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Ann Arbor/Ypsilanti

Macomb Center

Birmingham/Bloomfield North

Northville/Novi

Birmingham/Bloomfield South

Plymouth/Canton

Clarkston/North Oakland

Rochester

The Grosse Pointes

Troy

455 East Eisenhower, Suite 270 Ann Arbor, Michigan 48108 Phone: 734-930-0200

47766 Van Dyke Shelby Township, Michigan 48317 Phone: 586-739-7300

298 S. Old Woodward Avenue Birmingham, Michigan 48009 Phone: 248-644-6300 500 S Old Woodward Ave. Birmingham, Michigan 48009 Phone: 248-642-2400 7151 N Main St Clarkston, Michigan 48346 Phone: 248-625-1000

41860 6 Mile Road Northville, Michigan 48168 Phone: 248-347-3050

Understanding Short Sales and Avoiding Foreclosure

177 N. Main Street, Suite 100 Plymouth, Michigan 48170 Phone: 734-453-6800 1205 W. University Drive Rochester, Michigan 48307 Phone: 248-651-3500

20902 Mack Avenue Grosse Pointe Woods, Michigan 48236 Phone: 313-886-4200

4700 Rochester Rd Troy, Michigan 48085 Phone: 248-879-3400

Commerce/West Bloomfield 2600 Union Lake Road, Suite 150 Commerce Township, Michigan 48382 Phone: 248-360-1425

Trusted advice from the most trusted name in real estate

This pamphlet is provided as a community service to the general public. cbweirmanuel.com

You are receiving this for information purposes only. If your house is already listed, this is not a solicitation to sell your home. The accuracy of all information is deemed reliable, but not guaranteed.


Page 2

Understanding Short Sales & Avoiding Foreclosure

Page 7

cbweirmanuel.com

HOW CAN COLDWELL BANKER WEIR MANUEL HELP YOU?

Table of Contents What is a Short Sale?

3

What is a Foreclosure Sale?

3

Short Sale Vs. Foreclosure

4

Foreclosure Time Line

5

Tax Implications

6

Short Sale Requirements

6

How can Coldwell Banker Weir Manuel Help?

7

Explain the Short Sale and Foreclosure process in detail

Assist with a workout plan with you and your lender

Identify appropriate lender contacts

Provide and complete all required documentation

Submit all documentation to proper entity

Negotiate all terms with lien-holder(s)

Clear title by removing secondary lien(s) to facilitate sale

Minimize damage to your credit

Reduce deficiency amount of shortfall

Determine fair market value of your home

Market and sell your home

Facilitate your move to a new home

Be sure to contact our Certified Short Sale Experts today.

Be sure to contact our Certified Short Sale Experts today. cbweirmanuel.com

cbweirmanuel.com


Page 6

Understanding Short Sales & Avoiding Foreclosure

cbweirmanuel.com

Page 3

TAX IMPLICATIONS

WHAT IS A SHORT SALE?

Until recently loan balances forgiven under a Short Sale were considered taxable income to the borrower. Federal legislation approved in December of 2007 provides that, for the next three years, such debt forgiveness will not be taxable under the following circumstances:

The term “Short Sale” refers to a real estate transaction in which the debt owing on a property exceeds its actual market value.

The law only applies to debt forgiveness on principal residences

The law applies to first mortgage debt only

Refinanced debt where additional cash has been taken out is taxable to the extent that the cash taken out was spent on anything other than improvements to the property.

Always seek professional counsel on legal and tax matters.

In these cases the property can be sold only if the mortgage or other lien-holders agree to accept a payoff which is less than (or short of) the actual balance owing. While Short Sales were nearly impossible to arrange just a few years ago, they have become very common today. Lenders are more willing than ever to take the steps necessary to avoid more Foreclosures. Homeowners recognize the need for trusted representation in the process. Coldwell Banker Weir Manuel can provide such trusted advice and representation.

SHORT SALE REQUIREMENTS

WHAT IS A FORECLOSURE SALE?

Lenders will only consider a Short Sale request under the following circumstances:

A “Foreclosure Sale” occurs when a homeowner fails to make timely mortgage payments and the lender exercises the right to force a “Sheriff’s Sale” to satisfy the debt.

The property must be listed on the open market at current market value by a licensed real estate agent.

A Short Sale request will only be considered at the time an offer to purchase is made.

It is essential that all required lender forms and documents be submitted in the correct sequence to the proper departments

There are no out of pocket expenses to the seller for Realtor’s fees and closing costs as the lender absorbs them as part of their shortfall.

In the vast majority of cases, the lender is the only bidder at the Sheriff’s Sale and acquires title via a “Sheriff’s Deed” at that time. After the Sheriff’s Sale, the borrower normally has a six month redemption period in which they retain possession of the property. During this period, they have the right to sell the property or pay off the outstanding loan balance and retain ownership of the property. Otherwise, at the end of the redemption period, the homeowner loses all rights to the property.


Sheriff Sale— Sheriff’s Deed Recorded Five Consecutive Weekly Legal Notices

Home is Posted with a Notice of Default Final Letter and Referral to Attorney

Legal Action

Warning Letter/ Calls Warning Letter/ Calls Lender Action

*Seller has right to sell the property during this period. Once the Redemption Period expires, seller loses all rights.

Lender Acquires Clear title to Property

Owner Loses all Rights to Property

Month 7* Month 8* Month 9* Month 10* Month 11

Six Month Redemption Period (AKA Pre-Foreclosure) SELLER STILL OWNS PROPERTY! Missed Payment Missed Payment

The lending industry advises that a Short Sale will result in somewhat of a credit score reduction, but a foreclosure will greatly reduce your credit score. Short Sale credit score reductions can be mitigated within 18 to 24 months, while the damage caused by a Foreclosure can take years to overcome.

Missed Payment

Either a Short Sale or a Foreclosure will damage your credit report and your ability to borrow in the future. However, Short Sales are far less damaging.

Owner Action

YOUR CREDIT

Month 6*

Seller loses all rights Rigid legal process Seller’s credit ruined Attorney fees Stressful: seller has no control over process Purchase again in 3-5 years

Month 5*

    

Month 4*

Seller has rights Negotiated settlement Minimize damage to credit No attorney fees Relieve seller’s stress Purchase again in 18 mos.- 2 years No out of pocket expense to seller for commissions or fees Lenders required to work with Realtors Realtors are state licensed, have errors & omission insurance & adhere to code of ethics

FORECLOSURE TIME LINE

     

Foreclosures

Month 3*

SHORTSALES VS. FORECLOSURES Short Sales

Page 5

cbweirmanuel.com

Month 2*

Understanding Short Sales & Avoiding Foreclosure

Month 1*

Page 4


Sheriff Sale— Sheriff’s Deed Recorded Five Consecutive Weekly Legal Notices

Home is Posted with a Notice of Default Final Letter and Referral to Attorney

Legal Action

Warning Letter/ Calls Warning Letter/ Calls Lender Action

*Seller has right to sell the property during this period. Once the Redemption Period expires, seller loses all rights.

Lender Acquires Clear title to Property

Owner Loses all Rights to Property

Month 7* Month 8* Month 9* Month 10* Month 11

Six Month Redemption Period (AKA Pre-Foreclosure) SELLER STILL OWNS PROPERTY! Missed Payment Missed Payment

The lending industry advises that a Short Sale will result in somewhat of a credit score reduction, but a foreclosure will greatly reduce your credit score. Short Sale credit score reductions can be mitigated within 18 to 24 months, while the damage caused by a Foreclosure can take years to overcome.

Missed Payment

Either a Short Sale or a Foreclosure will damage your credit report and your ability to borrow in the future. However, Short Sales are far less damaging.

Owner Action

YOUR CREDIT

Month 6*

Seller loses all rights Rigid legal process Seller’s credit ruined Attorney fees Stressful: seller has no control over process Purchase again in 3-5 years

Month 5*

    

Month 4*

Seller has rights Negotiated settlement Minimize damage to credit No attorney fees Relieve seller’s stress Purchase again in 18 mos.- 2 years No out of pocket expense to seller for commissions or fees Lenders required to work with Realtors Realtors are state licensed, have errors & omission insurance & adhere to code of ethics

FORECLOSURE TIME LINE

     

Foreclosures

Month 3*

SHORTSALES VS. FORECLOSURES Short Sales

Page 5

cbweirmanuel.com

Month 2*

Understanding Short Sales & Avoiding Foreclosure

Month 1*

Page 4


Page 6

Understanding Short Sales & Avoiding Foreclosure

cbweirmanuel.com

Page 3

TAX IMPLICATIONS

WHAT IS A SHORT SALE?

Until recently loan balances forgiven under a Short Sale were considered taxable income to the borrower. Federal legislation approved in December of 2007 provides that, for the next three years, such debt forgiveness will not be taxable under the following circumstances:

The term “Short Sale” refers to a real estate transaction in which the debt owing on a property exceeds its actual market value.

The law only applies to debt forgiveness on principal residences

The law applies to first mortgage debt only

Refinanced debt where additional cash has been taken out is taxable to the extent that the cash taken out was spent on anything other than improvements to the property.

Always seek professional counsel on legal and tax matters.

In these cases the property can be sold only if the mortgage or other lien-holders agree to accept a payoff which is less than (or short of) the actual balance owing. While Short Sales were nearly impossible to arrange just a few years ago, they have become very common today. Lenders are more willing than ever to take the steps necessary to avoid more Foreclosures. Homeowners recognize the need for trusted representation in the process. Coldwell Banker Weir Manuel can provide such trusted advice and representation.

SHORT SALE REQUIREMENTS

WHAT IS A FORECLOSURE SALE?

Lenders will only consider a Short Sale request under the following circumstances:

A “Foreclosure Sale” occurs when a homeowner fails to make timely mortgage payments and the lender exercises the right to force a “Sheriff’s Sale” to satisfy the debt.

The property must be listed on the open market at current market value by a licensed real estate agent.

A Short Sale request will only be considered at the time an offer to purchase is made.

It is essential that all required lender forms and documents be submitted in the correct sequence to the proper departments

There are no out of pocket expenses to the seller for Realtor’s fees and closing costs as the lender absorbs them as part of their shortfall.

In the vast majority of cases, the lender is the only bidder at the Sheriff’s Sale and acquires title via a “Sheriff’s Deed” at that time. After the Sheriff’s Sale, the borrower normally has a six month redemption period in which they retain possession of the property. During this period, they have the right to sell the property or pay off the outstanding loan balance and retain ownership of the property. Otherwise, at the end of the redemption period, the homeowner loses all rights to the property.


Page 2

Understanding Short Sales & Avoiding Foreclosure

Page 7

cbweirmanuel.com

HOW CAN COLDWELL BANKER WEIR MANUEL HELP YOU?

Table of Contents What is a Short Sale?

3

What is a Foreclosure Sale?

3

Short Sale Vs. Foreclosure

4

Foreclosure Time Line

5

Tax Implications

6

Short Sale Requirements

6

How can Coldwell Banker Weir Manuel Help?

7

Explain the Short Sale and Foreclosure process in detail

Assist with a workout plan with you and your lender

Identify appropriate lender contacts

Provide and complete all required documentation

Submit all documentation to proper entity

Negotiate all terms with lien-holder(s)

Clear title by removing secondary lien(s) to facilitate sale

Minimize damage to your credit

Reduce deficiency amount of shortfall

Determine fair market value of your home

Market and sell your home

Facilitate your move to a new home

Be sure to contact our Certified Short Sale Experts today.

Be sure to contact our Certified Short Sale Experts today. cbweirmanuel.com

cbweirmanuel.com


Ann Arbor/Ypsilanti

Macomb Center

Birmingham/Bloomfield North

Northville/Novi

Birmingham/Bloomfield South

Plymouth/Canton

Clarkston/North Oakland

Rochester

The Grosse Pointes

Troy

455 East Eisenhower, Suite 270 Ann Arbor, Michigan 48108 Phone: 734-930-0200

47766 Van Dyke Shelby Township, Michigan 48317 Phone: 586-739-7300

298 S. Old Woodward Avenue Birmingham, Michigan 48009 Phone: 248-644-6300 500 S Old Woodward Ave. Birmingham, Michigan 48009 Phone: 248-642-2400 7151 N Main St Clarkston, Michigan 48346 Phone: 248-625-1000

41860 6 Mile Road Northville, Michigan 48168 Phone: 248-347-3050

Understanding Short Sales and Avoiding Foreclosure

177 N. Main Street, Suite 100 Plymouth, Michigan 48170 Phone: 734-453-6800 1205 W. University Drive Rochester, Michigan 48307 Phone: 248-651-3500

20902 Mack Avenue Grosse Pointe Woods, Michigan 48236 Phone: 313-886-4200

4700 Rochester Rd Troy, Michigan 48085 Phone: 248-879-3400

Commerce/West Bloomfield 2600 Union Lake Road, Suite 150 Commerce Township, Michigan 48382 Phone: 248-360-1425

Trusted advice from the most trusted name in real estate

This pamphlet is provided as a community service to the general public. cbweirmanuel.com

You are receiving this for information purposes only. If your house is already listed, this is not a solicitation to sell your home. The accuracy of all information is deemed reliable, but not guaranteed.


Understanding Short Sales and Avoiding Foreclosure