Short Payoff vs. NJ Short Sale: Which is Right for You?

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Understanding Short Payoff

 At Veitengruber Law we strive to help our clients in individualistic ways. When referring to New Jersey law and short payoff there are requirements that we can help you more easily navigate with the lender. In a situation where a short payoff might be a better financial solution for you than a NJ short sale, here is some preliminary information that will be helpful.

 

Short Payoff is a newer, alternative option for the borrower to consider when facing a foreclosure. This involves the option for the borrower to keep the property and pay back the lender at a reduced amount, especially if the homeowner owes more than what the property is currently worth. This could be the ideal answer if the borrower is NOT having trouble with mortgage payments.

 

Not all lenders will be willing to work with this option however, and as mentioned before, Veitengruber Law can help you in navigating key requirements.

 

Short Sale Basics

 

A short payoff should not be confused with a short sale. A short sale would inevitably involve you losing your home but you would also be able to avoid foreclosure. The process of a short sale and New Jersey law involves selling the property to a third party at a price that is less than the amount the homeowner owes on their mortgage. This option also involves the lender agreeing to the sale price as satisfying the homeowner’s debt. For example: the home is valued at $250,000 and the homeowner finds a buyer for $200,000; the lender must then agree to the price of $200,000 and release the mortgage despite being “short” of what was originally owed, thus resulting in a short sale. The homeowner must also be able to show that the market value of the home was decreased.

 

This is generally the right solution if a homeowner is having trouble making the monthly mortgage payments on time or at all, because continuing along this path usually leads to default, which then leads to foreclosure.

 

Short Payoff Key Requirements

 

There are clear criteria you must meet in order for a lender to consider a short payoff as a means to resolving your debt. You would be required to pay off the debt in a single payment because there are no payment plans. This would also entail you being able to acquire the funds with respect to your damaged credit, which often involves another person becoming involved who is not a borrower on the loan. On the flipside, if you have good credit, a short payoff can be beneficial if you are simply looking for an option allowing you to move away from the property.  This may require establishing a substantial market value decrease while also being able to show a proper income and excellent credit. Short payoff also requires the completion of an application similar to a short sale or modification instead of facing foreclosure.

 

 

How Do I Decide?

 

Now the question is ultimately:  Short Payoff or. Short Sale?  How do you decide which is the best option for you?  A short payoff would likely leave you with little negative affect to your credit while getting rid of the property.  A short sale would be ideal if you are behind or will begin to be behind on mortgage payments, in order to avoid foreclosure.

 

Veitengruber Law can help you navigate with lenders and New Jersey law regarding both options. We pride ourselves on offering a thorough FREE holistic debt relief evaluation to get you started on the right answer for your situation.

 

 

 

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Short Sale vs Foreclosure: The Facts

When trying to decide between a short sale and foreclosure, sometimes it’s easier for homeowners to just throw in the towel and let the agent do the work. It is important to seek legal advice from a professional before making a decision, but allowing the bank to have complete control may not be the wisest decision. By becoming more informed about short sale vs. foreclosure, you will be able to make a more confident and educated decision regarding your home.

Process of Foreclosure

A foreclosure occurs when a lender takes ownership of the property and removes the borrower. This occurs when the borrower cannot make the mortgage payments on a consistent basis. Foreclosures can be done through a real estate agent or sold at an auction. The lender can then sell the foreclosed property and collect and recover the unpaid mortgage balance.

This process begins when the lender doesn’t make the mortgage payment for three to six months. The lender will notify the borrower of foreclosure and the reinstatement period, which allows the borrower time to resolve any disputes. The mortgage balance then needs to be paid off within three months, and if not, a notice of sale will be given to the homeowner.

Process of Short Sale

A short sale can be used as an alternative to a foreclosure because it bypasses the extra costs and fees for both parties involved, but it does require a large amount of paperwork. A short sale occurs when the homeowner cannot make mortgage payments and owes more than the current market value of the property. Lenders are often hesitant to accept short sale offers because the proceeds from selling the house often equate to less than the mortgage payment, which is known as a deficiency. Homeowners may still be obligated to pay these deficiencies even after a short sale agreement. The homeowner will put the house on the market and if he or she receives an offer, the bank also needs to approve it. The short sale process can take three to six months to closer. If a homeowner is experiencing hardship such as divorce, unemployment, family death, or job relocation, banks will be more likely to approve a short sale.

Effects on Credit Rating

Unfortunately, foreclosures can cause the borrower’s credit rating to decrease by 200 to 400 points and will remain on the report for seven years. On the other hand, short sale usually only causes a credit rating to fall 50 to 130 points and a credit report will state that the short sale was “settled,” “paid as agreed,” or “paid in less than full.”

Future Homeownership

After a home foreclosure, an individual can buy a house in five years with some restrictions, or in seven years with no restrictions. After a short sale, an individual may be able to buy a home immediately and the lender will not require the loan to be paid back.

Purchasing a Foreclosed or Short Sale Home

Typically, short sales home are better to buy than a foreclosed home because the property has been inhabited. The house and utilities have been maintained, but short sales can take a large amount of time to close. On the other hand, buying a foreclosed house is usually quicker and they are sold at lower prices.

For more info, whether you’re thinking about selling or buying a short sale/foreclosure, visit: https://www.veitengruberlaw.com/Real-Estate-Transactions/

              

What is the Best Foreclosure Alternative?

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Veitengruber Law spends a lot of time helping our clients stay in their homes. We work tirelessly on foreclosure defense matters, and we’ve saved countless properties from being sold at Sheriff’s Sale. Since we do focus much of our attention on keeping homeowners out of foreclosure, you may be wondering why.

In other words: if we dedicate so much of our time to avoiding foreclosure – it must be a pretty darn undesirable outcome, right? Foreclosure is right for some people, but many people have gotten themselves into an unfortunate financial jam and would like to get out of it without losing their home in the process.

What is the BEST ‘foreclosure alternative’?

When we are helping a client avoid foreclosure, it’s for one of several reasons:

  1. The homeowner doesn’t want to lose their home;
  2. The homeowner doesn’t want a foreclosure on their credit report;
  3. The homeowner wants to avoid a deficiency judgement.

Therefore, the best foreclosure alternative depends on the desired outcome for each individual client. If you are in danger of losing your home to foreclosure but you really want to keep your home, Veitengruber Law can help you negotiate with your lender to get you approved for a loan modification or refinance. In doing so, we are often able to bring monthly payments low enough for our clients to manage, allowing them to bring their mortgages current and continue living in their homes.

Another way to avoid losing your home to foreclosure is to file for bankruptcy. In doing so, your bankruptcy case will engage an automatic stay. An automatic stay is an injunction that prohibits any of your creditors from collecting or attempting to collect any money from you until such time as your bankruptcy case has been officially settled. The automatic stay also stops any foreclosure action dead in its tracks, giving you and your foreclosure defense attorney time to determine the best course of action regarding your home.

If you don’t want to or wouldn’t qualify for bankruptcy, you would very likely be approved for a loan modification as mentioned above. Getting approved for a loan modification or mortgage refinance would keep a foreclosure and/or bankruptcy from appearing on your credit report

For the homeowner who is ok with the sale of their home, but would really like to avoid the credit score damage inflicted by a foreclosure, selling via short sale may be the answer. A short sale involves getting permission from your lender to sell your home for less than the amount left on your mortgage.

Short sales are great finds for buyers, but why would a bank agree to accept (often significantly) less than what they are owed? The answer is simple: a short sale is the lesser of two evils. Lenders will almost always receive (a lot) more money for a property that is sold through a short sale rather than a foreclosure sale (Sheriff’s Sale).

In addition, if you can find a buyer for your home in a short sale scenario, your lender is much less likely to file a deficiency judgement against you. In a foreclosure, a deficiency judgement can be obtained by a creditor (your bank or lender) for the difference between the sale price and how much you still owed on your mortgage.

Theoretically, lenders can also petition the court for a short sale deficiency judgement, but the reality is that they often don’t pursue one because they’ve received more money than they would’ve if the property had been sold at Sheriff’s Sale. Also, many lenders want to stay in the good graces of their customers, and chasing down already distressed homeowners after a short sale has repaid a significant portion of the debt simply isn’t good for business.

The bottom line is that if you’re looking for a foreclosure alternative, there are a wide variety of potential solutions. Veitengruber Law has seen it all, and we can help you determine the best fix for you and your home.

Image credit: Nicholas Cardot

My Home has a Short Sale Offer; Can the Bank Still Foreclose?

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Making your way through the short sale process can be a long and tedious operation, but seeing the light at the end of the tunnel is incentive enough for most people to soldier on. How frustrating, then, to discover that your bank went ahead with foreclosure, even while you were negotiating (with the bank) for the sale of your home via short sale.

It’s true: even if your home is in short sale negotiations and has a solid offer on the table, your lender can still move forward with the foreclosure process. Naturally, the big question here is: Why would they do that? After all, there is generally a lot less paperwork involved in a short sale vs a foreclosure, and the bank will likely make more money, too. Bonus: no court involvement.

The short answer is that there are several reasons why this situation may present itself. Often, even if a lender approves a home for short sale, they still keep the foreclosure process moving forward in order to keep pressure on the seller. Sometimes, short sales repeatedly fall through, in which case the bank can simply say they’ve waited long enough, and – BAM – foreclosure.

Another reason this happens in big banks is a lack of communication between its thousands of employees. Larger lenders have offices all around the country, with departments and sub-departments at each location. While it would seem like a good idea to keep communication lines open – the reality is that many times the short sale department doesn’t talk to the foreclosure department and your property can simply slip through the cracks.

Many sellers hit the panic button when they receive news that their home has been foreclosed upon when they are so close to selling it via short sale. Luckily, as long as you are working with a competent attorney who is familiar with both short sales and foreclosures, your short sale will usually still be able to go through.

Fact: Even if your lender officially forecloses on your home, it still needs to be sold to someone in order for them to make any money. Experienced listing agents and attorneys will be able to talk to the right branches of a large lending corporation in order to postpone the foreclosure sale date (aka Sheriff’s Sale). As long as they know you are in negotiations with a qualified buyer, most lenders will put off the Sheriff’s Sale long enough for the short sale to take place.

The short sale process is one of the most complicated in all of real estate. It is more than likely that you will hit many bumps along your route to seeing your house sold through short sale, but for those who persist, it can happen. If your short sale end game looks significantly better than a foreclosure, the lesson you should heed is: “If at first you don’t succeed – try, try again.” – T.H. Palmer.

Image credit: Mike Licht

Avoiding the Short Sale Deficiency: What are My Options?

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If you’re living in a home with zero or negative equity and falling farther and farther behind on your mortgage payments, you may have considered or already applied for a short sale. When approved, a short sale allows the homeowner to sell a home for less than they currently owe the lender.

Oftentimes, lenders will ‘forgive’ this discrepancy amount, for several reasons. Big-name, well-known lenders usually want to maintain a good relationship and reputation with borrowers, and a short sale allows them to recover at least some of the money owed.

However, there are times (lenders) who refuse to forgive the deficiency amount and will sue the homeowner (who becomes the seller) for the difference between how much the home sold for and how much was still owed on the original mortgage.

If you are experiencing a lender who won’t forgive your short sale deficiency, and you have no way of paying said deficiency, it should be noted that going forward with the short sale is not your best option.

What, then, are your best options, you ask?

First and foremost, we would ask if there is any possibility of a loan modification making enough of a difference for you to be able to catch up on late payments. A real estate attorney will be able to negotiate with your lender to work out the modification details, if the numbers crunch just right.

If a loan modification isn’t able to budge the numbers enough to make it a real possibility for you to stay in the home, consider applying for a deed in lieu of foreclosure. Avoiding foreclosure in this way allows you to approach the lender rather than vice versa, and also avoids a Sheriff’s Sale of your home, which can be embarrassing.

For homeowners who get turned down for a ‘deed in lieu,’ the path that makes the most sense would be to file for Chapter 7 bankruptcy. Naturally, we cannot know if you would meet all of the necessary qualifications for a NJ Chapter 7 bankruptcy without having a look at all of your finances.

In a situation like this, it is in your best interest to meet up with a bankruptcy/real estate attorney in New Jersey who has experienced a lot of success pulling through for his/her clients.

Some important pieces of information to bring with you to your FREE consultation with your NJ bankruptcy lawyer include:

  • How much total (unsecured and secured) debt do you currently have? Bring as many credit card statements, auto loan invoices, mortgage paperwork, utility bills, etc as possible with you to your first meeting with your attorney.
  • Proof of any tax debt;
  • Your current and recent total income and expenses;
  • A list of your exempt and non-exempt assets;
  • Your credit score. Come with the most recent copy of your credit report, if possible. We realize your score will be low, but we want to have a starting point we can look back on as we work to get your score moving upward!

Second in importance to working with the right bankruptcy attorney is to GET INFORMED. Read all you can about your options, including:

We have a plethora of other helpful information that will aide you in getting prepared for your attorney consultation. Please visit our blog at your leisure. Like and follow us on Facebook to get real time updates on the successes we experience for our current clients. You can become our next success story!

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Parents Facing Foreclosure: How Adult Children can Help

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Many older Americans are really struggling financially. Some are forced to keep working well past their desired retirement age, while others retire only to discover that money is much tighter than they realized it would be.

Sometimes, older homeowners who find themselves under water are lucky enough to have adult children who are anxious to do whatever they can to assist their parents. The question then, is: what can be done?

If your aging parents are having a lot of money trouble – so much so that they are having trouble paying their mortgage and utility bills – you undoubtedly want to help. If you could snap your fingers and make all of their money woes disappear, you would. But what is the reality of a situation like this?

If your parents’ home is put up for sale as a short sale, you will have a really hard time being approved to buy the home “back” for them simply because you are not what is considered an “arms length” buyer. In other words, short sale transactions are structured so that no buyer has an advantage over another buyer.

An option that may be a reality if your parents are not paying their mortgage is foreclosure. However, if their home goes into foreclosure and is sold at Sheriff’s Sale, you’d be taking a gamble at being able to buy it back for them (you’d need to have cash on hand and the ability to out-bid other interested parties.

It may be wise for you to help your parents find a reliable attorney who can walk them through filing for bankruptcy. A NJ bankruptcy attorney will be able to ensure that the right type of bankruptcy is filed for your parents’ specific financial situation. They may be able to keep at least some of the equity (if there is any) in their home by using federal bankruptcy exemptions.

Your parents may also qualify for a Chapter 13 bankruptcy, in which their debt would be restructured so that it is more manageable for them, keeping them in their current home with new, lower mortgage payments.

Another solution would be to help your parents (with the assistance of an attorney) apply for a loan modification without filing for bankruptcy. If they are able to pay for most of their other monthly necessities, like utilities, food, insurance and medication, modifying the terms of their mortgage may be all that is needed.

The absolute, #1 answer to this problem is for you to personally bring their mortgage current, if you have it in your power to do so. This will ensure that your parents stay in the home while you decide with them which path is the best option for them to be able to continue making the payments after the dust settles.

Remember that it is always in your (and your parents’) best interest to work with a qualified attorney on matters as important as keeping their home. Ask about a free consultation meeting with a local bankruptcy and loan modification lawyer, and keep in mind that investing in their professional assistance will be worth it when you get the end result that keeps your parents at home.

Image credit: J.B. Hill