Zero Down Home Loans are Back in Minnesota!

Yes, you can buy a house for Zero Down in Minnesota!

My loan officer Chad found a

Zero Down home mortgage loan.

Interest rates are Fixed between

5 and 6% for 30 years.

House payments are

Cheaper then Rent

It never hurts to call to see if you

Qualify to buy house or town home.

Just let me know

What city you want to live in?

How many bedrooms you want?

And if you want a house or a town home?

You can call Chad or I can have him give you a call.

Call Jay with Direct Realty

 

 

http://www.ForeclosureFirstCallForHelp.com <http://www.foreclosurefirstcallforhelp.com/>612-965-0937

Serving the Twin Cities Metro Area

Your New Home is Waiting!

Before You Buy a Minnesota Short Sale

There are a few things you should consider before you buy your next home in Minnesota at short sale pricing. 

Hire an agent with short sale experience. It’s one strike against you if the listing agent has never handled a short sale, but it’s even worse if your own agent has no experience in that arena. You need an experienced short sale agent. 

 An agent with experience in short sales will help to expedite your transaction and protect your interests. You don’t want to miss any important detail due to inexperience or find out your transaction is not going to close on time because no one has followed up in a timely manner.A lender is not going to agree to a short sale unless the seller has no equity and is unable to repay the difference between your sales price and the existing loans. Sellers need to provide a hardship letter to the lender. Sellers may also owe taxes on the amount of debt that is forgiven.

 A seller I know once demanded that the buyer slip the seller $1,000 to be given the right to purchase the seller’s property. We said no. This is fraud. The lender legally pursued that seller. Do not be lured by sellers who suggest this practice. In a short sale, the seller receives no money because the lender is losing money. 

Once the seller has accepted your offer, send it to the lender for approval. You do not have a deal until the lender accepts. Also, send the lender a copy of your earnest money deposit. Do not be astonished if the lender asks you to increase it. 

In addition, the lender will want to see that you have your own loan available and you are preapproved. Send a preapproval letter to the lender. It will help if your agent sends a list of comparable sales that support the price you are offering to pay for the home. 

Make your offer contingent upon the lender’s acceptance. Give the lender a time frame in which to respond, after which, you will be free to cancel. If the lender is under no pressure to make a decision, the paperwork will sit on an underling’s desk. 

Some lenders submit short sales to committee, but most can make a decision within two to three weeks, providing you have submitted the offer to the individual in decision-making capacity. Get a name and phone number for the appropriate contact at the lender. Don’t send an offer blindly to a department. 

Regardless of the commission the seller has agreed to pay, the lender is actually the entity paying the commission. The reason is the seller is not receiving any money with which to pay a commission. Since the lender is losing money, the lender will likely negotiate the commission directly with the listing broker, who will then share the commission with your agent. 

If you have signed a buyer’s broker agreement with your agent, ask if the agent will waive the difference due or you might have to pay it out of your pocket. Some brokers feel it is unfair to penalize the agent, but the lender is calling the shots.

Generally, the lender will not pay for customary items that a seller would pay. These include home protection plans for the buyer, buyer credits of any kind and pest / termite inspections. A buyer will be asked to purchase the property “as is,” which means no repairs.

It is extremely important that a buyer obtain a home inspection and pay for other types of inspections such as pest, roof, sewers, septic tanks, chimney or fireplace inspections. Do not waive your right to obtain these inspections and make your offer contingent on approving them.The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at http://www.foreclosurefirstcallforhelp.com/ for more information.

Factors that Affect Your Credit Score

There are several factors that can influence your credit score for Minnesota residants.

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

 First: Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.

 Second: How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.

 Third: The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.

 Fourth: How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

 Fifth: The types of credit you use. Generally, it’s desirable to have more than one type of credit – installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit http://www.myfico.com <http://www.myfico.com/CreditEducation/?fire=1/tnew&gt;.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at www.ForeclosureFirstCallForHelp.com for more information.

Foreclosure and Short Sale Taxes for Minnesota Sellers

 Home Sellers in Minnesota that do not get signed releases from their bank might owe the IRS tax money. 

 The IRS says there is no free lunch. If you transfer title on your home, whether voluntarily through a warranty deed or grant deed, or involuntarily through foreclosure, you have sold your home. You might be subject to taxes, even if you sold your home at a loss, either on a short sale or by foreclosure.It doesn’t seem fair. What’s worse is you might not even find out that you owe taxes until the day you open your mail to find a 1099.

 On average sellers who have owned their personal residences for lengthy periods still will realize gains. But sellers of residences acquired within the past two years or so are going to incur losses. Even assuming no price declines, losses will result because of expenses for real estate brokers, lawyers and the like. Sellers will not be able to deduct those losses. It makes no difference that they are forced to sell because of, for instance, job changes or health reasons.

Besides problems for sellers of personal residences, there are tax troubles for investors who, say, bought several condos in places like Florida and are unable to flip them because prospective buyers are waiting for further price declines. Often, it is not worthwhile for those investors to rent their places; what they receive as rent payments will be insufficient to cover their real estate taxes and mortgage interest. Their only option is to sell at a loss.

It is possible for sellers can offset their capital losses against capital gains. But in the absence of capital gains, the yearly cap is $3,000 ($1,500 for married couples filing separately) on the amount of losses they can offset against their “ordinary income,” meaning income from sources like salaries, pensions and withdrawals from retirement plans. The law allows them to carry forward unused losses to later years.The IRS has tax rules for foreclosures or repossessions by lenders of homes of owners who have fallen behind on their mortgage payments. There can be severe and unexpected tax consequences for an owner who simply walks away because he or she has little or no equity and the lender takes over and sells the place.

In most situations, cancellation or forgiveness by the lender of the debt usually means the debtor has reportable income, though there are some exceptions — for instance, insolvency. 

An example: Brown buys a condo and uses it as a personal residence. He pays $300,000, down payment of $15,000 and takes a mortgage loan of $285,000. He is personally liable for the mortgage. When the remaining balance of the loan is $280,000, Brown defaults and the lender bank accepts his voluntary conveyance of the unit, canceling the loan. Similar condos at the time sell for $230,000.The tax code treats the transaction as a sale. Brown incurs a nondeductible loss of $70,000, the amount by which his condo’s adjusted basis of $300,000 exceeds its market value of $230,000. No deduction for the loss because Brown uses the condo as a personal residence.

Brown also has reportable income of $50,000 when the bank cancels the loan. The $50,000 is the amount by which the debt of $280,000 exceeds market value of $230,000.

Enter the IRS when the mortgaged property is foreclosed or repossessed, and the bank reacquires it, or the bank knows Brown has abandoned the property. The bank sends a Form 1099-A to Brown and the IRS. Using the numbers in the example, the 1099-A indicates the foreclosure bid price ($230,000), the amount of Brown’s debt ($280,000), and whether he was personally liable. Debt cancellation (here, $50,000) is taxed at the rates for ordinary income, same as for salary.

The IRS says sellers who are not personally liable for a debt will realize an amount that includes the full canceled debt, even if the value of the property that is security for the debt is less, which can be offset depending on your adjusted basis in the property. 

For example, Ms. Smith buys a home valued at $300,000, puts down $30,000 and takes out a mortgage of $270,000. Smith stops making payments. The bank forecloses on a loan balance of $260,000, and the market value of the home has fallen to $250,000. Smith has an adjusted basis of $265,000, due to a $5,000 casualty loss. The amount Smith realizes on the foreclosure is $260,000. Smith figures her gain or loss by comparing $260,000, which is the amount realized, to her adjusted basis of $265,000. She has a $5,000 realized gain. 

Before you sell on a short sale or go through a foreclosure, seek legal and tax advice. Do tax planning ahead of time, before it is too late.For more information, contact a Certified Public Accountant or check the IRS Web site.

A temporary fix, called the Mortgage Forgiveness Debt Relief Act of 2007, provides relief from debt forgiveness taxation for certain owner occupants for three years. Call your lawyer to determine if you are exempt from taxation. 

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at www.ForeclosureFirstCallForHelp.com for more information.

City of Plymouth, Minnesota Demographics

Get an inside look at the demographics for the City of Plymouth, Minnesota

 As of the census of 2000, there were 65,894 people, 24,820 households, and 17,647 families residing in the city. The population density was 2,002.0 persons per square mile (773.1/km²). There were 25,258 housing units at an average density of 767.4 per square mile (296.3/km²). The racial makeup of the city was 91.36% White, 2.71% African American, 0.33% Native American, 3.79% Asian, 0.01% Pacific Islander, 0.50% from other races, and 1.31% from two or more races. Hispanic or Latino of any race were 1.64% of the population. 27.0% were of German, 13.1% Norwegian, 7.8% Irish and 7.5% Swedish ancestry according to Census 2000. 

There were 24,820 households out of which 37.8% had children under the age of 18 living with them, 61.2% were married couples living together, 7.6% had a female householder with no husband present, and 28.9% were non-families. 21.8% of all households were made up of individuals and 4.7% had someone living alone who was 65 years of age or older. The average household size was 2.60 and the average family size was 3.09.

In the city the population was spread out with 27.1% under the age of 18, 7.4% from 18 to 24, 33.0% from 25 to 44, 25.0% from 45 to 64, and 7.6% who were 65 years of age or older. The median age was 36 years. For every 100 females there were 97.1 males. For every 100 females age 18 and over, there were 95.5 males.

The median income for a household in the city was $77,008, and the median income for a family aws $90,134. Males had a median income of $59,751 versus $38,111 for females. The per capita income for the city was $36,309. About 1.5% of families and 2.6% of the population were below the poverty line, including 2.0% of those under age 18 and 1.5% of those age 65 or over.

According to a 2006 estimate, the median income for a household in the city was $82,288, and the median income for a family was $101,936.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at www.ForeclosureFirstCallForHelp.com for more information.

How to Find Short Sales in Minnesota

Finding a short sale in Minnesota is like finding a pot of gold at the end of the rainbow.

A reader asks: “How can I find short sales online from MLS listings? Some of the listings say it’s a short sale but some do not. I know my agent can figure out which ones are short sales. Is this information not available to the public?”Answer: Every MLS system is different, so short sale listings aren’t always evident. There seems to be a movement toward identifying short sale listings because of commission disputes. When agents fight over money, systems are often immediately put in place to keep disputes from happening.

What is a Short Sale?  

Short sales occur when property values drop or inflated appraisals were obtained, making the property worth less than the amount of its mortgage. This means when a seller enters into a purchase contract to sell for an amount that is less than the home’s present mortgage balance, if the seller isn’t bringing in money to close, the lender must approve the short sale. That’s because the lender is taking a loss.

Generally, short sales are not bargains for a buyer. It doesn’t mean the buyer is purchasing the property under market, and it can take a long time to close, if it closes at all, among a host of other reasons. Not all lenders will approve a short sale, and many short sale prices that are advertised are not real prices. They are guesses at what it takes to sell the home.

Short Sale Commission Disputes

The problem arises when an agent takes a listing on a home that is not yet in default, meaning the seller is still making payments to the lender. During the listing agreement term, if a Notice of Default is filed, this could change the terms of the listing. It now becomes a short sale listing, subject to commission negotiation by the lender.

In the Sacramento MLS, our rules state that agent comments — those that the public cannot see — must contain verbiage that specifically spells out the sale is subject to lender approval and the commission will be divided 50/50 between the agents.

Most lenders discount the commission, paying less than a seller would pay. One listing agent did not include this verbiage. While in escrow, the buyer’s agent insisted that his brokerage was entitled to the fee originally listed in MLS. The listing agent ended up giving a big chunk of his commission to the buyer’s agent.

Finding Short Sale Listings

Most short sales are listed by real estate agents. You will find these listings on local web sites and in MLS feeds. Some lenders have complained about advertising that identifies the home as a short sale, because the lenders feel it puts them at a disadvantage when it comes to home pricing. They are right. A buyer generally offers less when it’s advertised as a short sale.

If you have access to search terms, first look where the term short sale appears. It might be under “status modifier” or it might be contained in the marketing comments. Choose that field as your search term.

 

 

 

 

 

Preforeclosure, Notice of Default, Give the bank time to respond, Preapproved by bank, Headed for auction.Above all, hire an agent who is well versed in handling short sales and can advise you of the procedures. If you have legal questions, please ask a lawyer for advice and guidance.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at http://www.foreclosurefirstcallforhelp.com/ for more information.

How Minnesota Home Owners Qualify to do a Short Sale

There are several conditions that home owners need to qualify for to sell their house using a short sale.

Short sales is a hot buzz phrase. Some sellers who decide that their home won’t sell at the price they had imagined often start to wonder if they should do a short sale. A short sale doesn’t always solve problems, but it most assuredly can create problems. Short sales are not the “saving grace” some home sellers would like to believe.What is a Short Sale?

A short sale happens when the lender is shorted on a mortgage, meaning the lender accepts less than the total amount that is due. If your mortgage is $100,000, but your home is worth, say, $90,000, you are $10,000 short, not including costs to close the sale such as real estate commissions, recording fees or title and escrow charges.

Sometimes, to avoid going through the costs of foreclosure, a lender will sanction a short sale by letting a buyer purchase the home for less than the mortgage balance while the home is in pre-foreclosure stage. A pre-foreclosure stage is one of the three stages of foreclosures.

Here are sample steps of a short sale:

First, the seller signs a listing agreement with a real estate agent subject to selling as a short sale with third-party approval.

Second, the agent finds a buyer who makes an offer for less than the amount of the mortgage.Third, the seller accepts the buyer’s purchase offer.

Fourth, the seller’s lender accepts the buyer’s purchase offer.

Fifth, the transaction closes when the buyer delivers the funds, the lender releases the lien and the seller delivers the deed.

 

 

 

 

 

 

 

 

In fairy-tale land, everybody lives happily ever after. Except the seller. There are consequences.Before you eagerly climb aboard the short sale bandwagon, consider the following to determine whether you may qualify for a short sale. If you cannot answer yes to all four requirements, you may not qualify for a short sale.

 First, the Home’s Market Value Has Dropped. Hard comparable sales must substantiate that the home is worth less than the unpaid balance due the lender. This unpaid balance may include a prepayment penalty.

Second, the Mortgage is in or Near Default Status. It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to head off future problems at the pass.

Third, the Seller Has Fallen on Hard Times. The seller must submit a letter of hardship that explains why the seller can not pay the difference due upon sale, including why the seller has or will stop making the monthly payments.

Here are a few examples that do NOT constitute a hardship are:One, bad purchase decisions. Blowing your paycheck on a home theater system with surround sound does not qualify as a hardship.

Two, unhappy with the neighbors. Even if every home on your block has turned into pot growing houses, that will not qualify as a hardship.

Three, buying another home. The lender will not care if you have decided the home is no longer suitable for you or your family.

Four, pregnancy. Increasing the size of your family or starting a family is not considered a hardship.

Five, moving into an apartment. If you decide to move out of your home, that is a lifestyle decision and not a very good reason to abandon your home.

Six, unemploymentSeven, divorce

Eight, medical emergency / sudden illness

Nine, bankruptcy

Ten, death.

 

 

 

 

 

 

 

 

If the seller has no assets the lender will probably want to see a copy of the seller’s tax returns and / or a financial statement. If the lender discovers assets, the lender may not grant the short sale because the lender will feel that the seller has the ability to pay the shorted difference. Sellers with assets may still be granted a short sale but could be required to pay back the shortfall. 

For example, if the seller has cash in a savings account, owns other real estate, stocks, bonds or even IRA accounts, the lender will most likely determine that the seller has assets. However, the lender might discount the amount the seller is required to pay back. 

Many entities profit from short sales, but there is no seller short sale profit. 

A short sale is dependent on a buyer making an offer to purchase. If you do not receive an offer, you will not qualify for a short sale. So even if you meet all the other criteria, it is possible that no one will buy the short sale. It is also dependent on the lender accepting the buyer’s offer. If the lender rejects the offer, a short sale will not take place. 

There are tax consequences if the lender agrees to the short sale, the lender may possess the right to issue you a 1099 for the shorted difference, due to a provision in the IRS code about debt forgiveness. Many situations are exempt from debt forgiveness, according to the Mortgage Forgiveness Debt Relief Act of 2007.You should speak to a real estate lawyer and a tax accountant to determine the amount of short sale tax consequences, and whether you can afford to pay those taxes, if any.

A short sale will show up on your credit report. It’s a pre-foreclosure that has been redeemed. Short sales affect credit ratings. While the damage to your credit report may not seem as significantly bad as a foreclosure to you, creditors may not make the distinction. Experts say the drop in your FICO score is identical to a foreclosure reporting. 

Always seek legal counsel before attempting to pursue a short sale. A real estate agent cannot give you legal advice.The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at http://www.foreclosurefirstcallforhelp.com/ for more information.

City of Plymouth, Minnesota Ranks # 1 as Top 100 Places to Live

 The City of Plymouth, Minnesota is a wonderful place to live, work and raise a family. 

 The City of Plymouth, Minnesota has top notch schools, good jobs, affordable housing, low crime, an active outdoor culture – yep, they’re pretty much all here. Plymouth could have become just another Twin Cities suburb, but more than 50,000 jobs keep residents working there.Home prices are within reason: The typical three-bedroom, two-bath house goes for $350,000. The city’s main school district is ranked among the top three in the state, and for culture, Plymouth’s open-air amphitheater, the Hilde Performance Center, hosts numerous summer concerts. Residents are a quick drive from the Mall of America, the nation’s biggest mall.

 And did we mention the outdoors? Plymouth boasts more than half a dozen sizable bodies of water. Of course, this being Minnesota, winter can be brutal: January’s average low temperature is about 13°F. But when the mercury plummets, the locals get busy. In February the city hosts a Fire & Ice Festival that includes mini-golf, bowling and basketball – all right on the ice. Along with other festivals throughout the year including a fire works show and a parade.

There are over 30 parks and miles of walking trails to relax and unwind in. Many top name medical equipment companies and others corporate names have offices in Plymouth.

Both the Police and Fire Department are equipped with top notch equipment to protect and safe guard it’s citizens.

If you are looking for a wonderful place to live, work, shop, relax, play and raise a family the City of Plymouth offers it all.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at www.ForeclosureFirstCallForHelp.com for more information.

Paper Work you Need to Get a Mortgage Loan in Minnesota

The following is a check list of items you will need to give your loan officer.

First, W-2 forms – or business tax return forms if you’re self-employed – for the last two or three years for every person signing the loan.

Second, copies of at least one pay stub for each person signing the loan.

Third, account numbers of all your credit cards and the amounts for any outstanding balances.

Fourth, copies of two to four months of bank or credit union statements for both checking and savings accounts.

Fifth, lender, loan number, and amount owed on other installment loans, such as student loans and car loans.

Sixth, addresses where you’ve lived for the last five to seven years, with names of landlords if appropriate.

Seventh, copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, such as a boat, RV, or stocks or bonds not held in a brokerage account.

Eighth, copies of your most recent 401(k) or other retirement account statement.

Nineth, documentation to verify additional income, such as child support or a pension.

Tenth, copies of personal tax forms for the last two to three years.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at www.ForeclosureFirstCallForHelp.com for more information.

Plymouth on Parade Satureday, October 4th, 2008 in Minnesota

^{Enjoy family fun and see a parade in Plymouth, Minnesota.}

Join your fiends and neighbors in this community celebration hosted by the City of Plymouth and Life Time Fitness with Channel 12 serving as event media sponsor. Event parking will be throughout the city center area from Vicksburg Lane to Plymouth Blvd.

The parade begins at 1:00 PM on October 4th, 2008. The parade includes: calliopes, clowns, unicycles, ponies, gymnasts, puppies and more will be marching along Plymouth Boulevard.

The Plymouth Ice Center will have free activities including: open ice skating, open gym and swim. Other activities include the Plymouth Amphitheater include: face painting, balloons, hair painting, hay and pony rides, petting zoo and inflatable.

You can also support youth and education in the community by purchasing a floating plastic duck that has a chance to win you a price in a river race sponsored by the Minnetonka/Plymouth Rotary. Come bring the whole family for fun and lasting memories.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at http://www.foreclosurefirstcallforhelp.com/ for more information.

When does a Real Estate Short Sale Occure in Minnesota?

Real estate in Minnesota can be sold for less than what is owed as a short sale. 

A real estate short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers’ mortgage obligations and closing costs, such as property taxes, transfer taxes, and the real estate practitioner’s commission. The seller is unwilling or unable to cover the difference.Some – although by no means all – short sellers may also be in default on their mortgage loans and be headed for foreclosure. However, home owners who bought at the top of the market or who took out large amounts of equity with a refinance and who now need to sell because of divorce or job transfer may also find themselves upside down, owing more than the home is currently worth when closing costs are factored in.Losing your home can be very emotional and most people don’t want to face up to the reality until foreclosure sets in.

Other sellers simply don’t understand that if they have assets, such as stocks or a high-salaried job, a lender is not going to let them just walk away from a short sale without signing a note to repay what they owe. However, by involving a professional negotiator to handle the bank negotiations often times they can obtain reductions and total releases of second mortgages and junior lien positions against the house. These sign releases will reduce the seller’s financial liabilities to bad debt after the sale of the house.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at http://www.ForeclosureFirstCallForHelp.com/ for more information.

What Happens in a Short Sale When You Have Two Loans?

How Two Loans can Effect a Short Sale in Minnesota 

Two loans or a first and a second produce a different dynamic when working with a short sale.It doesn’t matter if you take out a second mortgage to help buy the home or if you have secured a home equity loan after the fact. The second lender will always be in second position, unless the first is willing to subordinate. Ordinarily, a mortgage lender who is in first position will not subordinate the position.

 First in position is first in the right to collect from foreclosure proceedings. This means when a Notice of Default is filed, if the second lender wants to be first in line to receive proceeds from the auction or sale or to take the property back, the second lender must initiate its own foreclosure proceedings.

In most parts of the country, this means the second lender must make up the back payments to the first lender, pay the first lender’s cost to file the Notice of Default and associated expenses, and then file its own Notice of Default. If the second lender does not do this, the second lender could get wiped out in the foreclosure and receive nothing, especially if there is not enough money to go around.

When the second lender receives a notice that states the first has foreclosed, after checking the value of the home, many second lenders do not initiate their own foreclosure proceedings. They take this stance because there might not be enough equity to make the cost of foreclosure profitable for the second lender. This non-action leaves the second lender in a vulnerable position. 

After determining that your situation fits short sale qualifications, and you have complied with all lender requests — plus, found a willing and qualified buyer — you’re not yet out of the woods.Let’s say that your closing costs are 5% or $4,250. After deducting the closing costs from the sales price of $85,000, you will have about $81,000 left. Now it becomes a tug of war between the two lenders.

 

Generally, the first negotiation is to offer the second lender a small amount, say $1,000. Now, that might not seem like much when compared to the second loan balance of $55,000 because you’re asking the lender to lose $54,000. On the other hand, however, if the second lender refuses, it may ultimately get nothing.

There are times, it seems, that junior lenders appear to cut off their noses to spite their faces. But this is where the first lender can give up a little more to make the deal work. In my experience, most lenders in first position are happy to receive at least 90%, which would mean on an $85,000 loan, the lender might agree to take $76,500.

If the net is $81,000, after closing costs, that would leave $4,500 that the first lender could offer to the second lender. The second lender must agree to release the loan. If not, the short sale will be denied, and the first lender will most likely get the property back in foreclosure, eliminating the second loan.Always hire a professional negotiator to help get the best deal for you and your family.

The author Jay Johnson is the owner / broker of Direct Realty. Direct Realty located in Minneapolis, Minnesota specializes in home listing and selling of short sale properties for sellers. His professional negotiators work on the seller’s behalf against the banks to reduce the seller’s financial liabilities. For questions and help selling homes on a short sale basis call Jay Johnson at 612 -965 -0937 or visit his web site at http://www.foreclosurefirstcallforhelp.com/ for more information.