"Short Sale Essentials"

Fernando Herboso

Broker for Herboso & Associates

www.Short-Sales-Expert.com

Know the Facts

Get The Help You Need!

Table of Contents

Introduction 3

• Know Your Options

Chapter 1 4

• Short Sale Option

Chapter 2 8

• Tax Consequences

Chapter 3 10

• Your 'Must Have' Qualifications

Chapter 4 13

• Summary & Recommendations

Chapter 5 13

• Special programs This publication is designed to be informative. It is provided with the understanding the author is simply offering

information and that such information may change from time to time and is outside the control of the author. The author

is not engaged in rendering legal, accounting, or other professional services. The reader is advised content discussed in

this e-book serves only as informative.

2

Introduction

Short Sale Option

Know Your Options My name is Fernando Herboso broker for Herboso & Associates.

The reason why you are reading this guide is because we have spoken via

telephone or you were an attendee to one of my “Distressed Homeowner

Workshops”

I created this short guide to point out you briefly the steps necessary to start a short

sale on your property if you decide to go forward.

The short sale option provides you the opportunity to sell your home and reduce,

or eliminate, your mortgage debt.

• In this e-book we will outline in greater detail the short sale option.

• Please note there may be tax consequences when selling your home through

the short sale process. For more information on this please read Chapter 2.

3

Chapter 1

4

Chapter 1

Your Short Sale Option

Why Consider A Short Sale? A short sale offers the opportunity to sell your home and to eliminate, or reduce,

your existing mortgage obligation.

What Is A Short Sale? It is the sale of a home for less than the amount outstanding, currently remaining,

on your mortgage. A short sale is also called a pre-foreclosure sale. Your mortgage

company must agree to a short sale. If it does you can sell your home and pay off

all, or a portion, of your outstanding balance with the proceeds from the sale.

Is A Short Sale An Option for You?

Yes it very well may be if

1.

2.

3.

4.

5.

You are unable to refinance or qualify for a loan modification.

You are behind on your mortgage payments. You are facing a

financial hardship.

You owe more than your home is worth.

You cannot sell your home at a price greater than your mortgage debt.

What Are The Benefits of A Short Sale?

You will enjoy the following

1.

2.

3.

4.

You can eliminate, or reduce, outstanding mortgage debt.

You will repair your credit sooner as compared to a foreclosure.

You may qualify for relocation assistance.

You may be able to qualify for another mortgage sooner, around 2 years, as

compared to 7 if you went through the foreclosure process.

5

How Does The Short Sale Process Flow? The sale is similar to a traditional home sale. You will hire a real estate agent. The

agent will provide an up-to-date opinion of value. Based upon this value you will

put your home up for sale.

Please Note You will require approval from your lender before you can sell your home as a

short sale. For this reason your lender will work with your agent to:

• Determine current market value. • Set the asking price based upon current market value.

• Collect additional mortgage information with other lien holders on your home.

• Review all offers and make a determination of offer acceptance.

• If offer is accepted, to work with all lien holders to finalize sale.

How Do You Apply For Short Sale?

You will... 1. Submit an application with your existing mortgage company.

2. They will review your situation and recommend the best mortgage option for

your current financial needs.

6

Take Action Today! A short sale is not a quick sale. It takes time to receive the approval required from

your lender to begin the sales process. You can expect a short sale to take as little

as 30 days to as much as 1 year before your home is official sold and closed.

Simply follow these steps to begin a short sale.

1. Before Contacting Your Mortgage Company

• Gather your mortgage statements. • If you have a 2nd mortgage include this as well.

• Include all monthly debt obligations such as car loans, credit cards, etc.

• Provide proof of current income.

2. Now Contact Your Mortgage Company

• Call to book an appointment with a loan officer. • Explain you are interested in a short sale.

• Ask what information they want you to bring.

• Bring any additional information they have requested.

3. Include Financial Hardship Statement

• Draft a to-the-point letter outlining the reasons for your financial issues. • Explain why you are unable to honor your debt.

• Explain you prefer to short sale your home to avoid foreclosure.

• Ask for their understanding and assistance.

4. Contact A Licensed Real Estate Professional

• Inform the agent you are interested in selling your home as a short sale. • Fully disclose all pertinent financial information on your home.

• Disclose all mortgage holders and lien holders.

• Request a CMA of your home.

• Price your home at current market value.

• Make the sale process as easy as you can by following your agent's advice at

all times.

7

Chapter 2

Tax Consequences

8

Chapter 2

Possible Tax Consequences

Please Consult An Expert Your real estate agent is NOT an expert when it comes to the tax consequences of a

short sale. For this reason you must consult an accountant or seek legal advice to

fully understand all tax considerations.

The Mortgage Forgiveness Debt Relief Act of 2007 The US government has updated tax laws with respect to foreclosures. Here is a

brief summary of the December 11, 2007 update.

• The Mortgage Forgiveness 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 foreclosure, qualify for this relief.

• This provision applies to debt forgiven in calendar years 2007 through 2012.

Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if

married filing separately). The exclusion doesn't 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.

Recommendation We urge you to consult with a legal advisor and/or accountant with respect to the

tax implications of a short sale and foreclosure.

9

Chapter 3

Your 'Must Have' Qualifications

10

Chapter 3

Your 'Must Have' Qualifications

Do You Qualify For A Short Sale? Most lenders require 3 factors to be existing before they will qualify you for a

short sale of your home.

Factor 1:

• Financial Hardship

Definition

• An event, or events, having taken place after you have secured a mortgage

which render you unable to pay.

Examples

Financial hardship are issues such as:

• You are too heavily in debt. • Personal business failure.

• Job loss.

• Death of major income earner.

• Mortgage payments too high.

Factor 2:

• Inability To Pay Your lender will require you to prove financial hardship. There must be evidence

to back up your request to short sale your home. For this reason you will need to

include a financial worksheet, most real estate agents will provide this to short

sale clients, in your application to your lender. This worksheet is basically a

monthly profit and loss statement.

11

Factor 3:

• Insolvency You must prove to the lender of your inability to pay down, and/or to pay off,

your mortgage. You must prove you owe more money than you have in cash.

Note Your lender is not requesting you to be totally broke and on the verge of living on

the street. They simply want to determine your inability to meet your mortgage

obligation. You are permitted to have money available for living expenses and this

does not disqualify you from a short sale.

12

Chapter 4

Summary & Recommendations

13

Chapter 4

Summary & Recommendations

Seek Additional Help

1. About Your Finances

• Have you given thought to credit counseling? • Have you sought advice from your bank?

• Have you a contacted your accountant?

2. About Your Legal Options

• Have you contacted an attorney? • If so, did you discuss other legal ways to maintain your home?

3. About Your Home

• Have you contacted a real estate professional? • If so, have they provided you with an opinion of value for your home?

Consider Contacting An Agent

If you live in MD DC or VA, I would be honor to assist

you during this difficult process.

At the very least you can request a CMA

to discover the value of your home in today's market and

see how far are you really underwater?

Our service is free and without obligation.

14

Chapter 5

Special Programs

Chapter 5

Special Programs

Did you know that: Bank of America is testing foreclosure waters with

an incentive program for defaulting homeowners to “short sell” their

homes instead of enduring a foreclosure, which can take years?

Almost unheard of five years ago, a short sale must be approved by the

lender because the sale amount winds up being less than the mortgage

owed on the house. Foreclosures have come to cost lenders so much in

terms of sunken prices, deteriorated properties and legal fees that Bank of

America announced last week that it would give $5,000 to $20,000 to

qualified borrowers who submit a short-sale request to the lender by Nov.

30. A seller would be paid if the house is sold by Aug. 31, 2012.

If you are late, don’t despair. .there is talk that this will be extended

for all least a couple more months. . . call me for the latest details.

This is an incentive for people who are delaying foreclosures or who are

in a foreclosure process. Bank of America added that this program will be

preferred over foreclosing the property and bringing an opportunity to

homeowners to get cash out and be relieved of the deficiency.

Guidelines for Bank of America’s new Enhanced Short Sale

Relocation Assistance program states that a borrower may use the

incentive to pay off existing liens or for relocation expenses. FHA, Ginnie

Mae, VA and USDA loans are not eligible. Details are available in a case

by case basis and if your loan is with Bank Of America, all we need is an

authorization form your part and your loan number. We can find out if

you qualify for this program.

Short-sale incentives are an outgrowth of earlier, “cash for keys”

programs offered by lenders and real-estate companies. Also, the U.S.

Treasury Department has tried to boost the number of short sales with its

Home Affordable Foreclosure Alternatives program (HAFA), which

provides $3,000 for borrower-relocation assistance, $1,500 for

servicers to cover administrative and processing costs, and as much as

$2,000 for investors who meet certain requirements. .ad no deficiency

judgment!

Other programs currently available:

•Wells Fargo offers incentives of $10,000 to $20,000 to certain

homeowners who opt for a short sale. The program is aimed at

properties in Florida and other states known for protracted, judicial

foreclosures. The money is available only on first-lien loans that the

company owns, which is about 20 percent of its portfolio.

•JPMorgan Chase has not reported how much it offers for short-sale

incentives, though some real-estate agents have reported sellers

getting $20,000. The lender also has declined to specify how it

determines the amount of its incentives. We found that most lenders want

to keep this under wraps. . I can only guess is because they do not want a

wave of “Strategic Defaults”

•Citibank has reported it offers an average of $12,000 for borrowers

when it owns the mortgage. The amount is determined upfront and

varies depending on a borrower’s financial circumstances and mortgage-

payment history. The money is disbursed when the short sale closes.

Finally, there are many other programs that could qualify homeowner in

relocation assistance making it the perfect timing to do a short sale.

Considering that this was not available just a few months back!

Avoiding a Foreclosure is not even the tip of the iceberg

We can help you. . .

Avoid the hassle that comes with selling your house

Avoid paying any closing costs even Realtor commissions

Avoid repairs, updating, or even preparing the property before selling

Avoid Bankruptcy and ruining your credit

Avoid making the #1 mistake that will assure failure in your short sale

Avoid a Foreclosure and losing your home

Stressing about how long you will last if this keep going on.

Learn why Lenders actually prefer short sales over foreclosure

Help you stay in your home and postpone the auction?

Learn exactly what the credit differences versus a foreclosure are

Learn how to get paid for moving expenses by your lender****

Most importantly, we can help you

in most cases and give you the peace of mind to finally

get rid of a very big bad debt.

My direct number is

How Can I Help You Now?

Fernando Herboso