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Short Sale vs Foreclosure

by Jon Smith, CRB, CRS, GRI

Short Sales offer the homeowner many more benefits than going through a Foreclosure.  In the case of a short sale, the benefits to the homeowner are:

  • Only late payments on the mortgage show on a credit report and after the sale of the home, the mortgage will be reported as paid or negotiated.  This could lower a homeowner’s credit score by as little as 50 points if all other payments have been made.  The affect of a short sale can be as brief as 12 to 18 months.
  • A Short Sale is not reported on a credit history.  There is no specific reporting item for ‘short sale.’  The loan is typically reported as ‘paid in full, settled.’ 
  • A Short Sale on its own does not challenge most security clearances whereas a foreclosure does.
  • A Short Sale is not reported on a credit report and is therefore does not present a challenge to employment.
  • In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner, (i.e., payment of the shortfall or the difference between what was owed and what the bank received.)
  • Under the Mortgage Forgiveness Debt Relief Act of 2007, if a deficiency is forgiven or cancelled, the home is a principal residence, and it is worth less than $2 million, the tax on the deficiency will be forgiven.  This benefit applies to homes that are the subject of a Short Sale and a Foreclosure.


Click the links below for more details about The Mortgage Forgiveness Debt Relief Act of 2007


  • A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 yrs.
  • An Investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

If you feel you are near foreclosure, please contact me, Jon Smith of Iowa Realty.  I can help you decide what your options are and explain what is in your best interest.

The WOW Factor - Mortgage Lending

by Jon Smith, CRB, CRS, GRI

Having good credit and a steady job just does not seem to be good enough in today’s credit world when it comes to getting your home loan approved.  You need to make an impression.  Below are some great tips I would like to share with you. 

Today’s lenders are a picky bunch when it comes to the loan approval.  Even well-qualified borrowers are expected to jump through some pretty high hoops to qualify for financing.
Have no fear. The tips below and suggestions can help you make the best possible impression on the lender of your choice.
Just as job hunters may wonder what top employers want to see on a resume, prospective borrowers may be curious about what lenders look for on a loan application.
The four C's
The answer may be summed up with a mnemonic called "The four C's,"

•    Capacity, which refers to the adequacy of the borrower's income to cover the interest and principal due on the loan, plus property taxes and homeowners insurance.
•    Character, which refers to the borrower's track record of paying debts, as evidenced by his or her credit history and credit score.
•    Capital, which refers to the borrower's down payment (or equity) as a percentage of the current value of the home.
•    Collateral, which refers to the safety and soundness of the home and the value of the home as determined by an appraisal relative to the agreed-upon purchase price.
Today’s mortgage broker might use a quadrant with "income," "credit," "assets" and "property" in the four corners, but his point is the same as that of the four C's:  What lenders like to see is strength and stability in all four areas.
Maybe your credit score has some dings or you need a stated-income loan.  Borrowers who are qualified but whose down payment will be less than 20% of the purchase price of the home must withstand a second level of scrutiny. That's because mortgage insurers also have to approve such loans, and they have "completely different qualification ratios”. Borrowers in this situation should discuss their options with a loan officer who is familiar with lenders' and insurers' guidelines.
Have paperwork in order
Lenders rely not on the borrower's say-so but on a pile of paperwork to verify and document the borrower's financial position. At a minimum, most borrowers are required to submit the following:
•    One month of paycheck stubs.
•    Two years of W-2 forms.
•    Three months of bank account statements.

Additional paperwork also may be required:
•    If you're self-employed or earn more than 25% of your income from commissions or bonuses, you'll need to hand over two years of income tax returns.
•    If you're divorced, the lender will want a copy of your settlement to ascertain how much alimony or child support you're obligated to pay or are entitled to receive and the duration of those payments.
•    If you've filed for bankruptcy protection within the past seven years, you'll need to show your bankruptcy papers.
•    If you've deferred repayment of student loans, you should provide your deferral agreement as well.
"If (borrowers) have student loans that are going to be deferred for at least 12 months, that may help them qualify, so they would want to bring the account numbers for those loans.  Student loans are counted as debt, but deferral of repayment may strengthen the borrower's application.

Garage Sale Organizational Tips

by Jon Smith, CRB, CRS, GRI

We find that many families use a change of residence as an opportunity to dispose of many outgrown and no-longer-wanted items. It beats taking the items with you and can even put several hundred dollars in your pocket toward buying furnishings for your new home.
As Realtors®, we are expected to be wise in all matters relating to a change of residence. Even though garage sales are far from our primary field of expertise, allow us to pass on the best advice we have picked up over the years.

Planning

Allow plenty of time – three to four weeks – to prepare. Choose a date that will not conflict with holidays or other events that might lure prospective customers away. More people are likely to show up on weekends than weekdays. Your sale is likely to attract more customers if you join together with neighbors in a larger effort with more merchandise – some homeowner groups sponsor neighborhood sales that are proving popular.

What to Sell
Practical household goods, bicycles, children’s toys and clothes, sports equipment and garden tools are popular. Adult clothing has less appeal – price accordingly. All items should be clean, polished and in good repair.

Display

Merchandise your items attractively in neat, clean surroundings. Paper tablecloths offer a pretty setting for glass and ornamental items. Cluster things in categories. Place more desirable items toward the back so browsers can notice other merchandise on their way to the most popular items. Have a 25-cent miscellaneous table for young shoppers. Clothes should be sized accurately and hung on a temporary rack.

Logistics

Locate your appliance table near an outlet so customers may try before they buy. Set aside adequate parking and a place to load large items. Have plenty of bags and boxes on hand for packing and newspapers for wrapping glass items. Ideally, a place for trying on clothing should be provided.

Promotion

Place a classified ad in the local papers – include three or four of the more tantalizing items for sale, directions and other pertinent details (you may or may not want to include your phone number). Take advantage of free publicity provided by bulletin boards in grocery stores and other public places. Provide directional signs to your property using an indelible pen. If your house is listed for sale, have your Realtor® hold an open house on the same day, thus increasing traffic for both the house and the sale.

Pricing

Visit other sales to get an idea on how to price things. Remember that garage sale shoppers are looking for deals, so be prepared to bargain and lower your prices. Really valuable items such as antiques should not be sold at a garage sale; they are not likely to bring the desired price from bargain hunters. Nothing is too worthless to be valuable to someone, so have a giveaway box for old magazines and other assorted odds and ends.

Staging

Post a notice that all sales are final and payment must be in cash. Keep ample change in a cash box in a protected spot. Keep a record of sales, especially when there are several sellers. One recording method that is simple and efficient is to use small adhesive stickers to price items, then transfer the sticker to the name of the seller when the item is sold.

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Contact Information

Photo of Jon Smith, CRB, CRS, SRES, SFR Real Estate
Jon Smith, CRB, CRS, SRES, SFR
Iowa Realty
3521 Beaver Ave.
Des Moines IA 50310
515-240-2692
Fax: 515-453-6404
 

 

 

Licensed in the State of Iowa