

Lenders have been lukewarm about the program, but some homeowners have benefited from the program and more lenders are likely to participate.

Does it really matter to whom the homeowner sells their home, as long as it’s a legitimate sale, there is a real hardship, and the owner can sell at fair market value?

Probably not, but in this crazy housing crisis, reality and common sense have not always led the way.

Here’s how the program works according to Bob Oakes at Evergreen Realty:

“The Short Sale Lease Back Program may allow some qualified homeowners to stay in their home after a short sale. Certain banks will approve short sale lease-back transactions on certain loans as long as the homeowner has a valid hardship and the short sale terms are acceptable to the bank.

The SSLB Program was inspired by changes to the federal Home Affordable Foreclosure Alternatives short sale program. Program founders designed it to help distressed homeowners find an alternative to foreclosure and more quickly return to the housing market as buyers.

A short sale occurs when a property is sold for less than is owed on it and the bank agrees to a discounted payoff. In recent years, banks and servicers have required that a short sale be an “arm’s-length” transaction, meaning the buyer and seller could not be related and could not have a prior agreement for the homeowner to stay in the property.

The U.S. Treasury Dept. in March 2011 issued a supplement, or amendment, to the HAFA guidelines to allow “servicers the discretion to approve sales to non-profit organizations with the stated purpose that the property will be rented or resold to the borrower, so long as all other HAFA program requirements are met.”

It further strengthened that option in a November 2012 supplement that smoothed the process for such a sale.

The SSLB Program is monumental and game-changing, providing a more attractive solution for homeowners who cannot afford their homes but have valid economic hardships and with steady incomes can afford a lease payment. Homeowners must work with a licensed agent who is trained and certified by the Short Sale Lease Back Program

A qualified non-profit would purchase the home in a short sale

The homeowner’s lenders MUST approve of the lease-back terms—the intent of the sale and tenancy cannot be hidden from the lienholders

The seller would lease the home for up to three years, allowing their credit to heal so that they could qualify for a mortgage and re-enter the market Homeowners must attend ongoing HUD and financial-literacy counseling and speak with legal and tax experts to ensure the program is the right fit

Not all homeowners qualify for the program. Borrowers must have sufficient income to afford the monthly rent payments in addition to their other debt payments.”

For more from Bob check out: http://www.sunnews.org/letters/on-real-estate-short-sale-lease-back-may-be-an-option-for-you/

What are the drawbacks?

  • The improving housing market has in many cases wiped out the negative equity in properties across the country. Because of that lenders are more willing to foreclose than make a short sale deal.
  • The ability to short sell and stay in the home is dependent on a sale to a “non-profit” organization. Finding that component is becoming increasingly difficult.
  • If the lender is willing to discount the amount owed they might as well just modify the loan and leave the owner in place. The gymnastics ofselling to a non-profit and allowing a lease back seems to be a long way around getting to the same result.

Final Word:

For the record, I’m not a fan of this option.

However, it’s my goal to bring you every option available whether I support the program or not. 

With the improving housing market short sales are becoming less necessary – with equity in your home there is usually a way out before foreclosure. 

My job is to help you explore those options and give you unbiased answers to your questions.   

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Lease Back

5 Surprising Reasons Many Seniors Choose to Rent

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Do you intend to stay in your home for the rest of your life?

Research by AARP suggests that 89 percent of Americans Age 50+ want to remain in their home indefinitely.

However, as they get older, many seniors are choosing to rent rather than own the home they live in.

Even those who easily afford to purchase or maintain a currently owned home are opting to rent instead. 

But, why?

Here a few of the reasons:

Renting is just easier than owning.

After his wife passed away Mike Abelson, the 65-year-old trial attorney, sold his house and began renting a 1,400-square foot apartment eight miles away in Bethesda, Maryland. 

Now he uses his downtime to enjoy warm summer evenings on his terrace.

“I pay a pretty steep rent, but it’s worth it,” Abelson said. “I don’t pay property taxes, I don’t pay for maintenance, plumbing or electrical. I don’t have to pay for the grass cutting. It’s just easier than being a homeowner.”

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Source: http://www.bloomberg.com/news/articles/2015-07-21/boomers-competing-with-millennials-for-u-s-urban-rental-housing

I might even be inclined to rent:

“We’re not about to move, but you know what? If I had it to do again, I’d never buy this house. If we had stayed where we were, we’d now have just four years left on our mortgage. But knowing what I know now, I might even be inclined to rent. For most folks, renting isn’t a bad option.”

Source: J.D. Roth is the author of Your Money: The Missing Manual.  He started the award-winning website Get Rich Slowly, which Money Magazine named the Web’s most inspiring personal-finance blog.

Why I Never Want To Own A House Again

Senior-Rent

“I’m not saying that owning a home is a bad thing. I liked being a homeowner. I just happen to like renting more. I liked that when our oven died, it was replaced – at no additional cost to me – that same day. And I liked that as I wandered through Home Depot, I happily gazed at cabinet pulls and meandered through the garden center rather than making a beeline for caulk, wood putty or other maintenance items. Maintenance is no longer my problem.”

Source: Forbes Staff Kelly Phillips Erb

These are a few glimpses into some of reasons seniors are more comfortable renting rather than owning.

But, what about an economic reason?

Is now the time to pull all of the equity out of your home before another downturn evaporates it?

What does bestselling author Harry Dent has to say about the road ahead: 

demographic-cliff

Harry Dent warns of a pending housing collapse:

“Property Prices Will Shed a Further 40% of their Values…as the greatest real estate bubble in history continues to deflate. (New York, Boston, Washington D.C., Miami, Los Angeles, San Francisco and San Diego will be hit the hardest – with McMansions and commercial real estate leading the way). Seventeen percent of mortgages are still seriously underwater. And in some States like Nevada the figure is closer to 38%. And as the economic situation worsens, these figures will only escalate again higher than before. Millions will be left owning homes that are worth less than the money they owe on them. And they will begin to default en-masse. It will be the Home-Shock of the Century!”

Source: http://pro.dentresearch.com/SLAW_BNBPOR/EBNBRA38?email=DANF%40gotlds.com&a=10&o=119376&s=128295&u=2293852&l=345052&r=MC&vid=ocnuMH&g=0&h=true

Why should you listen to Harry Dent?

““This is the most important forecast from the Harvard-educated business strategist and best-selling author who predicted nearly every major boom and bust of the last 25 years. For example…”

In his 1989 book, Our Power to Predict, Harry foretold of the collapse that hit Japan’s stock and real estate markets in 1990.

Then in The Great Boom Ahead, he predicted America’s completely unanticipated boom at the end of the 20th century.

In February of 2000 — at the exact moment the tech bubble peaked — he released an alert to his readers, warning them to get out of Internet stocks.

Almost six years later, in late 2005/early 2006, he warned that the U.S. housing market was nearing its peak.

Finally, in 2011 — months before the euro zone crisis began — he sounded the alarm of the coming European fiscal nightmare.

Each time, the “experts” said he was wrong. Each time, he was exactly right.”

Source: https://research.economyandmarkets.com/X195Q806?gclid=CIjCltjWzsgCFcERHwodZ5gHRQ

Is it 2008 again?

2008

In an earlier blog I talked about the reverse mortgage that I helped my mother obtain back in 2008.

She wasn’t short of cash.

However, when house prices collapsed,  my mom was afraid that further decline was possible.

She wanted to get as much equity out of the house and into cash as precaution.

At that time she was able to obtain a reverse mortgage because there was no Financial Assessment litmus yet.

It’s important to note however that today my mother might not qualify for that same loan.

So the question is:

question

In today’s economic environment would I recommend that my mother sell her house and rent?

Absolutely.

Why?

Let me explain my reasoning. 

We’ve all seen housing prices make a recovery since the lows of 2010. 

In many areas the prices have almost climbed back to the “pre-crash” levels. 

Now remember why housing prices crashed…

They rose to a level that was not supported by the ability of most people in the area to afford the house payment.

So, the prices were unsustainable and the collapse was inevitable.

So now I have to ask…. did I miss something?

  • Did everyone get a massive raise since 2010? (no….)
  • Is everyone now able to afford the same house payment that they defaulted on before? (no…)
  • Are interest rates about to fall (no…they’re already close to zero….)

Housing prices have risen artificially due to market manipulation. Like Harry Dent, I expect the housing market to fall back again very soon.

Now don’t get me wrong, in the long term I’m very pro-homeownership. 

History has shown it to be a good investment and over time (taking in to account the boom and bust periods) you come out ahead owning. 

However the key phrase here is “over time.” 

Back to my Mother’s situation:

In 2008 my sisters and I believed any further eroding of my mother’s equity would take years to regain just to get back to where she already was. 

Why take the chance?

We knew that every penny of that money would be extremely critical to her care if she eventually needed to enter senior care (which she did). 

By getting the equity out we were able to safeguard that we would have the needed resources when the time came. 

Attempting to predict the future is a matter of individual beliefs. 

Some believe that we are at the beginning of a new “up” cycle and the economy, the stock market and home prices are headed to new highs with no pullback in sight.

Others believe that we have just postponed the major collapse and that it’s coming right around the corner.

Either way, if you’re in your 20’s 30’s and even 40’s, there is time to recover from whatever happens.

You might make a decision to move one way, while if you’re 60 or older you might make a decision to move in another direction because there simply is not enough time to make up a loss. 

The links below are several resources that discuss the Rent v. Own question: 

http://www.bloomberg.com/news/articles/2015-07-21/boomers-competing-with-millennials-for-u-s-urban-rental-housing

http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

http://www.getrichslowly.org/blog/2010/01/27/does-renting-make-sense/

http://www.consumerreports.org/cro/news/2015/01/should-you-rent-or-buy-a-home-in-retirement/index.htm
https://blog.personalcapital.com/investing/buy-vs-rent-asking-question-mid-life/

fast cash for homes

Lease Back

Why Do Even the Rich and Famous Need Cash From Their Homes?

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Photos: Burt Reynolds’ Home of 35 Years

From Yahoo News, September 11, 2015 

This article recently ran in the homes section of Yahoo:

“Hollywood legend Burt Reynolds has finally sold the Florida mansion he’d owned since 1980. The buyer, who paid $3.3 million, reportedly says Reynolds will remain there and pay rent.

Or consider:

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Christian de Guigne IV, heir to a fortune made in chemicals who owns a Northern California property that has been in his family for 150 years — and in 2013, he sought to sell it for $100 million.

He had just one little contingency, not counting the stratospheric price tag:

He would live there until he died, whereupon the buyer could move in.

These are just two examples of the rich and famous needing to convert their homes equity into cash in order to maintain a lifestyle they have become accustom to.

Sometimes it just makes sense to rent rather than continue to own.

Even if you have no mortgage payment the cost of owning a home can be overwhelming.

Consider:

  • Property Taxes
  • Maintaining basic homeowner’s insurance
  • Property Maintenance
  • Homeowners Association Dues

Not having to worry about these things can make the prosper of paying rent pretty attractive, right?

For example, consider my own home.

Where I live in Florida, there is no cap on property assessment.

Basic costs are:

  • Florida property tax rates run about 2.5% of assessed property value.
  • There is no cap on property assessment.
  • Homeowners insurance is the highest in the country, meaning a rate of about $1.70 per month per $1,000 in value (what with the hurricanes and all…..)
  • I can be assured that at least once per year, something will break or need to be replaced.

So, what does that all mean when you break it all down into dollars and sense?

Here’s an example of a simple two bedroom condo ($250,000) in North Palm Beach:

home-ownership-costs

Now lets’ assume that there is also a $100,000 mortgage on the property which requires a monthly payment of $600. 

The total monthly expense to live in the unit is now $1,735.

Also, there is $150,000 of equity tied up, illiquid and not doing you any good.

What if you could sell the unit, rent it back for $1,875 per month (so you remain in your home), never worry about mortgage payments, taxes or maintenance again and have all that equity in your pocket where you can use it for whatever you like?

Would liberating all of your equity while remaining in your home make living your life a little easier?

Sale and Lease back was the right solution for Burt…. How about you?

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Lease Back Reverse Mortgages

Keep The Family Gathering Tradition Going

sell-your-home-fast

I’d like to talk to you frankly about a threat that millions of senior Americans and their families are facing today.

It’s a conundrum that threatens to disrupt our American way of life and dismantle the very customs and traditions that weave together the fabric of an American family.

Does your family center on Sunday dinners and holiday gatherings at Grandma’s house?

It’s the place where your entire family assembles.

It is where Uncle Bob subjects everyone to his current views on politics…

…where son Jeff and daughter Mary debate the pros and cons of allowing children access to the latest technologies…

… and where newlywed granddaughter Melissa announces that there will be a new addition to the family in 8 months.

In short, Grandma’s house is the platform where family happens.

Unfortunately for thousands of seniors today, maintaining the ability to provide the family this vital platform is jeopardized due to lack of finances.

Twenty years of economic turmoil began with two stock market collapses, then a great recession, and then ten years of close to zero interest earned on savings accounts has robbed seniors of the golden years they had planned for.

Help is on the way

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If you find yourself among these seniors struggling to maintain your way of life, I have some good news.

You might be living in the solution to your financial issues.

You see…

liberating some of the equity in your home and turning it into cash could provide you the ability to maintain a life that you love.

Reverse Mortgages Work

Government-ok-reverse-mortgage

Believe it or not, sometimes (not very often, but every once in a while….) Uncle Sam actually gets something right… 

Almost 30 years ago, a government insured program was created to help seniors pull out some of the built up equity in their homes through a loan without having to make a monthly payment.

The program is called a “Home Equity Conversion Mortgage” (commonly referred to as a “reverse mortgage”) and since its inception, millions of seniors have used the FHA guaranteed reverse mortgage to maintain their standard of living.

If you’re able to qualify for a reverse mortgage then it is absolutely your 1st option.

As I mentioned in an earlier blog, we don’t originate reverse mortgage loans but we can point you in the right direction.

Is a Reverse Mortgage Your Only Option?

options-reverse-mortgages

Nope.  

In some cases, “It’s Still Your Home” could be the solution.

If you didn’t qualify for a reverse mortgage, chances are that you were advised to just sell your home and move.

I saw this happen regularly during the time I spent in the reverse mortgage industry.

But why should you move?

If the only option available is to sell the house, then why not rent it back after selling to an investor?

Why not stay in your home rather than looking for and renting another?

The title won’t be in your name anymore but It’s Still Your Home’s, and isn’t the main goal to remain in your home by any means possible? With our sale leaseback program, you can.

How Home Sale Leasebacks Work

The process is actually very simple:

  • First, we will come to an agreement on the price of your home and buy it.
  • We then rent your home back to you for as long as you’d like to stay in it.

That’s it, no hidden agenda, no empty promises and no scams. We have an entire program in place to help seniors like you stay in the home that you love.

To best explain the program I invite you to contact me at 800-407-5696 or click the picture below to fill out our contact form.

We’ll have a 10 minute conversation and I can tell you right then if the program will work for you or not.

If you are a candidate for the program, I’ll do everything in my power to help you maintain your American lifestyle by keeping you in your home.

sale leaseback

Lease Back

What is the “It’s Still Your Home” Sale Leaseback Program?

home sale leaseback If you applied for a reverse mortgage and didn’t qualify, chances are you were given the recommendation that you should sell the house and move. I saw this happen over and over during my time in the industry. Then one day I thought, why should you move? If the only option available is to sell the house, then why not sell it to an investor and simply rent it back with a home sale leaseback?  Why not continue to live in your home rather than renting another? Sure, the title is no longer in your name but it’s still your home and isn’t the main goal to remain in your home by any means possible? With that in mind I started to put together the basis for It’s Still Your Home.

How Sale Leaseback Works

It’s actually pretty simple. We buy your house for an agreed upon price and then rent it back to you for as long as you’d like to remain in the home. That’s it. No hidden agenda, no empty promises and no scams.

The Home Sale Leaseback Process

Phone Call

During the initial phone call, we will collect your property details and learn more about your unique situation and requirements.

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After performing a thorough market analysis and including anticipated repairs based on your disclosures, we will provide you with a realistic estimate on the value range of your home. In other words, we will let you know about how much cash you can expect in your pocket if you sell  your home and about how much monthly rent you can expect to pay.

On Location Meeting/Proposal

If the initial value range is acceptable to you, we will schedule an on-location inspection of your home and provide you with a firm offer at that time. There is no obligation to accept our offer.

Review of Offer

At this point, the ball is in your court and you decide what is in your best interest. We encourage you to take as much time as you need to decide on our offer.  We understand this is a significant, possibly life changing experience, and it is your decision to make on your timeline.

Acceptance of Offer

If you agree to our offer, we’ll arrange a cash transaction and open up escrow & title to complete the purchase based on your time requirements. There are no hidden fees or costs involved. We pay all closing costs. What we offer you is what you get, and nothing less. At the same time, we will both sign a lease contract assuring that you will not experience any interruption in your ability to stay in your home.

What Happens Next?

With the equity from your home now liberated and in your pocket, hopefully the transition from property owner to renter has changed your life to one with freedom from financial worries. Imagine no longer being worried that the property tax bill is due or that a major and expensive repair such as a new roof is needed. Imagine the freedom to once again do the things you love, the things you might have stopped doing because you could no longer afford to do them. Now with the cash from the home, hopefully you can have the life that you deserve.   To find out if the It’s Still Your Home sale leaseback program is the right solution for you, give me a call at 800-407-5696 or click the picture below to fill out a form. Let’s talk about your goals. sale leaseback