SHORT SALES & FORECLOSURES:

1-800-669-6087 – Consumer help Line for consumers with a CountryWide loan. You do not have to be delinquent to call.

It has been told to me that a Deed in Lieu (owner walks away from property voluntarily) is worse than a short sale. A short sale shows not paid in full whereas a Deed in Lieu shows as a foreclosure.

In a short sale situation the bank will look closely at cash out refi’s in the last 18 months and will probably ask tougher questions about those.

The bank may ask for an unsecured promissory note. These typically carry no interest and you are supposed to be able to negotiate the due dates for these payments.

Countrywide does not offer a workout package in advance. Some lenders do allow you to do some of the work in advance and provide you with their list of needed items. This is what a “workout package is.”

Once an offer is received we will need to prepare a package to send with the offer. This package must include: (The first four items are things you must provide)

1) A Hardship letter – You write this. Short and sweet with the main reasons you can no longer pay the note as agreed. Best answers are health, job relocation, job loss etc.

2) Pay stubs and/or a couple months Bank statements – if you are self employed these need to be business and personal

3) A list of all monthly expenses you have on the property with the name and address as well as account number of who you pay. Include all utilities/ service people you use to keep the property running.

4) Authorization Letter for Title/Escrow and Realtor to talk to the bank directly

5) The Estimated Closing Statement from Escrow (HUD1)

6) A Copy Of the listing


Time Frame for acceptance of a Short Sale offer:

3-5 Business days to be assigned to a negotiator
8-14 days total for acceptance or counter offer


OTHER CONSIDERATIONS:

If there is a second loan on the property a release letter from the junior lien holder must be received before the first lender can close the deal. Communication with both lenders is vital.

If the property is already part of a bankruptcy proceeding the lenders cannot do anything.

A lender may issue a 1099 to you for the portion of the money that they did not get repaid after the sale of the property. This is because the portion you did not pay back is considered debt forgiveness by the IRS. It may be a good idea to specifically ask the lender not to issue a 1099 against you for their loss. There is currently a movement to have the debt forgiven if a seller loses their primary home this way. However, as of 1/2008 I was informed by a CPA that this does not included investment property or second homes. Please check with your tax professional to see how this affects your personal tax situation.

Most importantly ask for help from your lender. Faced with many cases these days lenders are offering to adjust terms, put you in new loan programs or delay payments if you need temporary relief. If there is no chance in sight that you will be able to pay these obligations a short sale is probably your best alternative to make the most of the situation. Please call an experienced Realtor to help you with this.

As always, everyone has different circumstances. It is vitally important that you discuss your options with your tax and legal advisors. This document is a general overview of the process and does not substitute for the advice of your attorney or tax preparer.