Just Right Property Solutions
Working with Distressed Buyers/Sellers, renting,
investing, and managing properties
Our company is built on the principles of making quality products
and providing reliable service. Our diversified product range continues to grow by
following trends, improving our standard products, and listening to the customer. Our unique service has established our place in this industry. This allows us to make a distinctive and substantial
impact for our clients.
If you have missed more than three mortgage payments, or your lender has filed a Notice of Default, you might think the loss of your home is inevitable. Even at this stage, there
are Several strategies you can use to stop the foreclosure process (more to come).
- Foreclosure Workout. The simpleest solutions if your credit/finances are not too out of wack. Until the time your home is at the auction, most lenders would rather
work out a compromise that would allow you to get back on track with your mortgage than process a foreclosure on your home.
- Short Sale. After your lender files a Notice of Default but before they schedule an auction, if you get an offer from a buyer, you lender must consider it. If they foreclose
on your home, the lender is going to simply turn around and resell it (REO Homes - Real estate owned or REO is a term used in the United States to describe a class of property owned
by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction.) if you present them with a reasonable short sale offer, they may
see it as saving them the time, effort and trouble of finding a qualified buyer in a soft market. So, if your home is on the market, continue to aggressively seek a buyer for it, even after your
lender initiates the foreclosure process. Read our guide on How to Sell Your Home Fast When Foreclosure Looms for action steps you can take to unload your home fast, then make your best pitch as to
why your lender should agree to the short sale.
- Bankruptcy. Bankruptcy stops foreclosure dead in its tracks. Once you file a bankruptcy petition, federal law prohibits any debt collectors, including your mortgage lender,
from continuing collection activities. Foreclosure is considered a collection activity, and so the day your lender becomes aware that you have filed for bankruptcy, the foreclosure process will
effectively be frozen. But here’s the rub; once you get to court, the bankruptcy trustee’s role is simply to play referee or mediator between you and your creditors. Bankruptcy really just buys you
more time to replace your lost job or recover financially from a temporary disability; it doesn’t let you off the hook for your debts. The law requires your mortgage company and other creditors to
work in good faith with you to formulate a reasonable repayment plan so you can get back on track. Consult with a bankruptcy attorney regarding whether filing for bankruptcy is a good strategy for
- Deed in Lieu. A deed in lieu of foreclosure is exactly what it sounds like. The homeowner facing foreclosure signs the deed to the home back over to the bank -- voluntarily.
This typically done after a short sale has been tried and is unsuccessfull. Its a fairly good option, and actually has the a little less impact on a homeowner’s credit
then foreclosure does. Lender must pay any second or third mortgages or home equity lines of credit (HELOCs) off before executing a deed in lieu, and the lender wants to be certain that the
borrower’s financial distress is real. Deed in lieu of foreclosure is virtually never granted unless: foreclosure is imminent; the owner has had their home on the market for several months and
been unable to sell it; there are few or no junior loans or liens the lender will have to pay off; the seller can document their financial hardship; and the seller initiates the process and documents
the voluntary nature of their request for a deed in
- Assumption/Lease-Option. Most loans these days are no longer assumable. The average mortgage now contains a “due on sale” clause by which the borrower agrees to pay the loan
off entirely if and when they transfer the property. However, if you are facing foreclosure, you might be able to persuade your lender to modify your loan, delete this clause and allow another buyer
to assume your loan. The lender may want to assess the new buyer’s qualifications, but it can be a win-win-win option for all. You might be able to negotiate a down payment from the buyer which you
can use to pay off your outstanding past due mortgage balance.
In a lease-option scenario, the buyer becomes your tenant, and you continue owning the property until the buyer has saved enough down payment money, improved their credit sufficiently or sold their
other home. In some situations, the buyer will make a one-time, lump option payment upfront, paying you to obtain the option to purchase your home. You can apply the option payment to bringing your
mortgage current. Then, the buyer will make lease payments monthly which you, the seller, then apply to your mortgage. To successfully use a lease-option to stop the foreclosure process, you must
negotiate lease payments that cover most or all of your mortgage payment, property tax and insurance obligations -- enough that you can make up any difference and still pay to live somewhere
- Subject to-Option. It sounds complicated, and some people even think it's illegal, but it is the safest, easiest, and, often times, the most profitable way to purchase
properties. When you purchase a home "subject to" it means subject to the existing mortgage that is already in place on the property. The terms of the note that were initially created with
the lender stay the same. That includes the name the loan was purchased in. In other words, you are not assuming the loan. The terms you create with the seller are between the two of you as
long as you follow to the letter the terms set up when the loan was conceived.
What about the "due on sale" clause?
The most common question asked by the investors (not the sellers) is: "What about the 'due on sale' clause?" This one concern often times keeps numerous investors from purchasing properties using
the "subject to" method. Let's address this right now. The "due on sale" clause states that the lender has the right to call the entire note due "Not a mandatory obligation" if any
of the terms of the initial agreement are not met, such as payments being paid or transfer of the deed without paying off the original loan. Please understand that the job of a lender is to collect
payments. They loan out money at a higher interest rate then they are paying and create their cash flow from the difference on that spread. If a loan were at 8% or 9%, why would a lender call that
loan due to have it financed at a lower interest rate? They would be cutting their own profit.Typically banks do not want to be in the bussness of owning and selling real estate and is very
rare that this happens.
- Investor -Options. There are several (under
- Investor - Owner partnering
This is where there is an agreement between the owner and Investor to go into a deal together. Terms can vary, but escentually owner goes under contract with the
Investor to sell the house to the investor at an agreeable price, investor fixes up the house and sells the house. A guarenteed amount of profit goes to the investor and anything above gets
splits between the owner and investor.
Equity partnering involves selling a home that has equity (when the home is owned outright or is worth more than what is owed on it) to an “investor partner”. The
investor partner then in turn resells the home (possibly as-is or possibly after renovating it) in exchange for agreeing to share some of the profits with the original owner. This can be a good
program for a homeowner that wants to renovate their home, but does not have the cash to do so.
A creative alternative to leasing may be selling with owner financing, using an instrument called a wrap-around mortgage, or “wrap”.
A wrap is simply a new mortgage that is created that “wraps around” the old mortgage.
The best way to move without having to buy or sell your home on the open market is house swapping. Working with a company that buys and sells homes occasionally yields
an opportunity for two or more homeowners, that want to live in different homes or areas, to trade houses. Example one may want to down size, while another may want to up size
The fastest way to sell any home is to sell it to a CASH buyer. This is because the cash buyer does not need to get qualified for a loan or wait for loan documents to be
drawn up. Cash buyers can make decisions quickly. Cash buyers can also take care of all closing costs, back payments or taxes, or whatever it takes to get the deal closed. These costs total to ~15%
or more of the resale value of the home, which means that cash buyers can only afford to buy the home at 65% to 75% of its full market value in order to make a modest profit. When you see a sign
saying “I Buy Houses For Cash” it means “I’ll pay you about 70% of the homes value, and do it fast”. For some people, such as sellers with lots of equity that need or want money quickly, this is a
great deal. For others with little or no equity, or that want to make more money selling the home, this is not an option.
Homeowners who can't afford their mortgage payments may want to take a look at the federal government's alternative to foreclosure: the Home Affordable Foreclosure Alternative program, or
HAFA, which intended to encourage lenders to facilitate short sales and deeds-in-lieu, or DIL, as alternatives to foreclosure.
The program, which is a part of the Home Affordable Modification Program, or HAMP,
may help some homeowners escape a bad situation, but the rules are complicated and they won't be able to keep their homes.
U.S. Treasury Assistant Secretary Herbert Allison explained the concept in congressional testimony.
"HAMP does not, nor was it ever intended to, address every delinquent loan," he said. "In these instances, the borrower may benefit from an alternative that helps the borrower transition to more
affordable housing and avoid the substantial costs of foreclosure."
Here are some details from the government's 43-page directive for loan servicers:
- A short sale allows the homeowner to sell the home and use the proceeds to satisfy the first mortgage even if the sale price is less than the loan balance.
- A DIL allows the homeowner to voluntarily give up the home to satisfy the first mortgage even if the home is worth less than the loan balance.
- The homeowner can get preapproval for a short sale at a specific minimum price or net proceeds before the home is put on the market.
- The homeowner can receive $1,500 - $10,000 for relocation reinburstment expenses at/after closing. This sum may be reported to the Internal Revenue Service as income.
- The home must be the homeowner's principal residence.
- The mortgage must be delinquent, or default must be reasonably foreseeable.
- The unpaid loan balance must be less than $729,750 for a single house or condominium. Higher limits are allowed for two- to four-unit residential properties.
- The homeowner's monthly mortgage payment must be more than 31 percent of his or her gross income.
- The homeowner must transfer clear title. The lender will allow up to 3 percent of each second loan or lien, up to $3,000 in total, to help the homeowner satisfy these obligations.
- The government's directive excludes loans that are owned or guaranteed by Fannie Mae or Freddie Mac. However, the two government-run mortgage corporations are expected to release their own
guidelines. Homeowners can use the Loan Look Up Tool on the Making Home Affordable Web site to find
out whether they have a Fannie Mae or Freddie Mac loan.
- The lender cannot require a cash contribution or promissory note, cannot pursue a deficiency judgment and must release the homeowner from all future liability for the debt
- The loan servicer can use the financial information and hardship letter that the homeowner submitted for a loan modification, or request updated information to evaluate the homeowner's
- The loan servicer must assess the current value of the home. If the short sale or DIL isn't completed, the servicer can add the cost of this assessment (e.g., an appraisal) to the loan
- The home must be listed for sale with a licensed local-area real estate professional. (This requirement doesn't apply to DIL.)
- The homeowner must cooperate with the real estate professional's efforts to sell the home and maintain the interior and exterior of the home.
- The servicer and homeowner must meet a number of time frames.
- The lender may require the homeowner to make full or partial payments on the mortgage, up to 31 percent of the homeowner's income, subject to the lender's written policies.
- The homeowner cannot have a close business or personal relationship with the real estate agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or
- The lender can initiate or continue, but not complete a foreclosure sale while the homeowner is involved in the program.
- Homeowners should discuss the income tax consequences of debt forgiveness with a qualified tax
- The servicer will report the short sale or DIL to the credit bureaus. That will hurt the
homeowner's credit score, although not as severely as a foreclosure.
- The buyer in a short sale can't resell the home within 90 days of the purchase.
- Homeowners are encouraged to contact their loan servicers to find out whether they are eligible for the program