Surviving Financial Hardship

After the Real Estate bubble in the Washington, D.C. Area in 2004 and 2005 many homeowners found themselves upside-down in their properties. Since that time we've been working with Sellers who are in financial hardship, helping them find the best possible solution to what can seem like an insurmountable problem.

Many of the people we have worked with have had family illness, loss of income or employment, job transfer, marital difficulties, or other financial difficulty that is completely beyond their control. If you find yourself in one of these situations, you will have questions. Don't worry, we have answers. 

Listed below are a few common Foreclosure Alternatives that our clients have chosen based on their specific circumstances:

• Loan Modification - Lender agrees to modify the terms of the loan (either temporarily or permanently) in order to allow the owner to continue making payments during a financial hardship
• Short Sale - a Seller is able to negotiate with their Mortgage Lender to sell their home for less than the amount they currently owe
• Deed in Lieu of Foreclosure - The bank regains ownership of the property with a decreased effect on credit
• Foreclosure - when the bank takes ownership of the property due to the Owner's failure to make payments (this should be a LAST RESORT)

These options may or may not be available depending on your specific situation. If you are encountering financial hardship and would like a bit of guidance, let us know. We offer 1 hour free, no obligation consultations to all of our potential clients.

**NOTE**Any of the options listed above can have tax and or credit implications. Preferred Realty Partners is a Real Estate team, we are not CPA's or Credit Counselors, nor are we attorneys. If you feel you need advice from an attorney, accountant or credit counselor please contact them directly to discuss your unique situation.

Short Sales and the MDRA of 2007

If you are a homeowner who bought your Northern Virginia house in 2004-2006 you may be significantly upside-down in the value of your home. Meaning that the full amount owed on your mortgage, may be higher than the current fair market value of the home.

The Mortgage Debt Relief Act of 2007 made it generally possible for taxpayers to exclude the deficiency (amount still owed after negotiating for a short-sale) from their taxable income when filing their taxes in the years 2007-2012. There is a lot more information available regarding this act from the IRS, who frankly know a lot more about it than we do. The most important thing for Virginia Consumers to note, is that if you are thinking about a short-sale you probably shouldn't sit on the idea for too long. Most short-sales take more than 4 months to negotiate, and there is not a lot of inventory on the market right now...so homes are selling quickly!

If you are a buyer looking at short-sales, please pay close attention to the time frame given by the listing agent. If we tell you it will likely take 4 months, we mean it. Sometimes a short-sale can be approved in 3 months, but typically it is longer.

Should you have any questions about Real Estate, please submit an inquiry to our website. We would be happy to answer any questions you have!

I'll leave you with some photos of our latest Reston Virginia listing, which was under contract in just a few days! Email us for more information about this property as well.

Handlebar Road - Gorgeous Rambler with Mature trees

Fully enclosed Sunroom with fabulous view of the tree lined backyard

 Photos Courtesy of Dan McCutcheon

Are Short Sales a better Deal?

Honestly? The answer is "maybe".
A short sale can be a fantastic deal. Some are in need of repairs, and some are in beautiful condition. The important thing to remember is just because a home is a short-sale, that doesn't mean the bank(s) will take ANY offer, even if the Seller will. Take for example this fabulous townhouse we have listed for sale in Chantilly Virginia.

This three bedroom two bath townhouse is currently listed for $355K, a great price on this size townhouse in South Riding. The issue? It's a short-sale which means any buyer who submits an offer has to understand that there will be a negotiation period of at least 3, possibly 6 months to obtain approval from both the first and second trust. They also need to understand that just because the Seller agrees to the terms of their offer, doesn't mean the bank is required to.

We have already received several calls from agents asking if they could offer $20K below list price, one with a cash buyer who was certain that would make all the difference to the bank. Any contract on a short-sale home is subject to third party approval, and the 3rd party doesn't see Cash as any more appealing than an FHA loan or a VA loan. Truthfully, the bank/investor couldn't care less where your money is coming from. They care about two things.

First - they want  to mitigate their losses. This means THEY WILL NOT TAKE JUST ANY OFFER THAT YOU PUT IN FRONT OF THEM. They are going to do the research. Before they agree to accept your offer they will have a local realtor or appraiser who is a neutral third party give them a value for the property. Let's face it, they're losing a LOT of money. Often in the 100 thousands. In many cases recently the bank actually comes back and asks the buyer for MORE than they originally offered.

Second - they care that you aren't doing anything fraudulent. They don't want you to buy the house for your cousin or your sister and let them rent it back from you at a lower cost because well, frankly that's unethical. They will likely require you to sign a statement saying that you are not in any way related to or affiliated with the Seller and that you do not intend to let them remain in the property after settlement.

This doesn't mean that you can't negotiate. But if you are a short-sale buyer, be cautious about looking at the top of your price range because you could end up waiting for 6 months only to find out that they will sell the property to you, but only if you are willing to pay another $15K that you may not have. So if the listing agent tells you you need to be "committed" to this offer and you need to be "reasonable with the market value" they aren't trying to gouge you, they're just trying to avoid months of stress for themselves, their seller and you that ends up being fruitless.