Bend and Eugene, Oregon Short Sale Specialists
Eugene and Bend’s markets have been on the up-and-up, and short sales have become a less and less likely scenario for buyers. But if you need to sell your home for less than you owe on it, it pays to know what you’re in for.
Let’s start with the basics. First of all, what is a short sale, and under what circumstances should homeowners consider pursuing one? The basic circumstance that would lead to a short sale is owing more on your mortgage than you can pay back through the sale of your house.
In a real estate market where home values are appreciating, this fate is only likely to befall home buyers who start to miss payments after putting very little money down on a recent home purchase. In the case of a depreciating market, however, all bets are off. We don’t yet know to what extent COVID-19 will impact home values in Bend, Eugene, and elsewhere in Oregon, though depreciation isn’t likely to match what we saw post-2008.
Still, if you don’t have much equity built up, you’re potentially at risk. If you end up in a situation where you’re unable to make your mortgage payments, it’s important to know what your options are. Let’s go over them briefly.
1. Forbearance Agreement.
This is a temporary agreement between you and your lender to postpone your loan payments for a set period of time during a temporary hardship. The 3-12 month mortgage forbearance being offered by loan servicers nationwide will be a boon for many homeowners facing tough economic times. We don’t yet know what will happen at the end of that period, and whether further postponement will be a possibility for most homeowners.
At the end of the postponement, you can choose to pay the overdue payments with a one-time payment, add the past due amount to the back end of your mortgage, or increase the amount of your monthly mortgage payments until the past due amount is repaid.
2. Loan Modification.
A loan modification is a change to the original terms of your loan. Loan modifications could involve lowering your interest rate or extending the term or maturity date of the loan. They could also involve moving from an adjustable to a fixed-rate loan, deferring some portion of the unpaid principal balance to the end of the loan, and/or forgiving some portion of the unpaid principal balance.
3. Short Sale.
A short sale is a commonly-used alternative to a foreclosure. If you can no longer afford to make your mortgage payments and your home is worth less than what you owe, a short sale may allow you to sell your home to pay off the mortgage. In a short sale, the lender agrees to accept an amount less than what is actually owed on the loan based on a showing of financial hardship.
4. DIL (Deed In Lieu Of Foreclosure).
Used as an alternative to foreclosure, a deed in lieu of foreclosure is where you sign over the deed to your property to the lender because you are unable to make your mortgage payments. This may also be referred to as Deed in Lieu or ‘voluntary conveyance.’
5. Non-Judicial Foreclosure.
This is legal procedure where a lender sells a property securing a mortgage loan at a public auction or sale to repay a borrower’s defaulted loan. Foreclosure proceedings typically begin after you have made no payments for 90 days or more.
If there are no successful third-party bidders at the foreclosure auction, title to the property will be transferred to the lender. The lender may then market and sell the property (known as an REO property) to recover its losses on the loan.
6. Judicial Foreclosure.
Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens or pending litigation. The complaint will state what the debt is and why the default should allow the lender to foreclose and take the property given as security for the loan.
The homeowner will be served notice of the complaint, either through mail, direct service, or publication of the notice. They will then have the opportunity to be heard before the court. If the court finds the debt valid and in default, it will issue a judgment for the total amount owed, including the costs of the foreclosure process.
After the judgment has been entered, a writ will be issued by the court authorizing a sheriff’s sale. The sheriff’s sale is an auction, open to anyone, and is held in a public place, which can range from in front of the courthouse steps to in front of the property being auctioned. Sheriff’s sales will require either cash to be paid at the time of sale, or a substantial deposit, with the balance paid from later that same day up to 30 days after the sale.
Check your local procedures carefully. At the end of the auction, the highest bidder will be the owner of the property, subject to the court’s confirmation of the sale. After the court has confirmed the sale, a sheriff’s deed will be prepared and delivered to the highest bidder, when that deed is recorded, the highest bidder is the owner of the property.
Both methods of foreclosure are utilized in the state of Oregon.
What Questions do I need to ask my Realtor Before I Pursue a Short Sale in the State of Oregon?
Question #1: Is a short sale the right option for my situation?
If the Realtor you’re interviewing answers this question quickly–without asking for further information about your particular situation and without suggesting that you chat with a real estate attorney and CPA first–this could be a red flag.
There are many options for homeowners who are in trouble financially and are either in danger of missing their house payment or are already delinquent. A short sale is not always the best option, and in some cases, it could actually be detrimental to the homeowner.
There are tax and legal issues sitting like land mines out there. State and federal laws constantly change, and there are many gray areas in the legal community with regard to short sales.
You need a Realtor who understands the relevant laws and tax issues associated with short sales and who also understands that a Realtor cannot and should not be a replacement for an attorney or accountant. Your Realtor should be able to recommend a local real estate attorney and accountant who understand the legal and tax consequences associated with short sales.
Question #2: Does your agent personally negotiate your short sales or hire someone else?
Here is where the rubber meets the road! Many Realtors hire third-party companies that may be out-of-area or even out-of-state. How invested in your best interest do you think an employee of a company that’s buried up to its eyeballs in files somewhere far away is going to be?
You need a Realtor who does his or her own negotiations or has partnered with a local Realtor specializing in the negotiation side of short sales. Why bring the middle man on board if you can avoid it?
Question #3: How many short sales has your agent personally negotiated to a successful close?
Many Realtors manage only to close a short sale or two before they discover how complex and labor-intensive they are and give up in frustration. You need a Realtor who has dozens of negotiations and successful closings under his or her belt, someone who is doing short sales to help homeowners out of their financial distress, not “resorting” to short sales to make ends meet.
Question #4: Does your agent have direct contact with the lender who services your loan?
Throughout the process of negotiating and closing a large volume of short sales, relationships with individuals at the lender banks are established. It’s in your best interest to hire a Realtor who understands the importance of those relationships, because they will become invaluable if your short sale negotiation gets dicey.
Question #5: Do the buyers’ agents trust and respect your agent and their ability to get short sales closed?
This question is similar to question #4, because it’s all about the importance of relationships. What often goes unnoticed is whether or not a Realtor is recognized by his/her peers as possessing all of the necessary characteristics we’ve discussed, with a proven track record to go with them.
You need a Realtor who doesn’t just talk the talk but actually walks the walk. You want the successful and busy buyers’ Realtors to respect and trust your Realtor enough to bring their buyers to your home.
Don’t trust the car dealer who claims that the car has super-low miles and was only driven by a little old lady from Pasadena. Pop the hood. Get a Carfax report. Do your homework.
Make sure your Realtor has worked with your lender more than once. Your prospective Realtor should make references available to you from an attorney, CPA, title company, past clients, and other Realtors. Don’t land yourself a lemon.