If you are planning a short sale, it is important to know your short sale options in the state of Oregon. It is my intention in this article to provide you with the tools to sift through the information that’s out there so you can make a well-informed decision of your own. Because short sale is just one option and there is no one-size-fits-all solution for everyone, and the playing field shifts on what seems like a weekly basis, I do not claim to be an expert. With that said, my qualifications are as follows:
My wife Megan and I have met with countless folks in distress since 2008, and we have personally negotiated and closed over 188 short sales in the last three years.
We have received dozens of additional lender approvals on short sales we negotiated that did not end up closing successfully. (The reasons why this sometimes happens will be discussed later.) Because short sales are fraught with potential legal and tax consequences, we have partnered with one of the best legal minds and one of the brightest accounting gurus in our area.
Before I continue, I will first make my disclaimer. I am a licensed Realtor in the state of Oregon. I am not an attorney or CPA, nor do I play one on TV. Any legal or accounting information that appears in this article is based on information discussed with both our attorney and accounting partners. Foreclosure laws vary from state to state, and since I am based in Oregon, the information provided will be Oregon Statutory Law-centric and should be discussed with your own attorney and accountant. So with that out of the way, let’s get started.
- Keep Making Your Payment
- Forbearance Agreement: A temporary agreement between you and your lender to postpone your loan payments for a set period of time during a temporary hardship. Acceptable hardships may vary from case to case, and can include job loss, illness, divorce, etc. 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.
- Loan Modification: A loan modification is a change to the original terms of your loan. Loan modifications could involve lowering your interest rate, extending the term or maturity date of the loan, 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.
- 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 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.
- 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.’
- Non-Judicial Foreclosure: A 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, which may then market and sell the property (known as an REO property) to recover its losses on the loan.
- Judicial Foreclosure: Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. 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 by mailing, direct service, or publication of the notice, and will 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.
In my next installment, I’ll discuss how to determine which option is right for you.
To Be Continued…