Being a Certified Short Sale Specialist is more important NOW than ever…..

As we reported over 2 years ago the number of homeowners choosing to de-leverage their own ‘toxic asset’ would only increase. In the past there was significant moral and social stigma associated with someone ‘walking away’ or doing a strategic default. Now, that has all changed.

For agents who were lead to believe that being a Certified Short Sale Specialist was optional…you need to rethink that mindset.

Its become very clear that there will be no ‘V’ shaped recovery…and certianly no fast recovery for housing. As you will read in this article, in some parts of the country it will take 10+ years for homes to return to peak bubble prices. With that in mind, millions of homeowners are considering a strategic default.

Disclaimer: We are not here to be the ‘moral’s police’. This is a very important and personal decision. As a Realtor, we don’t think its ethical for you to be advising your sellers to participate in strategic defaults.

Clearly, homeowners are coming to the decision to ‘walk-away’ on their own.

Where do you, a real estate professional fit in?

Simple, a Short Sale is by far a better alternative vs a foreclosure or a deed in lieu of foreclosure. The initial credit hit is roughly the same. But, the lasting effects of a Short Sale vs a Foreclosure are dramatically different. For example, according the FHA guidelines someone can qualify for a new FHA backed mortgage 24 months after a Short Sale. Much longer vs a Foreclosure.

Agents, learn how to become a Certified Short Sale Specialist. There is no question that knowing how to do a Short Sale….how to list it, sell it and get it closed in less than 45 days…IS the opportunity in this market. In come markets 75% of all homeowners are upside down…if they want to sell and avoid foreclosure they will need the services of an Short Sale Listing Specialist. When would NOW be the right time for you to learn how to do Short Sales….Watch the FREE Agent Short Sale Secrets video now…then grab your FREE Agent Short Sale Secrets book. Do this NOW.

Here are excerpts of the article from SeattleTimes.com

Scott Conroy pays the mortgage every month on his one-bedroom condominium in San Diego, even though it’s worth 33 percent less than what he owes and it may take more than a decade to break even.

Homeowners like Conroy who can afford their payments are weighing whether to sell and pay the difference, stick it out until housing prices recover or walk away.

In the U.S., 26 percent of borrowers owe more than their home is worth, said Karen Weaver, global head of securitization research for Deutsche Bank Securities. In parts of California, Florida and Nevada, it’s as high as 75 percent.

Realtors, did you catch that…..in some markets 75% of all homeowners are upside down! Staggering.

So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian, a credit-checking company, and Oliver Wyman, a New York consulting firm. Two-thirds of those who walked away defaulted on their primary residences.

“You’re looking at an extremely long horizon in order to see a return of home values to where they were at their peak,” said Stan Humphries, chief economist for Zillow.com, the Seattle real-estate data service. “It could be 15 to 20 years in some markets.”

Trickle for now

Strategic defaulters represent about 4 percent of all homeowners underwater. That trickle could become a flood as the likelihood recedes that home prices will soon return to their peak values, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac, an online seller of real-estate data.

Re-read that. Proof positive that this trend is just getting started. Learn how to become a HREU Certified Short Sale Specialist. Watch the FREE Short Sale video and grab your FREE Short Sale book NOW.

In San Diego, home values are down about 40 percent since March 2006, according to the S&P/Case-Shiller monthly index. Prices have rebounded for three consecutive months, returning to the October 2002 level, before the start of the housing boom.

Nationwide, home values are what they were in September 2003, according to the Case-Shiller index as of July.

“You have to ask yourself: ‘Are you just renting the home from the bank?’ ” said Michael Joe, a foreclosure expert at the Legal Aid Center of Southern Nevada. “Would it be cheaper to walk away and rent across the street?”

Conroy, 32, and his wife purchased their home for $385,000 in March 2006, a month before marrying. The property was reassessed this summer for $250,000.

Conroy said he and his wife are trying to save, knowing they may have to move to a bigger place within 18 months to start a family.

“We’ve given up on this dream of having equity in our home. We don’t expect to walk away with cash in hand; we expect to pay.”

More homeowners may opt to take a hit to their credit score rather than come up with cash to cover the loss, especially in California and the nine other U.S. states where the legal repercussions of foreclosures are less than in other parts of the country, said Sharga.

Ten states are so-called non-recourse, prohibiting deficiency judgments after most home foreclosures: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon and Washington, according to the Boston-based National Consumer Law Center. The bank can repossess your home in those states, not other assets, to settle the debt.

In California, a second-mortgage holder may try to pursue a delinquent borrower to repay through litigation, said Rick Brooks, a financial adviser with the San Diego-based wealth-advisory firm Blankinship & Foster. Banks generally prefer not to sue because it can easily cost $60,000 or more, said Debra Guzov, co-founder of the New York law firm Guzov Ofsink.

In a short sale, the borrower finds a buyer for the home at an acceptable price and the bank agrees to forgive the difference, said Greg McBride, senior financial analyst with Bankrate.com.

In a deed-in-lieu of foreclosure, the bank sells the home after a similar debt negotiation.

Tax break

A 2007 law exempts from tax up to $2 million of debt forgiven in a foreclosure or similar proceeding for a primary residence, according to Internal Revenue Service spokesman Eric Smith. The tax break extends to 2012.

The lender’s willingness to negotiate varies and depends on the loan balance, condition of the property, location and resale opportunities, said Alberta Hultman, CEO of USFN, an association of mortgage-banking attorneys based in Tustin, Calif.

Short sales or deeds-in-lieu of foreclosures are considered the same as a foreclosure on your credit score, said Craig Watts, spokesman for FICO Corp., owner of the credit-scoring formula most widely used by U.S. lenders.

A foreclosure remains on a credit report for seven years. Credit scores can begin to rebound in as little as two years if bills are paid on time, according to FICO.

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