Foreclosure IS NOT an Option


I want to hear your story


Are you or someone you know facing foreclosure due to one or more of the following circumstances:

  • Credit impact is around 30 points for a short sale and around 300 points for a foreclosure
  • A short sale is typically reported as settled for less than owed where a foreclosure is report to the credit bureaus exactly as it is foreclosed
  • Short sales will not affect your employment status where as a foreclosure can be seen as a negative mark against you and force an employer to re-assign or terminate your employment.
  • After a short sale you can typically get refinanced to purchase a home in about 2 to 3 years. After a foreclosure your minimum time to obtain a Fannie Mae loan is close to 7 years.
  • A lender typically will waive its right to pursue a deficiency judgment against you after completing a short sale. After a foreclosure in Colorado, a lender has the right to pursue you for the deficiency up to 6 years after the foreclosure!!!
  • There are seller incentives (up to $3,000) for the successful completion of a short sale under the Home Affordable Foreclosure Alternative (HAFA) program. A foreclosure has zero incentives.
  • A short sale is not much different from a traditional real estate sale. As your Colorado short sale specialist, here is everything you need to know about short sales and the short sale process:

     KPK Realty is devoted to help everyone avoid the devastating affects of foreclosure and bankruptcy.  Our Agents have specialized training and proven experience in short sales and can negotiate with lenders for a win-win solution for everyone.  With their best interests in mind, we help the banks see the encumbering hardship the homeowner is facing and negotiate the short sale.  Our goal is to give homeowners facing foreclosure a clean slate and a fresh start.


Short Sale Explanation


     In real estate, a short sale (or short pay or preforeclosure sale) refers to the sale of a property in which the sale price is insufficient to pay off all mortgages and pay the expenses of sale. If the lender is convinced that the owner, for various reasons, is unable to continue making the payments the lender will often agree to take less than the full amount owed to allow the sale to close deficient of what is actually owed. The incentive for the bank to approve a short sale is to have the property sell before the loan becomes a problem account on their books. 


     When a borrower is in default on a mortgage they not only owe the back payments, but also may owe late fees, accrued interest, and back taxes, etc. This can add up quickly to eat up all the equity (if any) the borrower had in the property. If the borrower is unable to bring the account current the lender will then foreclose on the property. With a foreclosure, the lender can lose up to 40% of the mortgage amount because of the extra costs involved with foreclosing on a property: attorney fees, court costs, lost interest payments, back taxes, eviction costs, property maintenance costs, selling costs, and REO company fees. Foreclosing on a property can also take up to two years in some states. Therefore, it is sometimes in the best interest of the lender to accept the short sale.


     It also can be in the best interest of the borrower. They will not have to endure the time and stress of a foreclosure and their credit may not be as adversely affected as it would with a foreclosure. It is quicker and easier and does not subject the borrower to the embarrassment of a foreclosure. This Process may be difficult to believe but it is a definite possibility. As stated below there are hoops to jump through. This is a system that works because the banks do not want to hold the property for one, but they also do not want to pay a fee (at times up to $50,000) in order to send the property through the foreclosure process.


Before a lender approves a short sale they will make two key decisions:


1.    Can the owner afford to continue making the payments on the property? If they can, there is no reason for the bank to eat the loss. Banks will not look favorably upon a borrower that they determine lied to get the loan.  Does the homeowner truly deserve a short sale?


2.    Will approving the short sale leave the bank in relatively the same position as they are likely to be in by going though the foreclosure process and then selling the property? If the bank can do significantly better by foreclosing they are likely to do so, but in today’s market a short sale will save them a lot of money in the amount of $50,000.   


Also, the seller must not receive any sale proceeds for themselves.  If there is a junior lien holder, (2nd or 3rd mortgage) the discounts can be substantial, sometimes as high as 90% or more. Question two is the primary determinant here. If the senior lender (1st mortgage) forecloses, the junior may get nothing so they may take a deep discount to get something out of the property.


Letting your home go into foreclosure will take $50,000 out of the lender’s pocket on top of the losses they’ve already accrued.  It is a good bet they will come after you for the deficiency (by suing you in court) and the statute of limitations is about 6 years in most states.  A short sale means you are working with the lender to minimize their losses so they tend to look more favorably towards not pursuing a deficiency judgment.


If a lender issues a 1099 for the deficiency, many homeowners don’t know that The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a short sale, qualifies for the relief.  This provision applies to debt forgiven in calendar years 2007 through 2013. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

Additionally, if a lender issues the homeowner a 1099 for the deficiency this typically means that the lender gives up their right to pursue the deficiency.  Further benefits of a short sale are the guidelines to rebuilding your credit.  According to Fannie Mae policies, a foreclosure will require borrowers to wait 5 to 7 years before reestablishing an acceptable credit history.  The time period to reestablish new credit after a preforeclosure (or short sale) is 2 years.  Can you afford to be without a credit history for 5 to 7 years?  The answer is clear.  Please contact us today for additional benefits of selling your property as a short sale.


Finally, contrary to popular beliefs, you DO NOT have to be late on payments to get qualified for a short sale.  The lenders want to avoid foreclosure at all costs and are willing to help those facing an insurmountable hardship.  Before you even think about not making your payments contact us first.

This is a brief overview of what a short sale entails.  We would be more than happy to educate you further on what a short sale means to you.  At anytime, we are just a phone call away. 


Short Sale FAQ’s

What is the difference between a Short Sale and a foreclosure? 

The current stats reveal that 90 percent of home owners do not understand the difference between a foreclosure and a short sale. Basically and simply, a short sale is selling a property through a Realtor before it reaches foreclosure and negotiating with the lender to accept less than the full amount owed.  A short sale will have some effect on your credit depending on how it is reported to the credit agencies.  A Foreclosure is the equitable proceeding in which a bank or other secured creditor repossesses a parcel of real property due to the owner's failure to comply with the mortgage. Commonly, the violation of the mortgage is a default in payment of a promissory note.  Once the bank repossesses the property they will then sell it to recoup some of their losses.  A foreclosure will impact the homeowner’s credit and possibilities of homeownership for many years. Obviously, the short sale is the preferred method in saving one's credit position, but only with the proper professional services.  Your credit is repairable and can be done quicker than you think. 


Why are so many homeowner’s being forced into a short sale or foreclosure?  

Here is the scenario: Homes were purchased with inflated prices over the past three to four years with 100% financing and adjustable rate mortgages.  Now, the interest rate on their Adjustable Rate Mortgage (ARM) is resetting and doubling the mortgage payment. Furthermore, the house has depreciated in value resulting in negative equity. Lenders won’t refinance these loans, and homeowners can’t afford to bring $20,000+ to the closing table to buy themselves out of their homes.  It is an epidemic that will be with us for the next few years.


What do I do if my ARM is resetting and my mortgage payment increased dramatically?  

The first step is to call KPK Realty where we will negotiate with your lender on your behalf to attempt to modify your ARM and into a fixed rate loan.  We will do this for you at no cost to you.  Our experience with all the major lenders can get past the minimum wage operators and talking to the negotiators who handle your case.  We believe in helping every homeowner with this crucial first step.  At no cost to you, what do you have to lose? 


What if I can not get refinanced?  

You need to call us IMMEDIATELY.  We will set up a no cost, no obligation consolation with you, and educate you on your options.  We are short sale specialists and we’ve helped many people just like you avoid foreclosure.  We know this is a frightening and embarrassing situation, but we are dedicated to giving you a second chance and a clean slate.  Our short sales system allows you to get out of your distressed property and regain control over your finances and your life.  There are many options and alternatives that a specially trained Realtor at KPK Realty has to offer.  We can give you a second chance, but only if you take the first step and call us today.




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