Sarasota Short Sale seminars a success!

The Short Sale seminars I hosted this week, on behalf of Prudential Palms Realty, went extremely well. The attendees were a diverse cross-section of the local community in deed.
We had people in trouble with their main and only residence, people who’d never heard the term “short sale”, others who are struggling with second properties, investors sitting on multiple assets, and even one gentleman who came to “buy up a couple of short sales”!
The main speaker was John Rigg of Save our Homes from Foreclosure, LLC. Also in attendance to answer questions were Matt Plummer of Blalock & Walters, Attorneys at Law, www.blalockwalters.com and Larry Geimer of Kerkering Barberio & Co., P.A., CPAs, www.kbgrp.com.

Several informative handouts were distributed including;
1. Florida Foreclosure Law – a description of the foreclosure process
2. Mortgage Forgiveness Debt Relief Act – from the IRS website
3. Fannie Mae Announcement 08-16, June 25th 2008 – Bankruptcy, Foreclosure, and Conversion of Principle Residence Policy Changes; and Revised Property. Value Representation and Warranty Requirements
4. Fannie warns homeowners who walk away

Email me here to receive a copy of any of the above.

John started by explaining the 4 main options possibly available to anyone who has a property on which they owe more than its current value when they find themselves unable, or unwilling, to continue making the loan repayments or make up the deficit from other sources. These options relate purely to the property in question; bankruptcy and other extreme measures are best discussed with an appropriate professional advisor and were not explored by the seminars.
These 4 options are;
a. Loan Modification. The HOPE NOW and Project Lifeline programs announced by the banking industry as part of the Federal bailout plan introduce the concept of loan modification. The programs allow for reductions in principal (to 80% of the property’s new market value) and/or interest rates and/or increases in loan term time in order to help homeowners. Of course this option is only available if the homeowner can afford the new terms. It is expected that Freddie Mac and Fannie Mae will be issuing guidelines in the next couple of weeks as to how much a borrower will be allowed to borrow in relation to their income. In reality lenders are happy to lower interest rates and increase term times but not so keen to reduce principal balances. This means that the homeowner will probably not make any saving in the long run and will still be “underwater” on their home.
b. Foreclosure; Deficiency judgments will be filed. They can be enforced for up to 4 years and, even then, they can be extended, all the while accumulating interest and penalties. Lenders do not like foreclosures; it costs them $50K – 70K per property and the value of an abandoned property plummets almost immediately, dragging down the neighborhood with it.
c. Deed in Lieu of Foreclosure; The homeowner voluntarily hands the keys back to the lender(s) who will normally write off the deficit in return for the saved legal expenses.
d. Short Sale; The homeowner finds a buyer for the property at current market value, or close to it. The lender(s) agree to write-off any deficit. Evidence of hardship is usually required but lenders have agreed to Short Sales even when the homeowner has substantial sums in accounts at the lenders own bank. No deficiency judgments are issued although, in some cases, the homeowner will be asked to sign a promissory note for a fraction of the deficit at a very favorable rate of interest – all of which are negotiable. Currently there are no official guidelines in place to calculate exactly what percentage of outstanding debt and/or fair market value the lender will accept as a short sale offer.

Many interesting discussion points came up during the seminars. I plan to spend some time doing some further research before posting the Q&A section of this write-up. Please check back in a couple of days.