foreclosure | Team Reba Real Estate

Earlier this week a couple of days were spent sitting on less than comfortable chairs in the local Renton Holiday Inn just off of Grady Way. Why were we willing to spend numerous hours of butt-numbing time in a jam-packed meeting room? For the benefit of getting the Certified Distressed Property Expert designation.

All of us at Team Reba have been working in the realm of short sales for many months and years so the large influx of short sale and distressed homeowner status is not new to us, but this designation is and it’s one of the fastest growing designations in the USA. With default rates climbing along with the unemployment rate (thankfully not in direct relation) it’s worth it to know the proper way to handle a short sale if a client needs assistance in doing it to close on a sale of a property that they can no longer afford.

In many cases a short sale can be better than a foreclosure or deed-in-lieu of foreclosure, as I’ve mentioned in prior posts. Plus there are other good reasons not to allow a foreclosure to be completed on the courthouse steps – and that is the long term employment picture. The 2 biggest reasons that someone loses their home, or the ability to keep paying at the same level, is because of either job loss or medical bills – or both of them combined. If unemployment is the reason then the last thing you’ll want to add to this is a foreclosure since many companies do credit checks prior to hiring new employees. A short sale is not reported in the same manner as a foreclosure and the timeline of impact on a credit report is much shorter in time. Foreclosures can show up on a credit report from 7 to 10 years later. For people whose jobs include security clearances or access to financial records, a foreclosure can mean the loss of a job or of position.

If you are a homeowner who is getting behind on payments and you don’t qualify for a loan modification program, please contact us to see if perhaps we can help you with your situation.

If you’re a buyer who wants to look at purchasing short sale, foreclosure, or bank owned homes it helps to work with an agent who understands the way these specialized sales work, including the potential pitfalls and delays that may occur.

We’ve got experience on both ends of the spectrum and can provide excellent guidance throughout the process.

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A recent post on Zillow has many people commenting on this topic. I did too but because Zillow limits you to 2000 characters or less, I’m going to flesh out my answer here on our site. For those readers who don’t know yet, a short sale is a real estate transaction where the house being sold has more debt against it than what it is being sold for. Therefore, the house is selling for short what is owed.

There is no one, single best answer for everyone. Typically a short sale has less effect on your credit score than “deed in lieu” or foreclosure but not all short sales are successful and they often depend on the between what is owed and what someone’s trying to pay for the property – as well as whether additional liens are posted against the property. Appraisals can also derail a sale if the appraisal comes in above what is being offered and the bank won’t budge. For them, depending on their financial evaluation of what they’ll eventually lose when comparing the short sale acceptance over a BPO (broker price opinion) that states the house is worth more, might lead them to not close the deal and force the foreclosure. It’s really necessary to sort out why the person is in default and then start looking for what will be the best remedy. If the seller has other assets other than the house, it might be harder to get a short sale approved. Bankruptcy for some is an option, but also can cause some issues that are long term like foreclosure.

For some people it is detrimental to their job to go the route of foreclosure, many companies do credit checks on potential employees and it could limit someone’s future employment opportunities to go this route. Other people can lose an existing job because of foreclosure; such as bank employees, jobs that require security clearances, and other financial services employees.

Loss mitigation departments are typically separate from foreclosure and even short sale departments. Each tends to be its own silo within a bank and often are in different states. Welcome to the world of call centers. We’ve been working with many short sales in our area and it is imperative that people understand what is needed to get the bank’s attention. When the financial storm hit the banks laid off employees, so staffing is short. Then the banks got hit again with the recent refinancing wave with not enough staff to handle it, and now the short sale and foreclosure waves are hitting. Working these kinds of deals requires a lot of patience and due diligence on the part of the seller, buyer, and agents (or others) involved.

An attorney and an accountant should be consulted. In some states there are taxes due on the forgiven debt, even if the IRS has the debt relief act in place for national taxes and extended it through 2012. WA State just had their REET (real estate excise tax) on debt forgiveness removed for this year with the Dept of Revenue (DOR) only just making the change last month. It will likely be reviewed annually.

Bottom line, be sure you’re working with someone who understands and can navigate the process.

Team Reba Real Estate

Seattle real estate and related wealth management topics

Category Archives: foreclosure

Team Reba’s No Fluff level 1 home buying class in Seattle, January 21st 10am-12pm!

Team Reba REO Squad coming to local neighborhoods soon

Team Reba adds Certified Distressed Property Expert designations to its ranks

People are asking if short sales are better than foreclosure or deed-in-lieu of foreclosure

Great Bloomberg video on how to avoid foreclosure

Thanks to Jonathan Jarvis for this “Crisis of Credit” vimeo

March 2009 newsletter from Team Reba is hot off the presses…

Distressed Property Consultant law gets modified…. finally!

A small bit of good news for homeowners selling in short sale position

Are we getting the whole story about this condo purchase gone bad?